193. Briefing Memorandum From the Assistant Secretary of State for Economic and Business Affairs (Katz) to Secretary of State Vance 1

SUBJECT

  • Strauss’ Talk with the Textile Industry

Bob Strauss has held a series of talks with representatives of the textile industry seeking their support (or at least neutrality) for the MTN package when it is before Congress. In return he is offering a textile “program” responsive to many of the industry’s long-standing complaints over our administration of import restraints on textiles. This program was presented to and reportedly accepted by textile in[Page 572]dustry and union representatives at a meeting with Strauss in New York January 19.2

We had a last minute opportunity January 18 to comment on Strauss’ proposal. We were able to change some of the more objectionable elements to where the proposal is at the margin of acceptability. Our changes were, STR tells us, accepted by the industry. Although I am sympathetic to Strauss’ objective of counteracting the severe damage the textile industry can do us on the Hill, the concessions he is making will haunt us in the future and aggravate the foreign policy problems, particularly with LDCs, arising from the textile restraint program. For example:

—we will negotiate with Korea, Hong Kong and Taiwan cutbacks in the levels of exports to us which they are otherwise permitted under our bilateral agreements which still have three years to run. Discussions with Hong Kong are already underway. Those with Korea will be the most difficult.

—we are accepting a relationship (even if ill-defined) between growth in textile imports to growth in our domestic market, a concept we have consistently avoided in the past and which could put us in violation of our obligations under the multi-fibre agreement.3 This was the key demand of the industry.

—by promising to deal with disruptive imports from any source, we are opening ourselves to pressures to restrain imports from small or single-product suppliers whom we have so far left uncontrolled (e.g., Chile, Costa Rica, Sri Lanka, Indonesia).

In general, the Strauss proposal will lead to industry expectations which we will be under immense pressure to fulfill, even if doing so entails higher foreign policy costs than we have been willing to accept up to now.

Mike Blumenthal and Charlie Schultze have expressed concern over Strauss’ proposal. They find its inflationary implications most disturbing, particularly if a direct link between imports and domestic market growth is in the event established.4 They have considered [Page 573]taking their concerns to the President but I do not know if they have decided to do so.

Strauss intends to submit his proposal to the President and ask him to meet with the industry and its Congressional supporters. However, the President would not be asked to endorse personally the specifics of the understanding Strauss has reached with the industry. Thus, no paper detailing the specifics would be officially issued and the status of the understanding beyond the personal commitment of Strauss will be left somewhat vague.

Strauss is doing what he believes he must do to remove one of the major obstacles to Congressional approval of extension of the countervailing duty waiver and eventual approval of the MTN results.5 The price he is paying to achieve this, in my judgment, may mortgage our future ability to administer a tolerably acceptable textile restraint program. It is a close call as to whether you should personally interfere at this point but, on balance, I suggest you not do so. You may, however, wish to discuss this with Mike Blumenthal and Charlie Schultze.

  1. Source: National Archives, RG 59, Office of the Secretariat Staff, Records of the Under Secretary of State for Economic Affairs, Richard N. Cooper, 1977–1980, Lot 81D134, Box 4, Trade—Imports, ’79. Confidential. Katz did not initial the memorandum. Drafted on January 19 by Deputy Assistant Secretary of State for International Trade Policy William Barraclough.
  2. No record of this meeting was found.
  3. See Document 8.
  4. In a January 22 memorandum to Strauss, Schultze expressed concern that the draft textile plan was structurally biased toward increasing restrictions on imports over time and that “such a program of restrictions for textiles may invite other groups to escalate their demands.” Schultze asserted that “the consequences of the draft as it now stands for our anti-inflation efforts and the precedent it may create for generating demands by other groups, lead me to question seriously whether the advantages of concluding such an agreement at this early stage are worth the costs.” In a January 23 memorandum to Strauss, Blumenthal echoed Schultze’s concerns and criticized the program’s ambiguous language. Blumenthal suggested three options: “meet the textile industry head on;” withdraw all non-woolen textiles from the MTN deal; or establish “a looser textile program.” Both memoranda are in the National Archives, RG 364, 364–80–4, Special Trade Representative Subject Files, 1977–1979, Box 8, Textiles Two.
  5. In a January 24 memorandum to Blumenthal, written in response to Blumenthal’s January 23 memorandum to him (see footnote 4 above), Strauss asserted that “a positive program” for the textile industry was “essential to passage of the CVD waiver bill and to passage of the MTN legislation. That is not all that is at stake, we are really putting on the line our future relationships with our major trading partners, which would deteriorate sharply in the absence of adoption of the MTN package.” Asserting that the draft plan “involves little more than what we do now,” Strauss addressed each of Blumenthal’s criticisms in turn and suggested that the program was “ ‘tilting the emphasis’ instead of ‘changing policy.’” (National Archives, RG 364, 364–80–4, Special Trade Representative Subject Files, 1977–1979, Box 8, Textiles Two)