163. Memorandum From the Special Representative for Trade Negotiations (Strauss) to President Carter 1

SUBJECT

  • A Political Assessment Of The Tokyo Round

This memorandum will enlarge upon the brief reference to the Tokyo Round and its negative aspects in last week’s summary.2 For sometime now, I have wanted to give you a personal report on the negotiations. I have been reluctant to add to your concerns, which I know are many, but I sense that the time has arrived to give you my judgment of where we are and where we are heading.

Background.

Twenty months ago, as you know, the Tokyo Round was in danger of foundering. The political will of key participants—an indispensable ingredient for such an ambitious undertaking—had been sapped by the oil crisis and the ensuing global recession. Repeated efforts by the previous Administration to revitalize the negotiations had failed. Many [Page 507]governments, faced with growing protectionist pressures, wished the negotiations would go away.

At the Downing Street Summit, under your leadership, we began the task of moving the negotiations from a state of inertia to one of action. In the past sixteen months, I can report, we have continued to make slow but steady progress. The status of each phase of the negotiations was described in detail in the “Framework of Understanding”3 which was reported to the recent Bonn Summit.

Our work has been painstaking, because of the recalcitrance of many of our trading partners. Concessions have been difficult for everyone concerned. Trade liberalization is never easy, but never so difficult than in the face of domestic economic problems and the resulting mounting protectionist pressures. Many serious issues remain, including several which could jeopardize the entire negotiations. I am far from certain, but nevertheless, I am hopeful that with luck it will be possible to conclude the international negotiations by December 15—or 60 days thereafter—and then turn our full attention to the task of domestic implementation.

Domestic Implementation.

Our present plan is to submit the domestic implementing legislation to Congress by mid-March of next year, for consideration and decision under the up-or-down-vote-no-amendments procedures set forth in the Trade Act. If such a schedule is adhered to, the legislation will likely be voted on by the House and Senate next summer.

The package of implementing legislation which we would send to the Hill next spring would, under the most favorable circumstances, be as complex and controversial piece of legislation as any to be considered by the next Congress. Because of the nature of the negotiations, it is not yet possible to describe with precision what the final package will contain. There still exists the risk that in some critical areas, most notably agriculture and subsidies, we will fall unacceptably short of what we must have to sell the deal at home. The reason would be simply that our trading partners, despite their sincere efforts, have been unable to deliver the necessary concessions to satisfy our agricultural constituents even though it will exceed what has been done before or what they expected this time.

If there is to be a deal, there is no question that it will contain both pluses and minuses. It will address subjects which are both politically sensitive and disparate, ranging from tariffs to government procurement policies, from customs valuation to the difficult problem of subsidies and countervailing duties.

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Throughout these negotiations I have consulted closely with the Congress, and sought to respond to the needs of individual Members. Wherever possible, we have attempted to include in the package features to add political buoyance to offset those negative aspects we could not avoid. At the present time, because we do not yet know fully what concessions our trading partners will be able to deliver, it is not possible to say whether the package is a net plus or net minus in terms of domestic political acceptability. It is probably one of those issues that will hurt in the short run and be praised in later years.

As our consultations with Congress have progressed, I have noted a steady chilling in the atmosphere on Capitol Hill, exemplified most recently in the soundings we have taken regarding obtaining an extension of the waiver on countervailing duties. Congressional concerns over import penetration in sensitive sectors, such as steel and textiles, combined with large trade deficits, have created an atmosphere which is the worst imaginable in which to seek approval of the results of the Tokyo Round. I cannot overemphasize this negative attitude that prevails, even among some of the most ardent supporters of a liberal trade policy.

It is my present view that the final package will be adopted, but only after a bruising and costly fight. It will pit the relatively small and disorganized, although highly respected, constituency which supports liberal trade against a formidable coalition of labor and management from numerous industries, most notably textiles, steel, dairies, and chemicals. It will require an effort on the part of the Administration not a great deal less than was mounted in the case of the Panama Canal Treaties4 and the natural gas compromise,5 and the chance of success is little, if any better. Needless to say a failure would be a major setback for the Administration and for the credibility of the United States in its international economic relations. It could also trigger a world-wide protectionist retrenchment that would endanger the western world’s economic prosperity as well as political stability. Obviously, we must go forward. While the agreements themselves certainly will not dra[Page 509]matically change the patterns of world trade they will help move in the right direction.

I assure you we are going forward aggressively and will continue to press for the best result possible but you should be aware of the probable domestic political costs that Congressional consideration will entail.

All of this, of course, must be evaluated by you in the broader context of Administration policy, and from a longer, historical perspective. In the coming weeks and months as we proceed we must evaluate, and re-evaluate, the results of the Tokyo Round and reach our decision as to how best to proceed. It was to alert you to the problems I foresee and to encourage such an evaluation by the appropriate advisors that I have written this memorandum. Accordingly, I am sharing copies of this memorandum with Blumenthal, Brzezinski, Owen, Cooper and Eizenstat.

  1. Source: Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 103, 9/25/78 [1]. Secret. Carter wrote at the top of the page: “Bob—The harder & better we bargain now, (obviously) the better in Congress next year. J.”
  2. The summary was not found.
  3. See Document 144.
  4. Reference is to the Carter administration’s effort to secure ratification of the Panama Canal Treaties concerning Panamanian control and operation of the Panama Canal. The United States and Panama signed the two treaties in September 1977, but the Senate did not vote to ratify them until March and April 1978.
  5. Reference is to the agreement on the pricing of natural gas reached in April 1978 by members of Congress with help from Carter administration officials. (Steven Rattner, “Conferees on Energy Agree on Gas Pricing, Ending Long Impasse,” The New York Times, April 22, 1978, p. 1) On September 19, the Senate rejected an attempt by opponents of the bill to send it back to a House–Senate conference committee for changes. (Richard L. Lyons, “Senators Reject Attempt To Scuttle Gas Compromise,” The Washington Post, September 20, 1978, p. A1)