Agriculture Secretary John R. Block said here today that "there will not be an agricultural trade war" between the United States and the 10 European Community countries. But he declined to rule out the possibility of dumping of U.S. surplus dairy products abroad.
Block and four other members of the Reagan Cabinet, led by Secretary of State George P. Shultz, met with the five top commissioners of the European Community in a three-hour, closed session meant to avert an all-out conflict over what Washington views as European undercutting of world market prices on some commodities.
The officials appeared to have had some success and to have averted at least some imminent retaliation by Washington. Both Block and Gaston E. Thorn -- president of the European Commission, or the executive arm of the community -- announced that the two sides had agreed to start in January to try to work out a strategy, find areas of cooperation and produce a report for review in March.
At a news conference, however, Block specifically left open the possibility that the United States might resort to dumping if an agricultural accord is not soon achieved. Dumping means selling products abroad for prices below their cost at home, both to get rid of them and to undercut foreign competition.
The dispute between the United States and many of its European allies over agricultural subsidies that enable goods to be sold cheaply around the world has grown into one of the most serious economic and political issues to face the alliance.
One official said privately that the threat of U.S. retaliation remains but that the general sense of good will that appeared to be involved in the meeting suggests that an immediate threat of dumping has receded.
The stakes in this battle are vast. The European Community is the largest trading bloc in the world, accounting for almost one-third of all exports and imports around the globe. The United States, in 1981, exported about $9 billion in agricultural products to community nations and in turn imported about $2.2 billion of their agricultural products.
Yet the battle is not over trade with each other. Instead it centers on what Washington claims is $8.8 billion that the European Community pays its farmers each year to overproduce and thus flood the rest of the world's markets with cut-rate products.
Although American exports remain high, both the U.S. share and value of its farm exports have dropped in the past three years. Increasingly, Washington believes it is losing markets in the Middle East, Latin America, Eastern Europe, the Soviet Union and elsewhere to European goods backed by excessive government subsidies.
Block recently has been quoted as saying that "our patience is wearing out," and other unidentified U.S. agriculture officials have suggested the United States may soon start dumping some of its huge stockpile of surplus butter or subsidizing poultry exports. The recent General Agreement on Tariffs and Trade (GATT) conference failed to resolve the issue.
Asked today whether there will be a trade war, Block said, "First of all, there will not be an agricultural trade war. I don't think we should talk about it. We need to solve problems, and my appraisal of the outcome [of today's meeting] is that there were some concrete actions agreed to. The European Commission appreciates the need to harmonize internal prices and world prices, and it was most important to agree to get down to specifics in terms of reviewing what can be done to solve the trade frictions."
Asked if the United States is still considering dumping of commodities such as butter, Block said, "We did not agree at this meeting today to withhold actions on the part of the United States or to take actions. We didn't specify what we are going to do. We leave that open. There is no decision at this time."
The European push for farm exports has come when low income for farmers in several countries is becoming an increasingly explosive political problem for producer nations.
The state of the world economy makes things even worse, as do changing patterns of exports. The United States, for example, long a huge grain exporter, is now exporting more dairy products, a commodity that traditionally has been a European export staple.
Washington claims that the European common agricultural system produces subsidies far beyond what is fair, while the Europeans say that the United States, in other ways, also subsidizes its farmers, lowering prices abroad.
Thorn called the impasse "the most difficult economic and political situation since the war" and said it was "absolutely essential" to work out a strategy for cooperation soon.