280. Memorandum From the Assistant General Counsel, Department of the Treasury (Bradfield) and the Deputy Assistant Secretary of the Treasury for Trade and Investment Policy (Worthington) to the Council on International Economic Policy’s Legislative and Negotiating Steering Groups1
SUBJECT
- An Alternative Legislative Approach on Trade Authorities
STR proposes to approach the Congress with a package consisting of a request for authority to go to zero duties staged over an extended period of time, authority to negotiate reductions in NTB’s which would be approved by Congress under a veto-type procedure, a mandate to negotiate free trade in grain-feed-livestock, and a combination of liberalized escape clause and adjustment assistance.
The possibility that a specific bill along these lines could be passed is founded principally on two considerations: (1) a strong Presidential initiative could put a liberal trade program through Congress, and (2) a liberal trade program will be made economically viable by improvements in the international monetary system.
There are grounds for questioning this approach and the Negotiating and Legislative Steering Groups have asked us for a fuller explanation of an alternative approach. It is true that a strong Presidential initiative [Page 706] could have a major impact, but it is worth remembering that the President himself, both on August 15 and in his Fund speech,2 emphasized the need for fairness in international trade rules. Important segments of Congress are very receptive to the fairness argument and are likely to insist on results in making the rules fair before giving broad authority to reduce U.S. trade barriers.
The legislation would be introduced next January against a background of a record United States trade deficit. This background will make it very difficult to obtain liberal trade legislation and reinforce the arguments of those seeking restrictions on imports.
Moreover, the Congress is skeptical of the ability of the Executive Branch to negotiate trade agreements advantageous to the United States. This concern is reinforced by a general desire to avoid ceding broad Congressional powers to the Executive.
Further, the STR proposal seems to run some very grave tactical risks. While it proposes to get strong negotiating authority in the tariff area, it would only obtain a mandate to negotiate in the NTB and agricultural areas with separate packages in these areas being brought back for Congressional approval. This would give our trading partners a wrong sense of priorities. They may be reluctant to negotiate with the United States in these two important areas of agriculture and NTB’s which are so important to the President’s concept of fairness and may only be willing to negotiate seriously in the areas where we have authority. On the other hand, if all segments of the negotiation were treated equally, there may be a better chance for a successful negotiation in all segments.
Judging from the ASP experience, even if we were able to reach agreements there is a high risk that the separate packages will generate a strong reaction from the specific industries affected and could be rejected by Congress. This judgment may also be made by our partners thereby weakening their willingness to negotiate seriously on these issues.
The STR proposal opens us up to the serious risk of Congressionally legislated highly restrictive import relief provisions that may vitiate the possibility of fruitful international negotiations.
An Alternative Approach
Instead of requesting specific authority from Congress for trade negotiations, we could seek a general resolution supporting broad trade [Page 707] negotiations. The basic objectives of reduction of tariffs to zero over a period of years and adequate agreements in the nontariff barrier and agricultural fields as well as on making trade rules fair could be spelled out in an accompanying Presidential message. The Congress would be informed that the results of any negotiations would be brought back as a package—and the package would be negotiated so that Congress would have to accept it or reject it as a whole.
This proposal has significant advantages. It would put the Congress on record in favor of major trade negotiations and allow the President a vehicle for expressing his view of how the world should develop in the trade field. It would give maximum leverage to our negotiators to require meaningful agreements not only in the tariff area but also on nontariff barriers and agriculture because any agreement had to be sufficiently attractive to be approved by Congress. If foreign countries refuse to negotiate on this basis, they would take the onus for the failure of the negotiations. It would also provide the greatest leverage for negotiating changes in trade rules.
Furthermore, it would assure that the negotiations could begin on schedule in October 1973 and that there would be no long delays due to Congressional unwillingness to enact specific trade legislation. It would also avoid the possibility that trade negotiating authority would be hamstrung by protectionist import restriction legislation. It would avoid the need for the Executive to decide its position on import relief and adjustment assistance.
Moreover, it would be likely that the trade package would be brought back in an atmosphere of an improved U.S. trade position and an improved international monetary system.
On the other hand, it can be argued that this proposal has major disadvantages.
First, there is a problem of the credibility of our negotiators. It can be argued that without explicit Congressional authority to reduce tariffs other countries would not negotiate with us. However, a strong Congressional resolution endorsing trade negotiations plus the provision that the negotiated package had to be accepted or rejected by Congress as a whole would appear to give strong negotiating credentials to our representatives. Moreover, it must be remembered that even under the STR scheme specific authority would be obtained only in the tariff field and a general mandate for NTB’s and agriculture. Finally, our trading partners would probably be reluctant to refuse to negotiate because they would bear the onus of this course of action.
Second, it would be argued that the requirement of returning to Congress for approval of the trade package would allow the forces of those who had been injured by tariff and other concessions to mobilize [Page 708] against the bill. Moreover, those who had gained from trade liberalization would not be a strong lobbying force in favor of the bill. Thus, it would be doomed to defeat. On the other hand, it can be argued that the package approach puts great pressure on Congress to accept the negotiated result. Moreover, the President could put the issue as one crucial to the survival of a peaceful Western world. Surely the chances for success in this atmosphere would be very great and would be further strengthened by a background of improved U.S. balance of trade performance and a strengthened international monetary system. Certainly there are great risks in this approach, but they may be more than compensated for by the dangers of asking Congress for trade legislation in 1973.
A final criticism is that the resolution approach could also serve as a lightening rod for Congressional provisions to restrict trade. On the other hand, the President could argue forcefully that no restrictions should be legislated until the Congress saw the results of the negotiations which would be brought back to them for approval. Since no specific authority would be given in advance no restrictions should be legislated in advance. To do otherwise would severely impair the ability to negotiate.
- Source: Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 A 15, October 13, 1972, Flanigan Working Lunch. No classification marking.↩
- For text of the August 15, 1971, address, see Public Papers of the Presidents of the United States: Richard Nixon, 1971, pp. 886-891. The second reference is presumably to the President’s September 25, 1972, remarks at the Annual Meeting of the Governors of the IMF and the IBRD; see ibid., 1972, pp. 907-911.↩