245. Memorandum From Charles Cooper of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • NSSM on International Cooperation in Agriculture

Attached at Tab A is a NSSM on the above subject, redrafted according to your instructions.2 A transmittal note to the President is attached at Tab I.3

I had extensive discussions with Joe Greenwald on this subject as a result of which he prepared an excellent memorandum, attached at Tab B, which is well worth reading. (Greenwald, by the way, is very impressive.)

I feel strongly that State should take the lead in the NSSM. USDA doesn’t have the imagination, nor can we count on their being open minded. CIEP doesn’t really have the right people, nor can we count on their taking as constructive an approach as might be desired. Although State isn’t well-staffed for this job, there are some good staff [Page 856]people there who can do much of the work. Jules Katz, the Deputy Assistant Secretary for International Resources and Food Policy, who would presumably lead the study, is good, and I think will do the job the way you want it done.

As regards substance, there is near unanimity that a frontal attack on the CAP would be folly. However, the domestic political aspect of this problem will require careful handling. For the most part, U.S. farm interests can be expected to oppose strenuously anything that smacks of international commodity agreements. This problem could be serious if publicity about a more flexible U.S. approach to international cooperation in agriculture were to cause trouble while the Trade Bill is still pending. In my judgment, we have to get started—but carefully.

Recommendations

1.
That you sign the memorandum for the President at Tab I.
2.
If the President approves, that you sign the NSSM at Tab A.

Tab B

Paper Prepared by the Representative to the European Communities (Greenwald) 4

AGRICULTURE AND FOREIGN POLICY

With the embargo of U.S. soybean exports,5 agriculture joined energy and money as top issues in U.S.-European relations. These economic problems have moved to the center of the Atlantic stage along with political/military affairs.

Agricultural policy has long been a source of conflict in our relations with Europe. We have argued and negotiated for access for our [Page 857]exports. The Europeans have developed a common agricultural policy (CAP) designed to favor domestic producers. The CAP is one of the concrete achievements of the European Community (EC) and it has major domestic political importance for most of the nine member states. The EC has made clear that its CAP is not "negotiable" in the next GATT round. At the same time, there are pressures within the EC for modifications to make the CAP less costly to both governments and consumers.

The recent emergence of protein and grain shortages has brought a new dimension to the agricultural problem. Previous discussions were based on the assumption of surplus production for commercial sale; it is now being suggested that we are entering a period of chronic shortages. There is no consensus on the long-term supply/demand prospects.

The resistance to changes in the CAP through the traditional negotiations for liberalization of imports and the possibility of a structural change in world agricultural supply and demand has led the EC to propose international commodity arrangements as the main approach to the agricultural phase of the GATT negotiations. The U.S. has in the recent past (February 1972), opposed commodity arrangements for temperate foodstuffs. Unless positions are modified, we are heading for another confrontation with the EC.

The present course of unwillingness to explore the commodity arrangement approach with an open mind seems calculated to continue the U.S.–EC stalemate in the agricultural area. Until the protein and grain crises, there was some support in the EC for the traditional trade liberalization (access) approach to agriculture. With the apparent change in the supply/demand situation, the Europeans are united in favor of the commodity arrangement formula. The only prospect of getting ahead in agriculture is for us to indicate a willingness to consider the European approach and find out what the practical possibilities are.

The first opportunity to signal this flexibility is at the GATT meeting in Tokyo.6 In a Presidential meeting and/or the Shultz speech, we could state our willingness to explore the commodity arrangement approach to see whether it can be used to achieve the objectives of the GATT negotiations. In terms of our relations with Europe, there are substantial political advantages in emitting this signal as soon as possible.

Once the present impasse is thus unblocked, we can pursue discussions with our negotiating partners formally and informally, multilaterally [Page 858]and bilaterally. Although the EC has a common agricultural policy and the Commission is responsible for implementing that policy, it is of such domestic political sensitivity that informal, bilateral talks with key member states (first of all with France) and the Commission will be necessary. These bilateral exchanges can, of course, proceed in parallel with more formal multilateral discussions in GATT and OECD. Multilateral meetings (in existing organizations or ad hoc) can be useful in demonstrating publicly that we are trying to deal with the world food problem through international cooperation. But such meetings cannot replace, and should not be allowed to interfere with, serious substantive exchanges looking toward agreement among the major producers and consumers.

Before entering into these international discussions, we will need a better idea of (a) the long-term supply/demand picture for major agricultural products (b) the impact of the U.S. agricultural legislation on our trade and stock position (c) the kind of commodity arrangements which could serve U.S. interests and (d) the negotiability of various types of commodity arrangements. Such a study should not aim at a blueprint for world-wide commodity arrangements. Its purpose should be to provide broad guidelines or parameters for exploratory talks this fall. These talks should not be limited to the Europeans but also include other major suppliers (Canada and Australia) and consumers (Japan). Separate talks might be held with the LDC’s. After these preliminary discussions with our trading partners, another interdepartmental exercise will be necessary to provide more precise negotiating instructions.

Recent developments in the protein and grain markets may provide the basis for a mutually satisfactory deal with the Europeans and Japanese. They are seeking reliable suppliers and we are looking for continuing access. If we try directly to force changes in the CAP and refuse to consider alternative solutions to agricultural problems, the likely outcome is a continuation of the present unsatisfactory situation. Continuing conflict in agricultural policy will inevitably have adverse effects on other aspects of U.S.-European relations.

Joseph A. Greenwald
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–200, National Security Study Memoranda, NSSM 187. Secret. Sent for action. Concurred in by Kennedy.
  2. Attached but not printed. Kissinger did not sign this version of the NSSM. An inter-agency dispute delayed the issuance of the NSSM. Documentation on the inter-agency dispute is ibid. For the NSSM as signed, see Document 246.
  3. Attached but not printed. Kissinger did not sign the transmittal memorandum to the President.
  4. No classification marking.
  5. On June 27, the Nixon administration instituted a temporary embargo on soybean and cottonseed exports. On July 2, it lifted the embargo, replacing it with controls on exports; at the same time, the administration also instituted restrictions on scrap metal exports. On July 5, the administration restricted the export of an additional 41 agricultural goods. (The New York Times, June 28, July 3, and July 6, 1973) Under Phase IV of his Economic Stabilization Program, announced on July 18, the President promised that controls on agricultural exports would be rescinded once the new harvest was ready for sale. The President also suggested that further export controls would be unnecessary, provided there were no major crop failures or sharp increases in foreign demand. For the text of the President’s announcement of Phase IV, see Public Papers: Nixon, 1973, pp. 647–653.
  6. A GATT ministerial meeting was held in Tokyo from September 12 to 14.