Washington, 16 March 1962
83. Secret
During our talks on preferences the Americans showed extreme good will, understanding and willingness to hear our side. I thought before discussions commenced, ‘though not represented as a negotiation, we could hope to get them to acknowledge and agree on certain positions. I mentioned my intention of giving Acting Secretary of State, Ball, a piece of paper, and by securing an appropriate acknowledgement have what I described as a basis for reporting to the Government but which, in fact, would be a commitment on their position.
2. From the outset at all levels it became clear that the Americans did not depart at all from their opposition to preferences and the perpetuation of the system. At the same time, Ball spoke loosely of a ‘phasing out’. On the other hand, all to whom I spoke were forthcoming in their acknowledgement of the desirability of commodity agreements. Some of the best informed admitted that they had not seriously thought through their positions on cereals. […]
3. On discovering their constant attitude against preferences, I took the line that I was not arguing the principle of preferences. Most of my arguments were built around the fact that all British countries had entered the GATT only on the understanding that existing British preferences were recognised and that only within the GATT should the principle of preferences be argued. I emphasised that the Americans should not seize the opportunity of the United Kingdom/EEC negotiations to support or incite the dismantling of preferences. I pitched my line on seeking an assurance they would not act thus. Of course, I was at special pains to point out the dependence of certain Australian industries, e.g., dairy, sugar, fruit, etc, on the preferences.
4. In my talk with Kennedy, the President said that on this particular point, he was not sufficiently informed and would consult with Ball. It is clear that Ball has the decision and I would be surprised if the President, having admitted his inadequate knowledge of the subject, would go Against Ball’s advice.
5. With complete agreement on the part of Ball, I had a draft letter conveyed to him recounting our situation and setting down as a tryout, a description of my understanding of what their attitude on preference would be in the light of our talks. It was in subsequent discussion with Ball and his senior people on this draft that their very firm attitude towards preferences was really brought out. They are unreservedly opposed to preferences on manufactures and make no bones about it. […]
6. They argue that there could be no ‘validation of preferences’ in any new arrangement resulting from the United Kingdom/EEC negotiations; that preferences existing now should be ‘phased out’ and that remedies ‘should be sought in global solutions’. Discussions were sufficiently full and direct to reveal the firmness of their policy line in this regard. For example, I tried them out on a number of lines. In accord with my general approach that preferences were accepted in the GATT, and without such acceptance no British country would have joined, I argued that preferences should not be killed outside GATT as the result of negotiations at which none of the Commonwealth preferential countries other than the United Kingdom were principals or entitled to be present[…]. I tried also the line that preferences should have their approval until such time as solutions by global or other arrangements replaced their need. It was not enough to rely on a hope, or even expectation that such arrangements might eventuate. I made clear we were not seeking to extend our preferences either in coverage or in depth.
7. These are examples of arguments advocated pretty comprehensively. Ball was quite definite and precise that he could not and would not depart from the clear line that preferences were wrong and should be ‘phased out’ and that any notion that America would condone the perpetuation of preferences, or be reticent in declaring their attitude, would misrepresent their position.
8. They could not be moved by any counter argument I could muster, many of which were telling, even through to the point that, but for Castro, they would still be buying their sugar preferentially from Cuba, which Ball admitted. Also our ability to trade hundreds of reductions in the preferences in our tariff couldn’t buy a reduction in their wool duty up to date. I put it to Ball that all his arguments increasingly brought out that their purist attitude would have the commercial result of leaving them much better off and us much worse off. We stood to lose heavily, vis-a-vis Common Market countries and vis-a-vis M.F.N.1 suppliers like the United States. In direct contrast, the elimination of preferences meant they improved their position against us in Britain, and their position against Britain in Australia. Moreover, for us preferences were often vital. For them the disabilities they suffered related only to a marginal proportion of production for which their producers had the benefit of an enormous home market.
9. I did not fail to point out the explicit character of the British assurance that they would not go in on terms which would seriously harm her Commonwealth trading partners and that a sufficiently strong American resistance to sustaining preferences could have the end result of making it impossible for Britain to go in.
[ matter omitted ]
11. In this atmosphere I came increasingly to the conclusion that adherence to their fixation on this point would at some time result in them being increasingly willing to support particular arrangements to enable the preferences to ‘be phased out’ and also add a very real spur to their contribution to find the ‘alternative global solutions’ on commodities to which they refer airily as the solution to the problem caused if preferences were eliminated.
12. I could not get them into discussion on their ideas of the timing in the concept of ‘phasing out’. In negotiation I would not expect them to be unreasonable on this, or in recognising special cases. I left with the feeling that the policy line of Ball has permeated through all officials concerned, including, I would expect those in Europe.
13. The pretty vigorous exchange of argument and counter-argument ranging over the whole issue at least brought forth from Ball a quite genuine effort to see whether it was not possible to produce an exchange of letters which embodied language which they could live with and which, at the same time, did not compromise our stand. We discussed several possible ways of doing this and I left him shortly before my departure from Washington with this question to be considered further by both sides in the light of an examination of what such letters would look like.
14. With my mind very much on future tactical handling, I reached the view, after my arrival in Ottawa, that our interests would be best served by disengaging from the question of an exchange of letters in a way which would leave a sense of ‘breaking off’ without giving the A mericans any grounds for grievance that their efforts to meet us on the language within the strict limits imposed by their policy position was not appreciated. Accordingly, I have asked Beale to see Ball today and to read to him a personal message from me. The text is as follows:–
Begins.
‘Following our talk yesterday afternoon, I have looked at the kind of letter you suggested I might send you and the kind of reply that you outlined. I think that our talk had value in bringing out quite clearly the way you stand on the preference issue. I think you also have a comprehension of our position on this matter. As you said, there are some points on which there is a real difference of view between your Government and mine, and whilst both you and we have made efforts to find something that we could both accept, my conclusion is that it would serve no useful purpose to gloss over these differences. I have, therefore, come to the view that we should not pursue the question of an exchange of letters. I want to thank you for the courtesies you extended to me and in the circumstances of the House hearings on the Trade Bill and the negotiations, in Geneva, I am most appreciative of the time and concentration you devoted to me and the problems of my country’.
Ends.
15. In my balance sheet, we have not lost anything which we had not previously lost, perhaps without a sufficient comprehension of it previously. There have been gains in the sense that within their stated policy, which we cannot expect to shake as a policy, there may be a more ready willingness as particular issues arise to accommodate special circumstances without abandoning their policy. The final talk with Ball and my message to him through Beale, in my view, puts us in a better position than hitherto to use any opportunity, public or otherwise, to present our line on preferences, and to declare our frustration at the lack of support by the major industrial countries.
1 M.F.N.: see note to Document 125.
[NAA: A1838, 727/4/1/4 PART 1]