Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

253. Memorandum From Secretary of State Rogers to President Nixon¹

Washington, April 9, 1971.

SUBJECT

• Generalized Tariff Preferences for Developing Countries

The Council of the European Communities approved its generalized tariff preference scheme on March 30 with a target date for implementation of July 1, 1971. The Japanese Diet has approved implementation of its scheme no later than October 1, 1971. Other developed countries are in advanced stages of preparation although some, including Canada, have indicated that they intend to withhold implementation until the United States acts.

If we are to maintain the position of leadership in this international effort that we have held since you announced our intentions in your Latin American policy address of October 31, 1969,² it is essential that we promptly submit our own preference proposal to the Congress. I can expect to come under pressure at the OAS General Assembly beginning in San Jose, Costa Rica, on April 14 about the timing of our action and hope that I will be able to inform the Latin Americans about our plans in specific terms. Certain press comments have already appeared in Latin America and elsewhere expressing disappointment that whereas other countries have already taken steps to implement their preference systems the United States has not acted.

I suggest that we introduce draft tariff preference legislation simultaneously with or shortly after submission of the new foreign assistance legislation, since by so doing we would hope to associate generalized preferences with our policies toward the less developed world rather than with trade issues in general. The message covering the aid bill could refer to the preferences bill and point up its importance as a fundamental part of our new approach to economic development problems.

This approach would require preliminary Congressional consultations, and I would therefore propose to undertake to consult with Representatives Mills and Byrnes and Senators Russell Long and Wallace Bennett so as to lay the groundwork for the legislative proposal.

Recommendation:

That, subject to satisfactory Congressional consultations, we introduce draft legislation for generalized tariff preferences simultaneously with or shortly after submission of the new foreign assistance legislation.³

The drafting of our legislative proposal is well advanced. However, there are at least two problems which we are working to resolve at the agency level and which will have to be decided before our legislation can go forward.⁴ These concern:

At the OECD on June 7, Rogers did not address the specific question of preferences during his opening statement, and instead spoke of the balance of responsibilities among the industrial nations which on the trade front would be a liberal and non-discriminatory world trade system. On June 8 Samuels specifically discussed preferences under the agenda item on cooperation with developing countries. He noted the President had indicated that the administration would soon seek legislative authority for preferences, but that the United States continued to be seriously concerned about reverse preferences. For the U.S. statements and the communiqué issued by the June 7-8 OECD Ministerial, see Department of State Bulletin, July 5, 1971, pp. 11-21.

1. Reverse preferences. Some developing countries give so-called “reverse” tariff preferences to certain developed countries. We have taken the position that these developing countries would not be eligible for our preference system unless they agreed to phase out completely reverse preferences by 1975. This position has met with a great deal of resistance from the developing countries concerned. It has created a problem for the Commonwealth countries in general and, in particular, the Caribbean Commonwealth countries, which are now attempting to negotiate preferential treatment in the enlarged Community for such products as sugar and bananas for which they now enjoy special treatment in the British market. We also have problems with Spain and other Mediterranean countries which are moving toward fuller association with the EC, as well as with some African countries.

In order to give you flexibility in dealing with these difficult political problems, I believe we should modify our condition on reverse preferences to allow the developing countries involved to participate in our preference scheme from the outset, without requiring agreement in advance to phase out such preferences gradually, but with the understanding that we shall not continue to grant preferences after 1975 to those countries which extend reverse preferences beyond that date. This would relieve the immediate political problem of resistance to our proposal on the part of countries now granting reverse preferences and would allow time to work out transitional arrangements with the Commonwealth and African countries which find themselves in a particularly difficult situation. In drafting legislation, you should be given sufficient flexibility to meet unforeseen circumstances in carrying out this provision.

2. Hong Kong. We had earlier decided to exclude Hong Kong as a beneficiary of preferences because the EC and Japan were also apparently leaning toward exclusion of Hong Kong. We also agreed, however, to reconsider our position if other donor countries did decide to grant preferences to Hong Kong. Since both Japan and the European Communities have now decided to offer limited preferential treatment to Hong Kong, I believe we should also extend preferences to Hong Kong but on a limited basis.

William P. Rogers

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume III 12/70-6/71. Confidential.
2. See footnote 3, Document 232.
3. Neither the Approve nor Disapprove option is checked, but the foreign assistance legislation sent to Congress on April 21 to implement the foreign assistance reforms the President proposed to Congress on September 15, 1970, did not provide for preferences. In the April 10, 1971, message accompanying the legislation, the President merely reported on progress on the issue in the OECD. (Public Papers of the Presidents of the United States: Richard Nixon, 1971, p. 566)
4. A copy of Rogers’ memorandum is attached to an April 16 memorandum from Bergsten to Kissinger regarding the GSP issue. Bergsten informed Kissinger that the preferences legislation was not yet ready for submission, primarily because of the two issues flagged here by Rogers. Bergsten agreed with Kissinger that the legislation should be submitted before July 1 when the European Community and Japan would implement their preference schemes, but recommended concluding work on the two outstanding issues with the U.S. decision to be announced at the June 7-8 OECD Ministerial to be chaired by Secretary Rogers. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume III 12/70-6/71)