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SECRET --8- on EC goods. It may contain a statement that full economic integration is the ultimate objective, but will not contain the timetable for the attainment of this objective that would make it consistent with Atticle 24 of the GATT. While Spain has long aspired to full membership in the EC, the new Spanish Government, in which the economic ministers have achieved unprecedented power, has made close ties with Europe a major --- perhaps the major - - foreign policy objective. The Spanish have warned us at a high level that if the United States attempts to block closer Spanish association with the EC, Spain might retaliate against American economic interests. It is also clear that our ability to retain military base rights in Spain would be jeopardized. On the other hand there are important commercial policy considerations involved. The United States has sought since the end of World War II to develop a multilateral system of trade and payments based on non-discrimination. A preferential agreement between Spain and the EC would encourage the pro- liferation of arrangements between the European Communities and non-member countries which would be inimical to United States economic interests and would seriously damage the multilateral system of trade which has been built up in the last two decades. * The agreement about to be negotiated between Spain and the EC is clearly contrary to the GATT which provides in Article 24 an exception only for arrangements lead- ing under a definite time schedule to a free trade area or customs union convering "substantially all" trade between the participants. The major courses of action open to us are: (For a. fuller discussion of these options see Basic Document, PP. 10-17.) OPTION 1 -- Remain silent. * The broader problem of EC preferential arrangements and what the United States can do to cope with it is being dealt with separately. [p8f9] SECRET NLN 08-14-01/8

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    "ocrText": "SECRET\n--8-\non EC goods. It may contain a statement that full economic\nintegration is the ultimate objective, but will not contain\nthe timetable for the attainment of this objective that would\nmake it consistent with Atticle 24 of the GATT.\nWhile Spain has long aspired to full membership in the\nEC, the new Spanish Government, in which the economic ministers\nhave achieved unprecedented power, has made close ties with\nEurope a major --- perhaps the major - - foreign policy objective.\nThe Spanish have warned us at a high level that if the\nUnited States attempts to block closer Spanish association with\nthe EC, Spain might retaliate against American economic interests.\nIt is also clear that our ability to retain military base rights\nin Spain would be jeopardized.\nOn the other hand there are important commercial policy\nconsiderations involved. The United States has sought since\nthe end of World War II to develop a multilateral system of\ntrade and payments based on non-discrimination. A preferential\nagreement between Spain and the EC would encourage the pro-\nliferation of arrangements between the European Communities\nand non-member countries which would be inimical to United\nStates economic interests and would seriously damage the\nmultilateral system of trade which has been built up in the\nlast two decades. * The agreement about to be negotiated\nbetween Spain and the EC is clearly contrary to the GATT which\nprovides in Article 24 an exception only for arrangements lead-\ning under a definite time schedule to a free trade area or\ncustoms union convering \"substantially all\" trade between the\nparticipants.\nThe major courses of action open to us are:\n(For a. fuller discussion of these options see Basic\nDocument, PP. 10-17.)\nOPTION 1 -- Remain silent.\n*\nThe broader problem of EC preferential arrangements and what\nthe United States can do to cope with it is being dealt with\nseparately.\n[p8f9]\nSECRET\nNLN 08-14-01/8"
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