215. Memorandum From Secretary of Commerce Stans to President Nixon 1

SUBJECT

  • Tariff Preferences for Less Developed Countries (NSSM-48)

I have just received Under Secretary Richardson’s memorandum of October 8, submitting to you a summary of the views of the Under Secretaries Committee on the preference issue.2

Commerce, without reservation, supported the recommendation that the U.S. should match other major developed countries in participating in a system of generalized preferences. However, I feel I must provide you some additional comments on the “Unresolved Issues” section of the summary because it does not fully reflect our views.

First, the subsection on “The Potential Trade Benefit” ( pp. 10 11) characterizes Commerce’s “competitive need” safeguard formula as one which would give LDCs “the lower range of benefits”. From this, it might be inferred that the escape clause or tariff quota safeguards would yield “the upper range of benefits”, and therefore should merit your support. Each of the three basic types of safeguards can be made [Page 560]to yield similar results by varying the product coverage, the depth of tariff cut and the exceptions. We believe that there are overriding advantages to the “competitive need” approach and want to be sure that it will continue to receive full consideration.

The competitive need safeguard would only withhold preferences on those products from an LDC where it has proved by capturing a fair share of our imports that it can compete successfully without preferences. Withholding preferences on such products does not, in our view, take away any benefits from LDCs if the purpose of preferences is to help them where help is needed. It would be very difficult to justify to American producers and the Congress why we are giving any country an additional and unnecessary advantage in our market on products that they can export to us successfully without preferences. Hong Kong is a good case in point. It is significant that one-third of our imports from LDCs that would be excluded by the competitive need formula comes from Hong Kong.

My general feeling about the subsection on “Safeguards” ( pp. 7 10) is that State’s proposal to use only the escape clause and adjustment assistance is not negotiable with the EEC and, even if it were, would not be acceptable to American industry or the Congress, given their increasing concern about import competition. I am convinced that the only prospect for reaching agreement on a common system, or at least similar (but not identical) systems, which the Congress will accept, is to incorporate automatic safeguards, such as the competitive need formula, tariff quotas, or some combination of the two.

Finally, with respect to the subsection on “Exceptions” ( pp. 6 7), I think we all understand that you will want the U.S. list of exceptions to be kept as short as possible. How short it can be kept, however, is directly related to the need to provide adequate protection to American industry and to share the burden of preferences equally with other countries. This in turn will depend in large part on the safeguards that are selected and the depth of tariff reductions that are made by the U.S. and other countries. Thus we believe that your decision on the U.S. exceptions list should be made in terms of a general principle rather than the specific alternatives contained in the memorandum.

I therefore recommend that: [Page 561]

(a)
On the selection of exceptions ( page 7), rather than direct us to try to achieve: “no exceptions/limited exceptions” or “a more extensive exceptions list,” you direct us to keep the U.S. list of exceptions as short as possible, consistent with the principles of equal burden sharing and adequate protection for American industry.
(b)
On the selection of safeguards ( page 10), you approve the use of automatic safeguards.
(c)
On the selection of a range of benefits ( page 11), rather than select an upper or lower range of benefits, you direct us to seek to maximize benefits for LDCs, consistent with the principles of equal burden sharing and adequate protection for American industry.

Maurice H. Stans
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 404, Trade Preferences for LDCs. Confidential.
  2. Document 214.