Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

266. Record of Meeting⁰

Washington, March 5, 1963, 4-5:20 p.m.

The President held a meeting on wool textiles for an hour and a half on March 5. Present were: Secretary Rusk, Under Secretary Ball, Mr. Blumenthal, Secretary Hodges, Governor Herter, Mr. Gossett, and Messrs. O’Brien (3/4 hour), Feldman, Donahue and Kaysen.

Secretary Ball began by outlining the problem in accordance with his memorandum.¹ We have a commitment to the industry, but we could carry it out only at enormous cost to other U.S. interests, especially the general trade negotiations. He sketched the history of our effort since August. The wool study group met to explore the possibility of an international agreement. The major exporters concerned are the UK, Japan and Italy. However, the situation is quite different from that in cotton textiles, in which the major industrialized countries shared our interests, and in which we were able to compensate the underdeveloped countries by opening up European markets to them somewhat. Therefore, the need for some “sweetener” was recognized and it was suggested that we combine a quota arrangement with a cut in raw wool tariff. There were discussions between Mr. Blumenthal and Eric Wyndham White, after which Wyndham White conducted exploratory talks in Europe. He received a loud and uniformly unfavorable response. It was the Department’s conclusions that (1) no agreement was feasible; (2) unilateral quotas would lead to large demands for compensation and great interference with the trade negotiations; and (3) a probable Japanese withdrawal from the cotton textile agreement,² which would kill that agreement. Secretary Ball noted that the cotton textile agreement was achieved without any compensation. Further, the same firms were involved to a substantial extent in cotton and wool, and the cotton textile agreement was worth much more to them than any wool textile agreement would be, if in fact it were achieved.

Secretary Rusk asked whether we could settle on the present or slightly higher level of imports and the President thought this might be a good idea. Secretary Ball said that the exporters chiefly concerned, viewed this as an important item and they would not be satisfied. Mr. Feldman quoted Senator Pastore to the effect that any quota arrangement, even if it increased the permissible level of imports to 25 percent, was worthwhile. There remained the possibility of combining this with reduced tariffs on both wool and cotton textiles. The counter argument to this was purely emotional.

Governor Herter disagreed. There was a very strong negative reaction in Europe to the threat of quotas. He has had many discussions with the Community and with Heath, Errol and Maudling in England, and indirectly with the Japanese. Every country he has approached showed strong negative reactions, and expressed the view that any quota proposals were inconsistent with our desire to make progress on the Kennedy round. Further, such proposals would raise large demands for compensation.

The President, however, thought that a limitation on future growth was much easier for other countries to accept than a rollback. He contrasted Feldman’s proposal³ with what we did on carpets and glass. Governor Herter responded that the wool industry just has not been hurt, and that in this respect the situation differed sharply.

The President raised some question about the method of computing the level of imports, and Mr. Feldman indicated that this was not an issue. Secretary Hodges showed a list of woolen manufacturers that had failed, and Secretary Ball pointed out that a private study of failing woolen manufacturers showed that imports were irrelevant to failure in 16 out of 18 cases examined.

The President observed that, if he had made no commitment, there would be absolutely no doubt in his mind as to what he would do, but since he had made the commitment, we should try our best to meet it. The question was: Should we try to sell Feldman’s proposal?

In response to Secretary Rusk’s question, Mr. Feldman said that the proposal would satisfy both Senator Pastore and the New England wool industry. The President again asked whether we could sell the proposal. Governor Herter pointed out that as far as the tariff part of it was concerned, the regular procedure involved hearings by the Tariff Commission, etc., and would take about six months. The quota problem would have to be treated separately, and he doubted that there was a legal basis for imposing a quota. The only one available was a Tariff Commission finding of injury to the industry, which he was confident would not be made.

After some discussion of the significance of the legal problem, it was agreed that, while there was a technical barrier, it was not substantively important. Either new legislation could be passed, which could be done readily, or the cotton textile agreement could be amended to include woolens. Here, however, the problem arose as to whether or not such an attempt would blow up the cotton textile agreement.

The President again repeated that it was unfortunate that he had made the commitment and asked again how we could make it effective. Secretary Rusk observed that if we rule out the finding of a threat to national security, he was doubtful that we could meet any agreement on anything worthwhile. Secretary Ball went over the history of the cotton textile agreement, and the market disruption theory on which it was based, and pointed out again there was no comparable situation in wool, no comparable line-up of interests, in which we and the other industrialized countries face a common problem. Further, there were now no quota restrictions on trade in industrial products among the major industrialized countries. This was the result of a long and consistent effort on our part, and an attempt to introduce quotas on woolen goods would undo this effort. Secretary Rusk remarked that the inability of the industry to show injury made our bargaining position very weak. In response to a renewed question by the President, Governor Herter said that he thought any effort to do more than we had done would have undesirable results. First of all, the cotton textile agreement would break up. Then we would be faced with a breakdown of our whole trade negotiation position and no possibility of maintaining our agricultural exports to Europe. Governor Herter suggested that it might be possible in the context of the general Kennedy round negotiations next year to treat wool as a special case and get some protection for it. This would have the advantage of merging the compensation problem with the general compensation problem in the broader framework. To isolate wool textiles in advance would simply not be useful. Secretary Ball endorsed that suggestion as being hopeful. In response to the President’s question of why we could not do wool first, Governor Herter repeated his doubts that we could achieve an agreement even with a great effort, as well as pointing out the probable adverse effects on our whole negotiating position, by undermining the philosophy of our trade policy.

The President then asked what he should say to Senator Pastore, and Mr. Feldman asked what Governor Herter should say to the industry committee tomorrow. Secretary Ball suggested that our response should contain two elements. First, we should show that we have made an enormous effort to meet the commitment, and explain in detail what it has been. Second, we should point out that next year, in the context of the over-all trade negotiations, there is some prospect for success in achieving something for woolens. Mr. Feldman suggested that it might also be useful to ask Wyndham White to come here to give the industry his assessment of the situation directly. Mr. Donahue urged that some feasible interim action be taken, if only another effort to negotiate through Wyndham White. Mr. Feldman agreed that a further effort to show good faith was useful. Secretary Ball pointed out that we had already done as much as possible through White, and that another round of failures would do us no good; we must not be in the position of mendicants. Mr. Feldman suggested that it might be useful to have White come in any event, and give the industry the notion that we are waiting for a final judgment on his discussion with them. He suggested Governor Herter say this to the textile group tomorrow. Secretary Rusk pointed out the great change in the international atmosphere since the commitment was made: failure of the UK to get into the Common Market, and our present difficulties with the French. Mr. Blumenthal, in response to a question from Secretary Ball, explained to the President that two separate efforts had been made in the past. First, he personally had led a delegation of twenty industry and fifteen government people to London, and achieved total failure.

In response to the President’s question as to what industry wanted, Secretary Ball said an OEP determination that quotas were justified on national security grounds. If this were done, the combination of compensation and retaliation that would ensue would leave us helpless to do anything on the Kennedy round. Secretary Rusk added that since no one would believe that national security was involved, it would undercut the whole basis of our position with respect to trade negotiations. The President agreed that the national security argument was weak. He thought, however, it might be useful to hold out some form of hope to the industry tomorrow; to point out what we have done and what perhaps can be done next year; and to indicate that we are watching the situation now.

There was some discussion of the techniques of breaking the bad news, and it was agreed that Mr. Feldman would produce a memorandum for the use of all involved which would summarize both the efforts we have made and what we might do. Secretary Ball suggested that we warn the governments concerned quietly that a further sharp increase in wool imports next year might prove troublesome to us in the Kennedy round negotiations. It was agreed that such a warning might be useful.

The President summarized the main points to be covered by Mr. Feldman as follows: A detailed account of our efforts to meet the commitment, an explanation of the new situation that has arisen in the UK and EEC since the commitment was made, and its effect on our ability to negotiate, the difficulties in negotiating a woolen agreement now in relation to the risk of failure of the cotton agreement, the fact that we are watching and have warned the governments concerned, and, finally, the possibility of achieving some relief in the Kennedy round negotiations.

C.K.⁴

0. Source: Kennedy Library, National Security Files, Kaysen Series, Trade Policy, Trade Expansion Act. Confidential. Drafted by Kaysen on March 6. The meeting was held in the Cabinet Room in the White House. The time of the meeting is from the President’s Appointment Book. (Ibid.)
1. See Document 262.
2. Document 242.
3. Not further identified, but See Document 262.
4. Printed from a copy that bears these typed initials.