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

237. Memorandum From the Chairman of the Council of Economic Advisers (Schultze) to President Carter¹

Washington, March 17, 1980

SUBJECT

• Steel TPM—An Emergency

The Administration’s failure to announce its decision regarding maintenance or suspension of TPM has created uncertainty which is discouraging needed steel exports to this country. This uncertainty needs urgently to be resolved, if the inflationary effects of a drying up of our steel imports are to be avoided.

As you know from the package that Bill Miller sent you last Friday,² I believe that the right course is to suspend TPM. Any other decision would be seen as inflationary—thus eroding some of the gains secured from announcement of your new economic program.³ We would have sent the wrong signal to the critical labor negotiations. We would be criticized for inconsistency and for yielding to pro-inflation domestic pressures.

I see no advantage in the three week postponement of your decision that STR proposes. Indeed, this might be the worst of both worlds. Publication of second quarter trigger prices in the face of US Steel’s two suits, would be criticized as inflationary, while the fact that a decision on TPM suspension was still only 21 days away would maintain the uncertainty that now discourages steel trade.

The effectiveness of our anti-inflation program hinges, in the end, on people believing that we will stick to it. The steel TPM is our first test.⁴

1. Source: Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 80, Steel [3]. No classification marking.
2. See Document 236.
3. Carter announced a new anti-inflation program on March 14. For the text of his remarks, see Public Papers of the Presidents of the United States: Jimmy Carter, 1980–81, Book I, pp. 476–482.
4. The White House announced on March 19 that it would maintain the steel trigger price mechanism at the same level for 3 months. It also cautioned that the TPM would be suspended if steel producers initiated a major anti-dumping case. (Clyde H. Farnsworth, “Imported Steel Curb Unchanged,” The New York Times, March 20, 1980, p. D1)