193. Letter From Secretary of Agriculture Butz to Secretary of the Treasury Shultz 1

Dear George:

I am concerned that the United States may be adopting a position that will seriously weaken the bargaining position for U.S. agricultural products in the forthcoming Multilateral Trade Negotiations.

The European Community, with the expected support of Japan and most other GATT countries, is advocating, at the meeting of the Trade Negotiating Committee now in progress in Geneva,2 that negotiations [Page 708]on all agricultural products be dealt with by an Agriculture Committee. We foresee serious dangers for American agriculture, and hence America, in this approach:

  • —Separating out agricultural products provides a convenient way to avoid negotiating on these products without jeopardizing the rest of the negotiations, but with great potential loss to the U.S..
  • —There is insufficient negotiating reciprocity within the agricultural sector. In FY 1973 U.S. agricultural exports totalled $12.9 billion against imports of $7.3 billion. With Japan we had a surplus of $2.2 billion. With the EC we had a surplus of $2.7 billion.
  • —Many non-tariff problems are essentially the same for agriculture as for industry: import quotas, licensing, export subsidies, and so on. If agriculture is handled separately, separate rules may be devised for agricultural products. We would then be worse off than we are under present GATT rules, which apply universally to all products with some exceptions for agriculture. This is a danger even if the negotiations are otherwise successful.
  • —If all agricultural products are considered together, delays associated with a few problem commodities may prevent progress on many products for which benefits could rather easily be negotiated.

U.S. agriculture’s contribution to our trade balance in FY 1973 was a plus $5.6 billion. This was made possible in substantial part because of the efficiency of this industry, and hence the competitiveness of its products when they go on to the world market. An MTN strategy which permits segregation of negotiations on all agricultural products into an Agriculture Committee for purposes of negotiations would tend to erode this U.S. industry’s ability to remain competitive and hence would weaken its effectiveness in maintaining the favorable trade balance that it now has. Further, it would inhibit its future ability to improve trade balance which is one of its major objectives.

We have—in the President’s program—deliberately sought to make American agriculture market oriented. A key element in our program is ever expanding access to foreign markets. U.S. agriculture in this manner can operate as a growth industry and remain efficient, conferring the benefits of such efficiency on the American people in terms of the food and fiber they buy. Hence, channeling agricultural negotiations into a separate Agriculture Committee would work against the best interests of American consumers and taxpayers.

The above are two compelling economic reasons why an Agriculture Committee should not be permitted for purposes of carrying out agricultural negotiations in the forthcoming MTN.

Further, the agricultural community has been one of the staunch supporters of the President’s Trade Reform Act. To permit our negotiators in Geneva to put agriculture in a second rate negotiating position in the MTN would probably tend to alienate substantial support for this bill which may still be needed for its passage. Indeed, I could [Page 709]find difficulty in continuing to give my own support as wholeheartedly as in the past.3

Lastly, we feel that there was some agreement and certainly full knowledge in other departments as to this Department’s opposition to carrying out these negotiations with an Agriculture Committee. The moves presently underway by the U.S. delegation in Geneva toward approving an Agriculture Committee are done without adequate advance consultations with the representatives of this Department.

I, therefore, request your strong, prompt support in avoiding segregating agricultural negotiations in the MTN, and hence also avoiding a downgrading of U.S. agriculture’s ability to export and remain efficient along the lines set forth above.

Sincerely,

Earl L. Butz
  1. Source: National Archives, RG 56, Records of Secretary of the Treasury George P. Shultz, 1971–1974, Entry 166, Box 1, GPS Agriculture 1973. No classification marking.
  2. The TNC met in Geneva from October 24 to 26. See Document 203.
  3. The final sentence of this paragraph has been underlined and highlighted.