371. Memorandum From the Special Representative for Trade Negotiations (Roth) to President Johnson1
SUBJECT
- Disposition of Four Remaining Escape-Clause Actions
Recommendation
I recommend that the four remaining escape-clause actions—involving temporary increases in duties for the protection of domestic industries—be handled as follows:
- 1.
- By permitting the actions concerning cotton typewriter-ribbon cloth, stainless-steel flatware, and carpets to expire by operation of law at the close of October 11, 1967. This requires no action on your part.
- 2.
- By extending the action on sheet glass for a little over two years until January 1, 1970. This will require your signature of the proclamation attached at Tab C–4.2
My recommendations concerning cotton typewriter-ribbon cloth, stainless-steel flatware, and sheet glass are concurred in by the Departments of Agriculture, Commerce, Defense, Interior, Labor, State, and the Treasury.
My recommendation on carpets is opposed by the Departments of Agriculture, Commerce, Defense, Interior, and Labor and is supported by the Department of State, with the Department of the Treasury abstaining.
This recommendation on carpets has been the most difficult one to make, since it basically involves a political judgment. Over 20 of the legislative or administrative assistants of the 51 Senators who signed a joint letter to you urging an extension of this escape-clause action have been contacted. For the reasons set out in this memorandum, I believe this round-robin letter does not reflect a serious concern on the part of most of the Senators who signed it.
In short, the carpet campaign has been a clever one, but does not seem to have as much power as might appear. My recommendation therefore is based on three factors:
- 1.
- Extension of this escape-clause action would not placate the textile interest in the least. In spite of their noisy support, they have a very marginal interest in the Wilton and velvet carpet industry.
- 2.
- Indeed, extension might only indicate that the Administration is on the run and thereby offset some of the advantage gained by your action in asking the Tariff Commission to review textile imports. We are beginning to organize a campaign against the growing protectionism on the Hill. There is increasing public awareness of the seriousness of the situation as indicated last week by editorials in the New York Times, The Washington Post, and the Wall Street Journal (Tab E). Extension of a higher duty—unsupported by economic facts—would only be seen as a weakening of the Administration’s determination to fight for its historical bi-partisan trade policy.
- 3.
- Extension of the escape-clause actions on both carpets and sheet glass would have a decidedly negative impact in Europe and would add to the growing protectionism there which especially threatens our agricultural exports. From a domestic, economic point of view, it is of much greater importance to extend the action on sheet glass.
Discussion
The four escape-clause actions have been thoroughly reviewed by the Tariff Commission and by this Office, working with the other agencies concerned. Moreover, they have been discussed at a meeting of the Trade Executive Committee, where the agencies are represented at the Assistant Secretary level.
[Page 962]Cotton Typewriter-Ribbon Cloth
It is quite clear that the expiration of the escape-clause action on cotton typewriter-ribbon cloth will not affect the sole domestic producer. Indeed, expiration of the escape-clause action would have a healthy effect by bringing back some degree of competition.
At the same time, there appears to be little likelihood that the European firms could regain any substantial part of the domestic market, primarily due to the fact that they do not have the capacity and are not as efficient as the U.S. firm. The Japanese producers could be a threat, on the other hand, but imports from that country could be controlled under the Long-Term Cotton Textile Arrangement.
All the agencies support these conclusions, but the Department of Commerce recommends that the U.S. firm be informed that, if imports should increase substantially, steps would be taken to restrict them. Unless you object, the Department of Commerce will proceed to do so if you decide to permit this escape-clause action to expire.
Attached at Tabs A–1 and A–2 are the report of the Tariff Commission on cotton typewriter-ribbon cloth and the letters of advice from the Secretaries of Commerce and Labor. At Tab A–3 is a brief memorandum giving our reasons why a confidential affidavit suggesting considerable export potential on the part of European firms should be disregarded.
To our knowledge, Congressional interest in this escape-clause action is limited to two Congressmen. Dorn (S.C.) has written in support of an extension because the sole U.S. producer is located in his district. Irwin (Conn.), on the other hand, has urged expiration, because he has in his district a firm which has had difficulty obtaining the cloth domestically.
Stainless-Steel Flatware
In January of 1966, you modified the tariff quota on stainless-steel flatware so as to increase the size of the quota and to reduce the rate on over-quota shipments. This was done because a number of firms in this industry had succeeded in improving their competitive position.
It has become even clearer since then that to extend this escape-clause action would provide excessive protection for the major U.S. producers, which account for about two-thirds of domestic production. It is true that there are several small firms, operating with obsolescent plants, which might be seriously injured by the expiration of the escape-clause action. However, the Department of Labor has provided data showing that these few firms are located in areas where the workers could obtain other employment without difficulty.
Attached at Tabs B–1 and B–2 are the report of the Tariff Commission on stainless-steel flatware and the letters of advice from the Secretaries of Commerce and Labor.
[Page 963]We know of only six letters from members of Congress urging an extension of the escape-clause action on stainless-steel flatware. They include Dodd (Conn.) and Brooke (Mass.) and four Congressmen from Connecticut, New York, and New Jersey. In addition, Burke (Mass.), Conable (N.Y.), and Pirnie (N.Y.) have introduced a bill to extend this action. At Tab B–3 is attached a full list of the members of Congress who have written the White House or this Office on this matter.
Sheet Glass
Last January, you terminated the escape-clause duties on the light-weight and heavy-weight kinds of sheet glass and reduced the escape-clause duties on the medium-weight glass. This was done essentially to protect the one small firm in the industry, which otherwise consists of three large and efficient companies. The small firm—Fourco—has two plants in Clarksburg, West Virginia. If imports had forced the firm to curtail or cease production, it was clear that about 900 workers in the heart of Appalachia would have had little or no chance of alternative employment.
This situation has not changed, and all the agencies therefore felt that there was no justification for permitting the escape-clause action to expire. Nevertheless, since under the best of circumstances Fourco will probably continue to be a marginal firm, it was concluded that a full four-year extension as permitted by the Trade Expansion Act would not be in order. The extension in the proclamation attached at Tab C–4 therefore continues the escape-clause action until January 1, 1970. Immediately before that time, it should be clearer what the ultimate fate of Fourco will be and what, if anything, should be done to assist it and its employees.
In recommending an extension, we have taken into account the considerable interest which Randolph and Byrd of West Virginia and Edmundson of Oklahoma, in particular, have had in this matter.
Attached at Tabs C–1 and C–2 are the report of the Tariff Commission on sheet glass and the letters of advice from the Secretaries of Commerce and Labor. At Tab C–3 is the letter from the Department of Justice approving the proclamation and Tab C–4 is the proclamation itself for your signature.
Congressional support for an extension of the escape-clause action has apparently been moderate, with letters from Lausche (Ohio), Monroney and Harris (Okla.), Scott (Pa.), and Baker (Tenn.), and six Congressmen. At Tab C–5 is a full list of the members of Congress who, to our knowledge, have written the White House or this Office on this matter.
Carpets
In our view, there is no economic justification for extending the escape-clause action on woven Wilton and velvet carpets. Since June of [Page 964] 1962, when it was first imposed, both imports and domestic production have fallen steadily. So-called tufted carpets have taken over more and more of the floor-covering market from the woven carpets. They now account for more than 85% of that market and are expected to increase their share.
Meanwhile, over this five-year period the domestic Wilton and velvet carpet industry has on the whole made significant economic adjustments. Two-thirds of the producers now make tufted as well as woven Wilton and velvet carpets, and one-half produce more tufted than woven.
Imports now occupy no more than 2.5% of the market and there is no indication that the expiration of the escape-clause action would bring about a substantial increase in imports. Import prices have risen sharply while the average unit value of domestic Wilton and velvet carpets has decreased. Moreover, imports appear for the most part to occupy a residual market for higher-priced specialty products.
The other agencies generally admitted that the economic case for extension was not a strong one, although the Departments of Commerce and Labor expressed concern over the workers in a small number of firms which have been doing poorly even during the lifetime of the escape-clause action.
Attached at Tabs D–1 and D–2 are the report of the Tariff Commission on carpets and the letters of advice from the Secretaries of Commerce and Labor recommending an extension.
The major concern which has led most of the other agencies to favor an extension is political. Accordingly, it is important to determine the true strength of Congressional feeling on this matter.
To our knowledge, about 16 Congressmen, from Massachusetts, Connecticut, Indiana, Nebraska, New York, Pennsylvania, New Jersey, North and South Carolina, and Georgia, have written the White House or this Office urging an extension. These include Conte and Philbin (Mass.), Cunningham (Neb.), Stratton (N.Y.), Thompson (N.J.), Green and Schweiker (Pa.), Kornegay (N.C.), Dorn (S.C.), and Landrum (Ga.).
More significantly, 51 Senators have jointly signed a letter to you urging the extension of this escape-clause action. Over the last several days, contacts have been made with the legislative or administrative assistants of almost half of these Senators. In the light of these contacts, it is our impression that most of the Senators signed the letter rather perfunctorily.
Of the 51 Senators, 33 have no Wilton and velvet carpet plants in their States. The offices of over 20 of these Senators were contacted. They all have indicated that, in fact, the Senators have little or no concern about the disposition of this escape-clause action. Some signed because they were told that the issue of increasing textile imports was somehow [Page 965] involved (Carlson (Kansas), McCarthy (Minn.), Harris (Okla.), Baker (Tenn.)). Others signed because of the wool growers in their States, who apparently related the Wilton and velvet carpet case to the well-being of the overall carpet industry (Allott (Colorado), Mundt (S.D.), Bennett (Utah), McGee (Wyo.)). Some signed because others signed (Holland (Fla.), Curtis (Neb.), Pell (R.I.)). Still others had forgotten they had signed (Metcalf (Mont.), Young (Ohio)), or their assistants had no real explanation as to why they had signed (Kuychel (Calf.), Murphy (Calif.), Fong (Hawaii), Miller (Iowa), Bible (Nev.), Montoya (N.M.)).
While we cannot be certain, these reports do suggest that most of the Senators who signed but who do not have plants in their States did so because it was politically convenient.
The 10 Senators who signed and who do have constituents depend-ent upon the Wilton and velvet carpet industry represent 11 states. Of these, five have prospering and even thriving Wilton and velvet carpet firms—Connecticut (Dodd and Ribicoff), Virginia (Byrd and Spong), North Carolina (Ervin and Jordan), South Carolina (Thurmond and Hollings), and Georgia (Russell and Talmadge). It would appear that most of these signed because of their concern about the overall textile industry. Of the group, only Talmadge wrote a personal letter to you.
This leaves 8 Senators who signed from five states—Maine (Smith and Muskie), New Hampshire (Cotton), Massachusetts (Kennedy and Brooke), New Jersey (Case), and Pennsylvania (Clark and Scott)—where there are small firms who are in a difficult condition, typically with old plants and a small work force. Yet not even one of these Senators has, to our knowledge, done anything more than sign the joint letter in expressing his concern. Indeed, Case’s office has indicated that he signed not out of conviction but simply because the textile union in his state had been badgering him.
In short, I believe that the joint letter should be substantially discounted in determining how the escape-clause action on carpets should be handled and that, for the other reasons which I have given, this action should be allowed to expire.
Attached at Tab D–3 is a full list of the members of Congress who, to our knowledge, have written the White House or this Office on this matter.
At Tab D–4 is a letter from the Department of Justice approving the proclamation and at Tab D–5 is the proclamation itself for your signature, should you decide to extend the escape-clause action on carpets. Consistent with the recommendations of the Secretaries of Commerce and Labor, it provides an extension of a little more than two years until January 1, 1970.
In their letters of advice, both the Secretaries of Commerce and Labor recommend, in addition to an extension, the creation of a task force [Page 966] to develop a program which would enable the firms and workers most directly concerned to work out their problems. I fully support this recommendation.
However, I do not agree with the Secretary of Commerce that the task force should consist of representatives of management, labor, and Government. I believe that it should be wholly governmental. Experience has shown, in my judgment, that a task force made up of representatives of the interested agencies would be more flexible and effective in taking into consideration all the interests involved.