Foreign Relations of the United States, 1961–1963, Volume XIII, Western Europe and Canada

38. Telegram From the Department of State to the Embassy in Belgium⁰

Washington, May 18, 1962, 6:33 p.m.

3242. Brussels for Embassy and USEC. Paris for Embassy and USRO. Brussels 2182, 2184, Ecbus 899; Geneva TAGG 617 and 619; Rome 3063.¹ Council preparations for retaliatory step of withdrawing recently granted concessions and public announcement thereof not well received here. Open threat of retaliation which now posed by EEC may create serious difficulties for us and if pursued to conclusion especially on tobacco will inevitably result in general hardening of attitudes. In past US has consistently agreed to consider compensation instead of resorting to retaliation in comparable cases involving Article XXVII tariff increases or impairment of concessions and has consistently sought amicable solution of problems in GATT. Same consideration due to US in carpet and glass case.

US had made clear from beginning it prepared to discharge fully its obligations under Article XIX this case and intended to negotiate restoration of balance of concessions. To date however EEC has refused to even entertain possibility of compensation and on contrary has devoted energies and publicity to preparations for retaliation. US intends to table meaningful compensation package in Geneva next week as initial down payment on amount owed and will be prepared thereafter to explore with EEC additional steps which could be taken once Congress grants President additional authority. Possibility working out solution along these lines only realizable, however, if EEC willing meet US halfway and tones down talk of retaliation. If EEC begins retaliation as procedure for GATT instead of compensation, implications should be apparent, not only for economic but also political relations.

1. Butterworth requested convey foregoing to Hallstein and Rey and indicate concern that EEC may be pushing issue close to point of no return for both parties.

2. MacArthur requested inform Brasseur that despite Council action we proceeding as promised to table best compensation offer possible at this time which will be of substantial proportions. We cannot complete our package by weekend because of need for formal interagency and White House approval but will cable you soonest summary containing significant items of interest to Belgium. This will represent maximum possible under present legislation but we will be ready consider further steps once President has new authority. (FYI. Delay in completing preparation compensation offer due to fact that almost all items available peril pointed and some especially sensitive at this time; interagency agreement has therefore been difficult obtain. End FYI)

3. All addressees should note US tactic is to avoid appearing flustered by threats of EEC and member countries and make clear its intention submit compensation package on assumption EEC will consider seriously. Addressees should avoid sharp reactions if this subject raised in conversations but stress dangers of retaliation and potential implications for our relations. Dept’s assessment is that Six are presently serious in carrying out line to which they now appear committed. Six would appear have no qualms about increasing tobacco duty in view past history this commodity. If this assessment correct, implications are extremely disturbing. Without directly approaching host governments, Dept would appreciate assessment by addressee posts of likelihood EEC withdrawal recently negotiated concession on tobacco.

Rusk

0. Source: Department of State, Central Files, 411.004/5–1762. Confidential; Niact. Drafted by Coster (OTF) and cleared with Trezise, Tyler, Beaudry, Vine, and Feldman. Repeated to Geneva, Rome, Bonn, Paris, and The Hague.
1. TAGG 619 and telegram 3063 from Rome are dated May 17; the remaining telegrams, May 16. (Ibid., 411.004/5–1662 and 5–1762) On May 15 the EEC Council of Ministers took the position that if the United States did not modify its decision to increase the tariffs on carpets and glass, the EEC would retaliate by withdrawing its previous tariff concessions on American products. The cables under reference reported this decision and early reactions to it.