President Reagan announced agreement on East-West trade policy Saturday although full accord had not been reached on how it was to be made public, diplomatic sources said yesterday.
This sparked the French government's sharp rejection of the agreement, leaving the United States and France with a potential split as bitter and serious as that caused by the administration's Soviet gas pipeline sanctions that Reagan ordered lifted in his Saturday radio broadcast.
It was the joining of the East-West trade agreement and the lifting of the sanctions in the same public announcement that left the French "very disappointed, very surprised," the sources said.
U.S. officials said yesterday that there had been extended communications throughout the week on the president's proposed announcement and that "all the countries had responded favorably . . . privately as well as publicly after the announcement, except perhaps for one."
The officials said the talks had progressed to the point that Reagan could make his decision on the proposed East-West trade studies and, separately, on the sanctions issue. They said Reagan saw no reason to delay an announcement.
There is understood to be lingering bitterness among some European diplomats involved in the intense negotiations at what were said to be last-minute French objections to some of the language in the agreement.
"If something came up at the last minute, it was not made very clear until that time," an administration official said.
A senior administration spokesman said Saturday that a few minor details in the agreement remained to be negotiated and that the text of the accord was not meant to be a public document.
Ironing out those details leaves Secretary of State George P. Shultz and his close aides, who negotiated the agreement announced Saturday, the possibility of bridging differences with France and bringing Paris into the continuing trade studies. Much will depend on whether the issue is handled without public rancor and behind the scenes, according to sources familiar with the negotiations. "Our understanding was that [the French] would participate, and we anticipate that they will," a U.S. official said yesterday.
While Saturday's announcement rid Reagan of one troubling issue, the sanctions policy, it spotlighted Shultz's diplomatic talents and Reagan's determination to put flesh on what otherwise is a bare-bones promise to pick up where the leaders of the seven major industrial nations stopped at the economic summit at Versailles last June.
The studies are designed to develop an alliance strategy on energy purchases from the Soviet Union and on credit policies for sales to Moscow and to tighten up on sale of strategic items with military potential.
While the studies are being carried out, probably over a six- to eight-month period until the next economic summit meeting in Williamsburg, Va., in June, Reagan decreed a moratorium on energy purchases from Moscow.
European officials moved quickly Saturday to put their own interpretation on the announced trade agreement, something the administration apparently anticipated.
"Obviously different countries will put different emphases on the agreement," one U.S. official said of what is believed to have been a carefully orchestrated European response to fit various domestic needs. It was the severity of the French announcement that apparently exceeded what was anticipated.
What happens between now and the Williamsburg summit will largely determine the course of Atlantic Alliance relations and the positive response Reagan and Shultz have received for resolving one difficult problem and launching a potentially promising policy course.
Sen. Richard G. Lugar (R-Ind.), chairman of the European affairs subcommittee of the Foreign Relations Committee, reflected that support yesterday on "Face the Nation" (CBS, WDVM).
Rejecting the suggestion that Reagan's pipeline decision was a "flip-flop" or a retreat, Lugar conceded that Reagan had been forced to modify goals he set forth in June in broadening sanctions on firms supplying pipeline components.
"The president's initial objective was perhaps more ambitious than the one he had realized. It probably became clear that the pipeline is going to get built, that people are going to ship things to the pipelines, that there will be severe losses to our allies and to us if we failed to come to that recognition," said Lugar, who generally supports administration policy.
Asked how to deal with France's refusal to join the agreement, he said, "I'm not sure we're in a position to do anything to France nor would we want to.
"France has some very peculiar economic problems of its own . . . . I think we need to keep closely in touch. There are many persons in France who share our general strategic viewpoint with regard to the Soviet Union, so that offers something for us to talk about."
Shultz, in a meeting with Washington Post editors and reporters last Friday, seemed to set the stage for Saturday's announcement as he outlined administration goals in the talks with the Europeans and offered a guideline against which to measure eventual results.
"We have not been talking about a trade war," Shultz said, echoing European sensitivities on the subject. "We are talking about certain aspects of trade that we want to be careful about.
"We want to be very restrictive about trade in things that give military support. We want to be careful about trade that plays into what one might call the strategic posture of the Soviet Union."
Shultz emphasized the cost of the heavy arms burden being carried by Western economies, a point he made often.
"There is only one reason why the West is doing that, and that is what the Soviet Union is doing. So under the circumstances what sense does it make to subsidize their economy?" he argued.
Shultz apparently was reflecting arguments he had reportedly made a day earlier to Reagan that the United States should take advantage of the change in leadership in the Soviet Union to make a gesture of a desire for better relations.
He said the talks with U.S. allies were resulting in an "outline of the kind of conditions in which trade would take place, and it would make sense that if the general atmosphere changed a lot and their sort of predatory activity around the world would cease," then possibilities for more trade might be increased.
Shultz seemed to reflect this desire for better relations with the Soviets when he and Vice President Bush arrived in Moscow yesterday for the funeral of Leonid I. Brezhnev.
Meanwhile, Dresser Industries of Dallas, another company affected by the repeal of sanctions, said yesterday that the decision should end the company's court action against the Commerce Department challenging the government's right to apply the sanctions.