Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

16. Memorandum From the Under Secretary of State for Economic Affairs-Designate (Cooper) to the President’s Assistant (Watson)¹

Washington, March 30, 1977

SUBJECT

• Shoes

The Strauss memorandum fails to point up adequately the considerable difference, both from a foreign policy viewpoint and from the viewpoint of domestic consumers, between an “orderly marketing agreement” approach and a “voluntary restraint” approach to limiting imports of shoes.²

A decision to negotiate formal orderly market agreements would be interpreted in the United States press and by the world as a turn toward import restriction. While this course would permit 90 days during which agreements could be negotiated with the two largest suppliers representing over 50% of the imports, the President would have to inform the Congress and the public now of the course he is taking. The impact of the policy decision would thus be immediate. Failing agreement, the President would be required to impose unilateral restraints on all imports. Moreover, if agreements were negotiated, they would contain “equity” provisions which would obligate the United States to undertake unilateral restraints against non-agreement countries whose imports “disrupt” our market. This will invite continuing controversy with other exporting countries.

The “orderly marketing agreement” route is in fact a more protectionist solution than the tariff quota option. It results in absolute quantitative limitation on imports and does not permit imports above quota to come in, albeit at a higher tariff. Thus, a tariff quota would, in general, have a smaller impact on consumer prices.

The alternative of voluntary restraints avoids these problems. The primary relief provided is adjustment assistance with voluntary agreements designed to avoid disruption of the market during the adjustment process. Since the arrangements by their nature are not mandatory, they provide much greater flexibility. They do not create the same complications with other exporting countries. Most importantly, they would not present the image of the President having adopted a protectionist approach in the first and most important trade case coming before him in his Administration.

1. Source: National Archives, RG 59, Office of the Secretariat Staff, Records of the Under Secretary of State for Economic Affairs, Richard N. Cooper, 1977–1980: Lot 81D134, Box 1, Memorandums, 1977. Confidential.
2. In a March 30 memorandum to Carter, Watson wrote: “Pursuant to your request, Bob Strauss has prepared the attached memorandum outlining the third option which he proposed at the EPG meeting on Monday [March 28]. As Bob’s memorandum indicates, there is still considerable disagreement among the group as to whether option three should follow the course of voluntary restraints or one of orderly marketing agreements. Mike Blumenthal, Henry Owen, Charlie Schultze, Zbig and Warren Christopher all favor voluntary restraints; Bob Strauss and I think the Vice President, Bert Lance, Juanita Kreps and Ray Marshall prefer orderly marketing agreements.” Strauss’ memorandum was not attached to Watson’s memorandum. (Carter Library, White House Central Files, Subject File, Box FG–92, FG 6–15 Executive 1/20/77–8/31/77)