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1g7g Trade Negotiations and MonetaRECOMMENDATIONS FOR EC POLICY

RAYMOND BARRE, Vice President, European communiiies Commission

The enlarged Community will next year face the

opportuniiies and risks presented by mu.ltilateral trade

nigotiations and talks on the reform of the international

rJn"t"ty system. Both major negotiations will be

decisiveieits of Community policy and solidarity'

For the past two years the United States has insisted

that correction of the American balance-of-payments

Jeiicit woutO benefit both the United States and the

iest of the world. This view is gaining strength in certain

international circles, even within the Community'

When he signed the law increasing the price of

goid, iresioeit nicnaro M. Nixon reaffirmed his country's

iesiie to obtain trade concessions from other countries

to make American products more competitive abroad' The

Americans expect concessions from Japan, Canada' and

".-p""i"tty from the Community' The Community's trade

poii"y, especially tor farm produce, is constantly

ititi.ii"O'"t discriminatory' In the US view' the Com-

munity's enlargement only extends discriminatory trade

oori"i". to moie countriei. The community's industrial free

it"a" "gi""tents

with non-candidate European Free

ilo"Itto"iation (EFTA) countries are seen as a ready-

maJe iustification for the United States to ask for

similar treatment.

US Wants to Link Trade and Monetary Problems

The United States, therefore, sees a need for "global"

international negotiations, linking monetary with economic

and trade problems. To facilitate such negotiations'

the United States advocates establishing an ad hoc body

including representatives of the world's principal

economic and monetary groups and of the developing

countries. This body would deal with matters usually

handled by the International Monetary Fund (lMF) and

the Generil Agre€ment on Tariffs and Trade (GATT)'

No one objects to the United States' protecting and

seeking to further its interests. Nevertheless, other

countries and the Community have every reason to re-

lect certain aspects of the US point of view, despite their

tlose and friendly relations with the United States'

The rest of the world cannot be expected to solve

single-handedly the US balance of payments problem'goih tne Community countries and Japan have made a

contribution by accepting the devaluation of the dollar'

by revaluing their own currencies, and by giving the

UniteO States trade preferences. Exchange rate realign-

ment will help the American trade balance if the United

States adopts appropriate budgetary and credit policies'

The US balance of payments will also benefit from

the increasing revenue of US investments overseas' Since

1958 the book value of US direct investment in the

Community has more than sextupled, rising from $1 '9

billion to $11.7 billion in 1970.

Capital Outflows Increase US Delicit

The outflow of long-term capital, particularly in the form

of direct investment, has seriously affected the US balance

ffi a speech Mr. Bane detivered

of payments. US net direct investment amounted to an

"nnuil average of $1 .8 billion between 1960 and 1964'

$3.3 billion between 1965 and 1969, and $4'5 billion by

1971 . ln a period when its balance of payments showed a

huge deficit, the United States continuously built up as-

seG abroad. Investments were financed by accumulating

dollar balances in central banks, especially in Com-

munity countries. Are European countries expected to

altow ihe United States to achieve a trade surplus at the

expense of their industry and agriculture, when the

UniteO States makes no effort to reduce the imbalance

in its caPital oPerations?

EC Trade Policies Severely Criticized

In the forthcoming international trade negotiations, the

enlarged Community's world trade policies will face

attac[s f rom all sides, not iust f rom the United States'

The new Community, however, need not fear freer world

trade. lts attitude should be based on the followingprinciples:o No concessions should be made without genuine

reciprocity, not merely promises, f rom the other side'o Tariff reductions should be accompanied by the dis-

mantling of non-tariff barriers (NTB's) since in some

countries, especially the United States, NTB's are an

effective substitute for tariff protection'o The Common Agricultural Policy should not be dis-

cussed without considering the non-member countries'

agricultural Policies.. The common customs tariff should be maintained' lt

is an aid to Community solidarity, a weapon against un-

employment in some cases' and an international nego-

tiating instrument.Uniess these principles are followed, the Community

risks dilution into an Atlantic free-trade zone'

Countries Must Maintain Payments Equilibrium

The Community should also follow a few simple principles

in approaching the reform of the international monetary

system. Here, too, essentials could become submerged

in a plethora of technical argument'The first principle concerns the adjustment of

balances of payments. No international monetary system

can function unless participating countries considerbetote the French Senate Finance Committee on April 27' 1972'

European Community October 1972 - 16

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European Community October 1972 - 17

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