Trade, security and GATT:

The United States, Western Europe and the political economy

of trade liberalisation (1947-1972)

Lucia Coppolaro
Unpeaceable Exchange:
Trade and Conflict in the Global Economy, 1000-2000
16-17 July 2010

Instituto de Cincias Sociais - Universidade de Lisboa

Email: lucia.coppolaro@ics.ul.pt

Introduction
World War I brought the liberal economic order of the late nineteenth century to an
abrupt halt, representing a dramatic and exogenous shock to the international economic
system. It reinforced existing trends towards increased protectionism and, above all, it caused
the disintegration of the international commodity markets. When the system was hit by the
second major shock of the Great Depression, the result was wholesale protectionism. World
War I and the Great Depression heavily contributed to the international disintegration of trade
relations and to the sharp contraction of trade that followed. With the outbreak of World War
II in 1939, trade between the belligerents ceased and by 1942 there was virtually no trade
between the three major blocs, Germany-controlled Europe, Japanese-controlled Asia, and the
rest of the world. War War II was even more devastating than the first and had implications
which were just as damaging for international trade. (Findlay and ORourke, 2010). At the
end of the war, the drift towards protectionism continued. The only region not to follow this
protectionist trend was that of the northern Atlantic economies of Western Europe and North

America. Here, under the U.S. leadership, governments slowly started to liberalise. The
opening of the Atlantic economy constituted an important exception to the generally
projectionist rule as it involved the most advanced economies.
This paper illustrates how trade between the United States and Western Europe was
liberalised in the new era of the General Agreement on Tariffs and Trade (GATT)
established in 1947. The period under review stretches from the creation of GATT to the end
of the implementation period of the Kennedy Round of GATT negotiations (1972), the first
post-war trade conference between western Europe and the United States to meaningfully
reduce trade barriers. First, the paper shows how the political economy of trade liberalisation
across the Atlantic was shaped by U.S. policy aimed at favouring, at the same time, the
reduction of trade barriers at a multilateral level and the strengthening of the western
European allies through regional integration. Thanks to its economic superiority and
prosperity, the United States was disposed to bear discrimination coming from Western
European countries so that they could pursue their policy of reconstruction and economic
growth in a regional context. It was in this peaceable context that trade relations between
Western Europe and the United States were reconstructed and trade was liberalised. Second,
the paper illustrates how regional and multilateral institutions played an interdependent role in
liberalising trade. It was only when a powerful commercial bloc, the European Economic
Community (EEC) was established in 1957 that GATT started fully playing its role in the
liberalisation of international trade.

Setting up regional institutions and neutralising GATT

After World War II, the United States engaged in reconstructing the world economy by
attempting to stabilize exchange rates and to liberalise international trade through the
implementation of a multilateral system based on non-discrimination and the unconditional
most-favoured nation rule. The U.S. position in favour of multilateralism and freer trade was
grounded by the belief that pre-war protectionism had been a leading cause of the World War

II. In 1947 GATT was established to enhance freer trade and trade cooperation, both
considered essential for the maintenance of peace.1
Despite U.S. intention to shape GATT as a global actor with universal membership,
the beginning of the Cold War represented a fundamental change. First, it broke the
universalistic perspective of the GATT, with the consequence that multilateralism had to be
adapted to the new bipolar strategic perspective.2 Second, it definitely led Washington to
foster western European regional integration. Already by 1946 the Western European
governments had appeared to be unconvinced that worldwide competition, multilateral
liberalisation, and the full convertibility of their currencies represented the path to follow for
their postwar reconstruction. In 1947 Western Europe opted for a regional and, therefore,
smaller and discriminatory framework, to pursue its policy of reconstruction. It was in this
regional context, and not in that of GATT, that Western European governments started to
gradually and slowly liberalise trade. European regionalism had the full support of
Washington. As early as World War II, the U.S. government had considered the question of
whether to encourage European integration and, in particular, a customs union, as a way of
promoting economic growth and prosperity that would, in turn, advance political stability. The
break out of the Cold War definitely moved Washington to support Western European
integration as a way of reinforcing the area politically and economically, and integrating West
Germany in the Western camp.3
The recovery of intra-European trade required the return of Germany to full
production through a return to statehood and a reduction of trade barriers among the Western
European nations. It was with these two goals in mind and with the broader objective of
strengthening western Europe politically and economically that in 1947 Washington launched
the Marshall Plan. Then the Organization for European Economic Coopearion (OEEC)
established in 1948 and the European Payments Union (EPU) set up in 1950, among many
other things, promoted a common reconstruction program, the removal of trade quantitative
1

For a description of the Bretton Woods negotiations the classical account remains Gardner (1980). On the creation of GATT
see Zeiler (1999) and Irwin, Mavroidis and Sykes (2008). For a description of the GATT system see: Curzon (1965) Kock (1969)
Jackson (1992) , J.H. The World Trading System. Law and Policy of International Economic Relations (Cambridge, MA, MIT
Press, 1992).
2

On Cold War and GATT see Kostecki (1979).

3 On U.S. policy on Western Europe see, among the others, Lundestad (1998).

restrictions and the convertibility of the currencies between the participating countries. With the
Marshall Plan, the western Europeans were stimulated to take those steps that would enable
them not to just grow economically, but to move towards open trading policies with each
other and with the rest of the world. The U.S. initiative was a key moment in western
Europes path towards internal freer trade, and more generally towards a broadly liberal trade
policy stance.4
U.S. economic superiority led Washington to encourage discrimination of Western
Europe in order to strengthen the area economically and politically. In so doing, any general
principles averse to West European governments' own reconstruction principles were pushed
into the background. In 1947, in the same year that the Truman government signed the GATT,
it also launched the Marshall Plan. While the GATT represented U.S. support for a
multilateral, non-discriminatory and global trade system, the OEEC and EPU endorsed the
principle of discrimination by the recipients of the Marshall Plan. The liberalisation of
western European trade started on a regional basis and through regional institutions, therefore,
bypassing the Bretton Woods multilateral institutions. In particular, by concentrating on
quotas in the framework of the OEEC, the Europeans neutralised the multilateralism of
GATT. In the U.S. plan, in the long run European integration would reinforce Western Europe
economically and in so doing would finally make possible the realisation of the multilateral
trade and payments system. For the time being, however, western Europe would discriminate
and would do so with the full encouragement of the discriminated ally.
As a consequence of the Western European decision to follow a regional path, during
all the 1950s GATT was ineffective in reducing tariffs. Still, the obstacle was not only western
European policy. The cumbersome reduction procedure used in Geneva did not favour a
major scaling down of tariffs. Governments bargained bilaterally on an item-by-item basis
and then, if agreement was reached, the reduction was multilateralised. This bilateralmultilateral method had been designed by the U.S. drafters of GATT presuming that the
United States, being the major supplier of most goods, would take the lead in offering major
tariff cuts. The plan underestimated the impact of the protectionist mood of the Congress.
Like the Europeans, the United States was not in a tariff-cutting mood either. Following the

4 The best account on the reconstruction of western Europe remains Milward (1984). See also Eichengreen (1996) and (2007).

State Departments lead, the US government advocated open markets, but a clear-cut support
for free trade did not exist in the United States. During the 1950s, the U.S. Congress
legislative body attached protective clauses to the Reciprocal Trade Agreement Act (RTAA),
which authorised the U.S. government to enter into trade negotiations. Responding to requests
of protection coming from different trade sectors, the legislative body qualified its
commitments to liberal trade. This policy made tariff rates inherently unstable and tariff
negotiations precarious, offering few prospects of long-term benefits to trading partners
(Curzon 1965 and Kock 1969). In effect, something appeared evident in western Europe: one
of the conditions to join sweeping and across-the-board tariff reductions was that the United
States would have to be able to offer substantial and, above all, long-term and stable export
benefits that would permit the Europeans to increase their exports. However, during all the
1950s the U.S. government never obtained the authority to reduce tariffs from Congress. 5
Unwillingness to reduce tariffs and cumbersome procedure accounted for the stalemate
of GATT in the 1950s. Tariffs remained fairly stable between the Annecy round (1949) and the
preliminary phase of the Dillon round (1960-2), when the Common External Tariff (CET) of
the EEC was submitted in Geneva under GATT article XXIV (Table 1).

Table 1 GATT Rounds and their main results

Year
1947
1949

Round and number of

attending countries
Geneva
23

Average Depth of Tariff Cuts in % AdNumber of concessions exchanged

Valorem in the industrial sector
19
45.000 tariff concessions

Annecy

29

5.000 tariff concessions

1951

Torquay

32

8.700 tariff concessions

1956

Geneva

33

2.700 tariff concessions

4,400 tariff concessions

1960-2

Dillon Round 39

Source: Asbeek Brusse (1997), 118; Hoeckman and Kostecki (2009), 101.

Still, GATT was not irrelevant. As noted by Irwin (1996) and Asbeek Brusse (1997), its major
contribution in the 1950s was to secure binding agreements on early tariff reductions and,
consequently, impeding the Europeans to set higher tariffs, as quotas and foreign exchange
controls were progressively removed at regional level.

5 On the US trade policy see Baldwin and O Krueger (1994) and Eckes (1995).

From regional to multilateral liberalisation: from the EEC to GATT

President Eisenhower maintained Trumans policy on European integration as he also
held that the reasons for the support were still valid and urgent. As such, when in 1955 the
Germany, Italy, France and the Benelux countries - the so-called Six - decided to start
negotiations leading to the creation of the EEC, the Eisenhower administration gave its
support. Washington was aware of the potentially discriminatory effects of the new regional
bloc. In addition to the customs union, the Treaty of Rome aimed at setting up a common
agricultural policy (CAP) and a preferential trade agreement with the former colonies.
Washington deemed that the political advantages European integration would provide were
worth U.S. support. In any case, it would be possible to ensure the development of the EEC
into an open regional area through rounds of GATT negotiations that would lower trade
barriers.6
As a result, when the Treaty of Rome was presented in Geneva in 1958 in order to
ensure its consistency with GATT, the Eisenhower administration gave its full support despite
the inconsistency of the Treaty to GATT rules. Flexibility and pragmatism was the approach
adopted to try to conciliate multilateralism and European integration. Consequently, during
the debate in Geneva, the U.S. government elaborated a pragmatic solution along which
GATT would verify whether the Treaty of Rome could lead to the implementation of a liberal
customs union, rather than scrutinize the legal consistency of the Treaty. No formal decision
was acquired, rather it was decided to observe the development of the EEC and to resolve
pragmatically any problem that could arise.7 Thanks to the U.S. support the Treaty went
unchallenged in Geneva, despite its inconsistency with GATT rules and the opposition of the
United Kingdom, Canada, New Zealand and Australia. As Romero put it, this new, crucial
advancement of European integration was allowed to entrench itself behind the shelter of the
USAs friendly diplomacy.8
Despite the full support in Geneva given to the EEC, latent concerns existed in
Washington. The Treasury, Commerce and Agricultural Departments together with the Federal
6
7
8

On the attitude of the Eisenhower administration towards the EEC see Winand (1993), Lundestad (1998).
Kock (1969).
Romero (1994) 165.

Reserve had a more critical position on the discriminatory effects of the EEC and the
consequences on the balance of trade. But the U.S. President and the State Department were
in full support and with the U.S. economy in good conditions, it was unproblematic for them
to affirm that European integration was worth some economic sacrifices. As in 1947,
Washington decided to bear economic discrimination for the sake of long-term geopolitical
and economic interest.9
In fostering European regional integration in 1947, Washington had aimed at
strengthening Western Europe economically and so that the area could finally join the
multilateral system. In effect, the formation of the EEC gave the right impetous to reactivate
GATT and deal with tariff reduction at the multilateral level. Against the new developments in
western Europe, Washington changed its tariff policy. From the U.S. perspective, the EEC
was both a challenge and an opportunity. It was a challenge as it could develop into an
inward-looking and discriminatory trade bloc. The concerns about the discriminatory aspects
of the EEC that had existed with Eisenhower increased by the time Kennedy entered the
White House in 1961 because of the policy of the French President Charles de Gaulle and the
deficit in the balance of payments. As for the first aspect, U.S. relations with France were
becoming strained due to divergences over the governance of the Atlantic alliance and
monetary issues.10 As for the second aspect, in 1958 the U.S. deficit in the balance of
payments began to increase, seemingly, as a result of the combination of economic recession,
overseas military spending, investments abroad and a decrease of the trade surplus. The
deficit, combined with the erosion of the U.S. gold reserve, caused concerns on both sides of
the Atlantic regarding the stability of the international monetary system. Against this situation,
it became paramount to develop initiatives to deal with the evolutions of the relations between
Western Europe and the United States.11
At the same time the EEC represented an opportunity to reduce tariffs. For the first
time since 1947 on the other side of the Atlantic it existed a credible negotiating partner,

Winand, Eisenhower, Kennedy, 112.

10

Lundestad (1998). For de Gaulles foreign policy see Bozo (2001) and Costigliola (1992).

11

The literature on monetary problems for this period is vast. See Harold James (1995). For the debate within the Eisenhower
and Kennedy administrations over the balance of payments see Zimmermann (2002). Gavin (2004) .

capable of making valuable counter-concessions thanks to the size of its market. It was
because of the existence of a strong and equal partner capable of credibly offering reciprocal
concessions that in 1962 Kennedy was able to obtain from the Congress the authority to
launch a new Round for a sweeping liberalisation of trade. The Trade Expansion Act
authorised the reduction of tariffs in the industrial sector in a linear way up to fifty percent
and, in some cases, even to eliminate duties, so abandoning the item-by-item negotiations
used in the previous rounds. The very existence of a regional bloc provided the decisive push
towards a far-reaching reduction of tariffs, a genuinely multilateral negotiations, reactivating
GATT multilateralism.12
The U.S. government stated its intention to include the agricultural sector in the
negotiations, for the first time since the creation of GATT. The United States responded to the
establishment of the regional CAP with the request to deal with this sector at a multilateral
level with the aim of moderating the discriminatory aspects of this common policy. The U.S.
government was aware of the difficulty of obtaining a substantial result in this sector as it
lacked bargaining power. In GATT, reduction of protectionism occurred when a reciprocal
interest in enhancing exports existed and this was not the case for agriculture, as the EEC had
no exports to enhance. Moreover, its own protectionism made Washington an unlikely
sponsor of trade liberalisation in agriculture. In addition, support for European integration
further weakened the U.S. stance. Washington backed the CAP as an instrument to give unity
to the EEC and, under the lead of the Europeanists of the State Department, never took a
challenging attitude by, for instance, questioning the consistency of the CAP variable-levy
system to GATT. The aim was therefore not to dismantle the CAP, but to moderate its
protectionism impact. In order to put pressure on the Europeans and at the insistence of the
U.S. Department of Agriculture (USDA), Washington stated that it would not conclude the
GATT talks in the industrial sector, unless meaningful results were achieved in agriculture.
Actually, the White House and the State Department however had no intention of risking the
non achievement of a bargain in the industrial sector, which was poised to provide the biggest

12 On the US initiative for the Kennedy Round see Zeiler (1995) and Preeg (1970).

gain, for the sake of agriculture. And the European negotiators were undoubtedly well aware
of this reality.13
In promoting the new Round, Kennedy set a clear link between trade, security and
monetary questions. Burden sharing of military expenses had to take place by increased
European military spending and by augmenting the already favourable trade balance with the
Western European countries to a level high enough to compensate for military commitments.
In short, Western Europe, which was growing at a higher rate than the United States, had to
share the military burden by accepting more imports from the United States. In Washington,
support for European integration and tolerance for its discriminatory aspects still

went

unchallenged. Yet, the time had arrived for the Europeans to contribute to the expenses of the
Alliance.14
On the other side of the Atlantic, the EEC members agreed to attend the GATT Round
in order to reduce protectionism and have the opportunity to increase their exports to the
United States and to the EFTA countries. To this end, they were ready to reduce the CET so as
to obtain the reciprocal reduction of U.S. and EFTA duties. Improvements in European
competitiveness made liberalisation on the multilateral plan finally bearable. The growth of
EEC members exports to the United States and the rest of western Europe led them to
complement tariff reductions at a regional level with tariff reduction at a multilateral level in
order to further sustain this flow of exports. Moreover, negotiating with the EEC single voice
gave the bargaining power to question U.S. tariff policy, and to push Washington to make
large tariff cuts and attack U.S. non-tariff barriers. Negotiating as a trading unit provided the
Europeans with the power to bargain with the United States that they had lacked in the 1950s.
From behind the protection of the CET, the EEC was ready to start competing with
Washington and reduce tariffs multilaterally.15

13 Components of a Strategy for the Kennedy Round written by George Ball, Preliminary Draft, December 10, 1963. Herter

Papers, Box 7 JFKL.

14

Report to the Honourable John F. Kennedy, dated 31 December 1960. Pre-presidential papers transition files, Task Force
reports, Box 1073, John F. Kennedy Library (hereinafter JFKL). On the Kennedys administration debate over the balance of
payments deficit and the relations with the European allies see also Zoumaras (1999).
15 Archives of the Council of Ministers of the European Union, Brussels (hereinafter CM2)1963 946, Note S/628/62, 30
November 1962.

While accepting to attend a sweeping liberalisation of trade, the EEC tried to reshape
U.S. trade initiative to its own trade interests. Thus they refused a drastic reduction of trade
barriers, as this would weaken their regional integration, which they considered essential for
their economic growth. Furthermore, the Six did not wish to see their Community dissolved
in an Atlantic free trade area the purpose of which was to enable the Americans to rectify the
deficit in their balance of payments.16. They rejected the link between security, monetary
matters.17 The United States already enjoyed a favorable trade balance with the Six, (see Table
2 and Figure 1) and US exports to the EEC were growing at a faster rate than US imports
from the Common Market (see Figure 1). This trade surplus with the EEC was proof that the
Six were already doing their part in sharing the American burden, they argued, and that they
could not be asked to do more.

Table 2
Trade of the Six with the United States, 1954-1963 (in millions of USD)
Germany

Italy

France

The Netherlands

BLEU

Exports

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

295

387

498

601

643

913

897

870

966

1051

Imports

532

764

952

1351

1005

1094

1423

1516

1758

1988

Balance

-237

-377

-454

-750

-362

-181

-526

-646

-792

-937

Exports

129

160

202

231

255

345

387

383

441

480

Imports

299

405

522

684

526

373

668

863

884

1028

Balance

-170

-245

-320

-453

-271

-28

-281

-480

-443

-548

Exports

156

210

226

246

304

470

401

417

426

421

Imports

381

458

682

831

563

429

746

737

775

901

Balance

-225

-248

-456

-585

-259

41

-345

-320

-349

-480

Exports

158

159

179

159

181

209

196

192

200

203

Imports

336

435

521

540

410

435

599

566

607

649

Balance

-178

-276

-342

-381

-229

-226

-403

-374

-407

-446

Exports

191

246

304

267

287

444

358

371

414

411

Imports

263

314

409

426

310

325

391

375

451

471

Balance

-72

-68

-105

-159

-23

119

-33

-4

-37

-60

Source: Direction of Trade Statistics Historical, 1948-1980 (Washington, D.C.: International Monetary Fund,
2002).
16

Public Record Office of the United Kingdom (hereinafter PRO) T 312/621 Telegram 3, from United Kingdom Delegation in
Brussels to Foreign Office, 21 January 1963 reporting words of Belgian officials to the British.
17 Ministre des Affaires Etrangres (Quai dOrsay), Paris (hereafter MAEF), Secrtariat Gnral, Entretiens et Messages, Vol. 19

Rencontre entre Pompidou et Erhard, 21 November 1963.

10

Figure 1
US exports to and imports from the EEC, 1958-1963 (in millions of USD)

$ million

5000
3750
2500
1250
0
1958

1959

1960

1961

1962

1963

Year
imports

exports

Source: Direction of Trade Statistics Historical, 1948-1980 (Washington, D.C.: International Monetary Fund,
2002).

As for agriculture, all of the Six agreed to include this sector in the GATT talks as
they held wise not to openly challenge this U.S. request. Still, their priority was to set up the
CAP and not to deal with agriculture in GATT.18
Despite the differences, both sides of the Atlantic agreed to star a far-reaching
liberalisation of international trade. The EEC members held that they were now competitive
enough to reduce duties multilaterally, whereas negotiating as a trading bloc give them
bargaining power to face the United States. Washington saw in the EEC a discriminatory bloc
whose protectionism had to be reduced, but also a credible partner able of making valuable
concessions. In short, both the United States and the EEC had concluded that the time for
playing the multilateral game had arrived.
18 CM2 1963/947 PV de la 101me session du Conseil de la CEE, Bruxelles, 8-10 May 1963. On the negotiations between the

Six on the CAP see Ludlow (2006).

11

Fostering GATT multilateralism and the EEC regionalism

The first far-reaching liberalisation across the Atlantic was launched at the GATT
Ministerial meeting of May 1963. It was soon labelled the Kennedy round by the British
and the German Minister of Economy Erhard, to the dismay of Kennedy, who started
complaining that the trade negotiations bore his name and wondering why they were not
called de Gaulle or Adenauer Round.19
The new Round was launched from a starting point broader than the previous
negotiations, showing that the willingness to reduce trade barriers existed on both sides of the
Atlantic. The EEC and the United States agreed to reduce duties by 50% across the board, but
with exceptions, to include the agricultural sector in the negotiations and make reductions to
trade barriers to those products of most interest to the developing countries. The EEC and the
U.S. were able to launch a trade negotiation with a broader impact than the previous GATT
Rounds, showing that willingness to reduce protectionism existed on both sides of the
Atlantic.20
Despite this valuable starting point, the trade negotiations advanced in a nervous
atmosphere that seemed to pull the Atlantic alliance apart rather than bring it together. The
Round soon became a harsh bilateral confrontation between the U.S. and the EEC. U.S.
negotiators put pressure on the GATT members to push them to adopt the U.S. standpoint and
isolate the EEC. The EEC was surprised and taken aback by what it considered a U.S. tough
negotiating stance and by the anti-EEC attitude of U.S. negotiators, who campaigned strongly
against the EEC and, the French claimed, above all against Paris.21
In truth, the Americans hardness did not derive from the opposition to the EEC itself.
Rather it was caused by the responsibility to move ahead and lead a difficult GATT talk and
by the fear that the EEC would eventually not consent to a sweeping liberation of trade.
19 FRUS 1961-1963, IX Foreign Economic Policy, 72. Memorandum of Conversation between Kennedy, Rusk, Adenauer and

Erhard, 24 June 1963.

20

Archives Europen Commission Brussels (hereinafter AECB) BAC 506 026/1969 CEE Conseil Rapport du Comit spcial de
larticle 111 GATT, 30 April 1963. On the negotiations of the Kennedy Round in addition to Zeiler (1995), se also Preeg (1970)
and Evans (1971).
21

Historical Archives European Union Florence (hereinafter HAEU) EM 16, MAE , Svolgimento dei lavori presso il GATT. A tutto il
21 maggio 1963; CM2 1963/948 CEE Conseil, Cinquime Runion de Coordination, 20 Mai 1963; MAEF, Cabinet de Couve de
Murville 1961-1966, n.160 Tlex 170 de la dlgation franaise a MM. Decarbonnel, Clappier, Ortoli, 20 May 1963.

12

Moreover, EEC internal quarrels and crisis slowed the negotiations in Geneva to the point of
putting the entire Round at risk. Against this situation, the U.S. negotiators adopted a
confrontational attitude with the EEC negotiators in Geneva, seeking a showdown and setting
up a crisis atmosphere in order to raise the possibility of failure. The U.S. harshness was also
caused by the de Gaulle factor - notably the fear that protectionist and anti-U.S. France
would attempt to deadlock the Round and that the other EEC members would bow to French
interests in order to keep the Community intact.22
Despite the tough bargaining stance towards the EEC, support for European
integration still represented a strong factor in the U.S. foreign trade policy and conditioned the
U.S. negotiators during the entire Round. During all the quarrels and crises between the Six
that hampered the EECs effective participation to the Kennedy Round and in which
Washington came to be involved, this latter considered not only its trade interests, but also
how to better support European integration and ease the tension between the EEC members.
This stance was clear from the very beginning of the negotiations in Geneva.
Washington had subordinated progress in the industrial sector to some valuable results in
agriculture. The U.S. stance complicated the EEC preparation for the Kennedy Round as it
came to interfere with the elaboration of the CAP. In Brussels the Germans refused to set the
unified grains prices, necessary to define the CAP and negotiate as a trading unit in Geneva.
In turn, the French threatened to leave the EEC and not to negotiate in Geneva in the
industrial sector. The U.S. link between the industrial and the agricultural sectors deepened
the existing tension within the EEC over the elaboration of the CAP and risked to stall the
entire Round. In order to move the Round ahead and ease the tension between the French and
the Germans, in November 1964 the State Department and White House assistants Bundy and
Bator decided to drop the link between the industrial and the agricultural sectors and to start
the bargain in the first sector, despite the lack of progress in the second. The move provoked
the tough opposition of the USDA which held that, under the lead of the State Department,
U.S negotiators in Geneva were conceding too much to the EEC and were not defending U.S.
trade interests. When the EEC in December 1964 eventually set unified grains prices at some
60% above world market prices, the USDA bitterly complained once more on what it
22

Memorandum of telephone conversation between Herter and Tuthill, 29 May 1963, Herter papers Box 1, JFKL.

13

considered to be the unwillingness of Washington to obtain concessions and reduce the CAP
protectionism.23
By the same token, during the EEC crisis of the Empty Chair crisis (1965-1966) which
seemed to threaten the very existence of the Community at risk, and stalled the bargain in
Geneva, Washington considered how to enhance its trade interest and move the Round ahead,
but also how to protect the EEC from the crisis. Against this situation, President Johnson took
the decision to go ahead with the negotiations, and in particular to table offers in the
agricultural sector, despite EEC absence from Geneva. The decision was taken following the
request to do so by U.S. Trade Representative Herter, the State Department, Bator and Bundy
who maintained that should the Geneva negotiations be formally halted to wait for the crisis
to be over and the EEC to be ready again to negotiate, they would later be difficult to revive.
With its decision, the intention was also to support European integration. For the Europeanists
in the State Department, persevering with the GATT talks could be of crucial importance for
the EEC. Once the crisis was over, negotiations in Geneva could well emerge as a major
opportunity for the Six to find and maintain their cohesion as a Community. Moreover, given
the hostility de Gaulle was displaying towards the European Commission - the EEC
supranational institution which represented the EEC in Geneva - it was important not to
undercut this institutions role. Since GATT was an important framework in which the
Commission negotiated on behalf of the Community, the Rounds continuation could play a
significant role in this institutions survival as a political force.24
It was for this reason that Washington refused the proposal from GATT Director
General Wyndham White to continue the Round by replacing the Commission with the six
Member States, who would negotiate on an individual basis. The Kennedy Round had to be
negotiated by the Community, represented by the Commission. With this decision,
Washington was attempting to reconcile its trade interests with its support for European
23

FRUS 1964-1968, Volume VIII, International Monetary and Trade Policy 260. Telegram From the Department of State to
Certain Posts, 2 November 1964; NARA 364 Records of the USTR on the Kennedy Round, Box 1, Memorandum for the President
from Herter, 9 November 1964; Memorandum for the President from Bundy and Bator, 16 December 1964, Bator Papers, Box 1,
LBJL.
24

NARA 59-250-57, 1964-1966 Ecin 3 Box 793 Telegram n. 37, From American Embassy in The Hague to State Department, 13
July 1963; Memorandum from Klein to Bundy, De Gaulle and the Common Market, 7 July 1965, NSF Country File United
Kingdom, Box 215, LBJL; Memorandum Impact of EEC Crisis on the Kennedy Round, 12 July 1965, Bator Papers, Box 12, LBJL.
On the crisis of the Empty Chair see Ludlow (2006), 71-94. On the Johnsons administration policy towards Western Europe see
Schwartz (2004).

14

integration, hoping to bring the Round to a successful conclusion, encourage the Six to regain
unity, help the Commission to maintain its role in international trade and shelter the European
integration process from the fallout of the crisis.25
Once the crisis over in January 1966, the Kennedy Round moved to its final phase in
July 1966. In this last phase, the Six were able to set a common stance to bargain in Geneva.
The paramount interest they had in attending the Kennedy Round with a view to lowering
EFTA and U.S. tariffs, and to do so as a regional trading unit led the Six to maintain their
unity. The EEC members were able to reach a common position to negotiate in Geneva with
a single voice and, most importantly they were able to negotiate as a powerful trading unit
and on equal foot with the United States.26
It was in this last phase that U.S. support for the European integration started to raise
problems in Washington. De Gaulles decision to withdraw French troops from NATO in
March 1966, his policy on the U.S. dollar, and his open criticism of Johnsons military effort
in Southeast Asia strained Franco-American relations to the point that the Treasury
Department concluded that France was practicing economic warfare against the United
States.27 The quarrel over the financing of U.S. troops in Germany produced tension in
American-German relations and the formation of the Grand Coalition did nothing to improve
the situation.28
With the U.S. balance-of-payments deficit increasing and all the strains this had on the
monetary system, the Treasury Department reproached the Europeans for failing to share the
security burden in a way proportionate to their economic strength. Moreover, while Johnson
had relied on the increase in exports through the Kennedy Round to improve the balance of
payments, the Europeans had slowed negotiations. Meanwhile, the American trade surplus
with the EEC started declining in 1965, as imports grew at a higher rate than exports. The

25

Memorandum from Leddy and Solomon to Ball and Mann, The EEC crisis, agriculture and the KR, 30 July 1965, Bator
papers, Box 12 LBJL; NARA 59-250-57, 1964-1966, Box 460 Telegram n. 3063 from Rusk to US mission in Geneva, 15
September 1965.
26 On this aspect see also Ludlow (2007).

27

Memorandum from Winthrop Knowlton to Fowler France, 11 July 1966, Fowler Papers box 68, LBJL.

28 On U.S.-German tension on the financing of U.S. troops in Germany see Schwartz (2004), Zimmermann (2002), 209-229 and
Gavin (2004), 135-165.

15

elaboration of a full protectionism CAP increased the concerns for what was considered an
insufficiently liberal attitude of the EEC. Moreover, the Johnson administration could not
ignore that the deteriorating domestic economic situation reinforced the protectionist stances
in the U.S. Congress, where mistrust for the selfish European allies and European integration
mounted. By 1967, as the Kennedy Round drew to a close, with the mood of the Congress,
the U.S. deficit in the balance of payments and the tension over monetary and security issues,
it became difficult for the State Department to continue to impose its readiness to subordinate
economic interests to security considerations.29

Support for European integration and

acceptance to bear European discrimination still characterised U.S. policy, but the change of
policy then brought about by Nixon was already in the air. In this sense, the U.S. support for
the EEC in the Kennedy Round was the last hurrah of the Europeanists of the State
Department.

Enhancing freer trade, with some notable exceptions

It was against this tense background that the Geneva bargain was concluded. In the
industrial sector, in comparison to the previous GATT talks, the Kennedy Round was
launched from a starting point of far more liberal initial offers, both in terms of trade coverage
and extent of tariff reductions. The reciprocal interest in enhancing their exports worldwide
led the western European countries and the United States to follow a liberal tariff policy
contributing in this way to the liberalization of international trade, even if important sectors
remained well protected.
Machinery and transport equipment represented 36% of OECD members imports in
manufactured items and was the most dynamic and biggest sector for value of exchange
between western Europe and the United States. The shared interest in reducing protection in
this sector both across the Atlantic and in western Europe in order to enhance exports led to
an average reduction of tariffs of 45%.30 Chemicals saw the toughest confrontation across the
Atlantic. The EEC conditioned the reduction of its tariffs to the removal of the U.S. system of
customs valuation of the American Selling Price (ASP) that heavily hit the sector. Yet, the
29

Draft Telegram from the State Department to all diplomatic posts US policy on EEC Association, January 1967.

30 For the negotiations in this sector see CM2 1964/143 PV de la 149me session du Conseil de la CEE, 10-15 November 1964

and CM2 1967/28 PV de la 216me runion du Conseil de la CEE, 10-11 May 1967.

16

U.S. negotiators were reluctant to agree to the removal of the ASP. They faced the opposition
of the U.S. chemical industry to relinquish this massive protection and the uncertainty of the
position of the U.S. Congress. Ultimately, it was because of the toughness with which the
EEC required the elimination of the ASP and the anachronism of this system of protection that
undermined the credibility of the U.S. liberal stance, that the U.S. negotiators accepted to
eliminate it. The final compromise consisted in accepting an average reduction of 45 percent
on the condition that the United States did the same and, moreover, abolished the American
Selling Prices (ASP).31 While in the two previous sectors the reciprocal interest to increase
exports led to an agreement to reduce tariffs, the situation was totally different for the
aluminium and paper sectors. France and Italy had the major goal of setting up a preferential
EEC market for their products, uncompetitive at the world level. They were making
investments to strengthen their national industries and aimed at protecting their regional
market. The fact that a member state firmly intended to set a EEC preferential market, rather
than increasing exports outside to third countries, impeded the reaching of a compromise to
reduce duties. As a result, the EEC made no relevant offer, to the dismay of the United States,
but above all, of the EFTA countries 32
The reduction of barriers concerned mainly trade between the industrialized countries,
rather then trade between them and the LDCs. The case of textile is a clear example. The
industrialized countries had assured that the Round would represent an opportunity for LDCs
to increase exports and, consequently, to foster economic growth. To prove their goodwill,
they had also agreed that LDCs would not be required to grant reciprocity in the exchanges of
concessions with developed countries. Being under the pressure of the UNCTAD conference,
the industrialized countries hoped with their assurance to get rid of the critics who contended
that GATT was merely a rich mens club that only favoured its own interests. However, when
promises were to be transformed into facts, the industrialized countries did not appear to
intend to concede a great deal. Quota restrictions on the imports from the LDCs were

31

Trade Talk Review, Vol. XI, No.2, 26 February 1964 in Herter Papers, box 13, JFKL; Memorandum for the President from
Roth, 5 October 1965, Roth Papers, box 1, LBJL. The U.S. delegation to GATT accepted the elimination of the ASP, but in 1970,
the U.S. Congress did not ratify the agreement. As a result the United States reduced duties on the entire chemical sector by
45%, but maintained the ASP, while the EEC reduced its tariffs by 25%.
32 CM2 1964/143 PV de la 149me session du Conseil de la CEE, 10-15 November 1964 and CM2 1967/28 PV de la 216me

runion du Conseil de la CEE, 10-11 May 1967.

17

maintained so that it was not competitiveness to determine trade patterns but quotas and
regulation to the advantage of the inefficient importers. 33
As for agriculture, negotiations centered on grains, the commodity with the largest
volume of trade involved and the bulk of U.S. exports to the EEC. Most importantly, grains
represented the test of how the EEC variable-levy mechanism would be lodged in the world
trading system and would show the place the EEC would take in world trade for farming
products. 34 The negotiations in the agricultural sector started in July 1966. The problem,
however, was that at this point there was not much left to negotiate. The Six gathered in
Geneva after having established a CAP characterised by a variable-levy system and set
common prices for grains at a 60% higher level than world prices. Washington asked for
quantitative assurances and for lower EEC prices, two requests that the Six rejected. In short,
the EEC had established a fully protectionist and non-negotiable CAP, leaving no room for
further negotiations in Geneva. 35 The EEC ended the Round with its protectionist common
policy intact. The GATT talks were not able to overcome EEC protectionism with major
consequences on world trade in this sector. During the following ten years, the EEC shifted
from being the prime importing bloc to becoming the prime exporting bloc. It would only be
during the Uruguay Round (1986-1994) that agriculture was seriously discussed and some
initial results were achieved.36
The Round was successfully concluded in mid-May 1967. Its achievements were
remarkable. Duties were cut by an average of 35% and applied to $40 billion worth of goods.
Even if the 50% linear cut had not been achieved, the reductions were higher than in the
previous rounds and dealt with the most dynamic sectors of world trade.37 The average level
of the CET, that in 1963, was 12%, was reduced by 33,4% so that at the end of the Kennedy
33 AECB BAC 122/1991-5 Rapport n.70 de la dlgation de la Commission pour les ngociations du GATT, 16 June 1966; PRO

BT 241/845 Note by Hughes of discussion with Mr. Wyndham White in Geneva on 23 September 1965; Administrative History of
the Department of States, Volume 1, part VIII: International Economic Relations 1963-1969, LBJL.
34

Department of State Administrative History Volume I-Part VIII, LBJL.

35 CM2 1966/34 188me session du Conseil de la CEE, 13-14 June 1966.

36 For a description of agriculture treatment in GATT the best account remains Josling, T.E, Tangermann, S., Warley, T.K.

Agriculture in the GATT (London: Macmillan/St.Martin Press, 1996) and Avery, W.P. (ed.) World Agriculture and the GATT
(Boulder: Lynne Rienner, 1993).
37

For an analysis of the Round achievement see Ernest H. Preeg (1970), 204-236.

18

Round implementing period in 1972, it would be placed at a new average of 8,2%. In 1972,
Japan would have an average tariff level of 11.5%, the United Kingdom of 10.4%, and the
United States of 9.4%. Achievements varied across the sectors and the major results were
reached in the mechanical sector and chemicals, the two most relevant parts of trade among
industrialised countries.38 To appreciate the reduction of tariffs, Tables 3 shows the national
level of duties of EEC members in 1958, and the CET in 1958, 1964 and 1967; Table 4
illustrates the level of duties of the United States before and after the Kennedy Round and
Table 5 the reductions made by the United Kingdom.

Table 3 National tariffs before CET, CET in 1958, before and after the Kennedy Round
(Average tariff on dutiable imports, as percentage of c.i.f. value)
SITC

Products

BNL

France

FRG

Italy

CET in
1958

5
61
62
63

All Chemicals

Leather manufactures
Rubber manufactures
Wood and cork manufactures,
except furniture

11
17
11

64

Paper and Board manufactures

65
66

CET pre-KR CET postKR

16

17

14,3

14,3

7,6

11
17
19

12
10
7

18
19
22

12
18
16

10,2
16
12,9

5,7
7,8
8,8

14

16

18

15

12,7

9,5

14
12

19
16

11
6

20
21

16
13

16
10,4

15,6
5,5

67

Textile, except clothing

Non -metallic mineral
manufactures
Silver, platinum, gems, jewellery

13

5,5

681
6841
691
699
71

Iron and steel

Primary aluminium
Ordnance
Manufactures of metal
Machinery other than electric

5
0
9
11
8

13
20
14
20
18

7
0
7
10
5

17
25
17
23
20

10
9
11
16
13

9,4
7
10
13,8
11,1

6,7
7
6,2
7,2
6,4

72
73
81

Electric machinery
Transport equipment
Building parts and fittings

11
17
15

19
29
19

6
12
8

21
34
25

15
22
17

14,2
17,4
15,6

9,1
9,9
9,2

821
84
851
86

Furniture
Clothing
Footwear
Instruments

13
20
20
13

23
26
21
25

8
13
10
8

21
25
21
20

17
21
19
16

15,8
20
17,8
13,3

12,5
18
12,4
8,4

Source: GATT archives, INT(67)201 Preliminary Assessment of the Results of the Kennedy Round, 11 August
1967.

38

The results of the Kennedy Round have been illustrated by Preeg (1970).

19

Table 4 US Tariffs before and after the Kennedy Round

Before the Kennedy Round

After the Kennedy Round

All Chemicals

17,8

9,3

Leather manufactures

16,2

10,4

Rubber manufactures

11,3

Wood and cork manufactures, except furniture

7,1

6,8

Paper and Board manufactures

10,9

5,5

Textile

21,4

20,1

Mineral manufactures

9,9

7,5

Iron and steel

6,5

5,7

Manufactures of metal

14,7

7,7

Machinery other than electric

11,9

Electric machinery

13,6

7,1

Transport equipment

7,1

3,5

Footwear

21,1

12,1

Instruments

21,1

13,1

Source: GATT archives, INT(67)201 Preliminary Assessment of the Results of the Kennedy Round, 11 August
1967.

Table 5 UK Average tariff on dutiable imports as percentage of c.i.f. value before and
after the Kennedy Round
SITC Products

Pre-KR

Post-KR

All Chemicals

18,8

9,4

61

Leather manufactures

17,7

13,1

62

Rubber manufactures

13,6

7,8

63

Wood and cork manufactures, except furniture

15,2

7,3

64

Paper and Board manufactures

16,6

13,2

65

Textile, except clothing

20,6

16,9

66

Non -metallic mineral manufactures

9,3

4,8

67

Silver, platinum, gems, jewellery

n.a.

n.a.

681

Iron and steel

11,3

9,2

6841 Primary aluminium

5,5

691

Ordnance

n.a.

n.a.

699

Manufactures of metal

12,8

71

Machinery other than electric

14,2

8,6

72

Electric machinery

20,1

12,4

73

Transport equipment

20,1

11

81

Building parts and fittings

15,8

9,2

821

Furniture

14,3

8,4

84

Clothing

19,1

17,8

851

Footwear

22,8

14,7

86

Instruments

26,4

13,5

Source: GATT archives, INT(67)201 Preliminary Assessment of the Results of the Kennedy Round, 11 August
1967.

20

Conclusions
Since 1947 the United States engaged in reconstructing world trade by promoting the
establishment of a multilateral trading system and, at the same time, western Europe
regionalism. Thanks to its economic prosperity, the United States was disposed to bear
western Europes discrimination as a way of strengthening the area politically and
economically. As a result, in the same year of GATTs establishment, the Marshall Plan was
launched. As a result, GATT was ineffective during all the 1950s.
The setting up of the EEC reactivated GATT. It was because of the existence of the
EEC that Washington eventually adopted a liberal stance and promoted a far-reaching
liberalisation of trade. Thanks to the increase in its competitiveness, the EEC accepted to
reduce tariffs in the Kennedy Round in order to further enhance exports. Once a regional
institution was secured to sustain the growth of trade at regional level, the Europeans got
ready to negotiate at multilateral level a reduction of tariffs with the United States and the
EFTA countries. In this sense a clear interconnection existed between the multilateral and the
regional dimensions.
In the Kennedy Round, Washington negotiated trying to move the Round ahead and to
strengthen European integration. The U.S. negotiators tried to enhance the international role
of the EEC and of the European Commission, and worked to ease internal Community
tensions. Even the CAP was never challenged by U.S. negotiators. U.S. policy of supporting
European regional integration was successful. Johnsons choice to continue to support
European integration, despite the disadvantages this brought, shows that the Johnson
Administration's policy toward Europe was both forward looking and, arguably, successful.
The very success of the American support for European integration created problems
in Washington, while tensions in other areas strained transatlantic relations to the point that
not even the conclusion of major trade negotiations was enough to diminish them. CAP
protectionism, the EECs strength, the deficit in the balance of payments, and the tensions
over monetary and security affairs made it more complicated for the American government to
justify to a domestic audience its toleration of trade discrimination on the part of as
Congress put it powerful, healthy and selfish allies. Consequently the economic sacrifices
the United States would have to bear in the name of European integration lost ground. Under

21

these conditions, the Europeanists of the State Department would no longer be able to retain
the support of the White House and to silence the existing doubts about European integration.
The Kennedy Round represented a significant result for the U.S. post-war policy. It
favoured the liberalisation of international trade, the strengthening of the multilateral trading
system and trade cooperation across the Atlantic. At the same time, it fostered European
integration. However, the Round ended a period of about twenty years during which the
United States acted to promote the multilateral trading system and, at the same time, the unity
of Western Europe. By the time Nixon entered the White House in 1969, it was no longer
possible to declare that the U.S. had to subordinate its economic interest to the strengthening
of European integration.

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26