U.S. and Europe Avert Trade War : Commerce: Bush hails 'historic' agreement on agriculture, and Washington drops plans for punitive tariffs. But dissatisfied France could veto deal.

By JOEL HAVEMANN

Nov. 21, 1992 12 AM PT

TIMES STAFF WRITER

BRUSSELS —

Averting a transatlantic trade war, American and European Community negotiators announced on Friday that they had finally settled their longstanding disputes over agricultural trade.

With President Bush applauding the “historic result,” American officials dropped their plans to slap 200% tariffs on $300 million worth of European products on Dec. 5.

But France, whose farmers had resisted any deal, considered the possibility of using its veto in the EC to block the agreement. France’s agriculture minister, Jean-Pierre Soisson, while declining to reveal whether France would invoke a veto, said: “In these present terms, I cannot accept the agreement.”

Luc Guyau, head of the French national farmers’ union, termed the accord “a knife in the back” and called for “immediate action by all farmers and people concerned to try to block this agreement.”

Frans Andriessen, the EC’s chief negotiator, admitted that “different elements of the deal we have made will cause problems in different EC member nations.” But he said he hoped that “we will get a working majority to go ahead.”

The deal, if approved by the governments of all 12 EC nations, could clear the way for a broad multinational agreement to liberalize world trade. For two years, the U.S.-EC dispute over agricultural trade has deadlocked the global trade negotiations called the Uruguay Round because they were launched in that South American country in 1986.

Bush, appearing before reporters briefly at the White House, said those talks “are fundamental to spurring economic growth, creating jobs here at home and, indeed, all around the world.”

He expressed his hope that “the breakthrough that we achieved today will spur movement across the board in the ongoing negotiations.”

The President’s appearance, two months to the day before he leaves office, was his first encounter with reporters since he was defeated for reelection two weeks ago. He concluded his statement and left without responding to questions.

EC officials, simultaneously announcing the accord in Brussels, said they, too, hoped it would lead to a speedy conclusion of the Uruguay Round. But Andriessen acknowledged that the complicated talks, involving 108 nations and such sensitive areas as textiles, services and copyrights, could not be wrapped up before Jan. 1.

The General Agreement on Tariffs and Trade, the Geneva-based organization that has supervised the Uruguay Round since it was launched, hailed the U.S.-EC farm deal and said the global negotiations could be relaunched “with a view to concluding the round.”

The agriculture agreement, cinched by transatlantic telephone less than 24 hours after the EC negotiators completed two days of talks in Washington, covered two separate but related areas:

* Subsidies for soybeans, sunflowers and other oilseeds, which are used to make animal feed and cooking oil. The United States protested that EC subsidies for oilseed growers, by giving European producers a substantial price advantage, had deprived American growers of $1 billion a year in sales to Europe.

It was in retaliation for these subsidies that the United States had threatened 200% tariffs on $300 million a year in European imports, notably French white wine.

Under the deal reached Friday, the EC agreed to reduce acreage devoted to oilseed production by 15% next year and at least 10% in subsequent years.

Ray MacSharry, the EC’s chief negotiator on farm issues, said there was “absolutely no difference” between this provision and the oilseed clause adopted by the EC earlier this year in an overall reform of its agricultural subsidies.

The United States abandoned its effort to force the EC to accept oilseed production limits as well as acreage limits.

* Europe’s entire program of subsidies to farmers. The United States, supported by other agricultural exporters, insisted as part of the Uruguay Round that Europe cut its general program of farm subsidies, and, in particular, slash its payments to agricultural exporters.

Friday’s agreement calls on Europe to reduce its subsidized farm exports as of 1994 by 21% from average levels that prevailed during the years from 1986 to 1990. For most products, the cuts will be even deeper compared with current export levels, although the United States had pressed for still deeper cuts.

The agreement also requires a 20% reduction in subsidies for farm products consumed domestically, compared with the average that prevailed from 1986 to 1988. The United States has already cut its domestic price supports by more than the required 20%, but Europe has not.

EC negotiators insisted that the deal committed the Community to do nothing that it had not already agreed to do as part of a reform adopted earlier this year of its overall farm subsidy program. Andriessen said the agreement with the United States would merely “consolidate” the EC’s own reforms.

The French, who had insisted that no deal exceed the reforms already adopted, disagreed with Andriessen’s interpretation.

“The conditions defined by the French government, in the light of what we know tonight . . . are not fulfilled,” Agriculture Minister Soisson said in a radio interview. He said he did not believe the French Parliament would accept it.

COPA, the association of Europe’s national farm organizations, also deplored the U.S.-EC deal. It said the EC “is sacrificing European agriculture to U.S. endeavors to conquer world agricultural markets by whatever means.” The organization called on “EC authorities and member states to reject this agreement, which would be disastrous for farmers and their families.”

MacSharry emphasized that the agreement did nothing to restrict unsubsidized EC agricultural exports, which make up a small fraction of total European exports. “The real victory is for international trade,” MacSharry said.

MacSharry and Andriessen spoke with reporters after presenting the accord to the 17-member EC commission, the EC’s executive body. Although the commission did not vote on the package, Andriessen said, its members were unanimous in their praise.

Seventeen days before Friday’s agreement, talks between the United States and the EC over oilseed subsidies had broken up in disagreement. Two days later, the United States announced punitive tariffs on $300 million in annual EC imports.

EC officials, insisting that they could not negotiate with a gun to their head, at first promised to fight back.

But soon all EC nations except France decided that negotiations remained the proper course.

Times staff writers James Gerstenzang and James Risen in Washington and Times researcher Isabelle Maelcamp in Brussels contributed to this report.