The Gatt Dispute: Washington ponders sanctions against EC

THE BUSH administration, struggling for survival in the final days of the election, was yesterday considering its options, including hard-hitting trade sanctions, after another acrimonious clash with the European Community in the long-running world trade negotiations.

Trade officials in Washington, who only a few days ago seemed hopeful of a breakthrough in transatlantic discussions on future levels of agricultural subsidies, accused EC negotiators of hardening their position again in senior-level talks in Brussels this week, sabotaging hopes of progress.

An immediate option that may have some political appeal for President Bush is unilaterally to impose long-threatened trade sanctions against the EC states, which together could be worth about dollars 1bn ( pounds 620m). 'We expect an announcement any time. I've never seen such a mess in my life,' an EC source said here.

The rhetorical campaign is already escalating, with US officials accusing the EC negotiators of going back on concessions apparently offered during talks at ministerial level in Brussels 10 days ago. 'It now appears that the Community has substantial difficulties even with some of the proposals they were willing to explore last week. It doesn't appear we have the basis for breakthrough in the near future,' one said.

Washington, meanwhile, flatly contradicted assertions from Brussels yesterday that the EC-US talks would be pursued in spite of the latest difficulties. 'They are over,' another US official said. 'Frankly, we are very disappointed. Where we thought we had made progress, we have substantial regression and retrenchment by the Community.'

The EC-US stand-off on agriculture has blocked all progress on the wider trade liberalisation talks of the General Agreement on Tariffs and Trade (Gatt), under negotiation between 108 countries worldwide for six years.

The US retaliation would, if applied, stem from a very specific row between the two sides on EC subsidies for oil- seed crops, used mostly for cattle feed. Washington has long demanded an end to subsidies for oil-seed production, but Brussels, in return, wants to impose tariffs on US exports to the EC of cereal substitutes such as corn gluten.

The sanctions would probably be targeted against luxury products, such as fine wines and cheeses, especially those originating in France. US officials make no secret of their suspicions that Paris is behind the hardening of the EC stance.

For weeks, US strategy in the Gatt round has been closely tied up with Mr Bush's electoral difficulties. A decision to react firmly to the Europeans with sanctions may offer the President a chance to display some assertiveness in defending US interests. He will also know, however, that any such move would trigger counter-retaliation from Brussels, perhaps setting in train a pattern of tit-for-tat trade retaliations across the Atlantic and burying the Gatt round for good.

And while the White House over recent weeks has been pushing for a Gatt deal before election day on 3 November to have it as a prize to show off to voters, it clearly is not in a position to offer Brussels too much ground. Any calculation by France that the United States was somehow going to be a soft customer in the last days of the Bush administration seems to have been misguided.

'Bush can't bring home a bad deal,' commented Carol Brookins, who is a member of the President's Export Council. 'The French thought the US could be rolled and just stonewalled. The Bush administration for the first time in the history of the Gatt has held fast.'

This latest rupture not only makes agreement before the election unlikely but may also push the process beyond the March 1993 deadline by which a deal must be submitted to the US Congress. After that, a law forbidding Congress from amending a presidential accord as presented to them would expire.