US and Europe Reach Compromise on Trade

But problems remain that could scuttle a GATT agreement at Geneva meeting

INTERNATIONAL trade liberalization talks that only recently were stuck on one of the world's oldest economic activities - farming - now appear to hinge on such future-growth sectors as audio-visual products and the civil aeronautics industry.

After nearly 24 hours of nonstop negotiating ending Dec. 7, trade representatives for the United States and the European Community announced here that the two trading giants had made such progress in resolving differences in agriculture and other key sectors that a full deal in the Uruguay Round of trade talks could be struck by a Dec. 15 deadline.

According to US Trade Representative Mickey Kantor, offers made by the US and the EC in bilateral talks would constitute ``the largest tariff-cut package in world history'' and ``give the world economy a needed boost.''

Yet as the focus of negotiations shifted to Geneva, where multilateral talks continue under the auspices of the General Agreement on Tariffs and Trade (GATT), both US and EC officials said problems remain that could scuttle a global accord.

Before leaving Brussels for Geneva Dec. 7, Mr. Kantor warned that no agreement had been reached on either the audio-visual sector or civil aviation subsidies. ``No Uruguay Round will be finished unless these issues are resolved,'' he said.

Noting that these two sectors represent ``two of the three most important export areas for the US,'' Kantor added, ``these are not manufactured problems, but are very important issues.''

France continued to insist on Dec. 7 that more progress was needed in agriculture, but most observers here say any remaining problems for the French in the farming sector will have to be addressed within the EC. Despite continuing internal disagreements, EC ministers did agree to send EC trade negotiator Sir Leon Brittan to Geneva.

After considerable progress in the long-stalled trade talks, many observers had predicted that a crucial bilateral agreement would be reached between the US and the EC on Dec. 6, paving the way for a global agreement among GATT's 116 members by a Dec. 15 deadline.

But by early Dec. 6, France was signaling that it intended to continue its hard line on concession demands, especially those concerning agriculture. Shortly after EC Agriculture Commissioner Rene Steichen announced that an agriculture agreement had been reached with the US, a fuming spokesman for French Foreign Minister Alain Juppe told journalists, ``That declaration does not obligate either France or the 12 members'' of the EC.

The revised EC-US farm agreement includes a more gradual implementation of an agreed 21 percent cut in farm subsidies, and an extension from six to eight years of a ``peace clause'' under which the US promises not to challenge the Community's multi-billion-dollar agriculture program.

In exchange for those concessions, the US won better European access for a list of farm products - including fruits and nuts, pork products, and turkey meat - and continued access to corn-gluten feed markets in Spain and Portugal.

Some analysts speculated that France, taking advantage of its EC partners' strong desire for a trade pact, was simply pushing as far as it could to get the maximum concessions possible.

`THE conditions for an agreement are not met, not yet,'' Mr. Juppe announced on Dec. 6 after a day of concessions to French demands. He said US offers on market access, including those for textiles, remained ``far from'' acceptable, and that French demands for a ``cultural exception'' clause to protect European movie production from American predominance were not yet met.

But some observers noted the shortening patience of certain European leaders and speculated that French officials were beginning to hit a limit. German observers said German Economics Minister Gunter Rexrodt was ``furious'' with a letter French Prime Minister Edouard Balladur sent to a number of European leaders, detailing French demands for internal Community action in tandem with any GATT accord.

The French want EC compensations for any additional sacrifices it is called on to make in the farm sector in reaching a GATT accord. Insisting that France would not accept ``one additional acre'' of fallow farmland to meet GATT conditions, one French official quipped that if Germany was so intent on an agreement ``maybe they would accept vast new wilderness areas'' in what are now agricultural regions.

Although differences between the US and EC have dominated the GATT talks, US and European leaders will have to convince developing nations assembling in Geneva that a deal hammered out by the economic powers will be in their interests, too.

Between now and Dec. 15, leaders from those countries may wonder if it is better to have the giants fighting, or in agreement.