Due to an editing error, remarks by Uruguayan President Luis Alberto Lacalle about European agricultural subsidies were attibuted to President Bush in a Business story yesterday about trade talks in Brussels. Lacalle was speaking in support of similar comments made by Bush. (Published 12/6/90)

BRUSSELS, DEC. 4 -- For the first time since World War II, the United States is prepared to allow global free-trade talks to fail if its trading partners in Europe and Asia refuse to make major concessions, senior administration officials here said today.

A senior U.S. trade negotiator, Rufus Yerxa, said today that the four-year-old Uruguay Round of talks is "very close to collapse" in its final days because of the European Community's refusal to agree to a sharp cut in farm trade subsidies.

In a statement issued tonight, the chairman of the talks, Hector Gros-Espiell, said negotiations are "in a very serious impasse" and "substantial breakthroughs" are needed within 24 hours in a number of areas, including farm trade.

President Bush underscored the U.S. negotiating stance today during his Latin American tour, saying the United States is flexible on the amount of cuts in agricultural subsidies the European Community pays its farmers, but he insisted that the amount both be larger than what the Europeans have been offering and include categories of subsidies they have been unwilling to cut at all.

" ... This agriculture policy has hurt millions of people... . I'm not telling you what kind of percentage I'm prepared to accept, but it must be in the package and it cannot be the percentage that has been officially offered up to now," Bush said.

Even if negotiators manage a breakthrough, a senior U.S. official said tonight that they will be unable to complete details of a full agreement by Friday, when the trade talks are due to end. But he said if a breakthrough can be reached on the agricultural dispute, enough progress can be made here so that an array of other issues can be settled and loose ends can be tied up next month in negotiations in Geneva, where GATT is headquartered.

The U.S. position, set by Bush in a Cabinet-level meeting last Wednesday, is an abrupt about-face from seven previous rounds of trade liberalization talks, in which the United States could be counted on to make last-minute concessions to avoid a breakdown.

Administration officials said they have decided that the world trade system, known as the General Agreement on Tariffs and Trade (GATT), would be worse off if negotiators here reached an agreement that did not include fundamental reforms in farm trade and the establishment of rules for such new commercial sectors as high technology, financial services and investment.

The officials said a narrow agreement would not produce the broad business and farm community support that U.S. leaders would need to gain congressional ratification. They said a bruising legislative battle over a GATT agreement could harm the president's objective of reaching a free-trade pact with Mexico and eventually expanding it to cover all of South America.

Frustrated U.S. officials said they fear the Europeans do not understand the new dynamic in America's tradepolicy and the sharp turn in its stance toward the talks. Europeans have indicated in conversations with officials and journalists here that they think the threat to allow the talks to fail is merely a negotiating ploy on the part of the Bush administration.

"There is a basic operating assumption on the {European} Community's part that in the end the United States can be forced to back down. They are sadly mistaken this time around," said a senior U.S. trade official.

A failure here, officials said, could force leaders in Japan and Western Europe to assume leadership roles equal to their new economic power.

If the Europeans are right, and the U.S. position is only a negotiating ploy, the Bush administration has been able to present a united position in public and private conversations with negotiators, foreign diplomats and others.

Although administration officials all say they prefer the benefits of a successful Uruguay Round, they now appear willing to live with the consequences of its failure.

"The United States can always make regional agreements," even though that is not what the administration prefers, Commerce Secretary Robert A. Mosbacher said earlier this week.

There are fears, though, that an increase of regional agreements, such as the U.S. free-trade pact with Canada and the proposed accords with Mexico and the rest of Latin America, will lead to a breakdown of the GATT system of global trade rules.

The consequences could include a slowdown in economic growth, a possible rise in protectionism around the world and an increase in already nettlesome trade disputes between the United States and some of its closest allies, including the 12-nation European Community, Japan and South Korea.

While recognizing these consequences, the American officials said the real losers from a failure of trade talks would be Third World nations that do not have the economic clout to strike separate trade deals for themselves but instead depend on a global system of rules.

While farm trade is the key problem area of the talks, business executives who have been leading supporters of the Uruguay Round are complaining that the results today in other areas have not met their expectations.

For example, Edmund Pratt, chairman of the Pfizer Corp., who was here over the weekend to support the talks, wrote U.S. Trade Representative Carla A. Hills before leaving Monday that the GATT proposal to protect patented products from piracy is weaker than agreements the United States has negotiated on its own with individual nations.

Harvey Bale Jr. of the Pharmaceutical Manufacturers Association said drug companies such as Pfizer would be better off without an agreement, as it is now shaping up, under GATT.

At the White House meeting last week, administration officials said that Bush emphasized that newly emerging democracies in Eastern Europe and Latin America, which need liberalized trade rules to boost their economies and preserve their fragile elected governments, would be ill served by a limited trade agreement.

The president said these countries include Latin nations such as Argentina, Brazil, Chile and Uruguay, which he is visiting this week and which depend heavily on agricultural exports.

Staff writer Dan Balz contributed to this report from Uruguay.