U.S., EC Negotiators Focus on Tariff Cuts : Trade: America agrees to delay its threat to retaliate for the ‘buy-European’ policy on government contracts.

Moving to head off a trade war, negotiators from the United States and the European Community lengthened the fuse on one of their most explosive disputes Monday and began exploring the possibility of deep, worldwide tariff reductions.

Mickey Kantor, in his first visit to EC headquarters as U.S. trade representative, said the United States will delay for three weeks its threatened retaliation over an EC policy that favors European bidders on some government procurement contracts.

Sir Leon Brittan, the EC’s chief trade negotiator, said he will urge the EC not to apply the “buy-European” provisions during that period. The two negotiators will meet again in Washington in mid-April. Brittan, who argued that the United States must itself act to quit favoring American bidders for government contracts, said he hoped to reach a final agreement on government procurement then.

Kantor, sounding less optimistic, warned that America reserved the right to retaliate if Europe did not dismantle its current system. The 12 EC-member nations give European bidders a 3% price break in competition with foreign bidders for government contracts.

“What was put on the table was constructive,” Kantor said of Monday’s EC proposal, “but it is not acceptable in its present form.

“If we can’t make significant progress” at the April talks, he added, “I’d be very pessimistic” about the chances of solving the problem short of U.S. retaliation.

Brittan also gave Kantor a new EC proposal for a worldwide reduction of tariffs on imports. Reducing tariffs is a central issue in global negotiations, now in their seventh year, aimed at liberalizing world trade. The United States has been disappointed with European tariff proposals.

Kantor said Brittan had put forward a “significantly enlarged” package of tariff reductions. Both sides declined to offer details, although Kantor said the EC proposal covered industrial products, agricultural goods and services.

Tariff reductions will be on the agenda of meetings in the next few months involving not only American and EC negotiators but also Japan, Canada and other industrial nations.

Kantor and Brittan both said they hoped that tariff reductions will become part of a “prompt” conclusion to the Uruguay Round of international trade negotiations, launched nearly seven years ago in the Uruguayan resort of Punta del Este.

The talks have languished since becoming deadlocked in December, 1990, over a U.S.-EC dispute about agricultural trade. That issue was apparently settled last fall, though France continues to threaten to veto EC ratification. A host of other issues now block progress.

Monday’s session between Kantor and Brittan, both new to their jobs, was the second in two months. The negotiators seemed relaxed at its conclusion, and Kantor was able to joke: “At least he didn’t call me a unilateral bully or a bureaucratic thug.”

Those were two epithets that EC officials have hurled at the Clinton Administration as it has acted not only to retaliate against EC procurement rules but also to impose new duties on foreign steel and fight back against European airplane subsidies.

The Administration, retaliating against what it called the EC’s unfair “buy-European” policy for government utility contracts, threatened on Feb. 1 to bar European firms from bidding on millions of dollars worth of American contracts. On March 19, just two days before the American measures were to take effect, Kantor met in Washington with Jacques Delors, president of the EC executive commission, and agreed to postpone the sanctions until after Monday’s meeting with Brittan.

Kantor said he offered to postpone the sanctions only when Delors agreed that the EC would make new proposals not only on opening government procurement to foreign bidders but also on reducing tariffs worldwide.

EC officials argue that U.S. law books are crammed with “buy-American” provisions that put up higher barriers to foreigners than does the EC. The Europeans are taking this chance to try to tear down some of those “buy-American” laws. Kantor acknowledged that the proposal made by Brittan Monday “is certainly not one-sided.”

At the same time, Kantor insisted that the U.S. market for government utility contracts is the world’s most open because “buy-American” provisions are largely not enforced. Foreigners, he said, get 54% of contracts for telephone switching equipment.

Kantor, who has been portrayed in Europe as unsure of details of trade policy and ready to shoot from the hip, denied a reporter’s suggestion that his was an aggressive approach to trade relations. He said he preferred such words as “positive” and “committed.”

“If that means we’re going to insist on opening (foreign) markets quickly,” he said, “so be it.”