Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

240. Circular Telegram From the Department of State to Certain Diplomatic Missions⁰

Washington, January 30, 1962, 8:09 p.m.

1332. Depcirtel 1309.¹ Following is guidance for mission use in official and public discussions new U.S. trade legislation.

1. New trade bill sent Congress by President January 25 represents watershed in U.S. foreign economic policy. It is most important development in U.S. trade policy since 1934 and makes marked advance beyond present trade agreements program. It complements new look in foreign aid policy and is intended give U.S. the means to take fullest part in building economically strong and progressive free world.

If Congress provides President with legislation requested, result will be to fix U.S. course for indefinite future squarely in direction liberal, multilateral, expanding world trade system. Legislation placed before Congress would give President far-reaching and flexible authority further reduce U.S. tariffs beyond anything previously authorized in trade agreements program; it would open prospect for mutual reduction and even elimination tariffs between two largest economic units in world, U.S. and European Common Market; it would generalize tariff concessions multilaterally and would progressively widen trade opportunities for less developed countries. Forthcoming great national debate on trade issue will present to American people, as never before, stake they have in international trade. It will thus develop basis of informed opinion for carrying out dynamic international trade policy by USG.

2. New statement of purposes in bill illustrates advance made in developing forward-looking concept of objectives of liberal trade program. It sets forth essential general welfare, foreign policy and security purposes of U.S. trade policy, and objective of promoting these purposes through international trade agreements affording mutual benefits. It refers explicitly to strengthening of economic and political relations with EEC and other foreign countries, assistance to LDC’s, and countering of Communist economic penetration.

3. Proposed bill gives President four separate authorities for reducing tariffs.

(a) He may reduce U.S. duties by one-half, over a five-year period, on any product, in negotiations with trading partners around world.

(b) He may reduce in an agreement with EEC to any level, including zero, duties applicable to categories of commodities in which U.S. and Common Market account for 80% or more of world trade. He has similar authority reduce tariffs to zero with respect agricultural commodities in Common Market negotiations, but without limitation of foregoing 80% formula.

(c) He may reduce or eliminate U.S. duties on tropical agricultural and forestry products not produced in substantial quantity in U.S., provided Common Market takes comparable action.

(d) He may eliminate U.S. duties now established at 5% or less ad valorem or equivalent.

Foregoing authorities represent greatest ever previously requested or provided in trade legislation. In 1934 and 1945 President was granted authority reduce then existing rates by 50%. Subsequent new grants of authority were 15% in 1955 and 20% in 1958. In new bill, President would have not only basic 50% authority but substantial additional authority as well. He would for first time be authorized eliminate duties completely under specified conditions.

4. Tariff cutting powers will be exercised within most favored nation framework. As under present legislation, new bill explicitly requires generalization of tariff concessions, including those made to EEC, to all other countries except Soviet Bloc. We are thus not proposing construct exclusive club with Western Europe. Intent rather is to press forward with large scale reduction tariff barriers to trade, benefits of which will be available all free world countries. We expect give impetus to steadily increasing volume total international trade from which all participants will gain.

5. Legislation would exclude from tariff negotiation power of President only those few commodities previous subject of national security or escape clause provisions present Trade Agreements Act. Petroleum only item covered by national security provision while following 11 commodities are subject escape clause: women’s fur felt hats and hat bodies, dried figs, watches, bicycles, toweling of flax, hemp or ramie, spring clothespins, safety pins, clinical thermometers, lead and zinc, stainless-steel table flatware, and cotton typewriter-ribbon cloth. Such reservation reflects current practice, under which items under national security or escape clause action are not offered as concessions. As noted para 7 below, bill contains time limit for termination escape clause actions, including existing ones listed above, in which case items would then be available for negotiation.

Apart this minor restriction, President, as now, will have discretion which commodities or categories of commodities he will offer for negotiation. Legislation puts this in explicit terms in order make clear to Congress and public that tariff cutting authority is discretionary. Among items which might be put on reserve list are those where benefit concession, if granted, would go largely to country not participating in negotiations or unwilling provide adequate compensation.

6. New legislation modifies substantially so-called “peril point” provision of expiring trade law. As in past, President will furnish Tariff Commission with list commodities or categories proposed as subjects tariff negotiation and Commission would be required give its judgment as to economic effect of reduction or elimination duties on competitive industries. Under proposed law, however, there would be no provision, as in present legislation, calling for Tariff Commission to establish the tariff below which the President could not reduce duty without causing serious injury domestic industry.

Furthermore, new legislation drops provision in present act which requires escape clause investigation if Tariff Commission finds that “peril point” should be rate of duty above existing level. In addition, criteria which Tariff Commission would take into account in advising President are more stringent than under present legislation. These criteria are “probability significant idling production facilities, prolonged and persistent inability of firms to operate at profit, and unemployment or underemployment of workers.” Tariff Commission advice not binding on President.

7. Other safeguarding provisions in new bill likewise represent considerable advance over previous legislation. Legislation includes for first time executive branch proposal that adjustment assistance be used as means coping with competitive impact of imports. Expectation would be that adjustment aid—loans, technical assistance and tax benefits for firms, extended unemployment insurance, retraining, and relocation allowances for workers—would be principal means deal with problems individual firms and workers.

Bill also provides escape clause under which increased tariffs or other import restrictions could be imposed. However, such relief is clearly labelled in legislation as “extraordinary” and is to be used only (a) when types of assistance described above for firms and workers are not sufficient to mitigate difficulties involved; (b) when difficulties to be remedied are widespread in the industry concerned as whole as distinct from individual firms and workers; (c) after other, more stringent criteria than under existing legislation are met, namely “significant idling of productive facilities, etc.” Finally, tariff or other extraordinary relief, if granted, would not be for period to exceed four years, subject to extension by President.

In connection with last point, escape clause actions already in effect for three years at time new trade bill comes into force would be terminated after another year unless President extends period. If such escape clause action is so terminated, item concerned need no longer be withheld under reserve list (see para 5 above) and could be included in negotiations.

It is expected these provisions would substantially remove irritant in our international trade relations represented heretofore by escape clause. We would expect fewer instances of petition for tariff relief from imports and comparatively few cases in which extraordinary relief would be considered relevant form of assistance.

8. While new bill defines President’s authority for trade agreement negotiations, it does not specify precise way this authority would be used internationally. Such negotiating plan for new round tariff reductions will have to be worked out with other countries and is subject of GATT Working Party which was established at GATT Ministerial Meeting last November. Working Party now not expected to meet until late spring or early summer. On assumption President obtains authority requested, we would hope Working Party would work out techniques for some type across-board tariff reductions. We would not expect new tariff negotiations themselves begin until some time in 1963.

While bill provides different authority in relation to negotiations with EEC as distinct from other countries, we anticipate we will negotiate with EEC and with other contracting parties at same time in broad multilateral negotiation under GATT and that results will be reflected in customary single agreement under GATT, under which concessions granted by one party to agreement would be automatically extended to all others. In this one large negotiation we would utilize, in different combinations with different countries, various types of authority under the act.

9. Though emphasizing positive elements in program and bold U.S. initiative in advancing liberal trade principles, Missions should make clear this is not unilateral program for increasing access for foreign products to U.S. markets. It is instead basis for reciprocal program whose implementation for free world benefit requires lowering of tariff barriers by all trading countries and opening of new market opportunities for products of LDC’s as well as industrialized countries. Statements by President and other high Governmental officials have made abundantly clear that through this program U.S. intends seek improved access for its exports abroad in exchange for concessions by U.S. and that we mean see to it that tariff concessions made to us are not frustrated by quotas or other restrictive devices. In acting upon President’s proposals Congress will undoubtedly register its own intent that authority is to be utilized this manner. Accordingly other countries should clearly understand that extent to which President’s new authority can be utilized in final analysis depends on their willingness enter wholeheartedly into new round tariff negotiations with view exchanging meaningful tariff concessions on broad range commodities.

10. It is of utmost importance that other countries respond positively to new initiative of President. Question has been raised here, notably by Chairman Mills of Ways and Means Committee, how we know other countries are interested in negotiating with us on basis provided in bill. We intend reply that informal discussions with various representatives of other Governments, including EEC, as well as sentiments strongly expressed in GATT Ministerial Meeting indicate general readiness undertake further tariff negotiations and on across-the-board basis. Missions may feel free respond along same line if question comes up.

Ball

0. Source: Department of State, Central Files, 411.004/1-3062. Official Use Only. Drafted by Trezise (E), Leonard Weiss (E/OT), and Selma G. Kallis (E/TA) on January 29; cleared by Philander P. Claxton (H), Leonard Wilson (P), and Myer Rashish (White House); and approved by Trezise. Sent to 34 Embassies and Consulates and pouched to all other missions except Moscow, Budapest, Prague, Bucharest, and Sofia.
1. Not printed. (Ibid., 411.00/1-2462)