194. Letter From the Deputy Special Representative for Trade Negotiations (Pearce) to Secretary of the Treasury Shultz 1

Dear Mr. Secretary:

This responds to your request for a list of issues which should be resolved within the Administration before we seek active support for dropping Title IV.

The most important issue involves how and when we approach a House vote. I am enclosing a brief summary of our options on this issue. While I can’t fully assess the impact of all this on our relations with the Soviet Union and on discussions looking toward a settlement of the Middle East crisis, on the basis of what I know, I support Option 3.

Both the first or the second options impose a serious risk that the trade bill will fail in the House for the reasons outlined. At best, the coalition supporting the trade bill (which now includes both liberal [Page 710]traders and the steel and textile industries) is fragile. There is clear evidence that our efforts to delay the bill and to delete Title IV are creating hostility among those who have supported us on trade. Failure of the trade bill in the House would effectively end our efforts to deal constructively with trade issues in our relationships with Western Europe and Japan. The effect on monetary negotiations is harder to judge, but it is not likely to be positive.

In weighing Options 1 and 2, these risks must be weighed against the prospects for success in avoiding the Vanik amendments in the House. I think it is fair to say that neither offers much in the way of assurance on this score.

I might view these issues differently if there had been a more thoughtful, effective effort on Title IV before attitudes hardened in the House. I am enclosing a letter I received from Congressman Conable several weeks ago which illustrates the point.2 Despite this clear, early warning, little was done in the intervening months to improve prospects on this issue. People who could have helped were unavailable to meet with the Ways and Means committee when it considered this issue. Indeed, I was without instructions on the issue when the committee began its final debate on this subject. Only after the bill was reported and, in a real sense, the die was cast in the House, was any serious effort made to turn the Jewish community around. Against this background, I find it difficult to believe that the very limited, tentative efforts now being made by the Jewish leadership can produce an about-face in the days immediately ahead.

A second important issue involves the President’s intentions with respect to the bill if the House does not respond to our request to delete Title IV. In my view, a threat of veto at this point would not help resolve the Title IV issues; if anything, it would reinforce Labor’s dedication to the Vanik proposals. On the other hand, a threat of veto could seriously undermine support for the bill. It would belie the President’s strongest argument for negotiating authorities. It would be hard to sell [Page 711]the idea that they are essential to restore order and equity to world trading arrangements if he is prepared to abandon the bill to preserve, temporarily, the authority to extend government credits to the Soviet Union. Moreover, it would give a clear signal to our allies and to developing countries that détente has a higher priority.

Finally, there is no apparent need—at least in terms of our relationship with Congress—to play this card now while we are still several months away from final Senate action. If it is felt that our relationship with the Soviet Union requires such assurances now, presumably, they could be given privately.

There is one another additional thing that I must tell you which has become clearer to me since our discussion earlier today. From several sources, including sources on the Hill, I have been informed that unless "Peter Flanigan gets out of this" we are going to lose substantial support for the trade bill. It has been made very clear to me, in no uncertain terms, by the Jewish community that Peter Flanigan is misinterpreting the position of the top Jewish leaders and underestimating the resistance of second echelon Jewish leaders to the top leadership on this issue. If he pursues his activities, it could provoke a public reaffirmation of their support for the retention of Title IV with full Jackson/Vanik. Leonard Garment concurs fully in this assessment.

When I was given and accepted responsibility for the trade bill, a procedure was established for supervision and policy guidance. In recent days, it has collapsed. Decisions are being made and actions taken without my knowledge. I am asked to carry out decisions which are later brought in question. Unless we can reestablish appropriate lines of authority and responsibility, we are headed for disaster.

Sincerely,

Bill Pearce

Attachment

Paper Prepared by the Deputy Special Representative for Trade Negotiations (Pearce)

Timing of the Trade Bill

Options

1. Delay House action on the trade bill until it is clear that Title IV issues can be resolved to our satisfaction (i.e., by defeating the Vanik amendment or dropping Title IV).

[Page 712]

Pro

a.
Avoids unfavorable House action on MFN, credit while Middle East issues unresolved (though see Con #e).
b.
Avoids threat of veto which would undermine prospects for the bill.
c.
Provides time in which to turn the House around on the Title IV issue.
d.
No real evidence the EC is prepared to go forward now anyway.

Con

a.
Delay increases risk that opponents of TRA will gain strength—we now have votes to pass it.
b.
Doubtful that Title IV issues can be resolved before the House recesses. Pushing House action into next year jeopardizes momentum in trade negotiations. Enables France, others to pull back, blame U.S.
c.
Reflects choice between Soviet détente and relationships with major allies, obligations to LDC’s.
d.
Increases hostility of W&M members who comprise our most solid House support for the TRA.
e.
Vanik amendment could be added to another bill (possibly veto-proof). If so, we would lose both ends.

2. Proceed on the basis of Mr. Ullman’s proposal (a privileged W&M committee amendment to drop Title IV).

Pro

a.
Would commit W&M to support dropping Title IV.
b.
If succeeds, strengthens somewhat prospects for beating Vanik amendment (since committee amendment precedes Vanik amendment).
c.
Avoids further delay in House vote, thus reduces chances of AFL–CIO chipping away necessary sup-port.

Con

a.
Forces issue in House before Jewish counter effort has time to succeed.
b.
Forfeits W&M responsibility for passage of the bill. (Ullman has said he will support a committee amendment if the President asks, but then the President bears the responsibility if bill fails.)
c.
Effect of success in dropping Title IV on vote hard to appraise—could result in defeat in House. All of our vote counts are based on the assumption that Title IV (and, presumably Vanik) are in the bill. This means liberal Democrats with obligations to Meany can vote for him on Title IV, then against him on bill. If they are pressured to vote against him on Title IV, it is hard to predict their votes on the bill.
d.
Doubtful we will have effective support of the liberal trade community. (This could change if solid evidence of support in the Jewish community emerges.)
e.
If succeed, still must contend with Jackson forces in Senate.
f.
No assurance that we can avoid or defeat the Vanik credit amendment even if we prevail on the committee amendment. Could end up with no MFN authority, restrictions on credit in House bill.

3. Proceed with action in the House. Seek deletion of Title IV but without asking for a committee amendment. Then work toward a solution in the Senate.

Pro

a.
Bill will pass (albeit with Vanik amendment, Title IV). Have basis for trade bill we want in conference where House usually wins on trade issues.
b.
Sets stage for a better considered, executed effort in Senate. More time for Jewish community to work for compromise. In the end, we must deal with Jackson anyway.
c.
Avoids delay in preparations, loss of momentum in negotiations. d. Avoids for now a Presidential "choice" between détente with Soviets and accommodation of allies, LDC’s.
e.
Soviet reaction could be moderated somewhat by effective diplomatic effort pointing out we have other chance to come out where we want to be by dealing with the issues in the Senate where there are fewer "cold warriors."

Con

a.
Risks offense to Soviets in critical Middle East period.
b.
Could increase difficulty in negotiating with Jackson since he has what he wants in the House bill.
  1. Source: National Archives, RG 56, Records of Secretary of the Treasury George P. Shultz, 1971–1974, Entry 166, Box 6, GPS Trade—Volumes I & II 1973/74. No classification marking. A copy was sent to Eberle.
  2. The attached, but not printed, September 28 letter from Representative Barber Conable (R–New York) to Pearce enclosed a letter Conable had written to Kissinger on March 2, 1973, warning him that a bill introduced by Mills in February 1973 and cosponsored by Vanik and twenty-three other Representatives, the "Act for Freedom of Emigration in East-West Trade," commanded substantial Congressional support and posed a serious threat to the achievement of increased trade with the Soviet Union through a new trade bill. Barber wrote Pearce: "If anyone at the White House is critical of you for your failure to get a more favorable result on MFN for Russia, you might show them the enclosed copy of a letter sent to Kissinger on March 2. The response I got from Kissinger, relayed through John Ehrlichman, was to the effect that if I was having trouble with my Jewish community, ’go ahead and sponsor the bill; we’ll work something out later.’"