226. Memorandum From the Executive Director of the Economic Policy Board (Seidman) to the Executive Committee of the Economic Policy Board 1

SUBJECT

  • Negotiations on Agriculture in the Multilateral Trade Negotiations

Before the Multilateral Trade Negotiations can proceed, an issue that must be resolved is the format for conducting agricultural discussions. There is disagreement among U.S. agencies on the substantive importance of the procedural issue and over the degree of flexibility U.S. negotiators should have in resolving the issue with the European Community.

The position of the European Community has been to maintain an independent focus in agricultural policy negotiations, but they are prepared to meet before February 10 in an attempt to work out an acceptable compromise. Lack of flexibility in the U.S. position would threaten to deadlock negotiations.

From the U.S. point of view, avoidance of a sectoral emphasis in negotiations is important in view of the language of the Trade Bill, a possible adverse reaction by the American farm community, and the unfavorable negotiating position of the U.S. if agricultural issues are not considered together with industrial issues.

  • —An options paper on the issue is attached in Tab A.
  • —Discussion of the issue by STR and Agriculture and letters from the State, Agriculture, and Commerce Departments are attached in Tab B.2
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Recommendations

  • STR and Commerce favor option 4.
  • —Agriculture favors option 3.
  • —The State Department favors seeking a compromise solution with either of the following acceptable:
    (a)
    Agreement to accept whatever compromise is possible, or
    (b)
    Reserve the right to judge the acceptability of the compromise achieved.

Tab A

Agricultural Negotiations Options Paper3

Option 1

We would insist that the negotiations be conducted on a functional basis, with agriculture and industry both included in overall tariff and overall non-tariff barrier groups.

Pros

1.
It would create the presumption at the outset that any negotiated liberalization should cover all trade, industrial and agricultural.
2.
It would assure the domestic agricultural sector that the totality of U.S. bargaining leverage would be brought to bear for agricultural trade liberalization.
3.
This would be the most practical way to conduct the negotiations on many issues such as subsidies and countervailing duties, where the Trade Act and other domestic law do not make any distinction between agriculture and industry.

Cons

1.
It would delay substantive negotiations for which the U.S. would have much of the blame, and should the EC become more flexible, we would get all the blame if we remained inflexible.
2.
If the EC is totally uncompromising, it could lead to a possibly acrimonious and costly confrontation.

Option 2

Continue to work on the basis of the organizational compromise which was in effect during the prenegotiation phase, in which agriculture was largely treated separately. Under this option, all negotiations on agriculture would take place in a separate committee.

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Pros

1.
Would enable substantive negotiations to begin February 11.
2.
While the organizational structure will influence the outcome of the negotiations, the ultimate settlement will depend on political realities.
3.
Continuation of the previous organizational structure may be flexible enough in any case to permit a coordinated discussion of agricultural and industrial trade issues on a selective basis.

Cons

1.
We would not have the same iron-clad assurance of equal progress as we would if we were successful under Option 1.
2.
We would be more likely to get into a situation where industrial negotiations were moving along faster than agricultural negotiations, and agriculture would come unhooked from industry as happened in the Kennedy Round.
3.
The Administration could be accused by the farm community of a sell-out.

Option 3

Be prepared to agree to a compromise which while providing for inclusion of agriculture and industry together in overall tariff and overall nontariff groups, would also provide for the formation of special review groups to look at certain products—industrial as well as agricultural. The purpose of such groups would be to isolate and examine the special characteristics of such products, if any, and to determine whether any special treatment within the overall negotiating framework is required.

Pros

1.
Would permit selective commodity discussions which certain negotiating partners and certain of our own domestic interests will undoubtedly insist upon.
2.
Would permit discussion of potentially troublesome product issues to proceed, while enabling the overall negotiations also to proceed.
3.
Such a compromise would probably be acceptable to the farm community and also to important segments of the industrial community.

Cons

1.
Countries who do not want to see rapid progress in the negotiations may find that even this option is not acceptable.
2.
Could result in certain product areas not sharing fully in the benefits of these negotiations.
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Option 4

Seek a compromise along the lines of Option 3, but be willing to settle for other compromises in order to avoid a stalemate and a breakdown of the negotiations. Such other compromises should assure as provided in Section 103 of the Trade Act that "to the maximum extent feasible [that] the harmonization, reduction, or elimination of agricultural trade barriers and distortions [is] undertaken in conjunction with the harmonization, reduction, or elimination of industrial trade barriers and distortions."4

Pros

1. Would give U.S. negotiators more flexibility than Option 3 to find a formulation acceptable to the EC and thus to avoid a confrontation.

Cons

1. Would give us an organizational arrangement that could be viewed by the farm community, as less favorable than Option 3.5

  1. Source: Ford Library, L. William Seidman Papers, Box 77, Economic Policy Board Subject File, Multinational Trade Negotiations (1). No classification marking.
  2. Tab B, attached but not printed, includes an undated memorandum from Malmgren to the EPB Executive Committee; a January 30 memorandum from Butz to Simon and Seidman enclosing an undated paper entitled "USDA Comments on the STR Options Paper on Negotiations on Agriculture in the MTN" and a revised options paper, January 30, entitled "Options Paper Favored by USDA"; an undated memorandum from Robinson to Seidman; and a January 31 letter from Dent to the President.
  3. According to Document 225, this paper was prepared in the Office of the Special Representative for Trade Negotiations and the Department of Agriculture.
  4. Brackets are in the original.
  5. On February 6, the EPB Executive Committee discussed this options paper and decided "that a confrontation with the Europeans should be avoided and that Ambassador Malmgren should seek a compromise with the Europeans as close as possible to option 3. Whatever compromise is reached must be cleared with the EPB." (Minutes of the Economic Policy Board Executive Committee Meeting, February 6; Ford Library, U.S. Council of Economic Advisers Records, Alan Greenspan Files, Box 57, Economic Policy Board Meetings, EPB—Feb 1975 (1))