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

272. Memorandum From the Under Secretary of State (Ball) to President Kennedy⁰

Washington, March 9, 1963.

SUBJECT

• Lessons from the Wool Textile Experience

I have been giving hard thought to the question of how we got into the wool textile predicament. Leaving aside questions of substance, I think there may be lessons in procedure to be learned by all of us who had a part in putting you in an awkward situation.

This requires a brief analysis of the manner in which the relevant decisions were made.

First Commitment—Letter of August 7, 1962¹

Until August 7, 1962, the Administration had given no firm promise to either the wool textile industry or to the Congressmen and Senators interested in that industry. The Seven-Point Textile Program of May 2, 1961,² provided merely that the Department of State would call a conference to “seek an international understanding which will provide a basis for trade that will avoid undue disruption of established industries.” Thereafter—over the strenuous objections of the industry, which wished to present a massive united front to the Administration—I insisted upon treating separately with the cotton textile producers and the producers of wool and man-made fiber textiles. All that we ever promised the wool textile producers was that we would keep their situation under careful study and observation.

Early in May, 1962, the Cabinet Textile Committee³ appointed a subcommittee to examine what should be done with regard to wool textile imports. (At that time, imports were not sharply rising although the industry was putting on incessant pressure.) This Committee recommended that we utilize the International Wool Study Group as a forum for exploring this problem on an international basis and as a means for relieving industry pressure.

I had hoped that the problem could be left to rest on this basis. Nevertheless, I took great pains on several occasions to advise the Cabinet Textile Committee that the international situation of wool textiles was totally different from that of cotton and that I did not see how a wool textile commitment could ever be fulfilled if one were made.

On July 16, 1962, the National Association of Woolen Textile Manufacturers called attention to a resolution of the Board of Directors of the Association demanding mandatory quotas.

Mr. Feldman prepared a draft reply to the Association’s letter that would have committed the Administration to hold woolen textile imports to the fiscal year 1961 level. He discussed this matter over the telephone with Mr. Blumenthal of the State Department, who was then in New York in the midst of the Coffee Agreement negotiation. There is a discrepancy in the recollection of this conversation. Mr. Feldman believes that after considerable discussion, Mr. Blumenthal acquiesced in the language that was finally incorporated in the reply that was sent on August 7. Mr. Blumenthal is equally clear that he recommended innocuous language, warned about the implications of a specific commitment and—although told by Mr. Feldman that the White House had decided a stronger commitment was needed—ended the conversation under the impression that he had made his point with Mr. Feldman and that no specific commitment would be given.

Obviously, this was a case of honest misunderstanding on both sides. Mr. Blumenthal did not call me immediately because he believed the matter was in hand. He felt he had prevented the making of a specific commitment and so reported to me on his return to Washington the following week. I was, of course, aware that during this period Mr. Feldman was under strong pressure from the industry and from Congress and that his position was not an easy one.

As sent, the letter of August 7 contained the following commitment:

"Limitation of textile imports to prevent market disruption is an essential element of Administration policy. We intend to implement this policy with regard to all textiles, and particularly to prevent market disruption such as would result from an increase over current levels of import.”

When this language came to our attention several days later, I requested a meeting with you which was held on August 20, 1962. In the course of that meeting, we reviewed both the cotton and wool problems, and some of the difficulties involved in a wool commitment were pointed out.

A larger meeting was held with you on the following day (August 21). Just prior to that meeting, I sent you two memoranda which were discussed during the course of the August 21 meeting. One was a memorandum entitled “Present State of the Textile Import Problem.”⁴ The third section of this memorandum headed “Woolen Textiles” is attached as Tab A. The second was a memorandum entitled “Woolen Textile Problem”⁵ which is attached as Tab B.

The meeting on August 21 was attended by Mr. Sorensen (since Mr. Feldman was at that time abroad), as well as by the Secretary of Commerce and (I believe) Larry O’Brien. In the course of that meeting—held in the Cabinet Room—we discussed the arguments contained in the memorandum at Tab A regarding the non-negotiability of a multilateral woolen textile agreement. It was also pointed out that any non-negotiated quota arrangements would involve heavy compensation.

The meeting was dominated, however, by the strong feeling that we had to do something substantial for the wool textile interests in order to keep their support for the Trade Expansion Act. There was considerable discussion as to the meaning of the expression “current levels” in the August 7 letter, and Mr. Sorensen suggested that we need not adopt the 15 percent figure which the industry was pressing. It was generally agreed that a figure something over 17 percent was defensible under the August 7 language.

In the course of the meeting, the State Department was pressed very hard to undertake negotiations. I explained again that a multilateral agreement was not possible. However, in view of the need for some action, it was agreed that—after all accessions to the Cotton Textile Agreement had been obtained—we would undertake some exploratory discussions.

Second Commitment—Meetings with Congressmen and Senators

My records indicate that you met with Senator Pastore and perhaps one or two other Senators on August 24 and that you met with a larger group on August 30. As you know, I do not recall being present at either meeting.

Just prior to the August 30 meeting, you telephoned me in New York to say that you were meeting in five minutes with a group of Senators on the textile problem. We quickly reviewed the pending cotton textile questions. When we reached wool textiles, I remember telling you that since it was agreed that we must go forward with the August 7 commitment, I would do my best to see what solution could be found—although I could not say what might be feasible.

You know, of course, of the measures that have been taken in the search for a solution.

Lessons from Experience

From this experience, the following lessons seem to me to emerge:

1. The August 7 commitment was made in too much of a hurry. A matter of this importance should have been cleared with the full Cabinet Committee and language explicitly agreed upon. This would have permitted the question to be appealed to you before irreparable action was taken.

2. The August 21 meeting should have been carefully prepared with a full advance written presentation of the arguments on both sides. This was, in part, my own fault since the memoranda which I sent you (Tabs A and B) were only a partial statement of the problem.

3. I feel I was myself at fault for not having come to you directly at an earlier point and expressed my concern at the implications of the gradual broadening of our textile commitments. This extends beyond the narrow scope of wool textiles. During the course of the last two years, we have progressively yielded our freedom of action:

(a) We have moved from a generalized commitment in the Seven-Point Program to call an international conference to consider measures against “undue disruption”, to a multilateral agreement against market disruption.

(b) We have then translated “market disruption” in the case of cotton textiles into an agreement to hold imports at six percent no matter how healthy the domestic market might be. (This is the source of our current serious problems with the Japanese which offer a threat to the whole structure of the Cotton Textile Agreements.)

In the case of wool, we have suffered the same creeping erosion:

(a) We have turned an agreement to prevent “market disruption” into an agreement to prevent “an increase over current levels of imports”, and

(b) We have turned this commitment into a commitment to a specific 17-1/2 percent figure.

This gradual extension and erosion of our commitments could have been prevented by tighter procedures. In the future, any alteration of an existing commitment should be brought before the full Cabinet Textile Committee—with the right of appeal. Moreover, it should be presented to that Committee in writing with a full opportunity for the presentation of written comments.

4. Finally, since it is difficult for anyone not in intimate and continuous touch with our dealings with other countries to assess the feasibility of arrangements involving them, I think you would be better protected if trade matters—as other foreign policy matters—were jointly screened through your own National Security Advisers as well as your advisers on domestic political problems.

George W. Ball⁶

0. Source: Department of State, Ball Files: Lot 74 D 272, Wool. Confidential. A handwritten notation on the source text reads: “All other copies burned.”
1. Not found, but See Document 262.
2. See Document 213.
3. At the urging of Secretary of Commerce Hodges, President Kennedy set up a Cabinet committee to study the textile problem. Established February 16, 1961, the committee consisted of Hodges as chairman, Secretary of the Treasury Douglas Dillon, Secretary of Agriculture Orville L. Freeman, Secretary of Labor Arthur J. Goldberg, and Under Secretary of State Ball.
4. Document 249.
5. Dated August 21, 1962; see the Supplement.
6. Printed from a copy that bears this typed signature.