Foreign Relations of the United States, 1961–1963, Volume XXII, Northeast Asia

341. Memorandum From the Deputy Assistant Secretary of State for Far Eastern Economic Affairs (Peterson) to the Under Secretary of State for Economic Affairs’ Special Consultant (Christopher)⁰

Washington, August 18, 1961.

SUBJECT

• Possible Basic Line to be Taken in Japanese Cotton Textile Negotiations¹

1. While the United States is in no way ashamed of its offer on cotton textiles which represents an 8-10% increase in Japan’s export opportunities at a time when other import suppliers are to be cut back (e.g. a 30% rollback for Hong Kong)—the increase being accepted at a time when the domestic industry is encountering unemployment—the agreement is proposed without a contention that in itself it is attractive or perhaps wholly palatable to the Japanese Government and the Japanese industry.

2. Rather, it is proposed for acceptance by Japan as one of the essential preconditions to the maintenance of an economic policy in the United States which is a prerequisite of well-founded relationships between the two countries. In the absence of a bilateral agreement with Japan, the possibilities of achieving some sort of rollback with Hong Kong, thus to restore some equity in the positions, becomes remote. Without U.S. bilateral understandings with these two important suppliers, the prospects of the Geneva multilateral agreement fade.² If the Geneva agreement fails to come to fruition, domestic pressures are certain to seek in the United States unilaterally imposed specific quantitative restrictions, commodity by commodity, country by country.

3. Such a result would mean the torpedoing of a commercial policy which has been pursued since the time of Cordell Hull and which was reaffirmed in our wartime agreements with the United Kingdom, which in turn started the undertaking to create an international trade organization which in its final form is the GATT. The institution of quantitative restrictions on cotton textiles would generate insuperable pressures from a wide range of other domestic interests which find imports from Japan disturbing or disruptive. The range of Japanese exports now subject to voluntary controls needs only to be recalled. The pressures will range from wire nails, pipe fittings, plywood, chinaware, woolen suits, steel flatware, optical goods, electronic items, basic and finished steel, ad infinitum. The whole spectrum of Japanese exports of manufactured goods which provide employment for such an important sector of the Japanese people and provide its treasury with foreign exchange for essential needs from abroad will be threatened. This in turn cannot fail to undermine the degree of political and military understanding between the two countries which happily now prevails.

4. In the light of these predictable consequences, it therefore behooves Japan and the United States to work in partnership to protect the institutions and policies which permit a logical mutually advantageous exchange of goods and in turn a political rapport which provides a basis for free institutions and avoids the coercive. Japan is urged therefore to accept what can be offered now which must be admitted as a step in the right direction, albeit not wholly palatable—this in the much larger interests of the two countries which clearly are endangered.

0. Source: Department of State, Central Files, 611.9441/8-1861. A marginal note reads: “OK’d by Mr. Ball 19 Aug.”
1. See Document 342.
2. For text of the Geneva Cotton Textile Agreement dated July 21, 1961, see Department of State Bulletin, August 21, 1961, p. 336.