38. Minutes of a National Security Council Review Group Meeting1

SUBJECT

  • Enlargement of the EEC (NSSMs 79 and 91)

PARTICIPATION

  • Chairman—Henry A. Kissinger
  • State
  • Nathaniel Samuels
  • William I. Cargo
  • Miriam Camps
  • Margaret Joy Tibbetts
  • Donald McHenry
  • Defense
  • G. Warren Nutter
  • Wynne James
  • CIA
  • E. Drexel Godfrey, Jr.
  • JCS
  • Lt. Gen. F. T. Unger
  • OEP
  • Haakon Lindjord
  • USIA
  • Henry Loomis
  • Treasury
  • John R. Petty
  • Commerce
  • Lawrence A. Fox
  • Agriculture
  • Howard Worthington
  • Labor
  • Charles D. Stewart
  • STR
  • John W. Evans
  • CEA
  • Hendrik Houthakker
[Page 135]

SUMMARY OF DECISIONS

It was agreed that:

1. The NSC staff would draft a directive for the President’s approval which would:

(a) Call for US stimulation of a European initiative for creation of a US–EEC consultative mechanism;

(b) set up back-stopping machinery in the Under Secretaries Committee for coordination of agency views on the issues to be raised with the EEC;

(c) give substantive guidelines to the Under Secretaries Committee for carrying out its back-stopping activities.

2. The draft directive would be shown to the agencies, and any strong agency disagreement will be stated to the President at the time the directive is submitted for approval.

Mr. Kissinger outlined the objectives of the meeting: (1) to define the issues; (2) to identify our posture choices; (3) to discuss methods of dealing with the problems. He saw the chief issue as how to reconcile the US interest in the political unity of Europe with the economic problems that an expanded European Economic Community would pose for us. He noted the President’s statements in Europe and in his Foreign Policy Report2 which made support for European unity a national policy. With regard to the applications of additional countries for membership in the EEC, he remarked that we would be “not unfulfilled” without the membership of Norway, Denmark and Ireland, but that we would have a major interest in UK participation. One basis of this interest lay in preventing Germany from becoming dominant in Europe and pulling other European countries into the vortex of its uncertainties. When De Gaulle was in power, Germany was to some extent subordinate to French policy, but this was no longer true. He cited the political chaos in Italy and the return of France to its normal state, and said it was hard to see a stronger Europe without a major UK role. He agreed that an enlarged EEC does not necessarily produce a united Europe but thought it would be a first step. He said the US was prepared to pay some price for a united Europe but the price was not unlimited. He thought the worst that could happen would be greater economic integration and no political movement. He thought the US was willing to pay an economic price but the question was how large and how to reconcile our interests in political unity with the problems that would be created for us by greater economic integration.

Mr. Petty questioned whether looking after our economic interests would frustrate political union.

[Page 136]

Mr. Kissinger said we could not “look after” our economic interests at the price of wrecking political unity, but that were many things in between the two extremes.

Mr. Houthakker asked to what extent we could influence the negotiations for expansion of the EEC, and did we assume that these negotiations would take place.

Mr. Kissinger replied that we assumed the UK would enter negotiations with the Community.

Mr. Samuels agreed, saying the initial meetings between the UK and EEC were set for July; they would adjourn for the summer and resume in the fall, possibly after the British elections.

Mr. Houthakker asked if we assumed UKEEC negotiations would be successful.

Mr. Kissinger replied that we did.

Mr. Samuels noted that if the negotiations were not successful we would face an entirely new set of problems.

Mr. Fox said that the President’s statements in Europe and in the Foreign Policy Report had assumed that the US must make economic sacrifices. He said the economic agencies do not believe that the negotiations need be conducted so as to sacrifice our economic interests.

Mr. Kissinger agreed and said the RG had been assembled to discuss how to minimize economic costs.

Mr. Fox commented that the President had prejudiced the US position in this regard by his statements, and that the economic agencies had submitted a dissenting document3 since they thought it necessary to minimize the adverse impact of the President’s Foreign Policy Report in this area.

Mr. Houthakker remarked that, while CEA had not associated itself with the dissenting document submitted by the economic agencies, he agreed with Mr. Fox on the statements in the President’s report. He noted that they had not been cleared by the economic agencies and thought the wording was unfortunate.

Mr. Bergsten commented that the President’s report had not said we favored political unity at any economic cost and that this was an erroneous interpretation.

Mr. Evans said that while STR had not accepted the State paper,4 they had chosen to state their position separately5 from the dissenting document of the other economic agencies. He thought it was possible to [Page 137]accomplish our objectives within the framework of the President’s statements. He thought we could not avoid some costs but that there was a wide range of such costs and of ways in which enlargement of the EEC could be carried out. He thought some things could damage us more than others and we should decide things we could tolerate.

Mr. Kissinger commented that no one intended that we would pay any economic price, although he noted that many European economists were scoring debating points on the basis of the President’s report. He believed any EEC enlargement would involve some economic cost for the US and that we were willing to pay some but that we were here to examine what those should be. He asked what the agencies thought the economic costs would be.

Mr. Samuels argued that there would not necessarily be a net economic cost. He thought the creation of an economic entity in Europe and the resulting economic dynamism would be to our benefit in terms of exports, investments, etc. He thought the net gain or net loss to the US would come from the future policies of an enlarged EEC. We should consider what we should do, in both positive and negative ways, to prevent or minimize the costs to the US of Common Market policies.

Mr. Evans agreed, saying he would not necessarily predict a long term net cost to the US. He thought some costs were inevitable and some were not and we should move to prevent those that were not.

Mr. Samuels agreed.

Mr. Petty thought it was not practical to try to “price” the costs. He agreed that it did not necessarily involve long-term cost and that the variables would be the issues that would arise in the negotiation. The cost would depend on how we conduct our affairs. He had faith in our ability to look out for our economic interests without hurting our political interests.

Mr. Fox had less faith. He said the State paper was written only in terms of agricultural problems and concluded that there was no problem in the industrial sector. He thought this conclusion was not supported either by the paper or by Foreign Service reporting. He said the paper had taken the static price effect of the elimination of tariffs in the EEC which was relevant only if tariffs were the dominant factor. He thought the real problem, however, lay in the dynamic factor. He saw a large group of countries unwilling to cooperate with us and using the specter of a takeover by giant US companies to unify Europe. That course had not been resisted by the US except for the statement6 by Bob Schaetzel in Bonn. He thought the statement in the President’s Foreign Policy Report required interpretation or at least clarification of its [Page 138]meaning. He cited, on the one hand, attempts to portray the US as the bogeyman and, on the other, statements in the Congress and by farm and industrial leaders. He thought European leaders were exaggerating the protectionist aspects of US statements but that page 32 of the President’s Foreign Policy Report had given them carte blanche to proceed as they wished. He thought the US should use clarification of the President’s report as a device to intervene in the UKEEC negotiations.

Mr. Kissinger commented that it was hard to keep the US from being the bogeyman.

Mrs. Camps said we could not tell in advance what the costs of enlargement might be since the major problems would arise from the policies pursued by the EEC.

Mr. Worthington replied that Agriculture knows what would happen. He said we have been hurt and will be hurt more if the EEC is expanded, particularly in grain, soy beans and tobacco.

Mr. Samuels asked what our course should be if US intervention should jeopardize the enlargement negotiations.

Mr. Worthington replied that he did not think US intervention would wreck the negotiations.

Mr. Samuels asked how far we should go. Could we say we should do nothing to jeopardize the success of the negotiations?

Mr. Evans thought we should agree on the level of economic costs that would require us to take another look at our position. He did not think the position in either dissenting document (that of the economic agencies or the STR document) would jeopardize the negotiations. He thought, however, there was freedom to maneuver in that area short of jeopardizing the negotiations.

Mr. Petty said that the Congress and the public believe there is a point beyond which we should not go. He thought the degree to which we are hurt depends on how we conduct ourselves.

Mr. Nutter said he could not identify any serious costs from the Defense point of view. He thought we might lose a few sales of airplanes, but the broadening of the EEC would not present Defense with serious problems.

Mr. Houthakker thought that the accession of the UK would actually change the nature and the structure of the European Community and, to the extent that this provides an opening wedge, we should not miss the opportunity to get changes in EEC policies. He thought we could make our concerns known without jeopardizing the success of negotiations, stressing agricultural and monetary policies and others where our interests were most at stake.

Mr. Samuels thought this was a question of degree. We had made clear to the EEC that we are concerned about their common agricultural [Page 139]policy and would like to see it develop downward in an evolutionary way. He said we had and would continue to press against any kinds of discrimination against the US and thought the question was how best to do this—by official US intervention in the expansion negotiations or in the normal context of diplomatic discussions. He thought we should avoid formal intervention in the negotiation on specific matters which might interfere with what the Europeans want to do in organizing their own community. If the negotiations failed, the US should not have caused their failure.

Mr. Kissinger said that no one intended the President’s Report to mean that we could not defend US economic interests. He thought the issue was whether we intervened in the negotiations while they are going on or whether we make our views known, say that we will insist on our rights, and then negotiate with the new entity once it has been created. He asked if that was a fair statement of the issues.

Mr. Samuels and Mr. Fox agreed.

Mr. Evans thought the position was prejudiced by the phrase “intervene in the negotiations.” He thought State’s presentation of the STR position was a straw man and that they are not proposing a change in our policy of favoring European unity; indeed, STR wanted a policy which would make it possible for us to continue to favor European unity. He thought we could not continue to do so if the Congress and the public became aroused by European economic discrimination against the US. He thought the chances were extremely slim of influencing EEC policies after the entity had been created. He did not believe the UK would be a liberalizing influence in the EEC. He agreed our GATT rights should be defended but said that was an extremely weak reed and should not be stressed. GATT rights would not help in some areas, e.g., a Buy European policy, or certain financial problems. Even if GATT rights were adequate to protect our interests later, the EEC has a very flexible interpretation of GATT rights, and EEC and US views on these rights differ. He cited Article 24 which grants an exception to MFN in the case of a customs union or free trade area in which barriers are removed on substantially all trade among the members. He noted that in dealing with Africa, the EEC had established 18 separate FTAs, each consisting of six European countries and one African country, in order to take advantage of Article 24.

He thought we should make our positions known to the EEC as early as possible: e.g., that we would never agree to the extension of CAP at its present level or in its present form. He thought we should keep ourselves informed of the course of the negotiations and should exert our influence at the appropriate time. He would go further than State with regard to machinery and would propose a consultative mechanism between the US and the EEC. He thought some degree of [Page 140]formality would help convince the Europeans we are serious and would improve the chances of our being kept informed. He thought these moves or the lack of them would affect the US ability to continue to maintain support for European unity.

Mr. Samuels agreed that we should make our position clear to the Community as we go along. He asked, if we do not rely on our GATT rights, what should we rely on?

Mr. Fox thought there would be major difficulties in trying to rely on trade negotiations after the EEC expansion negotiations had been concluded.

Mr. Samuels agreed that a consultative mechanism might be desirable but felt that the US should not take the initiative. He said that Brandt floated the suggestion and that we had told him we saw advantages in the idea and had encouraged him to proceed. He noted, however, that the French were concerned that it might become another mechanism for Anglo-Saxon influence in Europe.

Mr. Evans saw some advantage to a US initiative in this regard.

Mr. Petty thought that at least we had an opportunity to respond to the German initiative.

Mr. Samuels replied that we had responded but that we do not necessarily want a formal structure.

Mrs. Camps noted that Brandt could not speak for the Six and would have to get an agreed EEC position.

Mr. Worthington said we have told the Europeans repeatedly what we want in agriculture and they have done nothing. He said our GATT rights have not helped and that we should involve ourselves at the beginning of the enlargement negotiations, making ourselves clear on the specific issues of grain prices and soy beans.

Mr. Kissinger thought the difference in how to defend our rights was a question of nuance. State would rely on the normal diplomatic process and on subsequent formal negotiations with an enlarged EEC. STR preferred a somewhat more active process during the enlargement negotiations.

Mr. Evans saw both a difference in timing and a difference in what we say. He would rather say nothing than say we rely on our GATT rights.

Mr. Samuels thought this, too, was a matter of nuance.

Mr. Evans thought we should not even mention our GATT rights but should stress that we have major interests and should indicate our various forms of leverage early in the game.

Mr. Samuels said we have made all the points that were now being raised in discussions with the EEC.

[Page 141]

Mr. Evans said we had been talking about things that have already been done but he thought we should tell them in advance some of our requirements.

Mr. Fox said we had, over the years, thrown away our GATT rights on a variable levy system. He thought any negotiations would be approximately balanced in that we would have to put something in if we take something out. In this case, we would be trying to redress something that had already been done. He thought we should decide on our minimal objectives and communicate them to the EEC at the beginning of the enlargement negotiations and at the same time as a consultative mechanism is discussed. He thought the worst thing we could do would be to let them conclude their negotiations and then say we would negotiate on substance in GATT.

Mr. Samuels said we would continue to make our views known in an attempt to influence the enlargement negotiations. After enlargement, we would plan to move toward a major trade initiative. Simple groupings are not the end-all of our policy and we would continue to press for trade liberalization.

Mr. Fox commented that if we take a supine policy with regard to enlargement, Congress would never agree to broader trade negotiations.

Mr. Samuels thought attempts to push the EEC might be contrary to our objectives.

Mr. Fox said State assumes that the formation of a larger grouping will not in itself prejudice our objectives. Commerce thinks it will. He said the State paper might have been acceptable if it had recognized the negative factors and had concluded we should take a chance, but it had tried to write down the difficulties.

Mr. Kissinger said he was trying to think of the issues in terms of the decision the President can make. He thought anything less than a fairly specific decision would shift the debate to an exegesis of what the President meant by “US interests,” “aggressive policy”, etc. With regard to the differences in mechanics—an ad hoc arrangement or formal consultative machinery—he thought the existence of consultative machinery would also make it easier to raise problems of concern to the Community.

Mr. Samuels said there was no disagreement on the principle of consultative machinery but the difference lay in the degree of formality.

Mr. Kissinger asked if we are sure the Europeans want consultative machinery.

(Mr. Kissinger left the meeting.)

[Page 142]

Mr. Samuels said that, if consultative machinery existed, its use would not necessarily be confined to intervention in the enlargement negotiations. He thought it would be desirable to have a forum in which to air views, apart from the negotiations question. He said we had told Brandt this.

Mr. Evans asked if we know what Brandt had in mind. Was he thinking of a body which would meet continuously and to which EEC members would have an obligation, or of a loose grouping that might meet only once or twice a year?

Mr. Samuels said we did not know specifically what Brandt had in mind. He made a general suggestion and we had told him we would welcome some machinery. We thought Brandt had favored rather an ad hoc arrangement, at least in the initial stages. If we insisted on a formal mechanism we might well destroy US interests in the light of possible strong European feelings. He saw other questions, e.g., would we want to engage in a bilateral US–EEC relationship or work within the broader OECD framework. He said State was in full agreement on the desirability of consultative machinery. We should consider how far and how formally we should go.

Mr. Nutter cited our arrangements through the North Atlantic Council for consulting with our allies on the SALT talks. He said we now want the inverse of this arrangement and we would not be asking for more than we have given generously in other areas.

Mr. Samuels remarked that Brandt was planning to discuss the matter with Pompidou.

Mrs. Camps added that the French did not like the idea and that the six countries must first sort this out among themselves.

Mr. Evans noted that we want consultation with all participants, and that if the EEC turns us down because the French do not agree, we should try to set up some consultation with the individual countries involved.

Mr. Samuels noted the rivalry between the Council of Ministers and the Commission in Brussels, saying that the Council would prefer US bilateral arrangements because of its jealousy of the Commission.

Mr. Petty reiterated that we must make our efforts credible to the Congress.

(Mr. Kissinger returned)

Mr. Samuels said the question was should we go back to the Europeans and encourage creation of consultative machinery or should we wait for them to come back to us on it.

Mr. Kissinger saw something in between—that we let both Brandt and Pompidou know that we would like it and encourage someone to surface it.

[Page 143]

Mr. Petty remarked the Dutch would be glad to surface the idea.

Mr. Kissinger noted that Bahr had made the point to us during his talks here but that we had not done much about it.

Mr. Samuels reiterated his point that consultative machinery was not necessarily related to our intervention in EEC enlargement.

Mr. Kissinger asked, if we should decide to encourage creation of consultative machinery, how would we coordinate US activity in order to surface issues of concern to us in the machinery.

Mr. Fox said we should first get an idea of what our objectives were for the use of the machinery. He said he would like to solve our problems by the end of the negotiations for enlargement of the EEC.

Mr. Kissinger asked if we could be specific on individual items.

Mr. Worthington said he had a list of agricultural items.

Mr. Evans said it was hard to be specific on items other than the agricultural ones.

Mrs. Camps noted that Brandt had suggested an on-going mechanism between the US and the EEC in which to raise matters of concern, but this would, of course, be a two-way street. The EEC countries would expect to raise their problems, and would back off from consultative machinery if they thought the US would use it primarily to intervene in the enlargement negotiations.

Mr. Samuels noted that if the mechanism would be used by US primarily as a means of intervention, we might well achieve the opposite result to that we desired. If it is used in the over-all context of US–EEC relations, it would be constructive.

Mr. Fox noted that, in fact, the two choices were not those stated in the State paper, which he characterized as “frenetic intervention” or “catatonic withdrawal.”

Mr. Evans agreed the mechanism would be a two-way street, and thought we should make sure they understand that one of its purposes would be for them to keep us informed of major developments in the enlargement negotiations which might affect our interests.

Mr. Petty thought the issue of substantial trade negotiations was unrelated to expansion of the EEC, and asked if we should not use this consultative machinery to gear up for later trade negotiations.

Mr. Kissinger thought Mr. Nutter’s suggestion of a parallel with the SALT negotiations was particularly apt. He said in this exercise we had gone through the various arguments here and, when we were agreed, had put them before our European allies. We had posed three or four choices, given them the reasons for our decision, and given them a chance to object. In the present case, he assumed that the various agencies would find a way of surfacing their concerns whether we have machinery or not. He did think we needed an intragovernmental [Page 144]group to decide what issues should be brought into the consultative mechanism. He suggested we might give a watching brief to the Under Secretaries Committee, giving it the responsibility for watching the progress of the negotiations. This would give each agency a forum in which to raise the issues of concern to it, and he thought some 80 percent of the disagreements might be resolved in the Under Secretaries Committee.

Mr. Samuels agreed with this approach.

Mr. Fox agreed, but only if we could be specific about our objectives and could agree to resolve problems before conclusion of the enlargement negotiations and not store up these problems for future negotiations.

Mr. Kissinger asked what are the nature of our problems; are they matters of policy?

Mr. Samuels reiterated our intention to influence the course of the negotiations as they proceed.

Mr. Fox thought we should have some time frame for achievement of our objectives.

Mr. Kissinger asked if Agriculture had had a formal mechanism for considering agricultural problems.

Mr. Fox remarked that the question in the agricultural area was whether or not to permit a variable levy system. He thought before we undertook any consultation we must decide what are the major issues.

Mr. Kissinger said we can, of course, create a mechanism for raising the issues. However, if the President wishes to delay an expression of our views, he will delay. He said we could try to get a general expression from the President now on which way he would probably wish to proceed, but that he had found that it was usually difficult to get an expression of the President’s wishes in the abstract.

Mr. Samuels asked why we need to set out the topics in advance if we have a watching brief.

Mr. Evans agreed with Mr. Fox that we need a definition of our major objectives.

Mr. Worthington said Agriculture did not want to watch; they want to step in now on the grain price question.

Mr. Kissinger suggested that we do three things:

(1) stimulate an initiative from the Europeans for some sort of consultative machinery;

(2) set up some backstopping machinery in the Under Secretaries Committee in which each agency can raise the issues they think proper for consultation; if there is disagreement on which issues should be raised, the question would go to the President;

[Page 145]

(3) although we probably cannot get a formal expression of the President’s attitude, we could try to get him to indicate some guidelines for these discussions.

Mr. Evans asked what happened to the various papers which had been prepared. Do we need a new paper?

Mr. Fox said no, he thought the decision was close to that in Option 3.7

Mr. Samuels said we should leave it to Dr. Kissinger to draft a directive.

Mr. Kissinger agreed that we would draft a directive and would let each agency have a look at it, although we could not guarantee them the right to edit. If there are strong disagreements, he would state these disagreements to the President.

Mr. Evans commented that he hoped the directive would reflect a position close to Option 3.

Mr. Kissinger asked if we had to take a position on the neutral countries now.

Mr. Evans thought we should treat the neutrals like the four applying countries and apply the same option. He thought the preferential questions were a little more difficult. He noted a defect in the STR paper which had suggested that we recognize Spain and Israel as less developed countries. He said this suggestion was not intentional, since this would put us under an obligation to extend preferential treatment to Spain and Israel. He thought the category in which these two countries would be placed needs to be settled before we can decide what option they would come under.

Mr. Kissinger noted that Spain had been before us once before and that, for a while, the President had leaned toward subsuming our economic interests to our political interests; however, he had deferred decision pending an over-all examination of EEC issues.

Mr. Samuels noted preferential arrangements have complex political and economic interrelationships and they should be taken up in the backstopping group. He thought it would be hard to determine our policy in advance.

Mr. Kissinger asked if it would be acceptable to throw the preferential issues into the backstopping group.

Mr. Fox thought the Under Secretaries Committee should be instructed to guard US economic interests and that it should be made clear that this applies as well to neutrals and to preferential arrangements. He agreed with Mr. Evans on Spain and Israel.

[Page 146]

Mr. Samuels commented that the directive to the Under Secretaries Committee must spell out the protection of economic interests but must also take into account political interests.

The economic representatives expressed somewhat caustically their faith in the ability of the Under Secretaries Committee to protect US political interests.

Mr. Evans thought a key consideration was to operate in such a way to maintain or enhance our ability to maintain the MFN system.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–111, Senior Review Group, SRG Minutes Originals 1970. Confidential. The meeting took place in the White House Situation Room.
  2. See footnote 6, Document 37.
  3. See footnote 4, Document 37.
  4. See footnote 3, Document 37.
  5. See footnote 5, Document 37.
  6. Not found.
  7. The options are set forth in the enclosure to Document 37.