Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

231. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, undated.

SUBJECT

• Trade Hearings and Textiles Quota Legislation

Textile Quota Legislation: Background

Administration witnesses will testify next week before the Ways and Means Committee on trade legislation.² Their main effort will be in support of the trade bill which you submitted last November.

However, they will also have to take positions on the bill submitted by Chairman Mills. The agencies have agreed positions on all aspects of the Mills bill except one: its provision for immediate implementation of quotas on imports of woolen and synthetic textiles.

Under the Mills bill the quota for 1970 would equal the average of 1967-68 imports, which would reduce imports from current levels by an annual rate of about $330 million. The quota, however, would be superseded by any voluntary agreements which might subsequently be negotiated.

All agencies continue to prefer voluntary agreements. The difference between the three options is essentially tactical. However, there are significant differences between the policy implications of the three options.

Option 1. Oppose the mandatory textile quotas included in the Mills bill at this time, indicating a clear preference for voluntary agreements and indicating that we expect our negotiations to be successful. If voluntary agreements cannot be negotiated, we will consult with the Congress on appropriate means to deal with the textile problem. This position is supported by State, Labor, Budget, CEA and STR Gilbert.

PROS:

• —Avoids basic reversal of your (and traditional U.S.) trade policy, which has consistently opposed quota restrictions.
• —Thereby avoids major foreign policy problems, especially with Europe and Japan.
• —Since a quota bill will probably pass if the Administration supports it, foreigners could legally cut off up to $330 million of U.S. exports if all countries chose to retaliate instead of negotiate. It could thereby cause us major political problems with our exporters (especially in agriculture, since the Europeans would welcome an excuse to restrict our soybean exports and the Japanese could easily cut off our wheat sales to them).
• —Administration support for textile quotas risks Congressional passage of quota bills for additional industries, which would be politically difficult for us to oppose because some have stronger economic cases than does the textile industry. (This would be particularly true for shoes, which are included for quota protection in the Mills bill but which all agencies have agreed to oppose.)
• —Textile quotas would diminish our chances for reductions in Japanese barriers against U.S. exports.
• —Administration has other levers to use in negotiations for voluntary agreements.

CONS:

• —Will provide charges of bad faith from the textile and apparel industry in view of your commitments to them and the failure thus far of our negotiating efforts.
• —Will therefore hurt the Administration in some areas in the coming campaign.
• —Commerce argues that it would virtually eliminate our leverage in our efforts to seek voluntary restraint agreements. State argues that it would not significantly reduce our leverage, because we would indicate explicitly that we will consult with Congress on a solution to the textile problem if our negotiations fail.
• —Risks losing Administration leverage to influence specifics of the legislation if Congress were to proceed anyway.

Option 2. Defer at this time consideration of the mandatory textile quotas in the Mills bill, indicating a clear preference for voluntary agreements and indicating that we expect our negotiations to be successful. If voluntary agreements cannot be negotiated in the next few months, we will consider this matter with the Congress. This position is supported by Treasury and Agriculture.

PROS and CONS are similar to Option 1 with the exception that the language will provide somewhat more leverage on the Japanese to negotiate a solution and also provide somewhat more reassurance to the textile industry as to the Administration’s intentions. In addition, it conforms to your commitment to support legislation if negotiations fail.

Option 3. While reaffirming our preference for voluntary agreements and indicating that we continue to believe that a negotiated solution may be possible, note that such a solution cannot now be assured and that the Administration therefore does not oppose the textile quota legislation proposed by Mills, which authorizes voluntary agreements to supersede mandatory quotas. We would seek inclusion of an amendment to give us flexibility to waive quotas on non-disruptive imports, which would permit us to exempt imports from Canada and Europe. Commerce, Attorney General Mitchell, Bryce Harlow, Harry Dent, and Bill Timmons support this position. Separate memoranda from Secretary Stans and Harry Dent, supporting Option 3 and elaborating on the political consequences of not choosing it, are attached at Tabs A and B.³

PROS:

• —Would satisfy the textile and apparel industry, cotton and wool growers, and labor unions in the industry.
• —Maximizes our negotiating leverage with the foreigners to get voluntary agreements, increasing our chance to avoid quotas.
• —Administration might well be able to stop the bill, later in the legislative process, when voluntary agreements are concluded.
• —Proposed amendment would permit limiting the quotas to countries with whom we are now negotiating, thereby reducing the retaliation problem. (Japan would be the main possibility, but it also is subject to retaliation by us due to its many illegal quota restrictions.)

[CONS?]

• —Causes major foreign policy problems, which would be greatly magnified in Asia by actual application of quotas only against Asian countries.
• —Risks domestic political problems with U.S. exporters fearing harm from foreign retaliation.
• —Gives us little defense against efforts by additional industries to get quota protection, which is likely to ensue in Congressional deliberations.
• —Could lead to your facing a “Christmas tree” bill including quotas on shoes, electronics, and numerous other items.
• —The 1967-1968 base for quotas in the Mills bill runs counter to our stated objective of limiting the growth of, but not rolling back, textile imports.
• —Quotas would make the fight against domestic inflation more difficult.

Recommendation:

That you choose Option 2. The Administration’s preference is to defer at this time consideration of the mandatory textile quota provision of the Mills bill, but with a clear commitment to consider this matter with the Congress if voluntary agreements cannot be negotiated in the next few months. Peter Flanigan joins me in this recommendation, as do Treasury and Agriculture. State, Labor, Budget, CEA and STR Gilbert recommend Option 1. You should note that Secretary Stans, Attorney General Mitchell, Bryce Harlow, Harry Dent, and Bill Timmons strongly recommend Option 3.

Approve Option 1

Approve Option 2⁴

Approve Option 3⁵

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 399, Textiles Volume II. No classification marking. A handwritten note by Butterfield reads: “K—The President signed the letter to Mills (Tab C)—& letter taken to Hill at 9:50 am May 11.” See Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 427-430, for the text of the letter, which outlines the President’s trade plans but does not address the textile quota issue. A June 5 memorandum from Bergsten to Kissinger concerning an industry-Congressional meeting with the President on June 8 regarding textiles is attached. Regarding the meeting, see Document 233.
2. The Congressional hearings began on May 11; see Document 230.
3. Not attached.
4. The President initialed this option, and the date of May 11 is handwritten next to it.
5. Another copy of this memorandum is attached to an undated, handwritten note from Butterfield to Haldeman that reads: “This is a 2-part action paper. The President saw and acted on the 1st part—but missed the page bearing ‘clip’. Flanigan needs signed letter to Wilbur Mills by 10 AM.” At the bottom is typed: “The letter should bear the date of: May 11, 1970 and returned to C.F. Bergsten (NSC) for hand delivery.” (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 399, Textiles, Volume II) See footnote 1 above.