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

246. Memorandum From the Chairman of the National Security Council Under Secretaries Committee (Irwin) to President Nixon¹

Washington, October 28, 1970.

SUBJECT

• Generalized Tariff Preferences: Special Preference Condition—Chairman’s Report

Recommendation:

The Under Secretaries Committee recommends that you approve the criteria outlined in the enclosure which would provide for the elimination from our generalized preferences of countries whose special preference trade is significant and growing in items subject to generalized preference schemes.²

Background:

NSDM-86³ directed the Under Secretaries Committee to determine criteria which would provide for the elimination from our generalized preferences of countries whose special preference trade is significant and growing in items subject to generalized preference schemes. The Under Secretaries Committee believes that the enclosed proposed criteria will accomplish our objective of reemphasizing our opposition to special preferences without jeopardizing the prospects for a meaningful system of generalized preferences. The criteria were developed after analyzing as completely as possible the trade data available for the countries concerned. While we would not announce the details of these criteria at international meetings, we would discuss, as appropriate, the criteria in general terms with the countries concerned.

For the purposes of dealing with this economic issue, the Under Secretaries Committee did not include representatives from the Department of Defense, Joint Chiefs of Staff and Central Intelligence Agency.

John N. Irwin II

Attachment

TARIFF PREFERENCES FOR DEVELOPING COUNTRIES: SPECIAL PREFERENCE CRITERIA

The President decided that the United States will not insist that special tariff preferences be fully eliminated over a five-year period for countries to be eligible initially to receive generalized preferences. He directed the Under Secretaries Committee to determine criteria which would “provide for the elimination from our generalized preferences of countries whose special preference trade is significant and growing in items subject to generalized preference schemes.”

It is proposed that the following criteria be used in carrying out the President’s decision:

• First, we would interpret “special preference trade … in items subject to generalized preference schemes” to mean trade in:

  (1) Items included in the generalized preference scheme of the developed country or group of countries (viz. the European Community) for which special preference margins are extended to particular LDCs; and

  (2) Any items included in the generalized preference scheme which are subject to preference quota ceilings on which over-quota duties are imposed on imports from countries not enjoying special preferences. (In such cases, total trade in such items in any given year would be counted, not only trade which occurs after the over-quota duties are imposed.)

• Second, we would consider trade of the special preference recipient in products receiving both special and generalized preferences to be “significant” if it totaled more than $10 million per year and constituted ten percent or more of the developed country’s imports of such products from all countries receiving generalized, but not special, preferences.
• Third, we would interpret the word “growing” to mean that trade of the special preference recipient with the developed country in products subject to special and generalized preferences grows for two consecutive years in total value and as a percent of the developed country’s imports of these products from all countries receiving generalized, but not special, preferences.

1. Source: National Archives, RG 59, S/S Files: Lot 83 D 305, NSDM 86. Confidential. Drafted by E. M. Cronk (E/ITP) and J. R. Matz (E/OT/GCP) on October 27.
2. Neither the Approve nor Disapprove option is checked, but an attached November 27 memorandum from Kissinger to Irwin informed Irwin that the President approved the recommendation. Following Bergsten’s assurances to Kissinger in a November 16 memorandum that no country would be eliminated from the preference scheme unless it met all three criteria set out by the Under Secretaries Committee, Kissinger approved the recommendation for the President. (Ibid., Nixon Presidential Materials, NSC Files, Subject Files, Box 401, Trade General Volume II 4/70-2/70)
3. Document 245.