Hopes of trade deal rise as US agrees to talk

HOPES that a deal in the General Agreement on Tariffs and Trade (Gatt) might be imminent flared to life as the European Community's chief negotiator announced last night that he was leaving for the United States, probably early today, for face-to-face negotiations with his US colleagues.

Earlier, Ray MacSharry, the EC Commissioner for Agriculture, had said he was 'happy to fly anywhere, any time', but that a meeting was 'up to them', suggesting further talks were useless unless the US improved its offer.

Breaking the deadlock on an agricultural package would dynamite the logjam that has prevented the most comprehensive liberalisation of the world's trading system recently attempted.

That a meeting is to take place suggests the US is ready to deal. Mr MacSharry made a lengthy telephone call to Ed Madigan, the US Agriculture Secretary, on Monday night. The negotiations were said then to have reached stalemate. But a call yesterday afternoon signalled an apparent new flexibility.

George Bush has everything to gain from a deal and yesterday accordingly talked up the prospect of a breakthrough to farmers in Iowa - the heart of the US grain belt. His optimism has been echoed by the EC Commission, negotiating on behalf of the 12 member states all week. A senior official said yesterday that the gap separating the two sides had narrowed considerably.

Douglas Hurd, the Foreign Secretary, told the European Parliament: 'We do see here a dramatic opportunity for the Commission to show that it rises fully to the occasion. This is a chance to show we're not going to allow our undoubted political differences at home to deter us from reaching an agreement of benefit to us all.'

The agricultural row has been pared down to three main issues:

A US demand that the EC reduce its cereal exports by 24 per cent over six years.

A reduction in EC production of oilseeds. The US has complained that EC subsidies to oilseed producers damage the competitiveness of US soya bean exports. Washington has threatened punitive tariffs on EC exports to the US if the dispute is not settled.

EC insistence that the US impose export restraints on some products to 're-balance' the Community's concessions.

France's refusal to countenance a reduction in export volumes, supported by Spain and Ireland, panders to the farmers' lobby. But it is based on an argument that the EC has overstretched itself by putting together a Gatt deal that goes beyond the reductions imposed by the recent reform of European policy. The EC denies this.

The possibility of a deal has added to pressure on France to moderate its tone. Frans Andriessen, the EC Commissioner for Trade, said a deal would be good for French farmers.

He also laid bare the rift within the Commission by saying he did not agree with Jacques Delors, who has been criticised for identifying too closely with the French cause. Mr Andriessen said later: 'I am convinced an agreement is in reach as far as the substance is concerned.' But he warned: 'I still think we've got to find answers to political problems.'