18. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon 1
SUBJECT
- Textiles
Secretary Stans has proposed to you, both in writing (Tab A)2 and at your meeting with him on August 13,3 that the U.S. reserve the right to increase our tariffs on textiles. We have the legal right under GATT [Page 64] to make such a reservation during the “open season” which lasts through the rest of 1969. We would not actually raise tariffs unless our efforts to achieve negotiated voluntary agreements failed and we then decided that tariff increases were the best way to deal with the textile problem.
The objective of this step would be to pressure Japan to negotiate a satisfactory voluntary agreement. Secretary Stans has concluded that the Japanese will not be any more forthcoming despite our shift from seeking a multilateral agreement to seeking comprehensive bilateral agreements with the four key exporters.
However, the Japanese did not know of our shift in position before the recent ECONCOM. They agreed to send a delegation to Washington by September 15 to discuss the issue and we will not really know how forthcoming they might be until those talks take place. I think we should await the results of those discussions before taking any new steps to pressure the Japanese.
Reserving our right to increase our tariffs has serious implications which should be the subject of interagency study. We cannot legally reserve our right for textiles alone but would have to do so for all imports. Other countries, to protect themselves economically and for political reasons, would then reserve the right to raise their tariffs on all their imports—particularly since you have no authority at present to reduce other U.S. tariffs to compensate them for any actual increases in our textile tariffs which might eventuate. The results would be:
1. Major domestic problems with other U.S. industries seeking protection against imports. The opportunity to actually raise tariffs, once we had reserved the right to do so, would be irresistibly tempting and you would face tremendous pressure from them to act.
2. Major domestic political problems with all those industries who would be hurt by our own compensatory tariff cuts, or by foreign retaliation, if we were to actually raise tariffs on textiles. They would also be hurt to some extent even by the possibility of foreign retaliation, since their customers would seek alternative sources of supply to hedge against the possibility of actual action.
3. Additional domestic political problems because such action would increase the difficulty of inducing foreign countries (including Japan) to reduce their non-tariff barriers against U.S. exports, which is a major issue to many important U.S. firms.
4. Major foreign policy problems. A trade war would be threatened and there would be an anguished response from virtually every country in the world, because of the encouragement to their own protectionists as well as the real specter of export and hence real economic losses.
5. Re-escalation of the textile issue to a multilateral level. Your decision to shift from the comprehensive multilateral approval to the [Page 65] comprehensive bilateral approach was partly aimed at eliminating the need for further approaches to countries other than the four major exporters in the Far East. Specifically, it removed the problem from U.S.-European relations. Tariff increases would, however, catch imports from all sources. It would be a rather broad-gauged instrument to use solely for leverage against Japan.
Recommendations:
1. That you defer, until after the meeting with the Japanese in mid-September, a definitive answer to Secretary Stans’ proposal that the U.S. reserve its right to raise our tariffs on textile imports.4
2. That you should approve his proposal to develop an interagency paper on it which you could then consider, if necessary, after the mid-September talks with the Japanese. The interagency group should also be instructed to propose other tactics for bringing leverage on the Japanese.5
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 399, Subject Files, Textiles, Vol. I. Confidential. Sent for action. Bergsten sent this memorandum to Kissinger under an August 21 memorandum, recommending that he sign and send it to the President. Bergsten, in his memorandum to Kissinger, commented upon Stans’ proposal that the United States reserve the right to increase tariffs on textiles. Bergsten declared this proposal to be “one of the worst I have ever heard, for domestic political—let along foreign policy—reasons.” (Ibid.) Kissinger sent Stans a memorandum on September 2, informing him that Nixon wished to delay a decision on whether the United States would “reserve the right to withdraw its tariff concessions on textiles under the ʽopen seasonʼ provision of the GATT” until after the mid-September textile talks with Japan. (Ibid.)↩
- Tab A is Document 17.↩
- According to the President’s Daily Diary, Nixon met with Stans and Kissinger on August 13 from 11:30 a.m. until 12:45 p.m. (National Archives, Nixon Presidential Materials; ibid., White House Central Files, Daily Diary) No memorandum of conversation of this meeting was found.↩
- Nixon checkmarked his approval of this recommendation.↩
- Nixon checkmarked his approval of this recommendation.↩