Germans and French in squabble on trade

A DEEP-SEATED ideological battle between Germany and France on the reasons for the continuing economic recession in Europe has undermined efforts to forge a common response to the deepening world trade crisis. The dispute threatens to frustrate finance ministers from the Group of Seven industrialised nations as they gather in London today.

Klaus Kinkel, the German Foreign Minister, warned this week that 'we have reached a point at which our conception no longer coincides with that of France' on international trade talks, while Chancellor Helmut Kohl condemned moves to a 'fortress' Europe.

French politicians, in the throes of a National Assembly election campaign, have been growing increasingly protectionist because of virulent opposition to aspects of the General Agreement on Tariffs and Trade (Gatt) negotiations which are seen as damaging to French farm interests. With the ruling Socialists heading for defeat, Pierre Beregovoy, the Prime Minister, has sounded shrill and protectionist in the face of a national unemployment rate of 10 per cent. Valery Giscard d'Estaing, the former president and one of the opposition leaders, added to the protectionist theme this week, saying that if the opposition won power it would reject the contentious EC-US oilseed deal.

He went on to say: 'We shall seek re-negotiation of the reform of the (EC) Common Agricultural Policy', thereby threatening to unravel the entire Gatt structure which depends on the EC ending price subsidies to farmers.

The traditionally cosy alliance between Bonn and Paris has been severely strained by threats from France this week that it will veto the EC-US agreement on oilseeds because of the damage it will cause farmers in the community. Mr Beregovoy set off further alarms this week when he said that the entire Gatt framework should be re-negotiated from a position of European strength.

This posturing has infuriated Chancellor Kohl and Mr Kinkel, both of whom have sent out sharp warnings that their patience with Paris - already stretched by the huge German investment in maintaining the 'strong franc ' - was running thin. Mr Kinkel went on to demand that France 'renounce the step which would provoke a trade war between the EC and United States'.

At the heart of the rapidly escalating row is Germany's belief - supported by Britain - that the best way to deal with the economic recession is to complete the Uruguay round of trade talks and so give a badly needed boost to world trade. France, on the other hand, fears the impact of the Gatt agreements on its farm sector and is especially critical of the draft EC-US oilseeds agreement which it is threatening to veto.

For France's Socialist government, which is facing defeat in next month's National Assembly elections, the route to economic recovery lies not in making concessions to stimulate world trade, but in protectionism. If there are to be policy adjustments, they should be elsewhere - such as in a reduced US deficit and reduced interest rates in Germany.