228. Memorandum From the Deputy Assistant Secretary of State for Economic Affairs (Trezise) to the Under Secretary of State for Economic Affairs (Ball)0

SUBJECT

  • Comments on Petersen’s Trade Legislation Proposals

There are two considerations that we think bear upon the Petersen trade legislation paper.1

First, as a tactical matter, the Petersen proposal suggests that we begin, so to speak, with a minimum position. The theory is that by pre-senting a familiar concept, the peril point, and a well-known framework, the old Trade Agreements Act, we can hope to get a much improved and substantially more workable trade policy law. If enacted, it is argued, the Petersen proposal would give the Executive Branch a considerable range of negotiating authority. Further, its procedures would put the Tariff Commission in a position in which it would be usually awkward and difficult to find that peril points had been reached, since we would already have completed an extensive negotiation with our major trading partners. At worst, the President could always breach peril points if the Tariff Commission acted contrary to this expectation.

Even if all this is granted, there is a preliminary question as to whether it is tactically advisable to ask for a small package. Petersen, and I believe Ray Vernon and Stan Metzger, evidently are persuaded that nothing more can be obtained from the Congress and that to ask for more would be to risk an explosion on the Hill that would ruin the prospects for acceptable trade legislation. The other side of the argument, of course, is that by beginning low you insure that Congress will give you the rock bottom minimum. If you offer Congress the peril point and other features of the past, it will be driven to improve on all the protectionist aspects of the legislation and thus to leave us worse off than we are now, if that is possible.

The other point is strategic in nature. It is forcefully represented to me by the staff in E that the problem with our present trade agreements law is not only that restrictive features have been added to it over the years but that there has also grown up an environment of hypercaution and negativism about trade policy that is associated with the existing [Page 491]law. Thus, in preparing for the current Dillon round of negotiations (which had been advertised to the Congress as promising to be the largest and most complex tariff negotiations in our history), the Trade Agreements Committee whittled away at the preliminary negotiating list until it represented only but 26 per cent by value of the relevant 1959 imports. The whittling process reflected, in part, the prospect that items would be peril pointed by the Tariff Commission anyway and, in another part, the prevailing and pervasive negativism of the other Departments, built upon ten years of an increasingly protective atmosphere surrounding the trade agreements law. When the Tariff Commission was brought in, the list was further cut to about 18 per cent of our 1959 imports by value, this, of course, directly on the basis of peril points. I am advised that when we have completed these negotiations, which as I say have been represented in hyperbole to the Congress, the net reduction in our tariffs will be in the order of 2 to 3 per cent.

With this background, the staff people who have lived with this problem over the years feel very strongly that the time has come for a clean break, that unless we can get a law which in its language and spirit suggests a forward movement, tariff reductions of any significance simply will not be feasible. They argue that retention of the peril point concept in the law implies in a larger sense the retention of the negative bias that has progressively strangled the trade agreements program over the past decade. Thus, the Petersen proposal, even if enacted into law without restrictive amendments, would not give us the basis for a trade program suited to the requirements of 1962 and thereafter.

In the E view, therefore, the issue is not merely tactical. Although we feel that it would be dangerous to begin with a proposal designed in part to placate protectionist sentiment, since Congress quite likely would not stop there, we also feel that legislation built around the peril point and serious injury approach would in fact merely perpetuate a situation that has grown up in which a workable trade policy is not practicable of achievement.

We would recommend, therefore, that the Department hold out for a strong beginning position: broad tariff reduction authority; no peril point; and adjustment assistance to be the normal response to an injury finding.

  1. Source: Department of State, Central Files, 411.0041/10-1061. Confidential. Drafted by Trezise.
  2. Document 227.