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

321. Memorandum of Conversation¹

Washington, September 20, 1966, 3 p.m.

PARTICIPANTS

• Fruit Growers—(See Enclosure 1)²
• STR —
  • Christian A. Herter, Special Representative
  • Bernard Norwood, Chairman, Trade Staff Committee
  • Joseph G. Simanis, Assistant to the Chairman, Trade Staff Committee

SUBJECT

• U.S. Fruit Export Problems: Kennedy Round and Country Problems

Mr. Falk,³ speaking for the Council, outlined the attitude of the fruit exporters regarding U.S. trade and the Kennedy Round. He said that they wished to obtain fair access to export markets. In this connection, they had supported passage of the Trade Expansion Act. He said that U.S. fruit producers were gratified by the removal of some barriers to sales of U.S. fruit that had resulted from GATT Article XXIII consultations with France. (This comment was repeated several times during the meeting by other members of the group.) Falk said that the EEC agricultural offer seemed, from the information that had been made public, to be extremely poor and was perhaps a step in the direction of greater protectionism rather than a move toward liberalization.

Governor Herter expressed his continuing sympathy for the problems of the fruit growers and canners. He agreed that the EEC’s agricultural offer was not encouraging and, noting particularly the extension of reference prices to a new range of products, was regressive in some respects. Lack of provision in the CAP for production controls, he added, detracted further from the offer. We had informed the EEC, he said, that their offer, if not a trading position from which they were willing to retreat, was valueless.

In commenting on a statement by Falk that “no agreement was better than a poor agreement,” he said that an agreement could be considered poor if it were extremely limited but that it seemed to him to be wise in such a case to accept the agreement as long as adequate reciprocity was involved. In this connection, he noted that the American Farm Bureau had recommended immediate withdrawal of all U.S. offers of interest to the EEC until they improved their agricultural offers. As a matter of timing and tactics, Governor Herter disagreed. If the EEC does not eventually offer adequate concessions, withdrawals would be made; but for the time being, we should allow what we have tabled to remain as our offer.

Falk agreed that reciprocity was the crucial factor. He pointed out that the Fruit Exporters’ Council had prepared a statement to be presented to a group of Senators which included a recommendation similar to the cited proposal of the American Farm Bureau. However, in order not to create difficulties for the United States in the negotiations, he suggested that a change might be made in the Council’s wording. Governor Herter agreed that a few changes in the wording could make it acceptable. (Immediately after the meeting, the Council approved changes in the last paragraph of the statement so that it would recommend withdrawal of U.S. offers, but not necessarily “immediately,” and “unless” rather than “until” the EEC improved its offers. See Enclosure 2.)

Further reference to the Council’s meeting with a group of Senators scheduled for the following day was made in a statement read by Mr. Elliott.⁴ After cataloguing the import restrictions encountered by U.S. fruit exporters in Latin America, he proposed that a Senate body be requested to hold hearings on these trade barriers.

In response to Governor Herter’s questions regarding the basic objective to be sought by the Council in its discussions with the Senators, Falk said that they would emphasize the importance of reciprocity and would urge Congressional support for the views expressed by the Governor. Falk suggested to his associates that the Council give further consideration to how such a request for hearings should be presented in the light of Governor Herter’s comment that Congressional hearings, if conducted in the next few weeks, would interfere with efforts of his limited staff to bring the Kennedy Round to a successful conclusion. The hearings, it turned out, were envisaged by the Council as a means of putting pressure on the Executive branch, particularly the State Department, to abandon its policy of favoring regional arrangements.

It was generally acknowledged that the positions of the Council and of the Executive branch were in accord insofar as Kennedy Round objectives were concerned and that the Council was intervening—helpfully, it intended—into the area of negotiating tactics, which Governor Herter believed had to be left to his discretion.

Mr. Miller⁵ asked clarification of our policy toward Mexico to which we extend MFN treatment despite numerous restrictions in places on entry of our products. Norwood described the representations that the U.S. Government often makes to the Mexicans concerning arbitrary and harmful trade actions. He also stated that we had been prepared to negotiate a new bilateral trade agreement to replace the one which Mexico denounced about 15 years ago and to negotiate with Mexico in the Kennedy Round with a view to its becoming a GATT member. We wish to avoid retaliatory action which might evoke counter-measurers. Mexico, he observed, constitutes a growing market despite difficulties raised for the United States in exporting some products. U.S. imports from Mexico, contrary to Mr. Miller’s understanding, are not completely unrestricted, cotton textiles being an area in which the United States has considered quotas to be warranted. U.S. withdrawal of MFN treatment would invite several possible forms of retaliation by Mexico, possibly including Mexican export control materials vital to our economy.

Governor Herter added that, in our trade negotiations, we do not generally offer concessions on items which are supplied primarily by countries that are not members of GATT.

Mr. Reter⁶ referred to problems in gaining access to the Venezuelan market for U.S. apples. Norwood replied that this problem has been discussed with the Venezuelans and that we had achieved a modest, but transitory benefit, in getting an understanding on apple quotas for the current year. He observed that the Venezuelans are able to counter our complaints by citing our restrictions on petroleum imports, which cover trade many times that represented by fruit.

Governor Herter commented that our trade relations with the less-developed countries are complicated by a growing feeling in the poorer parts of the world that the world’s wealth should be more equitably distributed. The arguments presented are similar to those which were raised a century ago in our country against the tremendous gap between the mass of the poor and the great wealth concentrated in the hands of a few.

In closing, spokesmen for the Council expressed their continued support for the manner in which trade negotiations are being conducted.

Enclosure⁷

U.S. NATIONAL FRUIT EXPORT COUNCIL

Statement of Position

The U.S. National Fruit Export Council, representing non-price-supported perennial fruit crops and their products, has from its inception supported the principle of reciprocal trade agreement negotiations and specifically the Trade Expansion Act of 1962. Since the passage of that Act we have supported the U.S. hopes and efforts for achieving meaningful trade negotiations with balanced and reciprocal concessions.

The U.S. position in the initial stages of preparing for negotiations under the Trade Expansion Act was that it “would not take part” in the exchange of exceptions lists for nonagricultural products unless there had first been some agreement on how agricultural products were to be handled.

In November, 1964, the U.S. policy position was modified when the U.S. agreed to table offers on industrial products separately from agricultural products.

That action was followed by a modified policy statement that the United States would not “conclude” any agreement that did not provide for acceptable conditions of access for U.S. agricultural exports into foreign markets.⁸

In 1964 the United States had advised the EEC that its proposal to negotiate support levels was not acceptable. That proposal was the essential element of the EEC’s reference price and compensatory levy system of agricultural protectionism.

It is now clear from published reports from Europe that the EEC agricultural offers do not provide a basis for meaningful negotiations for trade liberalization. In fact, they embody and perpetuate the restrictions on agricultural imports which the United States had already rejected as a basis for negotiations.

Governor Herter has stated (before the Subcommittee on Foreign Economic Policy of the House Committee on Foreign Affairs, on August 10, 1966):

“In regard to agriculture the United States has made it clear that its offers have been put forward in the expectation that the other major participants will make comparable concessions, and has warned that if this proves not to be the case these offers will be withdrawn or modified to the extent it deems necessary. It has also warned that both its agricultural and industrial offers will be withdrawn to the extent required to achieve reciprocity in the over-all negotiations.”⁹

The statement from Governor Herter’s Office recognizes that reductions in U.S. industrial tariffs are the purchase price with which the U.S. will buy improved conditions of access for U.S. agricultural exports. This has been the U.S. position since the start of the Kennedy Round, and its soundness is based on the importance of U.S. agricultural exports to the domestic economic well-being of the U.S. and the contribution of agricultural exports to the U.S. balance of payments. It would be unthinkable for the U.S. to lower its tariffs on industrial products from the EEC without achieving its objectives with respect to agricultural trade liberalization. To do so would preclude hopes for future improvement in conditions of access for U.S. agricultural exports or even for the maintenance of our present level of agricultural exports.

In line with previous U.S. Government policy statements, we insist that the EEC reference price and variable levy system, if implemented, is incompatible with trade liberalization.

Notwithstanding the steadfast support that the U.S. National Fruit Export Council has given the U.S. efforts at trade liberalization, we can come to no other conclusion but that no trade agreement at all is better than a bad trade agreement.

In view of the course of events which is outlined herein, it is the conclusion of the U.S. National Fruit Export Council that the United States should immediately withdraw all offers, industrial and agricultural, on articles of interest to the EEC until the EEC submits agricultural offers that represent trade liberalization, rather than protection.

Adopted by the U.S. National Fruit Export Council September 20, 1966, at its annual meeting in Washington, D.C.

1. Source: Department of State, Central Files, FT 7 GATT. Unclassified. Drafted by Joseph G. Simanis (STR) and Bernard Norwood (STR) on September 26 and approved by Herter. The meeting was held in the Office of the Special Representative for Trade Negotiations. The source text is an attachment to CA-2653 to Brussels (USEC) and five other posts, October 5.
2. The list of 23 representatives of fruit growers is not printed.
3. Ernest Falk, Northwest Horticultural Council, Yakima, Washington.
4. Frank Elliott, California Canners and Growers, San Francisco, California. The statement has not been found.
5. Henry W. Miller, Consolidated Orchard Company, Paw Paw, West Virginia.
6. Ray R. Reter, Northwest Horticultural Council, Medford, Oregon.
7. No classification marking.
8. Not further identified.
9. The quotation is from an undated background paper that Herter submitted to the subcommittee at the outset of his testimony on August 10. (The Foreign Policy Aspects of the Kennedy Round: Hearings Before the Subcommittee on Foreign Economic Policy of the Committee on Foreign Affairs, House of Representatives, Eighty-ninth Congress, Second Session (Washington, 1966), pp. 25–26)