61. Memorandum From C. Fred Bergsten of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1
SUBJECT
- The Need for an Urgent Conclusion of the Textile Negotiations
It now appears highly unlikely that we will get a Trade Bill in this session of Congress. Time is simply too short, given the widespread opposition to the measure and the complicated parliamentary situation. This was the near-unanimous sentiment at the Republican leadership meeting on Tuesday morning, and Senator Mansfield and others echoed it to David Rockefeller yesterday.
As you well know, I regard this as a positive result in the short run. However, it means that our leverage on the Japanese to reach a textile agreement will be sharply reduced—perhaps to the vanishing point—and thus set off longer-term developments which may well be even worse than passage of the Mills bill this year.
I regard this as true despite Sato’s commitment to the President. Sato has now stated publicly that he will not invoke legislation to implement export controls. He therefore must rely on the acquiescence [Page 175] of his textile industry to implement any agreement he would negotiate with us. We might reasonably expect his industry to agree to voluntary restraints, however reluctantly, if its alternative was to face U.S. quotas under the Mills bill. It could hardly be expected to acquiesce at all if the alternative were no controls at all, at least for many more months.
It thus seems that our leverage is running out, at least for the moment. It erodes further every day, as Congressional adjournment without action nears.
But the problem thus raised goes far beyond textiles. If we fail to reach a negotiated agreement now, and the general consensus that there will be no legislation proves correct, there will be three extremely bad results.
First, the President’s commitment will remain unmet. Second, the textile issue will continue to overhang overall U.S. trade policy—preventing any positive steps, encouraging protectionism in the rest of the world, and perhaps triggering even worse legislation than the Mills bill in 1971 or 1972 with even more serious effects on our foreign policy. Third, our relations with Japan will continue to be eroded by off-and-on efforts to negotiate on textiles and other products—not to mention the recriminations over their bad faith in not carrying out their commitments.
I therefore regard it as urgent that we use the remaining leverage of the pending legislation to reach a negotiated textile agreement—even if that agreement is far short of what we want. I have every bit as negative a reaction to the Japanese performance on this issue as you do—perhaps even more, since I have been burdened with sitting through the thirteen Flanigan–Ushiba meetings and the interminable preparations for them.
Nevertheless, I feel that we must now try to make the best of a very bad situation—and it must of course always be remembered that it is we who are asking for a monumental favor from the other fellow. I therefore recommend that you urge Flanigan to move quickly to reach an agreement.2
In fact, the Japanese have now come far enough that an agreement based almost entirely on their present offer could be readily defended to our industry. It would certainly suffice to definitively turn off the Mills bill, and to deter any new legislative efforts to vote textile quotas in the future. It would therefore remove the major problem in our policy toward Japan, which will otherwise become increasingly worse, and remove the key factor which has turned U.S. trade policy into a potential source of major rift with Western Europe.
[Page 176]Recommendation:
That you urge Flanigan to reach agreement with the Japanese urgently on voluntary textile controls.3
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 400, Subject Files, Textiles, Vol. III. Secret; Eyes Only. Sent for action. Kissinger initialed the document, indicating that he had seen it.↩
- Kissinger wrote in the margin next to this paragraph, “No, there was a deal.”↩
- A final sentence, “The next negotiating session is at 2:30 today,” was crossed out.↩