31. Memorandum From Robert D. Hormats and Richard H. Solomon of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1
SUBJECT
- Textiles and PRC
As you know, the Chinese recently responded to our March 22 memorandum on cotton textiles by indicating that it was unreasonable for us to ask them to restrain textile exports when such products were at a low level of importation and represented China’s most important export to the U.S.2 We responded (see the cable at Tab A) by indicating that the U.S. has no intention of discriminating against the PRC, but it does have equity obligations to other trading partners.3 We said that our memorandum was intended to identify a problem which is developing—not to ask for PRC to take any action at this time—and that questions involved should be discussed in Washington after the PRC liaison office is established.
The Chinese positionon this is understandable in light of the fact that PRC textile exports to the U.S. are in fact at a relatively low level—16 [Page 253] million square yards—compared with much higher levels of Japan, Hong Kong, Korea, and Thailand, etc. Moreover, China has purchased substantial amounts of U.S. products—about $90 million worth in 1972—while only exporting about half as much to the U.S. Thus, if the PRC is to move toward a trade balance, it believes increases in textile exports to the U.S. are necessary and should be permitted.
From our point of view, however, we have restrained cotton textile imports from other nations (many of whom are close to us politically). Some of these nations have already inquired as to why we have not restrained textiles from the PRC. Moreover, domestic textile producers have expressed concern to us that the U.S. Government’s attempt to improve relations with the PRC will be at the expense of their interests. Thus, we continue to feel that it is necessary to work out some arrangement with the PRC which would limit imports to a reasonable level.
The amountat which we limit imports is a tricky issue. Under the Long-Term Arrangement on Cotton Textiles (LTA)—an agreement to which we and most textile exporting nations subscribe—there is a set formula which would determine this number based on how much was exported by the PRC in the period before restraints were imposed. If utilized nowthat formula would lead to a restraint level unacceptably low to the Chinese. If we were to waive the formula and agree to imports at a level substantially higher than that permitted under it, all other members of the agreement would complain.
The best way to handle this problem would be to discuss quietly with PRC representatives the issues we face but to delay on formallynotifying them that we want them to restrain their textile imports until a sufficient base has been established so that the LTA formula would give them a high restraint level. In this way, although we would be neglecting our other trading partners by permitting the Chinese to import unreasonably large amounts of cotton textiles without applying the LTA, we could, once we do apply the LTA, adhere to its formula. From the PRC point of view, their exports next year would then be limited at a level sufficiently higher than they would be if we applied the formula today, and in subsequent years their textile exports could grow by a certain percentage about the 1974 base number.
Recommendation:
That we hold off on making any representations to the PRC on textiles until their mission in Washington is fully established and PRC textile exports have reached a substantially higher level.4
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 527, Country Files, Far East, People’s Republic of China, Vol. 7, May-Jul 9, 1973. Secret. Sent for action.↩
- Regarding the March 22 memorandum, see Document 19. Telegram 10468 from Paris, April 14, conveyed the Chinese response. (National Archives, RG 59, Central Foreign Policy Files, 1973)↩
- Tab A, telegram 75300 to Paris, April 21, is attached but not printed.↩
- Kissinger initialed the Approve option. According to an attached correspondence file, he approved the recommendation on May 25.↩