12. Circular Instruction From the Department of State to Certain Diplomatic Missions 0

CA-8151. A. CA-7021 and replies thereto.1 B. Cirinstr CA-8152. C. Cirinstr CA-8153.2

This is first of three messages on Free Trade Area and contains restatement overall US position in light Mission comments CA-7021. Second message (Ref B) deals with French proposals. Third message (Ref C) pertains certain other FTA issues with emphasis on problem of treatment to be accorded imported raw materials and components.

After study helpful Mission responses Dept considers US position re FTA negotiations (an underlying rationale on which position based) still generally valid. Purpose this message is to summarize for guidance all addresees and action as appropriate: (I) Continuing US position and objectives; (II) our assessment present negotiating situation and outlook; and (III) immediate US objectives in relation present situation and outlook.

Continuing US position and objectives are:
US attaches major importance to achieving viable, multilateral trading system for associating European Economic Community (as a unit) and other OEEC Member Countries.
US has therefore supported and continues support negotiation of Free Trade Area arrangements which mutually acceptable Europeans and which would (1) promote achievement system multilateral trade and payments convertibility; (2) lead to equitable solution agricultural, institutional and other specific issues in manner consistent GATT objectives which will assure stable, workable FTA while protecting commercial interests outside nations; (3) embrace on equitable basis Greece, Turkey and other less-developed OEEC countries while providing for assumption progressively of FTA membership obligations by LDC’s.
Initiative in reconciling major differences and working out agreed plan should as general rule come from Europeans. US is however prepared make general position known and use good offices in furtherance [Page 21] basic objectives. US will also make views known specific issues as necessary in light those objectives.
US remains firmly committed to success EEC and other six-nation Communities. Especially wishes assure, insofar as outside country can, that progress on FTA does not: (1) delay progress implementing EEC Treaty or (2) compromise integrity common institutions of Six which we hope will provide dynamic for further development European political federation. (At same time do not see any necessary reason why broader association envisaged FTA should water down cohesiveness of Six. This view predicated on assumption that Six (especially French) are or can be persuaded of necessity wider European associations and non-Six (especially UK) realize that Rome Treaties3 represent firm commitments which offer major opportunities rather than primarily commercial risks.)
Foregoing position based on view that successful outcome FTA negotiations or some appropriate substitute arrangements (including EEC as unit) of major importance in assuring broad European unity for long term, and extending on wider basis economic advantages expected from Common Market. Hence US attitude FTA consistent long-standing US policies toward Europe. Conversely ultimate breakdown of negotiations could lead to situation adversely affecting European cohesiveness and (through impact on NATO) US strategic objectives. (With specific reference LDC’s US has strong interest in seeing that FTA is drawn so as encourage participation all European NATO countries and other OEEC countries.) Moreover, as explained CA-7021, failure efforts find multilateral solution would seem inevitably generate strong pressures for limited restrictive arrangements between Six and non-Six, contrary US aims of freer multilateral trade and also contrary long-term politico-economic interests of Europeans themselves and success of EEC. Such failure could also weaken UK economically and adversely affect confidence in sterling.
Essential that above objectives (admittedly most difficult accomplish) be furthered in balanced manner, and that tactics and timing be sufficiently flexible adapt position to specifics of situation as it develops.
Mission comments appear substantially confirm analysis present situation contained paras one and two CA-7021. Subject further developments and advice from field, major considerations appear to be:
Fundamental issues in negotiations (e.g., trade deflection, harmonization of policies and agriculture) almost all appear reflect basic [Page 22] problem to be solved: how to mesh EEC (which is customs union plus long step toward full economic union) with geographically wider arrangements of more limited scope as currently conceived. Under any circumstance solutions these fundamental issues difficult and complex, but more so at present because UK and Six (in particular French) have not found common ground on means accomplishing objective associating Six and non-Six. Rather divergence has been so marked that there has been question whether there is basic objective accepted by all parties.
In this situation, clear that resolution major outstanding issues requires both will to agree and common acceptance broad objectives. Naturally hope as much technical progress as possible will be made in advance basic reconciliation.
British, despite indications willingness compromise certain points, have not given indications they prepared move substantially from original proposal; i.e., industrial FTA which eliminates substantially all internal trade barriers while retaining for individual Member Countries almost complete freedom re domestic economic policies and external commercial policies.
French interests which oppose FTA for reasons summarized CA-7021 para one (b), have used overall UK position as rationale for French intransigence. Have also used UK position on agriculture in same sense. Fully recognize however genuine problems both French and UK face in negotiations.
Further, developments in other fields (NATO planning, force levels, etc.) have tended create frictions in UK/Continental political relationships which carry over to FTA negotiations.
Finally, while British, Scandinavians and Swiss anxious for quick solutions, many in EEC appear favor (or consider inevitable) taking more time. Latter view based on (1) general feeling atmosphere needs clearing; (2) hope that time will bring change in UK policy; (3) hope that time will provide chance for others of Six to work for moderation adamant French position; (4) chance that time will convince French business interests they can adjust successfully to both Common Market and FTA.
Foregoing leads to conclusion that, despite US hope for early progress toward sound FTA proposal which US can support, reconciliation fundamental divergences will require time. (Immediate US objectives section III below premised this evaluation OEEC negotiating outlook, but believe they sufficiently flexible be applicable in event unexpected change situation brings chance early agreement.)
Non-Six see “deadline” for achieving some kind of agreement in fact that initial Common Market tariff reductions scheduled Jan 1, 1959. [Page 23] (UK has additional incentive for quick progress in Commonwealth Economic Conference in Sept.) This situation seems involve two-fold risk:
Breakdown of negotiations which could exacerbate split; make acceptable FTA much harder negotiate; and perhaps lead to series bilateral deals;
Attempt to avert such breakdown by agreeing on partial (and probably unacceptable) arrangements such as French proposals.
Given considerations Section II above, believe long-term objectives best furthered if US:
Continues assert support for multilateral system to associate EEC and other OEEC countries on basis consistent principles explained para I, A and B above. Dept plans reiterate US views in public statements and informal conversations as occasions arise. Missions (including USRO and Butterworth) should make this viewpoint clear to Govts OEEC countries, pointing in particular to reiteration US position in McCarthy statement CIG last February (summarized Polto 2538 pouched all OEEC capitals).4
Encourages informally continuation CIG negotiations, both as means avoiding breakdown with consequent risk adverse results outlined above and as means achieving any further possible progress technical issues.
As far as possible guides CIG discussions into productive channels consistent US overall objectives. Seeks to mitigate unrealistically rigid positions on timing problem, lest failure reach agreement this year results in quasi-automatic termination negotiations.
Encourages UK and Six to get together on fundamentals using channels and methods outlined CA-7021 para 5, recognizing however risks in pushing too hard for speedy solutions. In particular should deal with Six as a unit through Common Market Commission. If Missions receive suggestions US pressure French directly should explain that US believes such action neither appropriate nor promising, and that might even be counterproductive. (This not intended preclude Embassy Paris informally making US views known French.) Should at same time point out that US informally making general views known all OEEC Govts, including Six through Common Market institutions.
Not endorse specifics any particular proposals this time. US will however make clear its views any proposals which clearly unacceptable.
  1. Source: Department of State, Central Files, 440.002/3–2058. Confidential. Drafted by Cleveland and Myerson on March 14, cleared with Jandrey and nine other officers in the Department of State, and signed by Dillon for Dulles. Sent to Ankara, Athens, Bern, Bonn, Brussels, Copenhagen, Dublin, The Hague, Lisbon, Luxembourg for Butterworth and the Embassy, Oslo, Ottawa, Reykjavik, Paris for USRO and the Embassy, Rome, Stockholm, and Vienna.
  2. See Document 8 and footnote 3 thereto.
  3. Neither of these circular instructions, both dated March 20, is printed. (Department of State, Central Files, 440.002/3–2058)
  4. These treaties and protocols, signed on March 25, 1957, established the European Economic Community.
  5. In Polto 2538 from Paris, February 19, Burgess reported on the discussion at the CIG meetings of February 17–18. (ibid., 840.00/2–1958)