G-7 Nations Split Over Farm Trade

Leaders decide each country will go own way on issue of direct aid to China, Soviet Union. ECONOMIC SUMMIT

NEW ZEALAND'S Michael Moore wasn't formally invited to the economic summit. But the minister of foreign affairs and trade came anyway to this annual gathering of the leaders of the seven industrial democracies. Mr. Moore wants to talk about farm trade - an issue that some experts rank as the most important and most difficult topic that the Group of Seven must deal with here.

``It threatens to destroy progress in all areas,'' Moore says. He was referring to all areas of the Uruguay round of trade negotiations under the General Agreement on Tariffs and Trade (GATT), the broadest set of talks on removing barriers to international commerce ever undertaken by the GATT's dozens of members.

Of course, other issues are under discussion at the Group of Seven summit, which formally began at Rice University here Monday. For example, the leaders of the United States, Japan, West Germany, France, Britain, Italy, and Canada reviewed the question of financial assistance to China and the Soviet Union.

Japan announced on Monday that following the summit it would lift a freeze on $5.4 billion in credit it promised China two years ago, before the suppression of democracy demonstrators in Tiananmen Square. The crackdown prompted the seven to decide at their summit in France last year to withhold aid to China.

Japan is worried about political stability in its huge neighbor with more than 1 billion people. It does not want to isolate China, Japanese Foreign Ministry spokesman Taizo Watanabe told the press here Sunday.

He noted that a struggle continues between conservatives and liberals within the Chinese regime. ``But it is the judgment of Japan that things are moving in the right direction,'' he said.

In the case of the Soviet Union, Japan will provide no financial aid. It wants the Soviets to return the chain of islands north of Japan that Josef Stalin seized after the US had dropped atomic bombs on Japan.

West Germany, however, will go ahead with $3 billion in assistance to the Soviet Union. It wants to encourage Moscow to get its troops out of East Germany and not erect any roadblocks in the way of political unification of the two Germanies.

The US attitude has evolved into one of, ``It's your money. You do what you like with it.''

However, Secretary of State James Baker III likes to refer to the ``$15 billion or so'' that the Soviet Union spends each year on such dictatorships as those of Cuba and Ethiopia and ``how much soap could be put on the shelves in the Soviet economy'' with that amount of money.

New Zealand's Moore met with US Secretary of Agriculture Clayton Yeuter and US Trade Representative Carla Hills on the eve of the summit to talk about the reduction of farm-export subsidies, which are hurting his country. They are ``many times'' more than the entire national output of his country, Moore notes.

The world's industrial countries spent $245 billion last year on farm subsidies of all types, according to the Organization for Economic Cooperation and Development.

Agriculture accounts for 70 percent of New Zealand's gross national product. So it is worth Moore's time to travel to a city that has adopted an appropriate summit motto, ``Houston's hot,'' to talk about farm trade.

``There is a historic opportunity here,'' he says. The world has been reshaped politically by perestroika (restructuring) in the Soviet Union. He would like success in the Uruguay Round to help reorient the ``post-Marxist'' economic world.

The GATT negotiations cover such areas as services (banking, insurance, tourism, and engineering, for example), investment, textiles, and intellectual property, as well as well as the trade in goods that has been the subject of previous trade negotiations.

The US has insisted that without progress on the farm side, there will be little removal of trade barriers elsewhere. Moore notes that such countries as Brazil are unlikely to offer concessions on such issues as admitting foreign banks unless industrial nations open their markets to more textiles and such agricultural goods as orange juice.

Japan has indicated it will put the importation of rice on GATT's bargaining table. Mr. Watanabe noted that with 80 percent of Japanese farmers growing rice, this matter is politically sensitive.

It is still unclear how far the European Community (EC) will go in cutting back its $9 billion in farm-export subsidies. The US argues that all such subsidies - including its own - should be gradually abolished. The EC says this is too ambitious.

Even the Hungarians are talking about ``No banks, no tanks,'' Moore says. They don't want Soviet tanks, and they won't allow Western banks unless the EC and the US open their markets to Hungarian farm goods.