Impasse on Farm Subsidies Stalls Accord at GATT Talks

MONTREAL — Efforts by the world’s trade ministers to jump start the stalled Uruguay Round of global trade-liberalization talks ended in disarray Thursday as an impasse between the United States and Europe over how far to go in reducing farm subsidies blocked progress on several other key issues.

In an attempt to salvage this past week’s work, the ministers referred the entire discussion to the Geneva-based General Agreement on Tariffs and Trade, with orders to try to muster a consensus on the unresolved issues in time for a special meeting of trade negotiators in Geneva during the first week in April.

U.S. Trade Representative Clayton K. Yeutter, one of those sponsoring the salvage plan, said the idea was to keep up the pressure on negotiators to compromise on outstanding issues. Under the plan, none of the provisions that have been adopted so far or are still on the agenda will be put into effect until the entire package is approved.

Yeutter also hinted that the United States made some concessions of its own on its demands that the Europeans agree to eliminate agriculture subsidies and trade barriers. The Europeans had sought language that would call simply for a substantial reduction in these barriers.

However, it was clear that the rescue effort would be an uphill fight. Divisions among ministers on many of the issues at this week’s meeting were unusually deep. The U.S.-European impasse on the agriculture issue was especially rigid.

This past week’s meeting was designed to be a stock-taking session in which ministers were to review the negotiations completed so far in the two-year-old Uruguay Round trade talks and set guidelines for negotiators to use in the final--and presumably crucial--two years of talks.

The trade ministers worked out a negotiating mandate this week for future talks on writing new rules to cover trade in services. And they completed 10 less sweeping accords on strengthening international machinery for settling trade disputes, increasing the power of GATT, cutting tariffs and drafting new rules to cover trade-related foreign investment problems.

But the group failed to reach agreement on a spate of other items, including a major U.S. proposal to improve protection for patents and copyrights. The ministers also fell short of reaching an accord on a proposal to deal with textile trade.

Both U.S. and European officials insisted that the failure of this past week’s session would not necessarily derail the overall negotiations, which are scheduled to continue until late 1990. “I don’t think we should dramatize things,” said Willy De Clercq, the European Common Market’s trade minister. “We still have a couple of years left.”

Nevertheless, the fact that the United States and other major industrial nations did not win accords on two of the three biggest issues on the agendas was considered likely to cast a cloud over the talks and force the incoming Bush Administration to fashion its own trade policies quickly. President-elect George Bush was consulted before the U.S. delegation came to Montreal. However, the new trade representative he has chosen, Carla Hills, is not widely experienced in the field.

Separately, Yeutter announced that the Administration will not reopen a complaint by American rice growers that Japan is unfairly barring imports of U.S. rice.

The trade representative had shelved the U.S. industry’s complaint in late October on grounds that it would be too difficult for Japan to open its rice markets very quickly because of political and cultural factors. But he warned that he would reopen the case if Japanese trade officials did not support the United States at this week’s meeting.

U.S. officials said the Japanese generally supported the U.S. agenda at the sessions and, in fact, escaped criticism by even the Europeans, who are angry at Tokyo for keeping some markets closed.

The deadlock between the United States and Europe came over American demands that the trade ministers commit themselves to phasing out agricultural subsidies and trade barriers entirely by a specified date--a goal that President Reagan has said was necessary to guarantee serious progress in reducing the cost of farm subsidies.

Common Market negotiators contend that agreeing to a complete elimination of current supports--even in 15 or 20 years, as the United States has been suggesting, would amount to dismantling Europe’s longstanding Common Agricultural Policy and risking serious political and social disruption. Europe has 11 million farmers, many on small, inefficient spreads. By contrast, the United States has only 2.5 million.

The agreement on services, worked out during an all-night bargaining session here, commits the trading nations to drafting plans for broadening foreigners’ access to their domestic markets for services--mainly by reducing existing trade barriers.

Parallel Talks

It also instructs negotiators to extend to industries in the service sector several key principles that now apply only to trade in goods--specifically, that countries treat foreign companies the same as they treat domestic firms and that they offer the same privileges to companies from all countries.

At U.S. insistence, the accord also allows negotiators the option of conducting parallel but separate talks to write rules to cover financial services. That move was designed to provide other countries with a kind of insurance policy against possible demands by the Europeans that other countries offer European banks equal access to their own markets in exchange for entry into the new integrated European market set to begin in 1992.

U.S. officials had been concerned, for example, that the Europeans would bar American banks from doing business on the Continent unless Washington guaranteed that all European banks could do business throughout the United States. The federal government could not mandate this if it wanted to, because banking in the United States is regulated in part by the states.

Besides the agreement on services, the ministers also approved accords that would:

- Reduce tariffs worldwide by an average 30% below their levels of September, 1986, when the Uruguay Round was launched.

- Strengthen the enforcement powers of GATT, including speeding up the time it takes for a GATT panel to decide whether a country has been engaging in unfair trade practices.