394.31/3–2151
Memorandum by the Assistant Secretary of State for Economic Affairs ( Thorp ) to the Secretary of State
Subject: Negotiations with British Commonwealth Countries at Torquay
Discussion:
The Torquay tariff negotiations with British Commonwealth countries have reached a critical stage.
Canada. The Committee on Trade Agreements has recommended a package deal with Canada which, if carried out, would result in a substantial agreement with that country. As an essential part of the deal it is necessary to secure authority from the President to make additional offers, including offers on five controversial items. The deal has been approved by the majority of the Committee with only the Department of Agriculture dissenting. A memorandum to the President urging approval of the Committee’s recommendations is submitted herewith.
Australia. Our negotiations with British Commonwealth countries at Torquay are jeopardized by the intransigeant position of the Australian Delegation acting under instructions from the Australian Government.
Australia has contractual rights to margins of preference on certain important agricultural products in the United Kingdom (Cheddar cheese, condensed milk, milk powder, raisins, preserved fruits) and in Canada (raisins, dried currants and canned peaches). The Australian Delegation has refused to give releases on these bound margins. Therefore the United Kingdom cannot give concessions to the United States which are essential to a successful agreement between the United Kingdom and the United States. Similarly, Canada cannot give concessions to the United States which are essential to the conclusion of the package deal with Canada which has been recommended.
The United States has offered Australia a concession on wool, and on other less important products. The concession on wool can be justified only if we get, in return, (1) substantial reductions in Australian duties and preferences in the Australian market and (2) concessions by the United Kingdom and Canada involving reductions in the margins of preference enjoyed by Australia on these particular agricultural products in the markets of these countries.
Australia holds the key to the successful conclusion of negotiations with the Commonwealth countries in the sense that if they maintain their present intransigent attitude, we can expect only a very limited agreement with the United Kingdom and a restricted agreement with [Page 1290] Canada, and it is even possible that we may have no agreements with any of the Commonwealth countries.
The Australian Delegation has stated that the offers Australia has already made to the United States would, with some improvement, be adequate to balance the United States wool concession. The United States Delegation considers that a balanced agreement can only be reached if Australia (a) agrees to release the bound margins on the agricultural products at issue, (b) agrees to reduce the preference margin in revising its tariff on automotive items, and (c) agrees to negotiate with Southern Rhodesia for reduction in the tobacco preference within a reasonable time.
United Kingdom. Our negotiations with the United Kingdom have reached a critical stage. In the opinion of the United States Delegation the present United Kingdom offers are not sufficient to provide even a limited agreement in fair balance. The United Kingdom Delegation has indicated that they are not prepared to offer any further concessions, particularly on certain agricultural products which also involve releases on bound margins of preference by other Commonwealth countries. The United States Delegation takes the view that a limited agreement on the basis of the present United Kingdom offers would be worthless and would do no credit either to the General Agreement or to the Trade Agreements program. The United States Delegation has urged the United Kingdom to try to obtain preference releases from the Commonwealth countries but the United Kingdom Delegation has replied merely by general references to the importance of United Kingdom-Commonwealth relations and has given no indication of intention to assist in a resolution of the present impasse. There is every indication that the British are strongly opposed to any concessions involving substantial reductions in preferences. The United States Delegation has left no doubt that they would prefer no agreement to an unsatisfactory limited agreement, though they have not closed the door entirely to the latter possibility. They have undertaken to consider again what United States offers could be made on the basis of existing United Kingdom offers, but they expect that it will be clearly evident that an agreement on such a basis would not only be meaningless but undesirable. It is clear that the United Kingdom Delegation does not believe that the United States is prepared to accept no agreement and is convinced that we will eventually accept a limited agreement.
New Zealand. It is expected that an agreement can be reached with New Zealand, providing that country is prepared to release bound margins of preference on the key agricultural products which are at issue in the Commonwealth negotiations. Should Australia and the United Kingdom agree to our requests involving the preference issue it is not thought that New Zealand would stand in the way of the conclusion [Page 1291] of successful agreements with the other Commonwealth countries.
South Africa. It is expected that an agreement can be reached with South Africa, though on a limited basis because of the relatively low South African tariff. It would be necessary for South Africa to give releases on the key preferences; but, as in the case of New Zealand, South Africa would not be likely to prevent the successful conclusion of negotiations with the other Commonwealth countries.
Ireland. Ireland has contractual rights to margins of preference granted by the United Kingdom on three key agricultural products, namely, Cheddar cheese, condensed milk unsweetened and milk powder unsweetened. The United Kingdom must therefore obtain releases from Ireland, in addition to other Commonwealth countries, in order to make concessions to the United States on these items. The fact that Ireland is not negotiating at Torquay complicates the problem of obtaining the agreement of Ireland to release the United Kingdom from the bound margins on these items. The United Kingdom Delegation has indicated that it would be difficult to get releases from the Irish Government, but, to the best knowledge of the United States Delegation, they have not yet made any effort to obtain such releases. It may be necessary for the Embassy in Dublin and the Department to seek the cooperation of the Irish Government in agreeing to the necessary releases.
Recommendations:
1. That you support the request of the Committee on Trade Agreements for approval of the package deal with Canada, as set forth in the attached memoranda.1
2. That, if Presidential approval of the Committee’s request is obtained, you inform the Australian Ambassador
- a.
- That we are seriously concerned over the unwillingness of the Australian Delegation to improve their present offers and particularly their refusal to give releases to the United Kingdom and Canada on bound margins of preference on certain key agricultural products.
- b.
- That, in our opinion, a balanced agreement with Australia can only be reached if Australia (1) agrees to release the bound margins on the agricultural products at issue, (2) agrees to reduce the preference margin in revising its tariff on automotive items, and (3) agrees to negotiate with Southern Rhodesia for reduction in the tobacco preference within a reasonable time.
- c.
- That the Australian Government would assume a grave responsibility if the maintenance of their present position results in the collapse of negotiations with the other countries of the British Commonwealth.
3. That, if Presidential approval of the Committee’s request is obtained, you inform the British Chargé d’Affaires [Page 1292]
- a.
- That we are seriously concerned over the unwillingness of the United Kingdom Delegation to improve their present offers, particularly on the agricultural products which we consider essential to the conclusion of an agreement in fair balance.
- b.
- That we cannot go against a basic principle of our trade agreements program by making concessions to the United Kingdom without receiving adequate reciprocal concessions.
- c.
- That the offers proposed by the United Kingdom are not in our judgment adequate in the light of the concessions the United States has offered.
- d.
- That we have, as the British Government is no doubt aware, agreed with the Canadian Delegation on the basis for an exceptionally satisfactory agreement with Canada. This agreement hinges in part on the willingness of the British Government to grant certain reductions in margins of preferences which Canada is willing to release. It would be extremely unfortunate if lack of cooperation on the part of the British Government were to prevent our reaching a significant agreement with Canada.
- e.
- That we would not be willing to proceed with an agreement on the basis of the present United Kingdom offers, and are prepared to accept no agreement with the United Kingdom if our Delegation so recommends.
- f.
- That the failure of our two governments to reach an agreement of real significance would be widely interpreted as evidence of disagreement between the United States and the United Kingdom which at this stage in our relations might have disproportionately adverse effects. It would strengthen the interests in both countries which have opposed our cooperative efforts to reduce trade barriers. Evidence of our ability and willingness to negotiate a meaningful agreement would be more than usually helpful in strengthening the solidarity between our two countries.
- g.
- That it is hoped the United Kingdom will reconsider its position and make the adjustments in its offers which will allow us to conclude a successful agreement.
Concurrences:
L/E, H, EUR/BNA
- Infra.↩