7:46 AM Sep 20, 1993

JUMBO EC MEETING MAY END IN MORE UNCERTAINTY

Geneva Sep 19 (Chakravarthi Raghavan) -- The jumbo session of Monday's European Community (EC) foreign, trade and agricultural ministers in Brussels seems set at this point for a standoff, with no clear decision either way, over the French demands for renegotiation of the Blair House accord with US on agricultural subsidies.

Simultaneously with the Brussels EC 'Grand Conseil' meeting, German Chancellor Helmut Kohl and French President Franois Mitterand are due to meet in Paris Monday, with the French stance on Blair House high on their bilateral agenda and talks and ways to find a solution to the French government's problem.

For the Germany the issue is complicated in that the CAP reform and the offset and compensation policy has benefited its highly inefficient farms, who have also got a boost through the 'green (farm) ECU' used to set farm prices and compensate farmers within the EC, which does not reflect the real value of the German Deutschmark with French Franc, fetching the German farmer 21 percent higher than the market value.

At the current exchange DM/FF exchange rate within the ECU basket, the more competitive French cereals and other agriproducts would easily swamp the German market.

The Germans, to protect their agriculture, have a stake in continued maintenance of the artificial farm ECU, which also would need higher EC budget ceilings on this, and all this makes the German talk of 'free trade' and need for cuts in subsidies somewhat more phone.

On the eve of the Monday meeting in Brussels, French Prime Minister Edouard Balladur, reiterated in Paris his opposition to Blair House and demanding its renegotiations and renewing the threat of a French veto.

The rest of the EC is more or less lined up against Paris on this issue, but with some (like Germany, Ireland and one or two others), wanting to find a way out, without formal renegotiations, to enable France to life its threat of a veto and allow the negotiations to go forward and be concluded.

The British Prime Minister John Major has been reported as threatening, in turn, to hold up various French initiatives for EC integration, if France does not lift its trade talks threat and allows the Uruguay Round talks, and agriculture within it, to be concluded on the basis of the Blair House.

But, the British threat is seen as part of its stance to break up the Franco-German alliance within the EC.

Observers in Geneva see the only likely outcome, and perhaps one that would emerge not at Monday's meeting but the subsequent 4-5 October meeting of the EC Council of Ministers, would be to ask EC Commissioner Sir Leon Brittan to negotiate with the US a "more flexible" interpretation of the Blair House accord to accommodate the French.

In this entire exercise and trans-Atlantic fights, in any US-EC compromise that may be worked out, the final losers would be the developing countries -- less market access than even the attenuated package would provide for their exports (in European or third markets).

France has threatened to use its veto power and scrap Blair House -- a further weakening of the trading rules (anti-dumping, dispute settlement etc) to accommodate the American viewpoints.

In a newspaper interview in Paris on Friday, the French Agriculture Minister Jean Puech insisted that The Council of Ministers meeting Monday "must decide to renew negotiations with the United States."

Such a stance by the agriculture minister, on the eve of the meeting, could be considered part of the normal pressure tactics within the EC.

However, at the highest levels, the French government has taken a high profile position which has been repeated so often that it is difficult to see them being able to retreat easily.

An IPS report from Paris adds:

Though agriculture contributes only four percent of its GDP, France considers itself a primarily agricultural country. The bulk of the country's industrial and urbanisation process was carried out in the post-war years and most French were born in rural areas, whatever their present circumstances.

This psychological conviction that French culture as well as farmers' incomes are at threat in Brussels Monday has led to an extraordinarily wide ranging set of arguments being deployed by the French against Blair House in particular and GATT and Uruguay Round in general.

The deal is said to be damaging to the environment, the Third World -- even the French film industry.

"Little attention has been given to the consequences of the liberalisation of world trade for developing countries," says economist Jean Chesneaux. "The South needs to establish relations with the North, but these relations should not be governed by the law of the market which will benefit only the rich countries... The fixing of prices, interest rates and exchange rates will all be determined by the North to its advantage.."

Critics have pointed to the havoc wrought by CAP subsidies in the developing world. The African beef market was self-sufficient during the 1970s, but by the mid-1980s beef-importing countries like Nigeria, Cote d'Ivoire, Ghana, Togo and Benin bought cheap EC beef dumped on their markets, crippling the incomes of African farmers.

In Burkina Faso alone, EC meat dumping resulted in a two-thirds decline in prices of local cattle over ten years, say British development charity Christian Aid.

But Chesneaux, echoing official French policy, says otherwise; "Inside the countries of the South, there are economic forces, mostly privileged groups, who believe in joining the GATT system and project their convictions as the convictions of the entire country. There are movements in these countries opposing GATT...The liberalisation of world trade will only widen the rift between the rich North and the poor South."

While France has taken an extreme stand and is seen as isolated inside the EC, the other more agricultural EC countries such as Spain, Ireland and Greece, all large beneficiaries of the CAP, are falling in behind France on the issue.

Some EC sources say aspects of Blair House do need clarification. A clause raising U.S. exports to the EC up to five percent of EC consumption levels has been interpreted very differently by the two sides. The EC reads it as a peak total of 200,000 tonnes; the U.S. as two million.

One solution open in Brussels Monday might be to attempt to buy off Paris with additional compensation for CAP reform. But one senior Brussels EC official said: "I don't see where the money will come from. The Community just ain't got it."

Another alternative would be for the French government to come up with money out of its own state coffers to compensate farmers, or the German government to help French farmers in exchange for French support for Frankfurt's bid to accommodate the planned new EC-wide Central Bank.

Strictly speaking both these solutions would fall foul of stringent EC state aid rules over fair competition.

But France is not seen as being in a strong position. Germany strongly backs a swift GATT deal and most of the EC, even some French, recognise that it could boost their flagging economies.

"I think the French realise that they are being totally unrealistic over their demands and on Monday it will be a matter of wording of a text," said French agricultural journalist, Jean- Christophe Filori in Brussels.

British officials said in Brussels that Monday's debate would simply go into technical details of the "compatibility" of the Blair House with the CAP reforms.

"The question of a vote on the Blair House agreement will not arise Monday; there is no question of France using its veto," said another EC official Friday.

But if the French do use their veto, it will be at the end of the day -- when the EC has finalised all aspects of the package.

Belgium's Foreign Minister Willy Claes, holding the meeting chair, wants to avoid any part of the package being put to the vote, now or later. His spokesperson said that "if there is no agreement Monday, we will try again. If we need additional meetings, these will be organised.