As you know, Bill Roth has brought off a handsome deal in Geneva. Its
basic structure is:
One caveat: not only is there a vast amount of mopping up to do in
Geneva, but legally we won’t have a deal until the President (and other
governments) sign off. There is no need to emphasize the distinction,
but it has to be kept in mind.
Tab A gives the specifics of the package, as far as we now know
them.2 Tab B
is the Vice President’s revised talking points.3 Tab C is a draft Presidential
Statement now in the White House mill.4
We gave you yesterday some talking points on the political meanings of
the negotiation.5 In the end our bargaining
partners—the EEC, Canada, and the
Nordics in particular, Britain also—went far to meet our demands.
Apparently Jean Rey for the EEC performed exceptionally well, and in
the end got strong backing from the member states, France included.
Bill Roth stresses the need to recognize these efforts publicly and build
an atmosphere of good feeling around them. You may wish to speak to this
point also on the Hill.
Tab A6
Washington, May 16, 1967.
GENERAL RESULTS OF THE KENNEDY ROUND
While a great many details are still to be worked out, the general
outline of the Kennedy Round agreement is clear. It consists of the
elements discussed below.
[Page 938]
Overall Balance
In overall trade terms and taking both industry and agriculture, the
tariff cuts made by the U.S. are in balance with those of the other
industrialized countries. The United States is giving tariff cuts on
about $7–1/2–$8 billion of industrial and agricultural imports and
is obtaining tariff concessions on about the same amount of U.S.
exports.
In industry, the U.S. and the other countries have agreed on cuts
averaging between 33–35%. In agriculture, the average cut is less
but the United States has obtained important concessions covering a
substantial volume of trade.
Country-by-Country Balance
With the EEC, the U.S. is roughly in
balance on a trade coverage basis in the industrial sector. In the
agricultural sector, the balance is somewhat in our favor, with the
EEC giving the U.S. concessions
averaging about 15%, with a significant range of products
covered.
With the U.K., we are somewhat short
of balance overall; with the other EFTA countries the balance is in our favor.
With Japan, the overall results are satisfactory although complete
balance on a trade coverage basis is not possible. This is largely
due to the fact that 44% of our exports to Japan are already
duty-free.
With Canada, we have a significant bargain involving substantial cuts
on $1.3–1.4 billion on trade on each side. Almost half of our
concessions involve eliminating duties of less than 5%, while most
of Canada’s reductions are on duties of 25% or more.
With the so-called “borderline countries”—such as Australia, New
Zealand, Spain, Portugal, and Israel—negotiations even in broad
terms are still continuing. We will probably have some imbalance
with these countries, principally because they benefit as secondary
suppliers from U.S. tariff reductions granted to the major
participants.
Grains Agreement
The Grains Agreement establishes a minimum price for ordinary wheat
at $1.73 a bushel (23# above the minimum now in the International
Wheat Agreement) and a maximum of $2.13–-or a range of 40#. However,
the prevailing world price for ordinary wheat is now above $1.73 and
is expected to stay above that level for the next three years.
The agreement calls for a food-aid package of 4.5 million tons of
grains each year for three years. The U.S. will contribute 42%, the
EEC 23%, Canada 9%, and
Australia, the U.K. and Japan each
5%. 4.5 million tons is the equivalent of $350 million a year—ten
times the value of the annual FAO program. Importing countries will
contribute 2 million tons per year ($150 million) which will help
make room for U.S. commercial exports.
[Page 939]
The grains agreement lasts for three years. It does not affect in any
way our rights under the so-called “Standstill Agreement” with the
EEC, nor our right to the zero
binding given by the U.K.
Non-Grain Agricultural Products
Returns in this sector are quite incomplete.
With the EEC, the balance is slightly
in our favor in the non-grains sector. In this sector, we are giving
concessions to the EEC on such items
as canned hams and Turkish-type tobacco—but not fresh or frozen
meats, dairy products, or wines. In return, we are getting
concessions on such items as tobacco, canned vegetables, and such
meat products as tallow, offals, and canned poultry.
In our non-grain negotiations with countries other than the EEC, we are acquiring valuable
concessions, as on fresh fruits and vegetables from Canada, and on
fish products from Canada and Japan.
Chemicals
In the first package, which will be part of the overall agreement of
tariff concessions, the U.S. will make tariff cuts averaging about
42%. The EEC, U.K., and Japan will make cuts which combined average
25%-30%. On this basis we have a balance in our favor in the
chemical sector.
In the second package, the U.S. agrees to seek legislation
eliminating ASP and establishing new
duties for chemicals at 20%, except for certain drugs at 25% and
dyes at 30%. In return, the EEC,
U.K., and Japan will make further
cuts of 20%-25%. The second package will therefore stand on its own
feet.
In addition, conditional upon elimination of ASP, the EEC will
modify its discriminatory road taxes and the U.K. will make a 20% reduction in the Commonwealth
preference on tobacco.
Rubber Footwear
The U.S. has agreed to eliminate ASP
on rubber footwear but to substitute a new compound duty of 20% plus
25# per pound, with the proviso that the combined duty shall not be
less than 58%.
Textiles
With respect to cotton textiles, the extension of the Long-Term
Agreement has been agreed to. Moreover, the U.S. has agreed to cuts
of no more than 20%.
Almost all woolen textiles have been excepted from negotiation.
However, a part of the wool textile duties depends upon the U.S.
duty on raw wool, which has been the subject of negotiations. It now
appears unlikely that Australia will grant concessions significant
enough to justify our cutting the raw wool duty. Without such a cut,
there will be no cut whatever.
[Page 940]
With respect to man-made textiles, the average tariff cut by the
United States will be 13 per cent, or, if we include the products of
the chemical industry, about 20%. A large share of these products
were totally excluded from the negotiations.
Steel
The U.S., EEC and U.K. have agreed on a general
harmonization of duties with the U.S. making cuts of less than 10%
on the average. This will bring our steel duties to about 6%. Japan
is making substantially greater cuts.
Aluminum
On unwrought or ingot aluminum, the EEC has agreed to bind a duty of 9% and enlarge a
tariff quota with a duty of 5%. Accordingly, the U.S. is making a
token cut in its duty on ingot.
On wrought aluminum, negotiations are continuing.
Significant U.S. Exceptions
The U.S. excluded the following from the negotiations:
- Most dairy products
- Most meats
- Most wines
- Many fresh fruits and vegetables
- Most cigars
- Most petroleum products
- Most wool and many man-made textiles
- Most footwear and gloves
- Most glass items
- Watch movements
- Lead and zinc
- Carpets
Anti-Dumping Code
The major negotiating countries, including the U.S., EEC, U.K., Japan, Canada and most EFTA countries, have reached agreement on an
anti-dumping code. This code will make the anti-dumping practices of
the big trading nations uniform. The code will provide major
benefits for U.S. exporters, including provisions for open hearings
in foreign countries, and the introduction by Canada of an injury
test in dumping cases.
The EEC has been in the process of
setting up a general dumping regulation for member countries, and
this could have been adverse if not nailed down by the new code. On
the downside, anti-dumping procedures will be speeded up once action
has been deemed necessary.
The dumping code will not require new legislation, since it is
consistent with present U.S. law.
