147. Minutes of the Bonn Economic Summit Meeting1

BONN SUMMIT

Session 3

Schmidt: This morning we have agreed to discuss trade and relations with developing countries. First we might spend a minute or two on the hijacking statement.

[Omitted here is discussion of a joint statement on hijacking.]

TRADE

Jenkins: The document worked out in Geneva last week2 was an attempt to resolve the question as to whether there was a reasonable [Page 461]prospect of concluding the MTN by the end of this year. The conclusion was that it is possible. This was a major and positive step toward the success of the biggest trade negotiation yet undertaken.

The USG has decided that it will build an injury test into its legislation in return for increased discipline on subsidies. There was also agreement that there would be selective safeguards but differences on modalities. Some elements of a tariff package were agreed with a substantial amount of liberalization. There was a move to agreement on agricultural commodities and substantial progress on an international framework for the conduct of world trade. If we can now build on the elements which were agreed, there will be a major liberalization of trade, improved GATT rules, greater fairness and discipline in the international trading system and additional benefits for the developing countries including special and differential treatment. But a lot of work needs to be done before the end of the year.

Strauss: Let me add a few words to what Jenkins just said. Not only does the document set out what has been done but it also covers what has not been done. It is a most significant agreement because it is also approved by 18–20 other countries not in this room who have endorsed and support it. It lives up to the mandate given us by the London Summit, and it sets out a schedule for us to conclude our work. This document is a framework of understanding made public in Geneva and approved by the EC, Japan, Canada and the U.S.

Deniau: With respect to the communique, we have a reservation on the first point which states that “we welcome and endorse the Geneva paper.” In Geneva we made definite progress on some subjects, on others there was vague progress and others there was little progress. With respect to the report given us on the negotiations, we feel it difficult to give final approval to this interim report. We can welcome progress on some points but we cannot welcome and endorse the report. We would agree to language which says we were informed of current progress and express the hope that the negotiations would be promptly concluded and provide balanced and real results for all participants. Yesterday the text I proposed was “we have been informed of the present state of progress of the MTN. We have expressed the wish that they be concluded before the end of the year.”

Strauss: We strongly oppose weakening the language. We could, however, agree instead of using the word “endorse” to a change which would read “welcome and strongly support the progress”. To say we were only informed moves back to the Downing Street Summit. Since then, great progress has taken place and we should have language which indicates it. I should also point out that there is full conditionality with respect to each issue. Also, this has been discussed with the [Page 462]Nordics and others support it as well. Weakening would be a major setback on trade at the Summit.

Carter: Does this modification meet French concerns?

Giscard: Before we seek to find words let us look at the problem. Negotiations are still underway. They have made substantial progress thanks to Strauss, who, I am told, is energetic and persuasive, and even difficult from time to time. We are not negotiating directly with the United States but through the European Commission. The Commission consults countries in the EC through an internal EC procedure under Article 113 of the Treaty of Rome.3

The Geneva framework of understanding was accepted by a representative of the Commission. Subsequently, France expressed reservations about the document.4 While we agree that negotiations should move along these lines and will re-emphasize the point that progress has been made, we do not want to give formal approval of a document on which France has reserved. We support the view that progress has been made which reflects our converging opinions, but we can’t approve a document which we have reserved on.

Lambsdorff: I recognize the legal reservation here. But last evening we expressed our political support for progress at Geneva.5 That is why we could agree to what Bob Strauss had suggested. We can say we appreciate and strongly support the progress as set forth in the framework of understanding. We could welcome the results and say we appreciate the results. But by saying we appreciate what is set forth in the document we also recognize that it is true that many points remain unsettled. But the first line spells out that not all problems have been or can be resolved.

A further point in Mr. Deniau’s text is point 2. I believe the last section of the text echoes what Deniau suggested. This stage of the Geneva negotiations was timed so that we could give new impetus at the Summit. For political reasons it is desirable to recognize the achievement at Geneva and lend support to it.

Schmidt: On the last bracket, it is not clear whether there is a difference in substance between the end of the year and December 15 conclusion.

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Deniau: This is a detail. The negotiators are trying to protect their Christmases. We can accept the 15th of December.

Carter: I should like to ask the President of France a question. Is our formulation on the first paragraph acceptable to you? Can we say we support the progress made?

Giscard: There is some ambiguity in this matter. Jenkins’ report is exactly on the point. There are questions not yet resolved and there are vague sentences which can be interpreted in one way or another. I have followed since 1973 the U.S. position in favor of a considerable tariff reduction. Europe also wants a tariff reduction as well as other aspects of trade to be dealt with. In the text of the framework the provision on tariffs is clearer than that relating to the obstacles to trade. Thus, there may be a certain commitment in our agreeing to the declaration. But by using these words we don’t want to hide our differences. Also, I am not yet clear about what Japan will do.

I prefer a formula which makes it clear that in the declaration there are points of real agreement but that ambiguities still exist.

Trudeau: One might say we support progress as set forth in the framework. Thus, we would not endorse the framework but we could say we appreciate and clearly support the progress as set forth in the framework, although there are still some differences and important issues to be resolved.

Giscard: That is a useful contribution from our bilingual friend and is a possible solution. Each word must be weighed carefully. “We appreciate and support the progress as set forth in the framework of understanding on the Tokyo Round of the Multilateral Trade Negotiations made public in Geneva on July 13, 1978, even though within the framework of understanding some difficult and important issues remain unresolved.”

Deniau: With respect to the last paragraph on page 1, in a certain number of countries there are reservations to the GATT based on the right to keep previous legislation. The U.S. has the right not to apply all GATT rules. One purpose of the MTN is to have equal application of the GATT rules. We want agreement on uniform application of GATT rules. The U.S. wants to move as promptly as possible. I would suggest that we have the language “there must be agreement on uniform application of GATT rules”.

Giscard: That seems fair.

Strauss: We can’t accept that. It would impair our ability to get support at home. We can’t accept the word “must”. We can say that we intend to move in this direction and have so stated. There should be agreement to move. The use of the word “must” would impair dramatically our ability to deliver what you want, i.e. to bring our laws into harmony with GATT rules. We can say we “seek”.

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Carter: We should not use the “must” in the communique. I can assure you that we will move toward this goal. If we use “must,” it will hurt in the Congress. I cannot accept “must” when Congress has to join with me in making the decision.

Giscard: Our Parliament feels strongly about this issue as well. There can be no French support for tariff cuts unless the negotiations seem to be a joint effort. They must seem to be joint and mutually balanced. In the Kennedy Round there was a U.S. commitment to seek to apply GATT rules. We do not want to repeat the Kennedy Round in which U.S. seeks to apply these rules, but Congress puts political obstacles in its path. We will act only when the U.S. authorities have acted in order to assess the application of GATT rules.

Lambsdorff: France has conveyed what it would like to see. “Must” is probably not appropriate in this situation. We must recognize the circumstances. Many countries had their own regulations prior to the GATT. We cannot get rid of all of these before December 15. We cannot have unrealistic commitments. While we recognize the French desire for this wording, it is not politically realistic. We should bring this as close as possible to a commitment, recognizing that a commitment is not possible. We should not overreach ourselves here.

Carter: I don’t disagree with the paper. But if I go back with a text saying “must,” it would make Congress more obdurate than they already are. I am in a difficult situation to use the word must. We should not use such language in dealing with sovereign nations. I will seek as strong language as possible. I cannot say “must” when it is not my decision.

Schmidt: We have two subjects here. It is clear that on the first one, the U.S. President is actively seeking unified application of GATT rules. There is no doubt about this. But he is afraid of counterproductive language. The French President says we have heard such statements of intention for years. I am skeptical about the will of the Congress. Therefore, I warn you that we have difficulties as well and we might not apply reductions of tariffs.

No one wants to harm or jeopardize the ability of the two governments to get their Parliaments to agree to what we jointly seek. Thus, we have to find language which doesn’t hurt the two countries which have spoken. Why can’t we say for instance that we will seek agreement on uniform application of the GATT rules as soon as possible.

Dell: I agree with this. We in Europe will not implement the agreement unless it is implemented in the U.S. I agree to your language. Or we can say we intend to move to do this, which is an essential condition for implementation of the Tokyo Round.

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Strauss: There can’t be one essential condition, as there is total conditionality in the negotiations. We can’t say there is one condition which overrides everything. We have attempted in every instance to determine the political difficulties of other nations and solve them while we solved our own. The Zenith case showed the good faith of President Carter. We fought against our own company all the way up to the Supreme Court and we won. This showed the good will of the President.6

Trudeau: We should say there must be agreement on uniform application of GATT rules. Uniform application of GATT rules is essential, and we agree to move as promptly as possible in that direction.

Lambsdorff: We can accept the last proposal. Trudeau’s proposal gets around the difficulty expressed by Strauss. More conditions would tie our hands in Geneva. We should not lose sight of the French objective, but we need flexibility in Geneva.

Giscard: Dell clearly indicated our position on substance. On the tariff measures we need to ask approval of our Deputies. We cannot obtain their agreement unless the U.S. takes some decisions in a symmetrical manner. We could accept Trudeau’s proposal to use the word “essential.”

Strauss: This would read “uniform application of GATT rules is essential and we shall move in that direction as soon as possible.”

Carter: Essential is too far-reaching. It would not be appropriate to put in essential. Perhaps vital.

Giscard: We accept vital. It means that it is a life and death issue. It is stronger than essential.

Carter: It means life. We can live with vital. I hate to see this as a prerequisite of all other progress.

Ushiba: I can go along with this.

Trudeau: We can say vital or important or necessary. All go in the same direction.

Schmidt: We should keep in mind that there are other preconditions as well.

Giscard: We should agree not to have too much technical detail. Also, we do not want another Kennedy Round where we enact everything and wait for the U.S. Congress to ratify. We want progress before [Page 466]Christmas, also. I also note that the negotiators have put in some complimentary language about themselves. Perhaps, we should mention their names as well . . . Strauss, Haferkamp, Ushiba? (laughter)

Strauss: There is an old Dizzy Dean7 quote “it ain’t braggin’ if you done it.”

  1. Source: Department of State, Office of the Secretariat Staff, Records of Cyrus Vance, Secretary of State, 1977–1980, Lot 84D241, Box 9, Vance NODIS Memcons 1978. Secret. Drafted on August 8. For more information on the drafting of these minutes and a list of Summit participants, see footnote 1, Document 145. This third session of the Summit, which took place in the Palais Schaumberg, began at 10:30 a.m. and ended at 1:01 p.m. (Carter Library, Presidential Materials, President’s Daily Diary)
  2. Reference is to the Framework of Understanding on the Tokyo Round, agreed to by the U.S., EC, Japanese, Canadian, Nordic, Swiss, New Zealand, and Austrian MTN delegations in Geneva on July 13. See Document 144.
  3. The Treaty of Rome, signed by Belgium, the Federal Republic of Germany, France, Italy, Luxembourg, and the Netherlands in 1957, established the European Economic Community.
  4. Telegrams 13806, 13820, and 13831 from USEC Brussels, all July 14, report on the French reaction to the Geneva Framework of Understanding. (National Archives, RG 59, Central Foreign Policy File, D780289–0020, D780289–0143, and D780289–0387, respectively)
  5. Presumably a reference to remarks at the dinner for the Heads of State and Chiefs of Government on the evening of July 16.
  6. On June 21, the U.S. Supreme Court ruled against the Zenith Radio Corporation’s contention that the Secretary of the Treasury was required to levy countervailing duties on imported Japanese consumer electronics exempted from taxes normally imposed within Japan. (Warren Weaver, Jr., “Court Calls Import Duty Optional, Probably Averting Price Spiral,” The New York Times, June 22, 1978, p. NJ21; Carol H. Falk, “Supreme Court Rejects Zenith’s Protection Bid,” The Wall Street Journal, June 22, 1978, p. 2)
  7. “Dizzy” Dean was a baseball player who pitched for the St. Louis Cardinals, Chicago Cubs, and the St. Louis Browns.