The record U.S. trade deficit last year will increase pressure on Congress to adopt protectionist measures that could disrupt trade relations between the United States and the European Community, a senior U.S. official warned today.
The official also said the new U.S. farm bill, while not aimed at the 10-nation Community, could have "byproducts" that would strain commercial ties. "It's not a comfortable world ahead," the official said.
The official, who spoke on condition that he not be identified, said the Reagan administration's record on opposition to protectionism was "entirely defensible." He said that while 180 bills considered to be protectionist were filed in Congress in 1984, only two trade measures opposed by the Community were passed.
In 1985, however, "the atmosphere is much more conducive" to the adoption of protectionist measures on account of the record 1984 trade deficit of $123.3 billion, the official said. Congress will be under stronger pressure, he added, to look for a "shortcut" to reduce the deficit. The U.S. trade deficit with the EC last year was $13.3 billion.
The Community said Thursday it had asked for the creation of a special panel by the General Agreement on Tariffs and Trade (GATT) to consider one of the measures cited by the U.S. official, the wine import provision of the 1984 Trade and Tariff Act.
The provision allowed U.S. grape growers to introduce antidumping and antisubsidy complaints against wine importers. The Community believes the provision violates GATT rules that state that only the specific industry damaged by alleged dumping or subsidies can initiate GATT proceedings.
The Community asked for the special GATT panel following the failure of talks at lower levels in an effort to resolve the issue.
The senior U.S. official praised statements made earlier this week by the EC agriculture commissioner, Frans Andriessen, indicating the Community would undertake a major review later this year of its costly farm program. "He is making a good start, facing the problem as it is," the official said.
The Community's heavily subsidized agriculture program is one of the major points of contention between Brussels and Washington. The United States believes the farm support program gives European producers an unfair advantage on world markets.
In recent months, Community officials have expressed fears that the administration's proposed changes in farm policy, which would drastically cut subsidies to American farmers, could slash prices for U.S. farm products and set off a battle with the Community for world export markets.
The U.S. official said that while it was difficult to predict the final shape of the farm bill after it gets through Congress, the United States and the EC "must deal with" the agriculture issue this year.
Andriessen, announcing his proposed farm budget for 1985-86, said Wednesday that cuts in prices for certain products, including cereals, were a "clear signal we are sending to trade partners" that the Community "means business" in getting its farm subsidy program under control.
In a clear reference to fears about the future of U.S. agricultural policy, Andriessen said he hoped the Community's signal would be seen on "the other side of the Atlantic," and suggested that negotiations on farm policies might be necessary to avoid "measures we would both lose from."
Andriessen's farm budget must be approved by agricultural ministers of the Community member states in March. West Germany has already made clear its strong opposition to cuts in cereal prices and other countries also are expected to contest parts of the farm budget.
The EC took a first tentative step toward reform of its agricultural policy last year when farm ministers agreed to put a ceiling on milk production, but that agreement has been threatened by resistance from the powerful farm lobbies of several member states.