EC Agrees to Overhaul Its Farm Policy : * Trade: Changes in the subsidy-based system could remove the key roadblock to completing a new GATT pact.

The European Community agreed Thursday on a radical overhaul of its farm policy, a move that could lead to cuts in subsidies and unlock stalled world trade talks.

The announcement of deep changes in the subsidy-based farm policy, originally designed to stave off hunger in Europe after World War II, angered French farmers, who immediately vowed to stage protests throughout their country.

“We are now talking about a common agricultural policy designed for a period of surpluses, not a period of shortages,” British Farm Minister John Gummer told reporters after ministers, bleary-eyed after three days of near-continuous talks, had struck their deal.

Italy, which had been blocking an agreement because it wanted permission to continue producing more milk than its partners agreed to, said it would continue to break its quotas but refrained from using a veto to block the overall deal.

The dispute over farm subsidies had been the main roadblock to completing 6-year-old talks on world trade reforms under the General Agreement on Tariffs and Trade.

Gummer and others said the farm policy reform, by cutting subsidies, would help unblock the Uruguay Round of GATT talks to liberalize world trade into the next century.

The talks have been tottering on the brink of collapse for months over a dispute between the EC and the United States concerning the community’s farm subsidies.

The deal “will make it easier to get a GATT agreement,” Gummer told reporters. “Now the heat is on the Americans.”

In Washington, U.S. officials said they are hopeful the agreement will move the trade talks forward.

“We certainly hope that any agreement on (EC agriculture policy) would allow the EC greater flexibility in the multilateral agricultural reform effort underway in the Uruguay Round,” said Kathy Lydon, a spokeswoman for the U.S. trade representative’s office.

Agricultural policy reform “is an internal EC debate. How that translates into the EC position on agriculture in the round remains to be seen,” she added.

Other farm-producing nations have long blamed the EC’s agricultural policy for gluts on world commodities markets, saying excessive subsidies forced the community to dump its produce abroad, robbing them of clients.

“The common agricultural policy had aged,” French Agriculture Minister Louis Mermaz said. “The reform will breathe new vigor into our agricultures, on a community level and on a global level.”

In London, British Prime Minister John Major hailed the deal and said the focus must now be on an agreement in the GATT negotiations, which cover other sectors such as industry and services.

“Now we need to direct our efforts toward completing the GATT round successfully,” he said.

The centerpiece of the EC farm policy reform is a cut of about one-third in the price farmers are guaranteed for their cereal crops--a price that has repercussions throughout the food-production chain.

Farmers would be compensated for losses providing they limit their output by leaving 15% of their land out of cereal production.