9. Memorandum of Conversation1

SUBJECT

  • The Kennedy Round

PARTICIPANTS

  • British Side
    • R.A. Butler, Secretary of State for Foreign Affairs2
    • Sir Richard Powell, Permanent Under Secretary, Board of Trade
    • Ambassador Ormsby Gore
    • Sir Harold Caccia, Permanent Under Secretary, Foreign Office
    • Denis Greenhill, Minister, British Embassy
    • Sir Eric Roll, Financial Minister, British Embassy
    • N. Henderson, Secretary to Mr. Butler
    • Tom Bridges, Secretary to Mr. Butler
    • R.M. Hadow, Press Secretary, Foreign Office
  • U.S. Side
    • The Secretary of State
    • Governor Herter
    • Governor Harriman
    • Ambassador David K.E. Bruce
    • William R. Tyler, Assistant Secretary, EUR
    • J. Robert Schaetzel, Deputy Assistant Secretary, EUR
    • Philip H. Trezise, Deputy Assistant Secretary, E
    • McGeorge Bundy, Special Assistant to the President for National Security Affairs
    • Richard I. Philips, Director, P/ON
    • M. Gordon Knox, Deputy Director, BNA

After Secretary Rusk had introduced Governor Herter, the British Foreign Secretary remarked that it was becoming increasingly clear that there would be much difficulty in deflecting Common Market countries from an autarchic commercial policy. Despite Mr. Erhard and the goodwill of Italy and the Benelux countries, the United Kingdom was not at all sure that the Six could be kept on a liberal trade path. From the British point of view, the Kennedy Round affords a great and unique opportunity for influencing the direction and future of the Six in trade policy. It was a matter of great concern, therefore, to HMG that the Kennedy Round aim of a fifty per cent linear tariff cut might be diminished and eroded by agreement on an unfavorable disparity formula or by a failure of the Six to allow sufficient access to EEC markets for exporters of agricultural products. Mr. Butler noted that the United Kingdom is undertaking a system under which domestic agricultural production will be limited and exporters given a more or less assured share of the market. [Page 18]He wondered whether the European position would be in any respect as liberal or forthcoming.

Governor Herter replied that we find ourselves in near agreement with the United Kingdom. We too are concerned that the eventual disparity formula may be used by the French to disrupt the entire Kennedy Round, especially if France first were to obtain from its European partners a favorable arrangement for intra-EEC agricultural trade. We think that the next few weeks should be devoted to probing Common Market intentions, both with respect to disparities and on the Mansholt plan for agriculture. Governor Herter noted that the French have said that they do not wish bilateral talks with the United States until the middle of April and he assumed that they hoped in the meantime to get a good settlement within the EEC on agriculture. He thought that the French did not necessarily wish the Kennedy Round to succeed but that France’s position would depend on intra-EEC developments.

Mr. Butler wondered whether the decisions taken by the Common Market Ministers in December could be taken to mean that these were final judgments which could not be altered, or whether they were negotiating positions which could be subject to change.

Secretary Rusk observed that it seemed to him that the Common Market decisions could scarcely be taken as final since we are considering a process of mutual commercial exchange. Obviously, if the Six were to think about keeping the United States or other suppliers out of Europe, then the United States for its part would have to consider what access should be provided to the American market.

Sir Richard Powell said that he did not think the Common Market could have an entirely autarchic end in mind. He did think, however, that the French would be more or less satisfied to have nothing happen in the Kennedy Round. After all, French industry already has been exposed to a large dose of competition within the Common Market. Moreover, there are indications from remarks made by General De Gaulle and others that the Government of France takes a reserved view about the political importance of the Kennedy Round. Although he had no hard evidence that the French would stand consistently opposed to a sixth round of tariff negotiations, Sir Richard’s guess was that the French would not be willing to move unless pressure could be exerted on them. Such pressure, he thought, would have to come from Germany and other EEC countries. The question in his mind was whether the Germans and others would be able to exert enough pressure. He had noted in this connection that Governor Herter appeared not to be in a hurry to complete the Kennedy Round.

Governor Herter said that this was right, that he was in no great hurry. His concern was with getting a satisfactory end product. He [Page 19]thought that if we were in good shape by the spring of 1965, the United States would be quite satisfied.

The British Foreign Secretary came back to the question of disparities and asked if the United States had an alternative to the Common Market formula to be presented at Geneva.

Governor Herter said that we have looked very closely at the trade statistics and that, subject to further examination, the EEC two-to-one formula might not be very damaging to the principle of a 50 per cent cut. This would be particularly the case if we could add the principal supplier criterion or qualification to the EEC approach. However, more work needed to be done in this area. Sir Richard Powell noted that we have a tactical problem here which also involves the Swiss and the Swedes.

Mr. Butler turned then to agriculture and wished to know whether we were prepared to take a more flexible approach in the agricultural sector than in the industrial sector, taking into account the wide range of agricultural commodities involved and the special problems surrounding agriculture in every country.

Governor Herter said that the answer was “yes”, that we could entertain special approaches and arrangements for agriculture. He said that the British representatives should remember, however, that the United States is a large agricultural exporter with special interests in agricultural trade.

Sir Richard Powell remarked that although British and American interests in the Kennedy Round were very close indeed, UK and US trade configurations were not identical. The UK is not a large agricultural exporter but it does have vital interest in the export of industrial products. The UK exports to the Common Market three times as much as it exports to the United States and most of the British exports are industrial goods. The Foreign Secretary observed at this point that the European Free Trade Area, with 90 million people, would achieve free trade between its member countries by 1966 and already had an overseas trade equal to that of the United States.

Mr. Butler summed up the discussion by repeating that the United Kingdom put a very high premium on obtaining a 50 per cent linear cut on Free World tariffs through the Kennedy Round. From the British point of view, this was an over-riding objective. The United States, [he] said, could expect from HMG the fullest possible measure of cooperation. Governor Herter said that we were in very close rapport and that he, for his part, could assure Mr. Butler that the United States not only welcomed the statement of British intentions but would be actively consulting the UK at every point during the preliminaries to the Kennedy Round and in the course of the tariff negotiations themselves.

  1. Source: Department of State, Conference Files: Lot 66 D 110, CF 2369. Confidential. Drafted by Trezise and Knox and approved in S on February 20. The conversation was held at the White House. The source text is labeled “Part II of IV.”
  2. Butler accompanied Prime Minister Alex Douglas-Home on his visit to Washington February 12–14.