EUROPEAN and American negotiators sit down in Washington today to attempt to resolve a long-standing trade dispute that threatens to become a trade war.
At issue is how much European - and mainly French - farmers will have to cut back on their government-subsidized production of oil seeds, such as soybeans, sunflower, and rapeseed.
However, a lot more than soybeans is at stake. If the two sides can resolve their differences, the settlement should give new impetus to the stalled six year-old Uruguay Round of world trade liberalization talks organized by the Geneva-based General Agreement on Tariffs and Trade (GATT).
If the dispute can't be settled, the United States has already promised to impose 200 percent tariffs on $300 million worth of French white wine, cooking oil, and pet food on Dec. 5. A failure to resolve the issue would most likely end the GATT round. "A lot of business people and policy makers will be saying `What good is this organization? GATT lacks stiff, swift, sure sanctions.' We will probably never get a resolution of this GATT round," says Michael Aho, a trade expert at the Council on Foreign Rel ations in New York.
Steve Yoder, president of the American Soybean Association, says he is optimistic that the two sides can reach an agreement. Yet he warns, "I certainly hope the Europeans are not coming to town to waste our time with the same set of proposals in the past. If the Europeans are not more flexible, there is not much point in talking."
On Nov. 3, the trade talks broke down in Chicago with the two sides reportedly close to settlement. However, European Commission president Jacques Delors reportedly pressured EC officials to back away from the bargaining table. Since then France has become increasingly isolated within the EC. "Now, the French can say all those other folks made them do it," Mr. Aho says.
The US is seeking to have the EC cut back on its subsidies for the production of oil seeds. The US would like the Europeans to place a cap on the amount of metric tons of oil seeds European farmers produce. The Europeans would like to put a cap on the amount of acreage planted. "Either one could get us where we want to be," says Mr. Yoder, "as long as there is not an open-ended ability to increase production." The US is concerned the Europeans will increase their yields per acre.
The EC reports it spent $4.83 billion in 1991 subsidizing 12 million tons of oil seeds. According to some press reports, in the Chicago negotiations the EC had offered to reduce production to 10 million tons while the US was asking for a reduction to 8 million tons.
"We are asking for a significant reduction - we don't want to put any numbers on it," Yoder says. The US Department of Agriculture, which is doing the negotiating, is consulting with the soybean growers.
Although both sides would like to resolve the issue, the dispute will leave a bitter taste in US farmers' mouths. During the 1960-62 Dillon Round of the GATT, the US asked the Europeans to allow US soybeans in without duty. The Europeans, who received a trade concession in return, agreed to not impose duties or hinder the sales of US soybeans. However, the Europeans dramatically increased their production and subsidies, which resulted in lost US sales. The US now estimates the world's farmers are losing $1.7 billion in annual sales including $1 billion to US farmers. Two independent panels have agreed with the US position but the dispute has dragged on since 1987. The EC contends the damage is only $400 million.
If the two sides resolve the issue, it could lead to settlement of other agricultural issues at the GATT negotiations in Geneva. Most of these issues relate to ending subsidies and other trade-distorting practices. As a result there are many lobbies in Washington who will be following the negotiations.
"The corn folks could be next, rice after that, beef, then dairy," Yoder says.
Once the agriculture issues are resolved, the GATT negotiators can move on to services, intellectual property rights (patents and copyrights), and industrial practices. Because of the logjam in agriculture, "there has been practically no progress on services or intellectual property since 1990," Aho says. "A lot of smaller countries have felt `Why show your bottom line on intellectual property if there is no liberalization in agriculture.' "
GATT negotiators, representing 108-nations, are rapidly running out of time. On June 1, a GATT agreement loses fast-track authority in the US Senate which must approve all treaties. Under fast-track authority, a senator can only vote "yea" or "nay." Once fast-track authority expires, amendments could be added to the treaty that would then require further negotiations. Since it will take about 90 days to get the complicated documents through the legislative process, the GATT round must be complete by earl y in March.