407. Memorandum From the Chairman of the Council of Economic Advisers (McCracken) to President Nixon 1

SUBJECT

  • Meat Imports

Under law, the Secretary of Agriculture is required to make an estimate of meat imports by September 30. If in excess of 1,087 million pounds, the estimate triggers meat import quotas under the Meat Import Act of 1964. Previous quarterly estimates have been kept below the trigger point on the basis of export limits undertaken by supplying countries. Honduras has, however, exceeded its limit, and the ceilings of a number of other countries are under pressure. The estimate which the Secretary of Agriculture is to make will depend on the position taken on the voluntary export arrangements.2

There are five basic options outlined in the accompanying paper.3

1.

(a) Take a hard line on the present export limits, which provide for total meat imports of 1,035 million pounds.

(b) A variant would provide for a strengthening of our stand with the use of Section 204 of the Agricultural Act, involving quotas on the imports of countries exceeding their export ceilings.

2.
Increase the limits under the export restraint program above 1,035 million pounds, but still below the 1,087-million-pound level.
3.
Trigger the quotas (with an estimate over 1,087 million pounds), and keep them as close a possible to the 988-million-pound level specified by the Meat Import Act.
4.
Trigger the quotas, but raise them significantly.
5.
Trigger the quotas, and suspend them.

The Agriculture Department favors the first line of action. The Secretary of Agriculture believes that any other course of action will result in beef quotas on a permanent basis, will fan the flames of protectionism both in U.S. agriculture and in industry, and will provide a poor introduction to the restructuring of farm policies. (The views of the [Page 1012]Secretary of Agriculture, and of other agencies, are explained in more detail in the attached memoranda.)4

The Department of State favors options 5, 4, and 2, in that order. An increase in imports would be helpful for our relations with the exporting countries, and there is economic justification for an increase because of the high prices of meat. Because most imports are of the lower quality beef consumed primarily by lower income groups, and because the price of this lower quality beef has risen at a higher rate than the prices of higher quality meats, an increase in imports is particularly appropriate.

The Special Representative for Trade Negotiations favors option 1.(a), a hard line on the voluntary agreements without the use of quotas under Section 204. Other acceptable options are 2 and 5. The use of import quotas by the United States, either under Section 204 (option 1.(b)) or under options 3 or 4, would be adverse to our trade policy interests.

The President’s Committee on Consumer Interests views option 5, involving the elimination of quantitative restraints on meat imports, as theoretically the best for the consumer. However, because of domestic political factors, they would favor option 4. They note that the total supply of manufacturing grade beef has not kept pace with our rising population, resulting in inflated prices for hamburger and other inexpensive meats which are important in low-income diets.

The Commerce Department does not take a formal position on the options, but leans toward option 2, as does Treasury. Treasury also would be inclined to use Section 204 against Honduras.5

The Council of Economic Advisers favors option 5 or option 2. In our view, import restraints are undesirable, particularly in the light of the high cost of low-grade meats. While option 5 is the most desirable on economic grounds, there is something to be said for option 2, since it involves a less drastic break with the past, and can be used as a means of temporizing until more fundamental decisions are made on the Administration’s position on meat imports. It must be noted, however, that the recent price levels of meat make this a particularly opportune time to relax our import policy significantly. This opportunity may not repeat itself at a later date. (The Meat Import Act requires a quarterly estimate of imports, which means that the question will come up again in 3 months.)

[Page 1013]

Thus, there is some support for all the options, with the exception of 3.

It should be stressed that the primary significance of the decision will not be economic (although its effect on our general trade policy may ultimately have significant economic effects). The difference between the meat imports under the most restrictive feasible policies and the most liberal is quite small. In 1970, a carry-through from option 1 would involve imports of about 1,050 million pounds. Without quantitative restraints, it is estimated that imports would be in the neighborhood of 1,300 million pounds. Thus, only about 250 million pounds are in question—amounting to about 1-1/2 percent of the domestic market.

The key questions are political. How are the interests of domestic consumers and foreign policy considerations, on the one hand, to be weighed off against the interests of domestic cattle producers, on the other?

Paul W. McCracken 6
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 215, Council of Economic Advisers. No classification marking. At the top of the page, Haig wrote: “Send to Bergsten for urgent staffing—through Secretariat.” Below that is the note: “Done 1:30 pm 9/26.”
  2. Next to this paragraph is written: “Tony—FYI—Bergsten sent over memo 9/27.”
  3. Not printed.
  4. These memoranda are not printed. The agency positions are described in this memorandum. Attached are a September 24 memorandum from Secretary Hardin to President Nixon; a September 24 memorandum from Trezise to Houthakker; a September 24 memorandum from Herbert F. Propps to Houthakker; and a September 25 from Elizabeth Hanford to Paul Wonnacott.
  5. The Treasury and Commerce views have not been further identified.
  6. Printed from a copy that bears this typed signature.