From sheep's milk and molluscs to global trade war

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HERE is the poetry of trade war: vodka and cigars; cheeses made from sheep's milk; gingerbread, oysters, 'snails (other than sea-snails)'; mushrooms, truffles, mangoes, walnuts, beans; flower buds 'for ornamental purposes, fresh, dried, dyed, bleached, impregnated'; vermouth; beef in airtight containers; fish whole or in pieces, but not minced; 'crustaceans, molluscs and other aquatic invertebrates', anchovies, caviar. . .

These may sound like part of a surrealist manifesto or the bill of fare at the latest Soho eaterie. In fact, they are just a few of the European products from a long and manically detailed list that the US trade negotiator Carla Hills produced back in June. She was threatening to block the importation of a wide range of European produce with the use of (in her unequivocal words) 'prohibitive duties'. In Washington this week that list, or an updated version of it, is once again being studied seriously by officials following the lastest breakdown of trade talks with

Europe.

The list is serious. It is part of a game of diplomatic poker that may yet lead to a global trade war. Last night the game was going on at fever-pitch across Europe, with phone-lines buzzing from one head of state to another. The details of protectionism are pernickety, even ludicrous. But its effects could be catastrophic.

If world slump comes, it will make our present economic plight seem mild. Much higher unemployment, much more misery - and the political and international instability that would mean. Such instability is now genuinely feared and talked about by a wide range of European politicians, anxious about the anti-Maastricht backlash, and about the rise of right-wing nationalist politics across Europe. Depression here is a serious possibility. And, as with the depression of the Thirties, protectionism would be the midwife to slump. The trading blocks - in North America, Europe and Asia - already exist. Now, in the midst of world recession, an accelerating protectionist race between them can no longer be ruled out.

Away from the front-page dramas about John Major's survival, interest rates and coal mines, therefore, a private political race to conclude the world trade talks has been obsessing ministers. Across Europe there is deep anxiety about the state of the German economy and the political and economic health of France and Italy, as well as Britain. The so-called Uruguay round of the General Agreement on Tariffs and Trade (Gatt) sounds hideously boring. Don't yawn: it involves millions of jobs and billions of pounds of tomorrow's wealth.

The crisis affecting the Gatt talks is about a forlorn and reactionary attempt to save the jobs of subsidised European farmers, particularly French farmers. Gatt covers a vast range of other goods, services and subsidies, but agriculture is the heart of the problem. Not only do French farmers evoke the kind of public emotion reserved here for the Queen Mother and coal miners, they also have political muscle that neither of the above can dream of. Getting a deal with America on agriculture will mean some French farmers - 8 per cent of the working population - going bankrupt. No wonder a weak government is worried.

The international politics of the Gatt plot is more tangled than that. A deal would help George Bush. It would make the struggling President look a little more effective. Mr Major, who sent his policy adviser Sarah Hogg to Washington to push things along, wants an early Gatt deal. At the Birmingham summit, he thought he had manoeuvred all the European leaders towards such an outcome.

But now it seems that the French Socialist government is trying to delay Gatt for the rest of the year. Although the view from Washington was that the French (unlike the British) wanted to delay Gatt to damage Mr Bush and thus to help Bill Clinton, this is discounted in Europe. But the mood of British ministers - including Mr Major, as he made clear in the Commons yesterday - is of cold fury at French weakness. President Mitterrand fears that doing a deal on Gatt will finally kill off his government. So, reportedly, the French made a series of impossible last-minute demands, which led to a serious breakdown in the talks this week. Delays cannot go on like this for ever, without real retaliations, of the kind the Americans promised in June, starting to happen. Trade wars start small, and spread fast.

Expressions of anger are all very well but the only way Mr Major can get the talks back on the road is by mobilising other European countries, particularly Germany, to put pressure on the French. A diplomatic counter-attack was under way last night.

One of the casualties might be the so- called Luxembourg compromise, a drastic, last-ditch veto used by EC countries to defend their essential national interests. It matters to British Tories, who see it as a bulwark defending the nation-state in the last resort. But if France invoked the compromise (which has no legal force) to block an agriculture deal, she might simply be voted down. The gentleman's agreement would be brutally squashed by other countries, including Britain, in defence of world trade. The Luxembourg compromise matters to the British government. But faced with world slump, free trade comes first in London, and probably in Bonn, too. A new and nasty confrontation seems about to hit Europe.

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