234. Memorandum From the Special Representative for Trade Negotiations (Dent) to the President’s Assistant for Economic Affairs (Seidman)1

A few days ago you raised the question whether the long-term contractual arrangements on grain sales to the Soviet Union and other countries might call for changes in our agricultural negotiating strategy. We have considered that possibility, and have concluded that the long-term arrangements will not have much effect on negotiations conducted elsewhere.

We now have a long range understanding with Japan, a good possibility for some kind of accord with the Soviet Union, reasonably well defined commitments from Romania and Poland, and private sector agreements of this type with Norway and Taiwan. Others may develop in the future. We certainly consider long range contracting to be a beneficial marketing mechanism from the standpoint of the U.S. Even though some of these commitments are relatively loose, they do provide a strong indication of anticipated future demand, and this helps to lengthen the planning horizon of U.S. farmers.

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The one major customer, however, with which we do not yet have such an arrangement is the European Economic Community. Because of the characteristics of the EC’s common agricultural policy, it is unlikely that we will be able to negotiate such an arrangement with them. They too have expanded their interest in long-term contracts, but only as a seller—not as a buyer. In addition, the common agricultural policy probably does more to destabilize world agricultural markets than any other man-made institution. The basic purpose of the CAP is to isolate the EC from supply and demand fluctuations; in other words, the burden of adjustment to such fluctuations falls entirely on the rest of the world, and particularly on us. For this reason, at least some adjustments in the border [broader?] effects of the CAP must remain as one of our high priority objectives in the MTN at Geneva. On the export side, we hope to curb the EC’s subsidy practices by development of an international-subsidy countervailing duty code. On the import side, we hope to negotiate at least some curbs on the EC’s variable levy system.

We also have some major negotiating objectives with Japan. Though the Japanese are excellent customers, particularly in grains and soybeans, they still have a list of about 22 trade barriers to other U.S. agricultural products. Japan uses a variety of quota and licensing systems to severely impede the importation of products such as beef, and many of the fruits and vegetables that offer export potential from our west coast. We have a long way to go in resolving some of these problems.

We likewise have some significant agricultural issues with Australia and Canada. Both countries often use export subsidies to compete with U.S. producers in a number of world agricultural markets. Here again, we hope to curb such practices through the development of an international code of conduct. Beyond that, the Canadians have a whole host of restrictive practices that impede U.S. imports. Over the past year or so, we have had a lengthy battle with them over restrictions against U.S. beef and live cattle imports. A few weeks ago they established additional restrictions against the imports of U.S. eggs; a proposed retaliatory action is now being processed by us under Section 301 of the Trade Act. They also have a number of restrictions against fruit and vegetable products.

Among the lesser developed nations, we have major disputes with both Mexico and Brazil. Both countries have customs and licensing procedures that make it very difficult for U.S. agricultural products to penetrate their markets. At the same time, both solicit duty-free treatment on their exports to the U.S. under our Generalized System of Preferences.

Finally, we would still like to negotiate an international agreement on food reserves that would transfer some of the burden of holding reserves from the U.S. to other nations of the world. Efforts in this [Page 804]regard are underway in the International Wheat Council in London, the one international forum in which the Soviets are participating. We hope that they will go beyond any long-term contractual arrangement that might be worked out with the U.S., by also joining in an international reserves program that would require them to meet certain storage commitments. We would like to get the EC and Japan, among other countries, also committed to holding reserves, though this may be even more difficult. The EC would much prefer to move the entire negotiation away from London to Geneva, where they would hope to entice us into an international commodity agreement on grains. Their hope is that in such an agreement the U.S. can be induced to compensate them for holding reserves. This will be a long and difficult negotiating battle.

There are a number of other agricultural negotiating issues not mentioned, but I thought you might appreciate the flavor of what is taking place at the moment. It is obvious that we still have a long way to go on a host of these issues, some of which must be dealt with bilaterally, and others in a multilateral context.

  1. Source: Ford Library, U.S. Council of Economic Advisers Records, Alan Greenspan Files, Box 59, Economic Policy Board Meetings, EPB—Oct 1975 (2). No classification marking. Seidman initialed the memorandum, indicating he saw it. Under cover of an October 13 memorandum to EBP Executive Committee members, Seidman forwarded Dent’s memorandum for the members’ information.