464. Memorandum from Herter to President Kennedy, March 71

[Facsimile Page 1]

SUBJECT

  • Wool Textile Problem

In anticipation of your talk tomorrow with Senator Pastore, here are my views on the current wool textile situation:

In attempting to fulfill its commitment to the industry, the Administration has two possible courses of action:

We can seek an agreement with the exporting countries; or we can take unilateral action.

The effort of the Administration to secure an agreement has not been successful and in the present circumstances could not be successful without the use of coercive measures. Even if coercion were successful, its use would foredoom hopes of success in the Kennedy Round, and might jeopardize the cotton textile agreement.

There are manifold risks involved in taking unilateral action, whether taken under the national security provisions, the escape clause provision or pursuant to new legislation. United States trade policy is already under suspicion and attack in Europe. To take such action in the wake of the EEC rejection of the UK, and the current Japanese contortions in adjusting themselves to the restrictions under the cotton textile agreement would provide the basis for violent attacks upon the United States and would strengthen the French position that United States trade policy is essentially protectionist.

Any such development at this time would impair our negotiating position on the eve of the important Ministerial Conference of the GATT, which is to take place in May, and inevitably would seriously weaken our negotiating position in the Kennedy Round. The effect of unilateral [Facsimile Page 2] action would be mitigated if it came after a finding of injury under the escape clause provisions of the Trade Expansion Act.

Any unilateral action to establish quotas at this time, regardless of how it was taken, would require under the GATT the payment of compensation to the exporting countries involved, in the form of decreased tariffs on other items. The payment of the large compensation required undoubtedly would have a substantial impact upon other [Typeset Page 1847] segments of the economy, including loss of employment. If the compensation offered were rejected, as it could be, the impact of retaliatory action would be even greater and more damaging because we could not control it.

The Kennedy Round of negotiations provides the best opportunity to work out a satisfactory arrangement for wool textiles. It could be a product of the broad give-and-take exchange of concessions that will occur there.

It must be emphasized, however, that we are not in a position to give any assurance that we will emerge from those negotiations with a package that is satisfactory to the wool textile industry.

Christian A. Herter
Special Representative
for Trade Negotiations
  1. Background paper on wool textile problem for Kennedy’s meeting with Senator Pastore. No classification marking. 2 pp. Kennedy Library, National Security Files, Kaysen Series, Trade Policy, Trade Expansion Act, 10/62–3/15/63, Box 378.