208. Memorandum From Secretary of State Rusk to President Kennedy0

SUBJECT

  • Possible Need for Increased Authority to Offer Tariff Concessions in Negotiations Under General Agreement on Tariffs and Trade (GATT)

In your special message of February 6 to the Congress,1 you stated that in negotiations under the General Agreement on Tariffs and Trade (GATT), the United States would seek the fullest possible measure of tariff reduction by foreign countries as a means of helping to correct the balance-of-payments deficit.

In these negotiations, the United States will have to offer tariff concessions to other countries in order to obtain from them tariff concessions which will provide improved market opportunities for United States exporters. Unfortunately, the authority available to our negotiators to offer reductions in United States tariffs is not sufficient to assure achievement of the results we need to obtain in these important negotiations. If necessary, I will submit recommendations to you in the course of the negotiations for augmenting this authority. At this time, I want to explain the background and bring to your attention the potential seriousness of the situation.

On May 27, 1960, the interagency trade agreements organization issued formal announcement of the intention of the United States to participate in these negotiations together with a public list of United States import products on which tariff concessions might be considered.2 Because of the careful selectivity exercised in its preparation, the list represented only 26.3 percent of our total imports in 1959 from the countries with which we contemplate negotiations.

The trade agreements legislation provides that the Tariff Commission shall conduct an investigation of the products on the public list and [Page 456]with respect to each item, report to the President, for his information, the level below which individual duties could not be reduced without causing or threatening serious injury to domestic industry. Although there is nothing in the legislation to prevent the President from reducing duties below the level (peril point) found by the Tariff Commission, if he does so, he is required to report his reasons to the Congress. The Tariff Commission found, in its peril point investigation, that the duties on products accounting for nearly one-third of the trade coverage of the list could not be decreased without causing or threatening such serious injury.

In light of the known views of the Eisenhower administration against breaching peril points in trade agreement negotiations, the interdepartmental Trade Agreements Committee (TAC) did not recommend any reductions in rates of duty which would have breached peril points. The TAC had been prepared, however, prior to receipt of the peril points, to recommend reductions on many products important to the negotiations on which the Tariff Commission subsequently reported the peril point to be the existing tariff level. The recommendations of the TAC on offers to be made in the negotiations were approved by the President on January 6, 1961.3

The limitations resulting from the Tariff Commission’s adverse peril point findings have reduced the trade coverage of the approved offers to only 18 percent of our total imports from countries with which we expect to negotiate. The statutory authority of the President in these negotiations is not great, authorizing him to make reductions in duty of no more than 20 percent of the existing duty, by stages, except in the case of certain duties in excess of 50 percent ad valorem or below 10 percent ad valorem where the authority is somewhat greater. Since we will seek from other countries tariff reductions of much greater depth than we will be able to offer in return, we need to be able to make reductions on as broad an amount of trade coverage as possible.

In the case of some countries we will be able to offer concessions on less than one percent of our imports from them, with the result that the negotiations would be either very meager or without any basis at all. The reduced bargaining potential with the European Economic Community (EEC), where the attrition caused by peril points is nearly 38 percent, is particularly serious. It is possible that the EEC will agree to settle for less than full reciprocity on the offer it has already made to reduce its future common external tariff by 20 percent provided adequate reciprocity is offered by other countries in return. There is a serious risk, however, that the negotiating power available to the United States negotiators will not be sufficient to induce the EEC to implement its offer fully, and that we will be unable to accomplish our objective of furthering the interests of [Page 457]the United States by securing the lowest possible level in the new EEC common external tariff as well as substantial tariff reductions by other countries.

If we find that increased authority is required in order to permit our aims in these negotiations to be accomplished, the only feasible course would be to breach some peril points on a selective basis. In such event, recommendations would be submitted to you as to the particular products on which the breaching of peril points in these negotiations would be in the national interest.

You will receive, in due course, the recommendations of the interagency Trade Agreements Committee on requests for authority to offer tariff concessions on articles selected from the supplementary list, issued by the Committee on November 23, 1960,4 of additional products on which tariff concessions may be considered in these negotiations. Although the authority of the United States negotiators will be increased somewhat if you approve recommendations with respect to articles on this supplementary list, it will be impossible, because of the limitations of the supplementary list itself, to enhance the negotiating authority sufficiently to have a significant effect on the problem here described.

Dean Rusk5
  1. Source: Department of State, Central Files, 394.41/3-1761. Confidential. Drafted by Selma G. Kallis (E/OT/TA) on March 2.
  2. See Document 2.
  3. For text of announcement, see Department of State Bulletin, June 13, 1960, pp. 968-972. The interagency trade agreements organization was also referred to as the interdepartmental Trade Agreements Committee (TAC).
  4. Not further identified.
  5. For text of the supplementary list, see 26 Federal Register 15; the Department of State Bulletin, January 30, 1960, pp. 161-162, briefly describes corrections to the supplementary list.
  6. Printed from a copy that indicates Rusk signed the original.