345. Memorandum From the Special Representative for Trade Negotiations (Roth) to President Johnson1
We are presently in the final, critical stage of the Kennedy Round. Chances are better than ever that an agreement can be achieved. However, there are still major unsolved problems that at least raise the possibility of failure.
The most important negotiating problems we face at this time are:
1. Grains
We have been pushing for a grains agreement with a minimum price of $1.70–1.75; an access commitment with certain automatic safeguards; and a food aid contribution of at least six million tons of which the U.S. would take 40 percent. Although the Canadians and Australians have been increasingly rigid on price, I believe it is possible to finally agree on something between $1.70 and $1.75.
On food aid the Community has tentatively said they would consider a three million ton program and the British would accept their share. We think it is possible to get the Community to somewhere between four and six million tons which would mean a contribution of one million tons from them. The Japanese may also agree to a small program, but only at the very end of the negotiations.
The major sticking point between the U.S. and the EEC is their demand for a minimum price range on feed grains. The only answer we can presently see to this impasse is the possibility of dropping our demand for access and, in effect, having only a wheat agreement involving food aid and price. Our consultations on the Hill and with the trade would indicate that politically a complex access arrangement would be difficult to sell under any circumstances and that we might be better off with merely the two elements of price and food aid. Further Congressional consultations on this will be necessary.
Schnittker will be joining us in Geneva this week for a final attempt at putting an agreement together. Meanwhile, it could be that Pearson or Holt2 might appeal to you to press for a higher price range, but anything higher than $1.75 is unrealistic.
[Page 907]2. Non-group Agriculture
Over the last two weeks we have gone much further than ever before in saying that we could not complete the Kennedy Round without some adequate offers from the EEC in the various areas of agriculture, i.e., canned fruit, offals, tobacco, tallow, etc. The Community negotiators have slowly reacted to this pressure by offering very small reductions in a number of hard core items. As of now, we have in excess of $200 million in trade offered which has a trade value of between $90 and $95 million. This is not enough, but we think by continuing pressure we can improve this somewhat.
Offers from non-EEC countries amount to approximately $400 million in agriculture.
3. Industry
There are a number of areas still to be negotiated out in industry, but I do not see any major problems in this area. We have pulled back our offers substantially in man-made fibers, and reduced the proposed cut in the new Long-Term Cotton Arrangement tariff from 50 percent to approximately 20 percent. Steel offers also have been reduced by almost 80 percent.
4. Chemicals
Perhaps the single most difficult problem other than grains lies in the chemical sector. Here we face the problem of American Selling Price which I discussed with you several weeks ago. We are maintaining that it will be necessary to bring back a separate package to the U.S. Congress and that it should include benefits both for the chemical industry and non-tariff barriers of interest to other segments of U.S. industry. The Europeans would prefer to put the whole chemical sector in the ad referendum package, but because our chemical exports are greater than imports this would create an additional imbalance in the Kennedy Round of almost a half billion dollars. We would then be in a position of saying to the Congress: “Unless you agree to the ASP conversion the U.S. will not have received a balanced deal in the Kennedy Round”. We have consist-ently told Congress this would not happen, but rather that the Kennedy Round would be fully reciprocal. The package that we brought back to them on ASP would, in effect, stand on its own feet.
5. Reciprocity
Last week we submitted to the other participants two offers: One a maximum package and the other a minimum package, each one having what we believe to be a sufficient degree of reciprocity. It is our hope to negotiate something in between these two extreme approaches.
Although we cannot achieve exact reciprocity with each country—especially Japan—overall we would expect to have a balanced package. [Page 908] Of a necessity, industry would pay for some of the benefits achieved for agriculture, but the payment should be kept within reasonable limits. The less-developed countries, of course, are not required to reciprocate in full what we are offering them and therefore there would be an imbalance in that area.
Schedule
The EEC negotiators have been resisting any terminal date for the negotiations. They have agreed to several, but have never been able to keep them. This is partly a result of their own internal difficulties in reaching common negotiating positions, but partly their belief that by pushing the U.S. against its deadline their negotiating position is improved.
We meet again in Geneva on Thursday and I would expect to say that we were still looking forward to the conclusion of the negotiations by Tuesday, May 9th. I would also like to add that after consultations in Washington I am able to report that Secretary Rusk would be available for a Ministerial meeting on that date if it were found necessary. A number of the other participants, including Japan, Canada, Australia and perhaps the Nordics may also indicate their desire for a final meeting at a Ministerial level. The Community, on the other hand, even if they finally agreed, would push for a later date. It would then be possible for us to allow a few more days and still keep to our timetable.
- Source: Johnson Library, National Security File, Subject File, Trade Negotiations, Kennedy Round, “Potatoes,” Box 47. Confidential. The source text is attached to Document 346.↩
- Lester Pearson, Prime Minister of Canada, and Harold Holt, Prime Minister of Australia.↩