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SECRET
- 2 -
preferential arrangement to be concluded and to take
effect without insisting upon our rights under GATT,
that agreement, which has been the cornerstone of our
international trade policy in the post-war period, will
be virtually destroyed. A proliferation of preferential
agreements could be expected to follow. In such event,
the U.S. would have to expect that practically all of
Western Europe, Africa and Asia would be folded into a
trading bloc discriminating against the U.S. (and Canada
and Japan).
4. United States trade and prospects for balance
of payments equilibrium would be severely effected by
this action. Congressional reaction to such a development
could involve significantly increased protectionism and
could trigger a trade war between the U.S. and Europe and
could disrupt the framework for cooperation with Europe
in the political, economic, financial, and military areas.
In the long run the U.S. national security would be severly
affected.
5. Meeting the Spanish request for relief from
balance of payments restraints on the financing of
direct investment abroad and from the Interest Equalization
Tax would disrupt the balance of payments program with
little or no benefit to Spain. Both the balance of payments
restraints and the Interest Equalization Tax are being
phased out, but the phase-out must be handled on a non-
discriminatory basis. Preferential treatment for Spain
would be administratively infeasible at this stage and
would stimulate intense pressure from a number of other
countries for comparable treatment. It would cause both
programs to fall apart prematurely.
6. Recognizing this cost to our multilateral trade
and payments policy and our balance of payments program,
it is the Treasury view that the United States should not
offer to mitigate its opposition to a Soanish preferential
trade agreement with the European Communities or give Spain
preferential treatment under balance of payments programs
in an effort to "buy" the retention of military rights and
facilities in spain or to appease Spanish political leaders
by bowing to their threat.
SECRET
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"ocrText": "SECRET\n- 2 -\npreferential arrangement to be concluded and to take\neffect without insisting upon our rights under GATT,\nthat agreement, which has been the cornerstone of our\ninternational trade policy in the post-war period, will\nbe virtually destroyed. A proliferation of preferential\nagreements could be expected to follow. In such event,\nthe U.S. would have to expect that practically all of\nWestern Europe, Africa and Asia would be folded into a\ntrading bloc discriminating against the U.S. (and Canada\nand Japan).\n4. United States trade and prospects for balance\nof payments equilibrium would be severely effected by\nthis action. Congressional reaction to such a development\ncould involve significantly increased protectionism and\ncould trigger a trade war between the U.S. and Europe and\ncould disrupt the framework for cooperation with Europe\nin the political, economic, financial, and military areas.\nIn the long run the U.S. national security would be severly\naffected.\n5. Meeting the Spanish request for relief from\nbalance of payments restraints on the financing of\ndirect investment abroad and from the Interest Equalization\nTax would disrupt the balance of payments program with\nlittle or no benefit to Spain. Both the balance of payments\nrestraints and the Interest Equalization Tax are being\nphased out, but the phase-out must be handled on a non-\ndiscriminatory basis. Preferential treatment for Spain\nwould be administratively infeasible at this stage and\nwould stimulate intense pressure from a number of other\ncountries for comparable treatment. It would cause both\nprograms to fall apart prematurely.\n6. Recognizing this cost to our multilateral trade\nand payments policy and our balance of payments program,\nit is the Treasury view that the United States should not\noffer to mitigate its opposition to a Soanish preferential\ntrade agreement with the European Communities or give Spain\npreferential treatment under balance of payments programs\nin an effort to \"buy\" the retention of military rights and\nfacilities in spain or to appease Spanish political leaders\nby bowing to their threat.\nSECRET"
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