REUTER - 13/3/95

By Patrick Chalmers

BRUSSELS COREPER rejected peace talks with Canada in a row over fishing rights on Monday but steered away from threatening trade sanctions against Ottawa, Spain's ambassador said.

"They have to liberate the boat unconditionally (before negotiations)," Javier Elorza told reporters after the Committee of Permanent Representatives had met on what to do about Canada's seizure in international waters of the Spanish fishing boat, the Estai.

He said the ambassadors had not discussed trade sanctions as a way of punishing Ottawa.

The European Union, furious at Canada's seizure of the boat in international waters, has been searching for ways to punish Ottawa without triggering an all out trade war.

The European Commission has been ordered to draft a list of possible retaliatory measures against Canada.

But the ambassadors have apparently decided that at least for now it was better to turn dow the heat.

Germany's ambassador Dietrich von Kyaw, asked as he entered the COREPER meeting whether trade sanctions were likely, said: "We will see. We will try to calm things down."

And one EU source, who asked not to be named, said: "It's very easy to condemn Canada, it's not so easy to agree on what we do next."

The Estai was seized and its captain arrested for fishing for Greenland halibut, also known as turbot, 28 miles outside Canada's 200 mile limit. Canada says it is trying to conserve the fish by limiting catches in the region.

Commission officials were tight lipped on Monday about what a prospective sanctions list might contain, but they made clear they wanted Canada to release the boat.

"There's no question of negotiations on this affair if the captain and the ship are not first freed," a Commission spokesman said.

Canada was holding the boat in St John's, Newfoundland, until a court hearing on Tuesday decides whether its owners can post a bond against one count of illegal fishing.

The ship's captain, Enrique Davila Gonzales, was released on Sunday on bail after being charged with four counts under Canadian law, including one count of illegal fishing.

Canadian fisheries officials said the Estai's 24 crew members were free to return to Spain.

The Commission was told not to excluded anything in its list of retaliations, but how far the EU is prepared to take the fight remains in question.

One Spanish source said the 15 nation EU's room for manoeuvre on sanctions could be limited by the fact that EU exports to Canada could end up being hardest hit in any subsequent trade war.

Tension is running high on both sides of the Atlantic as a result of the seizure, with Canada portrayed as a pirate or an environmental hero.

In St John's on Sunday, a hostile crowd jeered the captain of the trawler and pelted a delegation of European ambassadors with rubbish and eggs shortly after Canadian authorities docked the boat.

The row centres on the sharing of dwindling stocks of halibut or turbot in the north Atlantic fishing areas.

"This is in fact a trade dispute, which like all trade disputes has to be treated seriously but which cannot be solved by violating international law," said Spanish Prime Minister Felipe Gonzalez in Copenhagen.

Trade between Canada and the EU is estimated at $21.27 billion annually, including $1.13 billion in Canadian fish and farm exports.