European Talks Aim at Farm Trade Deadlock : Commerce: French agricultural subsidies are seen as the largest stumbling block to a new GATTagreement, which could give a needed boost to the global economy.

When senior European officials gather today in Brussels, a resolution of one of international commerce’s most intransigent problems will be hanging in the balance--and with it one of the best hopes for healing faltering economies from Pasadena to Paraguay.

While the topic on the negotiating table will be the subsidies paid by governments to farmers and limits on their exports, the impact will reach far beyond the fields of Europe and the United States to factories, market baskets and store shelves around the world, trade officials and analysts said Sunday.

If the foreign and agriculture ministers of the 12 European Community nations resolve their dispute quickly, seven years of negotiations to rewrite laws governing the broad reach of international trade may be brought to a speedy conclusion.

Failure to resolve the dispute over the subsidies and exports could doom chances that the current round of talks, under the General Agreement on Tariffs and Trade, will succeed either by the target date of Dec. 15 or even well beyond that.

And that failure, analysts fear, could plunge the developed world and the struggling nations of the Southern Hemisphere into angry recriminations--and reduce odds that the powerhouse economies, the emerging free-market economies of Eastern Europe or the rest of the world can use increased international trade to pull out of economic troubles that have swept the globe.

In short, there could be a renewal of economic crisis.

To be sure, extremely important meetings have appeared to be turning points before, and the tensions surrounding today’s meeting may merely reflect a degree of “European theater” intended to produce compromise, as one analyst noted.

But the calendar is undeniable. And more than at any previous point, the time has come to either conclude the international talks or risk severe--some say dire--consequences, according to those who have kept close tabs on the negotiations.

The agriculture talks have become a roadblock to progress on other issues in the 108-nation negotiations, and failure would be “pretty horrendous,” said Jim Frierson, a former senior official in the office of the U.S. Trade Representative.

“It says there is no glue, no consensus” within the world trading system, he said.

Such a failure would wash away the best opportunity for “real expansion of markets,” including the still-blooming prospects for cross-border investments, trade in services and international exchange of such intellectual endeavors as books and movies, Frierson said.

Still, the chances that the current effort, beginning with today’s meeting, will produce quick agreement are not great.

More likely will be an agreement to disagree, kicking the issue farther down the road, a hopeful European Commission official said Sunday. Others have said the eventual result could be to remove agriculture from the realm of the global talks.

France, which has objected to a proposed reduction in payments to its politically potent farmers, holds the key.

But Premier Edouard Balladur stood fast over the weekend in his threat to veto the subsidy plan.

That plan, drafted in talks last November at Blair House in Washington, would cut the allotment of European Community subsidized farm exports by 21% and is the basis for the agriculture sector of the global trade talks.

“We will not accept the so-called Blair House accord as it stands, neither now nor at the end of December,” Balladur said. France, he added, would veto any agreement “contrary to its interests.”

Under certain European Commission rules, any member can veto a proposed settlement of a dispute even if it has been negotiated with other nations by the community’s representatives. Thus, with the remaining trade issues held up by the dispute over agriculture, a French veto could stand in the way of progress in a much wider arena.

Mickey Kantor, the U.S. trade representative, made clear last week to Leon Brittan, the European Community’s external affairs commissioner, that the Clinton Administration would insist that the Blair House agreement be honored, and Treasury Secretary Lloyd Bentsen reiterated that stance to reporters.

“If the deadlock is not resolved, what it’s going to do is call into question the ability of Europe and the United States to bring this to a conclusion by the end of this year,” said Olin Wethington, an assistant secretary of the Treasury during the George Bush Administration. “Time is short. There are many other issues beyond agriculture that have not been revolved.”

“If the Blair House thing comes apart, it’s going to make it extremely unlikely” that the current round of trade talks can be wrapped up by the Dec. 15 target, he said.

Sounding a more optimistic note, the European Commission official, who declined to be named, held out the possibility that “no big decisions will be taken, and the French will not be able to pull the rug out from Blair House.”

One such course would be to “make some kind of statement sympathetic to French concerns without saying Blair House has to be renegotiated,” the official said.

For the Clinton Administration, the dispute in the so-called Uruguay Round of the trade talks--named for the beginning of the talks in the Uruguayan city of Punta del Este--is just one more headache in the international trade arena, an arena it hopes can be used to propel the U.S. economy into a more competitive position.

While the Administration is fighting the largely unseen battle over international trade, it is launching its campaign for House and Senate approval of the North American Free Trade Agreement, eliminating tariffs and other trade barriers among the United States, Mexico and Canada.

Proponents of the three-way agreement argue that failure to gain the required congressional approval would make the final negotiations in Europe for the wider trade pact all the more difficult by raising questions about the U.S. commitment to free trade.

The issue is also important--even explosive--in France.

Farmers make up no more than 6% of the population, but the nation takes pride in its agrarian roots, and the political clout of agricultural interests is not to be taken lightly.

Spain last week expressed support for the French position, but “the question in Europe has been whether the Germans and the British would have the clout to roll the French,” Wethington said.

In the past, they have not been able to overcome the objections from Paris, he said, adding pessimistically: “That’s probably going to be the case again.”