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

288. Memorandum From Secretary of Agriculture Freeman to President Johnson¹

Washington, August 9, 1965.

SUBJECT

• Agriculture in the Kennedy Round

We face an early decision on whether the United States will make its offers to cut tariffs on agricultural products as scheduled on September 16 even though the European Economic Community will not do so. I have serious doubt that the EEC will be able to participate effectively in the agricultural negotiations in the two years left to complete the Kennedy Round.

Last fall it was decided against considerable agricultural resistance to table industrial offers but to withhold agricultural offers because the EEC was not ready. It was argued then that the EEC needed time to shape its agricultural system and that we should not press them to open agricultural negotiations. It is being argued with equal force today that it is imperative that the rest of us make our offers “in order to maintain the momentum of the industrial negotiations, despite the absence of the EEC.” I find myself in the strange position of trying to understand why we should table now even though the EEC is not ready, when a year ago, we could not table until the EEC was ready.

You will recall that it was difficult to explain to farm groups why we went ahead in industry but not agriculture last fall. There will be similar resistance to tabling our offers now, particularly from those commodity interests here at home affected by our proposed tariff cuts.

The United States industrial offer now on the table is far better than the offers of the EEC and most other countries. To make offers now on all agricultural products would further overbalance that offer. Hence a procedure has been proposed to make limited offers on agricultural products if the other major countries do so, leaving out the items which could be of major benefit to the EEC, and making it clear that we are ready to withdraw our agricultural offers in whole or in part if necessary. This procedure, as outlined in detail in other memoranda,² does reduce the risks involved in making agricultural offers now, but I have grave doubts about the value to the United States of any such limited procedure. This tactic relies heavily on the possibility of our being able to withdraw agricultural offers if we do not achieve reciprocity. I fear that those advocating this seriously misjudge the difficulties of withdrawal.

Offers stimulate counter-offers, and quickly become woven into the fabric of a negotiation, especially if they remain on the table until its close. Withdrawals then stimulate counter-withdrawals and start an unravelling process which could threaten the whole negotiation. The prospect of having the negotiation fall apart just as the Administration was preparing to seek renewal of Trade Agreements legislation would be a great deterrent to withdrawing our agricultural offers, no matter how weak the reciprocity situation.

It is not the only alternative open to us. There are in fact four distinct alternatives:

1. To suspend all negotiations—industry as well as agriculture—until the EEC is ready to participate in an effort to liberalize trade. This is the course of action which uses our maximum bargaining power. It is fully consistent with our previous statements, and with the legislative history of the Trade Expansion Act, which recognized the crucial role of the EEC in the negotiations.

2. Postpone agricultural offers until the EEC can participate—possibly early in 1966. This has the merit of not playing our cards in agriculture and sustains our position that no final bargain can be reached without significant liberalization in agriculture as well as industry.

3. Make limited and qualified offers as proposed by Governor Herter. In the form it has been proposed however, this has serious defects. To be reasonably acceptable to the U.S. farm community, the qualifications should be about as follows:

The U.S. agricultural offers would be subject to withdrawal in their entirety if the EEC failed to table offers early next year that would provide for meaningful liberalization of agricultural trade on a large proportion of the commodities now imported by the EEC. Offers by the EEC based on the montant de soutien would not be acceptable. These qualifications should be stated publicly at the time the offers are made, and should make it clear that in view of the fact that our position has consistently been that liberalization for agriculture must be an integral part of any final result of the Kennedy Round, such a withdrawal of agriculture offers would mean the end of the negotiations.

4. Withdraw agriculture completely from the negotiations now and stake our hopes for trade liberalization in agriculture on an extension of the Trade Expansion Act and the possibility that time will make the EEC more flexible.

I recommend alternative (2)—postponing agricultural offers while we wait to see whether the EEC can participate in the agricultural phase of the Kennedy Round. We can decide early in 1966 whether or not to go ahead on a limited basis as in (3) above if the EEC is again not ready. We would thus avoid the political hazards of making agricultural offers while the farm bill is before the Congress, while preserving the opportunity to move ahead later on agriculture. Agricultural interests in this country would probably support alternative (2) just as they would strongly support holding up the entire negotiations until the EEC is ready. I do not know of any major agricultural group that would support our going into an agricultural negotiation that does not include EEC.

Some argue that alternative (2) runs the risk of collapsing the entire negotiation; I know of no basis for this judgment. But I recall that it was being argued a year ago that the success of the entire negotiation depended on “not going ahead in agriculture”, just as it is being argued today that everything depends on “going ahead in agriculture.” I believe that if we go ahead without the EEC on September 16, the world will conclude that the U.S. is getting panicky and has decided to get the best deal it can before the Trade Act runs out on June 30, 1967, and will make the best deal possible in agriculture, even if the EEC makes no offer.

The domestic political danger of alternative (3) is that we cannot anticipate any clear benefits for U.S. agriculture, while at the same time some U.S. commodity interests will insist they will be adversely affected by proposed tariff cuts.

As in the past, then, so far as United States agriculture is concerned, any decision to table United States agricultural offers without a simultaneous tabling by the EEC must be justified on foreign policy grounds. The small benefit that United States agriculture might anticipate from a limited negotiation will not nearly offset the criticism we will receive as the result of failure to use the Kennedy Round to curb the growing protectionism in the EEC. This in turn would almost certainly cause grave difficulties in trying to extend the Trade Act.

1. Source: Johnson Library, Bator Papers, Kennedy Round, 1964–1965 I, Box 12. No classification marking. Transmitted to President Johnson on August 10; see Document 290.
2. See Document 289.