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

271. Draft Circular Telegram From the Department of State to Certain Posts¹

Washington, January 21, 1965.

SUBJECT

• Visit of Vice-Minister Ohsawa of the Japanese Ministry of Agriculture—Agriculture and the Kennedy Round

From Herter. The following were the main points that were made in discussions on the Kennedy Round with an interagency group on January 18, 1965.

The United States side:

1. Reaffirmed strong interest in the Kennedy Round and the seriousness with which we view the agricultural side of the negotiations. About one-third of our exports to Japan are agricultural whereas only about 3 percent of Japan’s exports to us fall into this category. Therefore unless there are reductions in agricultural restrictions, the imbalance between the U.S. and Japanese offers that already exists on the industrial side will be significantly widened.

2. Reported the difficulties we had had with the EEC in trying to work our acceptable rules for the agricultural negotiations. The EEC is insisting on the montant de soutien approach; we have made clear that we cannot accept it as a general format for negotiations. Now Governor Herter was going to Geneva and would attend a meeting of the Agricultural Subcommittee devoted to devising procedures for getting the agricultural negotiations underway. He planned to suggest that by a given date—perhaps April 1—the participating countries should lay down their agricultural offers, without first having agreed on a set of rules.

In the period before that date, we would hope to have bilateral and multilateral meetings with our trading partners to try to see what hope there was of meaningful progress on agriculture. The move to offers, we felt, presents the best chance of clarifying the situation. If the present divergences with the EEC continued, the whole Kennedy Round could be seriously endangered.

The Japanese made no clear response to this proposal to proceed with offers. Ohsawa seemed hesitant to take a position, saying he felt he must have some time to study the suggestion. He added that he would have an opportunity to discuss it with Ambassador Aoki in the near future.

The Japanese side:

1. Stressed that they wanted to avoid a situation in which rigid negotiating rules on agriculture compelled them to alter domestic policies. In particular, they were anxious not to be subject to montant de soutien bindings. They urged that there be a “pragmatic” approach, taking account of differences in countries’ situations.

We recognized that, given the agreed objective of trade liberalization, the means to that end could vary according to the situation in particular countries. However, there should be, in our view, certain conditions, such as that existing bindings should be respected.

2. Described their internal agricultural problems at some length. Japan’s rapid economic growth had imposed severe strain on its agricultural system. Farming was still marked by small plots and low productivity. Meanwhile the type of products consumed had changed rapidly. The Government had passed a Basic Agricultural Law to expand production, adjust to new consumption patterns, and preserve family farming. Even so, less than 10 percent of Japan’s present farms are “economically viable.” To expose Japanese agriculture at this delicate point in its development to competition with advanced farm economics would devastate Japan’s farmers. Until the new program took effect, Japan could not afford to reduce its agricultural protection.

3. Estimated that even in the absence of the Kennedy Round, Japanese farm imports would rise to about $2 billion in 1968 compared to just over $1 billion in recent years. They felt that this increase indicated that in Japan there was already a satisfactory balance between internal support measures and trade liberalization.

4. On grains, expressed willingness to make an access commitment, if necessary, with a provision for review at the call of the exporters if a reasonable balance between imports and domestic production were impaired. They made clear that they were in a position to do this only because there was a natural tendency for their grains imports to increase.

We agreed with their estimate of a growing import market and admitted that we weren’t as concerned about our trade with them as we were about our trade with the EEC. Any international agreement, we felt, would have to contain something more than an undertaking to consult. Though it needn’t be exactly like the British Cereals Agreement, 2 we would expect it to have some such pattern.

Not further identified.2

5. On illegal trade restrictions, contended that it would not be fair to insist on revision of support systems just because they may be inconsistent with the GATT. They suggested that if it were possible to make an offer in the Kennedy Round to relax some of these restrictions, this would be desirable.

We agreed that this would be helpful, but it would not constitute an offer in the negotiating sense—that is, something for which compensation should be expected.

6. As for offers that Japan might make, they simply said that if they proceeded according to last May’s Ministerial statement,³ they assumed this would be an acceptable offer.

In reply, we specified a few types of offers which we hoped Japan would be able to make:

a) On poultry, for example, we recognized that even a binding of the present 20% tariff would be an important contribution towards the goal of acceptable conditions of access.

b) On such items as soybeans, which bear a fixed 13% duty, we would hope that it would be in Japan’s interest to reduce the tariff since domestic production is falling and the tariff is now at least partly a revenue device.

c) On products subject to either levies or quotas, we described our beef quota law, based on a moving base period and providing for growth, as the sort of pattern which to our minds would provide “acceptable conditions of access.”⁴

attendence:

• Japanese side:
  • Tohru Ohsawa, Vice Minister for Agriculture and Forestry
  • Osamu Morimoto, Counselor in the Ministry of Agri. and Forestry
  • Kiyoaki Kikuchi, Chief, U.S.-Canadian Section, Economic Affairs Bureau, Ministry of Foreign Affairs
  • Akira Matsuura, Spec. Asst. in Ministry of Agri. and Forestry
  • Yoshio Ohkawara, Counselor
  • Akitake Futagoishi, Counselor for Agriculture
  • Hiromu Fukada, Second Secretary
• United States side:
  • Governor Herter
  • Mr. Roth
  • Mr. Hedges
  • Mr. Hirabayashi
  • Mr. Hajda
  • Mr. Auchincloss
  • Mr. Ioanes
  • Mr. De Felice
  • Mr. Riley Kirby
  • Mr. Greenwald

1. Source: Kennedy Library, Herter Papers, Chronological File, January 1965, Box 3. Limited Official Use. Drafted by Auchincloss (STR), cleared by Greenwald (E/OT), and approved by Hedges (STR). To be sent to Tokyo, Geneva, Brussels for the Embassy and USEC, London, Paris for the Embassy and USRO, Rome, Bonn, Luxembourg for the Embassy and USEC, and The Hague. The source text does not indicate if the circular telegram was sent.
3. See footnote 3, Document 254.
4. See Documents 248 and 249.