94. Memorandum of Conversation0
SUBJECT
- Wool Tariff Quota
PARTICIPANTS
- Prime Minister Macmillan
- Foreign Secretary Lloyd
- Ambassador Caccia
- Mr. Dillon
I explained to the Prime Minister that we had examined the British idea of country quotas and had found this to be a very difficult matter. I pointed out that the imposition of a country quota would in effect be directed against Japan. I explained that this would cause direct difficulties for us in the present case but would be even more difficult as setting a very dangerous precedent. I pointed out that there were many private interests in the United States which would like nothing better than the establishment of quotas directed against Japan, and said that the Administration had resisted this type of pressure as a matter of general principle although there had been a few voluntary quota agreements with the Japanese in the most difficult cases. I reminded the Prime Minister that the burden of maintaining an adequate market for Japanese overseas trade fell more heavily on the United States because of the fact that some of the European nations, including the UK, had not as yet given the Japanese most-favored-nation treatment under the GATT. Because of all these considerations, I said that we had come to the conclusion that a country quota arrangement would not be practicable.
I then said that we had examined the situation to see what we could do to alleviate the situation as far as the UK was concerned. I told the Prime Minister that the Japanese had informed us that this year they were going to limit their exports of lower-priced woolens to the U.S. and that we understood that this limitation would result in some drop in the over-all percentage of the U.S. market held by Japanese imports. Secondly, I said that we were working on a plan for submission to the President which would provide a special quota for certain high-priced specialized woolens with a tariff of 30 percent. I said the cut-off price we had in mind for these woolens was six or [Page 201] seven dollars a pound, depending on the weight of the material and that we would hope that this would cover approximately $2½ million worth of materials.
Prime Minister Macmillan evinced an understanding of our position regarding country quotas and seemed to feel that the proposed action on higher-priced goods would be of considerable help as this was the type of woolens in which the UK was particularly interested. He hoped that a decision on this could be announced in the relatively near future, and I told him that we were hopeful of getting a decision in the next two or three weeks. The Prime Minister then asked about the over-all size of the quota for the coming year, and I said this was set by law at 5% of a three-year average of our domestic production. As a result of a poor year last year the quota would be somewhat smaller this year than had been the case last year. I then said that the whole operation of this quota had been very unsatisfactory and therefore we felt it would be advisable to consider the renegotiation of this provision in the fall of 1961 when it would come up for renegotiation under the provisions of the GATT. I pointed out that this would take place simultaneously with the expected new round of tariff negotiations under the GATT and said that although there would be obvious risks involved in a higher tariff, it seemed that the present situation was so unsatisfactory that a renegotiation ought to produce something better. I said, however, that our final decision on this would be influenced considerably by the UK attitude toward such a renegotiation, and asked for the UK views on this matter. It was left that this should be a matter of further study and conversation between us as the decision would not have to be taken for another year or so.