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

82. Telegram From the Department of State to the Mission to the European Communities⁰

Washington, September 20, 1963, 2:11 p.m.

Busec 131. Ref: TAGG 1416, Ecbus 310.¹ For Tuthill from Herter. Interagency agreement reached on following alternatives for dealing with poultry problem and avoiding collision with EEC. These alternatives should be presented during your Monday meeting with Hallstein.

1. EEC Council at its September 23 meeting to provide Commission with meaningful negotiating mandate so that US and EEC can seek immediately to negotiate satisfactory settlement of poultry issue. We would not insist this be accompanied by 11-pfennig reduction in levies but US would welcome this reduction as token of EEC’s good intentions.

We would interpret as meaningful a mandate from Council to Commission to seek agreement with US, on ad referendum basis, on reductions in poultry levies that gave reasonable assurance of restoring US poultry trade. We would not expect Council to specify amount required or to endorse either of specific proposals advanced by US in its aide-mémoire. Obviously those proposals were also negotiable. We would want formal indication however that Council was prepared to give serious consideration to any arrangement Commission worked out with US.

2. US to defer action on compensatory withdrawals while bilateral negotiations carried out. Definite time limit for such negotiations would have to be set. From every point of view it is essential this matter be brought to prompt conclusion. We think 30 days should allow ample time. At latest negotiations would have to be terminated successfully by October 31, 1963, and Council would have to approve results promptly if US not to make compensatory withdrawals.

3. If Council does not provide meaningful mandate to negotiate, or, if, following such mandate, US and EEC cannot reach accord on satisfactory reductions in levies within time limits indicated in (2) above, US will have no alternative but to make compensatory withdrawals. However before making such withdrawals we would be prepared to have trade coverage issue adjudicated by GATT panel in order avoid further litigation. As reported in ECBUS 277²EEC is prepared to challenge $46 million figure and launch counter-move if US proceeds with withdrawals. We have sufficient confidence in our case to go to adjudication. FYI. In our view GATT panel should determine not whether specific $46 million is proper but what is proper trade exchange figure under Article XXVIII principles. Framing issue in this manner would leave US free to argue before GATT panel that figure higher than $46 million is valid. EEC should presumably not object to so framing issue if they are as confident as they seem to be that proper figure is far below $46 million. If appropriate you may indicate US may plead higher figure since we consider $46 million conservative estimate. End FYI. We would leave for later discussion whether determination of GATT panel should be approved by GATT Contracting Parties.

Adjudication would be limited solely to trade coverage figure and US and EEC would be bound by GATT panel decision. FYI. US acceptance adjudication of trade coverage not intended to waive US right to proceed under Article XXIII concerning any aspects poultry CAP inconsistent with provisions or objectives GATT. Proposed US withdrawals compensate only for EEC withdrawal of poultry binding. Neither EEC withdrawal nor payment exacted by US for withdrawal entitle EEC to adopt measures inconsistent with GATT. You should avoid suggesting contrary and may state US understanding this point if appropriate. End FYI.

If EEC bound by GATT panel decision it would necessarily follow that EEC would accept justification of US case under Article XXVIII and would forego any subsequent counter-moves such as Article XXIII action against our withdrawals. We assume from Rey’s statement reported in ECBUS 227 this would create no difficulties for Commission. Pending adjudication US would of course defer issuing withdrawal proclamation.³

Rusk

0. Source: Department of State, Central Files, INCO Poultry US. Limited Official Use; Operational Immediate. Drafted by Hedges and Rehm (STR) and cleared in draft with Herter, Ball, Freeman, and Hodges.
1. Both dated September 19. In TAGG 1416 Blumenthal reported that the EEC would not accept the U.S. figure of $46 million and would make counter withdrawals if concessions totaling that figure were withdrawn. Blumenthal suggested that continuing along this line would not benefit the United States and proposed further negotiations and perhaps submitting to GATT the question of the amount of compensation. (Ibid.) Ecbus 310 reported that a meeting had been previously arranged with Hallstein for September 23 at which the poultry question could be discussed if Washington agreed. (Ibid.)
2. Dated September 3. (Ibid.)
3. On October 16 the United States and the EEC asked the GATT Council of Representatives to render an opinion on the poultry question. (Ecbus 483 to Brussels, October 16; ibid.) In November the GATT panel issued a finding on behalf of the United States but only for $26 million. On December 3 the United States informed representatives of 16 embassies which tariff concession the United States would suspend to compensate for this loss. (Memorandum of telephone conversations, December 3; ibid.)