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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