US, Europe wrestle over trade barriers as summit nears

Seldom have the leaders of major Western powers been under greater domestic pressure to abandon the principle of free trade and put up barriers against one another's goods.

More than 25 million people - many of them young, restless, and bitter - are jobless in the United States, Canada, Western Europe, and Japan.

Jobs is the issue for the presidents and prime ministers of these countries - especially the millions of jobs that are created or lost through the flow and ebb of foreign trade.

Charges of unfair trade practices thunder between allied capitals, threatening to undermine the structure of world trade so carefully built since World War II.

Officials are striving to find ways to ease tensions before seven heads of government convene for this year's economic summit, to be hosted by President Reagan in Williamsburg, Va., at the end of May.

The US and the European Community, or Common Market, meanwhile, are engaged in a mini-trade war in farm goods, invading each other's traditional markets by selling agricultural products at subsidized prices.

The latest ''shot across the bow,'' as US officials put it, was Washington's sale of 1 million tons of flour to Egypt, traditionally a French market, at below-market cost.

''A trade war,'' says Agriculture Secretary John R. Block, ''would be a disaster, both for the United States and Europe. Frankly, we abhor the thought of using money or grain to buy a market so that we can make a sale. It doesn't make any sense at all.

''We have done it on one occasion, with the wheat flour sale to Egypt. We may look toward doing this again, but we hope we can resolve this (dispute).''

The sale to Egypt, said Block, followed what he termed similar subsidized sales of farm exports by the 10-nation Common Market - subsidies that ''ripple throughout the world trading structure.''

The European Community, meanwhile - stung by the US flour sale to Egypt - is considering a major sale of subsidized wheat to China, an important American customer.

Both the US and the Common Market subsidize their farmers to the tune of $30 billion yearly, though in different ways, says Sir Roy Denman, EC ambassador to the US.

Farm export subsidies, under international trading rules, are legal, Sir Roy told reporters at a Monday breakfast, ''if they are limited to an equitable share of the world market.''

Subsidized exports of manufactured goods, by contrast, are prohibited by the General Agreement on Tariffs and Trade, the international organization to which most nations belong.

Americans and Europeans bury the hatchet when it comes to the Japanese, against whom they level various charges of unfair trading practices. Europeans are bothered by Japan's ''fierce inroads'' into ''sensitive'' European industries, and ''difficulty in getting our goods into the Japanese market,'' Sir Roy says.

US concern on this score is typified by ''domestic content'' legislation under consideration by Congress, which would effectively restrict imports of Japanese cars.

Major Japanese carmakers would be obliged, if domestic content becomes law, to include varying amounts of American-made components in automobiles sold in the US.

Some American experts, including William R. Cline of the Institute for International Economics, claim that Tokyo is no more protective than the US when it comes to direct trade barriers such as tariffs.

In fact, Mr. Cline says, the US sells more manufactured goods in almost all categories to Japan than it does to West Germany, which is considered to be an open market.

The real problem, according to some US specialists, lies in the Japanese practice of shielding selected high-technology industries from foreign competition while they develop, then unleashing them upon the world.

Japanese officials say Japan, uniquely among major industrial powers, imports almost all its fuel and other raw materials, which can be paid for only through exports.