France ready to sink trade deal: Compromise between US and Europe to end Gatt deadlock threatened by subsidies

FRANCE appeared ready last night to risk diplomatic isolation in the European Community by torpedoing a compromise to end six years of deadlock in the Gatt international trade talks.

Top officials from the United States and the EC met in Brussels yesterday for a last-ditch attempt to produce a free trade deal that could help to lift the industrial world out of recession. But French ministers attacked the talks, raising fears that France would veto any compromise.

Roland Dumas, the French Foreign Minister, said last night that the negotiations 'have not made it possible to advance positively and reasonably . . . we are much too far from the goal'.

If the talks fail, six years of negotiations, involving hundreds of meetings between ministers, will in effect have been thrown away.

Carla Hills, the US trade representative, was in Brussels under orders from President George Bush to meet her opposite number at the European Commission, Frans Andriessen, in an attempt to resolve a dispute that has held up since 1990 a wider agreement between 108 countries to reduce tariffs, trade barriers and subsidies.

But France, which would be asked to approve any draft compromise at the EC's Birmingham summit on Friday, appears likely to torpedo any deal by claiming that it jeopardises its 'vital national interests' by putting its farmers at risk.

Jean-Pierre Soisson - who has been France's Agriculture Minister for 10 days - said on French television yesterday: 'We cannot cave in to American demands.' In an interview with Le Journal du Dimanche, he insisted: 'I do not have to participate in George Bush's (election) campaign. He is trying to defend the interests of his farmers; I am defending the interests of our farmers.'

Only a day earlier, Mr Dumas had declared American proposals 'unacceptable in the current state of affairs' and said that France could go no farther in accepting reform of the EC's Common Agricultural Policy (CAP).

The French government, weakened by the narrow majority in favour of the Maastricht treaty in last month's referendum, faces angry opposition from farmers to any reduction in the subsidies they receive from the Community. In 1989 and 1990, French farmers received some Fr200bn (pounds 24bn) in subsidies, more than British and Dutch farmers put together.

The US is pressing for further reductions in both Europe's export subsidies and the direct income support that it proposes to pay to farmers as part of the reform of the CAP that European agriculture ministers decided earlier this year.

It was fear of the farm lobby, which accounts for one French vote in six, that prompted Paris to postpone further Gatt negotiations until after the referendum on Maastricht.

The decision raised the ire of France's EC partners, who hope that a successful deal in the round of negotiations that began in Uruguay in 1986 could increase world trade by some dollars 200bn (pounds 118bn) In Britain, according to European Community statistics, an agreement would add a full percentage point to economic growth for each of the next five years.

A compromise between the EC and the US could also help Mr Bush restore the fortunes of his faltering re-election campaign. But diplomats fear that the Gatt talks could be doomed if no deal can be struck before next month's poll, because it would be impossible to wrap up the details before Congress's undertaking to approve or reject the deal as a package expires next March.

Mrs Hills held talks yesterday with Mr Andriessen, which were continued over dinner at the Brussels headquarters of the European Commission. Talks were also held between Edward Madigan, the US Agriculture Secretary, and Ray MacSharry, the Agriculture Commissioner.

An EC spokesman said last night that Mr Andriessen 'is aware of the implications' of the French ministers' comments, 'but he hasn't given up'.

The talks were scheduled to resume this morning. Meanwhile French farmers, who blockaded Paris in June to protest at the reform of the CAP, are planning a 'day of action' as EC leaders prepare for their Birmingham summit.

US and Chinese negotiators have signed an agreement that will open China's huge market and avert a trade war. The US had threatened to impose punitive tariffs on up to dollars 3.9bn of Chinese goods if China did not remove most import licensing requirements, quotas and controls.