Crisis Over the 'Kennedy Round'

...But by far Britain's best chance of expanding trade depends on making the Kennedy Round a success...

...Meanwhile, new trade openings are being pursued in the EFTA and the Communist bloc, and Lord Home has just concluded a most successful visit to Japan in which his purpose was as much commercial as it was diplomatic...

...Yet under the Most Favored Nation provision of GATT, any reductions in tariff negotiated by America with, say, the Commonwealth, the European Free Trade Area, or Japan, must be extended automatically to the Common Market, even though they are not reciprocated...

...But since de Gaulle has never made a political concession to gain a purely economic end, this seems quite unrealistic...

...The coming political changes in Britain and Germany will offer the supporters of Atlantic unity a second chance to complete the process which slowed down dangerously 10 years ago...

...For all these reasons there is little basis for optimism about the Common Market's readiness to negotiate substantial tariff reductions in the Kennedy Round...

...To date, both America and Britain have failed to achieve this objective because they have approached the European countries separately and their demands have been too narrowly national...

...The West German Government is making the situation particularly awkward, for German farmers could not hope to compete on equal terms with the French...

...Government seems unwilling to negotiate with Europe on industrial tariffs unless it first gets guaranteed access to the Common Market for its farm products, and this is precisely what the Common Market's agricultural policy is designed to prevent...

...France, in turn, is unwilling to allow progress on any other issues until its agricultural needs are met...

...National survival requires that the British Government not refuse to contemplate the possible failure of the Kennedy Round and make some plans against that contingency...

...Worse still, there is growing concern at the prospect that de Gaulle may block what is generally seen on both sides of the Atlantic as the only other road now open to economic unity in the free world — the so-called "Kennedy Round" on tariff negotiations under the General Agreement on Tariffs and Trade...

...Finally, to many Common Market enthusiasts the common external tariff is at once the symbol and the instrument of integration, an instrument whose importance is increased by de Gaulle's opposition to other methods of integration...

...Thus, the free world is likely to face the stark choice between abandoning the Kennedy Round or changing GATT rules so that the Most Favored Nation provision does not apply to the Common Market...

...In any case, the type of tariff negotiation envisaged in Kennedy's Trade Expansion Act is not very attractive to Europe...

...But the British are deeply concerned to prevent discrimination against their products in the other foreign markets which take 80 per cent of the nation's trade...

...The agenda for such a joint approach would cover not only the commercial issues of the Kennedy Round itself, but also the problem of world liquidity —so cogently raised once again by Harold Wilson's speech in Washington—and the organization of NATO'S defenses in regard to the defense of Asia and the Middle East...

...In the last two years its exports to the Common Market rose 18 per cent annually, and this despite tariff discrimination...

...The key to the problem lies in de Gaulle's impact on the future development of the Common Market...

...The British economy depends more on world trade than that of any other Western country...

...Already the Executive Secretary of GATT has given warning that the organization itself might actually be a victim of the breakdown...

...The bitterness felt in Britain about his conduct is nothing compared to the bitterness felt among France's partners in the Common Market...

...I do not deny that these issues will require the most delicate presentation...

...Even if the Kennedy Round does succeed, some change in the GATT'S rules may be necessary so that the developing countries in Africa, Asia and Latin America will not suffer from the consequent increase of trade among the richer countries of Europe and North America...

...Moreover, today European costs are generally higher than those in Britain...

...De Gaulle has shattered this essential sense of community by the brutality and deceit with which he handled Britain's application to join...

...A more practical suggestion, supported by the EEC Commission in Brussels, is that France should pay for the common agricultural policy by agreeing to negotiate reductions in the Common Market's external industrial tariff during the Kennedy Round...

...Under these conditions, it is inconceivable that the reductions will be negotiated at all...

...But the price level at which European agriculture is to be protected from foreign competition has yet to be decided...

...Its Conservative Government is now no less determined than its Labor Opposition to break out of the stagnation of the last few years, and has recently set itself a growth target of 4 per cent for the coming year, which requires an increase in exports of 5-6 per cent...

...The Commonwealth Trade Ministers are assembling in London next month not only to study the opportunities for increasing trade within the Commonwealth but also to concert strategy for the forthcoming GATT negotiations...

...The coming crisis over the Kennedy Round, I believe, may enable the two countries to present their allies with a clearer choice of alternatives in terms of global policy, assuming of course that they act together...

...Britain is not particularly worried about exclusion from the Common Market...

...and since the General has already played his trump card by vetoing Britain's entry, the other governments no longer have any incentive to damage their own farm interests by accepting support prices at a level the French require...

...There may not be a third...

...A year ago, France was able to bully its partners into accepting machinery for a common agricultural policy whose prime purpose was to make France the granary of Europe...

...Various package deals are now under discussion, the basis of which is to satisfy France's agricultural demands in return for its concessions in other fields...

...Instead of a powerhouse, the Common Market has become a prison, bringing to its members paralysis instead of progress...

...The difficulty here, though, is that the U.S...

...The 50 per cent reduction in tariffs still permitted could be positively damaging to Europe's trade in the great majority of products where the existing American tariffs are very much higher than European tariffs, since here the reduction would operate wholly to the U.S.' benefit...

...Denis Healey, a regular contributor, was recently appointed Labor party Spokesman for Defense...

...It has always been clear that the European Economic Community— to give it its proper title—could only fulfill the promise of the Rome Treaty if it were genuinely a community in the psychological sense, if the policies of the member governments were primarily determined by common interests and common objectives...

...ON all these issues Britain's interests and objectives are very close to those of the United States...

...For now all of them are compelled to follow de Gaulle's example in putting national interests first, and if necessary using the veto to protect themselves...

...For the time being, Britain is exploring the possibilities of expanding its trade in every available market...

...Wrongly handled, such an approach could play into the hands of President de Gaulle...

...If in fact de Gaulle does torpedo the Kennedy Round, the whole structure of Western unity will require drastic revision and the free world may enter an economic crisis with disastrous political and military consequences...

...One of these common objectives must be a more equitable sharing of the global burden by the countries of the Common Market...

...But there is mounting evidence that the political current in Europe is now moving in a direction far more favorable to the solution of the fundamental Western problems, providing that this is recognized in time...

...There is anxiety in Whitehall that the collapse of the Kennedy Round, combined with the financial conservatism of Congress, may produce a recession in the United States leading to a general economic crisis throughout the Western world in which all the ideals of freer trade might crumble under pressure from resurgent protectionism...

...What seems obvious in this situation, where the policies of the Common Market countries are bound to remain uncertain and discouraging so long as de Gaulle holds power in Paris, is that Britain and the United States, which are condemned by circumstances to carry global responsibilities in the political, economic and military fields, should determine not to seek solutions at one another's expense, but rather to pursue their common objectives in concert...

...Britain's Foreign Secretary, Lord Home, has finally admitted that "there is no possibility of Britain joining the Common Market as long as the present French Government is in power...

...The most ambitious proposal is that in return for a common agricultural policy France should agree to advance the date— now set at January 1966—on which it surrenders its veto in the Common Market institutions...

...By its ill-judged insistence on Congress withdrawing the Douglas Amendment last year, the Administration has ruled out the possibility of abolishing industrial tariffs until Britain is in the Common Market...