90. Memorandum of a Conversation, Department of State, Washington, May 29, 19571
SUBJECT
- Pending United States Action on Lead and Zinc
PARTICIPANTS
- Mr. Norman A. Robertson, Ambassador of Canada
- Mr. A.E. Ritchie, Minister, Embassy of Canada
- Mr. R.G.C. Smith, Commercial Minister, Embassy of Canada
- Mr. Dillon—W
- Mr. Frank—ITR
The Ambassador said he was sorry to have to take the occasion of his initial courtesy call on Mr. Dillon to express his Government’s [Page 240] serious concern about the Administration’s decision to recommend to the Congress increases in the lead and zinc tariffs. He left a note (copy attached)2 which also expresses concern about a reported decision to reinstate the barter program for imports of these and other metals in exchange for surplus grain. In the Canadian view both sets of measures would “cause serious damage to important trade and economic interests and would be bound to have a profound effect on Canadian-United States trade relations.”
Mr. Dillon said we would check on the status of the barter program but that, in any case, he was certain that any decisions with respect to it were unrelated to the Cabinet decision to recommend additional duties on lead and zinc.
Mr. Dillon went into some detail on the background of the pending Administration action on lead and zinc. He noted that the President, in vetoing a bill relating to minerals in 1955 and again in a message this year, promised that the Administration would come up with a program of assistance for the domestic minerals industry, and directed the Department of the Interior to develop such a program. Mention was also made of the Tariff Commission’s recommendations in 1954 for increased duties under the escape clause and the fact that these were not adopted by the President. Instead, an effort was made at voluntary controls and a program of stockpiling was adopted. Mr. Dillon pointed to the recent situation in the market for lead and zinc and the strong political pressures that have been building up to assist the domestic industry. The tariff action to be recommended will be the smallest increase believed necessary to stabilize the domestic market and provide the required protection. In fact, the recommendation to the Congress will be in the form of a sliding scale duty under which even the existing duty would be removed if the price rises above a certain point.
After sketching the background of the Administration’s decision, Mr. Dillon took up the point in the Canadian memorandum that the proposed measures “would constitute a serious impairment of contractual obligations by the United States.” He noted that there were provisions in the GATT which would permit this action to be taken: Article XXVIII which would allow the unilateral withdrawal of concessions on January 1, 1958; and Article XIX, the escape clause provision, under which concessions may be withdrawn under circumstances of serious injury to domestic producers. He also noted the legal possibility of such withdrawals taking place prior to January 1, 1958 under the “special circumstance” procedures of the declaration of March 10, 1955.
[Page 241]Mr. Dillon explained that we fully understood our obligation under those provisions to negotiate and to seek to provide compensatory concessions. If this were not possible, we recognized the right of affected countries to make retaliatory withdrawals of concessions.
Mr. Dillon conceded the point made in the Canadian memorandum that the United States would not have enough authority left to offer adequate compensation. In the circumstances he saw one of three possible ways of restoring the balance of concessions between the United States and Canada. One possibility would be to wait until the Trade Agreements Act is renewed next year in the hope that an adequate basis for compensation would be provided in the new authority. The second possibility would be for the Canadians to withdraw equivalent concessions. The third possibility would be some combination of the first two. One consideration Mr. Dillon felt the Canadians should keep in mind is that the proposed action on lead and zinc has an important bearing on the prospects for renewal next year of the Trade Agreements Act. If the Administration could not or did not act on lead and zinc, many votes would be lost on the reciprocal trade issue next year.
The Canadian Ambassador stated that, however arguable the economic impact of the proposed measures may be, they were politically a major step backward in the relations between the two countries. Moreover, the prospect of reciprocal withdrawals was not something the Canadians would look forward to. He also questioned the proposed action in terms of hemispheric defense considerations, but Mr. Dillon noted that we were not trying to relate this action in any way to considerations of strategic necessity. Mr. Ritchie noted, nevertheless, that the action could have strategic consequences in terms of its effect on the sources of supply that the United States would have to rely on in an emergency. The Ambassador stated that the proposed action is particularly troublesome when added to the other problems in Canadian-United States trade relations, notably those arising from our surplus disposal program.
Mr. Dillon assured the Ambassador that throughout the interagency discussions on this subject the Department has been much concerned about the effect of the proposed action on our relations with Canada and had brought this aspect of the matter to the attention of the Cabinet. He indicated that the views contained in the Canadian memorandum would be given further consideration but he was not hopeful regarding any change in the decision.