Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

84. Memorandum From the Special Representative for Trade Negotiations (Strauss) to President Carter¹

Washington, December 19, 1977

SUBJECT

• Briefing Paper on Trade Issues for Your Visit to Paris and Brussels in January 1978

BACKGROUND

The multilateral trade negotiations should feature prominently in your discussions with EC President Roy Jenkins and French President Giscard d’Estaing during your upcoming visit to Europe.² Your visit will be extremely helpful in persuading the EC Commission to support a substantial negotiating package by the mid-January target date for completing the preparatory phase of the negotiations and in persuading the French government to support (or at least not to veto) such a package in the Council of Ministers. The Council is expected to meet on January 17 to decide whether the Commission should be allowed to proceed on the basis of the initial negotiating documents.

The London Summit produced the political will necessary to move the MTN off dead center. Since then, the EC Commission (Jenkins, Haferkamp, Gundelach, Davignon) has worked well with us in developing a plan for reducing industrial tariffs by 40 percent, and I would suggest that you commend the Commission for their leadership in this area.

At the same time, you should press the Commission to maintain their leadership role in working out other elements of a substantial MTN package, including agreements of substantial benefit to agriculture and a comprehensive solution to the subsidies/countervailing duty issue. I would hope that you could conclude your session at the Commission with a forceful communique that will pledge the U.S. and the EC to provide the leadership necessary to negotiate a substantial MTN package before the summer holidays.

KEY ISSUES

1. Tariffs.—The U.S. and the EC Commission have worked out a plan for reducing industrial tariffs by 40 percent. Formal adoption of the plan, and the exchange of offers, is scheduled for the week of January 15. The Commission will not be able to proceed, however, until the member states have approved it, and French consent will be key. The French government is reluctant with the March parliamentary elections only a few months away and with widespread public concern about imports from the third world and Japan. They have asked us to minimize publicity over the 40 percent tariff cutting goal.

The ability of the EC Commission to press ahead towards a major result in the MTN could depend on whether you can obtain a French commitment to support, or at a minimum not to veto, tabling of the European Community’s tariff offer by January 20. We can acknowledge that the 40 percent cut should not be given major press emphasis. Instead the major focus should be on the improvement of trade rules in such areas as subsidies, safeguards, standards, and government procurement.

2. Safeguards.—The European Community has conditioned its tentative support for a 40 percent tariff cut on the negotiation of a safeguard agreement that would permit them to restrict, on a selective basis, imports for particular countries when they become disruptive. In essence, they are saying that their economies can adjust to increased competition from the U.S., but not from some of the less developed countries, and perhaps Japan. We have indicated a willingness to work out an understanding on this issue, but we have been reluctant to accept unlimited selectivity because it could open the door to protectionism by making safeguards too easy to use; it could lead to a fragmentation of the world trading system and exacerbate North/South relations; it could lead to a diversion of exports from the EC to the U.S. market; and it could be used against us. We have insisted that any move toward selectivity be circumscribed by conditions for its use and better international discipline.

The French government has been pushing hard for selective safeguards, as part of their concept of organized liberalism. They consider it essential to reduce public fears about a potential flood of imports from the third world. Your ability to obtain assurances from French leaders on tariff cuts is likely to depend, in part, on our willingness to support them on this issue.

3. Non-Tariff Barriers (including subsidies and agricultural trade barriers).—Both the U.S. and the EC have emphasized the importance of non-tariff barriers in the current trade talks. We have made progress on a number of these, but we have yet to make such progress on some of the tough negotiating issues, such as plans for reducing barriers to agricultural trade and rules for minimizing the trade-distorting impact of subsidies. Disagreement on these issues evoke strong emotions on both sides of the Atlantic, and in the absence of substantive solutions in the MTN we are headed for a major confrontation that would tend to poison the political atmosphere in other areas. This negotiation is likely to be our only chance for quite a few years to put in place an improved international framework for resolving conflicts arising from differences in agricultural policy and in industrial policy. As a practical matter, we cannot conclude an MTN without adequate solutions in these areas; and a major political effort will have to be made to reduce U.S./EC differences.

4. Protectionist Pressures.—The primary concern of the Europeans is likely to focus on current pressures for trade restrictions. They will be particularly anxious about problems relating to trade in steel (Annex A).³ They will also be concerned about the protectionist mood in the U.S. more generally. They will welcome a forceful expression of U.S. intention to resist pressures for trade restrictions.

Talking Points

In Paris.—

1. We have been pleased by the progress that has been made in the MTN trade talks in some key issues as a result of close cooperation between the EC Commission and U.S. negotiators.

2. We are anxious that similar progress be made in the near future on non-tariff barriers affecting agricultural trade and subsidies.

3. We sincerely hope that the French government will support the package of proposals, including the 40 percent tariff cutting goal, which the EC Commission will present to the Council of Ministers on January 17 as a basis for further negotiation.

4. We understand the sensitive political situation in France and the need to find an acceptable political formulation for the negotiating package, including a de-emphasis of the tariff goal and major stress on improved trading rules, including those on safeguards.

5. If needed—We understand the need for more flexibility in the use of safeguard measures, but we must avoid arrangements which will open the door to protectionist forces and increase North/South tensions.

In Brussels with the EC Commission.—

1. We are pleased by the momentum that has been achieved in the MTN trade talks as a result of the close working relationship that has been established between the EC Commission and U.S. trade negotiators headed by Ambassador Robert S. Strauss. A substantial result from these talks is crucial to the maintenance of the open trading system.

2. We hope that the Commission will exercise the leadership necessary to make substantial progress in these talks on such difficult issues as plans for reducing agricultural trade barriers and minimizing the trade distorting impact of subsidies. Adequate solutions are needed to put the U.S. and EC relations on a sound footing over the years ahead and to avoid political problems.

3. We look forward to approval by the Council of Ministers on January 17 of the comprehensive package of negotiating proposals that have been worked out between U.S. and EC negotiators. [If warranted by the results of the Paris talks—We have been assured by the French government that they will be supportive of the proposals.]⁴

4. We attach great importance to the exchange of negotiating offers during the week of January 15. The U.S. is prepared to make a substantial offer, and we very much hope that the EC will do likewise.

5. If needed—We understand the need for more flexibility in the use of safeguard measures, but we must avoid arrangements which will open the door to protectionist forces and increase North/South tensions.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 6, President, Europe and Asia, 12/29/77–1/6/78: Stop Papers, Brussels, 1/6/78. No classification marking. Forwarded to Carter under cover of a December 20 memorandum from Owen. (Ibid.)
2. Carter visited France January 4–6, 1978, and Belgium on January 6.
3. Not attached.
4. Brackets in the original.