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

372. Memorandum From Secretary of State Rusk to President Johnson¹

Washington, October 10, 1967.

SUBJECT

• Trade Policy—Protectionist Threats and Countermeasures

Recommendation:

To help bolster the forces attempting to throw the current trade protectionist movement off balance, I recommend you authorize me to join other Cabinet members before the Senate Finance Committee October 18–20.² In an interagency meeting on October 2, chaired by Bill Roth, it was recommended that the Secretaries of State, Commerce, Agriculture, Labor and Interior should testify, along with Roth and Gardner Ackley. I propose to speak out very strongly against a retreat to protectionism both on foreign policy and economic grounds.³

Discussion:

There are some encouraging recent signs that the protectionist forces in America may have overreached themselves or at least made a tactical error in pressing simultaneously for trade restrictions covering such major and diverse sectors of the economy as textiles, steel, meat, dairy products, petroleum, lead and zinc. Other protectionist ploys such as the Dent “fair labor standards” bill and restrictionist riders to the Defense Appropriations and Foreign Aid bills have also served to draw more public attention than usual to the threat to our traditional trade policy.

Your own action last week in calling for a Tariff Commission investigation of the economic condition of our textiles and apparel industries has already done a great deal to help slow down precipitate Congressional action in this important sector.⁴ I trust your attention has already been drawn to the Sunday⁵ New York Times editorial which begins, “President Johnson once again demonstrated that he does not panic in the face of pressures exerted by an arrogant protectionist lobby.”

I strongly feel, however, that your Cabinet officers should not sit back and let you take the heat of the protectionist pressures and see if you can turn the tide by your own actions. There are steps we can take to initiate a major campaign to wake up the sleeping majority of American economic and political interests whose fortunes are in jeopardy if the more highly-organized minority of protectionist forces have the field to themselves.

An excellent opportunity is open to us in the public hearings Senator Long and the Senate Finance Committee will hold on trade policy October 18–20. I propose to join my Cabinet colleagues in appearing at these hearings.

There is also a need for Cabinet-level and other senior officials to speak out over the coming months in support of a liberal trade policy. I did so myself on September 15.⁶ Bill Roth made an excellent speech on this in Detroit last week.⁷ Nick Katzenbach will address the National Foreign Trade Council later this month.⁸ Failure to speak out would be misunderstood throughout the country; it would tend to undermine the Kennedy Round which is one of the major accomplishments of your Administration.

But more than speeches will be needed to throw the present protectionist movement off balance. We will have to urge leading American exporters, importers, financiers and shippers to be more visible and more vocal.

The need for a major campaign of this kind is, I believe, very real. Quantitatively, the combination of current protectionist pressures pose a threat to our trade policy of an entirely different order of magnitude than we have had to face for many years. US import restrictions on steel and all forms of textiles, for example, would affect close to $3 billion, or about 11% of our total imports last year.

If meat, lead and zinc, and a number of other trade interests pressing for protection are added, the figures would, of course, be much higher. By way of comparison, a rough estimate of the trade significance of all US escape clause actions since the end of World War II is less than $1/2 billion.

The combination of textile and steel pressures for trade restrictions, organized labor’s disenchantment, and Congressional receptivity to pressure groups in an election-year adds up to an ominous conjuncture. It is made even more dangerous by the following factors:

• —the certainty of retaliation by our major trading partners;
• —the undermining of the good faith and credit of the U.S. abroad;
• —the strengthening of anti-American sentiment in Europe;
• —the unsatisfied trade needs of the developing countries would suffer another blow if trade restrictions break out among the industrialized countries; our efforts to develop a constructive approach to generalized trade preferences for developing countries would have to be abandoned for a number of years.

There is, I am convinced, still a reservoir of support in America for the trade policy we have pursued for so many years and with such demonstrably favorable results for our own economy. With your approval, I propose to launch an effort to reach that untapped reservoir. A strong Administration position will, I believe, win support from the majority of the press, business community and virtually all the academic community.

The ultimate objective is to convince the Congress that in voting to reverse our traditional trade policy in order to placate one or more disaffected sectors, they run the political risk of incurring much greater domestic political disapproval from the larger number of American interests whose well-being rests on liberal trade. We also have to remind the Congress of the contribution of liberal trade policies to our own domestic prosperity.

Dean Rusk

1. Source: Johnson Library, National Security File, Subject File, Trade—General, vol. I [2 of 2], Box 47. Confidential.
2. For texts of the statements by Secretaries Rusk, Udall, Freeman, and Trowbridge, and Roth on October 18, and a letter from Secretary Fowler to Senator Russell B. Long, Chairman of the Committee, October 18, see Department of State Bulletin, November 13, 1967, pp. 634–652.
3. There is no indication whether the President approved or disapproved the recommendation.
4. For text of the President’s October 4 statement, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1967, Book II, p. 891.
5. October 8.
6. Reference may be to the Secretary Rusk’s remarks at a press conference on September 15, after taking part in the meetings of the Joint U.S.-Japan Committee on Trade and Economic Affairs; see Department of State Bulletin, October 9, 1967, pp. 455–459.
7. On October 5; for text, see ibid., October 30, 1967, pp. 574–578.
8. For text of Katzenbach’s speech to the National Foreign Trade Council in New York on October 30, see ibid., November 20, 1967, pp. 686–689.