On the eve of the Versailles summit, French officials today outlined sharp and seemingly irreconcilable differences between France and the United States on key economic issues, particularly on East-West trade and Western credits for the Soviet Union.
A senior French official, referring to U.S. proposals now on the table to restrict trade with the Soviets or toughen credit terms, described Washington's concern on the credit issue as a "one-sided obsession."
Following a lunchon meeting between President Reagan and French President Francois Mitterrand that centered largely on discussion of the Falklands crisis and skirted sensitive economic topics, Secretary of State Alexander M. Haig Jr. tried to minimize French concerns that East-West issues would dominate the summit.
"We hope the export credit issue will not be a spoiler," Haig told reporters after the meeting. "And I am confident it will not be a spoiler."
But French officials said Mitterrand will resist anything that smacks of an economic blockade of the Soviet Union. "We haven't forgotten that Napoleon tried it and it led to war," one official said, adding that it would not work because there would always be someone to break ranks.
"So our general approach is to avoid anything that seems like an aggression," a French official said. "Therefore, we don't agree with this approach of your president."
During the last decade, the Soviet Union has relied on Western commercial credits and loans guaranteed or subsidized by governments to pay for technology and equipment purchased from the West. The administration says this has enabled the Soviets to divert money and resources to military expansion and overseas adventurism.
The Europeans, whose investment is more substantial, and Canada, have argued that engaging the Soviets financially and economically contributes to an easing of East-West tensions.
Among the briefing papers prepared for Reagan before he left for the summit was a State Department proposal that the administration offer to end current restrictions on the sale of Western European pipeline equipment to the Soviets in return for an allied commitment to limit credits.
In a paper outlining U.S. summit strategy, Reagan was advised that "our positive attitude on macro economic/monetary issues can be used to elicit support for limitation on Western oficially supported credit to the U.S.S.R. and for efforts to increase Western energy security. We could also offer to eliminate export restrictions on energy-related equipment covered by existing contracts to attain this major objective."
The mention of "energyrelated equipment" refers to U.S. components needed by companies in Britain, West Germany and Italy to build more than $1 billion worth of turbines for the planned, 3,500-mile natural gas pipeline from Siberia to Western Europe. Exports of the components has been blocked under restrictions imposed by Reagan Dec. 29 in response to the martial-law crackdown in Poland.
Although denial of the General Electric-licensed European turbines of the Soviets would not prevent the pipeline from being built, it conceivably could delay its completion for up to two years. U.S. refusal to lift the restrictions has become a major source of friction between the United States and Western Europe.
The State Department proposal to trade an easing of the restrictions for European agreement on credit limits has caused dissension within the administration. It reportedly is favored by Haig as a means of keeping the president's options for conciliation at Versailles as wide as possible and preserve alliance unity.
Two senior administration sources reached in Washington today, however, charged that any deal with the allies would violate an agreement, reached at a National Security Council meeting last week, to defer any further action on U.S. export restrictlions against the Soviets until after the summit.
If adopted by Reagan these sources maintained, the proposal would be tantamount to trading something substanial and getting little in return, since verifiable restrictions on financial credits would be difficult to institute.
An alternative favored by the National Security Council, they said, would require the Soviets to make down payments for equipment bought from alliance members.
But one source in Washington said this approach already had been turned down by the French, who maintain it would violate a five-year economic agreement entered into in 1980 by the government of then president Valery Giscard d'Estaing. U.S. officials said the French repeatedly have refused to provide copies of the agreement to the United States or NATO allies.
Neither version of the U.S. proposal concerning the pipeline, should it be presented by Reagan to the allies, is likely to find a sympathetic French ear, judging by comments here today by French officials.
As to any less severe proposals the administration has put on the table to restrict trade with the Soviets or toughen credit terms, the senior French official said: "We French feel that we have more at stake than others because we supply the Soviets equipment, which normally is financed by extending credit, whereas the United States can sell them grain for cash."
The official protested that the French have adhered to changes recently recommended by the Organization for Economic Cooperation and Development, so that instead of charging the Soviets 7.8 percent interest as they did only four months ago, the French now charge 50 percent more matching their own internal interest rate structure "while the Germans, the Japanese and others charge only 8 percent, with no subsidy involved."
French acquiescence to the new OECD interest rate schedules which in effect classes the Soviet Union with other developed industrial countries is to be announced as an official part of the summit proceedings. While many European countries differ with the Reagan push to charge the Soviets at higher rates, they may have agreed to the recent action because they see the OECD ratecoordination efforts as unenforceable.