Hills Prods Europe on Agriculture

US trade official says EC distorts markets; seeks chair at July's G-7 summit to gain leverage. GATT UPDATE

IN an effort to spur current international trade negotiations, US trade representative Carla Hills is pressing the White House to break tradition and include her in the next annual economic summit of the Group of Seven. She would like to win a commitment from the leaders of the world's major industrialized democracies, especially the four in Europe, to liberalize farm exports.

The heads of state of the seven countries - the United States, Japan, West Germany, France, Britain, Italy, and Canada - will convene in Houston July 9-11. This, says Mrs. Hills, will provide an opportunity for the seven ``to give a political push to the negotiations.... We must succeed in the Uruguay Round.'' These talks began in 1988 under the General Agreement on Tariffs and Trade (GATT). ``We won't succeed unless each nation demonstrates the political will to move forward on liberalized trade,'' Hills says.

Trade in farm goods, services, and textiles currently are unregulated by GATT. But they have become part of the negotiations, now scheduled for completion by year end. The 12 nations of the European Community, moving toward a unified market in 1992, present the most serious obstacle to trade liberalization, US officials say.

Thomas Niles, US Ambassador to the Community in Brussels, says the European single market is ``comparable, compatible'' in 14 out of the 15 areas of common interest with the US. ``The exception, of course, is agriculture. We want to break the link between subsidy and production.''

Last week Hills lamented the ``enormously difficult time in coming to closure'' with the Community in agriculture.

The EC's new ambassador to Washington, Andreas van Agt, points to European agricultural reforms - ``substantial sacrifices'' - over the past six years. He cites a reduction of 5 million in the size of the EC's dairy herd since 1984. Supports for the community's cereal production have also fallen, he says.

Hills maintains that the ``$9 billion the EC spent last year to buy market share'' demonstrates the Community's protection of its agricultural producers.

Ambassador Van Agt asserts that ``Americans may have to digest that they won't get very much in agriculture.'' He quickly adds: ``Europeans see it's very difficult for Congress to dispose of unilateral measures such as Super and Special 301.'' These are punitive measures that Congress insists be taken against US trading partners persisting in unfair trade practices.

Ambassador Niles rejects any suggestion that the US might drop its demand for lower EC farm supports if the EC removes its objection to congressional measures against unfair trade practices.

Hills comments: ``We do not have internationally agreed rules [on farm supports], so ... it would be hard to say to Congress, `Well, just look the other way.' If we do negotiate multilateral rules it will take the pressure off of our Congress to enact laws. I'm not in a position to bargain in a vacuum. I've got to see ... rules.''

At present there are ``very high barriers'' to market access in the Community for ``both the developing and the developed world,'' she says. ``First, we urge that there be a mechanism of bringing down barriers to market access and propose, for negotiating purposes, over a 10-year period.''

She looks forward to the day, she says, when ``governments don't give export subsidies in the field of agriculture.'' She charges that the EC's purchasing of market share ``disrupts and distorts the market enormously since they are subsidizing their agribusiness, instead of letting them win it on the basis of price and quality.'' Countries like Argentina, Brazil, New Zealand, Australia, and the US are disadvantaged, she says, ``because we export about half of our grain.''

Hills calls for ``discipline over internal supports. That is not to say a sovereign state may not pay its farmers, either in the form of welfare or other non-trade distorting measures. If they want to make their farmers quite rich, that's a sovereign decision. What we ask them not to do is to give them a check to grow a particular crop.'' The market should grow on the basis of demand, she says.