Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

377. Telegram From the Mission in Geneva to the Department of State¹

Geneva, November 12, 1968, 1621Z.

GATT 5510. Subject: GATT Council discussion US wool-blend legislation. Ref: (A) State 269278.²

1. Summary: Nov. 11 Council heard and noted US and EC statements. US informed Council that when US Tariff Commission had completed its study (which has Dec. 21 deadline) and when necessary information is available for meaningful consideration, US “will take such measures as may be appropriate under GATT”. EC welcomed USTC inquiry and Presidential willingness, if USTC determines lower duty more equitable, to request Congress take prompt action to establish appropriate tariff rate. EC hoped between now and Dec 23 (when provisions PL 90–638 take effect) US would “invoke the necessary provisions of GATT for this type of case”. EC reserved its rights under GATT. End summary.

2. On Nov 10 Mission urged Italy make no statement (and USEC Brussels made similar point to EC Commission official). Morning Nov 11 EC and member state reps decided Commission should make low-key statement, which was prepared over luncheon interval. Impossible, therefore, for US have more than general indication contents statement before Council met.

3. According Italian GATT delegation (Guozzaroni and Vitale) the Six felt reply, for record, to US statement was necessary—particularly because of latter’s references to “loophole” reason for changing US method assessing duties on wool blend fabrics.

4. Under “other business” item at conclusion Council session US made statement (para 4, reftel A).

5. EC spokesman’s reply, reconstructed from our notes, was as follows. Thanks US for taking initiative place this item on Council agenda. Statement of interest to all CPs. Increases in bound duties requires compliance with certain procedures. Matter of particular interest to exporters—including EC. Regret US felt Dec 23 measures should be adopted. GATT provides rules for dealing with problems, when they arise. It may be necessary have recourse to those rules, as we witnessed today under another agenda item. (Note: We assume this is reference to item 3, renegotiation Israeli schedule.) EC considers its trade interest in affected wool fabric items in order magnitude $10 to 15 million per annum. Duty increases will occur in area where US duties already rather high. (Gave example effective duties silk-wool blends 34 per cent and 80 per cent.) Production of items affected concentrated in area where this is principal activity of workers affected. Social difficulties there are to be feared. US statement referred to “loophole”. But US customs tariff after simplification act contains 160 wool fabric items. This range invites exporters to resort to most favorable item classification for entry. Some, but not all items affected were subject US tariff concessions. US documents showed trade trends in these items. Concessions thus did not open unexpected loophole. US mentioned former attempts close loophole and also previous negotiations on wool fabric rates. If EC and member states then accepted US offers, it was because EC took into account the possibilities in US tariff relating to entry EC wool fabric exports. EC welcomes USTC inquiry and Presidential willingness propose lower duties to Congress. This gives hope satisfactory solution. EC hopes between now and Dec 23 US will invoke necessary GATT provision for this type case. EC reserves its GATT rights.

6. Chair said Council not asked take decision. Council takes note of statements, which will be reflected in minutes. No further discussion, and Council adjourned.

Tubby

1. Source: Department of State, Central Files, INCO–WOOL 17 US. Limited Official Use; Priority. Repeated to Bonn, Brussels, The Hague, Luxembourg, Paris for USOECD, and Rome.
2. Telegram 269278, November 8, contained a statement to be presented at the November 11 meeting of the GATT Council. According to the statement, P.L. 90–638 was intended to close a “loophole” that allowed blended fabrics containing wool to escape the higher duties levied on wool fabrics. When he signed the law, President Johnson requested the U.S. Tariff Commission to study the question and to report to him by December 31. Should the Commission determine that a lower duty would be more equitable, the President would request appropriate action by Congress. The U.S. representative was therefore to urge the GATT Council to “exercise restraint” until the Tariff Commission had completed its study. (Ibid.)