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

33. Memorandum From the Chairman of the Economic Policy Group (Blumenthal) to President Carter ¹

Washington, May 31, 1977

SUBJECT

• Footwear Agreements

Ambassador Strauss has negotiated orderly marketing agreements (OMA) with Taiwan and Korea on non-rubber footwear. In a separate memorandum he has described the details of these OMAs.² Both agreements cover a four-year period starting June 28, 1977. Over these four years the average monthly exports of non-rubber footwear from the two countries will average 13.6 million pairs or 17% below the 1976 level.

Concerning economic impact, STR estimates that these agreements could create 25,000 jobs by 1978 and generate about 3.4% increase in consumer costs or an average of around 44 cents per pair of shoes at the retail level. CEA estimates of the inflationary impact are considerably higher. However, both agencies emphasize that these estimates involve assumptions that are subject to a wide range of error.

The OMAs have been reviewed by the EPG members and all support them.

One issue has been raised, however, concerning the proclamation of import relief. Treasury, CEA and OMB recommend that as part of your proclamation, you request U.S. International Trade Commission advice on liberalization of import relief by March 1979, in time for possible action at the end of the second year. They argue that since a USITC study is required by law before you can liberalize an OMA, it is important that the USITC advice is delivered before April 1979, when U.S. consultations with Korea and Taiwan will take place as specified in the OMAs. The information and advice provided by the ITC may then be drawn upon in determining what, if any, liberalization is warranted at that time. These agencies believe that calling now for a USITC investigation may be politically more feasible than doing so in the spring of 1979 and would therefore insure that a review does take place. They also argue that in conjunction with the announcement of an OMA, a call now for USITC review would demonstrate your determination to closely monitor the impact of trade restrictions on consumers and inflation.³

STR, State, Commerce and Labor oppose your making a commitment now on a future USITC review. They believe it would prejudge economic conditions in 1979; that it would therefore be inconsistent with the Congressional intent that such reports only be made when it appears that modification or termination of relief may be warranted; and that it could commit you to a course of action you might not want to take in 1979. They argue that the announcement now to seek USITC review later would be interpreted as an indication that you do not intend to maintain a meaningful level of import relief for more than two years; hence, they consider it likely that this action will lose industry and labor support and lead to a Congressional override. Furthermore, they are skeptical that investment for needed structural adjustment would be forthcoming if it appeared that imports would again threaten the industry within two years.

Decisions

1. That you approve the agreements with Taiwan and Korea negotiated by Strauss. (All EPG members support.)⁴

2. That the proclamation for import relief call for USITC review and advice by March 1979. (Treasury, CEA and OMB support; STR, State, Labor and Commerce oppose.)⁵

1. Source: National Archives, RG 364, 364–80–4, Special Trade Representative Subject Files, 1977–1979, Box 4, Footwear 1977. No classification marking. Sent to Carter under cover of a June 1 memorandum from Watson. (Ibid.)
2. See Document 32.
3. In a May 31 memorandum to Carter, Blumenthal discussed his support, as Secretary of the Treasury, for an immediate USITC review request in greater detail; Watson sent Blumenthal’s memorandum to Carter under cover of his June 1 memorandum (see footnote 1 above).
4. Carter indicated his approval of this recommendation. The White House announced on June 14 the signing of a 4-year Orderly Marketing Arrangement between the United States and the Republic of China on shoe imports. See Public Papers of the Presidents of the United States: Jimmy Carter, 1977, Book I, pp. 1113–1115. The U.S.–ROK OMA was signed on June 21. For the text of Presidential Proclamation 4510 issued on June 22 on the “Implementation of Orderly Marketing Agreements—and the Temporary Quantitative Limitation on the Importation Into the United States of Certain Footwear,” see Public Papers of the Presidents of the United States: Jimmy Carter, 1977, Book I, pp. 1148–1151.
5. Carter indicated his disapproval of this recommendation.