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

80. Circular Telegram From the Department of State to Certain Missions⁰

Washington, August 3, 1963, 5:28 p.m.

220. Joint State–USIA. Also pass US Mission Geneva. US exports frozen poultry (broilers, stewers, turkeys, and parts) to countries EEC have been substantially reduced as result increases in EEC poultry charges and duties. Continuing efforts to arrive at an equitable solution have been unsuccessful. Instead of decreasing duties, duties have progressively increased. Cause and fact of damage to US trade not in question. Import charges into Germany, the principal importer of US poultry, have been tripled since institution EEC common agricultural policy. US exports of poultry to Germany have dropped from a monthly average of 4,500 tons in 1961 and 6,000 tons in 1962 to about 2,000 tons in the first four months of 1963. Denmark has also been affected by the EEC regulation and has suffered a serious drop in its poultry exports to Germany. While German production has increased, the high cost of production in Germany has left unfulfilled considerable consumer demand.

For more than a year the US has made every effort to arrive at arrangements which would provide satisfactory access for US poultry to the EEC. In a final attempt to reach a solution, US in latter part of June called for negotiations under what is known as the Standstill Agreement on poultry concluded between US and EEC in March 1962, following inconclusive discussions under GATT Article XXIV:6. The Standstill Agreement required the EEC to undertake negotiations on poultry. Unfortunately, these negotiations failed to arrive at a satisfactory arrangement on poultry, nor did EEC offer equivalent compensation to offset damage to US poultry exports. This situation provides legal basis under GATT for US to unilaterally withdraw concessions previously granted EEC upon 30 days’ notice to GATT Contracting Parties.

As first step US announcing August 6 that public hearings will be held on items being considered for withdrawal of concessions. If by Sept 16 there still no solution US will reluctantly resort to its legal rights as principal supplier under Article XXVIII of GATT and formally notify GATT that after 30 days US will withdraw concessions negotiated with EEC of value substantially equivalent to that of injured US poultry trade with EEC.

US has determined that value of US poultry trade affected is $46 million. $46 million is estimate of what US exports to Germany would have been if Germans had not had discriminatory quantitative restrictions on poultry in calendar year 1960. This calculation is consistent with Article XXVIII of GATT which provides that a country may qualify as a principal supplier, if in absence of discriminatory quantitative restrictions, it would have had a larger share of importer market.

Article XXVIII also provides that a compensatory increase in duties must be applied on a most-favored nation basis on those items on which tariff concessions were initially negotiated with EEC or individual EEC states. Therefore, duty increases on items eventually selected will in certain instances unfortunately fall to slight degree on some non-EEC countries as well. US will, however, provide appropriate concessions for any losses suffered by third countries.

Proposed schedule for withdrawing concessions follows:

1) August 6—announcement of scheduling public hearings on items being considered for withdrawal of concessions and publication of list of items to total trade value of $110 million from which we would eventually choose items valued at approximately $46 million.

2) September 4—Public hearings to end on or before Sept 10.

3) September 16—Presidential proclamation, effective in 30 days, withdrawing concessions on items totalling $46 million of US imports from EEC. Formal notification to Contracting Parties of US intention of making compensatory withdrawals.

4) October 16—Withdrawals to go into effect.

It is clear from above schedule that any time prior final US action, EEC could prevent withdrawal concessions by agreeing to satisfactory arrangements on poultry.

Treatment

1. US action being taken most reluctantly and only following repeated efforts to arrive at mutually satisfactory arrangements. General theme should be one of regret, not of recrimination.

2. Announcement on August 6 only first step in compliance domestic practice to hold hearings. Final action still several months off and could be avoided by prompt EEC action. Output should avoid any implication, however, that present US action merely a negotiating move.

3. Note that while damage real to US producers, major loss is to European consumer due to higher retail prices.

4. Protectionist agricultural policy not in best interest of Europe or free world. Would be most unfortunate if poultry action indicative of future EEC agricultural policy. US willing to make every effort work out problems on basis equitable for all concerned.

5. While US disappointed with EEC poultry policy this has not lessened US plans to move ahead on trade negotiations.

6. US acting under legal rights and in conformity with GATT. Assert but do not argue legal rights.

7. While German imports crucial on poultry action, emphasis should be on EEC acting as a unit. We can give EEC Commission credit for valiantly trying to find compromise.

8. Note that under MFN few other countries may be affected slightly but US abiding by GATT and will compensate for any trade damage to third countries. US recognizes its responsibility. Do not speculate when or how this will be done.

9. Emphasize theme that fundamental question is whether there is to be sheltered markets with resulting high costs to consumers or low cost production of mutual benefit to all countries.

10. US action should be described as compensatory withdrawals, not as retaliation.

11. Do not speculate on final items on US list.

12. Since Europeans can be expected to argue they cannot act under US pressure to remedy the poultry situation, we should point out that for over a year we have been more patient in efforts find solution but matters have been getting progressively worse.

13. Press backgrounder on Tuesday will provide further guidance. However, do not pick up statements which directed in first instance to domestic audience.

Ball

0. Source: Department of State, Central Files, Inco-Poultry US. Limited Official Use; Priority. Drafted by Freedman (EUR), cleared with RPE and USIA, and approved by Blumenthal. Sent to all missions except Sofia, Moscow, Budapest, and Bucharest.