Danger of US retaliation grows as trade talks stall

TALKS AIMED at defusing the politically charged dispute between the European Community and the Clinton administration over discriminatory procurement practices ended in Washington yesterday without any sign of a breakthrough.

Sources said that hopes of averting US trade sanctions due to be implemented on 22 March probably now depend on intervention at the highest political level, possibly during a meeting in Washington next week between Mr Clinton and John Major.

The US believes provisions in a new EC directive setting down common rules for procurement in the telecommunications, energy, water and transport sectors are unfair. It allows companies to reject bids for goods with less than 50 per cent EC-made content and includes a 3 per cent price preference for EC products.

America's retaliatory measures would exclude European companies from bidding for federal contracts in the affected sectors.

This week's talks followed an inconclusive first meeting last week between Sir Leon Brittan, the EC external trade commissioner, and the new US Trade Representative, Mickey Kantor. No further contacts are scheduled until mid-March.

In the area of telecommunications procurements, it was agreed at least to attempt to work for a deal based on mutual recognition. This would mean European companies being accepted as American ones in the US and American firms being similarly treated in Europe. Many details remain to be settled, however.

'I would say that on telecommunications we are considerably more advanced, but on the procurement issue as such you could say we are pretty much stuck,' an EC source said.

EC negotiators have offered to waive all provisions in the directive giving preference to European suppliers on condition that the US can guarantee 'compatible, effective and lasting' access to its market for Europeans.

The EC contends that various 'buy America' regulations in the US represent far greater discrimination than anything in its directive, with price preferences for US companies ranging from 6 to 50 per cent.