17. Memorandum From Secretary of Commerce Stans to President Nixon 1
SUBJECT
- Trade and Economic Issues in Cabinet Ministers’ Meeting in Japan.
During our discussions last week in Tokyo the entire delegation stressed the importance of the Japanese liberalizing their restrictions on American trade.2 Essentially the Japanese import from the rest of the world goods which they do not produce and restrict imports of goods which compete with their own products. Similarly, the Japanese [Page 62] have effectively precluded American companies from establishing themselves in key industries in Japan.
Some limited progress was made.
—The Japanese and we will be holding discussions this fall on Japanese import quota restrictions, which are illegal under the General Agreements on Tariffs and Trade (GATT), and on non-tariff barriers which each country maintains on imports.
—The Japanese will announce this fall their plans for liberalization of foreign investment in the automobile industry and have promised to announce in 1970 substantial liberalization in other fields.
—On the textile issue, I proposed the negotiation of a comprehensive bilateral agreement on wool and man-made fiber textiles and apparel. The Japanese agreed, without commitment, to send a delegation to Washington by September 15 to discuss this proposal with us. This could result in a subsequent negotiation of a bilateral agreement.
Despite their willingness to discuss the problem further in Washington, it is premature to be optimistic that the Japanese will negotiate an acceptable agreement with us.3 Nevertheless, working with the State Department we plan to follow up the Tokyo discussions with further representations to Japan as well as to other key textile exporting countries.
While we are carrying out these steps, however, time is running out on an essential element in our textile effort. This is the notification to the GATT that we are reserving our right to increase tariffs on textile products. We have the right—the so-called “open season”—to give such notification during a limited period of time only once every three years. We are now in that period.
Giving notice reserving our right under this provision would not commit us to raise textile tariffs. We could reach a decision on that question at any time during the next three years. It would, however, assure us of the authority under GATT to make such a change in our textile tariffs and would serve our immediate purposes.
—First, it would apply a certain amount of pressure on the exporting countries to negotiate textile agreements with us.
[Page 63]—Second, it would preserve the right to change our tariffs as an alternative to agreements if we are not able to negotiate agreements with the countries concerned.
—Third, our domestic position will be weakened if we allow the “open season” to slip by without having at least reserved our right to take action under it in the future. The “open season” question has been raised publicly and our failure to reserve our right to use it may be construed as a sign of weakness.
In essence, giving notice while not committing us to taking action is simply a prudent step to preserve this option for the future. There have been differing views on this matter within the government and unless an agreement is reached soon I shall work with the other agencies to develop a position paper for you to consider.
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 399, Subject Files, Textiles, Vol. I. Personal and Confidential. A notation in an unknown hand on the first page reads: “Pouch for Bergsten.”↩
- Since the Kennedy administration, cabinet officials from the United States and Japan had met most years as the Joint Japan-United States Committee on Trade and Economic Affairs (ECONCOM). The seventh ECONCOM meeting took place in Tokyo July 29–31. Delegates on the U.S. side, in addition to Stans, included Rogers and Chairman McCracken of the Council of Economic Advisers. Rogers used the occasion of his visit to Japan to meet with Prime Minister Sato on July 31. (Telegram 6333 from Tokyo, August 1; ibid., Box 533, Country Files, Far East, Japan, Vol. I)↩
- On August 25, the Consulate General in Osaka-Kobe produced a report that described problems of the Japanese textile industry. First, it was losing its competitiveness relative to other Asian textile producers. Second, it had lost its place as Japan’s most dynamic export industry, and realized that its influence over Japanese trade policy would become increasingly marginal as its importance diminished relative to other exporters. Third, it abhorred U.S. demands for voluntary restraints on Japanese synthetic textile exports to the United States, and feared that the Japanese government would weaken its opposition to such demands in exchange for American concessions on other economic and political issues. (Airgram 42 from the Consulate General in Osaka-Kobe to the Department of State; ibid., RG 59, Central Files 1967–69, INCO-FIBERS JAPAN)↩