218. Memorandum From the Special Representative for Trade Negotiations (Strauss) to President Carter 1

SUBJECT

  • Decision on Extension of Specialty Steel Import Relief

This memorandum discusses options regarding the duration of an extension of specialty steel import relief. As I noted in my May 18 memorandum on specialty steel,2 all agencies had agreed to recommend that you extend import relief for six months in the form of progressively larger bimonthly quotas.

During the past several weeks, Congressional interest in this case has intensified. To date, 34 Senators and 54 members of the House have written either you or me; they almost unanimously favor a substantial extension of import relief. If we were to respond to these strong Congressional concerns, which were evident in your meeting with the Congressional Steel Caucus on June 7,3 relief would have to be extended at least 1½–2 years.

There is not a good economic case for extending relief that long and I would not recommend that you do so. However, you may want to consider an eight month extension of relief as well as a six-month extension. Attachment 1 outlines my recommendations on quota levels for an eight month extension of relief.4

I personally recommend that you extend import relief for eight months rather than six months. This longer relief period is more responsive to Congressional concerns but because of the phase down of [Page 628]the restrictiveness of the quotas in each successive two-month period, would have little real effect. It would also allow a greater proportion of the build-up in foreign specialty steel inventories now in bonded U.S. warehouses to be imported while the quotas were still in effect thus reducing the likelihood of large surges in imports upon expiration of relief.

There are also several options with regard to the country structure of the quotas. Currently, Japan, the EC countries collectively, Sweden, and Canada generally have separate country quotas in each of five specialty steel product categories. Imports from other countries are generally subject to first-come, first-serve “basket” quotas. The existence of these basket quotas and of quotas for the EC countries collectively instead of individually has created a substantial build-up of imported steel from these countries in bonded U.S. warehouses.

In two categories (stainless steel bar and alloy tool steel), the stocks in warehouses are so large in relation to the EC and other country basket quotas that even very substantial increases in these quotas would not be sufficient to clear the warehouses. In order to ensure that these stocks are entered during, not after, the relief period, I recommend that you proclaim global quotas for the bar and alloy tool steel categories. For the remaining three product categories, I recommend that we maintain the current country breakdowns since the inventory problems are not as severe in these categories.

Attached to this memorandum are two alternative draft proclamations—one for a six-month extension and the other for an eight-month extension—for your signature if you decide to extend relief.5 Since the current relief program expires on Wednesday,6 it is critical that you decide no later than next Tuesday morning so that importers and exporters will have at least one day’s notice.7

  1. Source: National Archives, RG 364, 364–80–4, Special Trade Representative Subject Files, 1977–1979, Box 7, Steel File #2. No classification marking. A stamped notation indicates that Strauss signed the original.
  2. Not found.
  3. On June 7, Carter met with the Congressional steel caucus in the Cabinet Room from 9:04 until 9:34 a.m. (Carter Library, Presidential Materials, President’s Daily Diary) No memorandum of conversation was found.
  4. Attachment 1, attached but not printed, is an undated paper entitled “Bimonthly Quota Levels, By Product Category, for Eight-Month Extension of Relief.”
  5. Not attached.
  6. June 13.
  7. Presidential Proclamation 4665, issued on June 12, extended specialty steel import quotas for an additional 8 months. For the text, see Public Papers of the Presidents of the United States: Jimmy Carter, 1979, Book I, pp. 1032–1034.