View from City Road: No winners in a trade war

THE SCALE of the disaster if the Gatt talks collapse is hard to overstate: it seems inconceivable that they will be allowed to.

But what if the unthinkable does happen? The immediate problem will be US retaliations. Although the arguments are about agriculture, the list of European products the Americans have hinted that they will tax is a pragmatic one, designed to affect easily identifiable products. In July, they published a 'hit list' of dollars 2bn ( pounds 1.24bn) worth of products including wine, cheese, biscuits, gin, liqueurs and tobacco.

The list was designed to force the Europeans to back down in the oilseeds dispute, but makes a handy all-purpose Gatt sledgehammer. Only dollars 1bn of the dollars 2bn worth of products will be targeted: these could be named at any moment, and at that stage investors will be able to see which British companies will be in trouble. It is a fair bet that Grand Metropolitan, Allied-Lyons and Guinness - three of the biggest spirit companies in the world - will not escape the wrath of the US administration, and there are indications that they have been preparing for this by stockpiling bottles in the US. Britain is also a big exporter of biscuits, with United Biscuits the most obvious loser.

We can only speculate what would happen next. Best solution for the British would be if the Europeans gave way: this is, after all, a French-US dispute at root, and there is nothing British food companies would like more than the thoroughgoing reform of the CAP the Americans are demanding.

The alternative is that the Europeans counter-attack with their own restrictions, and it does not take much imagination to see that full-scale protectionism could follow. Everyone would then be a loser, because every economy would stagnate.

Investors have yet to take the risks on board. There was hardly a flicker on the stock market yesterday, not even among the food and drink companies. But once investors come to terms with the serious consequences of a Gatt breakdown, prices could start to weaken.