Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

286. Memorandum for the Record¹

Washington, September 21, 1965.

SUBJ

• Meeting of the Cabinet Committee on Wool Textiles Tuesday, September 21, 1965

ATTENDANCE

For the Administration—Messrs. Connor, Mann, Roth, Weiss, and Wallace

For the Industry—(Principal spokesmen): Mr. Morton Darman, Wool Textile Assn.; Mr. Milton Fried, Amalgamated Clothing Workers; Dr. Lazare Teper, International Ladies Garment Workers Union; and about 15 others

Connor opened with a short statement stressing that no decisions had yet been made, that the Administration was anxious to engage in the fullest and frankest consultation with the industry, and that the briefing paper (attached)² had been distributed for discussion purposes only. (Mann stated several times during the discussion that he had never before seen the briefing paper—that “we are all here looking at the paper for the first time.”)

Darman replied with a prepared statement, indicating that he was speaking for both labor and management. He characterized the industry’s current situation as that of a house with a leaky roof on a sunny day, with clouds building on the horizon. (This analogy obviously displeased the specialists in worsted fabric and knitted outerwear, who later suggested that they were undergoing a cloudburst.) His theme was that the sun could be expected to disappear soon and that immediate preparations for rain were necessary. On a less allegorical plane, he said that:

• —Quantitative restriction is the only real answer, and it is unfortunate that the Administration still doesn’t recognize this.
• —The study proposal is a diversion. All of the relevant information is now available, though the industry stands ready to cooperate in collecting any additional data really necessary.
• —It is too bad that the multilateral approach is being substantially abandoned, but the industry has no objection to a shift in emphasis in favor of bilateral discussions.
• —The industry will not agree to any “piece-meal” program; any acceptable approach must be on an industry-wide basis.
• —Attempts to convince foreign exporters that we are serious in seeking relief are badly hampered by the general confidence abroad that the U.S. will not take unilateral action under any circumstances. The industry did not favor unilateral action, but thought that the threat of it should be used as a negotiating tool.
• —It was disturbing to note the lack of any discussion in the paper of a possible U.S. quid for any foreign quo. It seemed highly unlikely that we could get any concession without paying a price.
• —The paper did not outline a satisfactory “program” to “get the job done” in wool textiles.

Threat of Unilateral Action:

Connor, Roth, and a couple of the industry people carried on a short, desultory discussion on this point in which it was agreed that the threat of Congressional action had been used with the Japanese last June. Darman acknowledged that fact, but argued that few of the knowledgeable people abroad believed we would follow through. Mann ended this exchange rather summarily by commenting that his negotiating experience suggested that this kind of threat was not very useful, and that, in any event, we Americans try to use it too often. His summation was that “deeds speak louder than words.”

Efforts Toward a Multilateral Agreement:

Mann expressed surprise at Darman’s implication that the Government was giving up its quest for a multilateral agreement. He said that he knew of no such decision. The industry people expressed regret that they had misunderstood.

Bargaining Price:

Weiss inquired what price for voluntary restrictions on wool the industry had in mind. Darman answered that he couldn’t make specific suggestions because he wasn’t familiar enough with the various currencies available to the Government for this purpose. Connor asked whether such a price would have to be stated in terms of concessions on other commodities. Fried (a former Foreign Service officer) replied with an ambiguous indication that “the price needn’t be money.” The discussion then bogged down when Roth suggested that the GATT-type compensation price would be of the order of $250 million, implying that we would stop wool textile imports altogether. The industry fell all over itself assuring everyone that it had no thoughts of complete stoppage, but wanted only to hold imports to “a reasonable level.” When pressed for a quantitative statement of that level, some industry representatives suggested that it should be the percentage of the market served by imports in the Spring of 1962, but this was not established by consensus as the industry objective.

Study Proposal:

The fundamentals of the industry position on the study which evolved in discussion were as follows:

• —Its purpose is unclear. The Kennedy-Johnson commitment and the much-cited effort to convene an international wool textile conference suggested that the Administration recognizes the industry’s problems and is moving to solve them. The study proposal suggests some chance of reversing this judgment (enter some political saber rattling).
• —All relevant statistical data are available; no “inexperienced student” will come up with any new facts or conclusions.
• —In any case, the problems of the wool textile industry are not susceptible to the usual statistical demonstration because two assumptions basic to the free trade model are not applicable to the industry. Specifically, (1) no foreign competition is needed in this area to keep domestic producers honest and innovative, and (2) rises and falls occur so quickly in the textile business that one cannot responsibly wait until domestic producers are “limping or crawling” before helping them (veiled implications that the industry’s support of the TEA and any future trade legislation was conditional on the understanding that it would get help without being subjected to an injury test).
• —Most of the facts the Administration seeks (i.e., cost data for foreign producers) will not be available from foreign governments, would not be reliable even if supplied, and are essentially irrelevant to both the prices of imports and the willingness of exporting nations to agree to voluntary restrictions.
• —If facts are relevant, we have all we need. It is clear that, except for the “freakish” 1964 situation, imports are rising while the total market is virtually constant. This alone should be a convincing case for import damage. (The industry people were thrown off stride during this discussion when a representative of the clothing manufacturers, their customers, rather stuffily announced that all of the remarks thus far were beside the point, which was that he and his associates would buy all the Japanese fabric they could get because “it is better and it is cheaper.”)

The critical point in this discussion was the question of the purpose of the study. The industry’s strategy was to implicitly dare the Administration representatives to say that the President’s commitment to help the industry was conditional on a statistical demonstration of need. It became clear very quickly that Roth was the only Administration speaker willing to say that the facts were needed for intra-governmental decision-making as well as for building a strong negotiating position. Roth made several manful attempts to establish that the Administration’s proposal was motivated by both needs, but eventually gave up when it was utterly obvious that neither Connor nor Mann was going to support him.

After Roth subsided, Mann, adopting a “no-nonsense” tone, suggested that the meeting stop “beating around the mulberry bush and get down to cases.” He emphasized that government and industry were “on the same team,” that the Government has no desire to wait until the industry was limping or crawling before helping it, and that progress could only be made in an atmosphere of mutual trust. Personally, he believed “95%” of the industry’s claims of injury and he was sure that a close examination of the facts would result in government-industry agreement on what the problems were and what it was reasonable to try to do about them. He agreed that cost data for foreign producers are probably irrelevant to their export pricing, and that such data, no matter how accurate, would not ensure our negotiating success.

But Mann maintained that a strong factual case was the necessary minimum for any negotiation. No matter how firmly he believed the industry’s general case, he could not go to the negotiating table without specifics (he slipped at one point and said that he also needed the facts to convince the President, but retreated quickly when asked whether that was another indication that the President remains unconvinced). What the Administration was proposing was that the Government and the industry agree upon an impartial, knowledgeable fact-finding agent who could develop a brief for the industry’s case.

Connor agreed with Mann’s remarks, and suggested establishment of a joint Government-industry working group to do the fact-finding, brief-writing job. After another long diatribe by the union economists against the concept and necessity of further fact-finding, and some table-pounding by the worsted and knitted outerwear people, Darman agreed to supply a list of names from which the industry representatives on the working group could be chosen. In doing so he remarked, however, that this represented no commitment that any firm would open its books to the working group.

Ed K. Hamilton ³

1. Source: Johnson Library, National Security File, Name File, Bator Memos [2 of 2], Box 1. No classification marking. Drafted on September 24 by Edward K. Hamilton. An attached note from Francis Bator to the President’s Special Counsel, Harry C. McPherson, Jr., dated September 24, reads: “Harry: Attached is Ed Hamilton’s good summary of Tuesday’s wool meeting. Somebody will eventually have to get it across to the industry that the President’s commitment is conditional—that they cannot expect him to do all sorts of costly things trying to help them unless help is clearly needed. I suspect that the joint fact-finding operation will bog down, forcing another Cabinet Committee confrontation. If by then the Congress is out of town, the time will be ripe for bringing Connor into line and plotting an Administration strategy which will provide the President with room for maneuver.” Also attached is a note from Bator to McGeorge Bundy, dated September 27, transmitting the minutes of the meeting.
2. Not found.
3. Printed from a copy that bears this typed signature.