242. Letter From Secretary of Commerce Hodges to President Johnson1
Dear Mr. President:
Governor Herter shortly will be sending you his recommendations for items to be placed on the United States exceptions list of products to be reserved from the forthcoming tariff negotiations at Geneva. I understand you agreed last Sunday that the exceptions list for industrial products is to be deposited with the Executive Secretary of the General Agreement on Tariffs and Trade (GATT) on November 16.
At a meeting of the Cabinet members of the Trade Expansion Act Advisory Committee yesterday, Governor Herter reviewed the exceptions [Page 645] list he will recommend to you. I want to call to your attention that not all textiles are included on the list, in view of special situations in textiles. During the passage of the Trade Expansion Act, interested Congressional leaders understood that President Kennedy assured them that textiles would not be negotiated under this Act. As you know, he began a special textile program and you have recently reaffirmed it.
To avoid swelling the size of the United States exceptions list, it was agreed to offer 50 percent duty reductions on all textiles except certain wool textiles.
However, in making the offer on cotton textiles, for which imports are about $250 million annually, the U. S. negotiators shall be instructed to inform our trading partners that the offer takes into account the exist-ence of the current Long Term Arrangement (LTA). This provides for quantitative controls on cotton textile imports into participating countries.
It has further been agreed that if the LTA expires prior to conclusion of the GATT tariff negotiations, cotton textile duty reduction offers will be withdrawn. In case the LTA expires subsequent to conclusion of the GATT negotiations, it was agreed that the Executive branch will take whatever steps are necessary in the interests of the domestic cotton textile industry. I believe these decisions, along with effective administration of the LTA, will make the offer of cotton textile duties—though not popular—at least acceptable.
On wool textiles, it has been agreed to place the statutory duties on $161 million of imports on the exceptions list. This covers practically all of the competitive imports.
However, there is also another duty on wool textiles, a compensatory duty to offset the duty paid on raw wool, which is not on the exceptions list. In 1947, the United States committed itself in a special GATT arrangement that if the U.S. duty on raw wool were to be reduced so would these compensatory duties. It is generally agreed, however, that lowering the compensatory duties will worsen the ability of most domestic wool textile producers to compete with imports.
The basic problem with wool textiles is that even with the present high duties, imports are coming in at alarming rates. The only practical solution to the wool import problem is through negotiation of an international agreement that will regulate the quantity of wool textile imports along the lines of the present arrangement for cotton textiles. I believe it essential that we continue to make every effort to secure conclusion of such an arrangement. Maintenance of wool textile duties should help in our attempts to negotiate a wool textile agreement since we could later hold out the prospect of lowering duties as an inducement to conclude an arrangement. Even though an arrangement would regulate the import [Page 646] volume, duty reductions would increase the profitability of exporting to this country.
Textile imports of man-made, silk, and other fibers have not been placed on the exceptions list. The economic arguments for including them on the list are not persuasive. For man-made fibers, for example, the U.S. is still in a favorable net export position.
While I would have preferred to have all wool textiles on our exceptions list, and while it would be easier to deal with the industry if cotton and other textiles were also, in light of the considerations of concern to Governor Herter, particularly his need to keep the exceptions to a minimum, I am not appealing his textile recommendations. But since textiles are very sensitive politically as well as economically, I did want you to have full knowledge of the background to the tariff treatment that Governor Herter will recommend for textiles in the forthcoming tariff negotiations at Geneva.
Meyer Feldman is fully aware of the textile problem. Either he or I, or both of us, would be pleased to discuss the recommendations for treatment of textiles in the Geneva Tariff negotiations with you.
Respectfully yours,
- Source: Johnson Library, Bator Papers, Kennedy Round (GATT), May 4, 1964 [2 of 2], Box 11. Secret. Copies were sent to Herter and Feldman. The letter is an attachment to a November 9 memorandum from Buddy to the President. Another attachment is a November 6 memorandum from Feldman to the President.↩