208. Telegram From the Mission in Geneva to the Department of State1

TAGG 1894. For Governor Herter from Blumenthal. All day session cereals group opened with EEC (Rabot) response to US paper. EEC takes same approach to grains as to agriculture in general. Reference price could be negotiated and each country would agree not exceed margin of support measured from reference price.

Should try attain price stability at reference price and better balance supply and demand. Closed with statement rejecting access commitment saying that after considering both domestic policies and production in each country, exporting and importing, we must see whether we have obtained maximum desired.

EEC was unable to continue with detailed comments on US suggestions because of disagreement within delegation.

Discussion then proceeded on basis US paragraph on international prices. Most exporters agreed that US and EEC positions did not seem much different since US submission encompassed broad range of possible prices including possibility of moderate increases. Rabot, however, stated real differences seemed to exist. IWA margins too wide and stability which now prevails is due largely to restraint of a few major exporters. In future, world should have price on basis not wholly dependent on wisdom of few exporters. Cited advantages of EEC approach which would provide much narrower margins than IWA.

US said understood that both (1) range like present IWA range and (2) reference price used for calculation of variable levies could be considered together. Attempt to set rigid international price would severely limit role of private trade. EEC replied did not see how both could operate at once.

After several attempts smoke out EEC on what reference price Community had in mind, replied should be price which would allow efficient countries not to resort to export subsidies. Comment: We assume he meant a $2 per bushel price for US wheat. End comment.

In response to Wyndham White invitation explain how access could be assured by EEC through negotiations of Montant de Soutien, EEC explained “access assurances are superfluous”. EEC in efforts to reconcile paragraphs 39 and 110 of Rome treaty attempting to reach levels of [Page 573] production which will maintain acceptable conditions of access, willing assume three year commitments on domestic policy, then as prices change traditional exporters will have an opportunity at end of period to review agreement in light of access at that time. (If not satisfied need not renew agreement.) Community access assurances without commitment on price policy (mutually exclusive) would leave Community free to pursue internal arrangements which could result in surpluses. If Community then purchased beyond its needs, would be forced to sell next year and destroy stability market. For these reasons, EEC rejects quantitative assurances.

Engholm (UK) opened PM session with lucid presentation UK cereals arrangment—one which he differentiated between end objectives of maintaining fair balance between domestic production and imports and means to this end which involve rearranging domestic policies.

US delegation then contrasted this clear cut contribution to trade objectives Kennedy round with EEC position which was to give three year binding Montant de Soutien (MDS) unilaterally determined, with no agreement reached in negotiations purpose to be achieved by such binding.

EEC was in effect telling exporters they must accept position as is and face possibility of seeing their trade wiped out by increased EEC production. How could this be reconciled with objectives agreed by GATT Ministers and EEC decision to take account of third country interests? Binding of MDS limited to three years was of limited value to exporters. It was all the more important that there should be clear EEC commitment to trade expansion, and assurance of corrective measures if policies adopted by EEC did not achieve this objective. Exclusive emphasis on MDS meant concentration on means and failed to face up to end which was trade expansion. This objective needed to be spelled out in quantitative terms. EEC seemed to have recognized this in internal discussion in which certain quantities had been mentioned. Noted UK and Japan saw merit in this approach. Success of Kennedy round depended on acceptable compromise.

US statement followed strong endorsement both US and UK interventions by other exporters and Japan, who specifically endorsed US approach and market access concept. (Community representative overheard to remark we are isolated.)

Chairman then attempted move discussion back to items 1 and 2, US paper. EEC declined be drawn into meaningful discussion, however, saying binding level of support in their view sufficient.

US delegation, while expressing understanding present limitations under which Community spokesman operating, again emphasized binding of support only means to an end which must be spelled out and agreed upon. He concluded by noting other exporters had already indicated [Page 574] progress in cereals essential to their participation in Kennedy round. This no less true for the US, just as in disparities meaningful compromise would have to be found on cereals group for US to go forward and conclude trade negotiations.

Toward end of session question of timetable for further meetings came up. Rabot said EEC unable to continue meeting next week. This evoked strong criticism from several delegations. Net result was that firm calendar for all meetings for month of April likely will be established. Will be at least one more meeting cereals group this week at which discussion negotiations of domestic problems will be continued but likely no meetings next week.

  1. Source: Department of State, Central Files, INCO–GRAINS GATT. Limited Official Use. Repeated to Bonn, Brussels for USEC, The Hague, Luxembourg for USEC, Paris for USRO, Rome, London, Buenos Aires, Canberra, Ottawa, and Tokyo and passed to the White House.