102. Memorandum From the Deputy Secretary of State (Irwin) to President Nixon 1

SUBJECT

  • Fifth Round of US-EC Consultations, October 5-6

The Fifth Round of US-EC Consultations on October 5 and 6 produced the most candid and in-depth discussion since the initiation of the US-EC Consultations.2 The US side persistently questioned the Europeans on where the European Community was going, both in its internal development of common agricultural, industrial and monetary policies and in the continued proliferation of preferential trading arrangements going well beyond Europe. We stressed that the seeming lack of concern on the part of Europeans for the difficulties which their actions caused for the United States could have dangerous political repercussions. We particularly voiced concern over the Commission’s proposed Mediterranean policy which is to be presented to the Council next Monday. We said that the most important move, both symbolically and practically, they could make to reassure the US was to drop the reverse preference provisions from these and other preferential agreements. We stressed the importance of [Page 268]obtaining positive signals from the Europeans of a willingness to approach these real issues between us in a spirit looking toward cooperative solutions. A most helpful signal, we said, would be a positive declaration on US-European relations at the European Summit.

The EC group was chaired by Commissioner Ralf Dahrendorf in charge of external relations. I chaired the US Delegation which included Bill Eberle, Herb Stein, and representatives from State, Treasury, Commerce, Agriculture and Labor.3 Bill Eberle was forceful in stating US concerns and in relating them to the many specifics in the trade field for which he is responsible without ever losing sight of the larger political and security contexts which surround all of these issues.

The EC side reported on prospects for the Summit which they indicated will probably produce only a “minor” or “passing” reference to the need to work on relations with the United States. They said this would be balanced by statements from individual governments around the Summit which would be more forthcoming. I said the need was for a statement from the Summit itself, not from friends in the corridor, of willingness to work with the United States in reordering economic relations through multilateral negotiations on monetary reform and trade liberalization. I also expressed the hope that the Summit can avoid an inflexible position on continuing EC preferential trading arrangements.

In a discussion of agricultural policy, Carroll Brunthaver of Agriculture expressed our willingness to work towards far-reaching liberalization of agricultural trade but pointed out that recent Community actions on agriculture would make it difficult for us to hold the line against our own protectionist pressures and move toward a liberalizing negotiation. In connection with a discussion of the Community’s industrial policy, which the EC side described as not likely to develop rapidly, we expressed concern over plans to restructure the European aircraft industry in a manner which may hurt an important American export. The EC side took note of this position, but referred obliquely to our recent action on the GE-SNECMA case as seeming to preclude the possibility of joint ventures with the United States in the aviation industry and, therefore, forcing them to combine among themselves to achieve sufficient size and strength to compete with US firms.4

Dahrendorf described the proposed EC Mediterranean policy to be considered by the Council of Ministers as required to deal with the economic problems of the Mediterranean countries caused by the enlargement of the Community and as furthering political interests common to [Page 269]Europe and the US. Bill Eberle and I made clear that the US favors strengthening the political and economic ties between the Community and the Mediterranean countries as a contribution to the stability in the area. What the United States objects to is the discriminatory aspects of this policy, especially the reverse preferences which can only be interpreted in this country as the continuation of a policy of forming a large preferential bloc around the Community. As a result of this exchange, Dahrendorf has a clearer picture of the objectionable feature of the proposed Mediterranean policy.

With respect to the Community’s free-trade arrangements with the EFTA neutrals, we made clear we expect a thorough examination in the GATT and action to protect American interests. We cited paper and other industries as likely to be injured unless the Community takes offsetting action. Dahrendorf indicated that there was a growing realization in the Community that something would have to be done for the US and other third countries as a result of the Community’s arrangement with the EFTA countries.

Finally, the two sides held a useful discussion of preparations for multilateral trade negotiations. Bill Eberle outlined in general terms the state of preparations in this country and the timetable we expect to follow leading towards the opening of multilateral negotiations in September of 1973. He stressed the need for expeditious action on the GATT procedures under Article 24 with respect to EC enlargement so that these issues could be disposed of before the beginning of multilateral negotiations. It was agreed that there would have to be further meetings to consult on the content of the respective negotiating authorities of the US and the Community to insure that they are mutually reinforcing.

The main area we were not able to discuss was energy. Commissioner Haferkamp who is responsible for energy matters was unable to come at the last minute in part because he was still in the process of gaining Commission approval for a new policy on energy. Because I believe this will be a particularly important area for US-EC cooperation in the near future, I hope to be able to meet with Haferkamp to discuss the energy situation sometime in the coming weeks.

In sum, these meetings met the objectives we set for ourselves and provided us with an opportunity—coming before the Summit—to get our views across to the Commission on the main current issues in our relationship. By the end of our meetings the European representatives recognized that the US was seriously disturbed over the manner in which the EC was handling the GATT aspects of enlargement and the preferential trade aspects of arrangements with non-member countries.

John N. Irwin II
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 219, CIEP. Limited Official Use. Attached to a November 3 memorandum from Flanigan to Kissinger regarding U.S.-European relations.
  2. The series of consultations was inaugurated in October 1970; see Documents 44 and 47.
  3. Earlier sessions of the U.S.-EC Consultations had been chaired on the U.S. side by Deputy Under Secretary of State for Economic Affairs Samuels.
  4. Reference is to the U.S. determination in September 1972 not to license the export of sensitive jet engine technology to France.