Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

276. Memorandum of Conversation¹

Washington, February 9, 1965.

Meeting between Vice President Humphrey and Mr. Sicco Mans-holt, Vice President of the Common Market, at the Executive Office Building on February 9, 1965. Present were the Vice President; Mr. Mansholt; Ambassador Tuthill, United States Representative to the Common Market; Mr. Alfred Mozer, Chef de Cabinet to Mr. Mansholt; and Mr. John Rielly, foreign policy assistant to the Vice President.

Mr. Mansholt opened the discussion with a reference to his meeting earlier that day with Secretary Freeman.² He said he understood and is sympathetic to the many difficulties facing Secretary Freeman as the Secretary of Agriculture, and understood the pressures he was under vis-a-vis the Common Market countries. The Vice President suggested that it would be useful for Mr. Mansholt to read the President’s message on agriculture,³ which gives a good indication of some of the problems confronting the U.S. Government in the field at present. He pointed out that the United States is the only country which has reduced acreage in recent years. American farmers consistently press the Administration to justify a reduction in acreage here when none takes place abroad. What we desire is not a further reduction in acreage but expanded markets.

Mr. Mansholt observed that the problem in Europe today is the same as that in the United States—that production is increasing beyond consumption. We now have the danger of surpluses accumulating in Europe just as they have in this country. The Vice President raised the question of whether the Europeans might be interested in giving some of their surplus food away, just as the U.S. does. Mr. Mansholt replied that the Europeans preferred to sell it, rather than to compete with the U.S. in dumping surplus food products around the world.

The Vice President said that it is difficult for Americans to understand how the Europeans can justify a policy of high grain price supports which may benefit the producer but certainly not the large mass of consumers. From the American point of view, the price is too high when the U.S. can sell it to the European countries cheaper than it can be grown at home. From the European point of view, Mr. Mansholt suggested, the price is too high when it encourages an increase in acreage. He added that Europeans are still importing cereals from the U.S. in large quantities, even though they could increase production further if they so desired.

Mr. Mansholt noted the parallel trends in Europe and the U.S., with labor from the farms drifting more and more to the cities and into industry. Whereas high prices have led to high acreage in the U.S., this has not necessarily been the case in Europe because they have prevented this through acreage controls. The justification of high prices for the consumer, according to Mr. Mansholt, lies in the obligation European governments feel to guarantee a fair income to farmers. This can be done only by maintaining a high support price.

The Vice President agreed that the farmers’ interests must be looked after and that the farmer cannot be left purely to the mercy of fluctuating prices. However, our experience with support prices has indicated that over a long period of time they lead to great political difficulties. In the U.S. there is a great deal of political pressure building up from urban areas where people resent more and more the heavy burden of paying for high price supports. This of course has created stronger and stronger pressure to find markets abroad for American agricultural products. And this of course brings us to the Kennedy Round. We have reached agreement for the most part on the question of industrial products, but unless we can reach some similar agreement on the question of agricultural products, the Kennedy Round will flop. The U.S. Congress will never permit us to enter into any agreement that would permit Europe to sell its industrial products in the U.S. but effectively cut the American farmer out of the European market. Concessions must be mutual. Our European friends must realize this, and our State Department must realize this.⁴ Given the prevailing sentiment in the American Congress, our Government will have no choice but to take stern measures unless Europe is willing to play fair on agriculture. The U.S. can, if necessary, subsidize sales abroad, undercutting competitors. We prefer, of course, not to do this.

Mr. Mansholt vigorously expressed the hope that both the U.S. and Europe could avoid selling subsidized products abroad. This would benefit neither Europe nor the U.S. He said he understood the political problems created for the government in this country, as most European governments were experiencing the same problems in regard to agriculture. A huge increase of U.S. exports to the Common Market countries is not possible, as European production is increasing. In regard to the surplus products which will be available for exports, he felt that it should be easy for the U.S. and Europe to agree on a common price. The underdeveloped countries which buy many of these agricultural products are also agricultural countries. They do not want to see prices for agricultural commodities forced down, as eventually it would hurt their own economics too.

The Vice President returned to the subject of U.S.-European trade, and emphasized once again that the Europeans could not continue to expect Americans to permit an increasing volume of imports of Volkswagens, machine tools, and china into this country, while holding agricultural exports to Europe at a stagnant level. The problem is likely to become more acute because when European farmers discover what they can produce with new fertilizers, their production will go way up, particularly if present high prices are maintained.⁵

Mansholt said that he appreciated the problem, but insisted that Americans should always remember that the U.S. continues to have a favorable balance of trade with Europe of over $3 billion. The Vice President acknowledged the favorable balance, and suggested the problem is not only economic but psychological. The feeling is strong in the U.S. that Europe is becoming more protectionist. It is the feeling here that rather than increase trade in agricultural products which could afford a real benefit to the European consumer, many European countries will soon be repeating the U.S. experience. That is, they will soon have to build extensive warehouse facilities to take care of the surpluses as long as high price supports are maintained. If they proceed to do this and shut the U.S. out of the market, not only will they be causing grave economic problems but they will be undermining the internationalist policy of the last 25 years which has been based on the interdependence of Europe and the U.S. This is what disturbs the Congress. This is what disturbs the President of the US.

Mr. Mansholt said that he understood the basic problem: that of finding a type of agreement in the Kennedy Round which would maintain an acceptable level of support, but not exclude U.S. agricultural products. We want to do this in a way that will permit them to avoid state trading systems similar to those on the Soviet bloc. We want to arrive at an acceptable level of imports and exports. This, he insisted, must be negotiated product by product. The Vice President agreed that this was the problem, but pointed out that in solving this problem it was important not to build increasing protection into the solution. The solution must not have built into it the seeds of a rising wall of tariffs. If it has built into it an eventual reduction of tariffs—mutual reductions—then the U.S. and Europe can resolve their problems. At the present time it would appear to us in the U.S. that most Europeans are not thinking along these lines. Re-emphasizing this point again, he said that the over-all design, so far as there is one, leaves the impression of increasing protectionism. Unless we succeed in working out some formula that leads not to higher tariffs against agricultural products but to lower tariffs, the Kennedy Round will fail. The present trade act expires July 1, 1967. By that date, we must reach some understanding on both agricultural and industrial products. Otherwise the U.S. Congress will never extend the provisions of the present act.

Mr. Mansholt said he understood the Vice President’s point of view, and insisted that Europeans are obliged to consider also the question of justice for the farm population. Solutions cannot be arrived at exclusively on the basis of international trade considerations. Farmers must be protected, all the more so because the younger population is tending to leave the farm, and this trend should not be accelerated. The Vice President agreed that the farmer should be protected in Europe just as he is in this country. At the same time, Europeans must understand why the U.S. is determined not to see European markets foreclosed to its agricultural products, just as the Europeans would be greatly disturbed if we were to attempt to foreclose our markets for French wines and German Volkswagens. This is a problem that pertains not only to the six countries of the Common Market but to the U.S. and Europe as a whole. We must also consider our relations with the European Free Trade Association countries, and both we and the Common Market countries must bear in mind the question of relations between the Common Market and the Outer Seven.

The Vice President closed by noting that the problem of trade with Eastern European countries is becoming increasingly important. We have very little trade with these countries at the present time, but there is a general feeling in Congress that we should increase this trade. This is another problem, however. The important point is that the Europeans know that the point of view expounded by the Vice President today is a representative one in the Congress, that it is supported by all four principal leaders in the Congress today. All of these men share a disappointment in the Kennedy Round thus far and a grave concern that unless some progress is made in the agricultural sector in the near future, the prospects for success in the Kennedy Round as a whole are dim.

1. Source: Kennedy Library, Herter Papers, Public Advisory Committee, January 6, 1965–November 1, 1965, Box 14. No classification marking. The source text bears no drafting information. Two March 4 letters from Vice President Humphrey to Herter are attached; one comments on his conversation with Mansholt: “I am not sure I got through to Mr. Mansholt but I laid it on pretty thick.”
2. See Document 275.
3. For text of President Johnson’s Special Message to Congress on Agriculture on February 4, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1965, Book I, pp. 139–148.
4. Following the comma and at the end of the sentence are handwritten brackets with the handwritten note, “omit,” in the margin.
5. Handwritten brackets appear at the beginning and end of this sentence, and handwritten notes in the margin read: “Omit” and “not good point.”