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338. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon 1

SUBJECT

  • UK Agricultural Policy

Issue

You will recall that Prime Minister Heath has proposed that British farm incomes henceforth be supported through high prices for key commodities rather than direct payments from the British Treasury to British farmers.2 UK tariffs would be raised to protect the new support prices from foreign competition. Assuming that Britain joins the Common Market, Heath’s plan would essentially accelerate British adoption of the Common Agricultural Policy by about two years since his idea is virtually identical to the CAP.

The higher British prices and tariffs could theoretically hurt our exports; however, world prices for the commodities in question are much higher than the new UK prices and everyone agrees that the real impact on us is negligible. The increase in British tariffs violates their international commitments, however; we can exercise our rights either by accepting compensation now on our industrial exports to the UK, or retaliating against the UK, or preserving them as leverage against the CAP itself after Britain becomes a member.

At Tab I3 is a memo from Pete Peterson outlining five options on this issue. We must convey our position to the British today. Secretary Hardin would like to present his views to you personally, and I recommend a short meeting if your schedule today permits.4

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Analysis

The British action carries no real economic cost for us. In addition, our refusal to accept the British proposal could lead only to (a) our getting meaningless tariff concessions on industrial items or (b) the beginning of a series of retaliatory actions which could cause us major political problems with Heath and even with the EC. The issue is thus whether we accept these realities and accommodate as best we can to the British move, or adopt a tough stance toward the British for domestic political reasons.

Secretary Hardin wants you to call Heath, to try to talk him out of moving. Even Hardin recognizes that the effort would likely fail; he would then have us reject the UK proposal outright and retaliate. The Secretary recognizes that US exports are unlikely to be hurt by the UK move, but wants to convey a tough Administration posture to the domestic farm community.

State originally proposed making one more counter proposal, in an effort to further improve the British changes. However, State was also willing to carry the issue to the GATT and possible retaliation if the UK refused to make further concessions.

Pete Peterson has devised a clever compromise position, which I support. He proposes that we try to get the improvement suggested by State, but accept the UK proposal whether or not we succeed. To meet our domestic political problem, he has developed an official US statement which would quite rightly point out that the UK action as now modified through our efforts would not hurt our exports; we had fully preserved our GATT rights for the crucial negotiations with the enlarged Community; the alternative was a loss of GATT rights and US exports; and that we would go back at the British if the arrangement proved unsatisfactory. He would also seek a Heath statement expressing understanding of our position, which is unlikely to succeed but worth a try if kept low-key.

I do not believe we should trigger a confrontation with Heath on this issue. We have nothing to gain economically, and could even lose our valuable negotiating rights on agriculture in return for meaningless industrial concessions if we let the problem go into GATT at this time. Retaliation on this issue could also cause broader trade and foreign policy problems with the EC. And Peterson has developed an approach which should meet the domestic political problem.

Recommendation

I therefore recommend that you accept Peterson’s proposal (Option 5 of Tab I). State and STR concur.

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Approve5

Disapprove, prefer Secretary Hardin’s approach (Options 1 and 2)

Other

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 728, Country Files—Europe, United Kingdom, Vol. V. Confidential. Sent for action. A stamped notation on the memorandum reads: “The President has seen.”
  2. See Document 332.
  3. Not printed.
  4. No record of a Nixon-Hardin meeting or telephone conversation that day was found. Hardin visited the White House on March 8 as part of a group meeting with the President. (National Archives, Nixon Presidential Materials, White House Central Files, President’s Daily Diary) Both Hardin and Secretary Connally continued to oppose the solution proposed by Kissinger and Peterson. Their views were outlined in a March 8 memorandum from Bergsten to Kissinger. (Ibid., NSC Files, Box 728, Country Files—Europe, United Kingdom, Vol. V)
  5. The President initialed this option. The date March 5, 1971, is stamped under his initials.