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

TAGG 1900. Pass Herter, Agriculture. GATT Cereals Group, March 19–20.

Wyndham White attempted steer Cereals group discussion into role Community’s concept of reference price as (1) base from which to meas-ure “Montant de Soutien” (2) stabilizing element for international prices. EEC agreed reference price meant to have double role.

EEC expanded somewhat on MDS with examples and citing of statistical sources available for calculation on renumeration to farmers, but refused specify rule to be adopted if world prices rose above reference price. Said most increases in world price would be result of short supply in which case importing countries probably justified in raising returns to their producers.

In response to UK question about effect indirect subsidies, EEC reiterated its approach not “untouchable”; but to facilitate negotiations EEC proposes to treat only direct subsidies at this time. Indirect subsidies could be taken into account, if necessary, when arrangements come up for renewal.

EEC several times drew attention to what it called singular example of its willingness see some of its producers take reduced returns and to [Page 580] bind future returns. Cited this undertaking as fair balance domestic and foreign interests.

EEC conceded that falling costs, increased productivity could lead to increased production under protection bound MDS. Said, however, CPs would have opportunity of annual confrontations plus decision on renewal every three years. Again sought emphasize stabilizing impact through fact EEC market will be in contact with world market and bound not to develop its policies unilaterally.

Most exporters expressed inability see that there would be contact with world market and emphasized need quantitative assurances in order bring world price to bear on EEC system.

US said unable see how market mechanism could operate with reference price concept. Inquired whether EEC willing contemplate direct transfers to exporting countries of levy collections. There was no direct reply.

US summarized by pointing to objective of balanced supply and demand. Asked EEC how fixed reference price at or above world prices would cope with present problem of chronic over supply. Making point that under EEC proposal accommodation would have to be made by exporters. This was not denied by EEC.

Discussion reference price continued Friday morning. US concluded not clear that reference price necessary to limit producer returns or that it would even accomplish this purpose. US had strong reservations about high fixed international price as it would (1) tend to aggravate supply management problem; (2) impede free grain trade. Furthermore, fixing prices on CIF basis would fail to stabilize producer returns in exporting countries because of freight rate fluctuations. UK, Canada, and Argentina supported US. Australia put in mild plug for higher international price; felt that distant suppliers must be permitted to absorb freight differentials to remain competitive in principal markets. EEC expressed satisfaction that there seemed to be general agreement on “moderate increases” of international prices and concept of “Montant de Soutien”. US made clear concept as put forward by EEC not accepted. Said EEC approach seemed unnecessarily complicated but US willing to consider circuitous route provided it leads to objective laid down by GATT Ministers. Trouble was approach suggested by EEC without major modifications and additions failed contribute to this end. Emphasize final judgment on role reference price could only be made on basis of contribution it makes achievement objectives—increased export opportunities and improved conditions of access. EEC repeated view that EEC approach would create acceptable conditions of access. Meeting concluded on this familiar note.

  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 on March 21.