Trade War? Or Trade Peace?

The nominal stakes -- soybeans and Pouilly- Fuisse wine -- hardly seemed worth war. But of course other matters are at issue. The future of French politics, for one. Also the balance of power within the European Community, and Washington's determination to stop playing Uncle Sucker in trade. Oh yes, and a grand trade deal that eventually might give a huge lift to the world economy.

The scrap began when Washington threatened to add a 200% tariff (thus tripling prices) on white wine imported from Europe -- unless the E.C. agrees by Dec. 5 to extraordinary cuts in subsidies that encourage production of oilseeds. In the U.S. view, these subsidies unfairly limit export sales of American soybeans. But France is trying to stall any such reductions until after parliamentary elections in March. President Francois Mitterrand's Socialists face defeat as it is, but the anger of farmers with reduced incomes might cost them even more votes and seats than expected. Reasoning: it's better for a successor center-right government to reduce subsidies further and face farmer fury.

Meanwhile, though, a U.S.-E.C. trade war could kill a deal among the 108 members of the General Agreement on Tariffs and Trade to lower many barriers to commerce. So while starting to list U.S. products for counter-retaliation, the E.C. also moved to reopen negotiations with Washington. France's partners forced E.C. Commission President Jacques Delors to reinstate Ray MacSharry, the Community's principal agricultural negotiator, who had resigned after accusing Delors of undermining his efforts. British Prime Minister John Major insisted on a deal, and German Chancellor Helmut Kohl called the prospect of a trade war "politics of idiocy." Mitterrand conceded that the isolation of France would be "very dangerous." But France has support from Italy, Spain and Belgium. A compromise is foreseeable, but not readily. (See related story on page 50.)

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CREDIT: [TMFONT 1 d #666666 d {Source: U.S. Dept. of Commerce; International Monetary Fund}]CAPTION: U.S. AND E.C.: WHAT'S AT RISK