Foreign Relations of the United States, 1961–1963, Volumes VII, VIII, IX, Arms Control; National Security Policy; Foreign Economic Policy, Microfiche Supplement

442. Memorandum of Conversation, Paris, May 29, among Ball and his EEC Counterparts¹

May 29, 1961

UNDER SECRETARY’S TRIP TO EUROPE
May 15–June 4, 1961

SUBJECT

• Textile Problem

PARTICIPANTS

• United States

  • Under Secretary Ball
  • Ambassador Tuthill
  • Mr. Jacques
  • Mr. Diebold
  • Mr. McClellen
  • Mr. Boochever
  • Mr. Stibravy

• Austria

  • Mr. Dienzl, Director of Textile Department Ministry of Commerce
  • Ambassador Carl H. Bobleter, Head of Delegation to OEEC

• Belgium

  • Mr. P.A. Forthomme, Ambassador, Administrator, Director-General Ministry of Foreign Commerce
  • Ambassador R. Ockrent, Head of Delegation to OEEC
  • Mr. Bassett, Delegation to OEEC

• Netherlands

  • Mr. van Oorschot, Director-General for International Economic Relations, Ministry for Economic Affairs
  • Mr. Kruijtbosch, First Secretary, Trade Officer in Delegation to OEEC

• Switzerland

  • Mr. Albert Weitnauer, Minister Plenipotentiary, Delegate of the Federal Council for Negotiations, Dept. of Public Economy
  • Ambassador Soldati, Head of Delegation to OEEC
  • Mr. Claude Caillat, Assistant to Mr. Weitnauer
  • Mr. Begle, Swiss Delegation to the OEEC

Mr. Ball outlined the textile problem as seen in Washington and made the following points:

a) the need for orderly development of international trade in textiles to avoid pressures for import controls in industrialized countries that might frustrate expectations in developing countries regarding their ability to earn foreign exchange from such exports;

b) the domestic political importance of the problem in the US;

c) the desire of the US Administration to avoid unilateral imposition of quotas on textile imports that would represent a setback for liberal commercial policy;

d) the general nature of the multilateral arrangement which we hoped could be established for dealing with the problem.

Mr. Ball also noted that:

a) Canada, the UK, France, Germany and Italy had recognized the problem and the desirability of exploring some multilateral arrangement;

b) we were still exploring such questions as the precise framework in which further discussions could be carried on, and their timing;

c) cooperation between OEEC and GATT in this matter would be useful;

d) we must avoid any impression of “a color line in textiles” or ganging up by the industrialized countries.

Mr. Weitnauer (Switzerland) recalled that it had always been liberal in its treatment of imports from less-developed countries. As regards imports of textiles from Japan, Switzerland now has in effect a price control system which excludes from entry into Switzerland textiles whose prices are lower than average Swiss prices by certain fixed percentages. Switzerland has not invoked Article 35 of the GATT against Japan and imports from that country now account for 10 to 15 percent of Swiss domestic consumption. Switzerland maintains no special control on textile imports for the less-developed countries. As regards imports from Hong Kong these need present only proof of Hong Kong origin. Such imports have increased by 3 to 4 times over the past few years but have showed signs of levelling off recently. Switzerland’s own textile industry was gradually shifting toward high priced specialty lines. Switzerland would be glad to join an international meeting on textiles as envisaged by the US.

Mr. Dienzl (Austria) noted that the problem raised by Mr. Ball was of great concern to Austria whose textile industry employed 25 percent of the Austrian labor force. Imports from OEEC countries have risen by 30 percent over the past year. Even with respect to imports from less-developed countries, Austria was an important buyer, taking imports from such sources to the amount of 82 percent per capita per annum compared with $1.40 in the US, 22 cents in Germany and 3 cents in Italy. Austria felt it necessary to maintain certain restrictions on textile imports, which were applied on a nondiscriminatory basis. It was difficult to see whether it would be possible to reduce these restrictions particularly in view of the fact that Austria’s imports from the OEEC area were increasing steadily while their exports were not doing so well.

Mr. Forthomme (Belgium) noted that the textile problem, along with the wider problem of imports from low-wage countries, was taking a lot of time of the Common Market people in Brussels. However, it had not thus far been possible to develop an agreed view. Various schemes had been considered, but all had disadvantages as well as advantages. As far as Benelux was concerned it maintained a reasonably liberal policy on textile imports. In addition, it had developed an arrangement with Japan under which the Japanese limit exports to Benelux, principally cloth.

Mr. Forthomme emphasized that it would be a great advantage if a common solution could be worked out in agreement with exporter countries. Such solution could provide a pattern of cooperation not only on textiles but also on other manufactured products from low priced countries moving in international trade. He expressed the personal view that restrictions on textile imports, even if these were developed in agreement with the exporting countries, were not the real answer to the problem. For example, it would introduce a significant amount of control into international trade with undesirable long term implications for the liberal commercial policy written into the GATT. Another argument against this approach was that the low prices at which even limited quantities might be permitted to enter importing countries would not benefit either exporters or consumers, but would simply provide windfall profits for the middleman. The scheme of “managed” textile trade outlined in the paper circulated informally by the US did not take into account the situation of other textile manufacturing countries. Many of these such as Mexico and Colombia, have their own well-established textile industries, but continue to maintain severe restrictions on textile imports. These should not be left out of any multilateral textile agreement. Mr. Ball agreed that provision should be made for entry into the world market of new textile exporters and that account must be taken of the possibility of shifts of textile production from countries which are now important exporters to other areas.

Mr. Forthomme thought that perhaps the problem might be dealt with through the imposition of some kind of import tax designed to eliminate substantial price differential between textiles produced, for example, in Hong Kong and those produced in Benelux. Such import levies might be negotiated with the exporting countries and the proceeds could accrue to a fund on which the exporters could draw for basic development projects. In this connection, the low wage position of the less-developed countries could be presented not as an advantage, but as the result of unfortunate circumstances which meant that these countries were not getting the full benefit of their labor. The development fund financed by special charges on low cost textile imports could help these countries attain greater benefits from the use of their labor force.

Mr. van Oorschot (Netherlands) noted that the Benelux allowed practically free entry of textiles, except from Japan with whom they have a special control arrangement. Mr. van Oorschot wondered whether it was intended to discuss the problem of all textiles or only some categories. Mr. Ball replied that we regarded this as primarily a cotton textile problem. Mr. van Oorschot felt that the kind of arrangement being suggested did not really represent liberal commercial policy but rather “managed international trade.” He wondered whether this would serve as a precedent for other manufactured goods exported by low wage countries. Mr. Ball replied that the exercise on textiles should not necessarily be regarded as a precedent for anything, but simply as an exercise designed to avoid retrogressive steps in the field of textile trade. While a completely liberal solution was not realistic for the foreseeable future, the US objective was to preserve as much liberalism as possible by building into any multilateral agreement possibilities of growth textile exports from less-developed countries. Mr. Ball agreed with the comment of Mr. van Oorschot that we should continue to present our long term objectives in this respect in terms of liberal commercial policy.

Mr. Forthomme (Belgium) felt that, if we must envisage quantitative restrictions as part of a multilateral arrangement on textiles, these should be part of a long term scheme aimed at replacing them with something else. While he recognized that we would have to use the GATT for this purpose, he felt strongly that the OEEC should first be the site of informal consultations among importing countries. Mr. Ball agreed that, because of the sensitiveness of other GATT members, it was necessary to utilize the GATT as the meeting ground of importers and exporters. Such meetings could be preceeded by further ad hoc consultations among consuming countries to explore various possible formulae which might be advanced at the GATT meeting.

Ambassador Bobleter (Austria) argued that the importers should have thorough informal consultations in the OEEC before taking up the matter with exporting countries. When Mr. Ball referred again to the problem of avoiding suspicion on the part of other GATT countries, Mr. Forthomme noted that this raised a long-term problem of relations with the less-developed countries. He felt that, if these were to object each time the OECD looked at relationships with the less-developed countries, the Organization would not be able to do much in this direction. He again urged that the importing countries first thrash out the problem. He was not trying to “fix things up,” but felt that prior consultation among importers was essential.

Mr. van Oorschot felt that conflict between the OEEC/OECD and other GATT members should be avoided and suggested that preliminary consultation among importers might be carried on in an ad hoc group. Then it might be possible to consider a joint OECD/GATT meeting as had been previously suggested. Ambassador Bobleter again argued that preliminary consultation should take place in the Organization in Paris. If this were not done, it would be clear that important trade problems would not be dealt with in OECD. He noted that it would be difficult for Austria to make any trade moves on a global basis if European trade questions remained unsolved. Ambassador Ockrent noted that it would be difficult to set up a restricted group in the OEEC to discuss textiles.

Ambassador Tuthill suggested that it might be desirable first to have a public announcement of the textile meeting to be held in Geneva, before convening an ad hoc meeting of importing countries. This would clearly stamp the importers meeting as preparatory to full scale discussion between importing and exporting countries. Mr. Forthomme suggested that the US circulate a new paper which would summarize the reactions obtained by Mr. Ball to the US proposals during his current visit to Europe and any new thoughts the US might have in view of these reactions. This paper might serve as the basis for further discussion among importing countries.

In response to a question as to the results of his various talks, Mr. Ball stated that, in general, the indications were that the various countries were prepared to cooperate in exploring the problem along with possible solutions, including the procedural arrangements which might serve as the framework for discussion.

Mr. Forthomme suggested that perhaps the paper to be prepared by the US might be submitted for consideration to the OEEC Steering Board for Trade in order to obtain the reaction of the expert members of the Board. This might be a prelude to the meeting of the importing countries discussed above. The discussion closed with the comment that if any such consideration of the paper were to take place in the OEEC, it would be better to use an informal group rather than the Steering Board. In any case, the question of precisely how consultation among importers would take place needed further thought.

1. “Textile Problem.” Confidential. 5 pp. Department of State, Conference Files: Lot 65 D 366, CF 1874A.