Kohl Visit Highlights Dispute With US Over Farm Subsidies

AGAINST a backdrop of darkened world-trade figures, German Chancellor Helmut Kohl visits President Bush at Camp David this weekend with proposals to break a long-running transatlantic agriculture trade dispute that remains the greatest stumbling block to major trade liberalization accords.

In an attempt to break the deadlock between the United States and European Community, Mr. Kohl is expected to propose a US freeze on exports of cereals substitutes to the EC in exchange for quantity restrictions on EC farm exports, a key US demand that until now has met with firm resistance.

The agriculture trade issue has dominated the five-year-old Uruguay Round of international trade talks ever since the 108-nation General Agreement on Tariffs and Trade (GATT) negotiations collapsed in US-EC acrimony in December 1990.

Since then, international trade officials have warned of the harmful effects that failure in the GATT talks and regional trade-bloc development would have on world-trade growth. Figures released by GATT this week show trade growth already slowing to 3 percent in 1991 - down from 5 percent in 1990.

Slowing trade growth and recession in countries like the US and Britain has made international trade liberalization more urgent, but at the same time more difficult, trade officials say. GATT experts acknowledge that depressed economic conditions favor protectionist tendencies, even though increased trade through freer trade rules is the sole viable global economic solution.

Hopes for the Uruguay Round, which would extend trade rules to services, intellectual property, and public works contracts, in addition to agriculture, have been swinging on a pendulum since the 1990 collapse.

The latest swing to optimism occurred last week when the US made new concessions, accepting an EC plan to implement direct income supports to make up for lost export revenue.

One of the keys to Kohl's success in talks with Bush will be whether he can convincingly represent not just Germany but the positions of the EC Commission and other EC countries, particularly France. The trade talks were a key issue when Kohl visited President Bush in May of last year. Washington had high hopes that Bonn could persuade the French - considered the main obstacle on agricultural issues - to accept a compromise. But in the year past, Washington has learned that it overestimated the ability o f the Germans to deliver the French, says a US diplomat in Bonn. "The Germans haven't been able to encourage the French to the degree the Bush administration thought they could," he said.

Despite renewed optimism among some EC and US officials that conclusion of the Uruguay Round before summer is possible, the pendulum probably retreated a few notches again this week after a decision from a GATT panel siding with the US on its complaint over EC assistance to seed-oil producers.

The decision is unlikely to facilitate a compromising mood among the French, whose farmers receive half of the $3 billion in questioned aid. Europe "mustn't go down completely to its knees before the Americans," says Raymond Lacombe, the president of France's largest farm union.