244. Memorandum From the Chairman of the Interdepartmental Committee on Trade Agreements (Walker) to President Kennedy0
The Interdepartmental Committee on Trade Agreements herewith recommends that the President approve the results of United States negotiations thus far concluded in the 1960-61 Tariff Conference, held in Geneva under the sponsorship of the Contracting Parties to the General Agreement on Tariffs and Trade (GATT).
Because of the scope of the negotiations and the complexity of some of them, the conference was held in two separate phases. The first, which [Page 522] commenced on September 1, 1960, was concerned primarily with negotiations held under Article XXIV:6 of the GATT with the European Economic Community (EEC) for a new single schedule of tariff concessions in the General Agreement to replace the previously existing separate schedules of the EEC Member States: the Benelux countries (Belgium, Luxembourg and the Netherlands), France, the Federal Republic of Germany and Italy.
The second phase, which began on May 29, 1961, was concerned with the reciprocal exchange of new concessions among interested contracting parties, and with the accession of new contracting parties.
Concurrently with the major negotiations in both phases, there were a number of renegotiations pursuant to Article XXVIII and certain other provisions of the GATT. In these negotiations the United States obtained compensatory concessions for changes that several other countries had made in previously granted concessions. On its side, in turn, the United States paid compensation for certain changes which it had made since the last tariff negotiations in 1956.
In the first phase, United States negotiators dealt with tariffs involving nearly $2 billion of United States exports. In the second, they dealt with export-import trade of some $2.2 billion. (Annex 11 contains a more detailed breakdown of the trade involved.)
Pending completion of other countries’ negotiations among themselves, the United States proposes to enter into formal bilateral agreements with the EEC and the United Kingdom, and such other countries as are prepared to do so promptly in order that the larger part of the results of negotiations may be made public in the United States. When all negotiations are concluded, the results, including those bilateral agreements of the United States that are now to be proclaimed and made public, will be incorporated into a multilateral GATT protocol. This will include the consolidated schedules of tariff concessions of the individual countries.
XXIV:6 Negotiation
The major negotiation of the first phase was that with the Commission of the EEC arising in connection with the establishment of the common external tariff of the Common Market. This negotiation was a complex one, involving as it did the replacement of four separate and widely-differing tariff schedules by one new schedule. According to GATT provisions, this single schedule is to maintain the general level of concessions provided for in the composite prior schedules of the Member States, and the purpose of the negotiation was to assure that this obligation was complied with.
[Page 523]The United States had a large stake in this negotiation. Approximately $1,028 million of United States trade entered the Community in 1958 under tariff classifications on which the rate commitment had been negotiated in past years with the United States by Member States, plus an additional $611 million under commitments negotiated by them with other countries. These figures are exclusive of United States trade in products within the domain of the European Coal and Steel Community (ECSC) and the EURATOM.
The difficulty encountered by the United States and other major exporters of agricultural products in finding a basis for dealing with the EEC’s projected Common Agricultural Policy, coupled with the unprecedented and complex nature of the negotiations, led to slow negotiations which were settled finally only at the time agreement was reached in the reciprocal negotiations and with the intervention of the special representative of the President, Mr. Petersen.
The result of the XXIV:6 negotiation is three-fold: First, for the bulk of United States trade, the EEC granted concessions on trade of $1,677 million in the base year, or on more than 60 percent of its imports from the United States. Of this, $1,583 million is in the form of direct bindings to the United States, representing a 60 percent increase in the trade covered by direct bindings. Further, there was also an improvement in the average rate level; increases in previously bound rates affecting $300 million were offset by new bindings at lowered rates affecting $530 million.
Second, for products on which the CXT rate of duty has not yet been determined, principally manufactured tobacco products and refined petroleum products, accounting for about 3 percent of United States exports, it was agreed that existing national tariffs would be maintained until such time as the CXT rate is determined, when it would be examined under the usual Article XXVIII procedures.
Third, for products to be put under the variable import fee system of the Common Agricultural Policy, agreement was reached on formulae postponing the final negotiation on them and providing certain interim safeguards. This agreement covers wheat, corn, rice, grain sorghum, and poultry, accounting for about 10 percent of our total exports to the Community area. In addition the EEC subscribed to a Joint Declaration envisaging renewed negotiation in future for more satisfactory rates on various products, notably tobacco, vegetable oils and chemicals.
The remaining 15 percent of United States exports not dealt with is accounted for almost entirely by products under the jurisdiction of the European Coal and Steel Community.
A more detailed explanation of the Article XXIV:6 exercise is contained in Annex 2 which has attached to it the agreements reached in the over-all settlement with the EEC.
[Page 524]Reciprocal Phase
In the reciprocal phase (or so-called “Dillon Round”) for the exchange of new concessions, which commenced on May 29, United States negotiators reached satisfactory agreements with the EEC and the following 16 countries: Austria, Cambodia, Canada, Denmark, Finland, Haiti, India, Israel, Japan, New Zealand, Norway, Pakistan, Peru, Portugal, Switzerland, and the United Kingdom. Of these, Cambodia, Israel and Portugal are newly acceding countries. Negotiations are still under way with Spain, which also expects to accede. The only other outstanding negotiation is with Sweden, and this appears to be nearing conclusion.
Details on the results of these negotiations are included in Annex 3. Annex 3(a) contains a country-by-country description of the agreements reached. The bilateral lists of the concessions obtained by the United States are attached as Annex 3(b). The lists of the concessions granted by the United States are attached as Annex 3(c). In the final protocols these concessions will be combined.
In reciprocal negotiations with all countries, the United States obtained direct concessions covering trade amounting to $1,206 million. The figures used in each instance are for the latest year for which import statistics were available as of the time of negotiations with the country concerned, usually 1959 or 1960. Annex 1 shows in tabular form the trade coverage of concessions obtained from each country. In addition to these direct concessions, the United States trade will benefit, to an as yet undetermined extent, from concessions which other countries are granting each other.
In exchange, the United States granted concessions covering base year imports of $1,003 million from the countries with which the concession was directly negotiated. United States concessions in the reciprocal phase covered $1,725 million in terms of imports from all sources in 1960. United States imports of the products on which concessions were granted are shown in Annex 1.
Participation of the less-developed countries in the reciprocal phase was limited. In its negotiations, both in this phase and in the renegotiations undertaken by many of the less developed countries, the United States made a gesture in taking into account their needs by accepting agreements balanced in their favor in terms of strict trade coverage. It was unable within the framework of policy laid down under existing legislation, however, to accede to their wishes for completely unreciprocated concessions.
The most significant of the reciprocal negotiations was that with the EEC. The United States made direct concessions to the EEC covering imports of $597.4 million which represented 59 percent of those granted by the United States. In exchange, the EEC made direct concessions to the [Page 525] United States covering imports of $750.2 million or more than 62 percent, in terms of trade coverage, of the concessions obtained by the United States in the second phase of the conference. EEC statistics subsequent to 1958 are not available. However, by projection from United States export figures, the 1960 value of the EEC concessions is estimated at about $1 billion, as against a 1960 value of $795 million for the United States concession.
A recapitulation of the combined results of XXIV:6 and the reciprocal negotiations with the EEC, in terms of what the United States yielded in return for what it obtained, net basis, may be graphically presented as follows:
| U.S. Grants EEC | EEC Grants to U.S. | |
| Increase in Bound Trade | 446 | 769 |
| Improved Duty Rates | 549 | 977 |
The foregoing may be projected into 1960 (estimated) by increasing all figures by one-third.
Negotiations with the United Kingdom were second only to the EEC and accounted for 17 percent of the concessions obtained by the United States and 18 percent of the concessions granted by it.
As the result of an unusually cautious approach to the selection of offers taken by the United States Government during the 1960 preparatory period, and of an unprecedented and economically questionable number of “peril point” determinations by the Tariff Commission, United States offers were limited in scope and of generally poor quality because of the exclusion of many key products. This, coupled with the 20 percent reduction limitation of the trade agreements legislation, led to individual offer lists which in many cases lacked appeal to the other countries negotiating. Partly because of this, the majority of the individual negotiations were small.
Early in the negotiations it became apparent that these limited offers would not enable the United States Delegation to obtain the concessions it had hoped for on the basis of the linear offers both the EEC and the UK had indicated a willingness to make. In an effort to improve the negotiating situation, especially with the EEC, the Department of State requested Presidential authorization to make additional offers by breaching peril-point determinations of the Tariff Commission on products dutiable under 27 tariff paragraphs. Such authorization was communicated to the Delegation on September 25, 1961. The additional authority covered imports amounting to $164 million in 1958, of which slightly more than half was for offer to the EEC. Of this United States negotiators used $76 million as direct concessions to the EEC and $7 million to the United Kingdom, with total trade affected amounting to $152 million. A list of [Page 526] the products on which peril-point determinations were exceeded is contained in Annex 4.
In addition, there were several products on which the Tariff Commission found as “peril-points” rates of duty higher than existing rates. Under the trade agreements legislation the Tariff Commission automatically initiates escape-clause investigations. In view of this, and in accord-ance with earlier experience, no attempt was made to negotiate the increased rates. Annex 5, attached, contains a list of the products involved, and an explanation of their current status.
Under the trade agreements legislation, the President is required to report to the Congress on each case in which a concession exceeds the “peril points” found by the Tariff Commission or in which he fails to negotiate the higher rates when “peril points” are found above the existing rates. The statute requires that the President send to the Congress a copy of the agreement in each case in which the finding of the Tariff Commission is not followed, together with reasons for the action. A separate draft communication to the Congress is being submitted to the President for this purpose. It will show the President’s action to have been fruitful and eminently justified.
As part of the reciprocal negotiations, the United States proposed to Belgium, Luxembourg, the Netherlands, France, Canada and the United Kingdom that pre-GATT bilateral agreements, in suspense since 1947, be altogether terminated. This proposal was generally acceptable to the delegations of the several countries but the matter had to be referred to capitals. Canada, the only Government replying thus far, does not wish to take the suggested action. Presidential authorization for the termination of these bilateral agreements, on the part of the United States, is hereby requested against such time as decisions are reached by the other governments to which the proposal was made.
In the negotiations, it was found desirable for technical reasons to offer a rate of duty of 9 percent for one item on which Presidential authority to offer 9.2 percent had been obtained. This situation is explained in Annex 6, as is a correction of a typographical error.
A number of concessions which had been authorized for offer were not made. These items, covering total imports of $815.8 million, were not used in the negotiation either because countries for which they had been earmarked were not ready to negotiate, or else were not prepared to make counter-offers sufficiently large to warrant their use. A summary of these unusual [unused] offers is attached as Annex 7.
United States Compensation Negotiations
During the conference, the United States Delegation treated with several countries concerning their claims for compensatory concessions for actions taken by the United States Government since 1956 that had [Page 527] the effect of impairing concessions previously granted on 12 products. The President’s approval has been sought separately on the negotiations which were completed as of November 24, 1961. Since then settlements have been reached with the United Kingdom and Italy. A recapitulation of the claims made and agreements reached is included in Annex 8(a).
Renegotiations of Changes in Concessions Made by Other Countries
The United States negotiations on changes being made by other countries in previous concessions involved 14 countries: Australia, Brazil, Canada, Ceylon, Finland, Haiti, Indonesia, Japan, Netherlands Antilles, Pakistan, Peru, South Africa, Sweden and Turkey. These renegotiations ranged from small ones involving one to four items to entire tariff schedules covering a total of several hundred tariff items. United States trade involved in the individual negotiations ranged from less than $100,000 to more than a $100 million and totalled about $220 million. The United States obtained compensatory concessions in exchange totalling about $202 million. A tabulation showing, by country, the trade involved is contained in Annex 8(b).
Action Remaining
If the President approves the recommendations in this memorandum, the final steps will be taken formally to conclude the negotiations and give effect to their results. The President will be requested to issue a full power for the signature of the bilateral trade agreements and eventually a protocol embodying the results of the 1960-61 Tariff Conference and separate protocols for the acceding countries. The putting into effect as domestic law of the United States obligations embodied in the agreements requires the issuance of a Presidential Proclamation.
- Source: Department of State, Central Files, 394.41/2-2662. Confidential. Drafted on February 20. This memorandum was another enclosure submitted to President Kennedy under cover of the February 26 memorandum from Ball to Secretary Hodges (see the source note, Document 243).↩
- None of the annexes is printed.↩
- Printed from a copy that bears this typed signature.↩