Veto threat hangs over Gatt round: The oilseeds dispute could yet destroy the world trade talks, David Bowen reports

A NEW crisis that could have destroyed the Uruguay Round of the General Agreement on Tariffs and Trade (Gatt) has been averted by Danish diplomacy. But the message from Gatt's headquarters in Geneva is that the round, the biggest set of trade liberalising measures ever devised, is still under mortal threat from special interest groups on both sides of the Atlantic.

At a meeting in Brussels tomorrow, European Community ministers will discuss the oilseeds deal that was reached after the US threatened retaliation if European countries did not agree to cut their subsidised production. The agreement was bitterly attacked by the French, who said they would use an arcane EC rule to veto it. The Germans and other EC members were determined to push it through with a vote, and only diplomacy by the Danes, who hold the EC presidency, avoided a showdown. The issue will not be brought to a vote tomorrow, and will not have to be settled until after the French elections at the end of the month.

The French government has thus avoided having to choose between using a veto, which would lead to a schism with the Germans and possibly a trade war with the US, and the politically suicidal acceptance of the oilseeds deal.

The confrontation may only have been postponed, however. The Socialist government is expected to be replaced by a right- wing one even more in awe of the agricultural lobby, and probably with a leader with his eye on the presidential elections of 1995. Gatt officials fear that it will be tempted to block the deal and bring the Uruguay Round to its knees. 'The man who succeeds in killing Gatt would be treated as a hero in France,' one said.

The process by which a veto of the deal could lead to collapse of the round is straightforward. The US administration would retaliate by introducing punitive tariffs similar to those threatened in November. The EC would retaliate in kind. Meanwhile Congress would refuse to allow negotiations on the round to continue without concessions that would fatally upset its delicate balance.

Even if the French do not use their veto, the Uruguay Round could still be killed by the Americans. The Gatt community was shocked by the emergence from Washington of a series of demands for changes to the text after the oilseeds deal had been signed.

'The Americans knew they had problems throughout 1992 but didn't want to think about them,' one diplomat said. 'I think they were hoping the changes they wanted would be swallowed when the agricultural deal was done, but they weren't'

The Americans said they would not accept the text on anti-dumping, that they objected to proposals to cut textile tariffs and that they wanted to keep their protection of domestic shipping. There are also pressures in Washington to renegotiate some of the fundamentals of the round, for example by adding an environmental element.

If neither the French nor the Americans throw a spanner into the works, the Uruguay Round will still take about a year to complete, officials believe. The original 'fast-track' authority to get the package through Congress expired last week, and President Bill Clinton is unlikely to ask for its extension until next month.

Congress will take about two months to approve this so negotiations are unlikely to restart until after the summer recess or to finish before the end of the year.