357. Memorandum From the Under Secretary of State for Economic Affairs (Mann) to President Johnson 1

Mr. President:

Carlos Trouyet and others in the Mexican private sector recently bought a number of Mexican cotton textile mills and invested capital in modernizing them. The pressure on Diaz Ordaz is almost certain to come principally from these owners. Measured in terms of millions of square yards, Mexican cotton textile exports to the U.S. have risen from virtually zero some 3 or 4 years ago to an estimated level of perhaps 60 to 70 million in 1966.

An increase of this magnitude in Mexico’s traditional exports of cotton textiles to our market cannot continue because (a) this would be unfair to many other cotton textile exporting countries which, at our insistence, have agreed on voluntary restraints, and (b) because the long-term cotton textile agreement negotiated some years ago would unravel. The pressure in Congress for protective import quotas on cotton textiles would then be irresistible.

I therefore believe the U.S. has no alternative but to make clear to Mexico that it is necessary to work out with them a ceiling on the level of their cotton textile exports to this market and that, failing in this, we will have to impose the quota that the world agreement contemplates. This ceiling should be a generous one, but in any event Mexico will come out with a much higher level of exports than they are entitled to from an historic point of view.

The tactic is important. I suggest that Walt Rostow and Linc Gordon call in Margain and explain that you really had no choice in this matter for the reasons stated in the preceding paragraph, and you are under great pressure not only from the industry but from all the interested departments, as well as other cotton exporting countries. Walt and Linc should explain to the Ambassador that under the long-term agreement which Mexico is party to, notice is required, and that this notice will have to be given. They should add that this would still allow 60 days to negotiate a satisfactory level, and they should suggest that the Mexicans send their best team to Washington to talk about this at their earliest convenience. The U.S. negotiating team should be [Page 757]headed by Linc Gordon if he is here, and if not, by Bob Sayre. Commerce and the other interested departments should of course participate. The negotiations conducted through Freeman thus far have not prospered and, in my judgment, it is not likely that they will as long as we negotiate through the Embassy in Mexico City.

Some two or three days following this meeting, a more formal notice should be given the Mexican Embassy at working levels and in the most abbreviated and polite form possible. The lawyers may say that this must be done in writing. If so, this is O.K. provided care is taken with the text.

There will be some repercussions in Mexico simply because all Mexican Governments must continually demonstrate to their people that they are negotiating tough with the U.S. There may be some adverse publicity. However, it would be easy to overestimate the significance of any initial official government reaction to the conversation and notice, since the Mexicans know as well as we do that their whole economy depends on our cooperation. They will have to find a way to adjust just as soon as they are convinced that there is no more give in the U.S. position.2

Tom Mann 3
  1. Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 11. No classification marking. Rostow forwarded the memorandum as an attachment to an August 30 note in which he recommended approval of “Tom’s suggested strategy.”
  2. The President approved these recommendations at the Tuesday luncheon on August 30. (Memorandum from Rostow to the President, August 30; ibid.) According to the President’s Daily Diary, luncheon participants included Rusk, McNamara, Moyers, and Rostow. (Johnson Library) No substantive record of the meeting has been found.
  3. Printed from a copy that bears this typed signature.