71. Memorandum of Conversation0
SUBJECT
- Six and Seven
PARTICIPANTS
- Mr. Robert Marjolin, Vice President, European Community Commission
- Under Secretary Dillon
- U—Mr. Leddy
- RA—Mr. Tuthill
- OT—Mr. Frank
Mr. Marjolin requested this opportunity to talk with Under Secretary Dillon because he believed strongly that the free world was today at [Page 153] a crossroads. Speaking in a personal capacity, Mr. Marjolin said the issue before us was whether the healthy developments in trade and payments already under way will progress toward further liberalization on a world-wide basis, or whether we will have to face the progressive disintegration of the world economy into a number of regional groupings.
On the favorable side, Mr. Marjolin noted that the European Commission can do much to steer Common Market policy in a liberal direction. The ideas contained in the recent Commission memorandum1 illustrate the possibilities, i.e., the total elimination of industrial quotas, the partial generalization of the next internal tariff reductions within the Community, the determination to reduce the common external tariff on a broad basis in the forthcoming negotiations, and a willingness to negotiate tariff reductions beyond what will be possible in the next general round.
Mr. Marjolin also called attention to the current shift in French commercial policy. Dollar liberalization has just been increased and now amounts to about 80 percent—equal to the level reached by the Germans and the British. Since the French until recently had liberalized very little in the way of dollar imports, this figure signifies a rapid opening-up of French markets to imports from all over the world. Even the Patronat has abandoned its diehard protectionist position. Minister Pinay has been a staunch supporter of a liberal policy and is in a strategic position to have the French take the lead in promoting a truly outward-looking, multilateral policy in the Common Market as a whole. Mr. Marjolin suggested that Under Secretary Dillon talk with Pinay and urge such a course upon him.
On the darker side, Mr. Marjolin saw the proliferation of regional schemes in Europe and Latin America as leading to the fragmentation of world markets. He was not worried about the direct effect of the Little Free Trade Area2 on the Common Market. He felt, however, that these schemes, barren of political content, were simply preferential commercial arrangements that could only lead to the end of GATT as an effective instrument. In that event both the European Common Market and the U.S. would suffer.
Because of its inherent discriminatory aspects, the Little Free Trade Area could, in Mr. Marjolin’s view, affect the U.S. only adversely, a situation that would be especially unfortunate in the present balance-of-payments situation. He tended to minimize the oft-mentioned point that because of Germany’s heavy dependence on the Outer Seven market, pressure would build up within the Common Market to come to terms [Page 154] with the Little Free Trade Area. In support of his view he called attention to the low level of tariffs in Scandinavia and Switzerland.
Under Secretary Dillon asked what Mr. Marjolin thought we could do in view of the fact that the British seemed determined to go ahead. Mr. Marjolin replied that British fears comprised two elements: commercial and political.
On the commercial side, the Common Market could contribute to a solution. First, it could adopt a generally liberal import policy along the lines already announced by the Commission. Secondly, it could provide assurance that the total volume of imports into the Common Market of products important to the UK and the other European countries would not diminish. If the British were worried about their exports of automobiles, for example, perhaps the Common Market could substantially reduce tariffs on cars on a most-favored-nation basis. Or, the tariff quota device might be used whereby more favorable treatment would be given for some predetermined volume of imports of sensitive products.
As for British political concerns, there wasn’t much the Common Market could contribute without denying the very purposes for which it was established. One possibility would be to give some more explicit recognition to the vital role that the U.K. must play in world affairs. The U.S. might suggest some form of close association among the U.S., the U.K. and the Commonwealth, and the Common Market (perhaps bringing in others on some agreed basis) to deal with broad issues of world economic strategy such as business cycles, commercial policy, aid to underdeveloped countries, and market stabilization. Since for obvious reasons such an idea would not be well received if it came from the Common Market, it would be necessary for the U.S. to make the initial approach to the U.K. in private talks. Thereafter the U.S. might convene a conference from which would emerge the new arrangements for dealing with world economic problems as well as commitments on commercial policy by the Common Market. But time is running out and the U.K. is getting more and more committed.
Under Secretary Dillon said he shared Mr. Marjolin’s concerns and wanted to give serious consideration to the ideas he expressed.
At the conclusion there was a brief discussion of Greek and Turkish association with the Common Market. Mr. Marjolin said that the only real justification for an association of these countries with the European Community would be as a device to provide substantial aid, thereby reducing the burden on the U.S. But the Greeks wanted more than financial assistance: they sought preferential treatment in the market of the Six but were prepared to give nothing in return. If the Outer Seven arrangement [Page 155] failed to materialize, Greece and Turkey would have no reason to feel isolated. In that event, perhaps any “association” with the Common Market could be limited to arrangements for financial assistance.
- Source: Department of State, Central Files, 440.002/9–3059. Confidential. Drafted by Frank.↩
- The Second Hallstein Report; see footnote 2, Document 70.↩
- The European Free Trade Association; see Document 52.↩