at ‘ —FOP-SECRET DINAR NEGCTIATIGNS FOR A CABINET IN ITALY Disagreements over the pro- spective government program are retarding the negotiations in Italy for a center-left coali- tion. Several of the current dif- ficulties seem to relate to the proposals for decentralizing Italy's administrative structure. The most important problem is that of decentralizing the large organization which controls the bulk of the nation's agricul- ture. This organization is dominated by the confederation of small farmers which is power- ful in tne Christian Democratic Party. Secondly, a compromise previcusly reaciea on setting up regional administrations been complicated by an accord reached a few days ago in the Aosta Valley region, where So- cialists and Communists have agreed to continue their cooper- ation in’ the government at this local level. A third difficulty “centers on the urban redevelopment program. The negotiations are being conducted in an atmosphere of rising tension as powerful oppo- nents of a center-left regime on both right and left continue to maneuver to block its forma- tion. The Communists sparted two more strikes this week and can be counted on to miss no 22 Nov 63 CURRENT INTELLIGENCE WEEKLY REVIEW Europe opportunity to embitter rela- tions between the Socialists and Christian Democrats, even to the point of provoking violence. | Right-wing Christian Demo- crats have been no less assiduous in trying to prevent a rapproche- ment with the Socialists. To this end, they are attempting to exploit the Socialists’ unwill- ingness for the government to undertake further. MLF comnit- ments during its first few months. — President Segni earlier this month went so far as to send word to the Socialists that the US was pressing for a definite MLF commitment "now." This particu- lar ploy seems to have been scotched, but the two sides are still unable to agree ona policy statement concerning the MLF. Premier-designate Moro also is under direct pressure fron rightist elements in his party. These are suggesting that he is bargaining away too much of the Christian Democratic posi- tion and that,in so doing, he could turn the country over to the Communists. Thus, even if a center-left government is eventually installed in office, it is bound to be in for rough sledding during its shakedown period. (SECRET) Page 18 —FOP-SECRET DINAR— HW 55355 DBocld:32401316 Page 23
—CONMDENTIAL NO FOREIGN DISSEM cf y f a THE MANSHOLT PROPOSALS. a The Manshalf proposals‘¢ are F designed top pave the way for free trade , in grains and derivative products within the European Economic Community by harmonizing the support~price levels for grains in the six member countries. Price levels now vary from about $82 per metric ton for wheat in France to about $108 in West Germany. Commissioner Mansholt proposes to effect the adjustment in one step to a level which, in 1964, would be roughly 11-15 percent below the German price, but 8-16 percent above the French price. ‘The single Community price would be subject to.annual adjustments, taking into account agricultural incomes, production costs, consumer pri ces, and aan supply and demand. To assist producers hit by the proposed price reductions (i.e., farmers in. - West Germany, Italy, and Luxembourg) the Mansholt plan provides for various kinds of compensatory payments totaling $206 million in the first year, but declining somewhat in subsequent years. These payments would be financed initially from the Community budget--presumably out of receipts from the variable levies on imports of agricultural products. Mansholt also proposes \ & that the Community assume from the member states the costs of subsidizing - 4 exports of grain, flour, poultry, eggs, and pork to nonmember countries. —~ a As a leading supplier of grains to the EEC, the United States is concerned primarily about the plan's expected impact on production in France, where the expansion potential is greatest. US experts believe that total returns to the French producer under the planare likely to exceed considerably the specific increase in French prices and that a sharp increase in production is therefore probable. While part of this increase will be absorbed by the expand- ing intra-EEC market, one official US estimate suggests that net annual EEC imports of grains from all sources are likely to decline from the 10:6 million metric tons of the recent past to 8.5 million metric tons by 1970. This particular study notes, however, that continuation of the present rate of inflation in France might well produce about the same price/production pattern in 1970 even without the Mansholt plan. Moreover, with or without the plan, the modernization of European agriculture is expected sooner or later ~ to mean considerable adjustments in the EEC's trade relations with its present major suppliers. 631121 ; CODE WORD MATERIAL ON REVERSE OF PAGE HW 55355 Docld:32401316 Page 29
HW 55355 DoclId: 32401316 Europe MANSHOLT PLAN FOR SETTLING EEC GRAIN CCNTRGVERSY ? EEC Commissioner Mansholt's proposals for early unification of grain prices in the Common Market appear to hold increasing promise of averting a crisis over agriculture, but perhaps at tlie expense of causing one in the EEC's relations witn the US and other major agricultural producers. The member states have begun an intensive study of the complex proposals in preparation for for- mal discussion scheduled for mid~ December. Whatever comes of it, there is general recognition that Mansholt, a former Dutch minister of agriculture, has been ingenious in his efforts to find a solution to the Community's most vexing problen. From Mansholt's point of view, Bonn's mildly favorable initial re- sponse--aespite the vigorous and continuing opposition from West German farm groups--has been par- ticularly gratifying. This posi- tive reaction appears due, at least in part, to effective lobbying by EEC President Hallstein, who has warned Chancellor Erhard that Bonn is certain to be outvoted in the EXC in 1966 when the majority ‘rule comes into effect on the grain price question. Under these cir- cumstances Erhard's Christian Demo- cratic Union could not expect to deliver on any promises it might make in the 1965 elections not to reduce support prices..--.. The Mansholt initiative is potentially of great importance to the broader question of European union. Under his proposals a degree of agricultural integration would be achieved in the next year or so which the EEC treaty had not 22 Nov 63 CURRENT INTELLIGENCE WEEKLY REVIEW envisaged before 1970. Such a rapid advance would probably necessitate acceleration in other fields. The prospect of an EEC bureaucracy spending several hundred millions annually ona farm program would,for example, make more imperative than ever the establishment of an effective European Parliament. These wider implications deepen the dilemma for outsiders who are committed to support progress toward European union, but who may stand to lose in the way of trade. The US is concerned . that increases in EEC production consequent to the rise in French grain prices will reduce EEC grain purchases from the US. More- over, US trade officials seriously question whether the Mansholt scheme will be the subject of bargaining in the Kennedy Round, or whether it is the EEC intention merely to offer not to increase the new and higher level of pro- tection the plan is believed to involve. The immediate tactical and substantive problems these pos-. sibilities raise are difficult ones indeed. Past experience has shown that the EEC would find it extremely hard to make any major adjustments in the plan once it has been negotiated through the complex EEC machinery. It is almost equally doubtful, however, that the Kennedy Round can go ahead at all unless some more or less final settlement of the EEC's agricultural policy is reached. (CONFIDENTIAL NO FCREIGN DISSEM) Page 19 —-FOP-SECRET-BINAR Page 30
sini. CHANGING BRITISH LABOR PARTY DEFENSE POLICY $ ca eerste vat mentee MA earns tee Leaders of the British Labor Party have recently indi- cated that there has been some modification in the party's flat opposition to the MLF and retention of an "independent" British nuclear deterrent. One factor pushing them in this di- rection may be a growing nervous— ness over how well they could defend their position against sharp challenges by the Conserv-— atives in the approaching elec- tion campaign or, beyond that, ‘aS ministers in a Labor govern- ment. Patrick Gordon Walker, presumptive foreign secretary in such a government, delivered a carefully worded statement. on defense early this month in which he put. new emphasis on the role of conventional forces in Britain's future defense estab- lishment. He was silent, how- ever, on the question of whether Labor would eliminate Britain's deterrent when it came to power. Gordon Walker went on to reject the idea of British par- ticipation in any effort to form a purely European nuclear deter- rent force, proposing instead the establishment of a four- power NATO directorate--includ- ing Germany--which would formu- late “the Alliance's nuclear strategy. In this scheme, the US would retain the ultimate decision on the use of nuclear weapons. On 14 November, George Brown, the party's deputy leader, repeated the usual Labor asser- 22 Nov 63 _ CURRENT INTELLIGENCE WEEKLY REVIEW swe ueee par town ee PONS Hig RUE — ra cena iar tion that the British deterrent is a spurious one, but left the ad party leeway to change its posi- tion. He said that an incoming Labor government would under- take an extensive review of existing weapons development pro- grams before deciding whether or not to proceed with them. He mentioned, as examples, Britain's Polaris submarines and its con- troversial TSR-~2 plane--which are designed to give Britain a nuclear delivery system through the next decade. ~ Brown also intimated that Labor might be amenable to pool- ing Britain's existing: nuclear weapons in return for a greater sharing of command and control . over NATO's nuclear arsenal. Such an arrangement, he felt, would eliminate pressures for nuclear proliferation. Party leaders still oppose the MLF, but appear to have become less rigid on this issue. Denis Healey, the defense spokes- man, is on record as saying that a Labor government might even- tually commit the UK "to join" the MLF but only if party lead-— ers were satisfied that no other method of sharing control of all nuclear weapons within the NATO framework is feasible. Accord- ing to Healey, this view was shared by party leader Harold Wilson and by Gordon Walker, although Healey added that, for obvious reasons, it could be found only in the "small print" of the party's statements on the MLF. (SECRET NO FOREIGN DISSEM) / Page 20 FOP -SECREF-DINAR HW 55355 DBocld:32401316 Page 31