Battle of the baguette in Senegal: Competition erodes traditional ties. Africa's former colonial rulers face a dilemma. They favor trade liberalization in Africa, but such reforms make it harder for them to sell their goods.

When the United States wanted to sell 100,000 tons of subsidized wheat to Senegal last year, the French made a last-ditch effort to keep the market in French hands. One cannot make good French bread with American wheat, French diplomats here insisted. US diplomats responded by bringing in a shipment of American flour, instructing bakers in this West African country how to adjust to the new grain and finally producing a tasty baguette that clinched the deal.

This year there will be no bake-off in the former French colony. According to Senegalese and other sources, the French wheat importer - who also owns the grain shipper and the largest mill in Senegal - used connections to French Prime Minister Jacques Chirac to persuade the Senegalese to buy French again.

Negotiations are still under way. But the sources say that a combination of political pressure and European Community (EC) subsidies will almost ensure that Senegalese breads will once again be made with French flour - even though US export subsidies make American wheat less expensive to this cash-strapped government.

The Senegalese wheat deal underlines a dilemma faced by the former colonial powers in Africa. While liberalization of trade and investment may make struggling African economies stronger and less dependent on aid, it also means Europeans are losing some of the economic benefits that have accompanied their special status.

Before the African nations gained independence, Europeans monopolized these economies. And today, Western Europe still usually holds a privileged position in local markets.

World Bank figures show 25 of 46 Sub-Saharan African nations are liberalizing, inspired by the International Monetary Fund and the World Bank, that reorients their economies toward the free market. One aid official in Dakar called the trend part of a ``historical evolution toward integration with the rest of the world.''

France is Senegal's largest trading partner, aid donor, and military supporter. The CFA, Francophone West Africa's currency, is tied to the franc, most urban Senegalese speak French, and cultural affinities remain strong between the two countries. In streets crowded with Peugeots and Citroens, ``You can count the number of Chevrolets on one hand,'' said a US diplomat in Dakar, Senegal's capital.

The French-controlled sugar, flour, and other industries - like many Senegalese-owned companies - retain monopoly or near-monopoly powers granted during the capital-hungry days after Senegal's independence in 1960.

But, as Senegal embraces the liberal economic policies - a process begun in earnest last year - and continues to open its borders to more foreign trade and investment, it creates opportunities for US, Asian, and non-French European businesses.

``The Senegalese have definitely been willing to diversify their sources of supply,'' said a US banker. ``They do feel they have been too dependent on the French.''

Senegal's mostly rural population of 6.7 million is a small market by US standards, but the country is pushing for foreign investors. The government recently sent delegations to New York and Ohio as well as to Brussels.

Former Ambassador to the US Abdourahmane Dia, the director of Dakar's industrial zone, says progress in attracting US investment has been slow, but argues that the potential is great.

``The best way now [for Americans] to penetrate the EC is to transfer technology and capital to Senegal,'' said Mr. Dia, noting that US products made in Senegal can be sold duty-free on the common market.

Mr. Dia said the Belgians and Dutch have shown some interest in Senegal, and officials say Asian companies are selling wire products and cookware here.

The trade liberalization puts the French government in a particular bind. France hopes for economic growth to make Senegal less dependent on its aid, but it must also protect French businesses that could be hurt by the new free-market policies.

The French are torn over the question of reducing Senegalese subsidies for the French-owned sugar monopoly, which sells sugar here at three times the world price.

``If the government of Senegal is subsidizing a business here, and the government of Senegal doesn't have sufficient resources, then that has to come from the donors,'' said a US diplomat. ``And the French are the largest donors and the donors of last resort.''

According to an aid official: ``The French are not speaking with the same tongue. ... There are individual interests that color the French position.''

So, while US and World Bank officials push for further reforms, the French preach caution, apparently out of a concern that rapid liberalization will cause unemployment as well as damage French commercial interests.

Many officials, however, view the French dilemma with sympathy. France, after all, gives Senegal many times more aid than the US does.

``Trade accompanies aid,'' said the aid official. ``If the US wants more investment, they should give more aid.''

Thus, despite challenges like the US baguette invasion, France will likely remain the dominant foreign economic power in Senegal for many years.

The next step, however, in weakening the ties between France and its former colony could come in 1992.

In that year, the EC hopes to expand the use of the European currency unit. If West Germany or some other EC member objects to supporting Francophone West Africa's trade deficits, then Senegal and its neighbors may have to issue independent currencies.

That would take away one key advantage French businesses now enjoy in Senegal and, the aid official said, could signal the start of ``a whole new ball game.''