15. Telegram From the Mission at the North Atlantic Treaty Organization and European Regional Organizations to the Department of State 0

Polto 3020. Department pass Burgess,1 Treasury and ICA. Luxembourg for Butterworth. Reference: CA-8151, March 20.2 Subject: Free Trade Area.

Appreciate instructions refair, which provide immediate guidance for informal conversations during CIG meeting. In view of agenda, do not believe there will be any occasion or need for US representative make any formal statement at this meeting. USRO in general agreement refair. There are few points on which we wish comment.
We agree that at this stage there is little likelihood that FTA treaty can be negotiated and ratified by January 1, 1959. We believe, however, next few months represent crucial period for reaching agreement on basic issues, particularly in light forthcoming GATT session and September Commonwealth conference. Even if basic issues not resolved, we would not expect have dramatic breakdown of negotiations, as no country or group of countries would wish bear onus. Rather, we would fear fade-out with Ministers meeting less frequently or on call, while for some time technical committees would continue to work. Meanwhile, would be realistic expect eleven seek actively other solutions which we consider undesirable, such as reinforcing preferential character of Commonwealth, tying Scandinavia to sterling area, restrictive bilateral arrangements with EEC, damaging pressures by GATT on EEC. At same time, strains would be developing in OEEC, raising serious questions of discrimination, and threatening existence of such institutions as EPU.
We believe refair does not fully recognize extent to which British have moved from their original concept of FTA. This appears to us to parallel slight underestimate in CA-70213 of degree progress achieved in CIG. In reviewing issues which have been negotiated in CIG, we are impressed by extent to which eleven have been prepared adopt specific provisions of Rome treaty. Most notable examples of issues where original wide disagreement has been substantially narrowed are: Harmonization [Page 27] of labor costs (along lines French protocol Rome treaty), institutions (particularly usual majority voting procedures), invisibles and capital movements, and special treatment for LDCs. In addition, UK has proposed that treaty should include specific obligations in member countries for harmonization domestic economic policies. Interesting note that British now closer to Rome treaty provisions on voting than French.
Progress on harmonization of external commercial policies is related to solution of origin problems, which is one of major outstanding issues. Here Carli plan raised some hope re possibilities finding basis for compromise. Expect his plan will be subject at least considerable informal discussions next CIG session. Would therefore appreciate preliminary Department reaction though realize absence details precludes firm position.
Despite progress on numerous issues, we agree, of course, that basic issue of nature of proposed free trade area, extremes of which primarily exemplified by British and French positions, remains unresolved. On agriculture, British have not budged from initial position although new paper expected at next CIG meeting. It is possible Maudling attempted invite strong opposition from negotiating partners to provide him with ammunition for use in UK to battle against strong agricultural interests. Also possible that announcement French FTA paper contributed to delay in presenting new UK agricultural paper in order to retain concessions on agriculture as bargaining weapon. In addition, there are several relatively minor issues, such as revenue duties and state aids, where British have been unnecessarily sticky and where timely concessions on their part would have helped improve atmosphere CIG meetings.
We generally agree with Department analysis French position paragraphs I-D, CA-8151, and I (B), CA-7021. Believe overriding reason for French government’s opposition to FTA is real conviction that FTA treaty could not get through Parliament within near future, although, as noted paragraph 3, Polto 2871,4 several political figures have now apparently switched to support FTA. Further comments on French position after review French plan.
In summary, events in western Europe are moving at too fast a pace and complications of delay are too great to admit of waiting for passage of time to solve some of obstacles. However, clear assurance that acceptable treaty can be ratified before end 1959 would probably satisfy eleven despite slight discrimination resulting from one year lag between Rome and FTA treaties. As to period for negotiations following agreement on basic principles, it is rather generally accepted that actual drafting might not be long drawn out because of vast amount basic technical work completed or well under way and wide area of agreement reached on many issues for which Rome treaty has more frequently than not served as model.
In light above, we consider time may be rapidly approaching when US should play more active role. Assume missions in talking with their respective counterparts in OEEC capitals would be free to use full US position in refair rather than just reiterate well-known position in paragraphs 1–A and B. We would think it unfortunate if they did not also indicate sense of I-C, to make known our willingness to “use good offices” if need arises. The idea persists among eleven that whereas we gave useful active support in case of EEC, we have been willing to date only to support passively FTA. We endorse importance of emphasis on approach to six through common market institutions, whose influence must be strengthened.
  1. Source: Department of State, Central Files, 440.002/3–2658. Confidential. Transmitted in two sections. Repeated to Luxembourg and London and pouched to the other OEEC capitals.
  2. Burgess was in Washington for consultations.
  3. Document 12.
  4. Document 8.
  5. In Polto 2871 from Paris, March 14, Burgess reported that the head of the French Delegation to the OEEC, Valery, had called on McCarthy and his staff to present a summary of the French paper as well as his personal views regarding the outlook for FTA. In paragraph 3 of the telegram, Burgess stated that, according to Valery, Faure and Gaillard had switched from opposing to supporting the FTA. (Department of State, Central Files, 440.002/3–1458)