The Gatt Dispute: Row over details threatens trade war

The European Community and the United States are playing an elaborate game of international chicken, said trade experts in Brussels yesterday.

The two sides appear to be within a whisker of a deal that could break the deadlock in the Uruguay Round of trade negotiations and make possible an agreement covering 108 countries and a whole range of industrial sectors. Economists have estimated that an agreement could increase world trade by some dollars 200bn ( pounds 114bn), and add a full percentage point to British economic growth into the bargain.

But Brussels and Washington were still arguing yesterday over three linked agricultural trade disputes, with the differences between them almost negligible by comparison with the benefits to their own and the world economies that a new agreement under the General Agreement on Tariffs and Trade (Gatt) would bring.

The European Commission, which has a mandate to negotiate with the US on behalf of the Community's 12 members, has begun to say forcefully that the national governments should devote more time to thinking about how to end the recession in Europe. Such are the political sensitivities of the Gatt negotiations, however, that not even Jacques Delors, the Commission's President, has the power to knock European heads together over farm trade.

Ambassadors from neutral countries think that two things caused the abrupt halt to technical negotiations in Brussels between the two sides yesterday. One is the Europeans' desire to take advantage of the weakness of President Bush, and force concessions from him while he remains behind Bill Clinton in the polls.

The other is increasing daily pressure from Paris on both the Commission and other member states not to agree to a deal that will anger French farmers. According to sources in Brussels, French ministers have more than once told their EC counterparts face to face that the government may fall if it is pushed into a Gatt deal that it cannot defend.

But tempers are wearing thin, both in London and in Bonn. Jurgen Mollemann, the German economics minister, said sharply yesterday that there is 'no longer any objective reason' to delay an agreement, and warned that his government would 'consider it irresponsible' if the negotiations were to break down.

British officials say they are even less concerned than the Germans about French sensitivities. John Major issued a firm rebuke in Parliament yesterday when he said he 'could not disagree more strongly' with a statement by Roland Dumas, the French Foreign Minister, that the negotiations are unlikely to produce anything serious for several more weeks.

But Britain is not ready to force a row in the EC Council of Ministers by demanding a straight majority vote on a compromise with the US, if the Commission can bring one. 'Nobody is yet talking about such things,' said one official. 'Until a deal is on the table, we cannot know.'

Members of the Cairns group of agricultural exporters, which includes Australia, Canada and New Zealand, put the blame for the impasse squarely on the Community. 'We want to see specific disciplines on export subsidies accepted by the EC,' said one ambassador in Brussels. 'The reform of the Common Agricultural Policy is an internal one; it doesn't deal specifically with subsidised exports.'

They also fear that the Europeans may be miscalculating if they think Mr Bush can be strong- armed into a deal. 'I don't think the President can take this,' said another senior diplomat. 'He needs to be able to present any compromise as an achievement. With the current EC position, that would be impossible.'