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

244. Memorandum From the United States Trade Representative (Askew) to President Carter¹

Washington, undated

SUBJECT

• Color Television Receiver Relief Extension

PROBLEM

By June 30, 1980, you must decide whether to proclaim an extension of import relief for the U.S. color television industry. We need your decision before you leave for the Summit because one option recommended is to extend the existing orderly marketing agreements (OMAs) with Korea and Taiwan, and these would have to be renegotiated by June 30. The United States International Trade Commission (USITC) unanimously advised that termination of import relief on color television receivers and subassemblies from Taiwan and Korea would have an adverse economic effect on the domestic industry. By law, relief can be extended for a maximum of 3 years and at a level no greater than that in effect immediately before such extension. Attached is a paper summarizing further background on this case.²

COMPACT,³ a coalition of eleven labor unions and three producers supports a continuation of relief. As of Friday, June 13, you had received 11 Congressional letters on this issue.

Within the interagency Trade Policy Review Group (TPRG), the Departments of Labor, State, Treasury, Commerce, Interior, and the USTR support an extension of relief. The CEA, COWPS, IDCA, and Justice favor termination.

RECOMMENDATIONS

I. Continue Relief

Agencies supporting continued relief argue that:

1. Extension of relief will provide more time for the industry to achieve benefits from the planned and implemented technological product innovations. Terminating relief during this economic recession could deny them some of these benefits.

2. Substantial idle color TV capacity exists in Korea and Taiwan which could result in a major increase in imports if U.S. import restrictions are completely lifted.

3. Failure to grant relief would make the United States the only major world market open to unrestricted import competition in color TVs.

4. Job loss in the industry could accelerate if relief is terminated.

5. Although relief has been in effect for the past 3 years in the case of Japan, and one and one-half years in the case of Korea and Taiwan, prices of color TVs have been stable relative to prices of most other articles.

All but one agency supporting continued relief recommend that you authorize USTR to seek to negotiate orderly marketing agreements (OMAs) with Korea and Taiwan at a combined level of 800,000 to 850,000 for the first year and 850,000 to 975,000 in the second year. These OMAs would not include incomplete receivers without picture tubes and receivers of a screen size 12 inches or less. Both exclusions represent a substantial liberalization of the existing relief. In addition, the Japanese OMA would be terminated; although we would indicate to Japan that any surges from recent levels could lead to U.S. restrictions. We would monitor the other countries to be in a position to prevent surges.

In the event that we cannot reach agreement by June 30, it is recommended that you implement a global quota of 1.4 million complete sets (including incomplete sets with picture tubes) the first year and 1.55 million in the second. This quota would exclude the same products as the OMAs. The quota would have indicative levels for individual countries to limit disproportionate surges.

The agencies supporting extension of relief feel that this proposal would:

• (a) provide a meaningful extension of relief;
• (b) meet the concerns of Korea and Taiwan who have been severely restrained under the existing relief;
• (c) continue the restructuring of the industry without significant inflationary consequences.

It is unlikely that COMPACT, particularly the unions, will publicly support this formulation, mainly because of the exclusion of incomplete receivers. This exclusion was recommended by virtually all agencies because they felt it did not provide meaningful protection for U.S. workers. I would propose to try to negotiate OMAs at the lower end of the ranges indicated (especially in the second year), if I can bring COMPACT to a more favorable posture.

The Department of Labor feels that the above approach will not provide sufficient relief to the domestic industry and recommends that you implement a global quota for two years at 1.4 million complete receivers and 3.05 million incomplete receivers each year. Labor would also exclude 12 inch and under receivers but feels that it is critical to include incomplete receivers and to have global coverage of imports. Under this option, OMAs could be negotiated later with Taiwan and Korea. It is considered likely that COMPACT would endorse this approach.

Should you decide to approve either of the relief options, we will provide you with a proclamation to be signed by June 30. Every effort will be made to keep your decision secret until after the Summit.

II. Terminate Relief

COWPS, CEA, IDCA, and Justice support termination of relief for the following reasons:

1. Domestic firms have adjusted to import competition. Domestic production and exports were at record levels for 2 years. Capital investment, capacity, capacity utilization, and productivity all increased. Inventories and imports declined, and U.S. firms have initiated significant cost savings measures, and substantially rationalized production by moving labor-intensive subassembly and component operations offshore.

2. Four foreign firms have moved their final assembly operations to the United States, joining three others already in the U.S. market. These entrants helped cause the significant decline in complete color television imports from Japan.

3. Despite the OMAs, domestic employment has declined. Continuation of relief is not likely to stop this trend. As the U.S. industry continues to rationalize, production will become increasingly automated, and job losses should continue.

4. Domestic producers can better compete with imports in terms of price. During the OMAs, some domestic manufacturers have become competitive in the low-priced private label market in which they previously had been unable to sell.

5. Termination of relief will remove a distortion in the international color television market place and the small consumer cost caused by trade diversion.

6. Termination of import relief will allow the Korean electronics industry to recover from the serious consequences of the OMA, and strengthen the Korean economy in this period of political instability. It would also avoid problems with Taiwan and Japan which would occur were relief continued.

DECISION

I. Extend import relief either by:

• A. Seeking to renegotiate OMAs with Taiwan and Korea and implementing a global quota of 1.4 and 1.55 million receivers respectively for 2 years should negotiations be unsuccessful (as recommended by USTR, State, Treasury, Commerce, and Interior).⁴
• B. Implementing a global quota for two years at 1.4 million receivers and 3.05 million incomplete receivers each year (as recommended by Labor).

II. Terminate import relief (as recommended by CEA, COWPS, IDCA, and Justice).

III. Please Discuss with me.

Attached to this memorandum is the Trade Policy Staff Committee paper on this case.⁵

1. Source: Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 51, Memos from President [1]. Confidential. Carter initialed “C” at the top of the page.
2. Not attached; however, Attachment 1, an undated paper entitled “Background,” is attached to another copy of Askew’s memorandum in the Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 39, Hutcheson, Rick [9].
3. Allied Industrial Workers of America, International Union; American Flint Glass Workers Union of North America; Communications Workers of America; Glass Bottle Blowers’ Association of the United States and Canada; Independent Radionic Workers of America; Industrial Union Department, AFL-CIO; International Association of Machinists; International Brotherhood of Electrical Workers; International Union of Electrical, Radio, & Machine Workers; United Furniture Workers of America; and United Steelworkers of America. [Footnote in the original.]
4. Carter indicated his approval of this option and initialed “J.” Presidential Proclamation 4679 on color television receiver imports was released on June 30; for the text, see Public Papers of the Presidents of the United States: Jimmy Carter, 1980–81, Book II, pp. 1257–1260.
5. Not attached; however, a June 10 Trade Policy Staff Committee paper, Draft Document 80–89, entitled “USITC Section 203 Report on Color TVs,” is attached to another copy of Askew’s memorandum in the Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 51, Memos from President [1].