26. Circular Telegram From the Department of State to Certain Posts1

2350. Erhard talks—Kennedy Round. Ref: Circ 2339.2 Kennedy Round was subject hour’s discussion morning June 13 between Herter and Erhard.3 Schroeder, Westrick among participants on German side; McGhee, Blumenthal, Roth on U.S.

Conversation dominated by subject of effect grains price issue on KR. Before Erhard arrived, Schroeder asked for U.S. statement that grains price unification is not precondition to KR. Herter replied to Schroeder and later to Erhard with points contained reftel (text subsequently handed to Germans), stressing problem was created by EEC, not U.S., since from U.S. viewpoint negotiations could go on without price decision. However, EEC refusal move ahead in KR agricultural discussions in absence grains decision presents very serious difficulty. November 16 exchange of offers and exceptions lists must cover both industry and agriculture. If no agreement on basis agricultural negotiations before then, exchange of lists would be postponed indefinitely and we would be left with no idea when meaningful progress in KR possible.

Erhard stated he had underestimated feelings and pressure of German farmers’ organizations on grains question. He suggested that solution might be to agree now that price level will be set and unification take place in 1968. He said that if unified price established now with implementation delayed until 1966, it may prove unacceptable to others among Six at time of implementation especially in light inflation.

Chancellor brought up question of access assurances, saying he was quite sure price alone is insufficient as regulator of imports. Access assurances, he noted, are contrary to Commission’s philosophy. He suggested solution along lines of a “mixed formula” where trade flow depends not only on price but also on some other commitment. Commission, [Page 58] he added, seems to be making some move that direction.FRG would continue to press for import guarantee.

Herter expressed full agreement on need for access assurances, since unified prices would not possibly be low enough to ensure access. Also explained pragmatic approach we suggest for agricultural negotiations. Then restated dilemma presented by EEC’s link of decision on grains price to agricultural negotiations.

Erhard replied that he couldn’t make binding response to this question now. We would discuss problem with Hallstein and with deGaulle in their meeting July 3–4. Though he recognized present stalemate, he at no point indicated grains price decision could be made this year. While stating that KR will not fail because of German position on grains price, he rejected thesis that grains price only stumbling block. His parting words were: “No one is as firmly interested as Germany in success of KR. One cannot advocate something with fervor on one hand and then say no when the decisive question is put.”

Westrick remained for further lengthy discussion after Chancellor had left. Said frankly that government doubts it could get Bundestag majority for grains price unification now. Though this not absolutely necessary, he added that in election period it would be very difficult to take decision opposed both by Free Democrats and substantial group within CDU. Herter reiterated need to work out negotiating rules on agriculture before November, and Westrick agreed that FRG would help.

Returning to earlier discussion of access assurances, Westrick thought Commission has “certain flexibility” in its agricultural mandate enabling move on access. Presently it is not disposed to use this flexibility, but FRG would exert pressure to change this attitude.

Comment: Discussion leaves us with no illusions that FRG can be persuaded to agree to unified grains price levels this year, even under EEC or U.S. pressure, which was never solicited. Present impasse will continue unless stalemate broken in one way or other. However, we will know more about possibility stalemate being broken after Hallstein and deGaulle visits to Bonn. Meanwhile, posts should continue follow line set forth reftel.

In continuing to report on this subject, EEC posts should comment on whether Commission and member states (except Germany) will continue insist on grains price unification as prior condition KR agricultural negotiations as word of German position gets around.

  1. Source: Department of State, Central Files, INCO–GRAINS EEC. Confidential. Drafted by Kenneth Auchincloss of the Office of the Special Trade Representative and cleared by Blumenthal, E, EUR/RPE, and GER. Sent to the EEC and EFTA capitals, Geneva, Ottawa, Canberra, Wellington, and Tokyo.
  2. Circular telegram 2339, June 13, reported that a unified grain price decision by the EEC was not now indispensable; that the problem of grain prices seemed to lie in Brussels; that unless the EEC could negotiate on both industrial and agricultural products, the final results of the Kennedy Round would be in jeopardy; and that unified grain prices could not be seen in isolation. (Ibid.)
  3. Erhard visited Washington June 12–14 for talks with President Johnson and Secretary Rusk. Memoranda of their conversations, primarily on German-related topics, are ibid., Conference Files: Lot 66 D 110, CF 2413. For text of the joint communique issued on June 12, see American Foreign Policy: Current Documents, 1964, pp. 536–538.