Trade Accord Eludes Bush and EC Officials : Diplomacy: Hopes fade for a new international agreement. European farm subsidies remain the big stumbling block.

Dashing hopes for a badly needed breakthrough in global trade talks, President Bush and top European Community officials failed Wednesday to resolve a handful of issues blocking a 108-nation agreement that would boost world economic activity by an estimated $5 trillion over the next decade.

“We had an extensive exchange of views on outstanding issues. Some new ideas were advanced,” Bush said after his meeting with European Commission President Jacques Delors and Anibal Cavaco Silva, the Portuguese prime minister who is serving in the rotating position of European Community president.

“We exchanged a lot of ideas,” agreed U.S. Trade Representative Carla Anderson Hills. But she conceded: “I don’t think any of the ideas hit home.”

Although both sides again vowed to press forward and stressed that success of the 6-year-old negotiations is crucial to the health of the world economy, the lack of progress added to a growing perception that the talks are dead for this year and possibly forever.

“I definitely think the noises coming out are not very promising,” said Harvard University economist Robert Z. Lawrence. “If we delay this, it’s a very devastating shock to the world trading system.”

At the very least, most economists agree, failure to complete an international trade accord that makes significant reductions in worldwide trade barriers would amount to a colossal missed opportunity.

The talks began in 1986 as an effort to rewrite badly outdated post-World War II rules that govern international trade. Although the system worked well for decades, it never covered such increasingly important areas of international commerce as agriculture and financial services. As a result, nations have been turning more and more to protectionism and raw political muscle to settle trade disputes.

President Bush has said that a good agreement could add $1 trillion to the U.S. economy alone in the next 10 years. The World Bank has estimated that if the talks could succeed in reducing overall trade barriers by half, they would do almost as much for developing countries as all the foreign aid they receive combined.

It is clear that the talks--known as the Uruguay Round because they were conceived at an international meeting there--will fall far short of those goals. But even the more modest package now under consideration, which calls for a 30% reduction in overall tariffs, could boost worldwide trade in goods and services by almost $200 billion a year, according to an estimate earlier this week by the Paris-based Organization for Economic Cooperation and Development.

But the domestic politics of various countries have stood in the way of international consensus, and many economic experts say it is time to face the fact that the talks have failed. Lester Thurow, dean of the Massachusetts Institute of Technology’s Sloan School of Management, said the talks are continuing only because “diplomats never have official funerals.”

Europe’s policy of heavily subsidizing its farmers remains the biggest stumbling block, as it has for more than a year. Although those subsidies enjoy potent political support in such countries as Germany and France, other agricultural exporting countries complain that the subsidies make it impossible for their farmers to compete on the international market.

Delors and Silva saidafter their meeting with Bush that they hope to make significant progress on the agriculture issue before late June, in hopes that it will not cast a shadow on July’s seven-nation economic summit in Munich, Germany.

After that, a number of other events--including this fall’s U.S. elections--could make it difficult to make further progress. “If you don’t have it done by July, it’s not on this year,” Harvard’s Lawrence said.

Yet he also noted: “Brinkmanship is part of what negotiations are all about.”

Carol Brookins of the international consulting firm World Perspectives Inc. agreed that the danger of failure might be what finally forces a solution. “It’s a testing time. . . . Can we risk getting into a bunch of trade wars?” she asked. “These are all calculations people have to make.”