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US Reaches Tentative Settlement with Europe in ‘Pasta War’

August 5, 1987

WASHINGTON (AP) _ The Reagan administration hailed a tentative settlement reached Wednesday in the long-running ″pasta war″ with Europe, but vowed to press in trade talks in Geneva for further reductions in agricultural subsidies.

In Brussels, Belgium, representatives of the 12 nations that make up the European Economic Community agreed to the proposal for a 27.5 percent reduction of European pasta export subsidies.

U.S. Trade Representative Clayton Yeutter said that under the agreement, ″export subsidies for pasta have been significantly restricted. This is a long overdue achievement but is not the end of our efforts.″

The agreement, which still must be ratified by the individual European governments, ended seven months of negotiations in a dispute that has flared for six years.

The United States had threatened to slap retaliatory tariffs and quotas on unspecified European products had the accord not been reached. The tentative settlement came five days after the latest in a series of U.S.-imposed ″deadlines.″

U.S. pasta makers have contended that European pasta subsidies, particularly in Italy, are undercutting their prices and harming business. Some voiced concern that the new accord does not go far enough.

″The impact of today’s agreement ... is unclear,″ said National Pasta Association Chairman Robert E. Ronzoni.

″Whether it helps restore free competition between U.S. and Italian pasta makers will not be known for several months. We certainly hope it will help our domestic producers participate in the growth of the U.S. market and help preserve the 10,000 jobs in our industry,″ he said.

The Europeans argued that they were subsidizing only the wheat content of the pasta, as permitted by international trade rules.

Americans annually eat about $2 billion worth of pasta, 10 percent of which comes from Italy.

″Even though the trade flows involved in this case are relatively small, this was an extremely difficult case to settle,″ Yeutter said. ″It required compromises by both sides. But in the end, the United States achieved a settlement that we believe will benefit American pasta makers.″

President Reagan last month proposed a worldwide end to all agricultural export subsidies by the year 2000.

Without mentioning this particular timetable, Yeutter said that the United States will continue to push for phasing out subsidies in the current round of international trade talks in Geneva under the auspices of the General Agreement on Tariffs and Trade, or GATT.

″Ultimately, problems such as this one can only be resolved when subsidies are brought under control as part of an overall agricultural negotiation,″ Yeutter said in a statement.

Under the agreement, which takes effect Oct. 1, 50 percent of future European pasta exported to the United States will be made of non-subsidized wheat.

Subidies on the remaining 50 percent will be reduced by 27.5 percent ″and is expected to be reduced further in the months ahead,″ according to Yeutter.

The trading partners also agreed to monitor compliance at three-month intervals through September 1988, and every six months thereafter.

The agreement marks the second time this year that a trans-Atlantic trade war has been averted at the last minute.

Last winter, the admininistration reached agreement under which the European trading bloc agreed to accept $600 million in U.S. corn and sugar sales. In return, the United States called off stiff punitive tariffs against a wide variety of European agricultural goods, including white wine, cheese and candies.

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