US and European Community lock horns over farm subsidies. Delay of trade talks until April may buy time to negotiate a breakthrough
Montreal — The disagreement that stalled negotiations here last week for a revamped world trading system seemed to be mainly over words. The chief stumbling block was whether trade-distorting farm subsidies should eventually be ``eliminated,'' as the United States insists, or merely be ``reduced,'' as the European Community desires.
The European Community (EC) views ``elimination'' of subsidies as unrealistic. It is willing to talk only about subsidy ``reductions.''
John Crosbie, Canada's international trade minister, says that the US-EC difference is not just semantic. He had proposed the following wording for a deal, hoping to avoid the dispute: ``The ultimate goal would be to move to agricultural policies having minimal effects on trade.'' EC officials rejected that language, too.
Behind this unresolved dispute lie key political and economic interests.
``It is a question of political will,'' says Arthur Dunkel, director-general of the 96-nation General Agreement on Tariffs and Trade (GATT), an organization that has the basic goal of liberalizing trade.
Mr. Dunkel spoke Friday at a press conference, winding up a week-long ``midterm review'' of the Uruguay Round - trade talks aimed at removing many obstacles to international commerce in industrial goods, agricultural products, services, intellectual property (such as patents, copyrights, and software), and trade-related investment. It was the eighth and broadest such round of negotiations since 1947.
With an EC-US stalemate the round, the major negotiators agreed at the last moment to delay further talks to the first week of April in Geneva.
``We could have lost the whole package. It is a clever means of safeguarding what we have got,'' a GATT spokesman said.
Outlines for 10 of 15 topics were agreed on before or at this meeting, along with an actual package of trade concessions on tropical products.
Negotiating packages for four topics - clothing and textiles, intellectual property, safeguards against import surges, and agriculture - were not resolved. It is hoped that political pressures, time, and Dunkel's tour of the key capitals will produce a breakthrough by April.
The delay is not expected to prompt protectionist measures. ``I see no shooting war breaking out,'' says William Miner, a trade policy adviser in Ottawa.
Nonetheless, some trade difficulties lie ahead. The EC plans to put into effect on Jan. 1 a ban on imports of meat from animals treated with growth hormones. The action would result in the loss of $169 million in sales for US producers. The US trade representative, Clayton Yeutter, has threatened to retaliate with 100 percent duties on a range of EC products.
Officially the Uruguay Round has another two years to go. But some experts say it could last somewhat longer, with a final deadline set by the fact that US legislation granting negotiating authority to the administration expires May 31, 1991.
Mr. Yeutter argues that American farmers can be persuaded that elimination of trade-distorting subsidies would be good for them. The US and the EC spend some $80 billion a year to support their farmers.
``There is not any evidence of [EC] willingness to change its `common agricultural policy,''' Mr. Crosbie says. The CAP, as European farm policy is referred to, protects farmers in the 12 member nations from imports to a considerable degree, maintains domestic food prices above world market prices, and subsidizes exports of surplus farm production. The CAP has been costly, although the price-raising impact on farm products of this year's droughts in the US, Canada, and elsewhere has eased that budget burden.
There are 11 million farmers in the EC, though the number is declining rapidly. There are 2 million farmers in the US. Farm efficiency has dramatically increased in northern Europe, but has lagged in Portugal, Spain, Greece, and southern Italy.
Politically, the few farmers of West Germany may be the most important. They give the ruling party the margin of votes it needs to stay in power. In return, the government insists on high enough EC price supports that help West German farmers prosper.
To get a GATT agreement, experts say, West German Chancellor Helmut Kohl would have to take more of a risk with his farm constituents.