Foreign Relations of the United States, 1969-1976, Volume XIX, Part 2, Japan, 1969-1972

71. Memorandum From the President’s Assistant for International Economic Affairs (Peterson) to President Nixon¹

Washington, March 19, 1971.

SUBJECT

• Textile Negotiations—a possibility for unilateral action on textiles

Issue: I believe that there is a place, as a part of the right political answer on textiles, for a tough, unilateral action on your part which is more under your control than that taken by a potentially unfriendly Congress. As long as Congress has the ball, there is obviously a very real possibility that it will either do nothing on textile quotas or give you a bill including so many added products that you will be presented with a major dilemma, (especially if the bill is attached to another major piece of legislation).

This paper discusses one such unilateral possibility.

Background: In the past, it was contemplated that once we had an agreement with Japan, we would move to enforce restrictions on other major Asian textile producers, namely, Taiwan, Hong Kong and Korea, under Section 204 of the Agricultural Act. (None of these nations has shown any desire to follow Japan’s lead in exercising unilateral restraint.)

With the Japanese Government showing no inclination to renew negotiations, we should now consider the desirability of opening negotiations with the other Asian textile producers.²

If successful, you could then unilaterally limit imports from Japan and from other countries, if necessary. It is the kind of option that will require extremely careful planning, delicate and yet purposeful negotiation, and clearly, some luck since the odds probably don’t favor it.³ However, if it could be pulled off, I would think it would be a major coup for you.⁴ I don’t know of any good way of evaluating its chances or its costs until we think through a set of specific negotiating packages so that we can assess it in a more specific, practical context.

Recommendation: That, within the structure of the Council on International Economic Policy, you authorize me to set up a working group to explore applying Section 204 of the Agricultural Act of 1956 to impose quotas on textile imports from Japan. (Under this section, the President can limit textile imports from another country if an agreement is: (multilateral and (2) accounts for “significant” part of world trade in textiles.) This would require the United States to negotiate textile agreements with Korea, Taiwan and Hong Kong, using whatever appropriate levers we have (economic, military, aid, etc.)⁵ Then, argue that this (possibly along with the cotton agreement) is a “significant” part of world trade in textiles and apply quotas to Japan unilaterally. If this approach is to be realistically evaluated, we need to think through the costs and concessions that might be required to induce them to enter into an agreement. Also, Peter Flanigan is reviewing the necessary statistics to consider industry modifications of the Japanese offer to make it more acceptable to the Asian exporters.

Pro: 1. With a major negotiating effort, might provide a means within a few months to permit your establishing an adequately comprehensive textile quota system unilaterally, and at the same time, minimize the chances of your getting an unacceptably broad protectionist trade bill.

2. It could provide an additional lever to apply against the Japanese in order to secure a satisfactory voluntary agreement.

3. We probably need to negotiate soon with these other countries on textiles anyway.

Con: 1. May involve some stretching on what is “significant” part of world trade and involves some legal risks. (It is the preliminary opinion of John Dean and lawyers from STR and Commerce that the President should reasonably have substantial flexibility to interpret the phrase “significant part of world trade.”)

2. Would involve putting major pressure on these other important Asian allies. (We would, of course, not know the magnitude of these pressures and their costs until we lay out a specific negotiating plan.)

I should also say this possibility does not preclude other legislative approaches to the problem, or a new multilateral textile negotiation through some organization like GATT.

Explicit in this recommendation is my belief that the Council is an appropriate setting to review textile strategy. We could try to give you a progress report at our first Council meeting now scheduled for April 5.⁶

1. Source: National Archives, Nixon Presidential Materials, White House Special Files, Staff Member and Office Files, Box 3, Peter Peterson, Subject Files, CIEP, Textiles, 4 of 5. Confidential. Concurred in by Dent, Ehrlichman, Flanigan, MacGregor, Kissinger, Shultz, State, CEA, and Commerce.
2. Nixon underlined the last phrase in this sentence, beginning with “we should now.”
3. Nixon underlined the following portions: “If successful, you could then unilaterally limit imports from Japan and from other countries,” “require extremely careful planning,” and “and clearly, some luck since the odds probably don’t favor it.”
4. Nixon placed a checkmark in the margin next to the sentence, “However, if it could be pulled off, I would think it would be a major coup for you.”
5. On April 16, Peterson sent a memorandum to Nixon that described specific proposals that Kennedy would make when he negotiated with the Taiwanese, Hong Kong, and South Korean Governments in pursuit of a textile agreement. Nixon approved this memorandum. (National Archives, Nixon Presidential Materials, White House Special Files, Staff Member and Office Files, Book 3, Peter Peterson, Subject Files, 371.4, Textiles, 3 of 4) H.R. Haldeman sent a memorandum to Pete Peterson on April 23, noting that “the President wants you to play a tough game on textiles and give the Japanese hell for dumping. He does not want you to follow the Meyer line. He wants you to hit the Japanese at every chance we can—starting the day after Kennedy leaves.” (Ibid., Box 1, Peter Peterson, Subject Files, Textile Negotiations, April–July 1971) On May 13, Nixon informed relevant Cabinet members that Kennedy possessed full and complete authority to negotiate on textiles as the head of the negotiating team going to the Far East on June 1. (Ibid., President’s Office Files, Box 84, Memoranda for the President, beginning May 9, 1971) Peterson informed Ushiba that, despite conflicting statements by U.S. officials, Kennedy “has been delegated full and complete authority by the President with respect to the current textile negotiations. Ambassador Kennedy is the only U.S. official authorized to speak for the President in this matter.” (Memorandum from U. Alexis Johnson to Meyer, June 4; ibid., RG 59, Central Files 1970–73, INCO FIBERS 17 US–JAPAN)
6. Nixon initialed his approval.