449. Memorandum from Kaysen to Petersen, October 71
Your memorandum of October 4 sketches out a line of policy with which I am broadly in agreement. However, I come to a different conclusion than the one implicit in the memorandum about the extent to which it is desirable to continue some of the present forms under which the procedure of tariff negotiation operates, even though their substance is materially changed by redefining the standards under which they are applied. In part, this judgment rests on matters of substance. In part, it raises questions of the tactics of legislative action and public appeal. While I have my own sense of these tactical issues, I pretend to no political expertise, and I advance that part of my argument which rests on them with an appropriate measure of diffidence.
In my own judgment a new program would do better to dispense with the whole peril point procedure. Continuing the procedure with the modifications in the standards of its application that you propose can be justified on two grounds: first, that it provides an opportunity for those affected by tariff negotiation to be heard; second, that its removal would be bitterly fought by the protectionists in the Congress. There are other ways to meet the substantive issue. In particular, the Interdepartmental Trade Committee could arrange for informal consultation with interested businessmen in advance of a tariff negotiation. [Typeset Page 1766] These consultations need not result in formal findings or determinations, but would simply inform the negotiating officials as to what particularly sensitive or difficult problems might be. The absence of formal findings need in no way diminish the extent to which the responsible officials would take into account the information, but [Facsimile Page 2] they would not be bound as they are now by the peril point procedure. The problem of injury to American business could then be handled after the negotiations by a combination of escape and adjustment assistance. I would suggest a provision that permitted injured industries to petition for escape and/or adjustment assistance in a period after one, and not more than four, years following a change in tariffs. The Tariff Commission would hear these petitions and, on a finding of substantial injury under the criteria proposed in your memorandum, could then recommend either a temporary import quota or a temporary rise in tariffs, or adjustment assistance, or some combination of these. This finding would then go to the President as it now does. It is important that the standard of injury be such that significant section of an industry, at least, be involved so that no small group of firms, or single locality should qualify. This method would have the virtue of substituting actual experience under the new tariffs for speculation as to their effect. This alone would be a great gain. Further, the fact that an interval of at least a year would have to pass before relief was asked would mean that affected businesses would be stimulated to make some attempt to adjust on their own, rather than be encouraged as they are now to foresee as many perils as their advisers can invent.
By contrast the peril point proceeding is bound to err on the side of caution, notwithstanding the proposed new standard which would take into account the total effect of a new trade posture rather than merely a change in duty on a particular commodity and which would be directed toward a finding of idling of facilities or displacement of workers. The Commission would still be required to draw conclusions from what were at best speculative forecasts. In these circumstances, all the pressures on them would be in the direction of caution, i.e., finding that a proposed change would in fact create injury.
Disclaimers of expertise in matters of tactics are usually made as cover for views thereon; mine is no exception. It seems to me that the protectionists in the Congress will in fact fight hard on whatever legislation is offered. In particular, if the peril point procedure is kept in, they will seek through a series of technical actions on the [Facsimile Page 3] committee level to push it in its present direction. The President’s problem in presenting new legislation is to get something which will rally the supporters of more liberal trade policy to a large positive effort. This is more likely to be achieved by broad changes in the form of the legislation than by redefinitions of technical criteria and procedural [Typeset Page 1767] changes. While the latter form a very good battleground for the experts in the Ways and Means Committee, they offer a very poor one for a public struggle. It is hard to see the League of Women Voters excited over the subtleties of industrial definition. Further, the fact that the technical battles have been fought and refought and, unfortunately by the same participants, further strengthens my preference for a larger measure of novelty.
On these, as well as on more general grounds, I am quite favorably struck by Kermit Gordon’s suggestion that over and above the other features of the proposed new legislation, there be a clause giving the President power specifically to negotiate a broad trade treaty with the common market subject to the approval of both houses of Congress by concurrent resolution. It seems to me this does provide the new concept around which a dramatic appeal can be made. I would judge that it would be too risky to rely on this alone, and therefore that it should appear as an addition to a legislative proposal along the lines you have suggested, with such modifications as my and other comments lead you to adopt.
- Comments on Petersen’s trade legislation proposals. Confidential. 4 pp. Kennedy Library, Petersen Papers, Trade Policy Memorandum, Box 2.↩