239. Memorandum of Conversation0

SUBJECT

  • Proposed Equalization Fee on Cotton Textile Imports under Section 22 of the Agricultural Adjustment Act

PARTICIPANTS

  • Mr. Koichiro Asakai, Ambassador of Japan
  • Mr. Tadao Kato, Counselor, Embassy of Japan
  • Mr. George W. Ball, Under Secretary of State
  • Mr. W. Michael Blumenthal, Deputy Assistant Secretary for Economic Affairs
  • Miss Thelma E. Vettel, Special Assistant to the Director, Office of Northeast Asian Affairs
[Page 511]

The Ambassador called at his request. He referred to the current Tariff Commission investigation of the possible imposition of an equalization fee on the raw cotton content of cotton textile imports under Section 22 of the Agricultural Adjustment Act.

The Ambassador said that the President’s request for such an investigation was embarrassing to the Japanese Government, following so soon after the Hakone meeting of the Joint U.S.-Japan Committee on Trade and Economic Affairs. He said that if the fee were imposed (as feared by the Japanese in view of the President’s subsequent statement to the press), it would be tantamount to an increase of 10 to 30 percent in ad valorem duty on Japanese cotton textile exports to the United States. In light of the understandings between the two countries, discussions regarding compensation (or remedial action) would be called for should the fee be imposed.

The Ambassador expressed the strong view that discussions of such compensation would be undesirable. He hoped to avoid possible acrimonious discussions of this kind, saying that textile discussions once a year were enough. In his view it would be difficult to agree on compensation which would be equitable for both the United States and Japan. He urged that, instead of negotiating such compensation, the Japanese industry be permitted to enjoy the level of export to the United States of the past five years (about $70 million). He emphasized that the level should not be decreased. He said that in his judgment the United States could find a way to make an adjustment of the raw cotton price differential without assessing this “tax at the time of importation,” and could permit Japan to enjoy the level of trade of the past five years without asking it to try to reduce textile exports. He pointed out that the Japanese Government had requested a small increase in exports to the United States. He was urging that the level remain the same and not be cut back, and that, at the same time, the United States not impose the equalization fee.

The Ambassador said the foregoing represented his personal views and that he was recommending this position to his government. He asked that careful consideration be given to these points.

The Under Secretary responded that we had already instructed Ambassador Reischauer to indicate to the Japanese Government that this was not a decision. The President had instructed the Department of Agriculture to explore means of taking care of the raw cotton price differential. From the viewpoint of the industry the maintenance of the two-price system, causing high textile prices, would not be healthy. The Tariff Commission has been asked to study the situation; Agriculture is also studying it.

The Under Secretary expressed regret that this had not been explained in advance. An unfortunate impression had been created in Japan. The Under Secretary expressed the hope that a satisfactory way [Page 512] could be found to take care of the inequities suffered by the domestic industry without the imposition of the equalization fee.

The Ambassador complimented the Under Secretary on his statement of December 12 before the Joint Economic Committee regarding the Common Market.1 He said the Japanese had had the impression that the Common Market was disturbing to the United States and had had misgivings that the United States, in order to appease protectionists, might introduce measures against certain third markets which might be disadvantageous to Japan.

The Under Secretary responded that the United States is committed to a policy of non-discrimination.

  1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. Official Use Only. Drafted by Vettel and approved in U on January 19, 1962. Attached to the source text is a note from Battle (S/S) to Freeman (U), January 17, 1962, requesting his approval of the memorandum prior to its distribution.
  2. Not found.