177. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter 1

SUBJECT

  • MTN Crisis

1. Problem. Bob Strauss has written you (Tab A)2 about the MTN crisis: The EC refuses to make any major MTN negotiating decisions until your authority to waive imposition of countervailing duties has been extended by the Congress. If progress in MTN negotiations must thus be postponed until early 1979, these negotiations may not be concluded in time for the Congress to approve any MTN agreement in 1979. This delay could doom the negotiations.

2. Strauss Proposal.

Option #1: Bob will try to persuade Schmidt, Barre, Jenkins, and others next week to complete the MTN by December 15, with the European Council of Ministers not formally approving the resulting MTN agreement until waiver authority has been extended by the new Congress in 1979. He would like also to tell them that the Secretary of the Treasury will “suspend liquidation” of the countervailing duties, i.e., postpone collection of these duties, with importers posting bond to cover any potential liability, until the Congress has enacted MTN implementing legislation that would include retroactive forgiveness of any duty liability. He stresses that this action may not satisfy the Europeans.

Option #2: If his visit to Europe does not produce a favorable outcome, Bob indicates that the International Emergency Economic [Page 535]Powers Act could be invoked to postpone any collection of countervailing duties for 60 days, thus allowing the Congress time to act. He points out that this course would engender a strongly negative reaction on Capitol Hill.3 He is not recommending this course, only pointing out that it will then be the only alternative to serious MTN delay, since he believes that calling a special session of the Congress to extend the countervailing duty waiver would be undesirable.

Bob says that he will seek your guidance early next week.

3. State, Treasury, and CEA favor Option #1.4 They have various ideas about how to make it more attractive.

State suggests assuring the Europeans that we will strongly resist any Congressional pressures for renegotiation of the MTN agreement that we would submit to the Congress in January.

Treasury believes that Bob should assure the Europeans we will submit a waiver extension bill to the Congress January 2. (The bill could then be dropped if it attracted undesirable amendments.)

CEA recommends that whatever subsidy code is included in MTN be made retroactive to January 2, 1979, so as to protect our trading partners against economic damage from countervailing duties.

All of these agencies have strong reservations about Option #2—on legal, political and foreign policy grounds. CEA would preclude it altogether; Treasury would only consider it in case of dire necessity.

The State and Treasury memoranda are attached at Tabs B and C.5

4. RECOMMENDATION: That you tell Bob Strauss if you talk with him—or authorize me to tell him if you do not—that:

a. You give him authority to speak on your behalf in assuring the Europeans that we will follow the course that he describes in Option #1—with such of the improvements suggested by State, Treasury, and CEA as he believes have merit.

b. If this trip fails to persuade the Europeans, he should then submit to you his considered view regarding invocation of the Interna[Page 536]tional Emergency Economic Powers Act. Analysis of this course should proceed, but there is no need to decide the issue now.6

  1. Source: Carter Library, Donated Material, Papers of Walter F. Mondale, National Security Issues, Box 83, National Security Issues—International Trade, [10/18/1977–12/14/1979]. Confidential. Sent for action.
  2. Tab A, attached but not printed, is a November 1 memorandum from Strauss to Carter.
  3. In his November 1 memorandum to Carter (see footnote 2 above), Strauss noted that the International Emergency Economic Powers Act “was enacted by Congress in 1977 to revise and delimit Presidential authority to regulate international economic transactions during wars or national emergencies.”
  4. Cooper commented on Strauss’ November 1 memorandum in a November 3 memorandum to Owen; Solomon discussed it in a November 3 memorandum to Owen; and Nordhaus in a November 2 memorandum to Schultze. Cooper’s and Solomon’s memoranda are in the Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 65, Trade: 11/77–4/79; Nordhaus’ is in the Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files.
  5. Tabs B and C are not attached.
  6. Carter indicated his approval of both recommendations and wrote below: “I talked to Bob. J.”