236. Memorandum From the Special Representative for Trade Negotiations (Herter) to President Johnson1
SUBJECT
- Adoption of 50% Linear Rule in May 4 GATT Meeting
Recommendation:
I recommend that, in light of the information presented to you in this memorandum, you authorize me to accept on behalf of the United States a rule providing for a linear reduction in tariffs of 50%, subject to the significant qualifications described herein.
[Page 637]I have communicated the substance of this memorandum to the Departments of Commerce, Defense, Labor, and the Interior. They concur in the transmission of this recommendation.
Discussion:
On May 4, 1964, the Trade Negotiations Committee of the General Agreement on Tariffs and Trade (GATT) will meet in Geneva, at the ministerial level. The purpose of this meeting will be to take note of the progress which has been made to date in developing the rules to be applied in the trade negotiations and, wherever possible, to refine and elaborate some of the general principles agreed upon at last year’s ministerial meeting.2
In particular, I believe it would be advantageous for the United States to be in a position to agree to a rule providing that the major participants would make a linear or across-the-board reduction of 50% in present tariffs. The meaning of a linear rule is that all dutiable imports are initially subject to the agreed tariff reduction of 50%, but each participant would reserve the right to except products from the list for reasons of overriding national interest. Due to the fact that the negotiating rules for agriculture have been set aside for separate consideration and have not yet been formulated, the commitment involved in adopting a 50% rule at this time would extend only to non-agricultural products.
The authority for the United States to make such 50% tariff reductions, subject to certain mandatory exceptions, is provided by the Trade Expansion Act of 1962. In the preparatory discussions to date, the United States has joined other governments in accepting a 50% linear reduction as the working hypothesis upon which we could formulate procedural rules for the coming negotiations. I am proposing that we agree to make this working hypothesis a rule for the negotiations.
I believe that the transformation of the working hypothesis into a rule would go far towards preserving the momentum of the negotiations and would, at the same time, establish as a firm proposition one of the most critical elements of these negotiations. It appears that the other important participating countries, including the EEC, United Kingdom, and Japan, will be prepared to do the same.
I should emphasize that the proposed 50% linear rule would be agreed to by the United States only on the basis of certain express conditions.
The first condition would entitle the United States to exclude from the general 50% tariff reduction whatever items we determine must be so reserved. At Geneva, the Trade Negotiations Committee will be asked to agree that exceptions to the linear rule should be kept to a bare minimum [Page 638] and should be justified on the basis of overriding national interest. This formula has the advantage of putting some international pressure upon countries which might otherwise reserve a large number of items from a linear reduction of 50%. At the same time, it lays down no objective standards as to what constitutes a bare minimum and therefore does not commit the United States to any quantitatively defined number or value of exceptions. Under the Trade Expansion Act of 1962, we are required to reserve certain items, including those subject to national security and escape-clause actions. In addition, we will be free to reserve other items, although we hope such further exceptions would not exceed the principle of a bare minimum.
The second condition qualifying the linear rule would permit the United States to adjust the number of items which it would reserve in accordance with the principle of reciprocity. It has already been agreed that it shall be open to each country to request additional concessions or to modify its own offers where this is necessary to obtain a balance of advantages between it and the other participating countries. This principle constitutes as significant a condition to the linear rule as that concerning exceptions.
These two conditions serve a further purpose in making clear that the 50% linear rule would not predetermine which specific items in the United States Tariff Schedules will be subject to a tariff reduction of 50%.
Before the United States can accept even such a generalized and conditional rule, I believe the Trade Expansion Act of 1962 requires you to make a preliminary judgment about the probable economic impact of tariff reductions, based upon the advice of the Tariff Commission and upon other information received during the recent public hearings concerning the forthcoming trade negotiations. The requirement is not that you make any particular finding. Rather, it is merely that you be given sufficient information about the content of that advice and information so that you may form a preliminary judgment about probable economic effects, and that you make the decision whether to agree to the rule after considering that information.
I have now received, on your behalf, the advice rendered by the Tariff Commission on the basis of its public hearings and independent study.3 I have also received the summary of the hearings of the Trade [Page 639] Information Committee of this Office. My Office has made a preliminary survey of the Tariff Commission advice, as well as the information presented to this Office through the Trade Information Committee and other various sources.
I believe that this review has furnished us with sufficient information of a preliminary kind to serve as the basis for a decision to agree to the 50% linear rule described above. The Tariff Commission advice indicates a judgment that a 50% reduction in tariffs on a clear majority of negotiable non-agricultural items in the United States Tariff Schedules would not create serious economic consequences. That judgment is supported by the other information reviewed by this Office to date. Such a judgment necessarily takes into account the fact that virtually all tariff reductions are required by statute to be staged over a minimum of five years, the capacity of domestic industries to adapt to import competition, and the availability of adjustment assistance under the Trade Expansion Act of 1962.
- Source: Johnson Library, National Security File, NSC Histories, Kennedy Round Crisis, Tab 1, Box 52. Confidential. Drafted by R. E. Hudec (STR) and John B. Rehm (STR). Herter sent this memorandum with a covering letter to McGeorge Bundy at the White House, requesting the President’s decision before Herter’s departure for Geneva on May 1. (Ibid.) Bundy told Herter that the President approved Herter’s recommendation on April 30. (Memorandum for the files by Fay Steiner (STR), May 1; ibid., Tab 2, Box 52)↩
- See footnote 2, Document 228.↩
- On October 22, 1963, the President submitted to the Tariff Commission a list of the articles that would be considered for concessions at the GATT Contracting Parties sixth round of tariff negotiations, and the Tariff Commission held public hearings December 21, 1963–March 27, 1964. It submitted its advice to the President regarding the probable economic effects of reductions in import duties on April 22, 1964. The advice was not made public. For further information, see U.S. Tariff Commission, Operation of the Trade Agreements Program, 16th Report, July 1963–June 1964 (TC Publication 164, Washington, 1966), pp. 42–43.↩
- Printed from a copy that bears this typed signature.↩