[Page 161]

45. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Bergsten) to Secretary of the Treasury Blumenthal 1

SUBJECT

  • Strauss Briefing on MTN Development

In this morning’s meeting of the Trade Policy Committee, Bob Strauss gave an optimistic reading on MTN moves.2 He recounted the recent flurry of activity including his own meetings in Brussels,3 a quick trip by Alan Wolff to the key European capitals,4 a long discussion between Ambassador Mansfield and Prime Minister Fukuda,5 and a sharp increase in press coverage in Europe.

Strauss believes that the other countries now fully understand that the United States is serious, and that we will not accept a mini package. He and the EC Commissioners have agreed to conclude the deal by the Spring of 1978; Strauss feels that our package must go to the Congress by May 1978 if it is to be voted by them next year. An important date is the next Summit meeting, which Owen is now planning for June or July 1978; the EC Commissioners clearly hope to finish the MTN prior to that time, to avoid losing control of the issue.

Alan Wolff reports, from his quick trip to Europe, that:

—The Germans are fully supportive of our position, and will push for maximum liberalization though they foresee an eventual tariff cut halfway between our proposal and that of the EC.

—The British want a “medium-size” package, but seem less protectionist than six months ago.

[Page 162]

—The French remain the most hostile; their goal is “organized liberalization”. They are following the old pattern of linking trade negotiations to every conceivable issue (Concorde, the VAT case, “dollar devaluation”). However, the Patronat6 has backed off its opposition to the whole exercise.

One possibly disruptive issue has crept into the picture. You will recall that the Tokyo Declaration promised “special and differential” trade for the LDCs.7 The British and particularly the French have in mind a new kind of “differential treatment”: differentially discriminatory against all “low wage countries”. At today’s meeting, Cooper suggested that we seek partial reciprocity from the LDCs via their cutting tariffs half as much as the DCs.

Strauss mentioned two operational issues:

—He would like you to meet with the TPC for an hour or two, to discuss the Kennedy Round experience,8 as a guide for this round; I gather he has discussed that with you personally.

—He wants designation of an official from each agency as his regular contact on MTN issues; I assume that I should fill that role.

Recommendations:

(1) That you agree to meet with the TPC to discuss the Kennedy Round experience, in the next week or two.9

(2) That I be the designated Treasury contact for MTN issues.10

[Page 163]

Attachment

Paper 11

MTN Timetable

On July 11 the United States and the European Community reached agreement on a four-phase timetable to be completed by January 15, 1978. The work done within this timetable will establish the framework for the final stage of the multilateral trade negotiations (MTN) next year. The four phases of the timetable (with target completion dates in parentheses), what each phase entails, and a brief description of the current status of negotiations on the subjects covered by the timetable are given below.

I. Agreement on a Tariff Plan (October 1)

—Elements to be included in the tariff plan include a tariff-cutting formula, language concerning the treatment of agriculture, procedures for tariff negotiations with non-formula countries, and an agreed basis for special and differential treatment of developing countries.

—Currently, there are four formula proposals on the table. The EC proposal provides for an average tariff cut of around 38 percent before exceptions and for a large element of tariff harmonization. The U.S. proposal provides for an average tariff cut of almost 60 percent before exceptions. In the US–EC bilateral discussions on July 11, and subsequently, the EC has backed away from its earlier proposal and is now proposing a less ambitious tariff cut of around 20 to 25 percent but with no exceptions.

—It is anticipated that the United States, the European Community, Japan, Canada, the Nordic countries, Switzerland, and Austria will apply the tariff-cutting formula.

—The United States has proposed a cross-notification procedure with developing countries, whereby the developing countries would notify the developed countries of those products on which they desire tariff cuts and the developed countries would notify the developing countries of those products on which the developing countries might make some tariff concessions.

[Page 164]

II. Tabling of Requests (November 1)

—Requests would be made on agricultural tariffs, industrial tariffs of non-formula developed countries and of developing countries, and nontariff measures relating to agricultural and industrial products. Countries would use restraint in making requests on those nontariff measures that would be subject to codes agreed in the MTN (i.e., subsidies/countervailing duties, government procurement, standards, customs valuation).

—A notification/consultation procedure is underway in Group Agriculture that covers both tariffs and nontariff measures. Similarly, notification/consultation procedures are underway for nontariff measures not being addressed in codes, including quantitative restrictions and customs matters other than valuation. The information being gathered in these consultations will aid countries in determining what requests to make of their negotiating partners.

III. Tabling of Draft Codes (December 15)

—Draft codes that could be used as a basis for negotiation would be tabled for those subjects for which no acceptable draft code has yet been tabled. These draft codes would contain bracketed language for those issues on which disagreement still exists. We expect to have draft codes for standards, government procurement, subsidies/countervailing duties, safeguards, and customs valuation. The current status of these codes is as follows:

—An acceptable draft product standards code is already on the table and has been under consideration in the MTN for several years.

—The OECD considered a draft government procurement code for several years and this draft was tabled in the MTN this year. This draft proved unacceptable and a new draft must be written.

—The Canadians have tabled a draft text on subsidies/countervailing duties. This text has encountered considerable opposition, especially by the EC, and a new text will be needed.

—The United States will table a draft safeguards code this fall that should be an acceptable basis for negotiation.

—The European Community will table a draft customs valuation code this fall that should be an acceptable basis for negotiation.

IV. Tabling of Offers (January 15)

—All MTN participants will table offers on tariffs and nontariff measures. Offers on those nontariff measures that will be subject to general codes may not be necessary. Most industrial countries are expected to table tariff offers on industrial products on the basis of an agreed tariff-cutting formula. Tariff offers on agricultural products will [Page 165]be tabled on an item-by-item basis, taking into account the tariff formula.

—Developing countries may refuse to make any offers until they have a better understanding of what they will receive in the negotiations.

V. Implementation of Timetable

—Considerable work has been done internally for determining what requests and offers to make. However, a tremendous amount of work, especially in the area of exceptions to a tariff-cutting formula, remains to be done.

—Much work also remains to be done on the draft codes.

  1. Source: National Archives, RG 56, Records of Assistant Secretary of the Treasury for International Affairs C. Fred Bergsten, 1977–1979, Box 1, Foreign Trade (FT) 1977. No classification marking. Sent for action. Reviewed by Hessler and the Executive Secretariat.
  2. No other record of this meeting was found.
  3. See Document 43.
  4. Telegram 11886 from London, July 19, transmitted a report of Wolff’s July 18 meetings with British officials. (National Archives, RG 59, Central Foreign Policy File, D770268–0832) Telegram 11976 from Bonn, July 21, reported on Wolff’s talks with West German officials. (National Archives, RG 59, Central Foreign Policy File, D770259–1118) Telegram 21280 from Paris, July 22, recounted Wolff’s July 20 meetings with French officials. (National Archives, RG 59, Central Foreign Policy File, D770262–0732)
  5. In telegram 10654 from Tokyo, July 15, Mansfield reported on his discussion of the multilateral trade negotiations with Fukuda during their first meeting, which took place on July 15. (National Archives, RG 59, Central Foreign Policy File, D770252–0563) Telegram 10787 from Tokyo, July 19, contains a fuller description of Mansfield’s first meeting with Fukuda. (National Archives, RG 59, Central Foreign Policy File, D770267–1312)
  6. Reference is to the Conseil national du patronat français (National Council of French Employers), known as the Patronat.
  7. For the text of the Tokyo Declaration, issued at the end of the September 1973 GATT Ministerial meeting, see the Department of State Bulletin, October 8, 1973, pp. 450–452.
  8. Blumenthal served as the Deputy Special Representative for Trade Negotiations from 1963 until 1967, as well as the head of the U.S. delegation to the Kennedy Round of GATT negotiations.
  9. Blumenthal initialed his approval of this recommendation on July 22.
  10. Blumenthal initialed his approval of this recommendation on July 22 and wrote, “if OK with Solomon.”
  11. No classification marking.