235. Telegram From the Embassy in Japan to the Department of State0

1625. Embtel 1554.1 I was called yesterday to FonOff by Vice FonMin Takeuchi who protested forcefully proposed equalization fee on cotton textiles.2 In strongest terms Takeuchi pointed out that while Japanese cotton textile exports to US were $71 million in 1960, Japan bought $251 million of raw cotton from US in 1960-61 crop year. Should equalization fee be imposed, he maintained, it would do irreparable damage to Japanese cotton textile exports to US. At one point he said if fee imposed, bilateral textile agreement would be dead and it would be too late for further cooperative efforts regarding world cotton textile trade.

Takeuchi stressed following points which also developed in talking paper:

GOJ cooperated with US in adhering to short-term Geneva arrangement and participating conference on long-term arrangement. Interests US cotton textile industry would be fully safeguarded by such arrangements. Equalization fee would subject Japanese exports to double restriction which clearly inconsistent with Geneva cooperative spirit.
US cotton product imports FY 1961 in terms raw cotton only 3 percent of American cotton crop while US exports of cotton products in raw cotton equivalent were larger than imports. Therefore, US should not argue that cotton textile imports adversely affect US cotton price support program or export program.
Export subsidy is domestic measure to make US raw cotton competitive in world market. Solution, therefore, is domestic problem and should not be at expense cotton textile exporters to US. Moreover, percentage US grown cotton in textiles exported from Japan to US has been as low as 21 percent. Unreasonable that equalization fee be imposed on textiles manufactured from raw cotton grown other countries.
Equalization fee would on average be tantamount to 10 percent increase in ad valorem duties on cotton textiles, and would reduce Japanese cotton textile exports to US by one-half making system of voluntary [Page 505]export restraints meaningless. Neither enlargement of quotas nor increased flexibility among categories could compensate for such losses.

Takeuchi maintained that confidential letter3 (exchanged in connection 1962 US-Japan bilateral regarding application nondiscriminatory equalization fee) means only that imposition equalization fee would not make arrangement inoperative. [1-1/2 lines of source text not declassified]Agreement does not mean, as has been suggested, that GOJ agrees, or has abandoned right to object. Japanese business interests will actively oppose fee at Tariff Commission hearings. Moreover, confidential letter commits US to “consider taking appropriate action to remedy an adverse effect which might result therefrom,” and Takeuchi stressed that FonOff wished to know as soon as possible what action US plans to take if fee imposed, because remedial action, if delayed until effects of fee are felt, would then be too late to be effective. Regarding long-term Geneva arrangement, Takeuchi said no progress can be made in negotiations while serious doubts exist about worth of agreement in view possible US action. While GOJ will make every effort to conclude long-term arrangement, FonOff believes it would be extremely difficult to secure industry cooperation if fee imposed.

On basis press reports from Washington regarding President’s press conference, Japanese now assuming that referral to Tariff Commission merely pro forma and determination in effect actually made. Some of FonOff claims outlined above are of course exaggerated, but both government and public reacting strongly to this “undercutting” of textile agreement and “reversal” of Hakone spirit.4

I would appreciate any guidance Dept can supply on how to respond to FonOff protest, particularly to insure [garble] properly coordinated with stand Dept taking in reply to any representations made by GOJ Embassy there. Also need to reply specifically to Takeuchi’s formal query re US plans for consultation with GOJ in case imposition of equalization fee approved.

Talking paper being pouched.

  1. Source: Department of State, Central Files, 411.006/12-561. Confidential. Repeated to Kobe.
  2. Telegram 1554 from Tokyo, November 24, conveyed the negative reactions expressed by Japanese Government officials and businessmen over the U.S. proposal to impose an equalization fee on cotton textiles from Japan. (Ibid., 411.006/11-2461)
  3. In a letter to Ben D. Dorfman, Chairman of the U.S. Tariff Commission, November 21, President Kennedy asked the Tariff Commission to investigate a duty on cotton imports. See Public Papers of the Presidents of the United States: John F. Kennedy, 1961, p. 736.
  4. Not found.
  5. See Document 232.