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ACTION EUR-12
INFO OCT-01 ISO-00 SP-02 AID-05 EB-07 NSC-05 RSC-01
CIEP-01 TRSE-00 SS-15 STR-01 OMB-01 CEA-01 CIAE-00
DODE-00 PM-03 H-01 INR-05 L-02 NSAE-00 PA-01 PRS-01
USIA-06 /071 W
--------------------- 104150
R 251534Z NOV 74
FM AMEMBASSY LONDON
TO SECSTATE WASHDC 6003
INFO AMEMBASSY BONN
AMEMBASSY BRUSSELS
AMEMBASSY COPENHAGEN
AMEMBASSY DUBLIN
AMEMBASSY THE HAGUE
AMEMBASSY LUXEMBOURG
AMEMBASSY PARIS
AMEMBASSY ROME
USMISSION EC BRUSSELS
USMISSION OECD PARIS
AMCONSUL BELFAST
AMCONSUL EDINBURGH
AMCONSUL LIVERPOOL
C O N F I D E N T I A L LONDON 15401
E.O. 11652: XGDS-1
TAGS: UK, FR, EEC, PFOR
SUBJECT: CALLAGHAN IN PARIS: EC RENEGOTIATION
REF: (A) PARIS 27888; (B) LONDON 15242
SUMMARY - IN HIS TALKS WITH FRENCH NOVEMBER 19,
CALLAGHAN SKILLFULLY AND PATIENTLY ARGUED BRITISH CASE
FOR A REDUCTION IN UK CONTRIBUTION TO EC BUDGET. PER-
HAPS MORE IMPORTANTLY, HE APPEALED TO FRENCH SELF-
ESTEEM AND STATESMANSHIP, SAYING THAT FRENCH COOPERATION
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WAS ESSENTIAL IF RENEGOTIATION IS TO SUCCEED IN KEEPING
UK IN EC. END SUMMARY
1. KEN JAMES, HEAD OF WESTERN EUROPEAN DEPT., FCO, WHO
WAS PRESENT WITH CALLAGHAN IN PARIS NOVEMBER 19, GAVE
US PROMISED RUNDOWN OF MEETINGS WITH FRENCH. HIS
ACCOUNT GENERALLY CONFIRMED SUBSTANCE OF ACCOUNTS AL-
READY GIVEN BY UK EMBASSY PARIS (REF A) AND BRITISH
PRESS (REF B). SEPARATE BRIEFING ON ENERGY ASPECTS
OF TALKS REPORTED SEPTEL.
2. IN DESCRIBING DISCUSSION OF EC BUDGET, JAMES OB-
SERVED THAT FRENCH WERE ESSENTIALLY THERE TO LISTEN.
THEY HEARD BRITISH OUT, ASKED QUESTIONS WITHOUT HOS-
TILITY, AND AGREED WITHOUT COMMITMENT TO STUDY HMG PRO-
POSALS FURTHER. THEY EXPRESSED CONCERN THAT THE BRITISH
PLEA FOR "EQUITY" IN THE DISTRIBUTION OF BUDGETARY BUR-
DENS MIGHT BE GETTING UNCOMFORTABLY CLOSE TO "JUSTE
RETOUR", AND PROTESTED THAT IN ANY EVENT THE BRITISH
CASE FOR REDUCED BUDGETARY PAYMENTS DID NOT TAKE INTO
ACCOUNT THE "DYNAMIC EFFECT" OF EC MEMBERSHIP ON THE
ECONOMIES OF MEMBER STATES. CALLAGHAN REJOINED THAT
"DYNAMIC EFFECT" WAS AN ARGUMENT MORE APPROPRIATE TO
THE 1960'S THAN TO THE 1970'S. HE POINTED OUT, TOO,
THAT THE PROPOSED BRITISH FORMULA WAS A SELF-CORRECTING
ONE, AND THAT IF THE BRITISH ECONOMY DID SOME DAY ENJOY
A REVIVAL BASED ON NORTH SEA OIL OR WHATEVER, THEN THE
BRITISH CONTRIBUTIONS TO THE EC BUDGET WOULD AUTOMATI-
CALLY BE ADJUSTED UPWARDS.
3. IN THE LAST TEN MINUTES OF HIS SESSION WITH
SAUVAGNARGUES, CALLAGHAN TREATED HIS FRENCH COUNTERPART
TO WHAT JAMES DESCRIBED AS A "BRILLIANT EXPOSITION" OF
THE DOMESTIC POLITICAL IMPERATIVES UNDER WHICH HMG MUST
CARRY OUT RENEGOTIATION. SPEAKING PERSONALLY, JAMES
SAID THAT IF THE FRENCH (OR ANY OTHER EUROPEANS) WISHED
TO KEEP BRITAIN IN THE EC, THEY WOULD HAVE TO MAKE A
CONSCIOUS EFFORT TO UNDERSTAND BRITISH DOMESTIC POLITICS
AND TO CONDUCT THE RENEGOTIATION EXERCISE ACCORDINGLY.
FROM A PURELY NATIONAL VIEWPOINT, HE READILY CONCEDED
THERE WAS NO REASON THEY SHOULD PUT THEMSELVES TO THE
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TROUBLE, BUT UNLESS THEY DID HE WAS FEARFUL THAT BRITAIN
MIGHT EVENTUALLY BE PULLED OUT.
4. COMMENT: ALTHOUGH JAMES DID NOT PUT IT IN THESE
TERMS, HE CLEARLY ENVISAGES THE COMING STRUGGLE OVER
CONTINUED BRITISH MEMBERSHIP IN THE EC AS ONE IN WHICH
THE PRO-EUROPEANS IN BRITAIN WILL REQUIRE THE AID OF
PRO-EUROPEANS ON THE CONTINENT IF THEY ARE TO PREVAIL.
CALLAGHAN IN EFFECT WAS CALLING ON THE FRENCH FOR AN
ACT OF STATESMANSHIP IN MEETING BRITISH DEMANDS. SHOULD
SUCH STATESMANSHIP BE FORTHCOMING, THE BIGGEST QUESTION
IN OUR OWN MINDS IS WHETHER CALLAGHAN, AND MORE
IMPORTANTLY WILSON, WOULD MATCH IT BY GIVING THE PRO-EC
CASE THEIR FIRM AND VIGOROUS SUPPORT AT HOME.
SPIERS
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