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Trade War Looms as U.S. Imposes Punitive Tariffs

By Norman Kempster and Joel Havemann
Los Angeles Times

WASHINGTON

Brushing aside the threat of a trade war that could subject President-elect Bill Clinton to his first foreign policy crisis, the Bush administration announced plans Thursday to impose punitive tariffs on French, German and Italian white wines, effectively pricing them out of the American market.

President Bush and his chief trade negotiator, Carla Hills, insisted that the move would not touch off an escalating sprial of trade sanctions. A top European Community official denounced the U.S. action -- which would triple the cost of European goods that account for $300 million in annual U.S. sales -- but did not renew an earlier threat to retaliate.

Nevertheless, the announcement added to the long-running friction between the United States and the European Community over agricultural subsidies and further complicates prospects for completion of a long-delayed international trade accord.

The announcement of the new American tariffs comes two days after the breakdown in Chicago of negotiations aimed at resolving a long-simmering dispute between the United States and the EC over European subsidies for growers of soybeans and other oil-bearing crops.

The tariffs -- which could raise the price of a bottle of imported white wine from $10 to $30 -- will take effect in 30 days, a little more than six weeks before Clinton's Jan. 20 inauguration -- unless the dispute is resolved, Hills said.

If the European Community retaliates, it could cause both sides to impose a series of trade barriers, although that possibility was discounted by Bush and Hills. In any case, the impact of the measures will not be felt fully until well into the new year and the new administration.

In Little Rock, Ark., Clinton declined comment on the action except to say: "I'll review it. We've got one president. He has to make those decisions. I don't want to get in the way."

Frans Andriessen, the EC trade commissioner, said in Brussels that the U.S. decision was illegal under world trading rules.

But while warning that the U.S. action endangered "the whole of international commerce," Andriessen did not explicitly threaten EC retaliation. Only the day before, however, he had told reporters that the EC would respond "proportionally" to any U.S. measures.

The dispute began Dec. 16, 1987, when American soybean producers complained that the EC was subsidizing the production of soybeans and other oil-bearing crops in violation of international trade law.

U.S. officials said that the subsidies gave European farmers an unfair advantage in price competition, costing U.S. exporters an annual $1 billion worth of sales in Europe.

Under the rules of the General Agreement on Tariffs and Trade, the United States filed a formal complaint against the Europeans. A GATT panel twice upheld the U.S. complaint, but the Europeans failed to eliminate the subsidies.

Wednesday, the United States sought GATT permission to impose tariffs on $1 billion worth of European farm products. While a majority of member nations approved the U.S. application, it was vetoed by the EC, which took advantage of rules requiring all decisions to be unanimous.

Hills said the administration decided to go ahead with tariffs on only $300 million worth of imports now. But the total would be increased to $1 billion later unless the Europeans agreed to change their subsidy policy.