The signing last week of a production cutback agreement among major European chemical firms has intensified American fears here of a growing trend toward protectionism by the European Economic Community members.
In the cartel agreement, 11 Common Market nations agreed to production cuts of about 15 percent this year and next to meet the slack demand in the chemical fibres industry.
Fears of antitrust action have kept the two big American firms. Monsanto and Dupont from getting involved in any such arrangements.
The companies involved in the agreement are I.C.I. and Courtlands of Great Britain. Bayer and Hoechst of Germany, Montefibre, Snia Viscosa, SIR. and ANIC. all of Italy, AKZO of Holland. Febelta of Belgium and Rhone Poulene of France.
"Concern expressed by U.S. officails about recent EEC industry policy trends is compounded by the revelation that the Common Market's antitrust authority appears to have encouraged the cartel by allowing executives from the participating firms to sign it in a conference room provided rent free at EEC headquarters here.
This move, embarrassed EEC officials, agree was "perhaps a mistake". It would be like the U.S. administration providing American firms with the pen and ink with which to infringe American antitrust legislation.
For there seems little doubt that the fibres cartel, concluded her on June 20, goes against present EEC antitrust rules. As these rules now stand said Willy Schlieder, director-general of the EEC commission's antitrust department. "We cannot authorize price cartels involving quotas." A new EEC rule which might provide such authorization is now under consideration, but almost certainly could not be law until the end of this year, according to antitrust experts here.
The six-page accord, made available to The Washington Post here, appears to be a model of competitive restriction. Faced with plummeting prices, the companies have between them agreed to scrap or freeze 400-500 thousand tons of surplus capacity by 1979, and have issued emergency orders to the expanding Italian industry to lop 100,000 tons off its present 620,000 capacity immediately. Total EEC capacity for the Fibres concerned is 3.1 million tons. EEC officials say.
Recalcitrant members of this group would be fined around $2,500 for every ton of surplus capacity not destroyed, and would also face penalties equal to the sales price for each ton of fibres delivered in excess of arrangements spelled out in the cartel text.
The cartel also has issued an open invitation for new members, but so far this request appears to have been cold-shouldered by Monsanto and Dupont, the major U.S. firms operating the chemical sector in Europe. One U.S. antitrust lawyer here said "The Justice Department would be certain to consider litigation against American companies joining this sort of arrangements."
U.S. officails appear to confirm this possibility saying that "the EEC commission has told us that Monsanto and DuPont have refused to participate in the cartel arrangement." But they complain that "American firms here look to be in a delicate situation," noting that they risk being put at "a competitive disadvantage" if they do not join in Europe-wide discussions on the beleaguered chemical fibres industry.
Europeans officials are divided over this American assessment. Some simply appear to believe that U.S. companies "will unofficially go along," while others feel that since they are outside the cartel's rules. American firms could further reduce prices and so seek a larger share of the European market. However, this theoretical possibility seems an unlikely course of action in the present economic crisis.
Despite Common Market antitrust rules, the EEC commission has gone out of its way to encourage the cartel formation. Prime mover here has been Viscount Etienne Davignon. EEC industry policy commissioner, who said recently that "without capacity reduction, any attempt at rationalisting the sector is doomed to failure."
Davingnon, also known for master-minding the EEC's steel defense plan, added that "all firms in the sector should share the sacrifices on an equitable basis."
The only way for the Common Market to get out of its current embarassment, observers here say, will be for it to adopt a new antitrust rule - or a crisis cartel regulation" as it is styled here - as rapidly as possible.