66. Memorandum From the Assistant Secretary of State for East Asian and Pacific Affairs (Green) and the Assistant Secretary of State for Economic Affairs (Trezise) to Secretary of State Rogers1
SUBJECT
- Textile Negotiations with Japan—ACTION MEMORANDUM
Discussion:
Negotiations designed to persuade the Japanese to impose restrictions on their exports to the United States of man-made and woolen textiles have dragged on for almost two years. They were broken off last summer but resumed again following Prime Minister Sato’s conversation with the President in late October. At that time the President designated Peter Flanigan to negotiate for us and Ambassador Ushiba was designated to represent the Japanese.
In mid-December Flanigan and Ushiba were close to an agreement on restraints which would have covered about one-half of the items involved in this trade, including all of the most sensitive ones. When Congress adjourned, however, without completing action on the Mills Bill, negotiations were again recessed. In January, Flanigan gave Ushiba a new proposal which was generally satisfactory except for a new provision which Flanigan described as essential. This provision called for the automatic imposition of restraints on any category in which imports from Japan increased by 10 percent or more, regardless of any showing of injury and regardless of whether or not the American industry was in fact a major producer of the item involved. This re-introduced the element of comprehensiveness on which the negotiators have never previously been able to agree.
We have been informed by Ambassador Ushiba that the Foreign Office was so shocked by the reappearance of the requirement for an automatic and comprehensive trigger arrangement that it did not dare, for fear of leaks and a public outcry, to show the proposal to the Japanese Minister of International Trade, to say nothing of the Japanese [Page 183] industry.2 In fact, Ushiba says it is known only to a few officials in the Foreign Ministry, and that Prime Minister Sato has been orally briefed.
Ambassador Ushiba tells us he has now received instructions to inform Flanigan that this proposal is not acceptable. It appears therefore that these negotiations have again reached a point of impasse. While both sides have held knowledge of Flanigan’s latest proposal very closely to date, the fact that a proposal was made and that the Japanese have turned it down must eventually become public knowledge. When this occurs, the minimum result will be another outburst of recriminations on both sides. Flanigan has told Phil Trezise that he now believes that the Administration should introduce and try to get enacted quickly the textile section of the Mills Bill.
We continue to believe that a settlement through negotiations is the best course. However, it appears to us that Flanigan has carried the cause of the American industry about as far as he can and that a negotiated settlement will require that we modify our position on the comprehensiveness question.
If we legislate quotas, we are in for more difficulties in our relations with Japan. These are outlined in the attached proposed memorandum from you to the President.3
These difficulties with Japan would be serious enough by themselves, but mandatory quotas on textiles, even if the legislation could be so limited, would have far-reaching effects on the entire structure of our international relations. It would put this Administration in the position of having closed the door of the American market to one of the very few industries which in the years ahead will provide some opportunity for the less developed countries of the world to sell to us. It would establish a precedent—and even an obligation—for the indefinite protection by legislation of the industry, and would distort our own economic prospects by preserving in our midst, virtually [Page 184] forever, a low-wage industry. This adds up to poor economics and bad public policy.
Recommendation:
We believe that now is the appropriate time to bring to the attention of the President the political and other ramifications of a breakdown in the negotiations on textiles with the Japanese. We accordingly recommend that you send the attached memorandum to the President, and that you be prepared to urge him to persuade the domestic industry that the national interest requires that we settle for something less than the wholesale protection that it desires.4
- Source: National Archives, RG 59, Central Files 1970–73, INCO FIBERS 17 US–JAPAN. Secret; Exdis. Trezise initialed this document; Green did not; it was sent through S/S and Eliot’s stamped notation is on the memorandum. Cleared by Richard Ericson, the Country Director for Japan, and Trezise, and U. Alexis Johnson in substance.↩
- Ushiba reported this information to U. Alexis Johnson during a meeting on February 2. (Memorandum of conversation February 2; ibid.)↩
- The draft memorandum to the President asserts that impasse over textiles would contribute to a deterioration of U.S.-Japanese relations. Acknowledging that many of Sato’s difficulties on the textile issue were of his own making, the memorandum states that U.S. interests will be served if Sato is strong enough to select his own successor. The memorandum concludes with the suggestion, “We should now identify those areas in which we could afford to make some concession without sacrificing what is really essential, in the interests of closing out this dangerous issue. The disappointment our textile people might feel over failure to obtain all they seek should be weighed against the corrosive effect this issue is having on our long-term interests with this most important Pacific ally.” Green sent another memorandum to Rogers on February 10, buttressing the case and noting that telegram 1159 from Tokyo, February 9, described the weakness of Sato’s position. (Both ibid.)↩
- There is no indication that Rogers signed the memorandum to the President. A note on the first page from a member of Rogers’ staff indicates that the issue was “OBE.”↩