28. Memorandum From the Acting Chairman of the Under Secretaries Committee (Samuels) to President Nixon1 2
Subject:
- IA–ECOSOC—United States Position for the Fall Meetings of the Special Committee for Consultation and Negotiation: Chairman’s Report
I. INTRODUCTION
A. The Issue
Beginning September 15, we are scheduled to meet with the Latin Americans in several IA–ECOSOC conferences on trade to respond to their request for reduction or elimination of our barriers affecting exports of some 800 products. A decision as to whether we are prepared to respond favorably—and to what extent—is required.
State believes the Latin Americans will look on these meetings as a test of our hemispheric policy which you enunciated last October. The Latin Americans have become seriously concerned about their lagging exports and consider trade issues to be central to our hemispheric relationship. They have interpreted our support for the creation of a Special Committee for Consultation and Negotiation (SCCN)—in response to their CECLA Consensus—as a commitment to help them expand their exports. They understand the significance of your support for generalized preferences, but do not consider our present proposal sufficiently responsive to their particular interests; they object to current restraint levels under our quantitative restrictions on key exports. Our failure to respond positively to their requests at the forthcoming meetings would be a great disappointment and would reawaken cynicism which has been allayed by our [Page 2] explicit commitment to support Latin American efforts to develop themselves and by our implicit commitment to react promptly and positively to their initiatives. State believes this could affect seriously our interests and objectives in the hemisphere, as well as risk losing the opportunity to capitalize on Latin American desires to earn more foreign exchange through export development.
There is serious concern, expressed by most agencies, as to the desirability of responding to the Latin American requests at this time. Hearings in the Ways and Means Committee on the Trade Bill revealed a strong protectionist undercurrent in the Congress. Announcement now of our intention to liberalize trade restrictions vis-a-vis Latin America (and other LDC’s) could increase our difficulties with the Trade Bill. It could also affect legislation on generalized preferences which will probably be considered early next year, possibly frustrating the hopes of Latin Americans and other LDC’s on preferences. On the other hand, State believes an initiative in the trade field now—supporting our foreign policy objectives in Latin America—could counteract some of the protectionist sentiment in the Congress and public generally.
The proposals set forth in this memorandum are considered by State to be of great importance to the success of our Latin American policy. At the same time, the Committee does not want to understate the problems this program may create domestically. The issue, essentially, is to balance our desire to be forthcoming with the Latin Americans with these domestic considerations. (See separate Commerce statement attached.)
B. Scope and Timing
The Latin American requests for action (Annex A) fall essentially in four areas: (1) elimination of tariffs; (2) more lenient treatment under quantitative restrictions; (3) financial and technical assistance to promote export development; and (4) simplification of certain health and sanitary regulations and assistance in meeting these.3 Although we regard all four areas as important, the Latin Americans will focus almost exclusively on tariff and quantitative restrictions.
[Page 3]The schedule of SCCN meetings agreed with the Latin Americans is keyed to a United States response in September, and the Latin Americans have attached great importance to this date. Other meetings to elaborate on this would follow in October and November.
Depending on what action, if any, you feel able to take, and when, we can move to adjust the scheduled meetings, if necessary. We should cancel them, however, if no significant new decisions by the Administration on either tariffs or quantitative restrictions can be announced, in which event it would be difficult to sustain the SCCN as an important element in our hemispheric policy.
If you approve changes in the generalized preference scheme in response to Latin American requests, we would benefit from announcing these at a September 15 SCCN meeting, especially since our preference scheme will in any case be presented in the OECD on September 7, and to the LDC’s in UNCTAD on September 21. We believe a positive response limited to the preference scheme would help meet our commitment to the September “response,” and maintain some momentum in the SCCN even if other meetings were postponed.
In formulating the proposals that follow, we have carefully culled the Latin American requests, eliminating many we considered infeasible (see Annex B). The recommended actions do not—and could not—attempt to meet all Latin American aspirations, which in many cases are ill-defined; they are clearly no panacea to Latin America’s trade problems. However, we believe (to quote your February report, U.S. Foreign Policy for the 1970’s) that they would help “demonstrate to our sister nations evidence of our sincerity and of our help—while recognizing practical constraints.”
II. RECOMMENDATIONS
A. Tariffs
At the September 15 meeting we would tell the Latin Americans which items on their request lists would be added to our generalized preference scheme.
An interagency task force has examined the feasibility of adding some agriculture and fishery items of special interest to Latin America to the generalized preference scheme. In the three options that follow, recommendations are made [Page 4] covering 60 of these items.4 Imports from Latin America in 1969 of all 60 items totaled $145 million, and accounted for only 0.4 percent of our total imports or 3 percent of our imports from Latin America.
The Latin Americans also requested tariff reductions on 54 primary products. All agencies have agreed to include 14 of these on a proposed “positive list” of primary products (Annex D). Your decision on this list is requested in a separate memorandum, “Tariff Preferences for Less Developed Countries.”
Option I
Most of the 21 items in this group (see Annex E) are insignificant imports from Latin America ($3 million last year) subject to relatively low duties. Their inclusion in preferences, nevertheless, would have some interest for several hemispheric countries. To include these items in preferences would probably evoke little domestic opposition. Most have been rated “least sensitive” by Agriculture.
This option is acceptable to all agencies.
Option II
The 17 items in this group (see Annex F) are of greater trade value to more Latin American countries than those in Option I. None has been rated “unacceptable” by any agency and duties on most are relatively low. The Latin Americans presently export all items in this group to the United States, generally in competition with developed countries.
[Page 5]Total imports of these items in 1969 were $62 million, of which $45 million came from Latin America. More than half of this was inedible molasses (dutiable at 0.7%), which is of interest to 17 Latin American countries. Castor oil is of particular interest to Brazil, which is not a major exporter of any other product under Options I or II. Winter peaches (dutiable at 1%) are supplied almost entirely by Chile. Adding these items to our preference list would significantly strengthen the value of the system to Latin America.
Conversely, increased imports of any of these items would probably arouse concern from competing domestic producers. Agriculture considers most of these items “very sensitive,” but has rated some as “moderately sensitive.” Interior classifies the fish item very sensitive, although the duty is only 0.7%.
All agencies except State and AID oppose this option.
Option III
This group includes items (see Annex G) important to 20 Latin American countries. Our 1969 imports of the 22 items in the group were $102 million of which Latin America supplied $98 million. Addition of these to the positive list would distinctly benefit Latin America and would demonstrate our serious interest in providing increased trade opportunities to Latin America.
Imports of Latin American canned and prepared beef in 1969 totaled $85 million, which accounted for nearly all of our imports of these products. Canned beef is of utmost importance to Argentina, and is also supplied by Brazil, Uruguay and the Central Americans. Although imports of Latin American rum in 1969 were under $1 million, political interest in this item is very high, since its trade is central to the economies of most Caribbean countries and important to several other Latin Americans. Puerto Rico now enjoys a substantial preference on this item and, of course, would oppose the extension of this preference to its main competitors.
Some items in this group are already entering our market in sufficient volume to cause concern to domestic producers, who would likely protest any significant increase in imports.
[Page 6]Agriculture considers all these items either “very sensitive” or “unacceptable.” Duties on some are relatively high. State and AID support this option, but other agencies strongly oppose it.
In addition to these options, the Under Secretaries Committee considered a fourth group, including canned pork, sardines, oysters, certain fruits and vegetables, wines, tobacco, and flowers (see Annex H). Our duties on many of these items are distinctly protective. The Latin Americans attach very high priority to improved access to our large markets. Domestic interests would object strongly to concessions on these items. Agriculture and Interior have classified all as “impossible” to add to the positive list. The Under Secretaries Committee has not recommended approval of this group. State and AID feel, however, that the addition of certain items from this group (i.e., cut flowers, wines, melons, oysters) should be considered.
B. Quantitative Restrictions
We would inform the Latin Americans what, if any, action we will take to increase imports subject to quantitative restrictions.
In IA–ECOSOC discussions the Latin Americans have repeatedly urged liberalization of our quantitative restrictions on their exports, particularly meat, textiles and sugar. At the last ministerial meeting a resolution was passed calling for a review of our quota system “in order that the developing countries may obtain the largest possible share in the increased imports resulting from expanded consumption or production shortfalls” in the United States.
In NSDM 30 you instructed our representatives to GATT and other international bodies to press for a multilateral lowering of non-tariff barriers to LDC exports. This effort will continue but few positive results can be expected in the short term. Interim measures are urgently needed to defuse some of our specific trade problems with Latin America as well as to support intensified efforts to get other developed countries to relax their barriers within a broader program.
[Page 7]We now must consider what, if anything, can be done to ease our restrictions on meat, textiles, and sugar. The following proposals, if approved, would symbolize our special interest in Latin America while avoiding preferential concessions that would violate the MFN principle and weaken the case for multilateral action in reducing barriers to LDC trade.
Meat
We could increase the level of the 1970 meat import program by 60 million pounds, to be divided pro rata among countries participating in the program.
Our meat import program is a major issue with the Latin Americans, particularly the small Central American and Caribbean countries. The Executive Branch can act within present legislative authority in this area. Our failure to do so, in the face of their urgent requests, would be particularly disappointing to the Latin American countries concerned.
We are committed to make any increase in the permissible level of meat imports in 1970 on a pro rata basis. Since Latin American suppliers account for slightly less than 20 percent of the total, we would have to raise the total substantially in order to give the Latin Americans a meaningful increase. An increase of 60 million pounds would add less than 0.5 percent to our annual supply and would not have a serious impact on domestic price levels. However, it would mean an increase for the Latin Americans of about 11 million pounds, valued at about $5 million. Such an increase would be much less than what the Latin Americans have requested (50 million pounds) and what they could ship to us even if liberalization were announced as late as November. However, it would satisfy some of their expectations and help keep slaughter and packing plants operating toward the end of the year. State and AID support this action.
Agriculture, Commerce, and STR strongly oppose this action, on grounds that re-opening the 1970 meat import program, which you decided to liberalize on June 30, would create serious domestic problems. In particular, they argue that (a) further liberalization during Congressional consideration of the trade bill could provide ammunition for proponents of tighter trade restrictions on meat; and (b) domestic cattle interests could accuse the Administration of duplicity in first gaining their concurrence in a small increase in imports last June and then granting a further increase shortly thereafter.
[Page 8]If you approve this recommendation, a decision to increase imports should be announced quickly, perhaps immediately after the elections, in order to allow foreign suppliers time to arrange for shipments to arrive by December 31. (See also Annex I and separate Agriculture comment attached.)
Textiles
(a) We would inform the Latin Americans that we will continue to administer the Long Term Arrangement on Cotton Textiles (LTA) in a manner which will not deny commercially viable entry to suppliers whose exports, considered on a case-by-case basis, do not seriously disrust the U.S. industry.
If this recommendation is accepted, the Interagency Textile Administrative Committee would be instructed to review the confidential guidelines for administering the LTA to develop, where feasible, a more liberal formula for invoking Article 3 restraints and to submit recommendations to the Cabinet Committee established by Executive Order 11052 by October 1. A copy of this report should be submitted to the Under Secretaries Committee. For example, we might agree not to invoke Article 3 unless aggregate cotton textile exports from a given country reach a specific level either in square yards or dollars, nor to impose restraints, even if the aggregate trigger level is reached, unless imports in individual categories reach a certain limit. These limits would also apply in the negotiation of bilateral agreements under the LTA.
(b) On a case-by-case basis, we would impose no restraints on the importation of non-disruptive cotton textile handicraft items.
If this recommendation is accepted, our agreements with several Latin American countries would be modified to exclude the exempted items.
Cotton textiles are among our most sensitive imports and have been subject to voluntary or mandatory quotas for nearly a decade. During this period, Latin American producers have become increasingly competitive and cotton textiles are now a major manufactured export. At IA–ECOSOC meetings the Latin Americans have pressed strongly for significant reductions in our restrictions.
[Page 9]In his recent recommendations to you Secretary Stans said: “Recognizing increased textile production as a means of short-term economic progress for LDC’s, the Administration should consider a plan to restrict textile imports from the developed countries to the 1969 level, allocating all future import growth over that level to developing countries.” Last year Governor Rockefeller recommended allocation of a major part of our import growth in cotton textiles to hemisphere nations. We recognize that, however desirable, broad concessions to the LDC’s on cotton textiles will not be possible in the current political atmosphere. On the other hand, a negative response would reinforce the widespread Latin American feeling that we are not willing to act on important trade issues.
State and AID believe the proposals would involve no significant lowering of import barriers to major cotton textile suppliers, and would favor small producers whose exports constitute a minor portion of our imports. They believe too that the current low restraint levels could be substantially increased without disrupting the domestic industry. The measures would tend to favor the least developed countries, whose quotas under existing arrangements are often too small to permit economic production runs. The confidential nature of the guidelines would still permit flexibility for extremely sensitive items. The recommendations could be implemented by Executive action without Congressional approval.
Commerce, Agriculture, Interior, STR and Labor object to both recommendations (see Commerce statement attached). State and AID support both.
Sugar
Congressional hearings on renewing sugar legislation (which expires December 31, 1971) will probably begin early next year. In the past, the Latin Americans have preferred to deal with us bilaterally, and they will probably continue to do so as regards their individual quotas. However, we expect they will make a common request soon to maximize their share of the market vis-a-vis other foreign suppliers, and to increase the foreign share at the expense of domestic suppliers. This would be in line with recommendations advanced [Page 10] by OAS sugar committees in earlier years, as well as with Governor Rockefeller’s recommendation. In response to the Latin Americans we would express our willingness, pursuant to our commitment at the Caracas IA–ECOSOC meeting, to consult individually or jointly regarding their desire for improved access to our sugar market and to review carefully all methods by which this objective might be achieved in formulating an Executive Branch recommendation on revision of the Sugar Act. Various ways in which imports of Latin American sugar might be increased are outlined in Annex J.
This response is acceptable to all agencies.
[Page 11]- Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–219, NSDM Files, NSDM 83. Confidential. Attached but not published are the Annexes, and the August 28 memoranda from Palmby to Samuels and from Nehmer to Samuels.↩
- Samuels reported on key issues for the upcoming IA–ECOSOC meetings and outlined the Department’s recommended responses to Latin American requests for reductions or elimination of trade barriers on exports from the region.↩
- On August 4 the Inter-Departmental IA–ECOSOC Committee considered various recommendations regarding assistance for export promotion and health and sanitary regulations. Inter-Departmental Working Groups are preparing programs in these areas for presentation at future SCCN meetings.↩
- In NSDM 30 you approved a proposal to seek legislation to eliminate unilaterally “nuisance duties” on products of interest primarily to Latin America. Since most of these would in any case be covered by generalized preferences, we propose to add the remaining items to the preference scheme. This avoids the need for separate legislation and means that tariff concessions on these items would be accorded only to LDC’s at this time. These “nuisance duty” items are not repeated in the options, but appear in Annex C.↩