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

338. Telegram From the Department of State to the European Office of the United Nations¹

Washington, April 21, 1967, 12:36 a.m.

179528. Ref: Geneva 3299.²

1. Wish to share with you results of two-hour conversations with group on basis your very helpful cable. Following comments are simply exploratory and for your consideration in the light of your best estimate of the negotiating situation.

2. If we understand correctly your four-part package, U.S. would maintain substance of pre-November offer—as modified by pullback in steel, cotton textiles and synthetics and necessary adjustments to agriculture—and accept good portion of EEC disparities claims. In return we would need: (a) more food aid and higher grain prices, and SSR if we can get a useful number, (b) something solid from EEC in non-group agriculture along with better EEC machinery offers, and (c) satisfactory decoupage.

3. We share your view on how to handle disparities issue. Our export interest in most of these items is not great. Both hold-back on formal acceptance of any disparities list and size of list we finally do accept give us some leverage. However in light 1963 ministerial resolution EEC believes it has disparities coming to it anyway, and our final acceptance not—at least as seen from here—likely to buy very much.

4. Understand you will be pressing hard on grains, non-group agriculture, and decoupage: the US items in four-part package. Our own reading of domestic political situation is that the greatest need in agriculture is movement on non-group items (fruits and vegetables, poultry parts, tobacco) combined with a somewhat bigger food aid package and higher wheat prices. Based on cables from Geneva and Bonn it would appear too early to discuss grains arrangement without access. Would be grateful for your judgment of best SSRs obtainable in context on other objectives.

5. Questions we have been asking ourselves is whether chemicals decoupage—while clearly desirable—need be sine qua non and whether at some point we should not seriously consider trading it off for satisfaction of other US objectives, particularly in agriculture. Additional EEC concessions could not of course be conditional on elimination of ASP, but only on abandonment decoupage.

Basic question is whether for purposes of balance—at least as far as US concerned—chemical sector could be treated as self-contained. Obviously this would give Congress clear shot at ASP decision.

Answer appears to depend essentially on two factors: (a) how close could we come to balancing remainder of KR including agriculture if all chemicals set aside; clearly this is a function of what we could buy by giving up decoupage; (b) what are our chances of getting a decoupage whose KR slice would make significant contribution towards balance?

Our instinct is that it would be politically easier for President to confront a divided if unhappy chemical industry than an angry farm bloc. This does not mean that we would be disposed to take a long risk with Senate Finance Committee and confront them with fait accompli. It does mean that in our view Congress would be less concerned with exact statistics of KR minus all chemicals if basic TEA goals in agriculture as well as industry are met. Key judgment of course is what statistical result would meet TEA goals. We must not end up in situation where ASP action would appear necessary to balance otherwise defective KR. However, this does not mean that exact quantitative matching is necessarily required.

Would much appreciate your judgment of (a) what balance might look like on basis of your four point package if all chemicals treated separately; will cable for your comment our own estimate on basis imperfect data available here; (b) what we might be able to buy from EEC and how if we acquiesced in putting all chemicals into separate package; and (c) what are chances that KR slice of chemicals decoupage would in fact contribute significantly to balancing KR.

6. Agree wholly with your assessment of use of positive list as bargaining tactic before it is formally tabled and of danger that it could hurt US by irreversible fixing KR at lower level once list is tabled. Although we are not entirely clear on timing as you see it, we assume you would not wish in any case table list before results of April 24 EEC Council are known. Further question is how far US would attempt convey informally to EEC contents of four-part package prior to formal tabling of positive list. Assume you share our feeling that formal tabling of positive list is move of such importance that President would wish to have opportunity to go over whole KR picture and his options before we act. Given Adenauer funeral³ he would not be able to focus on negotiations before Thursday or Friday next week.⁴ This would not of course prevent you from showing US positive list to Rey on informal basis beforehand.

Rusk

1. Source: Johnson Library, National Security File, Subject File, Trade Negotiations, Kennedy Round, “Potatoes,” Box 47. Secret; Immediate; Limdis. Drafted by Enders (M) and Rehm (STR); cleared by Trowbridge (Commerce), Schnittker (Agriculture), Solomon (E), Roger Morris (S/S-S), and in substance by Eugene Rostow; and approved by Bator.
2. Document 337.
3. Funeral services for Konrad Adenauer, who died on April 19, were held at Bonn and Cologne on April 25.
4. April 27–28.