WASHINGTON, APRIL 21 (IPS) – With fears of a trade war rising, U.S. President George Bush and European Community President Jacques Delors will meet here Wednesday in an effort to break the deadlock in the stalled global trade talks.

Analysts say the meeting is crucial to the increasingly desperate search for solutions to the basic issue of farm subsidies which has kept negotiations under the General Agreement on Tariffs and Trade (GATT) which began in Uruguay in 1986 from producing a new accord.

The discussions ended last week in disarray as Europe refused to drastically lower subsidies to its farmers despite strong pressure from other trading nations, particularly the United States.

Developing countries say these. subsidies have hurt their farm exports, since European and U.S. farmers have been able to sell their produce at artificially lower prices.

Analysts say failure to reach an agreement for the Uruguay Round could unleash a trade war between the Europe, Japan and the United States, which would greatly affect the developing world.

The trade issue has been the focus of recent dialogues in Washington between Bush, German Chancellor Helmut Kohl and Spanish President Felipe Gonzalez.

In a secret meeting in London last week between the U.S. and EC trade representatives, the Europeans insisted farm subsidies did not distort international trade and urged the U.S. to refrain from exporting cereal substitutes to the old continent.

U.S. officials pressed for measures that would limit the volume and price of European farm exports.

GATT Director-General Arthur Dunkel's compromise proposal on the farm subsidies- dispute met stiff resistance from Europe and the U.S.

Dunkel had recommended cutting domestic farm subsidies by 20 percent by 1999, reducing both the volume and the value of subsidised exports, and converting quotas and other non-tariff restrictions on farm trade into tariffs which would then be gradually lowered.

Instead of a 24 percent reduction in the value of subsidised exports, Europe said it would only agree to a maximum cut of 15 percent.

But the Cairns group, which is composed of major exporters of non-subsidised farm products, said they would not agree to a reduction of less than 24 percent.

Other issues also stalled the GATT talks. The EC wants to keep its quotas on banana imports while Japan and South Korea are seeking to retain its trade barriers against imported rice. The United States wants to exclude maritime and aerial transport from a new agreement liberalising trade in services.

The collapse of the GATT talks, due to the uncompromising stand of Europe and the United States, prompted German Economic Minister Jurgen Molleman to ask the leaders of the seven industrialised countries to hold another summit if the Wednesday meeting fails.

But analysts say u coming elections in France, Germany and the United States will force its leaders to reach an international accord which could boost their popularity for the polls.

These Western leaders have been buffeted by serious domestic problems and heavy criticisms of their foreign policies.

Local issues like the influx of immigrants from poor countries, and economic recession have weakened Bush, Kohl and French President Francois Mitterand, French historian Pierre-Henri Laurent said.