230. Memorandum From the Special Representative for Trade Negotiations (Dent) to the Executive Committee of the Economic Policy Board 1

SUBJECT

  • Agricultural Stalemate in the MTN

Over seventy countries met during the last week in March to organize the work of the MTN Agriculture Group. The U.S. and the EC reached a deadlock on how to proceed, and the meeting was recessed until April 15. In itself, the recess is not damaging, but reconvening in the absence of reaching a compromise would prevent work from taking place in the MTN on agriculture, would continue the deadlock on the wheat reserve talks in London, and may cause the EC to delay other work moving forward in the MTN.

New EPB guidance is needed to enable a practical solution to be worked out with the EC.

Attached are an options paper on the issues raised as well as background materials.2

I would hope that these questions can be resolved on Monday, April 7, so that there is enough time to work with the EC on these questions before the April 15 Agriculture Group meeting.

Attachment

CURING THE MTN IMPASSE ON AGRICULTURE

Problem

The United States and the European Communities (EC) have come to a procedural impasse on how agriculture should be dealt with in [Page 792]the Multilateral Trade Negotiations (MTN). This stalemate, if allowed to continue when the Agriculture Group meets in Geneva on April 15, poses a significant risk to the successful negotiation of agriculture issues in the MTN and may endanger overall progress in the MTN. Either of these results would have significant political and economic costs, both at home and abroad.

Issues

I.

MTN Structure for Dealing with Agricultural Issues.3

The United States has taken the position that there should be no difference between the treatment of barriers affecting agricultural trade and the treatment of barriers affecting industrial trade. The United States therefore wishes negotiations to take place first on general rules in the Tariff and Nontariff Measures (NTM) Groups that would not differentiate between industrial and agricultural products.

The EC has argued that the agricultural sector has special characteristics which makes it necessary to negotiate agricultural trade barriers separately. It therefore insists that agricultural issues be dealt with almost exclusively by the Agriculture Group. The bureaucratic division within the EC Commission and the tenor of negotiating mandate approved by the member states makes likely continued EC insistence on a separation of agricultural issues.

The first issue is, therefore, what the relationship should be between the functional (Tariff and NTM) groups and the Agriculture Group.

II.

Organization of the Grains Negotiations.

The U.S. position has been that the highest priority ought to be assigned to the establishment of better world food security, as agreed at the World Food Conference,4 and that ongoing negotiations on a new International Wheat Agreement under the auspices of the International Wheat Council (IWC) provides the most convenient institutional context for achieving this objective. It has also been the U.S. position, decided previously by the EPB, that any discussion in the MTN of commercial provisions affecting grains should be delayed until progress has been made on the negotiation of a food reserve agreement in London.

The EC position has been that negotiation of an international agreement on grain reserves cannot be separated from the negotiation of agreements covering commercial or concessional trade in grains. [Page 793]Moreover, the EC points out that it has a current mandate from the member states to negotiate agreements in the context of the multilateral trade negotiations, but that it does not currently have a mandate for the negotiation of a new international wheat agreement. The EC has withheld active participation in London and insisted that the negotiations take place solely in the MTN.

The issue posed is what the relationship should be of negotiations affecting grains in the MTN and the negotiation on grain reserves.

Options

Issue I. MTN Structure for Dealing with Agricultural Issues.

Option A. Accept the EC position that agricultural negotiations should be primarily, if not entirely, within the jurisdiction of the Agriculture Group.

Pro

1.
The procedural impasse would be broken and work could proceed on all aspects of the negotiations as this option would be accepted by most countries in order to get work underway.
2.
The battle lines could be drawn on specific substantive issues with positions being taken by the U.S. which would find greater support among other countries.

Con

1.
Agriculture would be treated as an exception from general trade liberalization rules from the outset, leading to isolation of agricultural questions from general rules directed at trade liberalization, thus making it more difficult to achieve U.S. objectives in agriculture.
2.
Could lead to separate, independent negotiations on industrial and agricultural issues (thus, having two, parallel MTN’s).

Option B. Maintain U.S. position unchanged that all negotiations (including those on agricultural issues) take place primarily, if not entirely in the functional groups (the Tariff and Nontariff Measures Groups).

Pro

1.
This option promises the greatest tie to the work of the Tariff and Nontariff Measures Groups and therefore can best lead to the applicability to Agriculture of general rules directed at the reduction of trade barriers.
2.
Other agricultural exporting countries have expressed some sympathy with this approach (if it were generally acceptable).
3.
This option best fosters trade-offs between industry and agriculture, necessary to obtain U.S. agricultural goals, because industry and agriculture would be treated in the same forums.
[Page 794]

Con

1.
Neither the EC nor Japan will accept this limitation on the competence of the method of operation of the Agriculture Group. Would likely result in a continuation of the impasse at the resumption of the meeting on April 15.
2.
Other delegations have clearly stated that they will not support the U.S. organizational approach if it cannot be adopted by consensus, even though there is some sympathy for the logic of the U.S. position.

Option C. Seek compromise formula which allows complementary work to go forward both in the Tariff and Nontariff Groups and in the Agriculture Group. Such a formula might include the concept that the Agriculture Group would facilitate and complement the work in the functional groups by making timely inputs into their work, and by working in conjunction with these groups. The overall Trade Negotiations Committee (TNC) could coordinate these work programs.5

Pros

1.
This is the most likely way to resolve the procedural issue so that work can proceed. It would allow U.S. and EC to continue to interpret respective positions in a non-prejudicial manner.
2.
Would receive support from our trading partners (including Japan which has supported the EC regarding the competence of the Agriculture Group).
3.
Would be consistent with our policy objective of treating agricultural issues in conjunction with other issues, and would make it easier to achieve our objective of liberalization for agriculture as well as industry.

Cons

1.
We may not succeed in persuading EC to avoid duplicating the Tariff and NTM work in the Agriculture Group.
2.
Even if they accept a compromise, EC nevertheless may try to block or delay progress in the Tariff and NTM Groups by resorting to delaying tactics in these groups in efforts to shift agricultural aspects to the agriculture subgroup.

Issue II. Organization of the Grains Negotiations.

Option A. Accept the EC position that while some technical discussions might take place in London, negotiations on all grains questions must take place solely in the MTN in Geneva.

[Page 795]

Pros

1.
This would allow MTN work to proceed on all agricultural issues as well as on grains, including reserves.
2.
This would give assurance that commercial grain issues would be given early attention in the MTN.

Cons

1.
The U.S. has been more interested than the EC in obtaining an early agreement on food reserves, and therefore has resisted a tie between the negotiation of a stockpiling agreement and the MTN negotiations which could last several years.
2.
The U.S. wants to minimize the extent to which the negotiation of a reserve agreement gets tied into the conflict between the EC view of organizing world trade in grains on the basis of government agreements and the U.S. view of reduced government intervention in world grain trade. Tying these issues together can complicate and delay negotiation of an agreement on reserves.

Option B. Maintain without change the U.S. position that work on grains in Geneva cannot begin until there is progress in London.

Pro

1.
This will keep the pressure on the EC to participate actively in the negotiation on reserves.

Con

1.
There is no indication that the current impasse will be broken if the U.S. maintains its position unchanged on this procedural question.
2.
Ultimately the U.S. has no support for this position. Canada, Australia and New Zealand—those closest to us—do not see grains work in Geneva as inhibiting reserves negotiations in London.

Option C. A pragmatic compromise should be worked out allowing the MTN agriculture work to move forward without prejudice to, and if possible fostering, early work on reserves, and taking advantage of the work which has been done by the International Wheat Council.6

[Page 796]

Pros

1.
This will allow the negotiations on agriculture to proceed, and presents the best chance for obtaining early results on reserves.
2.
This option gives the EC the optics of having a grains subgroup, as well as removing their concern that they will be asked to negotiate twice on grains, and thus it provides the basis for a compromise.
3.
There is wide support for this position among third countries, and the EC and Japan have given preliminary indications that they can accept it.

Cons

1.
The EC may be unwilling and/or unable to agree at this time to reaching an early agreement involving reserves.
2.
The EC may insist that any early agreement on reserves include elements of specific interest to them, such as market stability or supply access.
  1. Source: Ford Library, L. William Seidman Papers, Box 38, Economic Policy Board Subject File, Agriculture—Multinational Trade Negotiations. No classification marking. Sent through Seidman. Neither Dent nor Seidman signed the memorandum.
  2. The background materials, which are attached but not printed, consist of the following: telegram 2082 from USDel MTN Geneva, March 25; telegram 2167 from USDel MTN Geneva, March 27; telegram 902 from the Mission in Geneva, February 12; telegram 32200 to the Mission in Geneva, February 12; telegram 43473 from London, March 20; telegram 2409 from USEC Brussels, March 19; telegram 1862 from USEC Brussels, March 4; the September 14, 1973, GATT Ministerial Tokyo Declaration; telegram 972 from the Mission in Geneva, February 13; and the February 14 proposals by the Chairman of the GATT Trade Negotiating Committee. Telegram 902 is Document 227; telegram 32200 is Document 228; telegram 972 is Document 229; for the Tokyo Declaration, see footnote 8, Document 185.
  3. A background paper is attached which explores in greater detail the substantive interests which underlie these procedural issues. [Footnote is in the original. The "Background Paper on the Current Impasse on Agricultural Questions in the MTN" is attached but not printed.]
  4. The World Food Conference convened in Rome November 5–16, 1974.
  5. If this were acceptable, we could push further to develop an explicit understanding that from time to time the Agriculture Group might meet with the Nontariff Measures Groups to review work progress and provide amplification of those characteristics and problems peculiar to aspects of agriculture. [Footnote is in the original.]
  6. This could involve (1) an interim agreement involving reserves at an early stage in the negotiations, prior to final negotiation of all issues involving grains; (2) continued IWC involvement in London and/or Geneva; and (3) formation of an MTN grains group now, with an understanding that this would not prejudice reaching an early agreement involving reserves. [Footnote is in the original.]