Britain lifts three-year-old trade ban on Argentine goods. As memory of Falklands war fades, Britain sends goodwill signal -- but refuses to discuss islands' sovereignty

Britain has made its first unambiguous gesture of goodwill to Argentina since the confict over the Falkland Islands three years ago. By lifting a ban on trade between the two countries, the government of Prime Minister Margaret Thatcher hopes to lay the basis for a dialogue to produce a rapprochement between London and Buenos Aires.

Initial Argentine reaction to Britain's unilateral move was cautious, but in Whitehall hopes have begun to rise that a way may be found to normalize relations in the longer term.

The big stumbling block remains the issue of sovereignty, the issue over which the South Atlantic conflict was fought in 1982.

When President Ra'ul Alfons'in heard about the British gesture, which could mean revenue for Argentina of more than 100 million a year, he instructed his foreign minister, Dante Caputto, to propose discussions that would include future sovereignty over the Falklands.

Although on the surface this was a discouraging response, the British government is far from pessimistic.

Mrs. Thatcher has ruled out a transfer of sovereignty from Britain to Argentina, but she is known to want an easier relationship with Buenos Aires.

The question of sovereignty has remained a sensitive issue since Britain reasserted control of the islands in July 1982 following the landing of Argentine troops three months earlier.

Mrs. Thatcher is prepared to wait while the implications of the British move sink in.

Much of the advice she is getting assumes that President Alfons'in realizes he cannot move quickly toward reconciliation with London but might be prepared to drop Argentina's ban on trade with Britain a few months from now.

Thatcher knows also that pressures will build for her to bury the hatchet with Argentina. They have already come from Britain's partners in the European Community.

Even more insistent are pressures from Washington, where it is felt that no United States government should be required to choose between London and Buenos Aires.

Some Labour Party critics of Thatcher's apparent rigidity on the sovereignty issue have dismissed the lifting of the trade embargo as a ploy to ease these pressures on Britain.

But the British government wants to improve relations with Argentina partly because it sees this as a condition of its own economic development plans for the Falkland Islands.

A major airport has been opened in the Falklands at Mount Pleasant and there are plans to use it partly as a point of entry for limited tourism from Europe.

In addition, if a deal could be struck linking Mount Pleasant to an airport in Argentina, flights to the Falklands could become a jumping off point for tours of other Latin American countries.

Having made its move, Britain realizes that Argentine determination to assert its claim to the islands will probably not diminish. On the other hand, there are a number of other decisions Britain could take to keep up the momentum of reconciliation.

It has been suggested that London could offer to talk about sovereignty in 1990, after Alfons'in's presidential term ends.

More modestly, proposals for resumed flights for those wishing to visit war graves in the Falkland Islands are said to be under consideration.

Despite Thatcher's ``iron lady'' determination over sovereignty, the word in Whitehall is: Watch the horizon for more gestures of good faith in the near future -- and keep an eye open for Argentine responses.

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