224. Memorandum From the Department of State to Members of the President’s Cabinet Textile Advisory Committee1
- Wool Textiles
The Department of State has made an intensive investigation of the wool textile import problem. As part of this investigation, two Special Representatives of the Secretary of State, Messrs. Wilson W. Wyatt and Warren M. Christopher, made a special trip to Europe in mid-May. It is their belief that the prospects for an international wool textile agreement are remote at this time, but that an alternative proposal may offer a solution. Their report is attached at Tab A.
Based on our investigation, we have reached the following conclusions:
The scope of our wool textile import problem is not industry-wide but is limited to knit outerwear. Overall imports of wool textiles, measured on a square yard equivalent basis, increased only 1.5 percent in 1963 over 1962. Total imports in the first four months of 1964 declined one-third from the same period in 1963. Imports during the twelve-month period ending April 1964 were also significantly lower than during the twelve-month period ending April 1963.
Imports in 1963 from all EEC countries, from the United Kingdom, and from Hong Kong were all below 1962 levels. Imports from Japan, however, increased 12 percent. These nine countries accounted for 85 percent of our wool textile imports in 1963.
Woven fabric imports (about 30 percent of the total) and yarn imports (about 13 percent of the total) were down slightly in 1963 and in the first four months of 1964.
On the other hand, imports of tops (about 8 percent of the total) were up in 1963, but were much lower in the first third of 1964 than in the same period a year ago. Imports of apparel (about 35 percent of the total) rose in 1963, and have remained high in 1964. This rise in apparel imports, however, was caused solely by increased imports of knit outerwear from Italy. Imports of other apparel remained about the same as a year earlier. [Page 601] The value of knit outerwear imports in calendar year 1962 was $78 million. In 1963, their value was $99 million. Two-thirds of the knit outerwear came from Italy in 1963, whereas only half the 1962 imports were of Italian origin.
A more detailed picture of our wool textile import situation is attached at Tab B.2
Article XIX proposal offers the most promising approach to
meet the problem of increased imports of knit
outerwear. Five approaches have been suggested to meet
the wool textile import problem:
Negotiation of an international wool textile agreement patterned after the Long-Term Cotton Textile Arrangement. The governments of our major wool textile suppliers have stated that they would not accept an international agreement. Wyndham White has said an international agreement is “completely non-negotiable”. (See Tab A.) Although some European wool textile industries are now in favor of an agreement, no European government has adopted this position. The British Government has repeatedly stated that no matter what position its industry takes, it will not support nor participate in an international agreement. The Japanese Government is even more adamantly opposed to such an agreement.
Without United Kingdom participation there is no hope for a wool textile agreement. Even if the United Kingdom were to participate, obtaining Japanese participation would be an extremely difficult task and seriously damaging to our overall relations with Japan. (See Tab C.)3
- Import quotas. The Administration has refused to recommend such action for three reasons. First, imposition of quotas would either require the United States to pay substantial compensation or expose the United States to damaging retaliation. Second, it would significantly weaken our chances for a successful Kennedy Round. Third, it would establish a precedent for protection which could rapidly spread to other products. We see no reason for altering the Administration’s position in the present circumstances.
- Escape clause or national security action. The industry has declined to take its case before the Tariff Commission. The Office of Emergency Planning has concluded that textiles do not require national security action.
- Negotiation of higher tariffs or quotas in the Kennedy Round. The mere suggestion that the United States may have wool textiles on its exceptions list for the Kennedy Round has evoked strong protests in [Page 602] Europe, particularly in Italy. We could negotiate increased protection of wool textiles as part of the Kennedy Round only if we were willing to make the bargain by granting concessions wholly out of line with the value of the protection we would receive.
New interpretation of GATT Article XIX. Wyndham White has suggested a new interpretation of the GATT Article XIX “escape clause” to permit discriminatory action when imports from one or a few countries cause “market disruption”. The proposal is aimed at meeting fears that deep tariff cuts in the Kennedy Round could lay domestic markets open to disruptive low-cost imports. Wyndham White weds the broadened Article XIX interpretation to a concurrent agreement by the major trading countries to take discriminatory action only if an international panel of experts finds actual “market disruption”. He would use the “market disruption” standards agreed to by the GATT contracting parties in 1960 and set out in the Long-Term Arrangement.
If Wyndham White’s proposal were adopted, the United States might be able to claim “market disruption” in knit outerwear. As pointed out in section (1), if we could meet the problem in this segment of our wool textile industry, the whole wool textile import situation would probably be stabilized.
Wyndham White’s proposal requires intensive study. Wyndham White’s proposal seems to be, therefore, the most promising approach to our wool textile import problem. Its ramifications extend, of course, far beyond this problem, and they will require careful analysis. We have already begun an intensive study of the proposal’s possibilities in connection with our preparation for the Kennedy Round negotiations. At our next Geneva meeting on the proposal, we will suggest that a GATT Working Party be established to analyze the proposal.
Although our study is by no means complete, we believe that Wyndham White’s proposal may have several positive advantages, particularly as applied to our wool textile situation. The proposal creates, however, a number of domestic legal and political questions that must be resolved in the context of our overall trade policy. These questions include the wisdom of permitting developed countries to impose discriminatory restrictions, the scope of our own domestic legal authority to enter into such an agreement, and the effect of the proposal on our relations with less developed countries.
We believe that we may be able to resolve these questions, at least for wool textiles, but a considered judgment must await the conclusion of our study. As an alternative, we may be able to suggest a variant of the Wyndham White proposal which could meet our requirements.
- In line with the findings of Messrs. Wyatt and Christopher (Tab A), we should proceed as rapidly as possible with our intensive study of Wyndham White’s proposal and variations of this proposal, with particular attention to our wool textile problem.
- We should impress upon the domestic industry and the interested members of Congress that this course seems to be the most fruitful approach to the situation, although we recognize that the industry considers knit outerwear imports to be only a portion of the total problem. We should also indicate that if the industry should reject this approach, it is difficult to foresee any feasible alternative in the future.
- If Wyndham White’s proposal should not be adopted by the GATT within a reasonable period of time, we should re-examine the situation. No matter what happens, the entire wool textile problem should be kept under close and constant surveillance by this Committee.
- Source: Washington National Records Center, RG 40, Secretary of Commerce Files: FRC 69 A 6828, Textiles, Cabinet Committee on Textiles. Limited Official Use. According to a covering memorandum from Nehmer to Read, also dated June 13, copies of the memorandum were distributed to Secretary of Commerce Hodges, Secretary of Labor Wirtz, Under Secretary of Agriculture Murphy, Assistant Secretary of the Treasury Wallace, and the President’s Deputy Special Counsel Feldman.↩
- “Analysis of Recent Trends in Wool Textile Imports,” not printed.↩
- “Attitude of Foreign Governments to an International Wool Textile Agreement,” not printed.↩
- Printed from a copy that bears these typed signatures.↩