213. Action Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon 1

SUBJECT

  • 1969 Trade Bill and Presidential Message

Issue

Ambassador Carl Gilbert, with the support of all relevant agencies, proposes at Tab A that you approve the trade legislation at Tab C for Presidential submission to Congress under cover of the Presidential trade message at Tab B.2 He reports broad Congressional support for the proposed package.

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The bill embodies your April 9 NSC decisions.3 (The delay in submitting the bill to you was due to Gilbert’s long confirmation delay4 and the need to consult with Congress after the summer recess.) The message states your trade policy, explains the provisions of the bill, and announces that you will appoint a Commission on World Trade to devise a trade program for the seventies. I have checked the bill and message with Arthur Burns, Peter Flanigan, and Bryce Harlow. Harlow wants to submit the bill by November 18.5

Provisions of the Bill

The bill contains the following provisions, which you decided at the NSC:

1.
Modest tariff cutting authority of 20 percent or 2 percentage points, whichever is greater, to be exercised primarily to compensate for any U.S. tariff increases. Your presentation would make clear that the authority would not be used for major tariff negotiations.
2.
Relaxation of the escape clause, which has been inoperative since 1962 and has forced injured industries to seek quota legislation. The new law would permit U.S. tariff increases when imports are the “primary cause” of injury to domestic industry, rather than the “major cause” as at present. There would no longer be a need to attribute the increased imports to a previous tariff concession.
3.
Relaxation of adjustment assistance for firms and groups of workers, which provide them with direct payments and tax benefits to move into other endeavors. The present rules have also been virtually inoperative. Determinations of injury, previously made by the Tariff Commission, will now be made for your disposal by an interagency board.
4.

Repeal of the American Selling Price system of customs valuation on benzenoid chemicals and a few minor items. Repeal would implement the supplementary Kennedy Round chemical agreement, under which the U.S. would gain substantial tariff reductions on chemicals and plastics and some important non-tariff barrier concessions. Elimination of ASP will also permit us to start negotiating on other non-tariff barriers, since the Europeans regard implementation of the supplementary Kennedy Round agreement as the key symbol of our real interest in moving ahead.

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Because ASP will be the most contentious element of the 1969 bill, Gilbert has prepared an amendment to meet industry objections, if necessary, by allowing an especially lenient transitional escape clause on ASP items.

5.
In addition to the items decided earlier, the draft bill, with full interagency concurrence, provides specific Congressional authorization for U.S. contributions to the GATT. These have previously come from State Department travel and conference funds.

Presidential Trade Message

A trade message worked out by Ray Price and my staff, which has been cleared with all interested parties, is at Tab B. It explains the provisions of the bill and sets forth the main elements of your trade policy:

  • —that the U.S. remains committed to freer trade;
  • —but that new features of the world economy justify thorough investigation by a Commission on World Trade before the U.S. decides on any broad new trade policy for the 1970s;
  • —that our trade policy must be in our own interest—defined as our larger interest and not a cover for special interests;
  • —that our reduced trade surplus heightens the need to move toward freer trade;
  • —that textiles are a special problem, which should not deflect us from our larger goals.

The bill contains no request for authority to negotiate on non-tariff barriers (NTBs), but the message calls for a clear statement of Congressional intent to support U.S. efforts to reduce them. Gilbert has discussed this with key members of Congress and has prepared a draft joint resolution, which will be offered by a member.

NTBs are the next obvious area for trade negotiations, and Gilbert —along with Secretary Stans and all other relevant officials—believes that business concern forces us to make an effort to get Congressional support to pursue the matter.

Issues for Decision and Recommendations

Two further provisions of the draft bill go beyond your earlier decisions. The agencies disagree and your decision is needed.

First, your present retaliatory powers are extremely broad against unjustified foreign barriers to our agricultural exports but are less explicit on barriers to our industrial exports.

Gilbert, with the concurrence of Commerce, Labor, Interior and CEA recommends that you propose an increase in your retaliatory power on industrial products to make it as broad as your power on agricultural products. They argue that this would give you the same power [Page 550]enjoyed by other heads of state and would add to U.S. credibility in trade disputes. Their main argument, however, is that it will generate support for the overall bill.

State and Treasury argue that such a proposal could lead Congress to pass mandatory legislation which would encourage trade wars and which may conflict with our international obligations. Burns, Flanigan and I believe that State and Treasury are too cautious on this measure, which has attracted much business support.

Recommendation: That you approve inclusion of the proposal to increase your powers to retaliate against foreign barriers to our industrial exports.

Approve6

Disapprove

2. Gilbert also recommends that you ask for powers to raise our own import barriers to retaliate against countries whose subsidies damage our exports in third markets. Gilbert’s support and arguments are similar to those above, especially that it will help get the bill passed.

The State-Treasury objections, in addition to the above, are that the measure has been insufficiently studied and that our own agricultural export subsidies mean we might lose from the trade conflict which could be encouraged. They recommend that the Commission on World Trade consider this thoroughly before we seek legislation.

There is greater risk in this proposal than in the one above. However, the objections are based mainly on use of the authority whereas we would only be seeking the authority to bolster our negotiating strength. It would indicate more clearly than any other part of the bill that your Administration plans to pursue a tougher trade policy than did its predecessors—within the continued context of a policy of freer trade. Burns, Flanigan, and I therefore recommend that you approve Gilbert’s proposal.

Approve7

Disapprove

3. I recommend that you approve the bill at Tab C, subject to the above decisions, for submission from the White House. It is important [Page 551]that the bill and message go from the White House, as the first general statement of your trade policy.

Approve8

prefer submission by Gilbert

No submission at this time

4. I recommend that you approve the Presidential message at Tab B, which will be edited to conform to your decisions at 1 and 2 above.

Approve9

Disapprove—resubmit with suggested revisions

Disapprove—no Presidential message

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 403, Office of the STR. Limited Official Use. The date is handwritten.
  2. None of the tabs is printed. The message was sent to Congress on November 18. For text, see Public Papers of the Presidents of the United States: Richard Nixon, 1969, pp. 940-946.
  3. See Tab A to Document 195.
  4. In an August 7 memorandum to Kissinger, Bergsten reported that Gilbert had been confirmed by a 61-30 vote the week of July 28. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 401, Trade General, Volume I)
  5. See also Document 217.
  6. The President initialed this option.
  7. The President initialed this option.
  8. The President initialed this option.
  9. The President initialed this option. Below the final decision section is the handwritten date of November 15.