Monday, July 11, 1977, Morning

SUMMARY

I. OPENING PLENARY SESSION QUESTION TIME

(Working Documents: See p. 11)

Mr. Zagari opened the session at 0940 by welcoming the U.S. Congress delegation and by stressing the importance of these meetings. The members of the European Parliament delegation were introduced individually. Mr. Fraser thanked Mr. Zagari for his welcome and paid tribute to the late Sir Peter Kirk, who had played a key role in the relations between the European Parliament and the U.S. Congress.

THE CARTER ENERGY PROGRAM

Mr. Adams asked the first question on behalf of the European Parliament Delegation:

What are the expected results of the Carter administration's energy program and what effects are expected internationally and in particular in Europe? Could this program limit the uranium supplies required over the next decade for the European Community's nuclear power stations, both those in operation and those that are planned?

Mr. Adams stressed Europe's serious shortage of raw materials, including sources of energy, contrasting this with the position of the United States. Mr. Adams then referred to Europe's uranium requirements and spoke briefly about Europe's plans to set up its own enrichment capacity.

As a supplementary question Mr. Adams asked if the American administration favored a more stringent application on the Non-Proliferation Treaty.

Mr. Fithian confirmed that the U.S. administration was seriously worried about the risks of nuclear proliferation, and believed that a strengthening of the Non-Proliferation Treaty (NPT) would be necessary.

He reminded the meeting that some nuclear suppliers were not signatories of the Non-Proliferation Treaty, and said that President Carter would like to see a strengthening of this treaty.

Mr. Fithian analyzed the development of American attitudes to nonproliferation since October 1976, and said that he would prefer to discuss the problem of fast breeder reactors during the working session on nuclear nonproliferation.

Mr. Johnson believed that President Carter's energy program would be adopted in a modified form by the fall. He emphasised the need for

developing a comprehensive energy policy and said that, on the whole, President Carter's energy proposals had been fairly well received by the public.

Mr. Blumenfeld said that the Non-Proliferation Treaty was of only indirect importance to President Carter's energy program. He stressed the need for mutual trust between Europe and the United States, while not ignoring the difference in their internal energy resources. While the United States had enormous reserves of coal and might aim at near self-sufficiency in energy, in Europe only the United Kingdom could hope to become self-sufficient in the near future. This meant that Europe was more vulnerable than the United States to changes in the world energy market, or to halts in supplies.

NUCLEAR FUEL CYCLE

Mr. Blumenfeld spoke about the nuclear fuel cycle and the need for international guarantees. He felt that the technical problems of reprocessing and waste disposal could be solved more easily than the political problems. He felt that political pressure was being brought to bear on the EC on this matter and this was unacceptable.

Mr. Corman said that President Carter's proposals were aimed primarily at energy conservation. He deplored the energy inefficiency of motor transport and favored increased use of coal in industry and for domestic use. He believed that energy would inevitably become more expensive in the coming years.

Mr. Bordu said that nuclear energy would have a vital role to play in the immediate future and pleaded for increased research and development into energy sources and conservation.

He mentioned the unequal distribution of energy resources between the countries of the world, and in particular the energy scarcity in poorer countries of the Third World. International cooperation in energy would be a crucial part of a new world economic order.

Mr. Ellis, a member of the European Parliament attending the meeting, felt that nonproliferation should constitute a vital part of Europe's energy strategy, having enormous political consequences. However he believed that Europe could not afford to abandon fast breeder reactors and stressed the need for secure supplies of highly enriched and natural uranium.

Turning to the international safeguards and inspection systems of both Euratom and the International Atomic Energy Agency, he said that any attempt by supplier countries to restrict inter-Community trade of nuclear materials would have profound consequences for the European Atomic Energy Community.

Lord Bruce of Donington pointed out that oil supplies were exhaustible and then discussed the principles behind President Carter's energy proposals. He asked what the U.S. administration's fall-back position would be if these proposals failed to reduce energy consumption sufficiently.

NUCLEAR POWER NEEDS

Mr. Martin said that nonproliferation was not part of the legislation currently being examined by the U.S. Congress. He criticized certain aspects of President Carter's proposals, particularly those con

cerning coal exploitation and supply. He considered that nuclear power requirements, and the capital necessary for it, had been underestimated.

He concluded by saying that insufficient emphasis had been given to boosting energy production in the Carter proposals.

Mr. Corman felt that by using tax incentives and regulations a great deal could be done to conserve energy.

Mr. Ryan said that the President of the United States had proposed that uranium supply contracts should stipulate that the uranium would not be used outside the recipient country, commenting that this would pose problems for the non-EC European nation that currently wished to sign a contract with an EC Member State for reprocessing uranium of U.S. orgin.

Mr. Corman closed discussion of the energy issue by remarking that the President has his critics on this issue who say that he has not gone far enough as well as those who say he has gone too far. With regard to his energy conservation policy, we intend to accomplish that goal mainly through regulation and through taxation. If these approaches do not work the United States will then be forced to go to energy rationing.

PROTECTIONISM IN EUROPE

Mr. Frenzel asked the first question on behalf of the U.S. Congress delegation:

Is there a new trend towards protectionism in European trade patterns? Is this protectionism the answer to industrial trade problems? What revisions are needed in U.S.-EEC agricultural trade?

Mr. Baas, speaking on behalf of the European Parliament delegation, stressed that these questions on the subject of protectionism raised important issues and were closely related. As to whether there was a new trend towards protectionism, he felt that this was not the case, even though the recent changes in the economic structures of countries such as Japan, and even certain developing countries, might well lead the Community countries to readjust efforts in some industrial sectors, despite the limited opportunities for the sort of mobility that this implied. A pragmatic approach should therefore be adopted to the concept of free trade, bearing in mind that protectionist measures, if they had to be taken should be applied with the utmost circumspection.

Frequent references had recently been made to dumping, but this was an extremely difficult concept to define. Could it be said that developing countries engaged in dumping when some of them owed their favorable position on the market to efficient production rather than to nonauthorized practices. It should also be remembered that the industrialized countries themselves had often helped the developing countries to industrialize.

In the agricultural sector, Mr. Baas said that the Community had taken 25 percent of all U.S. farm exports in 1973 and 28 percent in 1976. He also noted U.S. restrictions on EC cheese exports.

The actual figures were US$4.4 billion and US$6.4 billion respectively, representing an increase of almost 50 percent over this period

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alone. In 1968, U.S. agricultural exports (to the nine Member States) were worth only US$1.8 billion. Community exports, on the other hand, were on an extremely small scale, totaling $1.1 and $1.2 billion for 1973 and 1976 respectively. Finally, the agricultural trade balance for 1976 showed a surplus of $5.2 billion in favor of the United States.

EC FARM POPULATION

The Community, therefore, was the United State's main trading partner, despite the common agricultural policy and the well-known structural problems with which it was faced. Approximately 9 million people were employed in agriculture within the Community, as against 4 million in the United States. The Community's farm population had almost halved over the last 20 years and its room for maneuver was consequently very limited, particularly in the present economic situation.

Mr. Baas pointed out that the two basic principles of the common agricultural policy were first security of supply and, secondly, guaranteed reasonable prices for consumers and fair prices for producers.

On the question of security of supply, a point to remember was the soya bean crisis of 1973: this was precisely one of the sectors in which the Community had agreed to complete liberalization although at the time, soya had admittedly not yet become the vital animal feed it is today.

U.S.-EC PROTECTIONISM GROWING

Mr. Nolan of the United States agreed that one should not throw stones if possible but he reserved the right to disagree with Mr. Baas' contention that there is not a trend toward protectionism in Europe. To the American farmer it certainly appears that there are trends in that direction as indeed there are similar trends in the U.S. economy. As to the recommendation for the liberalization of agricultural trends the United States is looking with much interest toward the results of the trade discussion in Geneva. The new Secretary of Agriculture, Mr. Bergland, has expressed interest in a variety of approaches designed to discourage protectionism. Such approaches have set minimum and maximum prices as well as stock and destocking arrangements, and could serve as stabilizing vehicles. Also Europeans are necessarily apologetic at times about the relative efficiency of European agriculture. The much vaunted U.S. efficiency was always based on energy. With the change in the energy situation, this relative efficiency has decreased. Now the United States is looking for new methods to substitute for our labor intensive ways to produce in the agricultural sector. Secretary Bergland in fact described U.S. agriculture as the most energy efficient.

Mr. Prescott agreed that Europeans are frequently apologetic about protectionism. Many do not admire the system which now exists in Europe. With such excess capability for example in shipbuilding and textiles, economic growth will not be like past decades. European countries are being left with real problems of how to absorb a cutback in capacity.

The first reaction to the problem of how to guarantee markets is usually dumping.

Laizze faire or free trade is now largely nonsense. Protectionism is the new economic reality and political factors are increasingly determining trade policy.

Mr. Bordu felt that protectionism was bound up with the crisis in that each country was trying to shift its own crisis onto the others. Everything depended, therefore, on the balance of forces involved. Hence the need for a new balance based on some measure of control over the various economies allied with efforts to prevent continued squandering of resources on the present substantial scale. Mr. Bordu also believed that multinational companies were to some extent to blame for the difficulties encountered in certain sectors such as textiles. He supported an agricultural storage system under international control. A system of cooperation should be established to insure that trade was based on reciprocity, which was not the case at present.

Mr. Scott-Hopkins, referring to the speech by Mr. Nolan, asked whether direct payments could be made to farmers in the United States, and whether they operated a system of control through quotas. If so, caution was called for, as such systems often acted as an encouragement to the least efficient. On the subject of access to the American market for Community products, he said he was aware that the Community policy of export refunds was the target of some criticism. But if these were offset, as had already been done to some extent, would the Americans be prepared to import cheese without restrictions?

BUILDUP OF SOY STOCKS

Mr. Nolan pointed out that the deficiency payments scheme introduced in 1973 had never been implemented as the market price of wheat had held its own. The situation might be quite different this year. Attempts were now under way to build up stocks of soy beans to preclude the necessity of imposing an embargo at a later stage, although the final decision on this matter would lie with the President of the United States.

Mr. Baas expressed interest in the American storage proposals as they would make it possible to hold down price movements. There was an undoubted need to seek new methods in the agricultural policy sector, possible alternatives, perhaps being direct aid to producers, channeling of production, or price modulation.

At a more general level, he considered it extremely important that the Ministers for Economic Affairs should be looking into the question of protectionism, as they were doing at that moment.

Mr. Frenzel said that all countries had certain leanings towards protectionism, and he was well aware that the Trade Act had caused some concern within the EEC. But the United States did not fully understand the nature of the agreements signed by the Community, such as the Lomé Convention or the agreements with the countries of the Mediterranean basin.

Mr. Gibbons said he could not go along with the views expressed by Mr. Prescott. The protagonists were not the same as at the time of the 1930 crisis, but the danger of protectionism remained the same,