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

411.003/6–754

Memorandum by the Secretary of State to the President¹

confidential

[Washington,]June 7, 1954.

• Subject:
• Tariff Commission Recommendation on Lead and Zinc

The Department has been asked to comment on the report of the United States Tariff Commission on the escape clause investigation of lead and zinc.² Because of the serious nature of the decision you must make on this matter I wish to place my views before you as forcefully as I can.

The Department does not contest the basic finding of the Commission that there is serious distress among marginal lead and zinc mines as a result of the sharp decline in prices since the peak reached during the Korean war. We do not agree however that any substantial part of that distress can be attributed to the reductions that have been made in the tariffs on lead and zinc under the Trade Agreements program nor that the increase in duties recommended by the Commission would serve to solve the problem of the industry. Even if an increase in tariffs were an adequate solution, however, there are most compelling reasons for avoiding tariff increases so long as any other remedy is available. Briefly, these reasons are:

1. The leadership of the United States in international affairs has already been seriously damaged by a series of recent actions that other countries are interpreting as a retreat to economic isolationism. Among such actions are the imposition of import quotas on a number of agricultural products, the rigid application of the “Buy American” principle, the withholding of appraisement on imports in “anti-dumping” cases, a rapid series of escape clause recommendations by the Tariff Commission, the subsidization of agricultural exports in competition with the commercial exports of other countries, and, most recently, the abandonment of the Administration plan for expanded trade agreement authority at this session of Congress.

2. Canada, our natural ally in foreign policy, would be particularly hard hit. The Canadian Government and people are deeply worried about our recent restrictions on agricultural imports from Canada and our export subsidies on some important Canadian export crops. Unfortunately, all but one of the latest escape clause recommendations by the Commission have been directed against important Canadian exports: fish fillets, alsike seed, in addition to lead and zinc.

3. Our present tariff rates on lead and zinc are bound by international agreement to 11 producing countries: Canada, Australia, South Africa, the United Kingdom, Belgium, Netherlands, Norway, Italy, France, Germany, and Peru. In addition, Mexico and Bolivia would be hard hit. These include many of the most important countries on whom we depend to support our political policies in Europe, the Far East and in Latin America. Yugoslavia, which is in a difficult situation, counts heavily on sales of lead to the United States to earn dollars. In the few days since the Commission’s recommendation has been available we have received sharp protests from most of these countries. A summary of other governments’ views and the texts of their notes are attached.³ Our detailed appraisal of the international implications of the proposed action is also attached to this memorandum. I might say here though that we are planning two important inter-American meetings during the next few months, one to eliminate the communist problem in Guatemala, and the other to review the entire field of our economic relations with Latin America. The interest of every Latin American government is concentrated on the question of whether this Administration will take measures which would have the effect of reducing present levels of their exports to the United States. An increase in tariffs on lead and zinc at this time would have serious repercussions throughout Latin America and would weaken our position at both inter-American conferences mentioned.

4. The United States is not, and cannot be, independent of lead and zinc imports even in peacetime. In time of emergency we desperately need these metals. During the period of shortage from 1950–1952 we urged other producing countries to sell to us within our price ceilings and not to take advantage of higher world prices. Canada and Mexico, who are high-cost producers—and particularly Canada whose labor costs are comparable with our own—would be the most seriously affected by increased tariffs. These are the two countries on whose production we should be able to depend in case of war.

Fortunately, increased tariffs are not necessary. The President’s Minerals Policy Committee⁴ recently recommended, and you approved, a policy of expanded stockpile objectives. This policy was designed to provide the United States with full security in case of emergency and incidentally to prevent the kind of hardship now being suffered by the domestic lead and zinc mining industry. A program of stockpile purchases for lead and zinc within the expanded objective should be instituted without delay. If it should prove that the quantities that can be bought under such a program are not sufficient to meet the problem, a subsidy or other direct support other than tariffs should be considered. This would be consistent with your message to the Congress transmitting the report of the Commission on Foreign Economic Policy.

The Department urges therefore that you reject the recommendations of the Commission and use the authority available to you to meet the problem in a way that would both be much more effective and would avoid the serious international consequences that are certain to result from the erection of additional barriers against imports from friendly countries.⁵

John Foster Dulles

1. Drafted by Assistant Secretary of State for Inter-American Affairs Holland and Acting Director of the Office of Economic and Defense Policy Evans.
2. U.S. Tariff Commission,Lead and Zinc: Report to the President on Escape-Clause Investigation, submitted to President Eisenhower, May 21, 1954. For a brief summary of the lead and zinc tariff issue, see U.S. Tariff Commission, Operation of the Trade Agreements Program, Eighth Report, July 1954–June 1955, p. 113.
3. Not attached to the source text and not found in Department of State files.
4. In October 1953 President Eisenhower appointed his Secretaries of State, Interior, and Commerce, and the Director of the Office of Defense Mobilization to form the Minerals Policy Committee, which was charged with the responsibility of making recommendations relating to the nation’s production and utilization of metals. In its interim report of Mar. 31, 1954, the Committee recommended establishing larger stockpiles of certain metals than had been approved in the past. See the editorial notes, pp. 1116 and 1257.
5. Secretary Dulles, in a meeting with President Eisenhower on June 14, 1954, expressed the opinion that an increased tariff on lead and zinc would have very serious repercussions on U.S. hemispheric relations, particularly in Latin America where the United States was trying to organize political support against the Communists in Guatemala. The President replied that he would be inclined to reject the increased tariff if some alternative such as a subsidy could be found. He requested the Secretary to initiate an effort to find such an alternative. (Memorandum by the Secretary of State’s Special Assistant O’Connor to Murphy, Waugh, Holland, and Merchant; 811.2543/6–1454)