86. Memorandum From the President’s Assistant for International Economic Affairs (Peterson) to President Nixon1
SUBJECT
- (1) Background—Where Do We Go From Here on Textiles?
- (2) Wilbur Mills
Ambassador Kennedy reports that he believes the Japanese will not come to an agreement with the United States on textiles at this time. In a three-hour conversation with Prime Minister Sato on July 24,2 it became apparent that the new U.S. policy toward China was being seized upon by the Japanese as a reason for taking no further action. Kennedy further believes that without agreement with the Japanese it will be very difficult to win agreement with South Korea, Taiwan, or Hong Kong. The textile industry agrees. Ambassador Kennedy’s presence in Japan is now becoming a serious embarrassment, and he plans to leave this Saturday. Kennedy has recommended that we postpone the September US-Japan Ministerial Meeting, but most of the rest of us think this would not be wise in view of your personal invitation to dinner at the White House, and delicate stage of the relationship vis-à-vis the China situation. If you disagree with us, I would of course want to know.
It is now a matter of some urgency to determine what action should be taken next with respect to this textile issue. When it becomes generally known here that this latest effort has failed, as it shortly will, [Page 254] Wilbur Mills can be expected to step in. He has already asked to see one of the top textile industry leaders who has just returned from advising our textile delegation in the Far East.
The Democratic textile industry leader has told me that if we don’t get agreement, he will recommend the industry work with Mills. Mills probably will point out that you failed to line up the three smaller countries after he had paved the way with the Japanese voluntary industry agreement. It is expected that Mills will take the leadership on this issue, which of course is very closely linked with the whole jobs issue. The most likely approach is that he try to line up a voluntary agreement, similar to the Japanese agreement, with the three smaller Far Eastern countries, monitor it, and if the results are not satisfactory (or if he fails to get a voluntary agreement), the industry reports he has told them he will support a broad quota bill, which would include textiles, next spring.
Thus, it becomes urgent to determine our course of action. I have been holding discussions with Secretaries Rogers, Connally, Stans, Attorney General Mitchell, Henry Kissinger and Peter Flanigan, and we expect to have an options paper ready for you in several days.3 This is likely to be a situation where none of the options is likely to be very attractive but the option of doing nothing—and all that implies to your whole credibility and political situation—may be the worst of all.
[Omitted here is Peterson’s discussion of his effort to repair relations with Wilbur Mills after a disagreement over the issue of shoe imports.]
- Source: National Archives, Nixon Presidential Materials, White House Special Files, Staff Member and Office Files, Box 1, Peter Peterson, Subject Files, Textile Negotiations, April–July 1971. Secret. Sent for information. The source text is a copy that indicates Peterson signed the original.↩
- On July 30, Rex Beach, Special Assistant to Kennedy, sent a report to Rogers concerning Kennedy’s meeting with Sato on July 24. (Ibid., NSC Files, Box 218, Agency Files, Council on International Economic Policy (CIEP) Aug–31 Dec 71) On August 3, Ernest Johnston of the NSC staff summarized the report for Kissinger, noting that Beach “believes that the textile negotiations are very near collapse. Hong Kong, Korea and Taiwan are not likely to come to an acceptable agreement without Japan.” He continued, “Japan had previously seemed willing to negotiate, but the U.S. China announcement so shocked the Sato government, that it is no longer willing to seek compromises. In addition, Japan now sees for itself a role as a protector of the smaller countries, which it can fill better if it does not help the U.S. to force agreements on them.” Johnston added, “Peterson is by now feeling desperate” and advocates citing national security concerns to justify imposing limits on textile imports. (Ibid.) On July 31, Kennedy submitted to Peterson a report of his July 24 meeting with Sato, which Peterson forwarded to the President. (Ibid., White House Special Files, Staff Member and Office Files, Box 1, Peter Peterson, Subject Files, Textile Negotiations, April–July 1971)↩
- On August 6, Peterson submitted to various administration officials a draft paper for the President on how to proceed with the textile issue. He requested their responses by August 9, and observed, “As you will note from the opening paragraph, it has now become urgent that the Administration decide on its course of action by August 13 because of a textile group meeting to decide where they go from here.” (Ibid., Box 3, Peter Peterson, Subject Files, 371.4, Textiles, 2 of 4) The attached draft paper laid out three options for the President: first, announce that textiles will be on the agenda of the ministerial meetings to be held in Washington with the Japanese in September; second, ask Congress for a textile-only quotas bill; and third, impose quotas on textile imports under Section 232 of the Trade Expansion Act. Peterson included the views of the officials he consulted in the paper that he submitted to Nixon on August 10. (Ibid., NSC Files, Box 400, Subject Files, Textiles, Vol. IV)↩