GATT Talks Teeter Over Subsidies

FOUR years of international trade talks, originally designed to usher in an era of freer world trade and more open markets, stood on the verge of collapse yesterday, as the European Community held firm to a plan for agricultural subsidy cuts that its trading partners reject as inadequate. The deadlock results from the EC's refusal to modify its proposal for a 30 percent reduction in farm supports over 10 years.

There was still some possibility of a backdown by EC farm and trade ministers late yesterday, that could save the so-called Uruguay Round of the General Agreement on Tariffs and Trade, or GATT, from failure.

But with words like ``stalemate,'' ``intransigence,'' and ``propaganda'' dominating the 100-nation talks, no breakthrough appeared able to deliver the ambitious results first envisioned in 1986 for 15 sectors, from textiles and services to dispute settlement.

International trade regulations to further the development of a ``new world order'' after the end of the cold war also have yet to take shape.

Before the GATT ministerial meeting opened Monday, some United States representatives and others expressed hope that a successful conclusion could add an economic dimension to the ``new world order'' touted by Washington officials and echoed by Soviet leader Mikhail Gorbachev and others.

Such lofty goals appear especially unrealistic, however, with the talks almost hopelessly stuck on the issue of farm trade liberalization.

The US and the Cairns Group of 13 food-exporting nations, including Canada, Australia, New Zealand, and Argentina, say the GATT talks cannot move forward without specific EC proposals for cutting agricultural export subsidies and improving market access.

``The process stands blocked at this stage, and the conference is in a very serious impasse,'' says Trade Negotiating Committee Chairman Hector Gros Espiell, Uruguay's minister of foreign affairs.

Earlier Rufus Yerxa, the deputy US trade representative said the negotiations ``are very close to collapse.''

Mr. Yerxa summed up the GATT impasse as the ``EC against the world.''

But the US remains somewhat isolated on the issue of services liberalization, and a number of developing countries still are dissatisfied with proposals offered on textiles.

Still, officials from various countries and trade groups, including the EC, say they believe negotiations can yet deliver significant progress in almost all sectors if the impasse over agriculture is broken. The talks are scheduled to close tomorrow.

The agriculture issue poses a fundamental problem for the EC. The Community Agricultural Policy (CAP), which accounts for 55 percent of the EC's budget and keeps many of Europe's 10 million farmers in business, was one of the catalysts for the Community's creation.

Two of the policy's cornerstones, subsidies to export high-priced European farm products and an internal preference for EC products, remain primary targets for international free-traders.

In addition, with the Community less than 10 days away from the opening of constitution-amending conferences on further economic and political union, the agriculture controversy is challenging cohesion among the EC's 12 members.

France and Germany have traditionally acted as the motor for major Community initiatives. But some German officials indicated Tuesday that their country might be willing to consider new agriculture initiatives, a move that remains anathema to the French.

After watching Monday's demonstration in Brussels by 30,000 European farmers opposed to any CAP adjustments, and recalling summertime violence carried out by French farmers over falling income and rising food imports, a French observer at GATT said, ``Where's our margin of maneuver? In France there are all those rural folks ready to break things up if the EC goes any farther.''