Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

250. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, January 2, 1971.

SUBJECT

• Secretary Hardin’s Report on His European Trip

Secretary Hardin has sent you an abbreviated report on the United Kingdom and European Community portions of his European trip (Tab A).

In speaking with the British and Community leaders, the Secretary emphasized that the import barriers of the Community’s Common Agricultural Policy are contributing significantly to protectionism in the United States Congress. Recent Community agricultural policy moves have all been in the wrong direction, instead of encouraging an interdependence of trade that would sustain an open U.S. policy. We have been chagrined by recent EC moves on grain, citrus, and tobacco.

Grains are the most serious. A Community increase in its already high grain import levies, which is a real possibility, would further damage our exports; we would pay the price of an unsuccessful EC social program to increase Community farm income levels. Germany, which is the most insistent on high grain prices, claims that grain price reductions are politically impossible.

The Secretary believes that we must use all U.S. Government resources to reverse Germany on this question, even at the risk of interfering with the UK-EC negotiations or of creating difficulties for Brandt. Otherwise, the Administration will have serious political problems in Indiana, Illinois, Ohio and Missouri.

The Secretary did not believe his trip had the result he wished for a number of reasons:

• —Authority in the Community is diffuse.
• —The Community is hypersensitive to criticism of its institutions.
• —The British dare not use their weight with the Community.
• —The Community argues that it cannot attempt fundamental changes during its British negotiations.

I agree that these are extremely serious issues. They will require us, at some point, to make a tough tradeoff between our direct interests in the EC and UK, on the one hand, and our domestic political interests and interest in maintaining some base for a generally free trade policy, on the other. This should undoubtedly be one of the first issues to be tackled by the new International Economic Policy Committee.²

Tab A

Washington, December 16, 1970.

Memorandum From Secretary of Agriculture Hardin to President Nixon³

SUBJECT

• Trip to European Community and United Kingdom

1. Purpose. I went to Europe to talk with European and U.K. leaders about the problems we are having because of the highly restrictive policies of the E.C.’s Common Agricultural Policy (CAP). We pointed out that the unreasonable protectionist features of the CAP have contributed to protectionist thinking in the Congress, that some new initiatives from the E.C. were needed and that all recent actions had been in the wrong direction. On the latter issue we pointed to:

a. The new citrus preference arrangements with Mediterranean areas (Spain, Israel, Morocco, and Tunisia).

b. A new “buying premium” for users of E.C. tobacco.

c. Recent discussions about additional increases in grain prices which will further reduce our trade volume.

We emphasized that these programs are harmful to the U.S. export position, and that our new farm law was built on a premise of expanding exports.

2. Difficulties. It is not easy to get through to the Europeans on these points because:

a. No one really speaks with authority for the EC. The Commission is an executive body not directly disciplined by budget or parliamentary control. Agricultural ministers of the member countries make the agricultural decisions.

b. The EC is unwilling to accept any criticism of its means or instruments. Any mention of the instruments of integration, such as the CAP, is interpreted as an attack on the system and the Commission itself. To some extent, this is tactical rather than real.

c. The U.K. continues to be timid with respect to its application for membership. In most of Europe, we found EC members willing and eager to have the U.K. come in. Still, the U.K. feels considerable lack of confidence, and is careful to avoid any action that might be seen as serving U.S. interests. It continues to fear another rebuff from the EC.

d. The CAP tries unsuccessfully to be an economic solution to political and social problems. The Europeans argue that change cannot be attempted during negotiations with the U.K.—an argument used in 1962 (when the CAP was harmonized) to our continuing sorrow.

3. Citrus and tobacco. We pushed hard the arguments that the newly initiated citrus and tobacco policies of the EC are harmful to U.S. producers. We insisted that we would make full use of our rights under the GATT, which we are doing. The Europeans argued that the U.S. would not be seriously hurt by their citrus and tobacco policies. They argued that their decisions on these commodities were political and could be justified in that way. Our response was that U.S. farmers should not be made to pay for the EC’s special political arrangements with certain areas and certain countries.

4. Main Issues: Grains.

a. Our argument: We contended that the Europeans’ effort to settle economic and social problems through fixed high prices is not working. We pointed out that high grain prices protected by variable levies are slowing the natural growth of livestock and poultry industries in Europe, keeping consumer prices high, and inhibiting consumption. (EC grain prices are about twice as high as those in the U.S.) We argued that lower internal grain prices in the EC would be beneficial to Europeans and traditional grain suppliers, including the U.S. Our exports to the EC of commodities subject to variable levies and high internal prices are down 47% since 1966. Furthermore, the use of large export subsidies to push surpluses created by artificially high prices into world trade, is disruptive of normal trade.

b. Germany is the key. When we raised the grain issue in other countries, the finger was pointed at Germany. When we raised the grain issue in Germany, the finger was pointed at Minister of Agriculture Ertl. The Minister wants to raise grain prices in the EC, not lower them. He contends it is not politically possible to lower grain prices.

We urged that he deal with his political problems by using direct payments.

5. Conclusions.

a. We should continue to press strongly for a reduction in grain prices in the European Community. This issue should not be postponed.

b. It appears to me that the only way possible to secure a grain price reduction will be to use all of the resources of our government to push the Germans into such an agreement. It is true that in doing this we may be accused of interfering with EC-U.K. negotiations. We also may find that we are creating difficulties for the Brandt government. But if we do not obtain a lower level of grain prices within the EC, and the UK, our Administration will have serious political problems in such farm states as Illinois, Indiana, Ohio, and Missouri.

c. We should avoid making any commitment to the U.K. at this time with respect to the changes they wish to make in their agricultural trade system because:

(1) To do so would undercut efforts to achieve lower grain prices in the European Community;

(2) We do not yet know what arrangements the U.K. will have with the Commonwealth countries under its probable new status as an EC member; and

(3) There has not been time to analyze the likely effects of these matters on U.S. agricultural experts.

d. In closing, may I state a strong conviction, which I also expressed abroad. The European Community is a strong, flourishing economy and a major trading power. It has a responsibility to help foster an expanding system of world trade in the interest of all nations.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 196, Agriculture, Volume II 1971-. No classification marking. A stamped notation on the memorandum reads: “The President has seen.” The memorandum was forwarded to Kissinger under cover of a December 18, 1970, memorandum from Bergsten, which indicated a memorandum similar to Hardin’s (at Tab A below) had been provided to the President in preparation for his meeting with Prime Minister Heath on December 17. (Ibid., Volume I 1969-1970)
2. The President circled “International Economic Policy Committee” and wrote the following note: “1) I agree. 2) But the emphasis must be on U.S. interests. We cannot continue to sell out U.S. interests for State’s ‘foreign policy consideration.’”
3. No classification marking.