394.31/8–2052
Memorandum by the Chairman of the Interdepartmental Committee on Trade Agreements (Corse) to the President 1
- Subject:
- Recommendation of the Interdepartmental Committee on Trade Agreements2 concerning Trade Agreement Negotiations with Japan
Japan has formally notified the Contracting Parties that it wishes to accede to the General Agreement on Tariffs and Trade and in this connection to enter into tariff negotiations with the United States and 27 other contracting parties. Although August 19 was the final date for making a reply, the Secretariat has been informed that our reply would be forthcoming shortly. Under a special procedure, Japan’s application is automatically accepted unless three contracting parties request that it be referred to the next session of the Contracting Parties. It is likely that at least three contracting parties will request referral of Japan’s application to the Seventh Session which will meet on October 2, 1952.
The Interdepartmental Committee on Trade Agreements requests the President’s approval of the following:
The United States should reply that it has no objection to Japan’s accession to the General Agreement, that it is prepared to enter into tariff negotiations with Japan subject to domestic legislative and constitutional requirements, and that it has no objection to full discussion of the question at the Seventh Session of the Contracting Parties. At the Seventh Session the United States delegation should support favorable action by the Contracting Parties on [Page 116] Japan’s application. However, the United States delegation should not press the application to the point of incurring the risk of outright rejection or of straining our relations with other countries so as to prejudice the attainment of our broad policy objectives.
For several years it has been a basic principle of the United States to further the development of a strong and stable economy in Japan and to strengthen Japan’s economic ties with the free world. Repeated, although unsuccessful, efforts have been made to obtain commitments from other major trading countries to accord most-favored-nation treatment to Japan, and in 1949 an effort was made to have Japan invited to participate in tariff negotiations conducted within the framework of the General Agreement.
There is bi-partisan recognition in this country that Japan must increase its trade with the United States and the rest of the free world. Japan’s over-all foreign trade is at present only about half of what it was before the war while its population has continued to increase. Trade with China, which accounted for over 15% of Japan’s foreign trade before the war, has recently dropped to less than 1%. Japan has been forced to secure more of its essential imports from the United States, both because of the reduction in imports from China and because other Far Eastern areas have not regained their pre-war importance as exporters of raw materials. This has made it difficult for Japan to balance its dollar trade. Japan is presently able to finance a $500,000,000 trade deficit only because of a temporary windfall resulting from the hostilities in Korea and from the stationing of United States troops in Japan. The Committee believes that the conclusion of trade agreements, bringing Japan back into the trading community of the free world, is one of the prime essentials in helping Japan in its necessary efforts to achieve a self-supporting economy.
The prospects of lucrative trade with the Soviet bloc, including Communist China, have a strong appeal to the Japanese trading community. The Japanese Government has recognized that its trade with the Soviet bloc must for the time being be strictly controlled in the interest of our mutual strength and security. However, if the Japanese are blocked in their efforts to expand their trade with the free world, they may think it necessary to re-orient their trade toward Communist China and the Soviet bloc.
The Committee believes there is no real alternative to supporting the Japanese application and agreeing to enter into tariff negotiations with Japan. Such action would in fact be consistent with and give effect to policy recently approved by the National Security Council. Any other course would certainly be misunderstood. The Japanese could reasonably feel that the United States was repudiating its former support and that actually we were unwilling to [Page 117] enter into trade negotiations with Japan. Furthermore, anything less than affirmative support would be taken by other countries as an abnegation of our commercial policy of reducing trade barriers and as a weakening in our efforts to obtain the economic objectives we desire. Elements already opposed to Japan’s accession would be strengthened and our future efforts on Japan’s behalf would operate under a severe handicap.
The United Kingdom, joined by Australia, is likely to continue its long-standing opposition to Japan’s accession to the General Agreement. The primary British concern relates to the depressed Lancashire cotton-textile industry. The Committee recognizes that, because of the important implications of the problem of integrating Japan into the free-world community, it may be necessary to have high-level discussion of the question with the British at some stage.
In making its recommendation the Committee has recognized that it will raise serious domestic problems. Our efforts to obtain favorable action on Japan’s application will undoubtedly be known publicly. Since most of the principal commodities which the United States imports from Japan are sensitive products, such as tuna fish, canned crabmeat, chinaware, cotton textiles and toys, there will undoubtedly be many cries of fear at the prospect of increased competition from Japan. Attempts may be made to justify these fears on grounds of unfair Japanese competition due to low labor standards. Such reactions to the prospect of tariff negotiations with Japan will be of special significance in view of the fact that the Trade Agreements Act will be up for renewal in the spring of 1953.
For the reasons outlined above the Interdepartmental Committee on Trade Agreements believes that, despite the difficulties which will arise, the United States should support Japan’s application and recommends that the United States indicate its willingness to enter into tariff negotiations with Japan in connection with Japan’s accession to the General Agreement. If the President agrees with this recommendation, the Committee will at the appropriate time request the President to approve a formal public notice of intention to negotiate a trade agreement with Japan and a list of articles on which possible concessions by the United States will be considered in the negotiations.3
- Drafted by Nan G. Amstutz and David I. Ferber of the Commercial Policy Staff, Bureau of Economic Affairs, and forwarded to the President under cover of a memorandum by Acting Secretary of State Bruce, dated Aug. 20, 1952, not printed, in which the Acting Secretary endorsed the Committee’s recommendation and recommended that the President approve it. (394.31/8–2052)↩
- The Interdepartmental Committee on Trade Agreements, also commonly referred to as the Trade Agreements Committee (TAC), included representatives from the Departments of State, Agriculture, Commerce, Interior, Labor, Defense, and Treasury, the Mutual Security Administration, and the Tariff Commission. The Committee was established on June 23, 1934, to make recommendations to the President of the United States relative to the conclusion of trade agreements.↩
- President Truman approved the recommendation on Aug. 22, 1952. (394.31/8–2052)↩