200. Memorandum From the President’s Deputy Assistant for National Security Affairs (Scowcroft) to Secretary of State Kissinger 1

You may have seen this memorandum yesterday at State. Shultz and Flanigan are likely to hit you on it during or after staff meeting this morning.

Flanigan’s memo is a pretty straightforward job, but there are a couple of points which I think need to be stressed. The first is the judgment that if we wait until after Christmas, the Trade Bill will be dead. That seems to be the unanimous opinion of the trade people, but I am not convinced of the rigor of their analysis.

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Assuming the correctness of the analysis on the effect of delay, however, there is some2 merit in Peter’s argument that we should go ahead in the House on the chance that we may be able to reach a compromise next Spring in the Senate or in conference. If we do not, however, we are faced either with vetoing the bill and thus publicly upsetting our major trading partners, or rebuffing the Soviet Union. Either of these alternatives, it seems to me, is worse than having no bill at all. The decision, therefore, seems to me to turn really on the judgment of the likelihood that some compromise would be possible next Spring—and the affirmative argument seems to rest basically on the feeling that the Jewish community would back off rather than assume the onus of a veto.

I am dubious.3

Attachment

Memorandum From the President’s Assistant for International Economic Affairs (Flanigan) to Secretary of State Kissinger

SUBJECT

  • Effect of No Trade Bill on U.S. Relations with Europe and Japan

Senator Jackson’s rebuff of your attempt to work out a compromise now on Title IV of the Trade Bill poses a major foreign policy problem.

Two Presidential enterprises are at issue. On the one hand, there is the need to avoid unduly endangering possibilities for constructive cooperation with the Soviet Union, including chances for a cooperative approach to establishing a lasting peace in the Middle East. On the other hand, there is the need to strengthen the marked success of the President’s initiatives to redress our balance of payments and to carry forward the momentum thus far achieved toward a lasting reform of the international economic system. Progress of historic significance has been made in both endeavors—but a misstep now in the handling of the Trade Bill would be extremely costly.

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The best time—perhaps the only feasible time—to move the Trade Bill is now. As the 1974 Congressional elections approach, as U.S. economic growth slows, with increased unemployment, and as the coalition of forces supporting the bill erodes from lack of momentum, there will be less and less chance that the Trade Bill can be passed in 1974. Moreover, there is little reason to believe the Title IV problem would be any more manageable in the House in 1974 than it is today. If no action is taken by the House prior to the Christmas recess, the November suspension of the trade negotiations in GATT could become permanent, endangering the movement toward expanded trade in the free world.

Conventional wisdom treats the issue as a trade-off between the Trade Bill and Presidential authority to extend MFN and credit to the Soviets. The real significance of the Trade Bill lies in the foreign policy area. Our NATO relations could be weakened, and the Soviet position throughout the world could be measurably strengthened if, as a result of our lack of a Congressional negotiating mandate, chances were aborted for constructive cooperation with Europe, Japan, and developing countries on trade issues. Both peace and prosperity are at stake. The international economic issues involve the jobs and living standards of hundreds of millions of citizens in the democratic developed world. No issue has a higher general priority throughout the developing world than improved access to the markets of the rich countries. If we do not move the Trade Bill through the House, the fabric of our political and security relations with Europe, Japan, and much of the rest of the world will be damaged to the long-term advantage of the Soviets.

In Western Europe, our friends, working for improved relations in the Atlantic Community and a less protectionist European Community, will be weakened. Those working for an independent and self-sufficient Europe discriminating against our trade, our investments, and our dollar, will be strengthened. Current trade disputes such as those growing out of the enlargement of the Community, are manageable in the framework of major negotiations but might well get out of hand in a context where retaliatory actions seemed to be the only effective response. This could not fail to complicate MBFR, CSCE, and other negotiations, while weakening U.S. domestic political support for our military presence. Working toward a shared economic objective, however difficult to achieve, is preferable to economic confrontation across the Atlantic.

In Japan, multilateral trade liberalization is a major national objective. The political and economic consequences of a forced reversion to bilateralism are difficult to contemplate.

In Canada, there is a marked reluctance to act boldly on bilateral U.S.-Canada trade problems but enthusiasm for multilateral negotiations where solutions may be found.

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In the developing world, deep frustrations over U.S. failure to act on generalized preferences would cumulate if broader LDC hopes for improved market access also failed. The reaction in Latin America would be particularly adverse.

In the United States, protectionists would return to the attack with consequent risks to our political posture in the world. The President’s signal successes in restoring the strength of the dollar and taking the initiative from the Hartke–Burke forces4 would be endangered. In trade, if one is not moving forward, special interest pressures inevitably move the country backward.

Finally, no action on the trade bill contradicts the Administration’s commitment to 105 nations in the September Tokyo Ministerial Declaration to proceed with multilateral trade negotiations.5 Passage of the Trade Bill is essential for meaningful negotiations.

There is an unquestionable risk in proceeding with the Bill in the certain knowledge that the House will adopt the JacksonVanik amendment, strengthened to include a prohibition on credit. Against the President’s commitments to trade reform must be balanced his commitment to the Soviet leaders. However, it should be possible to explain privately to the Soviets a strategy which includes a veto of the final bill if a satisfactory compromise is not reached. Your conversation with Senator Jackson, in which he indicated compromise in the Senate would be possible, could be cited.6 More important, the political pressures that will build on the Senator to avoid responsibility for provoking Soviet repressive measures reducing Jewish emigration, gives reasonable hope of an acceptable eventual outcome.

Therefore, I recommend to you the following line of action:

(1)
Send a letter from the President to the Speaker of the House noting that the immediate crisis in the Middle East has abated and that peace negotiations are likely; asking that the Trade Bill be scheduled before the Christmas recess; specifying the concerns over the potential adverse effects on our relations with the Soviet Union and chances for world peace if the JacksonVanik amendment is adopted; urging that the statesmanlike thing to do is to put aside Title IV for the present; [Page 725]and making clear that if a suitable compromise is not eventually reached with the Congress on this issue, the Act will be vetoed.
(2)
In a Presidential statement make clear to the Nation why it is essential that the Congress pass a good trade bill without amendments crippling chances for improvement of relations with the Soviets, the PRC, and other Communist States. Perhaps also explain why the JacksonVanik amendment does not even serve its avowed purpose of advancing freedom of emigration.
(3)
Give the Soviets strong private assurances that (a) the President is not abandoning his commitments to them; (b) in your judgment, the eventual outcome will facilitate U.S.-Soviet trade and credit relations, especially since without Congressional authority, the President cannot grant MFN and terminate U.S. trade practices that discriminate against the USSR; and (c) the President will veto if, contrary to your expectations, that becomes necessary.

If, on the other hand, you prefer to continue to defer consideration of the Trade Bill, notwithstanding the considerations outlined above and the provisions relating to trade ("active role in GATT negotiations," "multilateral trade expansion," etc.) in the draft U.S.–EC Declaration of Principles,7 we will need to develop another scenario for fully explaining our position to the Europeans and the Japanese.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 403, Subject Files, Trade, Vol. VI, April 8–December 1973. No classification mark-ing.
  2. Scowcroft inserted "some" by hand.
  3. Scowcroft added this last sentence by hand.
  4. See footnote 6, Document 153.
  5. See Document 185 and footnote 8 thereto.
  6. Possibly a reference to a meeting between Kissinger and Jackson that took place on November 21 at 7:05 p.m. (Library of Congress, Manuscript Division, Kissinger Papers, Box 438, Miscellany, 1968–1976, Record of Schedule) No memorandum of conversation from this meeting has been found.
  7. See footnote 3, Document 58.