240. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford 1

SUBJECT

  • 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.

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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.

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Tab A

Paper Prepared in the National Security Council 2

TRADE ACTIONS TAKEN AND PENDING

Actions Taken

Specialty Steel.

You directed the Special Trade Representative to negotiate Orderly Marketing Agreements with the major suppliers (Japan, Common Market, Sweden, and Canada). If agreements are not reached, import quotas will go into effect on June 14. We are currently discussing marketing arrangements with Japan and the Common Market. The prospects are that they will eventually agree to participate, although we can expect the issue to go down to the wire. Approximately $200 million in trade is involved.

Footwear.

You decided against the ITC’s recommendations for import relief and instead ordered expedited adjustment assistance for workers and firms of the footwear industry. Reaction to the decision in Spain, Italy, Taiwan and Brazil, as well as among unaffected countries concerned about the "protectionist" trend in the U.S., has been uniformly favorable. Total U.S. imports of non-rubber footwear amounted to $1.1 billion in 1975.

Stainless Steel Flatware.

You determined that the protection which has been in effect for 12½ of the past 16½ years should be allowed to lapse since some elements of the industry have been able to adjust to import competition. Trade in the protected tariff categories amounted to $30 million in 1975. Japan, Korea, and Taiwan stand to benefit most from the decision.

Ceramic Tableware.

You decided to terminate or phase-out escape clause duty rates on these products. Japan has been the principal foreign supplier, but your decision should open up the market to imports from Korea and Brazil.

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Iron Blue Pigments.

The ITC found injury and by a 5–1 vote recommended increased duties on these products. Your decision in this case is due by June 2. Total trade involved is less than $2 million.

Shrimp.

The ITC finding is due on May 17. Your decision must follow 60 days thereafter.

Stainless Steel Wire.

The ITC finding is due June 12, with your decision required within 60 days.

Automobile Dumping.

This case involves all major foreign producers of automobiles, approximately $7.5 billion in U.S. imports. Secretary Simon will decide tentatively on May 11 that there have been sales at less than fair value. This decision will not be final, however, and a further investigation of injury to the U.S. industry by the ITC must follow. Nonetheless, customs appraisement will be withheld pending resolution of the case, and this will have an obvious dampening effect on imports. Reportedly, German autos will be hardest hit by the decision.

  1. 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."
  2. No classification marking.