Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

104. Action Memorandum From Helmut Sonnenfeldt and Robert Hormats of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, October 16, 1972.

SUBJECT

• Flanigan’s Report to President on US-EC Relations

Bruce Kehrli has requested your comments and/or recommendations on the attached memorandum from Flanigan to the President on US-EC relations (Tab A).²

The Flanigan Memo

The memorandum summarizes the salient issues of last week’s annual US-EC consultations in Washington.³ Irwin headed the US side; Dahrendorf, the European side. The US position—consistent with the results of the recent CIEP meeting—was to keep maximum pressure on the EC on economic matters but not create an irresolvable confrontation.⁴

Flanigan feels that the EC is determined to maximize its economic potential regardless of the cost to the US and the Atlantic system. Specific decisions are resolved in favor of the EC and contrary to US interests. Examples are (a) the Commission’s proposal for a Mediterranean policy which would include trade preferences and (b) an EC industrial policy. The former exacerbates the discrimination against US agricultural exports and contains provisions for reverse preferences which discriminate against American exports to Mediterranean countries. The proposed industrial policy also contains protectionist devices, particularly in behalf of Europe’s commercial airplane and computer industries.

Membership of the Commission—now dedicated to action contrary to the US economic interests—should change. Mansholt will be replaced as President by a Frenchman. Britain, Ireland and Denmark will also have Commissioners. It will be important to schedule a quiet but high-level visit to Brussels to meet with all the new Commissioners shortly after they are installed and visit the new Governments in Bonn and the Hague to attempt to develop a common position on our relationship with the EC.

We must develop viable solutions to the two major US-EC problems: the Common Agricultural Policy and EC preferential arrangements with non-Community countries. On the latter the “horse is largely out of the barn.” Our policy should be (a) in the short run to get special tariff relief where a US industry is hurt, (b) in the long run to reduce industrial tariffs multilaterally so that tariff preferences do not discriminate against US exports. Preferences for developing countries should be subsumed under a multilateral program of generalized preferences, which the US supports. Reverse preferences should be phased out. The EC’s development contribution to the developing countries should be made through special programs of aid, investment, and technical assistance.

In the area of agriculture the US should concentrate more on international agricultural trade rather than attacking the Community’s agricultural policy, which they consider to be an internal matter. The Europeans must indicate a willingness to reduce subsidies to agricultural exports and reduce the protection against agricultural imports into the Community.

The strategy for our economic relations with Europe can be only a part of our overall relations. As agreed in the CIEP meeting, a review of these relations by NSC and CIEP is at the top of the work plan.

Our View

We believe Flanigan’s view of European attitudes is oversimplified. There are plenty of people in Europe, if not in the Commission then in top spots in various Western Governments, of whom it cannot be fairly said that they are “determined to maximize economic potential regardless of the cost to the US and the Atlantic system.” There are on both sides of the Atlantic important and senior leaders and officials who are eager to find a way to manage our admitted economic problems in ways that will not destroy those common interests we share.

Purely economic “solutions” in most cases (especially regarding fundamental issues such as preferential arrangements and agriculture) may be impossible without a heavy political component. The Mediterranean and Africa are cases in point. It is we, after all, who have urged the Europeans to raise their sights and assume responsibilities around the world which we no longer can or should assume to the extent we used to. However, it is true that so far the Europeans seem bent on doing so almost exclusively by economic and commercial devices, which are discriminatory in nature and are bound to bring them into conflict with those responsible for our economic affairs and with potent US economic interest groups.

Apart from this Flanigan makes a number of valid and constructive recommendations. His general conclusions are consistent with those expressed in Hormats’ memorandum to you of October 11, a copy of which is attached (Tab B).⁵ We both agree that a major US effort will be necessary to construct a will and a means of solving our problems with the EC in a way which will strengthen and make more sustainable the US-Europe political relationship. An NSC/CIEP study to develop strategy for this effort is of course a good thing provided that in the interim things are not done that deprive the President of any option but confrontation.

Recommendation:

That you authorize us to indicate that you have no objection to Flanigan’s memo (Tab A) going to the President.⁶

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 219, CIEP. Limited Official Use.
2. Document 103.
3. See Document 102.
4. See Documents 100 and 101.
5. Not printed.
6. Haig initialed his approval of the recommendation.