252. Memorandum From the Special Representative for Trade Negotiations (Gilbert) to President Nixon 1

SUBJECT

  • Nonrubber Footwear Escape Clause Action
1.

The Problem. On July 15, 1970, you directed the Tariff Commission to make an escape clause investigation of the effect of imports on the U.S. industry producing men’s and [Page 645]women’s leather footwear.2 The Commission in its report to you of January 15, 1971,3 divided equally on the question of whether increased imports resulting in major part from trade agreement concessions are causing or threatening to cause serious injury.

Under the Tariff Act of 1930, you may, in case of a tie vote, consider the finding of either group as the finding of the Commission. If you accept the negative finding, no further action need be taken. If you accept the affirmative finding, you may, under the Trade Expansion Act of 1962, prescribe any one or a combination of the remedies provided in the statute. The remedies considered to be realistic choices in this case are described in the attached paper (Tab A).4

2.

The Recommendation. I recommend that you accept the finding of those Commissioners who found that a threat of injury exists and that you prescribe as remedies adjustment assistance and a temporary tariff increase on imports of competitive footwear over current levels, technically called a “tariff quota” (Option 2A of the attached paper). My recommendation has the support of the Departments of Commerce, Labor, Agriculture, and Defense, although Commerce and Labor differ on some terms of the tariff quota. Commerce would preface establishment of any tariff quota with an effort to negotiate voluntary agreements and Agriculture recommends advance consultations with the principal countries concerned.

Interior would initially recommend an import quota (rather than a tariff quota) at levels supplying countries would voluntarily accept and would support my recommendation only as a fall-back position.

The Departments of State and Treasury do not support my recommendations. State does not believe, among other things, the evidence supports a finding of threat of injury. If you choose to accept the affirmative finding, it recommends that only adjustment assistance be provided as a remedy.

Treasury believes that the statutory tests have not been met and recommends that you do nothing. If you choose to accept a finding of threat of injury, it recommends that you double the present tariff rates on selected categories of imports.

The Council of Economic Advisers was also invited to comment and it agrees with State that the attached paper should have included adjustment assistance as a realistic option. The reasons for not doing so are indicated under Option 2A.

[Page 646]

All agencies commented in writing on the options paper and their views are attached (Tab B).5

3.
Follow-up Action. If you accept the finding of threat of injury and choose to take some form of import-restricting action, it will be necessary to work out the exact details of the scheme. Consequently, I am not submitting a draft proclamation for your signature at this time. It may also be advisable to undertake consultations with other countries in the interim. I would urge, however, that any consultations be expedited. Congressional criticism of the delay in resolving this matter can only be expected to increase. Further, since the receipt of the Tariff Commission’s report, imports have increased sharply. In January and February they were 33 percent above those of the same period of 1970.

This trend increases both the pressure on the domestic industry and the level of imports on which any future negotiations or tariff quota might be based. If 1970 is chosen as a base year for a restrictive action, our position that a tariff quota will not require immediate compensation ( page 9 of the options paper) becomes weaker as time elapses. If we delay action for a considerable time, we may find ourselves in the position of having to adopt a tariff quota on the basis of imports of the most recent 12 months which promise to be much higher than 1970. Such a base might not be acceptable and the compensation problem would then become a major concern.

Carl J. Gilbert 6
  1. Source: National Archives, RG 364, Office of the Special Representative for Trade Negotiations: Lot 78 B 1, STR Reading: March/April 1971, Box 44. Confidential. Attached to an April 2 memorandum from Eberle to Peterson reminding Peterson that the attached options paper had been sent to Peterson’s staff for review, along with a background paper that STR had not tried to clear with the agencies because “our experience indicates such an effort would be very time-consuming and would add little except occasional restatements of agency views.”
  2. The July 15 directive has not been found, but see Document 236.
  3. See Document 251.
  4. A 1-page options paper; not printed.
  5. An 11-page discussion paper of agency comments; not printed.
  6. Printed from a copy that indicates that Gilbert signed the original.