Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

27. Telegram From the Embassy in the United Kingdom to the Department of State¹

London, March 24, 1955—4 p.m.

4180. Personal for the President and the Secretary from the Ambassador.

Tariff Commission’s recommendation for increasing bicycle duties² raises such fundamental issues I feel I must call them to your attention, although I am sure you are aware of them.

Its potential effects on whole effort toward expanded international trade and on political as well as economic relations with the United Kingdom make the bicycle recommendation easily the most important escape clause case to date.

Efforts over the past few years to reduce aid dependence by encouraging British manufacturers to develop US markets have encountered one basic fear; that if British businessman invests capital and effort necessary for successful sales drive in world’s toughest competitive market, he simply risks being arbitrarily shut out by action under escape clause.

In bicycle case, British manufacturers were somewhat reluctantly persuaded to take part in dollar-earning drive and have been remarkably successful. They have really created new market in US by making and selling at reasonable price an item of high-quality standards. While price has no doubt played some part, fundamental reason for British success has been good light-weight design and well-organized sales effort. Over the years, this British initiative has resulted in an enlarged market for US producers as well.

Escape clause decision on watches³ was understood in UK, since it clearly involved defense industry considerations. These are not present in bicycles case. Adverse decision this case would be taken as sign of probable course of action in much wider field.

Bicycles are therefore a crucial test of the whole idea of “trade not aid”. Entire British business community, and of course the Government, are watching this case with intense concern. If tariffs are raised, British will feel that effort to stand on own feet and earn dollars they need to buy American products faces frustration, and that US Administration’s interest in expanded world trade is words not deeds. Such action would give aid and comfort to those in Britain and Europe generally who argue that economic cooperation with the US is impossible and who would willingly undermine the fabric of our political and security alliance.

Furthermore, when details of Tariff Commission’s report are made public, it will be difficult to explain injury in view of fact that US production increased steadily from 1949 through 1953 at same time imports were also increasing steadily. Though lower in 1954, production was still much higher than pre-war. Tariff Commission majority’s case in fact seems based almost entirely on 1954 decline, which on basis of past experience of industry may be a normal fluctuation in output. Impression general here that US producers are failing to produce the type of bicycle the US consumer wants, and are continuing to demand tariff protection rather than making the required adjustment.

President of Board of Trade has asked to see me Friday and I expect he will express the Government’s dismay over the recommendation in strong terms.

I appreciate grave difficulties of Administration’s position with H.R. 1 pending, but for above reasons I profoundly hope that Tariff Commission recommendation will be rejected as incompatible with national interest.

Aldrich

1. Source: Department of State, Central Files, 411.414/3–2455. Confidential.
2. Telegram 4762 to London, March 18, informed the Embassy that the Tariff Commission had recommended increased rates of duties on bicycles. (Ibid., 411.004/3–1855) The recommendation followed an escape clause investigation under the Trade Agreements Extension Act of 1951, which provided for the withdrawal of trade concessions which threatened serious injury to domestic producers. (65 Stat 74) For text of the Commission’s report to the President, dated March 14, see U.S. Tariff Commission, Bicycles (1955): Report to the President on Escape Clause Investigation (Washington, 1955).
3. On May 28, 1954, the Tariff Commission submitted a report to President Eisenhower recommending certain duty increases on Swiss watches. By his proclamation of July 27, 1954, the President implemented the committee recommendations. A convenient summary of U.S. actions regarding Swiss watches is in Operation of the Trade Agreements Program, Eighth Report, July 1954–June 1955, p. 112. Pertinent documentation is in Department of State, Central Files 411.004 and 411.544.