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

1681. Reference: Deptel 1465.1 I gave Vice Minister Takeuchi US reply on cotton textile equalization fee today as outlined reftel. After thanking me for information, Takeuchi said that FonOff could probably present written response along following lines, which I could report to Washington in meantime if I wished as preliminary FonOff views:

GOJ is scheduled begin discussions in Geneva during December on long-term cotton products trade agreement in preparation January multi-national meeting. Unless GOJ knows whether US will impose equalization fee in spring it will find it difficult to discuss long-term trade agreements in Geneva in January. US should recognize that there is close connection between two questions. Takeuchi added that some Japanese felt Geneva setting premature since would be better to wait to see how recently concluded short-term bi-national and multi-national agreements work out. At US urging, however, Japan had agreed to meet.
Uncertainty re possible imposition equalization fee already affecting Japanese export trade. Cancellations on orders for delivery [Page 510] after May have occurred while unusually high number of orders received for delivery prior May. Net effect is serious disturbance cotton textile industry regardless of what ultimate decision on fee may be.
GOJ has given thought to possible remedies in event fee imposed but feels that even if remedy found which would provide for maintenance present over-all level of cotton product sales, imposition of fee would produce disruptions orders within industry, resulting in hardships on various segments. Moreover, if certain segment unable export for six months or a year pending remedial action its sales contacts would be interrupted with losses which would be impossible calculate.

Takeuchi expressed strong view that because of these considerations would be far better start US-Japan consultations immediately even though ultimate decision on equalization fee will not be known for several months. He maintained such consultations at this time would give opportunity for US side gain clearer picture of problems face by Japanese in connection equalization fee. Takeuchi emphasized that he understood problem US faces (he remarked in passing it would be more equitable lower cotton prices to domestic consumers in US than to penalize foreign products which in many cases contain little or no US cotton) but said impression developing in Japan that after providing for protection US cotton industry in bi-lateral and multi-national agreements US now wished provide double protection through equalization fee.

  1. Source: Department of State, Central Files, 411.006/12-1261. Confidential; Priority.
  2. See Document 236.