Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

178. Memorandum for the Files¹

Washington, July 19, 1973.

SUBJECT

• Minutes of CIEP Council Meeting of July 19, 1973, Room 208, OEOB

ATTENDANCE

• (List attached)²

Mr. Flanigan asked Mr. Jackson to give the Council a report on the status of the Trade Bill.

Mr. Jackson began by asking that if anyone disagreed with the approach which he and Bill Pearce were taking on the Bill, he would appreciate their comments at the time. At present, the Ways and Means Committee is going over specific draft language section-by-section. They hope to finish the entire Bill not later than a week from Friday.³ The Speaker has indicated that he hopes to bring the Bill to the Floor by October 11th. However, Chairman Mills is skeptical and thinks this schedule may slip.

Mr. Jackson then discussed the variety of atmospheric problems which had arisen in recent weeks. They include:

1. The change in leadership of the Ways and Means Committee. This will be the first bill that Ullman will bring to the Floor on his own.⁴ He does not want to lose on the Floor and this will cause him to be more conservative than perhaps Mr. Mills would be.

2. There is growing opposition in the House on the whole question of Presidential discretion in the requested authorities, with the result that several limitations are being written into the bill.

3. On the Jackson–Vanik Amendment, congressmen are saying that they are getting more letters from constituents on this aspect of the Bill than most of them can remember with any other piece of legislation within their experience. This is thus creating very severe pressure in favor of Jackson–Vanik and it is likely that members will insist on a Floor vote for it regardless of what the Ways and Means Committee recommends.

4. The Hill is swarming with lobbyists. The business lobbyists in particular in that they are focusing on areas of special attention to them and not promoting the Bill as a whole. Labor lobbyists are very active and agricultural constituencies are staying away.

5. There is a mounting challenge to the presence of Executive Branch personnel in executive sessions of the Committee. This pressure limits our ability to argue forcefully on some points which we could be doing in the absence of it.

Mr. Jackson then went into a discussion of the situation title-by-title.

Title I:⁵

While we were in reasonably good shape after the first reading of the Bill, the Committee is now beginning to backslide. While the 50% authority remains intact, the exception concerning 80% of OECD country trade is being challenged. Here is where the business lobbyists could be helpful if they could be mobilized.

Under the 80% of OECD trade authority, about 83% of our trade could be eligible for zero duties. If the criterion were raised to 90%, that would reduce trade coverage by around 10–15%. If formula is further reduced to products in which Japan, the United States, Canada and the EC account for 80% of world trade, the coverage would be further reduced by around 10–15%. Regardless of what the Ways and Means Committee determines, the outcome on the Floor of the House is much less certain.

The NTB procedure is in good shape. However, we may have to accept a time limit during which we can use the veto procedure. Committee is considering a five-year limit and we are arguing for at least ten years.

Mr. Eberle also noted that there was considerable pressure for a mandatory reciprocity by sector. This began by arguments from industry sources such as steel and textiles but labor is also picking this up and now is giving great impetus to this idea.

Title II:⁶

Mr. Jackson said that the escape clause proposals remain essentially intact and that indeed most of the changes proposed by the Committee were improvements. On adjustment assistance the Committee has rejected the Administration proposals completely, substituting a revised system along the lines of the Trade Expansion Act. The main issue here is the question of financing. The Committee is considering three options:

1. Financing the whole assistance program from general revenues;

2. Financing it from increases in the unemployment tax;

3. Financing from general revenue only that portion of the benefits in excess of those which would be available from State assistance.

Most of the sentiment in the Committee is for the first option.

Secretary Shultz said that the arguments in favor of the third option were very strong for both fiscal and control reasons. Mr. Jackson said that we were pushing the third also and, though there was substantial committee sentiment for it, he was not sure it could command the majority.

In response to Mr. Flanigan’s question as to what to do if this came to a vote while Shultz is away on his trip, Secretary Shultz noted that if the Committee votes against Option 3, there isn’t much we can do.

Title III:⁷

Mr. Jackson said that the main issue here was on the countervailing duty section. Committee is charged up about this for two reasons: general antagonism against discretionary authority and criticism of the way this program has been administered in the past. The Committee wants judicial review of negative decisions, strict time limits on investigations and very little discretion granted. We believe we have been able to negotiate a compromise under which, for four years, Secretary of the Treasury would have discretion in applying countervailing duties if he judged it would jeopardize international negotiations in progress. After the negotiations, the Committee will probably insist that we bring the agreement, covering both countervailing duties and subsidies, back to Congress for action, presumably through the veto procedure.

Title IV:⁸

The Committee is very nervous about this title largely because it contains a lot of discretionary authority and has no time limits. As a result, they have restructured the Bill to put most of the elements of Title IV into Title I making them subject to the time limit provision. The reason is mainly that the Congress does not want to give up permanent control of these elements and wants the Administration to come back for renewal of these authorities after five years.

Regarding the balance of payments authority, Committee has inserted limitations on the amount of the surcharge (15%) and the time it would apply (not more than 150 days unless Congress extended it). The authority to reduce barriers for this purpose would be limited to not more than 5% ad valorem. A similar time limitation would be put on the anti-inflation authority.

The Committee has accepted the GATT appropriation section with the provision that the Administration try to negotiate changes in GATT. Their list includes voting power, border tax adjustment, Article 12⁹ and inclusion of a new article on fair labor standards. While we have indicated that we doubt we can negotiate many of these, the Committee says that we should at least make the effort.

Title V:¹⁰

As regards the Jackson–Vanik amendment, three options are being considered:

1. Jackson–Vanik;

2. The Pettis–Corman compromise;¹¹

3. Dropping Title V entirely.

Committee leaders believe there is no chance for the Pettis–Corman compromise on the Floor and that Jackson–Vanik will be adopted by the House. Mills and others want to drop Title V in order to avoid this. However, we are not sure that this would preclude the Floor from adopting Jackson–Vanik in any case.

Mr. Hinton said that the President has indicated clearly that he cannot live with Jackson–Vanik for foreign policy reasons. He assumed that Mr. Kissinger was prepared to do whatever is necessary to see that Jackson–Vanik is not adopted. Mr. Jackson also indicated that there was some pressure in the Committee to write in a separate provision limiting our ability to grant credits to Eastern bloc countries and that we have to watch this one closely.

Title VI:¹²

This is one part of the Bill which seems to be in very good shape. The only major change so far has been a decision by the Committee to require that, instead of leaving it to the discretion of the Secretary of the Treasury, the rule of origin would be that 35% of total value added must be accounted for by the exporting LDC. Mr. Eberle said that the other possible option which is still open would be to write in a higher percentage of value added accounted for by all eligible LDCs.

Mr. Jackson also said the Committee would like to specify which countries specifically are eligible. As a counter proposal we have said we could accept a list of ineligible countries (as in the Interest Equalization Tax legislation) and this might be acceptable to the Committee. Finally, he reported that there has been no Committee consideration of the portions of Title VII regarding repeal of the Johnson act or the fur embargo, but that this tied up in the consideration of the Jackson–Vanik and the issue of credits to eastern countries.

During the ensuing discussion it was agreed that Secretary Dent and Department of Agriculture would try to do more to mobilize business and agricultural organizations in supporting the Bill, bearing in mind the legal restrictions on lobbying activities by the Executive Branch.

Regarding the proposed mandatory provisions on sectoral reciprocity, Mr. Jackson said we are trying to develop qualifying formula. We have four options:

1. “If feasible”;

2. A consideration of “balance of market access”;

3. “Consistent with the desire to expand U.S. exports in general”;

4. Including a reporting requirement which would not be such as to “tilt” the negotiations toward a sector approach.

The discussion then turned to a report by Ambassador Eberle on Article XXIV:6 problems.¹³ Ambassador Eberle said that we will know next week how far the EC was prepared to go on the new offer. We will consider it at that time and also a formal request for additional products. We know their offer will not be satisfactory and several EC people know they have to move further. The “crunch” should come around the end of October and we will have to make major decisions then. While some industrial items are important, tobacco, grains, and citrus are the key to the package. We will have to judge in about a month whether the package is substantial enough to permit acceptance.

Secretary Dent raised the question of what to do about licensing requirements on soybeans and the 40-odd other items currently under license as of the end of September. He felt that the licensing requirement should be retained if we have any expectation at all that we may have to reinstitute controls some time in the future. The maintenance of a licensing system would facilitate imposition of such controls if that were deemed necessary. The matter was important today due to the need to make an early announcement of our intentions so that the trade would be prepared come October 1.

After some discussion about the techniques involved, it was generally agreed that it would do no harm to retain the licensing requirement at least through the coming month during the period while the new USDA reporting system was working out the bugs in its new reporting system. Secretary Shultz proposed that we retain the status quo until we could have a staff paper giving the considerations involved in removal or retention of licensing. Mr. Cooper was asked to develop such a paper through the Dam Group.

1. Source: National Archives, RG 429, Records of the Council on International Economic Policy, 1971–1977, Box 250, Executive Committee Meetings, 1973–1974, 52817 Hinton Dean R., Executive Cte. Mtg. Re: Trade Bill, July 19, 1973. Confidential. Drafted by Morris on September 20. Copies were sent to Flanigan, Hinton, and Morris. The meeting took place in the Old Executive Office Building.
2. Attached but not printed. According to the list, Shultz, Dent, Casey, Under Secretary of Labor Richard Schubert, Renner, Goodman, Department of Labor officer Blackman, Fox, Cooper, Seever, Department of Defense officer Captain Robertson, Office of Management and Budget Assistant Director Bernard A. Bridgewater, Eberle, Jackson, Flanigan, Hinton, Morris, Dam, and CIEP staff members Gunning, John Niehuss, Reuben Sternfeld, and Edward Jayne were in attendance.
3. July 27.
4. Mills suffered frequent bouts of ill health during 1973, leaving Albert Ullman (D–Oregon) to assume stewardship of the trade bill through the House Ways and Means Committee.
5. Title I covered the executive trade negotiating authority.
6. Title II covered escape clause relief and adjustment assistance.
7. Title III covered injury caused by unfair foreign trade practices.
8. Title IV covered trade management, including the au-thority to address balance-of-payments emergencies.
9. Article XII of the GATT dealt with “Restrictions to Safeguard the Balance of Payments.”
10. Title V covered MFN status for Communist coun-tries.
11. The Pettis–Corman proposal would allow the President to extend, or continue to extend, MFN status to a Communist country provided that the trade deal in which MFN was extended allowed for an equitable balance of trade concessions between the Communist country and the United States, the extension of MFN status to U.S. goods, and safeguard provisions to protect U.S. markets and producers; that the President submit an annual report to Congress affirming that the Communist country was “evidencing reasonable progress” in respecting human rights and not imposing unreasonable taxes or discriminatory obstacles on potential emigrants; that such trade deals be extended for no more than 3 years at a time, renewable on the President’s recommendation and Congressional concurrence. The President would have the authority to terminate the deal at any time in the interest of national security. (National Archives, Nixon Presidential Materials, NSC Files, Box 317, Subject Files, Congressional, Vol #9, June– September 1973)
12. Title VI covered tariff preferences for LDCs.
13. See footnote 9, Document 40.