Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

226. Memorandum From the Special Representative for Trade Negotiations (Herter) to Secretary of Agriculture Freeman and the Under Secretary of State (Ball)¹

Washington, February 6, 1964.

I found our talk yesterday useful and will be looking forward to a further meeting next week.² It occurred to me, however, that it might be helpful to try to relate these discussions more closely to U.S. Government policy as presently approved. I say this, in part, because I feel that each of us in presenting our broad and general strategic concerns tended to over-simplify the issues.

Perhaps I was the first to do this in stating my opinion that the negotiations should be pursued with the utmost determination through whatever crises may arise and without fear that such determination might lead to the disruption of the Common Market. However, Under Secretary Ball made clear that the State Department was fully in accord with this position and was only concerned that our negotiating strategy and tactics be as little disruptive as possible. As he noted, the Common Market will not fall apart because of U.S. insistence on a fair and reasonable trade bargain. On the other hand, I would certainly agree that tactically we must use due diligence not to put ourselves into a position where we can be accused of attacking the Community as an institution or its just concerns. I believe this is the kind of trap Pisani was preparing for us and which Secretary Freeman, by refusing to be drawn into a public discussion, ably side-stepped.

Second, it seemed to me that the discussion of agriculture tended to center on market-sharing as a cure-all. I know this is not what Secretary Freeman had in mind, since his own speech in Houston carefully delineates at least three different types of agricultural trade, each needing separate solutions.³ As the negotiations become more intense, however, it will become increasingly difficult but important to recognize the full range of agricultural interests and avoid over-simplification in seeking solutions.

In this light, I would be particularly concerned if the question of surplus disposal to under-developed countries became a major consideration in the commodity discussions, as the Community seems to suggest. Food aid, as such, is only a part of the complex problem of economic assistance to less developed countries, and should be treated in this context and not within the context of the GATT cereal negotiations. If food aid is allowed to become a central part of the agricultural negotiations, it will tend to de-emphasize the need of the EEC to supply disincentives to marginal production which is perhaps the only certain guarantee that access will, in effect, be maintained.

The agricultural phase of the trade negotiations is going to be difficult and complex. Probably no one formula can or should be adopted to apply to all segments of agriculture, whether it be a linear cut formula or a market-sharing concept. A flexible and pragmatic approach is required.

It goes without saying that the forthcoming negotiations should try to improve upon the degree of agricultural trade liberalization achieved in past negotiations. We have acquired some valuable concessions in these negotiations. Mansholt’s negotiating Plan No. 2 would seem intended to revoke all of these.⁴ Likewise, a simple market-sharing formula applied across the board might produce the same effects.

We have considerably refined our initial position regarding the methods of including agriculture from what it was about a year ago at the first meeting of the GATT Working Party. At that time, we recognized there were three major categories of products: variable levy items, products subject to mixed forms of protection, and those for which fixed tariffs constituted the principal form of protection.

We indicated at the first Working Party meeting that our goal in agriculture was for fixed tariff items, application of the linear cut, and for other items, a comparable degree of liberalization.

This position has subsequently been modified along the following lines, the most recent occasion being the preparation for the Erhard visit:

1. Agricultural products for which fixed tariffs constitute the chief barriers to trade should be included to the maximum extent possible in the linear cut formula. This makes sense not only from a practical standpoint but also from the standpoint of our determination to keep agricultural products an integral part of the overall negotiations rather than being broken out entirely for separate treatment. For example, in tariff classifications processed products derived from agricultural primary materials are generally classed as agricultural products. There is no reason why processed agricultural products should not, generally speaking, be included in the linear cut along with other manufactured items. Indeed, there has been a large degree of success in doing this in most negotiations.

2. Where variable levies, deficiency payments or similar devices to protect domestic producers’ incomes constitute the principal barriers to trade, our minimum objective is to negotiate access assurances comparable to those existing in a recent representative period.

We should try to attain this objective by negotiating limits on the trade restrictive effects of critical elements such as variable levies or deficiency payments, of national agricultural policies. To do this, we might have to consider the necessity of agreeing to limits on our own support prices, export subsidies, etc.

National agricultural policies and trade objectives might be reconciled by negotiating specific access targets or quotas underpinned by commitments as to the level of producer prices, the amount of deficiency payments, etc. The GATT Ministers decided that with respect to cereals, meats, and dairy products, the negotiations should be carried out within the framework of commodity agreements. This is probably the most feasible means of negotiating limitations on national agricultural policies on a reciprocal basis.

It is important that quantitative access assurances be accompanied by as low prices as possible, since artificially high prices would encourage increases in production and agricultural surpluses that would make it difficult for a country to live up to quantitative access commitments.

The EEC is our main problem in the agricultural phase of the negotiations. It now looks certain that grain prices which are the control valve that basically determines the levels of protection on livestock products will be set at levels which will stimulate production in the Community at the expense of imports.

In summary, I do not see, for the time being, the need to alter our basic objectives set forth above for the agricultural phase of the negotiations. The matter of the strategy and tactics that will further the achievement of these objectives does require a great deal more coordinated attention and thought. I would hope this strategy could be one subject for our meeting next week.

Christian A. Herter ⁵

1. Source: Kennedy Library, Herter Papers, Agricultural Policy, 1/30/64–7/1/64, Box 5. Limited Official Use.
2. No records of the Herter-Freeman-Ball talks of February 5 and the following week were found.
3. Freeman’s speech in Houston was not further identified. He commented on the memorandum printed here in a letter to Herter, February 11. (Kennedy Library, Herter Papers, Agricultural Policy, 1/30/64–7/1/64, Box 5)
4. Sicco L. Mansholt, Vice President of the Commission of the European Economic Community’s Plan No. 2.
5. Printed from a copy that bears this typed signature.