CONFIDENTIAL
106423
MDHIAN 4618
ON THE TAXATION OF FOREIGN CORPORATIONS AND HAVE APPROVED PHASE ONE OF THE BA/USAIR DEAL (WHILE MAKING CLEAR THAT THEY WILL PRESS STRONGLY FOR FURTHER LIBERALISATION OF AIR SERVICES). CLINTON IS NOT AT HEART A PROTECTIONIST, BUT THIS ADMINISTRATION IS MORE SUBJECT TO PROTECTIONIST PRESSURES THAN ITS PREDECESSOR AND KANTOR AND BROWN HAVE NO FIRM FREE TRADE COMMITMENT. WE SHALL HAVE A LOT OF TOUGH BATTLES AHEAD ON TRADE ISSUES OVER THE NEXT FEW MONTHS. SO FAR THE STATE DEPARTMENT ARE NOT EXERTING THE POSITIVE INFLUENCE THEY DID UNDER BAKER AND ZOELLICK. WE HELPED PERSUADE CLINTON TO STATE THAT THERE SHOULD BE NO GOING BACK ON THE EC/U.S. AGREEMENTS ON AGRICULTURE AND AIRBUS. BUT THIS WILL DEPEND ON OVERCOMING FRENCH RESISTANCE TO THE EC RATIFYING THE OILSEEDS AGREEMENT, FAILING WHICH THE U.S. WILL RENEW THREATS OF RETALIATION.
U.N. SECURITY COUNCIL REFORM
14.
THIS MATTER IS NOT ON THE FRONT-BURNER HERE. THE AMERICANS WILL GO ON REPEATING THAT THEY WOULD LIKE TO SEE JAPAN AND GERMANY AS PERMANENT MEMBERS OF THE SECURITY COUNCIL IN DUE COURSE. THEY KNOW THAT WE AND THE FRENCH ARE DETERMINED TO PRESERVE OUR POSITION AS PERMANENT MEMBERS, WITH VETO POWERS, AND SAY THAT THERE IS NO U.S. INTENTION TO CONTEST THIS. THEY ALSO ACKNOWLEDGE THE PRACTICAL DIFFICULTIES OF ACHIEVING ENLARGEMENT OF THE SECURITY COUNCIL, BUT THEY WILL STICK TO THEIR POSITION OF PRINCIPLE.
RENWICK
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FCO WHITEHALL
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CONFIDENTIAL
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