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

7. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter¹

Washington, March 9, 1977

SUBJECT

• Cargo Preference Legislation

You asked, Tab A, for a brief on oil cargo preference legislation.²

Congressman Murphy, Chairman of the House Merchant Marine and Fisheries Committee, is now holding hearings on H.R. 1037, a bill to “require that a percentage of US oil imports be carried on US-flag vessels”. Executive Branch agencies have been asked to testify on March 15. The bill would require that an initial 20%, and by June 20, 1980, 30% of US-imported oil be transported on privately-owned US-built and registered commercial vessels. Similar legislation was pocket-vetoed by President Ford on December 30, 1974 because, as he then noted, of its substantial adverse effect on the US economy and international interests.³

This bill would benefit the US maritime industry by increasing the utilization of US tankers and jobs. However, it has a number of drawbacks as well. It would, by extending cargo preferences to commercial cargoes, deviate from the long-standing US policy of fostering competition in international shipping; violate most-favored nation and “national treatment” clauses of our Friendship, Commerce and Navigation Treaties (which require that each treaty partner provide reciprocal treatment to the flag vessels of the other party with respect to international carriage of commercial cargoes); encourage the adoption of similar measures by other countries (particularly oil-exporting countries who are already demonstrating a tendency to get into the oil shipping business); force the US consumer to eventually absorb the higher operating cost of using US-registered vessels as opposed to foreign vessels; and force the US to underwrite the higher construction costs of new ship tonnage in a world already suffering from an unprecedented tanker surplus.

A diplomatic note expressing “considerable concern”, delivered on March 4 by the UK, Norwegian, Swedish, Greek and Danish Ambassadors, and senior officials of the Netherlands, Belgian, Japanese and Finnish Embassies made a number of these points regarding the bill.⁴

The EPG is now considering whether the Administration should support or oppose this bill.⁵

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 14, Congressional: 3/77. Secret. Aaron initialed the memorandum on Brzezinski’s behalf. Carter wrote at the top of the page: “Sounds bad. J.”
2. Tab A, attached but not printed, is the second page of what appears to be one of Vance’s daily evening reports to Carter. In the margin next to the third item in the report, on “Oil Cargo Preference Legislation,” Carter wrote, “Zbig—give me brief on this.”
3. For Ford’s “Memorandum of Disapproval of United States Tanker Preference Legislation,” issued December 30, 1974, see Public Papers of the Presidents of the United States: Gerald R. Ford, 1974, p. 782.
4. Not found. Telegram 49149 to London, Brussels, Copenhagen, Helsinki, Athens, Rome, Tokyo, The Hague, Oslo, and Stockholm, March 5, transmitted an aide-mémoire given to Katz that day on the oil cargo preference legislation. (National Archives, RG 59, Central Foreign Policy File, D770076–0269)
5. In a March 15 memorandum to Brzezinski, Hormats urged him to attend an EPG meeting scheduled for March 16 in order “to express your strong opposition to the proposed cargo preference legislation.” (Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 16, Economic Policy Group Executive Committee: 1–12/77) No minutes of the meeting were found.