3. Memorandum From the President’s Assistant for International Economic Affairs (Flanigan) to the Under Secretary of State for Economic Growth, Energy, and the Environment (Casey)1

SUBJECT

  • US Position on GATT Negotiations Concerning EC Enlargement and ECEFTA Agreements

As a result of the CIEP Senior Review Group meeting on January 25 concerning the position the US Government should take on the subject negotiations, the following decisions were reached:

1. Examination of EC Enlargement Under GATT Article XXIV:5

We will proceed with our own preparation and analysis of data concerning the general incidence of protection under the EC enlargement arrangements to be in a position to submit our data to the GATT EC enlargement working party. Our general position in the examination will be that until the parties concerned are able to agree on the effect which the adoption of variable levies by the acceding states will have on the general incidence of protection, we cannot reach a conclu[Typeset Page 7]sion as to whether the general incidence of protection after enlargement will “on the whole, be higher or more restrictive” than the general incidence of protection before enlargement. We will advocate that the working party continue its examination and review when further progress can be made, and that the emphasis should now shift to the Article XXIV:6 negotiations.

2. Negotiations on Enlargement Under Article XXIV:6

We will table a list of products on which we have bindings (or enjoy similar rights) which have been impaired and which are of some consequence to our trade. We will state that we have a right to compensation on all items. However, we will agree eventually to accept, as satisfactory, compensation in items which are of significant importance to us, including some industrial and some agricultural products. (These will be identified after further interagency discussion.) We will inform the EC that we believe these negotiations should be conducted expeditiously and completed before next September. We will also inform the EC that, if we are unable to reach an agreement on satisfactory compensation, we would feel free to make compensatory concession withdrawals pursuant to the rights we have in GATT. However, we will not, at this time, indicate that we will in fact make such withdrawals, reserving that judgment to the President for a later date.

3. Examination of ECEFTA Agreements and Related Action

We will state our view, in the GATT working parties, that we do not believe these agreements conform to GATT requirements regarding free trade areas (supporting that view with reasons to be developed by STR). However, we will not press the legal issues to a decision in GATT. Rather we will press the parties involved to undertake consultations bilaterally and/or under GATT Articles XXII or XXIII concerning impairment of our trade interests. We would state that we believe these consultations should proceed expeditiously and be concluded before next September. We will also state, that in the absence of a satisfactory agreement on adjustments or compensation in these consultations, we will feel free to exercise our rights under GATT. As with the Article XXIV:6 negotiations, we will not state that we will in fact exercise those rights, reserving such a decision for the President later. An interagency group under STR will propose appropriate positions to be taken in these consultations for approval.

The positions regarding our need for compensation and our freedom to withdraw concessions in its absence may be made known to Prime Minister Heath and Trade Minister Walker during their visits.

  1. Summary: Flanigan reported the decisions reached at a January 25 CIEP SRG meeting on the U.S. position on the GATT negotiations on EC enlargement and the ECEFTA agreements.

    Source: National Archives, RG 429, Records on the Council on International Economic Policy, 1971–1977, Records of Senior Review Group Meetings, 1971–1974, Box 254, SRG Meetings 1973, 1/25/73 SRG Meeting re GATT and EC Enlargement (51718). Confidential. Memorandum addressed to William Casey, Jack Bennett, William Eberle, Carroll Brunthaver, Lawrence Fox, Helmut Sonnenfeldt, and Geza Feketekuty. Copies were sent to Treasury, State, USDA, NSC, and STR. For memoranda of conversation recording Heath’s February 1 to 2 official visit to Washington, see Documents 216, 217, and 218.