Foreign Relations of the United States, 1958–1960, Western European Integration and Security, Canada, Volume VII, Part 1

45. Memorandum of Conversation⁰

January 8, 1959.

SUBJECT

• British Views on Future Common Market-Free Trade Area Developments

PARTICIPANTS

• Mr. Thorold, British Embassy
• Mr. Merchant, Assistant Secretary—European Affairs
• Mr. Timmons, Director, Regional Affairs
• Mr. Elrod, Economic Officer, United Kingdom & Ireland Affairs

Mr. Thorold called to suggest again the possibility that the United States seek to encourage the Common Market countries to come to agreement with the other members of the OEEC in the proposed Free Trade Area. Mr. Thorold said that he agreed with the U.S. view that direct pressure should not be brought to bear upon the French to bring about a CM–FTA association, but suggested that perhaps the U.S. could let it be known to Bonn that we favored the FTA. Mr. Thorold felt this would be effective as the Germans were themselves desirous of accommodation of the CM with an FTA and would press the French for agreement.

Mr. Merchant reviewed the U.S. position of leaving adjustment to the interested European countries. He said that while we had expressed our support of an FTA in association with the Common Market we had not intended to intrude ourselves in the actual working out of the details, preferring to remain rather aloof. Mr. Merchant said that we would consider Mr. Thorold’s suggestion but could hold out no hope that we would now be prepared to approach the Germans on the basis suggested.

Mr. Merchant asked Mr. Thorold if he had any idea as to what was behind the proposal for a delay, probably to January 24, in the OEEC Ministerial Council scheduled for January 15. Mr. Thorold said he knew of no specific reasons for delay and had himself wondered about this since the meeting would obviously be mostly concerned with the problem of liberalizing quotas to OEEC countries outside the Common Market. Mr. Timmons noted that no one wanted a repetition of the December 15 OEEC meeting.¹ Therefore, should the OEEC countries themselves desire a postponement, this might be a good thing. A less hurried approach to the outstanding problems might contribute to a more harmonious atmosphere and avoid a repetition of the December 15 meeting. Mr. Timmons said that he assumed the next Ministerial Meeting would be concerned primarily with the question of interim arrangements on import quotas. Acceptable arrangements on these would, in turn, facilitate consideration of the longer-term problems. Since January 1 had now passed, perhaps better arrangements might be arrived at without the necessity of meeting pressing deadlines.

Mr. Thorold said it was the small quota problem that was causing the most trouble and that the U.K. felt that the formula of quota relaxation on individual products up to 3 per cent of the production of the national market should be extended to all the OEEC countries. Mr. Thorold said that the division of Europe into economic blocs was becoming a reality, as the British had feared would be the case lacking an FTA, and that the British wanted to avoid discrimination by the CM against the rest of the OEEC countries. He suggested that, in supporting the FTA, the U.S. had supported the proposition that there should be no discrimination between the Six and the Eleven.

Mr. Merchant said that there had always been a discriminatory element inherent in the concept of the Common Market which had been recognized to exist before the FTA was ever proposed. This discrimination would have been evident as the CM came into operation, without an FTA, and had been weighed against the political and economic advantages that would arise with the creation and development of the CM.

Mr. Timmons reviewed the historical development of the CM idea and pointed out that for more than ten years the U.S. had accepted discrimination against itself as a price justifiably paid for what the U.S. considered to be advantages in European integration and economic cooperation. He noted that the U.S. had supported the idea of associating the Eleven with the CM by means of a free trade area as something which, in principle, was desirable on its merits. Mr. Timmons pointed out, however, that our attitude toward the CM had never been made dependent on the outcome of the FTA negotiations. He said that the 3 per cent national production formula for quota liberalization was primarily a commercial problem between the British and the French. Referring to Mr. Thorold’s mention of possible British retaliation against the French, Mr. Timmons said it was our hope this could be avoided. He added that we hoped that the advantages of a CM would spread with the gradual enlargement of a relatively free trading area. Hasty actions (e.g., retaliation) could well disappoint these expectations.

Mr. Timmons pointed to the need for economic statesmanship. He alluded to the accomplishments of the integration movement since its inception. He also referred to the important new developments in Europe—non-resident convertibility, French economic reform and trade liberalization. These were all hopeful developments, and he noted that the preparatory steps which had made them possible were apparently marked by close cooperation between the British and French authorities.

Mr. Merchant asked Mr. Thorold if the British were in touch with the Six and particularly with the French on the January 15 meeting. Mr. Thorold said he knew of no special contact as the British felt they had put forth their proposals which the meeting could now consider.

Mr. Merchant told Mr. Thorold that we would again examine our position, but that he could give him no encouragement to expect a change in our attitude on intervention in this matter, since the problems appear to us to be the primary concern of the CM and other OEEC countries, especially the United Kingdom.

0. Source: Department of State, Central Files, 440.002/1–859. Confidential. Drafted by Elrod.
1. See Documents 41–43.