Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

100. Memorandum of Conversation⁰

May 11, 1959.

SUBJECT

• Restrictions on Imports of Heavy Electrical Equipment under National Security Amendment of Trade Agreements Act

PARTICIPANTS

• Governor Hoegh, Director, OCDM—Chairman
• Douglas Dillon, Acting Secretary of State
• E. Perkins McGuire, Assistant Secretary of Defense
• Frederick H. Mueller, Under Secretary of Commerce
• Elmer F. Bennett, Under Secretary of Interior
• Millard Cass, Deputy Under Secretary of Labor
• John A. Derry, Director, Divn. of Construction & Supply, AEC
• Don Paarlberg, Special Assistant to the President
• Raymond J. Saulnier, Chairman, Council of Economic Advisers
• Isaiah Frank, Acting Director, E:OT

The meeting was called by Governor Hoegh to obtain the views of representatives of various Departments on his tentative findings in the OCDM investigation of imports of heavy electrical equipment under the terms of the national security amendment of the Trade Agreements Act.¹

Governor Hoegh reviewed the history of the industry’s petition, noting that in January 1959 it was limited to four specific types of equipment: (1) hydraulic turbines (2) hydraulic turbine-driven generators (3) transformers, and (4) power circuit breakers. On the basis of voluminous testimony and documentation he found that there was no national security threat from imports of the last three types of equipment but that imports of hydraulic turbines constituted a threat within the meaning of Section 8. The principal basis for this conclusion was the need for elephant tools, such as those used in plants manufacturing hydraulic turbines, particularly to restore power and to make other necessary civilian repairs following a nuclear attack. He requested the official views of each representative with respect to his finding on hydraulic turbines.

After hearing each representative Governor Hoegh summarized the consensus of the meeting as recommending against any finding that imports of hydraulic turbines are impairing the national security. Although he did not indicate what he proposed to do in the light of the unanimous recommendation against his proposed finding, he thanked those present for their frank expression of views and stated that he planned to report to the President within about a week.

Among the principal points made at the meeting were the following:

By Assistant Secretary McGuire of Defense:

1. Repair of hydraulic facilities would probably have a fairly low priority following a nuclear attack.

2. Although Defense has a need for elephant tools, the need can be adequately met from facilities other than those currently engaged in the manufacture of hydraulic turbines.

By Mr. Paarlberg of the White House:

3. Only about 10 percent of the U.S. stock of elephant tools are in plants making hydraulic turbines.

4. 95 percent of U.S. demand for hydraulic turbines is met from domestic sources and only 5 percent from imports.

5. It follows from points 3 and 4 above that, if imports were cut off completely, the addition to our total stock of elephant tools would not exceed 5 percent of 10 percent of the total, i.e., about ½ of 1 percent.

By Mr. Dillon:

6. The case for restricting imports of hydraulic turbines is being made more on grounds of injury to the industry than on legitimate national security grounds. It is important to avoid the precedent of using the national security route in what is more properly a case for consideration under the escape clause by application to the Tariff Commission.

7. While agreeing with Mr. McGuire’s point that hydraulic turbine facilities are not essential for national security reasons, it is necessary to take a broader view of the national security effect of import restrictions in terms of our allies’ reaction, since we depend on them for military bases and other types of defense support. In the U.K. view this is the most important economic issue in relations between the two countries since the Smoot–Hawley Tariff² was enacted. Moreover, following the uproar over the Greer’s Ferry decision we gave the British assurances that the decision was no precedent for future actions, which would be taken only on a case-by-case basis. Any possible damage to U.S. national security from imports of hydraulic turbines would be outweighed by the broader adverse national security effect of taking the restrictive action.

8. The U.K. has indicated its readiness substantially to open up its remaining quotas on dollar imports. Restrictive action on electric equipment would probably result in such a sharp political reaction in the U.K. as to prevent the Government from going ahead with its liberalization plans; in fact, it might well have to take retaliatory action. U.K. imports of machinery from the U.S. are considerably greater than their exports of such items to this country.

By Under Secretary Bennett of Interior:

9. With the availability of the escape clause and the “buy American” advantages already enjoyed by the electrical industry, there is no need for additional protection for the heavy electrical industry at this time.

10. If restrictive action were taken, we would have to invoke the national security exception in the GATT to square such action with our international obligations. This is a dangerous precedent, however, since the GATT contains no objective test of damage to national security, and our action might well open up the use of the exception for widespread restrictive action by other countries.

By Under Secretary Mueller of Commerce:

11. If there are adequate repair facilities in the U.S. or Canada for hydraulic turbines, there is no national security basis for restrictions.

The others present—Messrs. Saulnier, Deny and Cass—made no additional points but concurred with various of the points enumerated above.

0. Source: Department of State, Central Files, 411.006/5–1159. Confidential. Drafted by Frank and approved by Brewster on May 15.
1. See Document 88.
2. Reference is to the Tariff Act of 1930.