RESTRICTED
$7,000 million of imports (on the basis of trade in 1976) would receive under their offer more than formula reductions as compared to some $4,000 million receiving formula reductions and as little as $1,400 million totally excepted from their offer for one reason or another and a further $400 million subject to less than formula reductions. We should be falling over ourselves in thanking them. Sober study however of the offers shows that included among the exceptions and partial exceptions are a wide range of important Commurity exports (notably woollen textiles) while other high US tariffs (some ceramic products and benzenoid chemicals) are excluded for the time being from the offer on the grounds that certain Congressional procedures have to be gone through before decisions can be made. In contrast the greater than formula cuts apply to a wide range of items such as motor cars, aircraft, internal combustion engines and a huge range of miscellaneous items in which the Community has a large trade but where most people would judge that trade is not much affected by tariffs.
THE JAPANESE OFFER
7. The Japanese offer looks on the face of it to be similar to the US offer and to cover as much trade in relative terms. In fact how- ever the offer is quite different. The key feature of the Japanese scene (so far as Japanese tariffs are concerned) has been the reductions which took place in 1971 and 1973, that is after the Kennedy Round. (They are also of course implementing a further fairly modest reduction in April 1978). The reductions in duty offered however are on their pre 1971 rates. The reduction offered is likely, we judge, to amount to less than 20% on a weighted average basis as compared to present levels - lamentably poor for a country in record trade surplus.
8. Whereas the US has virtually excluded from her offer one commodity area where she has grossly high tariffs and where we have a major interest, namely woollen textiles, Japan has excluded a number of commodity areas (aircraft, leather, pharmaceuticals) where we have a substantial but less overwhelming interest and where the Japanese tariffs are at least more modest than the US tariffs on textiles. These however are all cases, like the US woollen textiles one, where the country concerned is excepting in whole or in part a commodity area where it enjoys far greater protection than does the Community under the common external tariff.
THE COMMISSION QUESTIONS
9. At the meeting of the Article 113 Committee (Full Members) on 17 February Sir Roy Denman asked member states for views, preferably at the meeting but otherwise at Deputies on 24 February, on two things.
10. First what should the Community's priorities be in pressing the US and Japan for improvements in offers (bearing in mind that success in getting extra concessions from the USA and Japan might make it the more difficult to justify withdrawals on the part of the Community)?
11. Second Sir Roy asked for views on which more than formula cuts – the emphasis here was more on the US than on Japan - could readily not be taken up.
-2-