French obstruction may provoke US trade sanctions

The prospect that France's EC partners might override its veto to force through a compromise on international trade with the US appeared to draw closer last night.

There was rising anger in European capitals as talks in Brussels between US and EC negotiators to overcome differences on agricultural subsidies appeared to have broken off. In Washington, the White House was considering trade sanctions worth dollars 1bn, aimed especially at products from France.

Jurgen Mollemann, the German Economics Minister, accused the French government of being 'motivated by questions of domestic policy' in its repeated attempts to sabotage the negotiations. His words came on top of John Major's stern attack in the Commons on Roland Dumas, the French Foreign Minister.

British officials said they were not ready to challenge France's right to veto a deal on the grounds of a threat to its vital national interests, since no agreement is yet on the table. But there is increasing concern that French obstruction is making it almost impossible for the EC and US to agree.

US officials said EC negotiators had reneged on concessions offered in previous meetings. 'It seems the French have taken control,' one remarked.

The suspension of the Gatt talks gives the French government much-needed breathing space during the autumn, the season of strikes and protests. It takes some of the pressure off the minority Socialist government in the five months before National Assembly elections.

French ministers have warned Community colleagues in private that they fear the government might fall if it is forced to accept a compromise on the farm trade dispute, which has for the past two years held up a wider trade agreement between some 108 countries. But now the dispute is threatening to become a full-scale trade conflict.

US trade officials confirmed yesterday that unilateral retaliation was being considered as an 'option'. Such action could trigger a long and debilitating tit-for-tat trade war between Europe and the US, perhaps dooming the six-year-old negotiations on liberalising world trade.

Sanctions would be in retaliation against EC subsidies on oilseeds and cereal exports. According to one diplomat the US wants a 10 per cent cut in the area of land where the EC subsidises oilseeds growers, and a cut of between 22 and 24 per cent in subsidised cereal exports.

Mr Dumas said in an open letter published today in the Journal de la Dordogne, where he has his constituency, that no serious talks could be held until after the US election next month. 'The current state of negotiations does not permit a conclusion now because the talks have not reached a fair balance,' Mr Dumas said in his 'letter to my friends, the farmers'. He asked how Europe could agree to reduce exports 'when the Bush administration announces new aid for agriculture in the United States'.

'Whoever wins the US election, a serious discussion cannot begin for several months on subjects which determine the lives and survival of many French families who earn their living from the land.'