Last-ditch bid to avert trade war

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A LAST-DITCH attempt to avert a trade war between the United States and Europe will be made tomorrow when Ed Madigan, the US Agriculture Secretary, meets Ray McSharry, his opposite number at the European Commission, near Chicago.

The two will meet less than 48 hours before Americans start to go to the polls for their presidential election. Analysts believe that no compromise will be possible for several months if one cannot be struck before the election.

Some 108 countries, signatories to the General Agreement on Tariffs and Trade (Gatt), will watch the talks for signs of a deal that could unblock a wider international trade agreement that they have been trying to achieve in Gatt's Uruguay round of negotiations for the past six years. The transatlantic dispute has prevented any progress for almost two years.

The US-EC dispute focuses on the billions of pounds that the Community pays every year to exporters of grain and other farm products, and to the growers of soyabeans and other oilseeds. Having agreed an unprecedented reform of its Common Agricultural Policy earlier this year, the EC has been reluctant to accede to US demands that it should make further swingeing cuts.

The difference between the two sides is now only half a million tons of soyabeans and a couple of percentage points' cut in the proportion by which the EC would reduce subsidised exports.

Recent polls suggesting that George Bush has sharply narrowed Bill Clinton's lead in the presidential campaign mean that even the small boost to Mr Bush's fortunes that would come from announcing a Gatt deal might be the factor that helps him to win re- election. But the President's campaign managers are reluctant to stake too much on a deal.

EC politicians, however, appear to have scented a breakthrough. On Thursday, Dominique Strauss- Kahn, the French Industry Minister and a leading opponent of further European concessions, said a deal might come 'at any time'.

But Michel Sapin, France's Finance Minister, has continued to dismiss talk of a deal before the US election. He and other ministers are under unprecedented pressure from France's one million farmers, who stand to lose the most from cuts in subsidies and are the most vehemently opposed to any European concessions.

A Gatt breakthrough would be an important psychological boost to the depressed stock markets of Europe and the US; more importantly, it could inject up to pounds 114bn of new trade into the world economy, adding one percentage point to Britain's annual growth rate for the next five years.