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

317. Memorandum From the President’s Deputy Special Assistant for National Security Affairs (Bator) to President Johnson¹

Washington, August 2, 1966.

SUBJECT

• Another Tactical Decision on the Kennedy Round

We face another tactical decision on agriculture in the Kennedy Round, and I am afraid we need your instructions by Thursday or Friday.² I apologize for the short notice, but the situation in Geneva has moved very quickly. (Actually, you made this decision last September. But last evening Orville Freeman decided that he wants to flag for you once again his doubts about the approved strategy³—so I feel you should have another shot at the problem.)

The Situation

You will recall that last September you approved (1) immediate tariff offers on agricultural products of only secondary interest to the Common Market; and (2) later offers on products of major interest to the Six “at such time as the EEC is ready to table… .” (At that time, the EEC was not yet ready to table any offers on agriculture. Orville argued that we should not table anything until the EEC was ready. The rest of us, including the Vice President, voted the other way.)

The Six are now ready. Saturday is the tabling date. We know in advance that their offers will be quite poor.

The Issue

Should we (1) go through with the original strategy of 50% initial offers on the agricultural items we withheld in September; or (2) make much more limited offers, matching the EEC? (It is understood that we would not offer tariff cuts on beef, poultry and a few other sensitive items in either case.)

The Line-Up

At Tab A, Bill Roth, speaking also for Governor Herter and his negotiator Mike Blumenthal, argues for tabling full offers, subject to later withdrawal as necessary to achieve a balanced bargain.⁴ Roth’s recommendation is strongly and personally supported by the Vice President, Secretary Rusk and George Ball. (Acting on your instruction of September that we bring the Vice President into this, I checked with him personally.)

At Tab B, Orville indicates that he is prepared to go along with the Herter strategy, but would much prefer a much smaller offer designed just to match the EEC.⁵ (At Tab C is the paper outlining the Herter strategy which you approved last September.)⁶

The Arguments

Everybody agrees that

• —we should maximize pressure on the Common Market and our other customers (UK, Canada, Japan, etc.) to improve their offers on agriculture;
• —we will make it clear to all concerned that our initial offers are conditional, and that we will tailor our final list to assure a fair bargain.

Herter and company argue that the best way of putting pressure on the EEC is to stay with the September strategy. They have no illusions that it will be easy to move the Six. But they think it is worth a hard try. And they are clear that, in the end, they will have to make whatever withdrawals are necessary to achieve balance.

Freeman recognizes that “this is a question of strategy” and “is prepared to acquiesce”. And he has explicitly decided not to ask for a meeting with you. He is, however, (1) skeptical that even an aggressive strategy will cause the EEC to move; (2) worried that, in the crunch, we will lack the fortitude to make the necessary withdrawals; and (3) nervous that our efforts might leak and we will face some political flack from his clients.

My vote is with Herter. The trouble with Orville’s strategy is that it will badly damage our bargaining position in Geneva, and, if the offers leak, it is likely to generate just as much political heat. Judged in the light of our aggressive strategy thus far, a small U.S. offer now will be taken as a signal that we have given up on agriculture in the Kennedy Round. We will be charged at home and abroad with throwing in the towel before the opening bell. (In fact, the chances of a leak specific enough to cause trouble are small. We have had industrial offers on the table for two years with no publicity problem. And despite Agriculture’s anxieties, we have had no trouble with our September agricultural offers either. Moreover, if there is a leak, we have a good answer; we are following an aggressive strategy to get maximum access for our farmers in foreign markets; we will withdraw wherever there is no adequate response from the others.)

After all the offers are on the table, and after we have bargained item by item for all we are worth, we will know what is the best obtainable bargain in agriculture and overall. It will then be up to Herter and the rest of us to advise you whether such a bargain is better or worse than no bargain at all. And it will be up to the President to decide. Herter, Roth, et al are right that it is too early to quit now.

FMB

Follow through on the Herter strategy as approved last September

Want to hear Freeman argue his case—set up meeting Wednesday or Thursday with Herter/Roth, Rusk, Ball, Vice President⁷

Speak to me

1. Source: Johnson Library, Bator Papers, Kennedy Round (GATT) (May 4, 1964) [1 of 2], Box 11. Confidential. Attached to the source text are copies of notes from Bator to Ball and Solomon, and to Roth, both dated August 2, saying he would inform them of the President’s decision as soon as he heard it. Also attached is a note from Bator to the President, August 3, indicating, among other things, that he had set up “your Kennedy Round mtg” for August 4 at 6 p.m. Also attached is a memorandum from Bator to the President, August 4, setting forth the agenda and three options for decision at the meeting: making full 50 percent initial offers on agricultural items, matching “the EEC’s very poor offers,” or a compromise (medium) offer of 25 percent cuts. Bator favored the first option.
2. August 4 and 5.
3. See Document 315.
4. Document 316.
5. Document 315.
6. Document 292.
7. This option is checked. No record of the August 4 meeting at 6 p.m. has been found. (Johnson Library, President’s Daily Diary)