195. Memorandum From Secretary of the Treasury Blumenthal to President Carter 1

SUBJECT

  • Proposed Trade Arrangement with Textile Industry

I sympathize greatly with Bob Strauss’ effort to work out an arrangement with the textile industry which would help assure passage of the MTN legislation and countervailing duty waiver extension bill. The industry could clearly cause us major problems and the stakes for the Administration are extremely high.

However, it is my judgment that the program which has been negotiated would be extremely costly to a number of key Administration interests:

—It would add to inflation by cutting back import levels, and would be widely perceived and publicly described as inconsistent with the basic policy thrust of the Administration.

—It would be an extremely dangerous precedent, inducing numerous other industries to seek protectionist commitments from the Administration as the price of their support for the trade legislation over the next six months.

—By providing for sharp rollbacks in import quotas, it would reverse the whole history of United States trade (including textile) policy which has always permitted at least minimum growth for foreign suppliers.

Despite these severe problems, I would regard the package as barely acceptable if it were adopted in the context of successful conclusion of the MTN [Page 578]legislation (and the earlier CVD waiver extension). In the absence of such an outcome we would get the worst of both worlds—no MTN and a highly restrictive textile program. In fact, the textile program should go into effect only upon successful completion of the MTN legislation.

I therefore recommend:

—That no textile program be accepted until absolutely essential to assure industry support for the MTN legislation.

—That its implementation be conditioned on successful conclusion of the MTN package including our implementing legislation.

In the interim, that further efforts be made to improve the specifics of the program; most notably, its rollbacks of import levels and perhaps the “global import evaluation” which implies a USG commitment to global rather than country quotas.

W. Michael Blumenthal 2
  1. Source: National Archives, RG 56, Records of Assistant Secretary of the Treasury for International Affairs C. Fred Bergsten, 1977–1979, Box 3, Foreign Trade (FT). No classification marking. Sent to Blumenthal for his signature under cover of a February 5 memorandum from Bergsten, who wrote: “Attached is the textile memo for the President, per your directions. I have informed Wolff of your view. His only response was to reiterate that they will be doing all these things anyway, so explicit announcement of the program adds nothing. This is of course fraudulent.” (Ibid.)
  2. Printed from a copy with the signature “Mike (per copy)” above this typed signature.