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133. Memorandum From the President’s Assistant for International Economic Affairs (Peterson) to President Nixon 1

SUBJECT

  • Textile Negotiations in Taiwan
1.
Ambassador Kennedy has reported that U.S. and Taiwan have reached some preliminary understanding on several major portions of a five-year voluntary restraint program for textiles, including a nine percent average growth rate for man-mades and one percent for wool.2 However, several very serious points of contention remain (base year figure and trigger mechanism for imports in categories not specifically covered in the agreement). Until they are resolved, the negotiations are at an impasse.
2.
Ambassador Kennedy believes there is no give whatsoever in the U.S. industry’s position on these issues and there is some strong pressure for the industry representatives to come home. The Chinese also have compelling reasons to be adamant. They see no reason why they should not hold out for something at least as good as Japan is now giving us unilaterally. They are also concerned about being the first of the three Asian countries to voluntarily settle with us unless the terms are advantageous. The Taiwan Government feels it has taken a heavy beating from the U.S. in recent months (oil moratorium, Two- China developments) and that it would lose a great deal more international face if they were to settle for a disadvantageous bargain.
3.
Ambassador Kennedy believes we have three alternatives:
(a)
Go to Hong Kong and Korea with the agreement as it now stands and with an understanding with Taiwan (which they have agreed to) that they will accept a base year figure and consultation mechanism that those two countries are willing to accept. Ambassador Kennedy rejects this approach since Hong Kong and Korea will know [Page 342]the problem we face with Taiwan and be in a good position to exert leverage on us to give in other areas to get what we need on the base year and the consultation mechanism.
(b)
Return home now and admit failure. Ambassador Kennedy believes your prestige is on the line in the textile and footwear issues and that to fail could have very serious domestic and foreign ramifications (he believes the footwear negotiations would collapse if the textile negotiations were called off). While the industry indicates it would rather go home than give any further, he doubts that would be their feeling a few months down the road in the face of totally unrestrained textile imports.
(c)
Offer certain concessions to Taiwan. Ambassador Kennedy feels the impasse can be broken without causing disastrous side effects for either our industry or the Taiwan Government. While the Chinese have stressed the importance of certain military items (F–4’s for example) Ambassador Kennedy is convinced that the “only” way to resolve the issues is to withhold turning the Senkaku Islands over to Japanese administrative control under the Okinawa Reversion Agreement.3
4.
Ambassador Kennedy’s argument on the Senkaku follows:

“This is a major issue in Taiwan with both domestic and international implications. If the U.S. were to maintain administrative control, it would give the GRC a tremendous public boost since they have expressed themselves so forcefully on the issues. Further, it would be a very direct indication of our continued interest in and support for the GRC—and it would be done at Japan’s expense, a point that is vital to our ability to proceed effectively with textile negotiations in Hong Kong and Korea and subsequently in Japan. Announcement of such a decision allows the GRC to save face both at home (it takes the Vice Premier off the hook) and abroad. Taiwan could accept the current textile package in face of Hong Kong and Korean pressure.

“In addition, such an act would, in my opinion, provide a very badly needed shock effect on the Japanese. It would indicate that U.S. acquiescence in all matters requested by the Japanese could no longer be taken for granted.

“I can fully appreciate the opposition which such a proposal will generate in certain quarters of our government. But I feel that this can and must be done. We accepted stewardship of these Islands after World War II. Neither historically nor geographically are they a part of the Ryukyus Chain containing Okinawa. Consequently, the GRC suffers a great loss of face if we allow Japan to gain administrative control of them. Since possession of the Islands is still in dispute, there is every reason for the United States to maintain administrative control until such time as the dispute is settled. Taiwan feels very strongly that [Page 343]once Japan had administrative control there is absolutely no possibility of their ever relinquishing that control. By no means am I suggesting that we hand the islands over to Taiwan. Rather, I am strongly recommending the wisdom of preserving the status quo rather than allowing Japan to assume administrative control with the great loss of face this entails for Taiwan.

“I know of no other action sufficiently important or sufficiently dramatic to resolve our textile problems specifically as well as to pave the way for resolution of several general international trade difficulties. The stakes involved are very high which I fully realize. I realize, too, that only the President can make such a decision. Therefore, I urge you in the strongest possible terms to present to him all the potential benefits and ramifications of my recommendations.”

5.
Henry Kissinger is looking into the background of the Senkaku Islands dispute and will be able to report to you at our meeting this afternoon on what would be involved in not turning over the Senkaku Islands to Japan at this point.
6.
I’ve just heard from Harry Dent that Roger 4
  1. Source: National Archives, Nixon Presidential Materials, White House Special Files, President’s Office Files, Box 12, President’s Handwriting Files. Secret. Sent for action. A notation on the memorandum indicates the President saw it. This trip was arranged in early May. See Document 121. Overall trade policy toward the nations of East Asia is documented in Foreign Relations, 1969–1976, volume IV.
  2. Attached but not printed is a message sent via backchannel by Kennedy to Peterson on June 7. A relatively complete record of the Sino-American textile negotiations is in National Archives, Nixon Presidential Materials, White House Special Files, Staff Member and Office Files, Peter Peterson, Box 1, 1971, Textile Negotiations (cables).
  3. See Documents 113, 114, and 115.
  4. Roger