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

316. Memorandum From the Acting Special Representative for Trade Negotiations (Roth) to President Johnson¹

Washington, August 2, 1966, 2:45 p.m.

SUBJECT

• Kennedy Round Agricultural Offers

Summary

On Saturday, August 6, 1966, the European Economic Community will table in Geneva its agricultural offers in the Kennedy Round. This Office now intends unless otherwise instructed to follow the general negotiating strategy approved by you in September of last year, i.e., to put forward our agricultural offers of principal interest to the Community that we had previously withheld. In addition, we propose to table initial offers in the meat and dairy sectors.²

Discussion

You will recall last September you authorized Governor Herter to table agricultural offers in the Kennedy Round.³ Items of primary interest to the European Economic Community were to be withheld until the Community was ready to reciprocate.

Ten days ago the six EEC member countries reached agreement on a common agricultural policy for most of the major products. They also agreed to table their agricultural offers. This memorandum, therefore, proposes that we now table the U.S. offers of principal interest to the EEC as well as offers in the meat and dairy sectors. This procedure has the strong support of Under Secretary Ball and the reluctant acquiescence of Secretary Freeman.⁴ In addition, the Vice President is in agreement with the proposal, subject, of course, to whatever withdrawals are ultimately necessary to establish reciprocity.

The Community’s new agricultural policy is based, for many products, on very high support prices and tightly protected markets, and the EEC offers related to these policies are consequently expected to be entirely inadequate. Should they not be substantially improved, and it would be unrealistic to expect very much improvement, it will be necessary for the U.S. to make extensive withdrawals of its own agricultural offers. Nevertheless, we are convinced that a strategy of generous U.S. initial offers creates the most effective pressure possible on the EEC to improve its offers.

The overall strategy in the Kennedy Round—both in industry and in agriculture, has been to make a strong opening bid. Given the internal politics of the six nations of the Community, this continues to appear to be the most effective way of achieving the maximum result in the negotiations.

Position of the Department of Agriculture

At the request of Secretary Freeman, a meeting of the Trade Expansion Act Advisory Committee was held last Friday.⁵ Subsequently, he addressed a memorandum to you (copy of which is attached) indicating that although he questioned the wisdom of the decision, he regarded it as a tactical question and was prepared to acquiesce in the basic strategy decided upon in the meeting with you last August. Nevertheless, he has serious doubts about this strategy in three principal areas:

1. Domestic political repercussions: Should it become known that the United States had tabled an offer of considerably greater magnitude than that of the Community, the political repercussions would be serious.

We do not believe that details of the negotiations, which are secret, will become fully known for some time. The industry offers which now have been on the table for a year and a half are still, on the whole, very much a secret—both from industry and from Congress. Further, in one of the two most sensitive categories, dairy products, the proposed U.S. offer, as approved by the Department of Agriculture, is merely an expression of willingness to examine issues such as market access, the use of export aids by high-cost producers, and disposal of dairy products in non-commercial channels. In the meat sector, the other sensitive category, the central aim of the U.S. is to create acceptable conditions of access for meat exporters in other markets than our own, principally in the EEC and Japan. We, ourselves, would only be willing to undertake commitments to maintain access to our market for beef, veal and mutton, along the lines of our present meat import quota legislation. In other words, the U.S. would be offering no more than the present law in beef already permits. No tariff reduction is offered at this time.

2. Reciprocity: Secretary Freeman doubts that the U.S. will be in a position to make sufficient withdrawals of offers to achieve reciprocity.

Governor Herter has made very clear to the Secretary, to Congress, and to the European Community that full reciprocity must be achieved under our legislative mandate. He is absolutely committed to this and is fully supported in his determination by George Ball. Neither foreign policy considerations, nor problems of the less-developed countries will, of themselves, require less than full reciprocity with the EEC and the other developed countries.

The headnote accompanying the U.S. agricultural offers tabled last September 16 stated that:

The United States is tabling these offers:

(a) in the expectation that other principal negotiating countries will also table concrete and specific offers on agricultural products, and

(b) on the understanding that, if the other principal negotiating countries are not willing to implement concrete and specific offers on agricultural products which are of a trade coverage and of a degree of liberalization equal to that of the United States offers, the United States will withdraw such offers in whole or in part, to the extent it deems necessary.

These conditions will, of course, also apply to the additional offers of interest to the EEC which we now propose to table.

3. Strategy: Secretary Freeman questions the basic U.S. negotiating strategy of beginning with full offers.

This strategy, as approved by you, remains the most effective method of eliciting full offers from our negotiating partners. Experience in previous negotiations clearly indicates that the opposite tactic of beginning with low offers and negotiating upwards tends to lessen the total scope of substance of the negotiations. In addition, to change this strategy at this time would indicate to the Community and to the other agricultural exporters that the U.S. did not now feel that the agricultural part of the negotiations was as important as the industrial. It would lessen rather than enlarge the hope of achieving the continuing access to the European market that Secretary Freeman desires.

William M. Roth

Attachment⁶

U.S. OFFER SUBMITTED TO THE GATT MEATS GROUP

1. The central aim of the U.S. offer is to create acceptable conditions of access to its market for meat exporters. It goes without saying that the U.S. offer could only be implemented as a part of an arrangement under which other major meat importers likewise undertake commitments that provide acceptable conditions of access to their markets.

2. Product coverage. Beef, veal, mutton (fresh, frozen, chilled).

3. The United States would be prepared within the context of the Kennedy Round, and subject to the conditions set forth in paragraph 1 above, to undertake commitments respecting the meats concerned to permit imports to share in the United States’ market, and to share in any growth in that market, as follows: The annual aggregate quantity which will be admitted will not be less than the average quantity imported during the period 1959–1963 adjusted by the same percentage that domestic production of these articles has increased or decreased in comparison with the average annual production during the base period 1959–1963.

4. The United States has no fixed ideas as to the form of a meat arrangement. On the basis of the discussion held to date by the GATT Meats Group, it appears likely that an international meat arrangement might take the form of an agreement on a statement of general principles supplemented by bilateral agreements registered with the GATT between principal importing countries and their major supplies. The Meats Group has identified certain elements that should be taken into consideration in the negotiations. These elements are listed in Annex A to TN 64/17, the report of the Group to the TNC.⁷ The United States is prepared to participate in the further examination of these elements by the Meats Group.

Attachment⁸

U.S. OFFER SUBMITTED TO THE GATT DAIRY GROUP

1. Product coverage. Butter, the principal types of cheese, non-fat dried milk.

2. The discussions in the Dairy Group have not yet progressed to the point where there have emerged the outlines of arrangements which would carry out the Ministerial Directive of improved access to markets in furtherance of the development and expansion of trade. The United States is, however, prepared to continue to participate in the work of the Dairy Group with the view to carrying out the Ministerial Directive.

3. The issues which the United States would consider as appropriate to be considered by the Dairy Group would include access to markets, the use of export aids by high cost producers, and disposal of dairy products in non-commercial channels. It is the U.S. view that export aids and non-commercial disposals should not be used to disrupt normal commercial markets of efficient dairy exporting countries. It is prepared to cooperate in the examination of measures or commitments which could be undertaken by all countries to avoid this occurring.

1. Source: Johnson Library, Bator Papers, Kennedy Round, (GATT) (May 4, 1964) [1 of 2], Box 11. Secret.
2. A handwritten note in the margin next to this paragraph reads: “Approved by the President August 4, 1966. F. M. Bator.”
3. See Documents 290 and 292.
4. See Documents 288 and 289.
5. No record of this July 29 meeting has been found.
6. Secret.
7. Not found.
8. Secret.