Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

178. Memorandum From the President’s Assistant for Domestic Affairs and Policy (Eizenstat) to President Carter¹

Washington, undated

SUBJECT

• Enrolled Bill H.R. 9937—Bank Holding Company Act Amendments of 1970

THE BILL

H.R. 9937 terminates the President’s authority to negotiate cuts in U.S. tariffs on textiles and textile products in the Multilateral Trade Negotiations (MTN). The enrolled bill also authorizes the General Services Administration to sell 978,000 rare silver dollars it now has in storage to raise revenue.

ARGUMENTS FOR SIGNATURE

1. The textile and apparel industry has lobbied intensively for the MTN exemption provision of H.R. 9937. This industry which employs over 2 million people, including many low-skilled and minority workers, would strongly support a decision to sign this enrolled bill.

2. The sale of rare silver dollars by GSA would net an estimated $24 million in revenue for the Treasury.

ARGUMENTS FOR VETO

1. Withdrawal of our MTN tariff offer on textiles and textile products would seriously hamper our efforts to conclude a MTN package.

—At best, this action would trigger a series of retaliatory withdrawals by our trading partners. These retaliatory withdrawals would be made on those agricultural and industrial products that have the greatest potential for increased U.S. exports if present offers are maintained.

—At worst, the withdrawal of our textile offer would result in a complete collapse of the negotiations. Failure of the MTN would mean the loss of new agreements on export subsidies, trade safeguards, customs valuation and government procurement, as well as the loss of foreign tariff cuts. Failure of the MTN would also damage the overall climate for international economic cooperation.

2. Acceptance of the MTN exemption provision in the enrolled bill would undoubtedly lead to requests for similar treatment by other industries. Congressmen would be under intense pressure from important industries in their districts to extract similar concessions in their behalf.

DISCUSSION

Although the industry would clearly prefer that you sign the enrolled bill, the negative reaction to a veto would not be as strong as we had originally anticipated. The recommended veto message emphasizes our interest in the prosperity of the industry and pledges us to take further action on its behalf.² In view of these commitments, key union leaders have agreed to downplay their disapproval of a veto and stress the positive elements of our policy toward the industry.

We have already responded to the legitimate concerns of the textile and apparel industry by limiting our tariff cut offers in these products to less than one-half of the level consistent with the general tariff-cutting formula. Although this industry accounts for only 10 percent of dutiable trade in the industrial sector, more than 50 percent of our industrial sector exceptions have been taken on textile goods. These exceptions have been designed to give the greatest protection to the most import sensitive segments of the industry. Overall, we are proposing to reduce textile tariffs from their present average level of 24 percent to approximately 18 percent over an 8 to 10 year period beginning in 1980. This gradual phase-in will help to ease adjustment problems in the industry.

A successful conclusion to the MTN is already in jeopardy over the issue of the countervailing duty waiver extension. To completely exempt textiles from our tariff cut offer, as required by H.R. 9937, would only throw more fuel on the fire. The authorization for GSA to sell silver dollars can be resubmitted at any time with good prospects for passage. We will not have another opportunity to negotiate a comprehensive trade package in the foreseeable future.

VOTES IN CONGRESS

H.R. 9937 passed the House by a vote of 198–29 and the Senate by a vote of 48–13.

RECOMMENDATION

OMB, STR, CEA, State, Treasury, Commerce, Labor and Agriculture recommend that you veto H.R. 9937. The General Services Administration recommends that you sign the enrolled bill. Anne, Frank, Bob and I recommend that you veto the bill and issue the attached veto message to limit adverse reaction to this decision. It has been cleared by Jim Fallows.

DECISION

Sign H.R. 9937

Veto H.R. 9937 (Recommended)³

1. Source: Carter Library, White House Central Files, Subject File, Box TA–29, TA 4–14 1/1/78–12/31/78. No classification marking. Sent for action. A typed notation at the top of the memorandum reads: “Last day—Saturday, November 11.” Eizenstat did not initial the memorandum.
2. The recommended veto message is not attached.
3. Carter did not indicate his preference with respect to this recommendation; however, on November 11, Carter vetoed H.R. 9937. For the text of Carter’s veto announcement, see Public Papers of the Presidents of the United States: Jimmy Carter, 1978, Book II, pp. 2010–2011.