Foreign Relations of the United States, 1964–1968, Volume XIII, Western Europe Region

109. Memorandum of Conversation¹

Washington, November 12, 1965.

SUBJECTS

• 1. U.S. Policy Toward Common Market and EFTA
• 2. Kennedy Round
• 3. EFTA
• 4. EFTA and Economic Union
• 5. EFTA and Yugoslavia
• 6. Austrian-EEC Association
• 7. OECD Secretary General

PARTICIPANTS

• Dr. Ernst Lemberger, Ambassador of Austria
• Dr. Gerald Hinteregger, Counselor, Embassy of Austria
• Dr. Thomas Klestil, Economic and Scientific Secretary, Embassy of Austria
• Deane R. Hinton, Director, EUR/RPE
• Arthur D. Foley, Officer-in-Charge, Austrian-Swiss Affairs
• Herbert Spielman, Economic Officer, Italian-Austrian Affairs
• Thomas W. Fina, Officer-in-Charge, EUR/RPE

1. U.S. Policy Toward Common Market and EFTA

Ambassador Lemberger said that he wanted a clarification of U.S. policy in the light of the proposals made by Congressman Reuss and by senator Javits to re-examine U.S. policy toward the European Communities and the European Free Trade Area.

He recalled that during his tenure in Brussels, he had found U.S. Ambassador Butterworth a warm supporter of the EEC but somewhat reserved about EFTA.² However, following the French veto of United Kingdom accession to the European Communities, Ambassador Lemberger thought the United States had become a little less ardent supporter of the European Communities. While the European Communities were still the United States’s preferred vehicle for the attainment for European unity, he thought Ambassador Tuthill was more open-minded about the EFTA than his predecessor. Therefore, he wanted to know: 1) whether there had been any change in United States policy with respect to European integration, and 2) whether the United States felt that the Kennedy Round might have to be put off for a year or so.

Mr. Hinton replied that there was no change in fundamental United States policy with respect to the European Communities, the European Free Trade Area or the Kennedy Round negotiations. On the other hand, our views did evolve realistically as the objective situation changed.

It was clear that General De Gaulle did not share United States views on the type of Europe that we wished to see created. It was General De Gaulle’s rejection of this type of Europe that had led to the present Common Market crisis. For tactical reasons, the United States had remained publicly silent and had taken relatively little private diplomatic action. This by no means meant a change in U.S. policy toward the European Communities. It was a matter of what tactic was best to avoid giving General De Gaulle an opportunity to exploit our support for the Communities.

Statements by members of Congress do not necessarily express the views of the Administration. In the case of Congressman Reuss, the State Department had already replied to him saying that we did not share his appreciation of the situation and had very serious questions about the advisability of his proposed changes in policy.

As for Senator Javits’ speech in London, it seemed to mark somewhat of an evolution from Senator Javits’ position three or four months ago. The most important aspect of Senator Javits’ speech seemed to Mr. Hinton to have been that he now felt that the first priority for the United Kingdom was to seek membership in the Common Market at an appropriate moment. It was only if this renewed effort should fail that Senator Javits favored a return to his original proposal for a broad free trade area embracing the United States, United Kingdom and others.

2. Kennedy Round

The Kennedy Round negotiations could by no means be written off. Mr. Hinton said that he had been optimistic about concluding them successfully when Austrian Foreign Minister Kreisky had been here.³ His views had not changed. There were a number of signs from the French Government that it was interested in a successful Kennedy Round. One could never be sure, of course, that these signs were conclusive. But there were sound economic reasons that might well lead France to conclude at least a modest Kennedy Round. The great unknown was the attitude of General De Gaulle. There was evidence to support the view both that he would or that he would not favor a successful negotiation. This uncertainty remained even after our recent discussions with Sir Richard Powell. The UK view, otherwise, was also optimistic.

The United States very much wanted successful conclusion to the Kennedy Round and we believed that there was some chance of achieving this goal whether or not the French return soon to the Common Market. If the French did return, it seemed quite certain that Germany and the Netherlands would insist upon a commitment for a satisfactory Kennedy Round conclusion. If France did not return soon, there was increasing readiness on the part of the Five to proceed to conduct Common Market business on an empty chair basis awaiting the French return. Since one of the first major issues that the EEC would have to face would be the Kennedy negotiations, there was some chance that the Five might proceed were they obliged to do so.

In conclusion, while the French boycott of Community institutions had made the negotiations infinitely more difficult, they had not become impossible and the game would have to be played to the end.

3. EFTA

Ambassador Butterworth certainly, accurately reflected the attitude of the U.S. Government toward EFTA. The U.S. was never enthusiastic about it, while it saw a great potential in the Common Market. The U.S. realized that the United Kingdom and Sweden conceived of EFTA primarily as a response to the EEC. It looked to the U.S. like a discriminatory trading block offering no compensatory political advantages. We thought then, and still think, that United Kingdom membership in the EEC was highly desirable and it was evident today that various members of the EEC who were once lukewarm to UK accession, now realized that it would have been highly desirable. France would never have been able to put the whole existence of European integration into doubt had the United Kingdom been a member of the European Communities accompanied, as was likely, by Norway, Denmark, Ireland and possibly Portugal as well.

The United States never thought that states unwilling to move toward political unity should be members of the Common Market. It seemed, therefore, inappropriate for either Switzerland or Sweden to join. But the United States always recognized that Austria occupied a special position, had special problems, and deserved some special form of association.

The passage of time had caused an inevitable evaluation in our thoughts about EFTA.

• First, the Seven had made such important progress toward reducing their duties that one could not easily contemplate a re-imposition of duties among them.
• Second, thus far the United States had enjoyed greater commercial benefits from EFTA than it had suffered commercial disadvantages. We still feared, however, that these disadvantages would become fully apparent only when EFTA had eliminated its final internal barriers. The United States and Austria have had similar economic problems vis-a-vis the Common Market. That was one reason that the United States was so interested in an early and successful Kennedy Round.
• Third, the United States was also fully aware and deeply appreciative of the excellent support which the EFTA member states have given the Kennedy negotiations. Their success would be best not only for the EFTA and United States, but for Japan and the developing economics as well. A purely European trade solution would be contrary to our interests and would not have our support.

Ambassador Lemberger asked whether the United States still expected any of the political benefits from the Common Market which it had originally foreseen.

Mr. Hinton replied that the United States Government’s view, if there were one, would be that it was too soon to know. The play of forces in Western Europe was far from over. We should have to wait and see the eventual result.

Speaking personally, however, he recalled that the principal reason for U.S. support of European political unity was in order to find a lasting solution to the problem of Franco-German relations and to the problem of German relations to the West as a whole. We felt that it was essential to give a democratic Germany a viable alternative to a return to nationalism. We felt that tying Germany to Western Europe could help to foster loyalty to a European ideal in place of a national one. The European Communities provided just such an opportunity. They continued to symbolize and to work in this direction. The obstacle to the successful pursuit of these policies was France. This was first evident in its veto of UK accession.

The United States always felt that the Community structure tended to moderate nationalistic excesses. Until today, it had no proof of its hypothesis. But now that General De Gaulle wanted to free France of its Community obligations, to get rid of the pro-European leaders of the Community institutions and to change the system of majority voting, we had all too convincing proof that our contention was well founded.

European political unity was not close. But we were not prepared to conclude that simply because of the French attack upon it, the objective had become unattainable. We had seen that the Five remained loyal to the Treaties and that they wished to keep the Community institutions alive. Of course, there were differing views on how this should be done. Whether the Five would attempt to do so by making concessions to De Gaulle now in the hope that France will mend its ways after his departure, or whether the Five would proceed without France would be seen in the next 6 to 9 months.

The Kennedy negotiations and other commercial issues had given the impression of U.S. differences with the Common Market. But this was inevitable and in no sense suggested that our confidence in or support for these European institutions had at all diminished. The fact that the Kennedy Round had been delayed by the inability of the Common Market to negotiate did not reflect upon the Community institutions but rather upon the Government of France. We saw the Kennedy Round as a test of the liberal nature of Community trade policies. We were being patient and were waiting for the EEC to resume meaningful negotiations. We knew that the Government of France was in default of its obligations to the EEC partners and to its partners in the Geneva negotiations. But we were not walking out of the negotiations. We were waiting and hoped to be able to resume the negotiations in adequate time for their successful conclusion.

Ambassador Lemberger agreed that one of the principal justifications for the EEC had been the achievement of Franco-German rapprochement. But he felt that the European Communities had shown, during the last 2 or 3 years, that they had exactly the contrary effect. The more closely the French and Germans were obliged to work on questions within the European Communities the more friction seemed to develop as the Germans felt compelled to make concessions, especially on agriculture, as the price of increased integration. It appeared to him that these frictions arose because of the Community.

Mr. Hinton could not entirely agree. The friction within the Community seemed to him to stem from the decision made by the French to pursue a policy of strident nationalism. The cause for the friction was not the institutions but rather the unwillingness of one of the members to work easily with the others for the common good of the Communities. There has been an unfortunate breakdown in “Community spirit”.

4. EFTA and Economic Union

Ambassador Lemberger said that EFTA fulfilled one of the major conditions that the United States sought in a European grouping that it was outward looking in its commercial policy. He felt that EFTA would not lead to political unity as this was not one of its objectives. But he did believe that it was moving toward economic union. The members had discovered that the removal of tariffs alone would not suffice. They were being obliged to follow the example of the Common Market in working for the harmonization of other factors, e.g. drawbacks, agriculture and standardization. At the same time, the EEC was moving away from its political goals. As a result, he thought that EFTA and the EEC were moving closer together and perhaps toward a common structure.

Mr. Hinton agreed that the EFTA was evolving in this sense. He thought that greater EFTA policy coordination on technical questions was necessary. The case of the United Kingdom surcharge was a good example. But when experience had shown that the Six had great trouble in attaining this harmonization even when they were committed to it, motivated by a shared political vision, and had institutions to accomplish it, he doubted that the Seven could hope to do better. He doubted that the Seven had enough in common to achieve economic union. He thought the experience with United Kingdom’s surcharge was fairly convincing evidence that the Seven were still very far from being ready to coordinate their policies.

The case of Yugoslavia seemed to confirm this assessment. The U.S. welcomed the development of closer Yugoslav ties with the West and with EFTA, but if EFTA brought in Yugoslavia, would it not be more than ever difficult to go beyond more than loose policy coordination?

If EFTA would achieve economic union, the U.S. would be delighted. But, it seemed to him that the limited type of economic policy coordination that was likely to be feasible for the Seven was far better suited to achievement within the OECD. The matters on which coordination might be attained—such as border taxation, standardization of nomenclature, patents, etc., were broader than EFTA. They were a matter of concern not only for all of the OECD countries but some of the Eastern European states as well. The U.S. had a very direct interest in these questions. Therefore, he felt that they could be more successfully dealt with in a larger forum.

In resume, the U.S. was prepared to give its full support to genuine political or genuine economic union in Europe but if the relationship among the member states were to be a loose one, then he would hope that it would be at the Atlantic or free world level.

5. EFTA and Yugoslavia

Ambassador Lemberger said that he expected the United Kingdom and Switzerland to push for favorable action on the Yugoslav approach. While Yugoslav relations with the EEC were stalled because of Yugoslavia’s quarrel with West Germany, there was no such obstacle in EFTA. Although the official response from the Copenhagen Ministerial Meeting was not very forthcoming, this was primarily because the session was principally concerned with EFTA-EEC bridge-building. Ambassador Lemberger suggested that Sir John Coulson might be ready to explain EFTA Council thinking on the Yugoslavia question during his visit next week.⁴

As for Austria, it had excellent relations with Yugoslavia and important commercial relations. There were neither political nor frontier issues between Austria and Yugoslavia. Austria was, therefore, very receptive to the Yugoslavia approach.

6. Austrian-EEC Association

Mr. Hinton asked whether Ambassador Lemberger’s observations about the EEC should be interpreted to mean that Austria had lost interest in association with the Common Market.

Ambassador Lemberger said that Austria was still interested but that its negotiating partner was in limbo. In the absence of the French no meaningful negotiations were possible although Austria would continue to go through the motions.

[Here follow 3 paragraphs of discussion on the choice of a new Secretary General for the OECD.]

1. Source: Department of State, Central Files, ECIN 3 EEC. Confidential. Drafted by Fina.
2. W. Walton Butterworth was U.S. Representative to the European Communities August 1961–October 1962.
3. Foreign Minister Bruno Kreisky visited Washington October 21–22.
4. EFTA Secretary General Sir John Coulson visited Washington November 18–19. Memoranda of his conversations, primarily devoted to the new Secretary General’s getting acquainted with Mann, Herter, Leddy, and other U.S. officials, are in Department of State, Central Files, ECIN 6 EFTA and FT 13–2 US.