Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

217. Telegram From the Embassy in Germany to the Department of State¹

Bonn, December 10, 1971, 1152Z.

15341. Subject: Nixon/Pompidou meeting: EC trade negotiations. Ref: Bonn 15229; Paris 2977 (exdis).²

1. Summary: I am concerned that the GOF might hold up approval of the EC trade negotiating mandate until the Nixon/Pompidou meeting. Department should be alert to the possibility that Pompidou might also concede on grain prices in full recognition of the fact that it would be politically difficult for the Germans to move on this issue.³ I believe the GOF should not be allowed to shift the entire burden for seeking a grain CAP modification to the USG but should share the responsibility with other EEC members of working out an overall acceptable trade response. End summary.

2. I have noted reports suggesting that GOF might seek to hold up the EC mandate on trade negotiations so that Pompidou can gain political mileage by reaching agreement with President Nixon. It is also conceivable that Pompidou will offer us some satisfaction on grain during the Azores meeting while at the same time expecting that this would be politically impossible for the Germans as stated in para 3 reftel B. Such a development would admittedly put the Germans in an extremely difficult position. However, in my view this would not necessarily be detrimental to our interests; such a move by Pompidou might thus bring additional pressure on the Germans to offer some satisfaction on grain prices; perhaps also the reverse system could be used with Brandt to put pressure on the French on other “impossible” issues.

3. For some time now the Embassy has urged the FRG to reduce grain prices. We have made it clear that present CAP prices are a serious burden to American agriculture and undermining support for liberal trade in the U.S. In recent weeks we have strongly re-emphasized the necessity for a reduction of EC farm prices and the use of production neutral income payments to compensate German farmers for the effects of revaluation and requested price reductions.

4. Admittedly grain price reductions will be extremely difficult for the Germans. Brandt and the SPD are dependent on the Free Democratic Party to continue in power. The FDP has important strength in agricultural constituencies making Brandt particularly dependent on Minister of Agriculture Ertl who is a conservative member of the FDP and a Bavarian farmer. Alienation of Ertl could bring down the Brandt government thus explaining the difficulty of obtaining any price movement on grain prices in the short-run.

5. However, as is clearly evident from ref B, all difficult agricultural decisions are politically impossible in the EEC in view of the unanimity rule involving significant policy issues. Therefore we must keep pressure on to bring about economically essential solutions to trade issues and their possible adjustments. This should of course be done in a manner as not to jeopardize our relations with the FRG or our broader European policy interests.

6. I believe the Department should be alert to all the various political and economic infighting now going on in the EEC such as is clearly evident in ref B. This applies especially to responsibilities for trade policy in agriculture, making it essential that the US place emphasis and responsibility on the total EEC for its trade actions rather than in any way supporting one country against another.

Rush

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 356, Monetary Matters. Secret; Exdis. Repeated to The Hague, Luxembourg, London, Paris, Rome, Brussels, and USEC. Attached to a December 9 memorandum from Hormats to Kissinger regarding economic policy at the Summit.
2. Neither printed.
3. In his December 9 memorandum to Kissinger (see footnote 1 above), Hormats noted that Connally believed that he received a commitment from the Europeans at the G-10 meeting in Rome to empower the Commission immediately to begin trade negotiations. Hormats then referred to reporting from Paris that at the EC Ministers’ meeting on December 11 France might oppose giving an immediate mandate. Hormats concluded it was far from certain that the international economic situation had been resolved.