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173. Letter From the Head of the Delegation to the Multilateral Trade Negotiations (McDonald) to the Special Representative for Trade Negotiations (Strauss)1

Dear Bob:

As a result of my conversations with Denman over the last few days, it now appears to me that we have two broad options for handling the expiration of the waiver and the completion of the MTN. Neither of these options is very appealing; both entail serious political difficulties and risks.

Under the first option, we would take the administrative steps necessary to mitigate the effects of the expiration of the CVD waiver. I know this is likely to involve political and legal risks, but I believe that we can find lawyers who can find a way to do it, in appropriate consultations with Congressional leaders. If not, this would be the first time that our system would have proved so rigid as to force us into a completely irrational situation that makes us the unwilling victims of future events.

Provided we can find a reasonable administrative solution, I am sure that we can successfully close out the MTN according to schedule by December 15. We still have a few difficult hurdles to jump over, but each day a larger and larger proportion of the details of a package are falling into place. I repeat, we can do it, and the package is a very worthy one that our country and the world desperately need.

The other option involves riding out the storm until the Congress can pass an extension of the waiver. Under this option we could still resolve many of the technical issues in the MTN before the end of the year, but we could not put the overall political package together until Congress passes an extension of the waiver. I think there is a good chance that we could persuade the EC to react relatively mildly to the implementation of countervailing duties on January 3, as long as they remain convinced of the prospects of early Congressional action on a waiver. We would not, however, be able to go to the Congress with a completed subsidy agreement.

I am convinced that under any circumstances it would be extremely difficult to persuade the Congress to pass a clean waiver extension bill; delay in the subsidy negotiations would make it that less likely, further postponing final Congressional action until the end of [Page 529]next year or later. Moreover, every delay jeopardizes everyone’s position. We cannot hold our offers much longer, the EC is worrying about this, and even the Japanese think it will be very difficult to keep their support base together past January. This extended agony gains us nothing but opponents, creates new political problems with every new Congressional suggestion, provides a field day for the protectionists and jeopardizes the final approval of the package if it is ever completed. Frankly, this is far less attractive than the first option.

I have not mentioned a third option of getting them to change their minds since this is such a longshot that it seductively leads us into number two.

In sum, we need the highest degree of urgency possible given in Washington to finding a solution. As we discussed by telephone, I talked with Henry Owen about this and he was not fully aware of what Washington needs to do to preserve our Bonn agreement on a December 15 finish. He has promised to get onto it immediately with a new appreciation of the seriousness of the situation. I will continue a few calls a day to keep up awareness from here to supplement your primary efforts.

Look forward to seeing you on November 9. In the meantime, you can count on me to keep pushing flat out across the board.

Best personal regards,

Alonzo L. McDonald 2 Ambassador
  1. Source: National Archives, RG 364, 364–80–4, Special Trade Representative Subject Files, 1977–1979, Box 5, MTN Geneva 1977. No classification marking.
  2. McDonald signed “Al” above this typed signature.