DEEP RIFT AT GATT STIRS FEARS OF CRISIS ONLY JAPAN MAKES SIGNIFICANT OFFER

DEEP RIFT AT GATT STIRS FEARS OF CRISIS ONLY JAPAN MAKES SIGNIFICANT OFFER

Geneva is a gloomy town today for trade negotiators from more than 100 countries.

Failure by U.S. Trade Representative Mickey Kantor and European Community Trade Commissioner Sir Leon Brittan to bridge significant differences during two days of talks in Brussels, Belgium, resulted in a decidely dour tone in the seven-year Uruguay Round of the General Agreement on Tariffs and Trade.Further negotiations by senior U.S., EC, Canadian and Japanese officials Thursday and Friday were similarly disappointing.

With a deadline of Dec. 15 looming, many trade officials are resigned to the fact that without a real crisis - such as missing the Nov. 15 deadline for reaching an accord on tariff reductions - there is no prospect of substantial progress.

Although the United States and EC came forward with improved tariff-cutting packages Friday, wide gaps remain in the area of textiles and natural resource products like nonferrous metals, wood and paper products.

One positive development emerged Friday, however, when Japan proposed significant reductions on nonferrous metal duties and pledged cuts of 50 percent or more on textile tariffs of 15 percent and greater.

These cuts would apply to roughly 150 products, the equivalent of more than half the entire Japanese textile schedule.

"It's very positive. That's the one concrete step to emerge today," said John Schmidt, U.S. coordinator for the Uruguay Round.

Most of the other 100 or so countries involved complain they are sidelined

from the negotiations in part because market-access discussions between Washington and Brussels are bogged down in bickering over the progress for tariff cuts.

The United States wants offers made on specific products, while the EC insists on a formula approach that would result in set cuts across the board.

"It's very frustrating because we have not been able to fully engage. We make offers and get nothing in return," said one senior Asian official.

There also was evidence of backtracking by Brussels in the toys and vegetable oils sectors. Sir Leon had pledged EC willingness to eliminate duties on such imports provided other participants lowered barriers in other areas.

Sir Leon's announcement on these cuts at a news conference in Brussels last week apparently caught his negotiating team off guard and EC officials - not for the first time - are backing away from a commitment made by the community's principal negotiator.

For their part, EC officials have grown so frustrated with U.S. reluctance to liberalize ocean shipping that they have threatened to pull off the table earlier offers opening their markets in port and port-auxiliary services.

Washington has been preparing an offer in those two sectors for presentation as early as this week. However, EC officials said pressure from two member states - Denmark and Greece - to include all three maritime sectors has grown so intense that Brussels would rather walk away entirely than accept an unbalanced package.

U.S. officials Friday said they were setting forward a new package of tariff cuts - again, conditional on improved offers from other countries - that would lower tariffs across the board by an average of about 42 percent. That is an improvement on the 37 percent average cuts proposed earlier.

EC negotiators responded with a proposal to bring down average duties by 33 percent, compared with the 26 percent average cuts on the table since

December 1992.

Both the U.S. and EC offers remain below those of the Canadians (50 percent on average), and Japan (59 percent).

"The EC had a long way to come and they have come some of the way, but I don't think they have come far enough . . . The EC is standing in the way of a deal on market access," Mr. Schmidt said.

Washington has reluctantly resigned itself to the fact that EC tariffs on electronics will not be eliminated and has apparently accepted a cut of only 33 percent. On semiconductors, the area in electronics of greatest interest to the United States, the EC imposes a 14 percent import duty.

The community, meanwhile, remains highly critical of U.S. movement on textiles, which they say has resulted in an offer that cuts in half peak tariffs above 15 percent on just half the product lines protected by those high duties.

"The United States has not said anything on textiles . . . There has been no real movement since the first of September," said one senior EC official.