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

196. Memorandum From the Chairman of the Council of Economic Advisers (Schultze) to President Carter ¹

Washington, February 6, 1979

SUBJECT

• Proposed Administration Textile Program

This proposal is a significantly restrictive international trade measure.² I recommend that you agree to it only on the condition that it goes into effect after the MTN is signed and in hand.

The industry is finally getting in this program what they have been seeking from the U.S. Government for years. It includes a very restrictive mechanistic “ratchet” effect (Import Control #4) that prevents importers from getting back to agreed upon import quotas on any category of imports if they should fall short in a given year. This sets a very bad precedent. This provision virtually guarantees substantial import restraint for many of the textile and apparel categories, because they are subject to large annual fluctuations. It will therefore have a net depressive effect on international trade and increase our inflation rate.

Given the very restrictive nature of this program, we should make it absolutely clear to the industry, as well as in public presentations, that this is a balancing item to the liberalizing effects of the MTN. Our position should be that this program is acceptable only in the context of balancing MTN costs and benefits. If the MTN should fail, we do not want to be saddled with this program. Moreover, we would not want to be on record with this program as the first in a series of very restrictive worldwide trade actions that might be taken if the MTN should collapse.

In short, this program should only be implemented in the context of a signed, sealed, and delivered MTN. If it is presented to the industry in this light, it might also have a chance of making them real allies in the CVD and MTN ratification fights.

1. Source: Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 86, Textiles. No classification marking.
2. Attached but not printed is a February 6 paper entitled “Administration Textile Program—Pursuant to the President’s Statement of November 11, 1978.” On November 11, 1978, Carter vetoed H.R. 9937, which contained a provision that rescinded U.S. authority to participate in textile negotiations in the MTN. For the text of Carter’s veto statement, see Public Papers of the Presidents of the United States: Jimmy Carter, 1978, Book II, pp. 2010–2011.