Foreign Relations of the United States, 1950, National Security Affairs; Foreign Economic Policy, Volume I

394.31/9–2650

Memorandum by the Chairman of the Interdepartmental Committee on Trade Agreements (Corse) to the President

secret

[Washington,] September 26, 1950.

There are presented herewith for your approval the recommendations of the Interdepartmental Committee on Trade Agreements as to the tariff concessions which the United States should request of and offer to certain countries in the negotiations which are to open September 28 at Torquay within the framework of the General Agreement on Tariffs and Trade. The countries covered by these recommendations are Australia, Belgium, Brazil, Canada, Denmark, Dominican Republic, France, India, Indonesia, Italy, Luxemburg, Netherlands, New Zealand, Norway, Sweden, United Kingdom (countries already parties to the General Agreement) and Austria, the Federal Republic of Germany, Guatemala, Korea, Peru and Turkey (countries which plan to negotiate at Torquay for accession to the Agreement).¹

Recent information indicates negotiations may not take place with Guatemala but your approval of the recommendations regarding such negotiations is nevertheless requested, since there is still some possibility that Guatemala may find it possible to participate. No negotiations will be held with the Union of South Africa, with which intention to negotiate was announced, and no recommendations are submitted regarding negotiations with that country.

The complete recommendations of the Committee as to the offers of concessions which the United States should make at this time, covering over 2000 items, are contained in Annex I.² All but a few of these recommendations are supported by the unanimous vote of the Interdepartmental Committee, consisting of members from eight agencies and an observer from a ninth agency (Interior) which is now in process of becoming a member of the Committee. The few formal dissents from the Committee’s recommendations and the comments of the majority on the items involved are in Annex II. Annex III contains requests which we have made on other countries and on which we expect substantial satisfaction as a quid pro quo for the grant of the? concessions to be offered.

The offers here recommended cover only items which were included in the original list of products published on April 11 and in the first supplementary list published on May 15. Supplementary recommendations with respect to negotiations with Cuba and offers to a number of countries on products included in the second supplementary list published on August 17 will be submitted to you as soon as possible e conclusion of the public hearings on this list, which are to September 25.

You are, however, requested to approve the present recommendations in order that negotiations can begin with the countries listed above on September 28, or as soon as possible thereafter. Our offers at that time will include only those which you have approved up to that time with an indication, if necessary, that further offers may be forthcoming as soon as required study and analysis can be made. The negotiations are expected to last about six months and will be secret, so that the final results of the negotiations would become public late next spring at the earliest and the concessions would probably become effective in June at the earliest.

The recommendations of the Committee may be summarized as follows:

(a) that we request from the twenty-three countries involved in these recommendations concessions in their tariffs on products accounting (in 1948 or a selected representative year) for about two billion dollars of their imports from us (reductions of duty, one and a half billion dollars; duty bindings and free list bindings, approximately 500 million dollars). These requests cover major export items such as wheat and wheat flour, fruit, tobacco, rice, cotton, refined petroleum products, radios, refrigerators, office machinery, pharmaceuticals, motion pictures and hundreds of other items of interest to agriculture and industry. Annex IV shows the total imports in 1948 into the twenty-three countries from the United States of products on which we have requested concessions.

(b) that we offer concessions on products which in 1948 accounted for 952 million dollars of our imports from all countries. Of this amount, as shown in Annex V, imports of products on which duty reductions are recommended accounted in that year for 896 million dollars; duty bindings 55 million dollars; and free list bindings amounting to about two hundred thousand dollars (most free-list items are already bound free).

Thus, though our offers bulk smaller than our requests, a large proportion of the offers represents concessions in the form of duty reductions. As explained above, further offers to these countries are also expected to be made on items in the second supplementary list. Our requests, naturally, include some leeway for bargaining and undoubtedly some of our requests will have to be modified or withdrawn. But even so, it may also prove necessary to request authority to make additional offers in the course of the negotiations in order to conclude a mutually satisfactory agreement. Your approval of such additional offers, and of the final results, will be requested.

These recommendations have been prepared, in accordance with the customary trade-agreement procedures, on the basis of careful study and analysis by the Committee on Trade Agreements and its country subcommittees after full public hearings and consultation with technical experts of the Government and of other interested organizations. The Committee had the benefit of commodity digests on export concessions to be sought, prepared by the Department of Commerce, and of digests on each possible import concession, prepared by the Tariff Commission. The latter contain background information and the judgments of the Tariff Commission, acting as a body, as to the probable effects of tariff concessions.

In acting upon these questions, the Committee has invariably followed the rule of avoiding recommendations which involved a threat of serious injury for any domestic industry. In general no concession has been recommended where an industry seems to be a declining one, especially where the present duty is moderate. Further, the Committee has endeavored to keep before it the importance of avoiding concessions on products which constitute the sole income of the communities in which they are produced and of avoiding an undue impact upon employment and income in any one region through the cumulative effect of concessions on different products. Where there appeared to be danger of such effects, recommendations for reductions in tariffs, if any, are for moderate reductions. For example, in the case of lace, although the rate could, legally, be reduced from the present 75 per cent ad valorem to 45 per cent, the Committee recommendation is for a rate of 65 per cent on the most competitive products. In addition, some concessions have not been recommended in order to save bargaining power for use in possible later negotiations with an important secondary supplier. Especial care has been exercised to save concessions for possible negotiations with Switzerland.

Important commodities on which no new concession is recommended, for reasons falling within the categories described above, are ground-fish fillets, surgical instruments, shotguns, and leather gloves. On other important goods in this class the recommendation is merely to bind an existing rate which would otherwise be increased as the result of the lapse of earlier bilateral trade agreements. These include filberts and lead. The recommendation on potatoes is also one which does not lower the duty or increase the quantity of low-duty imports at times when potatoes are in surplus. These examples of care to avoid injury are all, of course, in addition to items omitted from the published lists because no basis existed for considering a possible concession.

The question of possible serious injury has been handled with special attention where the security interests of the United States are involved, and it should be noted that there are no dissents by the Defense representative, who has participated fully in all of the work of the Committee.

Notwithstanding the care which has been exercised in preparing these recommendations, there may be considerable domestic controversy concerning the concessions proposed on a number of items, the most important of which are discussed in Annex VI or, if a dissent is involved, in Annex II.

In general, it may be said of all of these cases that a continuation of present active domestic demand, including accelerated defense purchasing, will somewhat lessen the intensity and considerably lessen the effectiveness of protests. However, where the reason for the protest is fear rather than any actual difficulty, the fact that conditions are good now may not satisfy the interests concerned, despite the favorable record of the program with respect to avoidance of injury.

It may be anticipated that, during the course of the negotiations, various domestic interests will urge that no reductions should be made in duties on products of particular concern to them, especially if the international situation does not improve substantially. In such circumstances these interests will probably cite the continued emergency situation in support of their protests, just as they have already urged that the negotiations should be postponed because of the existing emergency. It is recommended that such contentions should be rejected. The offers which you are being asked to approve, if finally negotiated, will have an anti-inflationary effect domestically and will help to strengthen and integrate the economies of all friendly countries.

It is, of course, not possible to say that these offers if approved and the recommendations yet to be formulated on the basis of the second supplementary list will offer sufficient bargaining power to secure an agreement with all of the countries at Torquay. It may therefore be necessary to request additional authority on particular items as the negotiations proceed. However, it is believed that the offers which are recommended at this time will provide an adequate basis on which to begin negotiations.

Your approval of the Committee’s recommendations is requested.

Carl D. Corse

1. There n extensive file of the records of TAC in the Department of State lot files, in Bureau of Economic Affairs files. Lot 59D599, consisting of minutes of TAC meetings, “documented minutes” and preparatory documentation. Generally the records covering 1950 are found in Boxes 302–304. There is also an extensive documentation in the Department of State’s central indexed files, file series 394.31 and 411.003, but there are gaps in important respects, one of the most notable being in connection with this document.
2. None of the annexes is attached. This of course became a public list. There is an extensive public documentation found in the boxes enumerated in the preceding footnote, consisting of Tariff Commission and Treasury (customs) literature and Department of State press releases.