US holds off on EC trade war: High-level talks due this month

WASHINGTON - An escalating transatlantic trade row was temporarily defused last night, as the Clinton administration agreed to postpone sanctions against European manufacturers bidding for federal contracts here, at least until high-level talks between US and Community negotiators at the end of this month, writes Rupert Cornwell.

In a joint statement by the US Trade Representative, Mickey Kantor, and the visiting European Commission President, Jacques Delors, the two sides said they had put the dispute on hold until after meetings between Mr Kantor and senior Community officials in Brussels on 29 and 30 March.

Originally, Washington's measures, which would ban EC companies tendering for various US government contracts in retaliation for allegedly protectionist regulations in force in Europe since last January, would have come into effect on Monday. Mr Kantor himself had abruptly cancelled an earlier round of talks, saying that Europe's reluctance to shift its ground made them pointless.

Yesterday, however, the mood seemed to have changed - in part at least as a result of Mr Delors' brief White House meeting with Mr Clinton. 'Whether it lasts isn't clear, but the atmosphere's a little better,' an EC official said. 'At least, Mr Delors seems convinced that the President doesn't want a trade war, and Mr Clinton understands the protectionist dangers out there.'

According to the statement, Mr Delors indicated the Community's desire to reach a 'mutually satisfactory' solution to the procurement dispute, and promised US concerns would be addressed 'constructively'. In return, Mr Kantor said the US would hold off further action until the next round of discussions had been completed.

However, the brief truce on procurement, which coincided with an unexpectedly benign US ruling yesterday on Japanese semi-conductor imports, has not allayed the concern of European officials over the zigzags of the new administration on trade policy. They remain confused and uncertain at the contrast between the reassuring noises from the White House and the intermittent belligerence of key advisers such as Mr Kantor. Even if the two sides can reach a deal on procurement, deadlock still remains on Gatt.