Is Washington Getting Ready To Give Up On Gatt?

Many important issues hang in the balance in the Presidential election. But for gourmands, the most critical may be the price of a bottle of Bordeaux. The U.S. and the Europeans--particularly the French--have been at odds for more than a decade over farm subsidies. After the voters go to the polls on Nov. 3, it's unlikely the Bush Administration will see much point in prolonging the agony. And should President Bush lose, he need no longer worry about the ire of American consumers. That means he may heed a four-year-old demand by U.S. soybean farmers angry over European Community subsidies and impose 100% duties on French food imports, among them wine, brandy, cheese, truffles, and sausage.

The list represents some $300 million worth of annual imports. And it could be just the beginning of a round of tit-for-tat trade retaliation. Such may be the denouement of an exhausting seven-year struggle to fashion a worldwide trade pact. The Bush White House has shown near-infinite patience with the negotiations, held under the auspices of the Geneva-based General Agreement on Tariffs & Trade (GATT). Small wonder that wags dismiss the bargaining as the Gentlemen's Agreement to Talk & Talk. Under two successive Republican Administrations, the White House has used the ongoing bargaining as an excuse to turn aside pleas for help from beleaguered U.S. industries.

RICE RUCKUS. The Bush Administration held off on imposing trade sanctions in hopes that the soybean dispute and dozens of others could be resolved through the multilateral talks. But Bush is both losing patience and trying to win the votes of farmers, who say they are losing $1 billion a year in soybean exports alone because of Europe's intransigence on subsidies. So, at an Oct. 27 campaign stop in Des Moines, Bush proclaimed: "We are going to have to insist that if they don't open up these markets--would use a little softer term than retaliate--but we are going to have to insist on our rights."

There are other signs that the U.S. is giving up hopes that the GATT logjam will be broken. Take the plight of the U.S. rice industry. Twice, in 1986 and 1988, the White House turned down formal petitions from the Rice Millers' Assn. to force open the closed Japanese rice market. The Reagan Administration promised instead to take care of the problem in the Uruguay Round, as the current stage of GATT talks is called.

Now, the U.S. rice industry, which has watched its share of the world market decline from 21% to 15.7% in just four years, is crafting a new strategy that would target Japan, Korea, and the European Community for retaliation for their closed markets and massive production subsidies. "The Europeans and the Japanese are playing the same hand--doing exactly to us what they did to the U.S. soybean industry," says association President David R. Graves. He estimates European rice subsidies at $400 a ton, higher even than the world market sales price of $325 a ton. For American rice growers, there doesn't even appear to be much incentive to go on talking. Tokyo has said the latest compromise proposal is still unsatisfactory, even though it would give imports just 3% of the Japanese market.

SNIPING. Europeans have threatened counterretaliation for any U.S. action on soybeans. And the French have dug in their heels on the trade talks. President Francois Mitterrand's shaky Socialist government would rather not anger the powerful French farm lobby before parliamentary elections next March. "If the Americans want an agreement, they have to make new offers," says Agriculture Minister Jean-Pierre Soisson.

Still, sniping is more likely than an all-out trade war. The White House is being careful to avoid levying duties on European food imports that do not come primarily from France, such as olive oil or gin. If foot-dragging France is hurt the worst by carefully targeted retaliatory U.S. tariffs, Paris may have difficulty persuading other EC members to fire the next shot at Washington. And other EC nations are tired of taking the heat for the French.

If the trade talks don't explode in a round of recriminations, they may just die a quiet death fairly soon. Without new congressional action, the White House's authority to conduct the negotiations runs out on Mar. 1. While Bill Clinton has endorsed the GATT process, it's unlikely that he would place continued talks at the top of his agenda.

One possible scenario: a face-saving announcement of an agreement in principle with details to be hammered out later, long a ploy in trade negotiations. And then break out the champagne--French, of course.

      European products targeted for U.S. retaliation
      CHEESE         CUT FLOWERS
      SAUSAGE        CAVIAR
      BRANDY         LIQUEURS
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