Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

411.0031/5–2754

Memorandum by the Deputy Assistant Secretary of State for Economic Affairs (Kalijarvi) to the Secretary of State¹

confidential

[Washington,]May 27, 1954.

• Subject:
• Discussion of the Trade Agreements Program Extension with Congressman Reed²

Problem

To persuade Congressman Reed of the necessity for urgent political and security reasons to extend the trade agreements program for one year without any limitations on the President’s authority to negotiate.

Background

A. The President told Mr. Reed today that he is adamant in insisting upon a one-year extension without limitation on his authority to negotiate.³ Mr. Randall shares this view. It is apparent that the President has asked you to see Mr. Reed in order that you can emphasize the political and security consequences of a failure to get an extension with authority. There should be no reason to be drawn, therefore, into a discussion of the economic details of the trade program.

B. From the standpoint of the United States position internationally, our recent foreign economic policy record, is one of inaction at best or retreat and this is having serious political consequences.

C. The decision of May 10 to drop the heart of the Randall recommendations⁴ for this year, was carefully handled to give us some chance of maintaining our position of diluted economic leadership. This is possible if we can engage with other countries in tariff negotiations with Japan.

D. There is alarming evidence of weakness of the Japanese economy. If any progress is to be made in working out improved economic relations between Japan and the free world it will be dependent upon American initiative and leadership. The heart of any endeavor will have to be multilateral tariff negotiations.

E. Prime Minister Yoshida⁵ arrives in Washington June 7, representing a shaky government. If the action taken by the United States Government on the trade agreements program is one which has the effect of precluding any negotiations with Japan, there is a real likelihood that his government will fall upon his return and be succeeded by one less cooperative.

F. Ambassador Aldrich, in a telegram today, gave his considered opinion that a United States failure to take some constructive action in the field of trade policy may preclude British moves towards convertibility and thereby postpone what could be a source of new strength to the free world.

Conclusion

A. A trade agreements act which for the second time precludes the President from using the authority of the Act will be certainly viewed in the free world as a capitulation of United States economic leadership, with consequent impairment of our political position.

B. United States failure to legislate a program which will provide authority to bring about general negotiations with the Japanese would not only mean a failure to provide what could be a significant positive action in the critical area of Asia, but would contribute to further political and economic deterioration in the area.

Recommendations

In presenting the case for quick action with no limitations on Presidential authority to negotiate, you should stress

(a) the frightening political consequences in Asia which might easily flow from a failure to take the action which would otherwise be available to us to bring Japan into the free world’s economic community;

(b) the vital significance of this action to the unity of the free world and the strength that might be gained through encouraging British action towards convertibility; and

(c) the immediate political consequence which might result in the fall of the Yoshida government.⁶

1. Assistant Secretary of State for Congressional Relations Morton and Deputy Assistant Secretary for Far Eastern Affairs Drumright were also originators of this memorandum, which was drafted by J. Robert Schaetzel, Special Assistant to the Assistant Secretary for Economic Affairs.
2. Daniel A. Reed (R.–N.Y.), Chairman of the House Ways and Means Committee and a member of the Randall Commission.
3. Regarding President Eisenhower’s personal interest in expanding U.S.–Japanese trade, see the editorial note under date of June 22, 1954, volume xiv.
4. Commission on Foreign Economic Policy,Report to the President and the Congress (Washington, January 1954). See the editorial note, p. 49.
5. Shigeru Yoshida, Prime Minister of Japan.
6. In a memorandum to President Eisenhower dated May 28, 1954, Secretary Dulles reported that he had felt from his conversation with Reed that the Congressman would not be unwilling to permit the negotiating of a multilateral treaty under the GATT under an extension of the trade agreements legislation, but Reed claimed he could not control his Committee in the matter. Reed suggested that Secretary Dulles invite the Republican members of the Ways and Means Committee to lunch, which Dulles reported he had done. (394.31/5–2854) No record of the meeting was found in Department of State files.