240. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford1
- International Trade: Impact of Recent Trade Act Decisions
The Trade Act of 1974 substantially liberalized the conditions under which American manufacturers may seek relief from competition from imports. The International Trade Commission (ITC), which evaluates the claims of injury filed by U.S. firms, has generally recommended a more “protectionist” line than is consistent with your international trade position. This has presented the government with a basic question on the overall direction of U.S. trade policy and you with some difficult individual decisions on the specific cases which have come before you. The Presidential discretion provided by the Trade Act has made it possible for you to avoid the possibility of a “trade war”, which could have slowed worldwide economic recovery and possibly wrecked the multilateral trade negotiations in Geneva.[Page 839]
The overall pattern of these decisions has reaffirmed your commitment to a more open international economy and given credibility to our consistently stated belief that the free flow of resources and products among nations results in the greatest contribution to global welfare. More specifically, it has:
- —Eased, at least for the moment, concern among our developed trading partners about increased U.S. “protectionism.” We can expect to hear the theme repeated, however, whenever this country moves to protect American firms and workers from subsidized foreign competition. In the steel case, there was initially a lot of finger-wagging abroad about the decision, but the main foreign suppliers realize that the Orderly Marketing Agreements which we are now negotiating are far preferable to the five years of quotas which would have gone into effect had the recommendation of the ITC been allowed to stand.
- —The developing countries see in these decisions reaffirmation of the United States’ commitment to provide better access to its markets for efficient and competitive foreign manufacturers. Brazil and Taiwan in the case of footwear, and Korea and again Brazil in the case of ceramic tableware, are examples.
- —The decisions have minimized the possibility of the U.S. having to provide compensation or face retaliation by our trading partners as permitted under GATT in the case of escape clause actions. This retaliation would have in effect shifted the burden of supporting an inefficient domestic producer to elements of our export sector which are truly competitive. Our trading partners have seen that you have been willing to accept political risks, and even possible short-term economic losses as inefficient U.S. producers readjust, in support of your conviction that the world is best served by an increasingly liberalized trading environment.
- —In some cases the reaction of U.S. manufacturers has been strong, but in critical cases the Administration has worked to reduce this adverse reaction by discussing the threat of decisions with industry in advance. At the same time the U.S. has shown itself willing to protect industry threatened by outright export subsidies abroad by holding to a firm line in countervailing duty cases.
These issues will continue to arise in coming months. The pattern of decisions has demonstrated that you intend to weigh these cases in terms of their merits and their impact on overall national interests—including those of the consumer—and will serve notice here and abroad that the U.S. will not yield to protectionist pressures to shield inefficient industries from international competition.
Attached at Tab A is a brief summary of the status of the cases which you have decided this year, as well as a listing of other important trade actions pending before the ITC or the Treasury Department.[Page 840]
- Source: Ford Library, National Security Adviser, Presidential Subject File, Box 24, Trade (6). Confidential. A stamped notation indicates the President saw the memorandum, which he initialed. Sent under cover of a May 1 memorandum from NSC staff members Malcolm Butler and Timothy Deal to Scowcroft that notes: “The Trade Act has posed some very difficult choices for the President, particularly in this election year. Overall, however, his decisions have served to reinforce our position as a leading advocate of a more open world economy and underscored our desire to promote the free flow of resources essential to economic growth and global welfare.”↩
- No classification marking.↩