202. Memorandum From the Deputy Special Representative for Trade Negotiations (Pearce) to the Members of the Council on International Economic Policy1

SUBJECT

  • Trade Bill: Issues for Senate Consideration

With the important exception of the Title IV—Jackson/Vanik language, the House of Representatives has passed what is on the whole, a very good trade bill.2 There are many issues that we sought to have resolved differently, but the general policy and tone of the bill is in line with the bill that we proposed.

We are planning our presentation of the trade bill to the Senate Finance Committee to support, at least at the outset, the House bill to the fullest extent possible. It is important to do this for a number of reasons. The Administration may not be present in the conference and we must rely on those members of Congress that have been working towards the same policy objectives that we favor. Moreover, the House bill is the result of a number of compromises in which we modified our original requests in order to avoid seriously detrimental Committee amendments. To seek reversal of some of these decisions in the Senate Finance Committee could lead to results in conference opposite to those desired. Another concern is that opening many issues in the Senate Finance Committee may encourage wholesale changes in the House version of the bill which could be very damaging. It could also delay the bill. While generally supporting the House bill, we will of course be receptive to constructive suggestions from the Senate.

For the reasons stated above, the changes that we consider must be made in the House bill should be kept to a strict minimum as listed [Page 730]in Tab A. A second list of issues (Tab B) contains those matters which should be raised, but not pressed if indications are that such effort would be counterproductive.3 This list includes issues which were not fully aired in Ways and Means. In addition to the items on these two lists, there are a number of changes of a technical nature (including modest substantive improvements) which can be raised in technical work with the Ways and Means Committee staff. Examples would include some time-limit problems and some clarifying provisions to resolve ambiguities.

The lists attached hereto are the result of interagency discussions held by the trade bill working group (those working in support of the trade bill effort on the hill), after consultation by members of that group with their departments.

For your information, Tab C contains a detailed analysis of the differences between H.R. 6767 (the trade bill as sent to Congress in April) and H.R. 10710 (the bill as adopted by the House).4 A brief review of the major differences is at the beginning of this tab.

Action Recommended: Approve the general approach to efforts to achieve Senate approval of the trade bill, with changes to be sought as outlined in Tabs A and B.

Tab A

Paper Prepared in the Office of the Special Representative for Trade Negotiations

Improvements To Be Sought in H.R. 10710

In the list below, the first two items are so important that they call for the maximum possible effort. The "next priority" items are significant enough to call for a full effort, but failure to achieve the desired results would, presumably, be tolerable.

Highest Priority

1.
Title IV—Non-Discriminatory Treatment for Non-Market Countries: The House added the Jackson/Vanik language to condition the [Page 731]authority to extend MFN treatment and further added comparable limits on the extension of government credits. Change desired: Compromise Jackson/Vanik language, or (b) prevent Jackson/Vanik "credit" amendment, or (c) delete Title IV. (p. 129.)
2.
Countervailing duty amendments: The house established strict time limits within which to act on petitions, and provided for judicial review of the Secretary of the Treasury’s decision that a practice abroad was not "bounty or grant." Although some escape from these tight measures is provided during the first four years after enactment by exception for cases which might jeopardize the negotiations, another clause in the House bill limits this escape for the period of only one year in a number of important cases. Change desired: Our objectives will be (a) write into the law (which will be fully enforceable with negative judicial review etc. after 4 years) sensible exceptions to countervailing, such as: practices similar to those U.S. engages in, LDC exports, other serious cases causing international strife, certain tax exemptions or remissions; (b) eliminate one year limit on discretion not to countervail against products from plants owned by developed countries. (sec. 331(3), p. 123 line 13 to p. 124 line 4.)

Next Priority

1.
Worker Assistance: The House bill provides for the total cost of Worker Adjustment Assistance to be supplied out of a "trust fund" composed of receipts from customs tariffs. In effect, this means that the cost will be from the general revenue fund. There are many reasons why at least a portion of the adjustment assistance payments should be funded from sources which would otherwise have to supply funding for regular unemployment compensation. Change desired: Change financing to provide "supplemental" approach for federal funding (State Unemployment funds would cover portion they would otherwise cover). Second problem: Legislative history on the eligibility criteria of the bill (§ 222) could lead to interpretations that would cause dangerous cost increases. (See especially the "actual or relative" language used to modify increase in imports, at p. 53 of Ways and Means Committee report.) These criteria should be clarified so that the cost of the program will not get out of hand. (Title II, ch. 2, p. 66 ff.)
2.
Karth 5 "Equivalent Competitive Opportunities in Sectors" amendment: The Karth amendment provides that a principal objective of the negotiations shall be to obtain within each sector of manufacturing and within the agricultural sector, equivalent competitive opportunities in the major trading country markets. It also provides, to the maximum [Page 732]extent appropriate, that NTB agreements be negotiated on a sector basis. Although the seriousness of these provisions is debatable, it seems clear that they will constrain the negotiation and somewhat reduce the opportunities for trade liberalization. Change desired: Modify the impact of the Karth amendment to expand flexibility. Equivalent competitive opportunities in sectors should be one of several stated objectives, and should be applied to assessment of negotiation results and should not require negotiations to be primarily on a sector basis. Reporting requirement after negotiations should look towards broader objectives than sectoral balance of market access. (If there is substantial resistance to modifications and danger that existing flexibility would be lost, this issue should not be pressed but existing provisions defended.) (Sec. 102(3), p. 9 line 1 to p. 10, line 3.)
3.
GATT revision requirement: The bill provides that the President shall, as soon as practicable, negotiate a list of changes in GATT. The bill as now worded, fails to adequately recognize the practical difficulties of achieving some of the results called for, and could be a source of embarrassment at some later time. Change desired: Modify to acknowledge difficulty of obtaining reform and modify to allow attainment through means other than formal amendment of GATT. (Tactical considerations would dictate the manner and extent to which this issue is raised. If major efforts would be counterproductive, minor improvements would be sought.) (sec. 121, p. 15 line 4 to p. 16, line 15.)
  1. Source: National Archives, RG 429, Records of the Council on International Economic Policy, 1971–1977, Box 251, Records of Executive Committee Meetings, 1973–1974, 53179 PMF Executive Committee Meeting of CIEP on December 21, 1973 in Roosevelt Rm 12/13/73. Limited Official Use. Drafted by Jackson, who initialed the memorandum on Pearce’s behalf. It was sent under cover of a December 13 memorandum from Flanigan to the Secretaries of State, the Treasury, Agriculture, and Commerce, the OMB Director, the CEA Chairman, the Special Representative for Trade Negotiations, and the President’s Assistant for National Security Affairs, outlining the agenda for a December 21 meeting of the CIEP Executive Committee.
  2. The House of Representatives passed the trade bill on December 11.
  3. Attached but not printed at Tab B is a December 14 memorandum proposing changes to the provisions on "Non-MFN application of NTB agreements," "Non-MFN BOP surcharge," "Worker assistance," "Firm Adjustment Assistance," "Anti-dumping," "Compensation authority," "Import Relief," "Countervailing duties," and "Patent provisions amending section 337."
  4. Tab C is attached but not printed.
  5. Representative Joseph Karth (D–Minnesota).