The Acting Chairman of the United States Delegation to the Eighth Session of the General Agreement on Tariffs and Trade (Brown) to the Director of Foreign Operations in the United Kingdom (Gordon)
- Conference with Randall Commission1
Dear Linc: I suggest for the Ambassador’s2 consideration the following points that he might care to make in his presentation to the Randall Commission at its Paris meeting on November 9.
1. To stress that extent to which movement by other countries toward convertibility and multilateral trade and, particularly, the key country of Britain, depends upon policy decisions by the U.S.
We hear this theme continually in London, and it has been a recurrent motif throughout this entire meeting of the GATT.
2. To stress the extent to which this is a problem of confidence and psychology.
These countries not only want the U.S. to go forward; they want concrete assurance that it will not go backward.
The U.S. customs restrictions, agricultural restrictions and Buy-American Act are bad enough, but what is as bad—and in my opinion worse—as a barrier to trade is the psychological attitude that has grown up around them in the minds of European and other countries. There is a combination of feeling that to try to get into the U.S. market is impossible and a fear that, even if you succeed, further barriers will then be raised against you. There is no real [Page 164] confidence that we genuinely mean to accept greater competition from imports.
This attitude of mind inhibits action even by the energetic exporters. It provides a convenient alibi for those who do not particularly want to try to compete.
Our need is somehow to inspire confidence and hope in the energetic, and to remove the alibi of the lethargic. To my mind this is the most important element in the picture, even more important probably than the actual measure of tariff reductions we might make or restrictive laws that we might modify or abolish.
Moreover, now is the time, the opportunity par excellence, for us to do what is necessary in this respect, for we are now at the beginning of the first Republican Administration in twenty years. If a broadly based, forward-looking program could be adopted by a large majority in a Republican Congress, it would go far toward meeting the need.
3. Two or three things would be indispensable to create this impression. The first would be that we should abandon the emphasis we have hitherto placed upon strict reciprocity in tariff bargaining. If we could, for example, announce that except for a few specified cases, dictated perhaps by needs of national security, there would be no tariff in the U.S. over 50%, that would make a drastic impression and would be something that I would think would be supported by most intelligent people in the U.S. We could then bargain our moderate and low rates against other countries’ moderate and low rates in the normal way.
Tariff negotiation on the basis of straight reciprocity is outmoded in other countries as well as with us. That is the basis of the whole long discussion which has gone on between the high and low tariff countries in Europe and which has culminated in the so-called “French Plan” for tariff reduction which has been worked out by experts in the GATT, a copy of which is enclosed. The essence of this plan is that the bargain would be that each country would agree to reduce its tariffs by a certain percentage over a period of time. The percentage would be allocated by groups of imports in order to give flexibility for protection in necessary cases. Countries with tariffs below a certain level would have to do no more than agree not to raise their present rates. The reciprocity would come not in the action on individual items, but on the overall action by each country in return for comparable overall action by the others.
I do not think it is feasible to eliminate the “escape clause”,3 but I do think it would be feasible and consistent with the spirit of the [Page 165] “escape clause” to say that if action under it has not been taken within a limit of say three years, the rate must thereafter remain fixed. This would give plenty of time for industries to adjust to reduced rates and to see what the effect of the adjustments would mean. It would also give confidence to exporters that after a certain period at least they could proceed with confidence.
A beginning should be made on a complete review of our tariff classifications. These are the real source of customs delay because of the litigation to which they lead.
The Buy-American Act should be repealed.
The GATT should be approved by the Congress.
And finally, some formula should be found whereby the operation of U.S. price support programs for agricultural commodities would not result in total exclusion of imports.
This would not mean drastic reduction of our tariff except in a few cases. It would not wholly abandon our traditional manner of tariff negotiation. It would not abandon our “escape clause”.
Doubtless the program should also include contribution, through the Fund or otherwise, to a stabilization fund.
To sum up, there seem to me to be two essential elements that will have to be included in any U.S. program which will meet the need. The first is that it have an element of unilateral contribution by the U.S. to the solution of the great world trade imbalance. The second is that it be so drawn and so adopted that it convinces other nations that our intention to accept more imports is real and that whatever steps we do take will be lasting. It would to my mind be better to take modest steps in such an atmosphere than to take bigger steps which have a larger element of doubt as to their duration.
The unilateral element is very important because all these countries look at the comparative size and power of the U.S. and at the tremendous imbalance which has existed in dollar trade for so many years, and in the light of this state of affairs the current approach of precisely balanced quid pro quos seems to them futile.
- The Randall Commission, or the Commission on Foreign Economic Policy chaired by Clarence B. Randall, Special Consultant to the President, was set up by President Eisenhower to conduct an extensive review of U.S. foreign policy. The Commission, composed of members of Congress and private citizens, published its Report to the President and the Congress in January 1954. For further documentation on the Commission, see pp. 49 ff.↩
- Winthrop W. Aldrich.↩
- For background on the “escape clause” in U.S. trade agreements legislation, see the appropriate section of the Metzger memorandum dated Feb. 25, 1953, p. 151.↩