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189. Paper Prepared by the National Security Council Staff1

MULTILATERAL TRADE NEGOTIATIONS

Major progress was made in the Multilateral Trade Negotiations (MTN) during the month of December. Few issues remain outstanding. The United States has reached close-out understanding with a large number of developed and developing countries covering agricultural and industrial tariffs as well as non-tariff measure codes of conduct. (U)

European Community (EC)

The United States and the European Community have not resolved all bilateral issues. We are both seeking a more “balanced” package. However, a U.S./EC joint statement was issued on December 22 reflecting our present level of agreement.2 We and the EC have essentially resolved our differences on non-tariff measures, agriculture, and reforms of the General Agreement. We have reached bilateral agreement on the safeguards code, but the EC must bring the LDCs on board before negotiating positions can be finalized. Tariff negotiations with the EC will recommence on January 7th. (C)

The French Position. The French continue to voice dissatisfaction on several points and remain among the only holdouts in the negotiations. First, the French oppose agricultural agreements that they perceive might undermine the EC Common Agricultural Policy (CAP). This has led to French opposition to an agreement on agricultural subsidies as well as to the establishment of an agricultural council in the GATT. Second, the French maintain that the U.S./EC tariff package is not sufficiently balanced. Third, the French have stated that a significant tariff cut staged over an eight year period is politically unacceptable. They have proposed implementing tariff reductions in two stages. The second stage would not be implemented automatically but only after a review of the economic situation and a positive decision by participants to continue. (U)

French opposition on these issues is clearly linked to the French domestic political situation. The Gaullists and the French Communists together are attacking the MTN and exerting considerable pressure on [Page 565] Giscard d’Estaing. This pressure is particularly important to Giscard as this is the run-up period before European Parliamentary elections.3 Giscard has been reported to be seeking time to make structural adjustments in the French economy. In European meetings Giscard has recently expressed concern about foreign competition but has been rebuffed by Schmidt who strongly supports an open world economy. (C)

U.S. Response to the French. The United States has indicated a willingness to seek presentational devices which would help the French deal with their political problems. However, we do not see the need to concede on substantive points. The negotiated language on export subsidies will not undermine the CAP. It enables signatories to maintain but not to increase existing market shares through subsidization of agricultural products. A GATT agricultural council, also opposed by the French, is intended only to be a consultative forum whereby nations could discuss their agricultural policies—not to pose a threat to the CAP. On balancing of tariff offers, we will continue negotiations in January until a mutually satisfactory balance is achieved. Furthermore, we can agree to adjust the presentation of arrangements that are made for implementing tariff reductions. We can agree to implement tariff reductions in two stages with an evaluation of the international economic situation at the end of the first stage. However, we could not agree to a situation whereby a positive decision would be required to activate the second stage of tariff cuts. (C)

Developing Countries in the MTN

A number of developing countries have joined the negotiations. A final effort with LDCs is now needed to close out as many tariff agreements as possible and to lay a basis for their participation in the non-tariff codes. (U)

Attempts to block imports from these countries may be popular but they increase inflation, reduce productivity, and waste the opportunities which appropriate adjustment and trade expansion create. The steady direction of our policies must be to encourage the movement of capital and labor to their most productive uses and to bring the advanced developing countries into the world economic system. (U)

Schedule for 1979

Tariff negotiations are scheduled to resume in Geneva on January 7. Our objective will be to finalize tariff offers and the entire MTN package within a few weeks. The EC has expressed its intention to submit the results of January negotiations to the EC Council for approval on February 6, 1979. The U.S. Congress will have been notified [Page 566]by January 4, 1979 of our intention to enter into a final agreement. This will initiate the required 90-day period for congressional comment and thereby enable the United States to sign formally an MTN agreement in early April 1979. (U)

Countervailing Duties

The EC will meet February 6 to review what should then be a completed MTN agreement. The EC will not give formal approval to an agreement until the Congress has resolved the countervailing duty issue. We have told the Europeans that we would ask the Congress to extend our authority to waive countervailing duties early in the new session. In the meantime, Treasury will ask affected importers to post bonds, instead of collecting countervailing duties. (C)

  1. Source: Carter Library, National Security Affairs, Staff Material, Special Projects File, Henry Owen, Box 26, Summit: Guadeloupe (Briefing Book): 1/79 [I]. Confidential. Sent to Carter under cover of an undated memorandum from Owen, who noted that the paper was being forwarded at the President’s request. (Ibid.)
  2. Telegram 19785 from Geneva, December 22, transmitted a copy of the U.S.–EC joint statement. (National Archives, RG 59, Central Foreign Policy File, D780529–0576)
  3. European parliamentary elections were held June 7–10, 1979.