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Farm-subsidy rift causes collapse of trade talks


BRUSSELS, Belgium -- A four-year round of talks to establish new rules for world trade broke off in disarray yesterday as the United States and the European Community remained deadlocked over the issue of reducing subsidies to farmers.

Trade ministers had set yesterday as a deadline to reach an agreement to liberalize rules governing $4 trillion in annual world trade. The goal was an accord that could increase economic growth and living standards worldwide by removing government rules that restrict trade not only in agriculture but also in a wide range of manufactured goods, financial services and technological expertise.

But instead, after marathon negotiations throughout the week, the trade officials gave up, disbanded and suspended the talks after failing to overcome their impasse on farm trade.

Trade officials tried to put the best face on the failure. The chairman of the 107-nation talks, Hector Gros Espiell, the foreign minister of Uruguay, expressed confidence that the ministers, after additional reflection and consultation with the heads of their governments, would resume the talks in Geneva in a month or two.

But many officials said that unless the wide gulf between the American and European positions on farm trade could be bridged, the breakup in Brussels might signal that the talks had collapsed permanently, ending the effort to set international trading rules for the 21st century.

U.S. officials say the lack of success in the talks could have significant effects on American consumers, farmers, workers and businesses. For example, with many countries subsidizing exports of their grain, a failure to reduce agricultural protection could make it harder for U.S. farmers to export wheat.

For U.S. pharmaceutical companies, the deadlock means they will have to wait longer to get Third World nations to agree to respect their patents.

For U.S. consumers, a trade agreement could mean lower prices for many goods, from peanuts to pants, since an agreement could result in lower tariffs and import barriers. At the same time, an agreement might bode ill for the jobs of U.S. textile workers because an accord probably would reduce quotas on clothing imports from the developing world.

Conversely, many governments in the Third World hope for an agreement because it probably would mean new markets and more jobs for their textile industries.

"We have tried to improve the economic situation in the world, but we have failed," Helmut Haussmann, the economics minister of Germany, said yesterday.

The round of talks, known as the Uruguay Round because it began in that country in 1986, aims to set liberal new rules in 15 broad areas of trade, including farming, patents, financial services, telecommunications and textiles.

This week's talks were dominated by a bitter clash between the 12-nation European Community on one side, and the United States, Canada, Argentina and more than a dozen other nations on the other. The Europeans were reluctant to move nearly as far as the other side wanted in slashing farm subsidies.

The Europeans, who pay the most generous farm subsidies, said the opposing side was asking for cuts that were too deep to be politically acceptable in Europe.

Trade officials fear that without an agreement, trade wars could erupt as nations erect barriers to protect domestic businesses and farmers from imported goods.

Such policies are economically counterproductive, eventually hurting industries, farmers and consumers throughout the world, trade officials say.

Many officials predicted that without an overall agreement there would be more and more bilateral and regional pacts in which the most powerful countries or blocs, such as the United States or the European Community, would have the upper hand.

[As congressional leaders quickly called for tightening trade controls, U.S. Trade Representative Carla A. Hills said she will begin examining trade complaints, the Associated Press reported.

[Those complaints involve the Japanese rice market and purchases of farm products, including pork and beef, in Europe. Farm groups in the United States have already asked the administration to retaliate in those matters.

["Those petitions are on my desk, and we will be assessing them under the law," Ms. Hills said. "We pledged when we took office to uphold the law."

[If the United States does retaliate against farm imports from Europe and Japan, it probably would spark similar moves against U.S. products.]

The United States and a group of 14 food-exporting countries wanted the 12-nation European Community to cut its farm supports by as much as 75 percent to 90 percent.

But the EC said the U.S. proposal would force more than 2 million of its 10 million farmers off the land. The Europeans offered 30 percent cuts in one area, seeking to protect the livelihood of 10 million farmers.

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