468. Memorandum of Conversation, May 1, between Ball and Luxembourg Foreign Minister Schaus1
SUBJECT
- EEC and Trade Negotiations
PARTICIPANTS
-
For United States:
- Acting Secretary of State, Mr. George Ball
- Assistant Secretary of State, Mr. William Tyler
- Ambassador William R. Rivkin
- OIC, Luxembourg Affairs, Mr. George R. Andrews
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For Luxembourg:
- Foreign Minister Eugene Schaus
- Chief of Protocol, Luxembourg Foreign Office, Mr. Andre Phil
Mr. Ball said that he was glad to be able to continue the discussion with Mr. Schaus which they had had the previous day with the President. Mr. Ball continued that, as the President had made clear, the development of the EEC position on trade negotiations was a matter of real concern to us. We look forward to the negotiations resulting in real liberalization of trade. The US has definite positions on two matters, Mr. Ball stressed. Firstly, we felt that agricultural commodities should be included in the trade negotiations. Mr. Ball noted that the Foreign Minister, during his conversation with the President, had expressed agreement in principle to the inclusion of agriculture, despite the difficulties involved. Secondly, Mr. Ball emphasized the necessity for acceptance of the principle of linear tariff cuts across the board with only a limited exception list. We had been advised before drafting the Trade Expansion Act by some members of the EEC, including the French, that the principle of linear cuts was the only basis on which the EEC could negotiate, and that for structural reasons negotiations on a commodity by commodity basis would not be feasible for the EEC. Therefore, we had drafted the Trade Expansion Act to negotiate on a linear cut basis. Our experience during the Dillon Round a year ago confirmed the difficulty of negotiating on a commodity by commodity basis.
[Typeset Page 1854]Mr. Ball noted that the French had raised the ecretement problem. Most EEC tariffs fall within a narrow spectrum in the middle. On the other hand, Mr. Ball continued, while there are some high US tariffs, we have many low tariff items and there are, moreover, many on the free list. As an example of a US low tariff Mr. Ball cited the case of automobiles, in which the US duty is only 6%, as compared [Facsimile Page 2] to the EEC tariff of 22%. Mr. Ball said he had had to explain to the US Congress that a reduction from 28% to 22% for the EEC was as important as a reduction from 8% to 6% for us. A cut of 50% in a high tariff would probably result in more trade than a 50% cut in a low tariff. Therefore, we feel that there is no real problem in certain US high tariffs, as the French do. We believe that a linear cut is far preferable to the French ecretement proposals and we can have discussions on individual adjustments for specific high tariff items after agreement on a linear cut. Mr. Ball stressed that we hope that the EEC Ministerial Meeting on May 7–9 and the subsequent GATT Ministerial Meeting will result in the EEC accepting the principle of linear cuts, without injection of the French ecretement proposals.
Mr. Schaus replied that he thought the Six would be prepared for a linear cut. His personal opinion was that this was the only method which could be adopted. He continued that while exceptions should be as rare as possible, there would definitely have to be exceptions. Mr. Schaus then said that he imagined that in many cases US tariffs would be higher than equivalent European tariffs. If a 60% US tariff were reduced by half to 30%, the US would still have 30% protection, while a comparable reduction of a lower European tariff from 20% to 10% would provide practically no protection. Mr. Ball indicated that we were prepared to examine the facts in such instances. Foreign Minister Schaus then raised the question of the US reaction, as expressed by Mr. Blumenthal in Geneva, to the recent EEC proposals based on the French ecretement formula. Mr. Schaus quoted from a message from EEC representatives at Geneva, saying that the US reaction to these proposals had been very negative. The US Representative (Mr. Blumenthal) was reported to have said that the US could not participate in the trade negotiations if they were based on the ecretement principle. Mr. Schaus remarked that he thought this was “too radical” (i.e., extreme) a position by the United States.
Mr. Ball replied that he felt that perhaps the problem has been overstated. We feel that this is really not a very large problem. Where high US tariffs exist, we are willing to examine individual cases. However, under the Trade Expansion Act, reciprocity in cuts is required, which is difficult to reconcile with the French ecretement formula. We also have much more on the free list than the EEC and have many low tariff products in addition.
[Typeset Page 1855]Mr. Schaus asked whether he could speak frankly and proceeded to read the recommendation2 from the EEC representatives at Geneva that he (Schaus) should stress to the US Government how important the question of US high tariffs is to the EEC. The message went on to say that the EEC had not yet taken a position on the US proposals for inclusion of agriculture in the negotiations but that it would be “difficult” for the EEC to accept the US proposals.
[Facsimile Page 3]In reply Mr. Ball indicated he would also be frank. He noted that before drafting the Trade Expansion Act, we had discussed the question of linear cuts with the French, Germans, and others as well as with the EEC Commission. Nobody had mentioned the ecretement problem at that time. Therefore, the French, by raising it now, were interposing an objection after the fact. We do not know whether the motivation behind the French proposals is to create an obstacle to the negotiations or whether it is a question of principle. We do not think the ecretement problem is as serious as the EEC does, and believe that exceptions can be worked out in a spirit of good will later. We could perhaps also make a serious issue out of the fact that we have so many items on the free list. Mr. Schaus agreed that there might be a possibility that the French are using the ecretement issue as a pretext. On the other hand, if the French do have serious objections, it would be better for them to air them now than at the very end, as in the case of the UK/EEC negotiations. Mr. Schaus felt that basically the French were not opposed to negotiations and that they would not risk the isolation involved in opposing them. At the same time, Mr. Schaus remarked, the French were not alone in their position and there were other members of the Six who were “quite hard” (“assez durs”). Mr. Schaus mentioned Germany and Italy as supporting a liberal policy along with Luxembourg.
It would be helpful, Mr. Ball stated, if at the May 7–9 EEC Ministerial Meeting, the US view were fully understood. The US view, he reiterated, is that the principle of across-the-board cuts be accepted. Mr. Tyler added that the Europeans should understand that Congress authorized the President in the Trade Expansion Act to negotiate only on a basis of reciprocity.
Mr. Schaus remarked that the Trade Expansion Act was drafted on the assumption that Britain would be a member of the EEC. Since it appears certain that Britain will not be a member of the EEC for some time, the utility of the Act has perhaps been lessened. Mr. Ball replied that while it was true that the Act did provide for 100% reduction in tariffs for those items comprising 80% of our trade (as would [Typeset Page 1856] have been the case if the UK were a member) this was secondary to the central element in the Act providing for 50% reduction regardless of the volume of trade. In fact, Mr. Ball continued, some Europeans had felt that 100% reduction in tariffs might even compromise the integrity of the Community by diluting the elements of cohesion in the Community.
In response to a question by Mr. Schaus, Mr. Ball said that we were reviewing the whole problem of anti-dumping and would be prepared to discuss it with the EEC. We are considering an international approach to the problem, although the US position has not yet been fully formulated. Mr. Ball indicated that we were also prepared to discuss other non-tariff problems and, in reply to Mr. Schaus, stated that we were prepared to discuss cereal prices on a global basis in the Cereals Committee in GATT.
[Facsimile Page 4]Mr. Schaus emphasized that he was very glad to know US thinking on these important problems since he would be presiding over the May 7–9 EEC Council meeting. He would, he indicated, “do his best” at this meeting. The negotiations would have to succeed, he stated. They would be a test of the continuation of the EEC as well as of the EEC’s relations with the U.S. At the same time, Mr. Schaus insisted (“J’Insiste”) that the U.S. understand the problems of the EEC and be ready to make certain concessions. Mr. Tyler observed that much depends on our respective attitudes not being too rigid. Mr. Schaus stated that the climate in the EEC is “difficult” which makes it difficult to reach agreement.
Mr. Ball said it was important for Europe to understand that, although there was naturally disappointment in the US about the rupture of the UK/EEC negotiations, there had been no loss of faith in the EEC and in its ultimate success. Far from wishing to have the Five attempt to frustrate integration, we wish to have the Six keep up momentum toward integration.
Mr. Schaus asked whether he should understand that the US supports the continuing development of the EEC and does not wish it to retrogress. Mr. Ball agreed. Mr. Schaus continued that he had asked this because amongst the Six there are some elements that feel that no further forward steps should be taken until the UK is admitted as a member. Mr. Ball answered that he did not think the US could endorse that view. The EEC would have to continue to move forward to leave. Mr. Schaus said the UK view was similar to Mr. Ball’s and noted that he had reacted against tendencies within the EEC to “freeze” the situation. He continued that it seemed to him that the April 2 EEC Council meeting had resulted in the renewal of forward movement.
The Schroeder proposals for synchronization were useful, Mr. Ball felt, and it would be a mistake to have certain members of the EEC [Typeset Page 1857] setting preconditions. Mr. Schaus agreed fully and said that such preconditions would be impossible. Mr. Tyler noted that the German position on agriculture might be somewhat difficult. Mr. Schaus replied that he did not think that the Germans would adhere to their “hard” position on agriculture in the last analysis, since they were anxious for the success of the Kennedy Round.
In conclusion, Mr. Ball said that it had been a great pleasure to discuss these matters with the Foreign Minister and that we would look forward to the results of the forthcoming EEC Council meeting. He continued that Luxembourg had played an important role and would continue to. Mr. Schaus replied that the future of Luxembourg could only be assured in an integrated Europe in partnership with the United States. Mr. Tyler observed that we were fortunate that in Mr. Schaus we had a Chairman of the EEC Council who understood these basic truths. Mr. Tyler noted that Mr. Schaus had presided over the EEC Council during other crises, as in the discussions of a common agricultural policy last year. Mr. Schaus said that he had had to act as the spokesman of the Six at that time, with the result that he had to express the view of the least common denominator. He commented that much had been learned since then.