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

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

Washington, January 29, 1963, 7:37 p.m.

1336. For Ambassadors. Re: Wool textile import problem.

1. Nature of Problem

a. Wool textile imports (defined as wool tops, yarn, woven and knit fabrics, apparel, and miscellaneous items) into US have risen to point where they represented estimated 20 per cent of domestic consumption in 1962 as compared to 10 per cent in 1955. (Similar figures for cotton textiles estimated 6-7 per cent in 1962 and 2 per cent in 1955.)

b. Imports in 1962 estimated at $225 million as compared with previous peak of $182 million in 1960.

c. About three-fourths of wool textile imports from Italy, Japan, and UK in descending order of importance. Hong Kong fourth. Other EEC members rank next in importance.

d. Increase in imports in 1962 over previous peak of 1960 occurred in items constituting 93 per cent of total wool textile imports. Major increase in apparel, with Italy as major supplier of increased apparel import items.

2. Administration’s Commitment

a. US wool textile industry claims imports causing serious disruption and entitled to relief under President’s 7-point program of May 1961.

b. Administration committed itself to industry in August 1962 to hold wool textile imports to level which would prevent disruption to domestic industry.

3. Alternative Courses of Action

President’s Cabinet Textile Advisory Committee has considered various alternatives in effort implement commitment, as follows:

a. Impose import quotas. Inconsistency this course action with basic foreign economic policy, probable retaliation, effect on Kennedy round, precedent for other industries, have ruled this course out of consideration at this time.

b. Raise tariffs. Such action would have to be comprehensive, increases for some items would have to go beyond Smoot-Hawley levels, and would involve granting substantial compensation. Wool textile industry has opposed this course as not being able to do job effectively or fast enough.

c. Negotiate bilateral agreements with three major suppliers. This would not prevent others from increasing their share of US market, as indeed is happening with some LDC’s—e.g. Hong Kong, which already in fourth place in US market.

d. Negotiate international agreement such as cotton textile arrangement. Major exporting countries made it clear when agreeing to Long-Term Cotton Textile Arrangement (LTA) that this not precedent for similar agreements in other fields.

Pending Action by GATT

At direction of President’s Cabinet Textile Advisory Committee, Dept has discussed with Wyndham White, Exec Secy GATT, problem and above alternative courses. Recent meeting of International Wool Study Group in London had indicated that GATT was proper forum for discussion problem faced by US re wool textiles. Although Wyndham White believed there would be great difficulty in securing agreement from other governments, he felt it was necessary, in view commitment which has been made by Administration and fact some action will be taken by US in any event, to sound out UK, Japan, and EEC re possibility multilateral approach to this problem involving limited number of countries. He felt that an indispensable part of such approach would be action by US to reduce raw wool duties accompanied by corresponding reductions in specific duties on wool textiles. This sounding out now in proc-ess on highly confidential and informal basis. Meeting of these countries will be held in Geneva February 4. On basis this meeting, it is possible that US will be invited to participate at similar meeting ten days to two weeks later. (Canberra note Australia not involved in February 4 meeting but Wyndham White now in process of advising Australians of current discussions.)

Action by Addressee Posts

At this stage, Ambassadors are not being requested to approach host government. In view delicacy problem, it is essential to keep matter as quiet as possible at this time. Foregoing has been transmitted for background and to permit Ambassadors to clarify situation if matter is raised. Points to be stressed by Ambassadors in any comments should include:

a. US has serious problem re wool textile imports, and Administration is committed to provide some relief.

b. No decision on specific program has been made, but in view reactions at London Wool Study Group that GATT is relevant forum for discussion such problem, we have raised matter with Wyndham White.

c. Latter strongly argued for multilateral action generally along lines alternative (d) above and offered to sound out key countries.

d. US believes opportunity to discuss question with exporting countries subsequent February 4 meeting highly desirable.

e. Completely negative attitude by others might have effect of forcing US into position which would be adverse to implementation of objectives of Trade Expansion Act.

f. USG has no fixed ideas at this stage re best means of multilateral action but willing to develop approach with exporting countries cooperatively.

Foregoing message is being sent to Bonn, Brussels, Canberra, Geneva, The Hague, London, Paris, Rome, and Tokyo.

Rusk

0. Source: Department of State, Central Files, 411.006/1-2962. Confidential; Priority; Limit Distribution; No Distribution Outside Department. Drafted by Stanley Nehmer (E/OR), cleared by W. Michael Blumenthal (E), and approved by Ball. Sent to Bonn, Brussels, Canberra, Geneva, The Hague, London, Paris, Rome, and Tokyo.