The Common Market yesterday warned of a major "trade war" unless the Carter administration continues to waive countervailing duties on subsidized European exports.
The warning came in a letter from Wilhelm Haferkamp, vice president of the European Economic Community, to Robert Strauss, the chief U.S. trade negotiator. The letter was in response to an earlier letter from Strauss warning of a growing protectionist mood in the U.S.
The Haferkamp letter received the full backing of the Common Market foreign ministers at the meeting here yesterday.
The letter warns of a breakdown of the Tokyo Round of trade talks, and reflects European fears that if Congress does not act to extend President Carter's authority to waive automatic application of American countervailing duties against subsidized imports, hundreds of millions of dollars of European trade with the USA will be directly prejudiced.
(Strauss told a breakfast meeting in Washington that "there is little or no sentiment on the Hill" to extend the waiver provision. He added that this is "a major, major problem," because without the extension, there would be pressure to take action on so many countervailing duty cases that it could "blow up" the MTN negotiations.
(Strauss also said that the MTN talks are moving too slowly for him to recommend the treaty's adoption in its present shape. As for a proposal to exempt textiles from the MTN, he said that "if we lost textiles in the MTN, we wouldn't have any MTN.")
The President's waiver authority, expires January 3. If it is not extended, countervailing duties could be slapped on the vast majority of EEC farm exports and goods sold to the American market by European trade officials. The ECC letter terms the January 3 deadline "a time bomb."
Blanket application of U.S. countervailing duties, which the ECC maintains contravenes world trading rules, would occur even if the long-awaited Tokyo Round accord is reached in December as hoped.
"The imposition of countervailing duties on our exports on Jan. 4," Haferkamp said, "would inflict grave damage on out exporters, would lead to strong pressures for retaliation and, since not only (European) community exports would be affected, could thus unleash a trade war of considerable dimensions."
The earlier Strauss letter warned that any attempt by the Carter administration to push a countervail extension bill through Congress would be counterproductive, merely exacerbating protectionist sentiments.
"Even worse," Strauss said, "Ambassador Wolf (his deputy) and I have become convinced . . . the bill would serve as a target for the attachment of many protectionist amendments and, with the mood of this country, we would end up doing more harm than good." He concluded, "I am becoming convinced that the risk of regressive legislation is too great for us to gamble on introducing the extention."
Without bankable American assurances on countervail, the European position is stark. "The common assumption of shared responsibilities on which we have based the Tokyo Round would no longer exist and these negotiations could not be concluded," Haferkamp said.