Gatt fuse burns dangerously low as deadline nears: Severe problems hang over world trade accord as Washington and Europe remain locked in last-minute negotiations

THE FUSE that leads to Gatt's Wednesday deadline was burning yesterday, as negotiators struggled to salvage a deal from the obstacles that risk destroying the most ambitious liberalisation of the world trading system ever attempted.

The European Union's chief negotiator, Sir Leon Brittan, who flew to Gatt's Geneva headquarters to see his Japanese, Canadian and US counterparts, emerged from the long meetings declaring that the talks were in trouble.

'We have very severe problems at the moment. Things are not looking good. I think we have a bit of a crisis on our hands,' he said. The US special trade representative, Mickey Kantor, was more optimistic: 'I think the odds have certainly shifted in favour of a successful completion but we're not there,' he said. Sir Leon and Mr Kantor were due to hold further talks last night.

Peter Sutherland, the Gatt director-general whose job is to steer all 115 parties to the General Agreement on Tariffs and Trade to an accord by 15 December, put pressure on the two trade blocs to end the logjam by laying the responsibility for failure squarely at their doors. He called on the EU and US to bury the hatchet and match their pro-Gatt rhetoric with results. Only then, he said, could a deal be sealed, noting that Wednesday's deadline 'was not an expendable date'.

The 103 other parties to the talks have dealt with most of the other dossiers - most crucially agricultural trade - in a series of tradeoffs agreed over the past weeks. Only a few problems remain, yet failure on these will blow agreements on everything else out of the water.

Mr Sutherland had hoped to have the bare bones of the free-trade package ready yesterday, in time for the legal texts to be prepared and shown to goverments before Wednesday's meeting, when all parties to the Gatt will signal whether or not they can accept a deal. But that deadline has slipped - it is now clear that the negotiations will go on up to the very last minute.

In Brussels, the European partners over the weekend made a big push for victory by resolving internal squabbles to the satisfaction of France, whose antagonism to several sections of the proposed Gatt deal and efforts to extract compensation guarantees, have for so long prevented the European Union from presenting a united front.

Gerard Longuet, the French Foreign Trade Minister, was optimistic yesterday about the chances for a deal. 'I think we are going to get there . . . I deeply hope so,' he said.

The remaining obstacles will be hard to remove, in part because of the strength of the vested interests backing them; Geneva is bristling with lobby groups. They are:

Audiovisual - The EU wants a 'cultural protection' clause and control over the introduction of hi-tech developments in the future.

Aeronautics - The US complains of unfair European subsidies for Airbus. Europe says the US makes 'hidden' subsidies through support for military programmes.

Trade rules: The US wants to keep the right to act unilaterally against unfair trading. This is particularly contested by Japan and South-east Asian countries.

Services - This area accounts for a third of world trade. The US intends to open its markets wider to some countries than to others, which is unacceptable to everybody. But there is agreement that Japan must also move further. Washington is also reluctant to open its market in maritime services.

There was little progress in any of these areas at the weekend and Mr Sutherland said it was not possible to drop difficult dossiers. On Gatt, nothing is decided until everything is decided.

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