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

85. Memorandum of Conversation⁰

Washington, October 8, 1963, 10:30 a.m.

SUBJECT

• European Unity and Trade Problems

PARTICIPANTS

• U.S.
  • Mr. Ball
  • Ambassador Bohlen
  • Mr. Tyler
  • Mr. Schaetzel
  • Mr. Beigel
• France
  • Couve de Murville¹
  • Ambassador Alphand
  • Mr. Lucet, Director, Political Affairs, French Fon Off
  • Mr. Pelen, French Embassy

Mr. Ball said he would like to speak about European unity. We had an intimation from Rome it was believed in Europe that the U.S. may have become disenchanted with the EEC. He said there should be no ambiguity on this point, and he wished to reaffirm that we see progress toward European unity through Brussels or in other forms as being an important step toward unity of the Western world. While it is a European matter as to how this unity is to be organized, we see our own interests served by progress in this direction.

Mr. Ball said that he also wished to make clear that the U.S. believes effective unity within the EEC means that there must be a common agricultural policy, and it should be understood that the U.S. is not in opposition to a CAP. We realize that it will create problems of adjustment for us as well as for the participants. Nor do we minimize the difficulties in forming a CAP, in view of the senseless bases for agricultural policies in every country.

The Foreign Minister interjected that even the Russians would agree on this last point. The Foreign Minister went on to express his appreciation for the above statements. He said that no one knows how the European concept will end, that it will be a long and painful process. There is hope of development in other fields, and there is the parallel question of whether others will join the Six, which is an open question at present. He said that the Six had only begun to do something effective, and that this process is not a matter for a few years but for one or two generations. In the process there are two aspects to note: there are differences among the partners, and there are problems with outside countries, in Europe and elsewhere, beginning with the U.S. He said that they recognized that the U.S. could not remain indifferent to developments within the Six.

The Foreign Minister recalled that the January crisis had been a topic of discussion after dinner at the Department the previous evening and said he had nothing to add to this.² He repeated that opinions differ as to what was at stake and the methods used, that France considers matters were not ripe in January and that the question remains open.

The Foreign Minister agreed with Mr. Ball that the immediate problem is further progress in the EEC. He said that two fields are open: the CAP and the merging or reorganization and systematization of the three communities, especially the ECSC and EEC. He said that France would like to pursue the question of the merging. He said that the partners of France are very vocal about direct election of the Assembly because they know the French oppose this step now. This would be the ultimate solution if the political situation develops the way France hopes. It is a question of method, whether the executive or the assembly should be developed first. He said France favors the formation of the executive before having an elected assembly.

With regard to the CAP the Foreign Minister said that France will seek a regime before the end of 1963 for the main products, and that the Six will have to deal with the problem of prices. Establishment of cereal prices for the 1964 and 1965 seasons is the only thing that has been agreed upon, and the matter of general price policy remains open. France had discussed this only with the Germans so far, in view of the opposite positions of France and Germany on this question. The Six should have at least an idea of what price policy will be if they are to discuss agriculture at the GATT negotiations next spring.

The Foreign Minister said that the CAP will have an impact on Denmark and on the important outside producers such as the U.S., Canada, Australia; New Zealand and Argentina. He put aside tropical products as another matter. He went on to say that if there is an EEC there must be a CAP, and the CAP is bound to change something. On the other hand, we are faced with problems of disruption of present arrangements. He said that the question may be less difficult if we consider the realities of European agriculture and European import requirements. The future of European agriculture in which a CAP can develop relates principally to meats and to fruits and vegetables, and less so to cereals. He dismissed dairy products as a special, local problem. He said that fruits and vegetables are normally handled on a regional basis and the same could be said for meat. The French people are eating more fresh meat, and increased meat output is the important future for the agriculture of France and Denmark. He noted that Italy is importing more meat from Europe and less from the Argentine, its traditional supplier.

The Foreign Minister said that the big problem is with cereals, since Europe cannot produce all the types they need, and there will always be a place for Manitoba wheat and for corn. The problem here is prices. He said that this will, of course, be discussed internationally over the next two years, whether in the Kennedy round or otherwise. For several years, France has favored discussions on a world basis with the idea that discussions would begin with respect to price policy especially for cereals. He said that when this is discussed with the U.S. they would expect to run into problems similar to those they found in the British negotiations, over the question of comparable outlets as sought by the Commonwealth cereal producers. He said that quotas do not seem to be the solution. If the Six can complete regulations for meat and rice this year they can then explore how to discuss agricultural questions with outsiders, either in connection with the Kennedy round or by some other procedure. He said that perhaps the EEC Commission should proceed to have informal talks with the U.S. What is necessary is to find some compensation for the German and Italian peasants, something that might be artificial but would be necessary.

Mr. Ball said that we see these problems along the same lines as the Foreign Minister, that we all have domestic problems especially in the agricultural sector.

The Foreign Minister said that another problem is what to do with farm surpluses after an export price is set. It is expensive for governments to give away surpluses to the LDC’s and is self-defeating to feed LDC’s whose task should be to develop their own agriculture. The problem becomes intractable if a world system is established to provide farm surpluses to the LDC’s

Mr. Ball replied that we are aware of the dilemma of feeding the LDC’s too well and running the danger of inhibiting local agriculture. We try to move along both lines. He said that it would be a fine thing if some general agreement could be reached with regard to surpluses.

The Foreign Minister referred to the FAO fund of $100 million and said that management of the surplus question under international supervision would be undesirable, and would risk becoming a permanent international system. He saw no difficulties with U.S. disposals.

Mr. Schaetzel said that we have been anxious to discuss this general question and noted that Secretary Freeman is willing to discuss U.S. price levels, a new departure for the U.S. He said that we would like to discuss the subject with the major countries. The Foreign Minister said that we might discuss this at Geneva in a preliminary way, with special discussions to follow sometime later.

Mr. Ball turned to poultry and said that we are very anxious to settle and dispose of this issue. We realize agreement is not likely and we therefore wish to dispose of the issue of the amount of trade damage by mutual agreement. We have suggested adjudication by a GATT panel. The Foreign Minister said that he thought the panel method was acceptable, adding that France could of course not speak for the Six. He understood the only question was whether the panel would decide or advise. Mr. Schaetzel said that both sides have agreed to the panel, to be composed of the Secretary General of GATT and two others, with non-binding conclusions. The point of contention now is over the rights that the U.S. might continue to enjoy with regard to previous negotiations with the EEC. The Foreign Minister noted that we now have lawyers in Brussels discussing the legal technicalities of this situation with the Commission. He wondered what the practical significance of these discussions might be, and noted that when they accepted the panel procedure the Six in effect renounced any rights to take counter-measures.

Mr. Ball referred to the UN trade conference next spring and said that this must be handled very carefully. He said that Kristensen³ had suggested when he was here that the November ministerial meeting of OECD should endeavor to agree on the general position the advanced nations can take in the UN conference, not to form a solid front but to discuss among ourselves the questions involved and understand each other’s position. The Foreign Minister said that there will be a question of preferences for the LDC’s which is a problem for the Six in Africa as well as for the Commonwealth. Mr. Schaetzel noted that Mr. Ball would head the U.S. delegation and said that we do not want to formulate any bloc position. The Foreign Minister agreed and said that we must also avoid a quarrel between the Africans and the Latin Americans at the conference.

0. Source: Department of State, Central Files, ECIN 6 EEC. Secret. Drafted and initialed by Beigel and approved in U on October 16. The meeting was held in Ball’s office.
1. Couve de Murville was in the United States to attend the U.N. General Assembly.
2. No record of this conversation has been found. For a memorandum of Couve de Murville’s conversation with the President on October 7, see Document 275.
3. Thorkil Kristensen, Secretary-General of the OECD.