176. Telegram From the Department of State to the Embassies in Germany, Belgium, France, Italy, and the Netherlands1

109871. Subj: US Balance of Payments Program.


Please deliver following message at highest appropriate level governments and EC Commission on February 5:

US wishes to pursue consultations on Balance of Payments Program begun during mission of Undersecretary Katzenbach.2 Our particular emphasis will be on trade.

Most of the major elements of the President’s program are already in train. Proposed income tax surcharge is before the Congress. The programs to reduce direct investment and lending overseas are in effect. Today we are sending up to the Congress legislative proposals on travel. We have begun discussions of ways of neutralizing defense expenditures overseas. And we have already moved to reduce civilian expenditures of the government abroad.

We wish now to move ahead with remaining major portion of President’s program: action to improve the trade account. Although action on non-trade accounts will produce a major reduction in the US deficit, there must also be action to improve the trade account if we are to avoid the dangerous consequences of continued large-scale deficits. As the President said in his January 1 message, we must improve our trade position by $500 million in 1968.

To this end, US is considering several alternative proposals. We wish to consult closely with our principal European trading partners.

Ambassador Philip Trezise will undertake these consultations for us and present to members of your government and your senior officials the elements of our thinking. We should be grateful if your government would receive him.

For Bonn. Letter from President to Chancellor concerning Trezise mission follows septel for presentation February 5.3 We hope Trezise could make initial call on Germans no later than February 8. Trezise prepared to stay in Bonn as long as necessary to follow up.
For Paris, Rome, Brussels, The Hague. Will be in touch with you on scheduling Trezise visit, which in any case would be no earlier than February 12.
For Brussels (USEC). Trezise mission intended to continue process of consultation started by Katzenbach and Rostow4 and continued during Rey visit here.5
Essential to this mission that Trezise meet with responsible ministers at each stop.
Washington team accompanying Trezise will consist of John Rehm, Counsel to the Special Representative for Trade Negotiations; Lisle Widman, Director, Office of Industrial Nations, Treasury Department; Thomas O. Enders, Special Assistant to the Undersecretary for Political Affairs.
For Trezise. Terms of reference for your mission follow septel.6
  1. Source: Department of State, Central Files, FN 12 US. Confidential; Immediate. Drafted by Enders (M) on February 3; cleared by Solomon (E), Leddy (EUR), Henry L. Heymann (S/S), Deming, Roth, and Fried; and approved by Katzenbach. Sent to Brussels also for USEC and Paris also for OECD.
  2. Regarding Katzenbach’s discussions with European leaders, see Documents 170174.
  3. Document 178.
  4. In late January Eugene Rostow visited Europe and consulted with EC officials on January 29. A report of their discussion is in telegram 4349 from Brussels, January 29. (Department of State, Central Files, FN 12 US)
  5. For a memorandum of Rey’s conversation with President Johnson in Washington on February 7, see Foreign Relations, 1964–1968, vol. XIII, pp. 662664. Rey also met with other senior U.S. officials. A memorandum of Katzenbach’s conversation with Rey on February 7 is in Department of State, Central Files, FN 12 US. A report summarizing a U.S.-EC combined meeting on the afternoon of February 7 and the morning of February 8 was transmitted in telegram 114351, February 13, to eight Western European posts. (Ibid.) A report of Fowler’s meeting with Rey on February 8 was transmitted in telegram 113391, February 10, to the same posts. (Ibid., Central Files, EEC 7)
  6. Document 177.