272. Memorandum From the Special Representative for Trade Negotiations (Herter) to President Johnson1
SUBJECT
- Agriculture in the Kennedy Round
We have reached a critical stage in the Kennedy Round. With the tabling of the industrial exceptions list by the principal trading countries on November 16, the industrial phase of the negotiations is actively under way. Agricultural products were not included. This has been interpreted by some as a weakening of our resolve that agriculture and industry must be closely linked and that the final package must result in significant liberalization of agricultural trade.
Unless steps are taken to get the agricultural phase of the negotiations under way promptly there is indeed a grave risk that the opportunity to achieve significant liberalization of agricultural trade will be seriously compromised. So far we have been unable to reach agreement with our largest agricultural customer, the EEC, on rules which offer reasonable prospects of liberalization of agricultural trade. Prior to November 16 it became apparent that further efforts to get the agricultural negotiations under way were futile until the EEC agreed upon unified grains prices. This decision has now been taken. On December 15 the Council agreed upon a schedule of grains prices to become effective July 1, 1967.
We must now determine if this decision has advanced the EEC’s ability to negotiate meaningfully on agriculture. I am convinced that further efforts to get the EEC to agree on acceptable rules for agriculture would be unproductive. Most of our negotiating partners share this view. Rather I propose that we adopt a strategy that will test the EEC’s willingness to make offers of agricultural trade liberalization.
To this end I propose to go to Geneva later this month and suggest that a date be set for the tabling of our agricultural offers consistent with the resolutions adopted by the GATT Ministers. We would seek a date that allowed us sufficient time for intensive exchanges with our negotiating partners. It would be my intention to make clear to our partners during the late January meeting that we would attach great importance to those talks and the resulting offers which are laid down.
[Page 700]These talks would also assist us in coming to a decision as to the extent we should use, in making our initial offers, the authority you have already given to me to offer a 50 per cent reduction in U.S. agricultural tariffs with a bare minimum of exceptions. In this connection I would plan to obtain your prior approval of the actual offers we lay down.
Since the EEC is our largest agricultural customer, what it is willing to do in the way of agricultural trade liberalization is crucial. So far EEC proposals for agricultural negotiations have consisted essentially of an offer to bind producer price supports for a specified period at the levels unilaterally set by the Community under its Common Agricultural Policy.
We, as well as most of the other major participants in the negotiations, have made clear that EEC offers on this basis would not meet the objectives established by the GATT Ministers. I would therefore intend again to indicate in Geneva that the proposals the Community has made to date would not constitute acceptable agricultural trade liberalization and that offers by the EEC solely or largely on this basis would have grave consequences for the Kennedy Round.
I am not prepared at this time to set forth the minimum degree of agricultural trade liberalization required of the EEC for us to obtain a meaningful agricultural bargain. Clearly, the negotiating proposals the EEC has advanced to date would not meet any minimum requirements and, unless supplemented by other measures, would even be of negative value.
We would face a crisis if, on the basis of the bilateral talks and the actual offers laid down, it were apparent that the EEC was unwilling to make the minimum degree of liberalization which we considered essential. The United States would have to decide whether to suspend the negotiations or to proceed with a negotiation limited to industrial products and the agricultural concessions which countries other than the EEC were willing to make. This latter alternative would have to be considered in light of relevant economic, legislative and political factors.
These issues need not be faced now, however. At the moment I am only asking your approval to proceed as indicated above in an effort to persuade the EEC and other major participants to negotiate significant reductions in agricultural trade barriers. On the basis of the results of these efforts I shall make appropriate further recommendations to you among the alternatives available to us. In the meantime the United States position would remain that the negotiations must provide for liberalization of agricultural trade.