Foreign Relations of the United States, 1958–1960, Western European Integration and Security, Canada, Volume VII, Part 1

102. Telegram From the Embassy in the United Kingdom to the Department of State⁰

London, February 3, 1960, 5 p.m.

3843. Paris for Embassy & USRO. Luxembourg for Embassy & USEC. Brussels for Embassy & USEC. Paris pass to Leddy and Corse.

1. Following is Embassy appraisal of current British positions and longer-term objectives concerning European trade and organizational problems that may affect negotiations in coming months.

2. In general it appears that Paris meetings accomplished genuine relaxation of tensions and greatly improved U.S. chances of accomplishing at least its short-term objectives. But a misreading of the UK position could result in a sacrifice of these gains.

3. On a number of important points present British position appears to lend genuine support to U.S. objectives. These include:

(a) Apparent willingness to consider generalization of July 1 tariff cuts in exchange for comparable concessions by Six (see Embtels 3770 and 3779).¹ Embassy assumes U.S. in favor of any such arrangement on MFN basis which is acceptable to Seven and Six.

(b) Willingness to bargain directly with Six at GATT tariff negotiations (Embtel 3208).² Nature and extent these negotiations would depend on results of (a).

(c) Recognition that any interim concessions for smoothing differences between Six and Seven must be generalized on MFN basis.

(d) Recognition that any over-all solution to problem of Six and Seven would have to conform to GATT and that no such agreement now negotiable.

4. UK ability and willingness to maintain these helpful positions, however, may depend to considerable extent on their estimate of possibility accomplishing certain objectives to which they are deeply committed. These are:

(a) “Ratification and effective operation of EFTA.”

Embassy has seen no sign that UK determination to achieve this objective has been weakened or that it could be weakened even by major concrete demonstration of liberalism by EEC.

Aside from serious loss of prestige with public and with partners in Seven if EFTA fails, HMG has positive political and economic stake in its success. They look upon EFTA as means capitalizing on previous acceptance by British public and industry of tariff reductions and closer association with rest of Europe which was developed in anticipation of OEEC-wide FTA. Also consider that EFTA has been and will continue to be invaluable spur to liberal trade policy in EEC. In addition, UK eager to maintain leadership of Seven and in order do this must avoid any impression willingness sacrifice interests of Seven for those of UK.

(b) “Ultimate conclusion of European-wide arrangement.”

Despite recognition Six-Seven agreement not now negotiable, UK has not abandoned this long-term objective. We believe British concerned that their currently “relaxed attitude” on this issue may have been misunderstood by U.S. and Six and believe recent Maudling speech New York and Lloyd speech Strasbourg deliberate efforts to dispel any illusions. UK will have to keep European-wide arrangement in forefront of discussions in light passionate interest of its EFTA partners, but Embassy convinced HMG has more basic attachment to this objective. UK sentiment has moved toward closer association with continent on both economic and political grounds. All political parties, industry and general public now support concept of European association and seem to believe that this not inconsistent with continued Commonwealth ties. Main disagreement is over methods; some sections of industry and press, for example, continue to urge UK to join Common Market. Thus movement which may have been originally conceived as tactical device to avoid trade “discrimination” has become major determinant of British foreign policy. In Embassy view it would be serious mistake to underestimate force of UK position with respect to both EFTA and wider association.

Notwithstanding British feeling they obtained adequate assurances, explicit and implicit, from discussions with Under Secretary Dillon that US will not (despite its preferences) take any actions inimical to basic UK objectives, some suspicions remain about US motivation and ultimate goals. These lingering doubts could be turned into conviction and possible loss of US gains by any of following actions by US:

(a) Anything that suggests US hopes or expects Seven will abandon EFTA.

(b) Any effort to persuade UK or others to abandon longer-term objective of European-wide ETA. They would not, of course, so interpret efforts to obtain tariff reductions on global basis (through GATT or otherwise) which are not tied to abandonment of specifically European arrangement.

(c) Any sign that US applies different standards to examination of Rome Treaty and Stockholm convention in GATT. UK believes EFTA is more liberal than EEC from international trade point of view, i.e., it has less adverse impact on trade of outside countries. Our preference for EEC on political grounds recognized by British but they do not consider this element as justification for differential treatment under provisions of GATT. UK officials feel US has until now unduly favored details of Rome Treaty in GATT and therefore welcomed statement by Under Secretary last month that we now are able to take firmer line with Six.

(d) Perhaps less damaging but also potentially dangerous would be any effort to force British to abandon support of efforts rest of Seven may make for obtaining early consideration of broader European agreement. Even though British share our belief concerning negotiating prospects at present, we believe they would be unwilling accept onus for deferring discussion of matter.

In Embassy view, differences between US and UK long-run objectives need not cause clash. We believe that similarity in our present positions is sufficiently close to permit US to achieve its shorter term objectives. But care will be required to avoid jeopardizing this valuable asset. In terms of trade impact, gains to be derived from generalization of July tariff cuts by Six and Seven and British cooperation in subsequent GATT negotiations would greatly outweigh any disadvantage to US trade resulting from implementation of Stockholm convention. Re larger European arrangement, British agreement that this not now negotiable helps avoid possible threat to US trading position in near future. US position also safeguarded by British acceptance our view that any such arrangement must conform to GATT Article XXIV.

Embassy believes it is impossible to say now that establishment larger European arrangement several years hence will necessarily be contrary to US interests. It seems likely that UK will go along with global approach for next eighteen months or two years and reassess situation around mid–1961.

Even if substantial reductions in Common Market external tariff are made in this period, UK may feel, for both political and economic reasons, that it must pursue efforts to obtain European-wide solution. Depending on developments in interim (including US balance-of-payments position), we may also consider closer European economic ties between Six and others in our own interest, both as means strengthening political cohesion of Europe and building greater European prosperity.

Whitney

0. Source: Department of State, Central Files, 375.42/2–360. Confidential. Repeated to the OEEC countries.
1. Telegram 3770 from London, January 28, reported on British reaction to the proposal of the Benelux nations that the EEC and EFTA generalize the internal tariff reductions scheduled for July 1 and on British negotiating strategy for its forthcoming meeting with EEC representatives. (ibid., 394.41/1–2860) Telegram 3779 from London, January 29, reported further on British views of the Benelux proposals. (ibid., 394.41/1–2960)
2. In telegram 3208 from London, December 21, 1959, the Embassy reported that while the EFTA had made no decisions on whether to enter into negotiations with the EEC, the British Government was prepared to begin discussions.