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The G7 Summit: France dashes hope of Gatt breakthrough

FRANCE has ruled out all hope of a breakthrough on the deadlocked world-trade talks during the three-day World Economic Summit in Munich. But its decision, intended to avoid a backlash by the nation's farmers at the 20 September French referendum on the Maastricht treaty, leaves the way open for a final settlement late this year.

Today's final communique, officials say, will reflect the leaders' growing belief that an agreement is within reach by the end of the year. James Baker, the US Secretary of State, said he was 'really disappointed' that the summit had been unable to break the deadlock, but added: 'I'm frankly of the view that we are much, much closer to an agreement'.

During a dinner for the leaders of the seven richest industrial countries last night, President Francois Mitterrand made it clear that he did not want to risk a negative response from farmers in the referendum. Mr Mitterrand's uncompromising posture came despite strong indications that the US was ready to reduce differences with the European Community over the depth of cuts in farm export subsidies - the main barrier to an overall Gatt accord.

The French decision also represents an embarrassing setback for John Major, the Prime Minister, who launched a high-profile effort to make significant progress on the Uruguay Round at Munich. His aspirations were shared by many other leaders, who recognise that a Gatt deal could do much to transform the sluggish world economic recovery. A senior British official said that Britain would continue to press for a Gatt agreement during Britain's six-month presidency of the EC.

According to G7 officials, both the US and the EC admitted that remaining technical differences between them were now slight, but the political will for an accord had been sunk by France. Mr Major was said to be frustrated that at the two previous G7 Summits the leaders had pledged their personal commitment to conclude the Uruguay Round, which is intended to liberalise world trade in agriculture, services and foreign investment, as well continue the work of lowering the tariffs holding up trade in manufactured goods. But in effect they reneged, which has damaged the public image of the summits.

However, French intransigence was not the only reason that Munich was unable to come up with a Gatt breakthrough. Japan, which would be forced to open up, at least partially, its protected rice market, faces elections this month and did not want an agreement to affect the election campaign.

US officials insisted that President George Bush was prepared to take the political risk of angering his own farmers by compromising on the tough US stand on farm export subsidies. But some leaders believe that he might not want a Gatt agreement to become an issue during the presidential election campaign, where protectionist posturing is thought to have benefited Ross Perot, the independent candidate.

Nevertheless, US officials said President Bush had ordered that there should be 'no slowdown' on the Gatt talks and was ready to authorise high-level ministerial consultations after the summit. Mr Mitterrand scotched any chance even of that. He said that no talks were possible before the Maastricht referendum. A US official said: 'A political push has been given at Munich and the communique reflects this.'

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