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

280. Memorandum of Conversation¹

Washington, March 29, 1965.

PARTICIPANTS

• Honorable Jean Rey
• Honorable Theodorus Hijzen
• STR
  • Ambassador Roth
  • Ambassador Blumenthal
  • Mr. Hedges
  • Mr. Rehm
  • Mr. Norwood
  • Mr. Auchincloss
• State
  • Ambassador Tuthill
  • Mr. Deane Hinton

After greeting Mr. Rey and passing on Governor Herter’s best regards, Ambassador Roth raised the issue of having a permanent EEC staff located in Geneva. We recognize the problems covering Article 111 Committee activities in Brussels but now that the negotiations have become more active it is very difficult to operate without an EEC representative present with whom our delegation can communicate on a day to day basis. Rey said that the Community recognized the problem and knew that they would now have to have people at the staff level in Geneva on a permanent basis. However, given the nature of the problems with the member governments in Brussels, it was essential to have Hijzen available in Brussels whenever necessary. Hijzen himself added that he planned to be in Geneva at least three days a week from now on. One problem which the Commission now faces is to decide what sort of technical staff to station there. The Commission’s personnel shortage would make it impossible to have duplicate staffs, one in Brussels and one in Geneva.

The discussion turned to agriculture and Rey suddenly became quite blunt. Did we really expect a major liberalization of agricultural trade in the Kennedy Round? he asked. He felt that we were really far more concerned that the EEC’s agricultural policies not become more restrictive than they are at present. It is simply not realistic, he contend-ed, to think that a broad liberalization is now possible. If it had been it could have been achieved in the Dillon Round. Certainly after the enormous difficulties of the EEC in fixing the common grains price, we could not expect a further lowering of the price in the Kennedy Round. On feed grains and fruits and vegetables, he understood that the United States has special problems and they will have to be dealt with. But he felt that the time had come for some frank talk between the EEC and the U.S. Delegations in order to make clear what our real interests were and what could be accomplished. He recognized that the EEC is not going to convince other countries to adopt the montant de soutien approach, so the EEC must make some adjustment of its position. But he felt that any adjustment would be impossible unless movement on the EEC side were matched by movement by its negotiating partners. Only then could the Six be persuaded to make some accommodation. In this context he had been most surprised at recent statements by Ambassador Blumenthal which appeared to reject the montant de soutien out of hand.

Ambassador Roth replied that the U.S. is indeed seeking liberalization of agricultural trade, in conformity with the Ministerial Resolution. Of course we have somewhat modified our position. We had first thought of liberalization carried out by tariff reductions just as would be done on the industrial side. Then, in Ambassador Blumenthal’s proposal at the TNC meeting last summer, the U.S. had adopted a more flexible approach—more flexible in substance as well as in procedure. But this would not alter the fact that liberalization is still the goal.

As for our statements on the montant de soutien, what we reject is the effect of such a system; we do not believe that it would lead to trade liberalization. We are not, however, rejecting out of hand all elements of the proposal, as we have made clear by repeatedly stating our willingness to discuss our own internal agricultural policies and to make offers to place limitations upon them. Ambassador Blumenthal emphasized that we have made a great effort to meet the EEC’s problems in our response to the montant de soutien proposal and stressed, along with Ambassador Roth, that we agreed with its key element: that internal policies should be considered in the negotiations. Obviously we are not in apposition to say that we are interested in concessions in some products but not in others. That would be politically impossible. But through the negotiations a fairly clear picture will emerge showing where our principal interests lie. He urged that the EEC not be too impatient to get this picture painted immediately. The next few months would bring this in the natural course of events.

Rey reiterated his view that the Kennedy Round would score a great success if, in the agricultural field present markets were maintained. Perhaps there has been a misunderstanding of the U.S. views on liberalization, Ambassador Roth suggested. He pointed to our meat liberalization as an example of what we view as provisions for reasonable access: the opportunity to maintain present trade levels and to share in normal expansion. Mr. Hedges added that one of our main problems with the CAP and the MDS is that in our judgment it would not maintain present trade levels, but would in fact be retrogressive, allowing for increased protection. In this sense the MDS is a rather self-serving formula since it would impose no obligation on countries maintaining a variable levy system (such as the EEC’s) to bind their border protection or effectively bring internal policies into the negotiations. He also mentioned that when we agreed to have internal policies considered, this of course included programs for adjusting supplies to market outlets and that this issue must be dealt with in the negotiations when we consider internal policies.

Ambassador Blumenthal suggested it would be in the EEC’s interest to use the Kennedy Round to keep the EEC common agricultural policy flexible.

Ambassador Roth mentioned President Hallstein’s concern about rumors that the EEC and EFTA would draw closer together thus diminishing their interest in the Kennedy Round. The EFTA countries have stressed on a number of occasions their very great concern about the EEC exceptions list and so he hoped that the EEC would be prepared, when the time came, to review and modify its exceptions list. Rey said that that problem had not been very much discussed but he wondered what sort of bargaining we had in mind. Do we foresee a process of swapping items to be removed from the respective exceptions list much as was done in the Dillon Round? Ambassador Blumenthal said that his own view was that in the bilateral discussions now taking place the various delegations are making clear their real trade interests. He thought that the next phase of bargaining would not be very different from past negotiations. We do not yet know how the final balancing of offers will take place but we do not exclude tit-for-tat bargaining. Hijzen followed this up by commenting that whereas in the Dillon Round the negotiators had in general been faced with maximum offers with no chance for improvement, in this Round there were various possibilities for movement that could be worked out through discussion. He mentioned as an example that he was hopeful that the EEC could do something in the ceramics area.

Mr. Norwood pointed to the “over-riding national interest” rule for justification of exceptions. We feel that there have been considerable difficulties between the quality of the justifications and this is something that will have to be borne in mind as the negotiations move along.

1. Source: Kennedy Library, Herter Papers, Chronological File, April 1965. Limited Official Use. Drafted by Auchincloss on April 7, cleared by Hinton (EUR/RPE), and approved by Roth. An attached draft telegram, April 12, indicates that this memorandum of conversation was to be transmitted to eight diplomatic missions and to the Special Representative for Trade Negotiations.