Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

330. Memorandum From Secretary of State Rusk to President Johnson¹

Washington, February 11, 1967.

SUBJECT

• A New Trade Policy for the United States

Recommendation

Last August George Ball sent you a memorandum outlining a new trade strategy designed to reverse current trends not in the United States interest and to maintain our leadership in free world trade policy in the post-Kennedy Round era.² In accordance with your instruction, a small group led by Tony Solomon has examined these ideas further within the Executive Branch. We have consulted with Secretary Connor (and Acting Secretary Trowbridge) and with senior officers of Agriculture, Labor and Treasury. Ambassador Roth and Francis Bator also have taken part in the discussions. The result: unanimous agreement both on the need for a new United States trade policy and on the broad outlines of the policy itself.

We do not envisage a request for major new trade legislation before 1969. It is important, however, to consult informally with key Members of Congress now if we are to adopt a positive posture at several important international meetings over the next 12 months, including your meeting with the other Presidents of the Inter-American system. We must know soon whether the new policy direction—described below—can command the support of the Congress. If it does, the new policy should be taken up as the first order of business of a blue-ribbon public committee which Ambassador Roth will recommend be established to assist him in developing recommendations for trade legislation after the Trade Expansion Act expires on June 30.

You could then announce at the Latin American meeting in April that a major re-examination of our trade policy is under way with a view to improving the trade position of developing countries in ways that will further the historic United States objective of liberalizing world trade. This statement would be warmly welcomed by the Latin Americans and would, Linc Gordon feels, be a critically important contribution to a successful summit meeting. A careful statement along these lines would not arouse serious protectionist opposition, since only a general approach would be outlined at that time. Recently, Congressional leaders as diverse in their trade views as Senators Dirksen and Fulbright have comments on the unresponsiveness of the United States Government to the problem of the poor countries’ declining share in world trade.

I recommend, therefore, that you approve informal soundings with key Congressional leaders.

Approve Congressional Consultations

Disapprove³

Discussion

The Need for a New United States Trade Policy

For the next few months our primary effort must be devoted to a successful conclusion of the Kennedy Round trade negotiations. At the same time, however, we must address ourselves to future United States policy—to new problems which have arisen and to old problems which have acquired new dimensions. To meet these and to maintain our leadership in the field of trade policy, we must take into account:

• —the vital importance of maintaining our own export surplus;
• —the strong likelihood that the European Economic Community will be enlarged over the coming years, forming the largest market in the world with free trade among its members, but retaining substantial barriers against the United States and other outsiders;
• —the danger of further proliferation of special trade arrangements which discriminate:
  • —among developing countries,
  • —against Latin America, and
  • —against the United States;
• —and, above all, the passionate and persistent appeal of the developing nations of the world for preferred tariff treatment for their exports. At the present time, the willingness of other industrialized countries to respond to the appeal leaves the United States virtually isolated in its opposition to preferences. For this we are paying significant political costs.

The challenge presented by these developments coincides with our need to obtain new trade legislation. After the Trade Expansion Act expires at the end of June, we will need a period of reflection and discussion with our trading partners. Thus, a simple extension of the Act for two years seems appropriate. But to exercise leadership and attract international support for a policy designed to meet these new circumstances, we need a new and flexible Congressional mandate.

Basic Elements of a New Trade Policy

1. To meet the objective of keeping open our commercial markets in developed countries, we propose:

• —That we seek legislation in 1969 which will enable us to urge the Europeans and other industrialized countries to join in a policy of progressive reduction and, where possible, elimination of trade barriers. Where agreements can be reached on specific products or groups of products, tariffs might be phased out over a period of five to twenty years.

2. To meet the twin problems of growing discrimination among poor countries and their appeal for tariff treatment more in keeping with their competitive abilities, we propose:

• —That the legislation enable us to offer the poor countries of the world a “head start” in the movement toward tariff disarmament among the advanced countries. The benefits of tariff reductions would be given to poor countries in advance of reductions among industrialized countries which would be phased over a longer period.

3. To meet the growing problem of regional bloc discrimination against United States exports, we propose:

• —That this approach be conditioned on agreement by the advanced countries to give up the preferential treatment they enjoy in the markets of associated developing countries.

4. To meet the problem of possible injury to United States industry and labor arising from increased imports from low-wage countries, we propose:

• —That the adjustment assistance provision be improved.
• —That there be an additional escape clause applicable to the special tariff treatment for the developing countries. Should difficulties arise, the advance cut might have to be withdrawn or, alternatively, a tariff quota might be established.

Dean Rusk

1. Source: Johnson Library, National Security File, Name File, Bator Memos, Box 1–2. Confidential; Exdis. Another copy indicates that this memorandum was drafted in the Office of International Trade on February 9. (Ibid., Bator Papers, Post Kennedy Round and Trade Policy Study, June 1967, Box 13)
2. Document 318.
3. Neither option is checked.