Trade Group Tackles U.S.-EC Spat : Tariffs: Agency’s director says Washington’s moves against European imports threaten free trade. But he also blames the Continent for impasse.

The world’s trade watchdog Friday called an emergency meeting for next Tuesday to try to end the trade war erupting between the United States and the European Community over agriculture.

The 105-nation General Agreement on Tariffs and Trade summoned trade negotiators to its Geneva headquarters to discuss “the very grave situation.”

Arthur Dunkel, GATT’s director-general, said the United States had threatened free trade around the world by announcing Thursday that it intends to impose 200% tariffs on European imports worth $300 million a year. But Dunkel held the EC equally responsible for the impasse.

The two combatants declared themselves ready to negotiate an end to their trade war.

Jacques Delors, president of the EC’s executive commission, said after a meeting in London with British Prime Minister John Major that negotiations should resume “without delay.”

American officials said they hope the threat of punitive tariffs, scheduled to take effect Dec. 5, will drive the EC to seek an agreement. “It is often only under such threats that these kinds of negotiations succeed,” said a senior U.S. official in Brussels.

At immediate issue are EC subsidies to growers of soybeans, sunflowers and other oil-bearing plants, used chiefly as animal feed. The United States contends that the subsidies give EC growers an illegal price advantage that has cost U.S. exporters sales of $1 billion a year in Europe.

Also at stake, however, is the entire six-year effort to liberalize rules governing all forms of international trade. Economists say an agreement, by creating new international markets for goods and services, could lift the world’s economic output by as much as $200 billion a year.

But those talks--called the Uruguay Round because they were launched in that South American country in 1986--have been deadlocked for two years by a U.S.-EC dispute over agricultural trade in general. That dispute will never be resolved as long as the two sides are fighting a trade war over soybeans and other oilseeds.

Each side blamed the other’s powerful farm lobby for precipitating the oilseed crisis.

Europeans, still considering how to retaliate against the U.S. sanctions, charged that the Americans broke off negotiations earlier this week under pressure from the U.S. Farm Bureau and the American Soybean Assn.

U.S. officials pointed particularly at France. The French government, they said, was so afraid of farmers in France that it was blocking all agricultural trade agreements, no matter what their terms.

American officials in Paris said the European goods singled out for 200% tariffs--notably white wine--were chosen explicitly to punish France. Of the $300 million worth of exports, they said, France produces $135 million.

A cartoon in the French daily Le Monde showed a U.S. soldier, his helmet camouflaged with $100 bills, shooting a bottle of French wine with his M-16 rifle.

French Agriculture Minister Jean-Pierre Soisson, reflecting French outrage at the U.S. tariffs, vowed not to yield in the trade talks. “If we lay down every time the Americans raised their finger, we wouldn’t exist,” he said.

In the U.S. view, the French government has been paralyzed by its farmers since May, when they held a series of violent demonstrations to protest the EC’s decision to overhaul its generous system of agricultural subsidies. And in a country where farmers represent less than 6% of all workers, it is not only political clout that animates the government’s support of its farmers.

“We’ve got to convince the Americans that we’re defending a rural culture, that France’s situation is different from other countries,” said Rene Monory, president of the French Senate. “We’re not just defending our economic interests, but the very existence of our farmers.”

In the European view, it is the United States that has blocked agricultural trade agreements. Twice in the last month, EC sources said, U.S. and EC negotiators were on the verge of settling the soybean dispute and agreeing on the farm chapter of the broader international trade accord, only to have U.S. farm lobbyists prevail on Agriculture Secretary Edward R. Madigan to demand greater concessions from the Europeans.

Frans Andriessen, EC chief trade negotiator, told reporters that U.S. farm lobbyists were swarming over the Chicago hotel where three days of negotiations ended in disagreement Tuesday.

Many neutral observers believe there is lots of blame to go around.

“It’s pretty much 50-50,” said Christopher Horseman, an analyst with the British agricultural consultancy Agra Europe. “France has been determined to wreck the whole thing,” he said, and U.S. negotiators at critical moments have reneged on earlier offers.

The prospects of reaching a settlement soon are clouded by the presence of lame-duck officials in both the United States and Europe.

The Bush Administration’s experienced negotiators have only until Jan. 20 to complete an international trade accord before President-elect Bill Clinton moves into the White House. “With a new Administration, you could be 18 months before you’re back to where you are now,” said a senior American official in Brussels.

The situation on the EC side is no less unsettled. EC farm commissioner Ray MacSharry, charging that EC President Delors (who is French) was meddling in the soybean negotiations, served notice Wednesday that he was stepping aside as the Community’s chief agricultural trade negotiator.

Both MacSharry and Andriessen are leaving office at the end of the year. When an EC spokesman in Brussels was asked Friday who would answer the phone if the Americans called and proposed new negotiations, he responded, “The secretary.”

Delors, who was in London on Friday to give a lecture at the London School of Economics when Major summoned him to an urgent meeting, is widely thought there to have his sights set on running for the French presidency in 1995. In the British view, that makes him particularly prone to placate militant French farmers.

Havemann reported from Brussels and Tuohy from London. Times staff writer Rone Tempest in Paris also contributed to this report.

Wine War Q&A;

Some questions and answers about the trade tiff:

Q. What triggered the latest controversy?

A. U.S. Trade Representative Carla Hills announced that the United States will impose 200% fees on certain products sent to the United States. The reason: To punish the Europeans for practices it alleges are robbing American farmers of $1 billion in sales of soybeans and other oilseed crops annually in the European market.

Q. What would the tariffs do to the price of wine here?

A. It will basically triple the price importers pay for white wine and depending on how much of the cost hike is passed on, consumers could pay triple the current price as well.

Q. Is a tripling in price the only consumer impact?

A. No. Wine drinkers can expect short supplies as well. Wine importers have said they will cut back drastically on their orders so they won’t be stuck with high-cost supplies they can’t unload.

Q. Why white wine instead of red?

A. Americans spend more for French wine--both red and white--than for wine from any other foreign country. But the Administration believed that American consumers would be less upset if they were forced to drink more domestic white wines, which officials and some in the wine industry say enjoy a better reputation among many American wine drinkers than domestic red wines. Additionally, Germany is a big producer of white wines and that country has been a key French ally in the farm fight.

Q. If the fight is over soybeans, why pick on wine drinkers?

A. The Administration wants to exert maximum pressure on France, which is seen as the biggest stumbling block to resolving both the soybean dispute and a related fight over all European farm subsidies. The second battle has stalled efforts to complete free trade talks.

Q. Is wine the only product affected?

A. No. The Administration also targeted $30 million in imports of wheat gluten, an ingredient used in baking and as a binder in pet food, and rapeseed, for the 200% tariffs. France is one of the leading European producers of both products.

Where Your Money Goes

Currently Under new tariff Importer’s price $10.00 $10.00 Tariff (Import fee) 7 cents $20.07 Retail markup* $8.76 $26.16 Final cost $18.83 $56.23

*Retail markups, including shipping, taxes and profits, vary widely but average around 87% above the price paid by importers.

Source: Associated Press