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BREAKING THE DEADLOCK IN THE TRADE SQUABBLE
President George Bush definitely got the European Community's attention with his move to impose a new duty of 200% on French wines and other imports starting on Dec. 5 (page 34). The EC quickly agreed to a new meeting with U.S. trade officials to try to settle the dispute over EC farm subsidies, which displace U.S. soybean exports to the European market.
That's the immediate problem, but a far larger issue is whether the EC will make broader concessions on its highly protectionist farm policy. That might break the deadlock in negotiations to liberalize trade in merchandise and services among 108 nations in the General Agreement on Tariffs & Trade. This pact represents the best chance to spur renewed worldwide economic growth by stimulating hundreds of billions of dollars of added trade.
EC leaders should view the U.S. alert as a last call for make-or-break action on the agricultural deadlock. The EC has ignored two gatt rulings that the subsidies to European oilseed farmers distort normal trade.
To end the impasse, it will be up to German Chancellor Helmut Kohl and British Prime Minister John Major to put pressure on French President Francois Mitterrand, who is blocking measures to ease the EC's agricultural protectionism for fear of a political backlash from French farmers.
A breakthrough on oilseeds would open the way for compromises on other agricultural issues, including U.S. farm subsidies and agricultural import barriers. And for leaders worried about the backlash from farm lobbies on both sides of the Atlantic, losing the chance to lift the global economy out of the doldrums could be politically far more costly.