277. Memorandum From the President’s Deputy Special Assistant for National Security Affairs (Kaysen) to President Kennedy0
SUBJECT
- Reprise
With your permission, and at your pleasure, may I return to the subject of the relation between our balance of payments position and what we seek in the trade negotiations? If you have already had enough, stop here.
Your discussion with Messrs. Marjolin and Rey of why we need to increase our already large trade surplus further in order to meet our military and tourist outlays (among others) was clear, and from our point of view, convincing. We are providing Europe both with income that does not register in the trade account, e.g., tourists and investments, and with military services which we pay for and they do not, and the benefits of aid expenditures for which we still pay a disproportionate share. It is the fact that we must either finance these outlays by our trade surplus or reduce them. The Europeans should understand this, and it should affect their attitude toward the trade negotiations.
However, despite all this, it may not be helpful to our negotiating position to emphasize these truths. The negotiations under the Trade Expansion Act are carried on by a Commission which must act under instructions from six governments. The competence of the Commission is essentially economic. In our dealings with it, our arguments and theirs are couched in economic terms. The best argument we can make in these terms in that successful trade negotiations, resulting in the greatest possible reduction of barriers, are in the economic interests of both the U.S. and Europe. It is easier to make this argument because the negotiations involve not only the U.S. and the Six, but the rest of the world as well.
An argument that goes further and speaks to the U.S. need for the trade negotiations to result in a better balance of payments position for us, and rests on broader political and military security grounds, may prove too much. First, it would suggest that we are in a weak position and it is so important for us to try to succeed that the Europeans can toughen their bargaining terms. An analogy that may be helpful is the position of a man selling a house. If he tells the prospective buyer that he is in a tough financial shape and must get a very good price for the house, it is as likely to weaken as to strengthen his bargaining position.
[Page 599]Further, such arguments by us may be used, especially by the French, to support the view that we are seeking more from Europe in the trade negotiations than we are willing to give. While we can put the negotiations in their broader context, the Europeans in their discussions with each other need not. The French are already making this kind of argument in Europe, with some effect. Since the relations between the French and the other five within the Commission are crucial to the decisions that the Commission makes on the trade negotiations, we do not want to provide them with what may look like evidence that the French position is correct.
The same problem would arise in any discussion you might have with the Finance or Economic Ministers of individual countries, since they, too, would see the problem from their own viewpoint. The broader argument may be appropriate with Foreign Ministers, or even more so with heads of governments, who can instruct Finance Ministers and Economic Ministers on the political values to Europe of a successful negotiation. Even with them it is risky. In the narrower context of arguments about economic benefits, it is decidedly two-edged, and seems to me as likely to work against as for us in the bargaining process.