183. Paper Prepared in the Office of the Special Representative for Trade Negotiations1

Title V of Trade Reform Act: Pros and Cons of Major Options

Background to Problem:

Title V of the Trade Reform Act would grant to the President the authority to enter into bilateral commercial agreements to extend most-favored-nation treatment to imports from Communist countries. The President would also be given the authority to extend MFN treatment to Communist countries which becomes parties to the GATT.

Strong Congressional opposition to the granting of these authorities had developed even before the Trade Reform Act was introduced. In late 1972 the so-called JacksonVanik bill was introduced which would have denied the President the authority to grant MFN treatment to any Communist country whenever the President determined that such country denied its citizens the opportunity to emigrate or imposed more than a nominal emigration tax. Additionally the JacksonVanik bill would have prevented such countries from participating in any U.S. programs of export credits (e.g. Ex-Im Bank loans) or investment guarantees.

It became clear to the Administration before the TRA was submitted to the Congress that the JacksonVanik bill had the support of perhaps 70% of the Senate and 60% of the House. In search of a compromise which would satisfy those concerned with Soviet emigration policies in particular and treatment of Jews in general, the Administration added a clause to Title V of the TRA which allows the Congress to veto any Presidential action granting MFN treatment under this title.

This compromise now appears to have been totally unsuccessful in winning Congressional support for Title V. For this reason as well as others, Chairman Mills has given some thought to an alternative compromise which would keep the Soviet Union from backsliding on [Page 675]its presently more liberalized de facto emigration policy for Soviet Jews, but would leave all determinations to the President.

During the past several months, however, the probabilities for the passage of a Title V which is acceptable to the Administration have deteriorated rather rapidly. The worsening climate seems attributable to three separate factors.

In the first place, Jewish leadership in this country has become so publicly committed to the JacksonVanik position that it is now very difficult for them to back away from that approach. It is probable that many Jewish leaders recognize that the passage of the JacksonVanik amendment might worsen the plight of Soviet Jews, but it will take months of quiet, carefully calculated planning on the part of Jewish leadership to alter its present public commitment to the JacksonVanik amendment.

In the second place, the fallout from the Soviet wheat deal has added a new dimension to the argumentation over Title V. It has called into question the value of increased trade with the Soviet Union, and raised doubts in the minds of many whether we can benefit from increased commercial exchanges with a state trading country.

In the third place, the escalating Soviet crackdown on its internal critics—particularly some recent expressions by Sakharov2 of the dangers of a U.S.–Soviet détente—have added a superficial validity to some of the long-expressed concerns of those in the Congress basically opposed to a policy of détente.

In sum, opposition to Title V of the TRA is no longer a one-issue opposition if it ever was. It now encompasses the Jewish community, opponents of a détente policy, and those who feel that a free-enterprise system will always be out-traded by a monolithic state trading regime. This coalition appears at present to constitute well over 60% of each house of Congress. The opposition in the House is so strong that the acting Chairman of the Ways and Means Committee, Mr. Ullman, is now actively considering various approaches to the Title V problem which might improve the prospects for the passage of the TRA. While we are not in a position to control Mr. Ullman’s choice among several alternatives, the Administration might well influence that choice substantially if an Executive Branch decision on its own preferred course of action can be reached within the next few days.

The following options are presented without knowledge of the exact details of the Administration’s commitment to the Soviet Union regarding U.S. action to achieve MFN status for the USSR. Two of the [Page 676]options assume that Title V can be separated from the TRA without violating any commitment.

The Options

Option I

Continue on our present course of action. Under this approach the Administration would attempt to keep Title V in the bill as is, and would work within the Ways and Means Committee to see that the Committee retains exclusive control over this Title. If successful, this strategy would guarantee that Title V would be reported out of the Committee within the next 4 to 6 weeks as an integral part of the Trade Reform Act.

Pros:

1.
This approach would suggest to the USSR that the Administration was doing everything possible to obtain the authority required to implement our bilateral commercial agreement.
2.
The approach would allow Title V to benefit from whatever momentum the TRA has developed when it reaches the House Rules Committee and the floor of the House. At the very least it guarantees House consideration of the Title V issue before the end of the year.
3.
This option keeps open the outside possibility that Chairman Mills can lead the fight for a somewhat revised Title V should he recover from his operation in time to manage the TRA before the House. He generally supports the Title with modifications which would establish criteria to be met before each 3-year renewal of the US–USSR agreement, but he would leave it to the President to make the necessary determination.

Cons:

1.

The approach jeopardizes passage of the TRA in several different ways. In the first place, the AFL–CIO’s strategy of defeating the TRA by inaction could benefit by the choice of Option I. If Title V remains a part of the bill, organized labor can play upon concerns over this title to slow considerably the pace of Congressional consideration of the bill in the Ways and Means Committee, before the Rules Committee, and before the Democratic Caucus.

In the second place, retention of the Title could produce a rule that would be totally unacceptable to the Ways and Means Committee. In this event the TRA would be taken back to the Committee, and might not be reported out again before the Congress adjourns.

2.
This approach runs a very high risk that the TRA will go to the House floor with a modified open rule. At the present time it seems certain that the Democratic Caucus would support, and the Rules Committee would grant, a rule allowing consideration of an amendment [Page 677]to Title V when the bill reaches the House floor. Chairman Mills and Mr. Ullman have both expressed this opinion on several occasions, and have seemed prepared to let Title V go to the floor this way. The major problem for the rest of the TRA is that if the opportunity to obtain a closed rule is lost over the issue of Title V, the prospects increase that other amendments will be accepted by the Democratic Caucus and allowed to go to the floor. Smart parliamentary maneuvering by opponents of the bill might then gut the Administration’s entire approach to trade policy at the very moment when negotiations are opening in Geneva.
3.
If the approach does, as expected, result in a rule allowing amendments to Title V, there will be a strong effort to add the JacksonVanik amendment to the Title on the floor. If this tactic is successful the Administration will be in a worse position vis-à-vis the Soviet Union than it is now because of the provisions of the amendment denying export credits and investment guarantees.
4.
Finally, Option I does not present the Administration with an opportunity to make a public case for the détente policy implicit in Title V. The question cannot be debated before the Ways and Means Committee since it is now in closed executive session. It can, of course, be debated on the floor of the House, but it will be too late by then to develop the rationale and build enough support to influence many House votes. At most, the bill would be debated in the House for two or three days.

Option II

Endorse and support a tentative suggestion by Acting Chairman Ullman that the House Foreign Affairs Committee be asked to submit its views on Title V issues to the Ways and Means Committee.

Under this approach Mr. Ullman would speak to Chairman Morgan3 very shortly to see if he would be willing to hold hearings on Title V and submit his committee’s views to the Ways and Means Committee within approximately four weeks. The report and recommendations of the Foreign Affairs Committee would not be binding on the Ways and Means Committee. But if they were adopted, they would add some weight to the Ways and Means Committee’s decisions on Title V when the TRA is reported out.

Pros:

1.
This approach would provide the Administration with a public forum in which to develop its rationale for Title V as an integral part of a broader foreign policy, and to build a wider base of support for the authorities requested therein. It would also provide what is [Page 678]probably the most congenial forum in the House at the present time. This is not to say that the membership of the Foreign Affairs Committee would not present the Administration with problems, but simply to say that it would probably be less hostile to the Administration’s case than any other House committee.
2.
This approach provides a maximum of flexibility for the TRA at the present time. It would allow the Administration to (a) avoid a lengthy debate over Title V in the Ways and Means Committee which would slow progress on the other titles and (b) delay any decision on Title V until the Administration can appraise the sentiments evoked by the Foreign Affairs Committee hearings and reassess the strength of support for the JacksonVanik amendment. At that point a decision on what to do with Title V can be made in full knowledge of its implications for the passage of the TRA if it remains a part of the trade bill.

Cons:

1.
The actions of the Foreign Affairs Committee cannot be accurately predicted in advance. If hearings are held and witnesses hostile to Title V are heard in detail the Committee’s report and recommendations might not strengthen support for the Title V approach. Little ground would be lost, however, since lack of support within the Committee would simply confirm the prevalent view that Title V in its present form is dead.
2.
The Foreign Affairs Committee is not one of the really prestigious committees in the House. Therefore, its endorsement of Title V, even if it did result, could not be expected to guarantee acceptance of the Title by any means. Thus the potential gains strictly in terms of House votes cannot be expected to be large.
3.
If the Foreign Affairs Committee is brought into the act the Ways and Means Committee does sacrifice some degree of control over the issues raised in Title V, and this strategy might make it more difficult for Mr. Mills to push forward with some compromise of his own. However, given the Ways and Means Committee’s apparent willingness to sacrifice Title V in the fight for the rest of the trade bill, it is difficult to argue that some loss of control by Ways and Means would be very detrimental to the Administration’s position on Title V.
4.
The Soviet Union might wonder if Administration backing of a referral of Title V to another Committee represented a diluting of support for MFN for the USSR.

Option III

Suggest to Mr. Ullman that he request the Foreign Affairs Committee to submit its views on the foreign policy aspects of Title V issues without going through any process of public hearings. This represents a less effective [Page 679]version of Option II. It is suggested as a possibility in case the Foreign Affairs Committee would agree to this option but would be unwilling or unable to undertake public hearings over the next several weeks.

Pros:

The same as in Option II, but without the benefit of a public forum to develop the Administration’s case.

Cons:

The same as in Option II, but with less risk of losing control over the course of events.

Option IV

Request Mr. Ullman to drop Title V from the TRA and consider it as a separate piece of legislation.

Under this approach the Administration would immediately request the Ways and Means Committee to delete Title V from the bill and handle it as separate legislation. As part of this approach the separated Title V would be referred to the Foreign Affairs Committee for hearings and recommendations. The Ways and Means Committee might easily be persuaded to accept this option given its general desire to report out a trade bill which will meet with the approval of the full House.

Pros:

1.
This approach would eliminate the serious risks which Title V now poses to the passage of the trade bill (including the risks of an open rule and consequent amendments unacceptable to the Administration).
2.
The approach would provide the Administration with the time and the public forum required to present its best case for Title V and détente.
3.
It would provide the time needed to work behind the scenes with Jewish leadership to move them away from JacksonVanik and toward the Administration’s position.

Cons:

1.
This approach might prove offensive to the USSR. It would mean postponing the MFN question at least until 1974, and there is no ironclad guarantee that the bill would be acted upon next year. There is certainly a risk that the Ways and Means Committee might not return to consideration of trade legislation next year, although that risk could be limited if Mr. Ullman or Mr. Mills were willing to commit the Committee to action within the next six months.
2.
1974 is an election year, and that setting might prove very inauspicious for judicious consideration of the Soviet MFN question.
3.
Title V as a separate bill would lose the advantage of the momentum which the TRA may have gained, and should prove more vulnerable standing on its own. However, this argument is completely nullified if, as certainly seems the case, Title V as part of the Trade Bill goes to the House floor open to amendment.4
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 404, Subject Files, Special Assistant for Trade (Ambassador Eberle). Limited Official Use. Sent to Eberle under cover of a September 6 memorandum from Special Assistant to the Special Representative for Trade Negotiations Roger Hansen that reads: "Attached is the Options Paper on the Title V question which will be discussed in Mr. Flanigan’s office this afternoon. Copies have been distributed to the following: Secretary Shultz, Mr. Flanigan, Mr. Dam, and Mr. Scowcroft." The attached NSC correspondence profile notes that Sonnenfeldt attended the meeting on Kissinger’s and Scowcroft’s behalf. No other record of this meeting has been found.
  2. Andrei Sakharov was a Soviet nuclear physicist, political dissident, and human rights advocate.
  3. Representative Thomas E. Morgan (D–Pennsylvania) was Chairman of the House Foreign Affairs Committee.
  4. Another copy of this paper contains the following addendum: "Whichever option is chosen, consideration should be given to accepting a Ways and Means Committee staff proposal which calls for Congressional confirmation of the renewal of all bilateral commercial agreements entered into under Title V. (It is not clear whether the staff proposal contemplates a veto procedure or an affirmative act of Congress.) In the Administration’s version of the bill no Congressional approval of the renewals (required every three years) was called for. Administration acceptance of this proposal would certainly improve the chances for Congressional acceptance of Title V. However, it would somewhat diminish the authority of the President." (National Archives, RG 56, Records of Secretary of the Treasury George P. Shultz, 1971–1974, Entry 166, Box 6, GPS White House)