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FOREIGN RELATIONS OF THE UNITED STATES 1964-1968 Volume VIII International Monetary and Trade Policy DEPARTMENT OF STATE Washington, DC

General and Financial and Monetary Policy

315. Memorandum From Secretary of Agriculture Freeman to President Johnson/1/

Washington, August 1, 1966.

/1/Source: Johnson Library, Bator Papers, Kennedy Round (GATT) (May 4, 1964) [1 of 2], Box 11. No classification marking.

SUBJECT
Kennedy Round Negotiations--Tabling Offers, Agriculture Department exception

I take this occasion to call to the President's attention a decision which apparently has been made subject to final Presidential approval to table U.S. agricultural offers of interest to the EEC in the Kennedy Round negotiations regardless of the fact that the EEC will not make any real offers. The Department of Agriculture has expressed its reservations to this procedure and has recommended that instead of tabling our generous offers, we table an offer roughly commensurate with what the EEC will offer.

Basically, this is a question of strategy. The strategy has been reviewed in detail with the Herter Office and the State Department who carry the negotiating responsibility. The Trade Expansion Act Advisory Committee has also considered it. Other Departments, including Commerce and Interior, expressed certain reservations at the proposed strategy. Nonetheless, the decision has been made to go forward, subject to the President's final approval, by the Herter Office. Because this is a strategy question, I am prepared to acquiesce in the course of action recommended. I have not asked for a meeting with the President. I did want him, however, to be apprised of my reservations.

Agriculture's reservation in this matter is based on the following facts:

1. The United States agricultural offer to the EEC is a very generous one, encompassing a 50 percent cut in tariff on some $315 million of U. S. agricultural imports in 1965. The items covered include some that are very sensitive politically, such as tobacco. At the same time we are being called on to make offers on dairy and meat products, specifically beef. (An offer to cut the duty on canned pork was tabled last September.) If it should become known that such offers are being considered, particularly in the absence of anything even remotely commensurate by the EEC, there would be swift and serious political repercussions in the United States, and there is every reason to expect that they will become known through the EEC.

2. The EEC will make no meaningful offer. From advance information we have, it seems likely that their offer, rather than representing progress, would result in a more protectionist rather than more liberal trade position. It is argued that we have made progress in the negotiation because the EEC has on some few items abandoned its completely unrealistic Montant de Soutien position, which would have only frozen high EEC support levels and which would not have liberalized trade. Initially the EEC insisted this system cover all products. The fact that the EEC will now offer shallow duty cuts on a few items does not represent any real progress in my judgment. Their offers, overall, still do not constitute a basis for negotiating anything but increased protection in the EEC market. It appears that all the EEC is trying to do is legalize internationally its notorious variable levy and gate price system, which relegates third countries to a residual supplier position. The EEC has just finished setting its internal agricultural support prices. The EEC internal price levels on many products are now at least half again as high as the United States price levels, and considerably higher than was previously the case. Such an uneconomic high level of internal pricing can have only one effect. It will certainly increase domestic production within the EEC. With the application of the notorious variable fee system which protects the most inefficient internal producer from any outside competition, it will limit trade possibilities. Moreover, the process of setting these prices is difficult, time-consuming and both economically and politically hazardous. This being the case, it is impossible to conceive the EEC Ministers will now turn around and reverse these decisions.

3. This latest tabling of offers increases the necessity for withdrawals. This offer comes on top of an already imbalanced industrial offer and a seriously imbalanced U.S. agricultural offer to countries other than the EEC, which was tabled a year ago. Thus we are widening the offers gap and increasing sharply the degree to which U.S. withdrawals will have to be made.

4. We do not believe that full withdrawal of these imbalanced offers will be feasible. It is argued that if the EEC and others do not improve their offers, we can at the end of the negotiations withdraw as many of ours as necessary. But once an offer is laid on the table for each country to see, it becomes very difficult to withdraw that offer. For example, our offer on tobacco, involving $100 million worth of trade, is a generous one. Greece and Turkey will find it very attractive. If at the end of the negotiation we try to withdraw it, they will protest strongly. Yet there is a strong likelihood that we would want to withdraw it. The EEC will not even tell us until November whether it will make an offer on tobacco.

There are many other similar examples.

The United States has repeatedly told the less developed countries who complain bitterly about the lack of preferential access to our markets for their raw materials, that rather than seeking the establishment of bilateral quotas and such systems, they should put their confidence in the Kennedy Round and in world-trade agreements. We have told them that they will come out much better through international trade liberalization. If we table offers they find very attractive, and then proceed to withdraw them because we are unable to reach any commensurate arrangement with our commercial equals, these countries will react bitterly. The positions taken and the arguments made which we have had great difficulty meeting at the UNCTAD will come swiftly to the front, aided and abetted by such withdrawals on our part at the Kennedy Round.

Further there will be a great temptation to hold U.S. agricultural offers on the table for the benefit of other agricultural exporters like Australia and New Zealand. This temptation will be sharpened by the fact that other agricultural exporting nations will argue strongly and with some merit that they, as substantial importers of U.S. industrial items, are entitled to this improved access to our market for their agriculture. Withdrawals of U.S. offers from these countries, and even from the EEC, could start a chain reaction of withdrawals which could threaten the unravelling of the whole trade negotiation.

It would, therefore, seem much sounder strategy on our part now only to match the EEC offers, to indicate to the EEC privately but clearly that we are prepared to go a long way if they indicate their willingness to change, and to hold that position rather than exposing our whole hand first.

Orville L. Freeman

 

316. Memorandum From the Acting Special Representative for Trade Negotiations (Roth) to President Johnson/1/

Washington, August 2, 1966, 2:45 p.m.

/1/Source: Johnson Library, Bator Papers, Kennedy Round, (GATT) (May 4, 1964) [1 of 2], Box 11. Secret.

SUBJECT
Kennedy Round Agricultural Offers

Summary

On Saturday, August 6, 1966, the European Economic Community will table in Geneva its agricultural offers in the Kennedy Round. This Office now intends unless otherwise instructed to follow the general negotiating strategy approved by you in September of last year, i.e., to put forward our agricultural offers of principal interest to the Community that we had previously withheld. In addition, we propose to table initial offers in the meat and dairy sectors./2/

/2/A handwritten note in the margin next to this paragraph reads: "Approved by the President August 4, 1966. F. M. Bator."

Discussion

You will recall last September you authorized Governor Herter to table agricultural offers in the Kennedy Round./3/ Items of primary interest to the European Economic Community were to be withheld until the Community was ready to reciprocate.

/3/See Documents 290 and 292.

Ten days ago the six EEC member countries reached agreement on a common agricultural policy for most of the major products. They also agreed to table their agricultural offers. This memorandum, therefore, proposes that we now table the U.S. offers of principal interest to the EEC as well as offers in the meat and dairy sectors. This procedure has the strong support of Under Secretary Ball and the reluctant acquiescence of Secretary Freeman./4/ In addition, the Vice President is in agreement with the proposal, subject, of course, to whatever withdrawals are ultimately necessary to establish reciprocity.

/4/See Documents 288 and 289.

The Community's new agricultural policy is based, for many products, on very high support prices and tightly protected markets, and the EEC offers related to these policies are consequently expected to be entirely inadequate. Should they not be substantially improved, and it would be unrealistic to expect very much improvement, it will be necessary for the U.S. to make extensive withdrawals of its own agricultural offers. Nevertheless, we are convinced that a strategy of generous U.S. initial offers creates the most effective pressure possible on the EEC to improve its offers.

The overall strategy in the Kennedy Round--both in industry and in agriculture, has been to make a strong opening bid. Given the internal politics of the six nations of the Community, this continues to appear to be the most effective way of achieving the maximum result in the negotiations.

Position of the Department of Agriculture

At the request of Secretary Freeman, a meeting of the Trade Expansion Act Advisory Committee was held last Friday./5/ Subsequently, he addressed a memorandum to you (copy of which is attached) indicating that although he questioned the wisdom of the decision, he regarded it as a tactical question and was prepared to acquiesce in the basic strategy decided upon in the meeting with you last August. Nevertheless, he has serious doubts about this strategy in three principal areas:

/5/No record of this July 29 meeting has been found.

1. Domestic political repercussions: Should it become known that the United States had tabled an offer of considerably greater magnitude than that of the Community, the political repercussions would be serious.

We do not believe that details of the negotiations, which are secret, will become fully known for some time. The industry offers which now have been on the table for a year and a half are still, on the whole, very much a secret--both from industry and from Congress. Further, in one of the two most sensitive categories, dairy products, the proposed U. S. offer, as approved by the Department of Agriculture, is merely an expression of willingness to examine issues such as market access, the use of export aids by high-cost producers, and disposal of dairy products in non-commercial channels. In the meat sector, the other sensitive category, the central aim of the U. S. is to create acceptable conditions of access for meat exporters in other markets than our own, principally in the EEC and Japan. We, ourselves, would only be willing to undertake commitments to maintain access to our market for beef, veal and mutton, along the lines of our present meat import quota legislation. In other words, the U. S. would be offering no more than the present law in beef already permits. No tariff reduction is offered at this time.

2. Reciprocity: Secretary Freeman doubts that the U. S. will be in a position to make sufficient withdrawals of offers to achieve reciprocity.

Governor Herter has made very clear to the Secretary, to Congress, and to the European Community that full reciprocity must be achieved under our legislative mandate. He is absolutely committed to this and is fully supported in his determination by George Ball. Neither foreign policy considerations, nor problems of the less-developed countries will, of themselves, require less than full reciprocity with the EEC and the other developed countries.

The headnote accompanying the U. S. agricultural offers tabled last September 16 stated that:

The United States is tabling these offers:

(a) in the expectation that other principal negotiating countries will also table concrete and specific offers on agricultural products, and

(b) on the understanding that, if the other principal negotiating countries are not willing to implement concrete and specific offers on agricultural products which are of a trade coverage and of a degree of liberalization equal to that of the United States offers, the United States will withdraw such offers in whole or in part, to the extent it deems necessary.

These conditions will, of course, also apply to the additional offers of interest to the EEC which we now propose to table.

3. Strategy: Secretary Freeman questions the basic U.S. negotiating strategy of beginning with full offers.

This strategy, as approved by you, remains the most effective method of eliciting full offers from our negotiating partners. Experience in previous negotiations clearly indicates that the opposite tactic of beginning with low offers and negotiating upwards tends to lessen the total scope of substance of the negotiations. In addition, to change this strategy at this time would indicate to the Community and to the other agricultural exporters that the U. S. did not now feel that the agricultural part of the negotiations was as important as the industrial. It would lessen rather than enlarge the hope of achieving the continuing access to the European market that Secretary Freeman desires.

William M. Roth

Attachment/6/

/6/Secret.

U.S. OFFER SUBMITTED TO THE GATT MEATS GROUP

1. The central aim of the U. S. offer is to create acceptable conditions of access to its market for meat exporters. It goes without saying that the U. S. offer could only be implemented as a part of an arrangement under which other major meat importers likewise undertake commitments that provide acceptable conditions of access to their markets.

2. Product coverage. Beef, veal, mutton (fresh, frozen, chilled).

3. The United States would be prepared within the context of the Kennedy Round, and subject to the conditions set forth in paragraph 1 above, to undertake commitments respecting the meats concerned to permit imports to share in the United States' market, and to share in any growth in that market, as follows: The annual aggregate quantity which will be admitted will not be less than the average quantity imported during the period 1959-1963 adjusted by the same percentage that domestic production of these articles has increased or decreased in comparison with the average annual production during the base period 1959-1963.

4. The United States has no fixed ideas as to the form of a meat arrangement. On the basis of the discussion held to date by the GATT Meats Group, it appears likely that an international meat arrangement might take the form of an agreement on a statement of general principles supplemented by bilateral agreements registered with the GATT between principal importing countries and their major supplies. The Meats Group has identified certain elements that should be taken into consideration in the negotiations. These elements are listed in Annex A to TN 64/17, the report of the Group to the TNC./7/ The United States is prepared to participate in the further examination of these elements by the Meats Group.

/7/Not found.

Attachment/8/

/8/Secret.

U. S. OFFER SUBMITTED TO THE GATT DAIRY GROUP

1. Product coverage. Butter, the principal types of cheese, non-fat dried milk.

2. The discussions in the Dairy Group have not yet progressed to the point where there have emerged the outlines of arrangements which would carry out the Ministerial Directive of improved access to markets in furtherance of the development and expansion of trade. The United States is, however, prepared to continue to participate in the work of the Dairy Group with the view to carrying out the Ministerial Directive.

3. The issues which the United States would consider as appropriate to be considered by the Dairy Group would include access to markets, the use of export aids by high cost producers, and disposal of dairy products in non-commercial channels. It is the U. S. view that export aids and non-commercial disposals should not be used to disrupt normal commercial markets of efficient dairy exporting countries. It is prepared to cooperate in the examination of measures or commitments which could be undertaken by all countries to avoid this occurring.

 

317. Memorandum From the President's Deputy Special Assistant for National Security Affairs (Bator) to President Johnson/1/

Washington, August 2, 1966.

/1/Source: Johnson Library, Bator Papers, Kennedy Round (GATT) (May 4, 1964) [1 of 2], Box 11. Confidential. Attached to the source text are copies of notes from Bator to Ball and Solomon, and to Roth, both dated August 2, saying he would inform them of the President's decision as soon as he heard it. Also attached is a note from Bator to the President, August 3, indicating, among other things, that he had set up "your Kennedy Round mtg" for August 4 at 6 p.m. Also attached is a memorandum from Bator to the President, August 4, setting forth the agenda and three options for decision at the meeting: making full 50 percent initial offers on agricultural items, matching "the EEC's very poor offers," or a compromise (medium) offer of 25 percent cuts. Bator favored the first option.

SUBJECT
Another Tactical Decision on the Kennedy Round

We face another tactical decision on agriculture in the Kennedy Round, and I am afraid we need your instructions by Thursday or Friday./2/ I apologize for the short notice, but the situation in Geneva has moved very quickly. (Actually, you made this decision last September. But last evening Orville Freeman decided that he wants to flag for you once again his doubts about the approved strategy/3/--so I feel you should have another shot at the problem.)

/2/August 4 and 5.

/3/See Document 315.

The Situation

You will recall that last September you approved (1) immediate tariff offers on agricultural products of only secondary interest to the Common Market; and (2) later offers on products of major interest to the Six "at such time as the EEC is ready to table. . . ." (At that time, the EEC was not yet ready to table any offers on agriculture. Orville argued that we should not table anything until the EEC was ready. The rest of us, including the Vice President, voted the other way.)

The Six are now ready. Saturday is the tabling date. We know in advance that their offers will be quite poor.

The Issue

Should we (1) go through with the original strategy of 50% initial offers on the agricultural items we withheld in September; or (2) make much more limited offers, matching the EEC? (It is understood that we would not offer tariff cuts on beef, poultry and a few other sensitive items in either case.)

The Line-Up

At Tab A, Bill Roth, speaking also for Governor Herter and his negotiator Mike Blumenthal, argues for tabling full offers, subject to later withdrawal as necessary to achieve a balanced bargain./4/ Roth's recommendation is strongly and personally supported by the Vice President, Secretary Rusk and George Ball. (Acting on your instruction of September that we bring the Vice President into this, I checked with him personally.)

/4/Document 316.

At Tab B, Orville indicates that he is prepared to go along with the Herter strategy, but would much prefer a much smaller offer designed just to match the EEC./5/ (At Tab C is the paper outlining the Herter strategy which you approved last September.)/6/

/5/Document 315.

/6/Document 292.

The Arguments

Everybody agrees that

--we should maximize pressure on the Common Market and our other customers (UK, Canada, Japan, etc.) to improve their offers on agriculture;

--we will make it clear to all concerned that our initial offers are conditional, and that we will tailor our final list to assure a fair bargain.

Herter and company argue that the best way of putting pressure on the EEC is to stay with the September strategy. They have no illusions that it will be easy to move the Six. But they think it is worth a hard try. And they are clear that, in the end, they will have to make whatever withdrawals are necessary to achieve balance.

Freeman recognizes that "this is a question of strategy" and "is prepared to acquiesce". And he has explicitly decided not to ask for a meeting with you. He is, however, (1) skeptical that even an aggressive strategy will cause the EEC to move; (2) worried that, in the crunch, we will lack the fortitude to make the necessary withdrawals; and (3) nervous that our efforts might leak and we will face some political flack from his clients.

My vote is with Herter. The trouble with Orville's strategy is that it will badly damage our bargaining position in Geneva, and, if the offers leak, it is likely to generate just as much political heat. Judged in the light of our aggressive strategy thus far, a small U. S. offer now will be taken as a signal that we have given up on agriculture in the Kennedy Round. We will be charged at home and abroad with throwing in the towel before the opening bell. (In fact, the chances of a leak specific enough to cause trouble are small. We have had industrial offers on the table for two years with no publicity problem. And despite Agriculture's anxieties, we have had no trouble with our September agricultural offers either. Moreover, if there is a leak, we have a good answer; we are following an aggressive strategy to get maximum access for our farmers in foreign markets; we will withdraw wherever there is no adequate response from the others.)

After all the offers are on the table, and after we have bargained item by item for all we are worth, we will know what is the best obtainable bargain in agriculture and overall. It will then be up to Herter and the rest of us to advise you whether such a bargain is better or worse than no bargain at all. And it will be up to the President to decide. Herter, Roth, et al are right that it is too early to quit now.

FMB

Follow through on the Herter strategy as approved last September
Want to hear Freeman argue his case--set up meeting Wednesday or Thursday with Herter/Roth, Rusk, Ball, Vice President/7/
Speak to me

/7/This option is checked. No record of the August 4 meeting at 6 p.m. has been found. (Johnson Library, President's Daily Diary)

318. Memorandum From the Under Secretary of State (Ball) to President Johnson/1/

Washington, August 15, 1966.

/1/Source: Johnson Library, National Security File, Subject File, Vol. I [2 of 2], Box 47. Confidential. A memorandum from Anthony M. Solomon (E) to Ball, August 12, recommended that he sign this memorandum. (Ibid., Solomon Papers, Chronological File, August 1966, Box 13)

SUBJECT
Trade Policy--A Proposed Strategy for the United States

During the past several months, Secretary Rusk and I have become increasingly aware of the need to develop a new trade policy strategy for the United States after the Kennedy Round. You may recall that during your meeting with State Department Assistant Secretaries on May 31,/2/ Tony Solomon mentioned a possible U.S. initiative in this area.

/2/No record of this meeting has been found.

Our ideas have now become a bit clearer and I want to acquaint you with the direction of our thinking. Enclosed is a copy of a memorandum Secretary Rusk proposes to send to Governor Herter, Secretary Connor, and Secretary Wirtz outlining our views as to the need for a new trade policy strategy and a possible way of meeting these needs. We are requesting the support and assistance of these key agencies in developing these ideas further so that an inter-agency proposal (in which Agriculture, Interior and Treasury would subsequently participate) can be submitted to you.

Speculation about possible changes in U.S. trade policy could, I know, be a sensitive issue domestically. It could also have repercussions in the Kennedy Round negotiations which must remain our principal focus in the trade field over the coming months. However, I believe that by restricting inter-agency consideration of this matter to a very small group at the Assistant Secretary level, potentially embarrassing leaks can be prevented.

Although it is not likely that we will be seeking major new trade legislation in the next year, it is necessary that we begin now to develop a policy. What we propose is to refine a strategy which, with your approval, could be tested with Congressional leaders. You would then be in a position, if this seemed desirable, to use this as one element of a positive U.S. program to help ensure a successful meeting of the Inter-American system.

George W. Ball

Enclosure/3/

/3/Confidential. Another copy indicates that this memorandum was cleared in substance with Walter J. Stoessel, Jr. (EUR), Allen D. Gordon (ARA/LA), Joseph Palmer II (AF), Rodger P. Davies (NEA), Samuel D. Berger (FE), Joseph J. Sisco (IO), and Douglas MacArthur II (H). (Johnson Library, Solomon Papers, Chronological Files-August 1966, Box 13) For evidence that the proposed memorandum was sent to the President, see Document 330.

MEMORANDUM FOR
Governor Herter
Secretary Connor
Secretary Wirtz

SUBJECT
Trade Policy--A Proposed Strategy for the United States

I am deeply concerned that the world trading community appears to be drifting into regional blocs and discriminatory arrangements which, unchecked, would have serious political and economic consequences for the United States.

We need a new trade policy strategy following the Kennedy Round to check this drift. A sound strategy for the United States must, I believe, take account of:

--The likelihood of increased discrimination against our exports as more countries in Western Europe associate themselves with the European Economic Community and form the largest market in the world with free trade among themselves and barriers against the United States and other outsiders.

--The further proliferation of special trade arrangements which discriminate among poor countries, against Latin America, and against the United States.

--The persistent appeal of the poor nations for preferred treatment for their exports. The countries of Southeast Asia as well as Africa and elsewhere will judge the sincerity of our interest in their progress by what we are prepared to do in the field of trade as well as aid.

--The willingness of other industrialized countries to respond to this appeal which leaves the United States virtually isolated, a position which carries with it significant political costs.

United States political and economic interests require us to take the initiative and try to guide developments in a manner likely to advance our own national interests. We cannot let matters drift, leaving it to other nations to continue to work out ad hoc arrangements which adversely affect our interests.

This memorandum sets forth a possible way of meeting these challenges. I commend it to your personal attention and invite your support and assistance in developing it further so that an inter-agency proposal can be submitted to the President.

If our prognosis of a link between the EEC and most other Western European nations proves correct, the resulting continental trade wall against us would jeopardize our export position. We could, like Joshua, trumpet against such a wall and perhaps it would crumble. But prudence dictates that we arm ourselves with other tools. The only realistic way, in my view, is to move to the maximum extent possible toward free trade among all industrialized countries. This would be the first element in the proposed new trade strategy and would be in line with the authority to eliminate duties contained in the Trade Expansion Act but which could not be used because the United Kingdom did not join the EEC.

Appropriate legislation would be needed to enable us to enter into negotiations after the Kennedy Round. One approach would be to seek authority to negotiate the mutual reduction and possible elimination of trade barriers staged over an extended period, perhaps ten or fifteen years. An alternative would be to seek authority for another round of negotiations to reduce duties by a specific percentage as a further step toward our ultimate goal.

The second element of the proposed strategy would be to offer the poor countries of the world a "head start" in such a move toward ultimate free trade. The benefits of tariff reductions would be given to them immediately while reductions among industrialized countries are phased over a longer period. This would have a number of advantages for us:

--It would improve our position vis-à-vis the developing countries.

--It would, to the extent the developing countries support this approach, make it politically more difficult for other industrialized countries to resist the longer-term move to reduce barriers among themselves.

--It would result in the phasing out of existing trade preferences which discriminate among developing countries, Latin America in particular.

--It would strengthen our ability to insist on the elimination of preferences enjoyed by the European industrialized countries in the markets of some poor countries which discriminate against United States exports.

--It would probably increase the trade earnings of the poor countries and assist in their economic development; they need trade as well as aid.

There is the problem, of course, of possible injury to U.S. industry and labor arising from increased imports from low-wage countries. This may require additional safe-guards and expanded adjustment assistance. Particularly sensitive items might be excluded entirely. In other cases, quantitative limitation on the amounts which could enter from developing countries at reduced rates might be appropriate.

No formal action should be taken which might divert attention from the Kennedy Round (which has to be substantially wrapped up by February-March 1967). We would not seek new authority until the basis for negotiations has been worked out with our trading partners. This process might take a year--from mid-1967 to mid-1968. In this event, the new program could be included in the 1969 State of the Union message. If the pre-negotiations moved faster and the traditional bias against trade legislation in an election year were overcome, the bill might be sent up in early 1968. In any case, for July 1967 (when the Kennedy Round is concluded), we would propose a simple one or two year extension of the period during which the existing authority under the Trade Expansion Act could be used.

These targets for submission of new legislation may seem far off, but we need to elaborate an inter-agency proposal so that we are in a position to:

--Initiate consultations with Congressional leaders;

--Refer to the direction of our thinking at the prospective meeting of Presidents of the Inter-American system toward the end of this year; and

--Present a proposal in some detail at the Second United Nations Conference on Trade and Development in the summer or fall of 1967.

I believe the trade policy strategy outlined above is in the best interests of the United States because:

--It offers the possibility of dealing realistically with the major commercial policy problem we face in the coming years, namely the strong likelihood of increased discrimination against our exports to Western Europe as these nations enter into various forms of associations with the Common Market;

--It is responsive to the appeal of more than 100 poor nations for a special boost for their exports;

--It would involve only a temporary departure from the basic objective of non-discrimination in world trade but simultaneously will enable us to obtain elimination of the invidious forms of discrimination which exist at present;

--It would include adequate safeguards against injury to American producers and labor; and

--It would help retain the historic US position of leadership in the trade policy field.

I would appreciate your designating a senior officer to meet with Assistant Secretary Solomon to develop further the proposed strategy so that an inter-agency proposal can be sent to the President within the reasonably near future. If the President agrees with this general approach, Congressional sentiment could then be tested.

Because of the sensitivity of this whole subject, I would appreciate your holding this memorandum closely within your respective agencies.

 

319. Memorandum From the Acting Special Representative for Trade Negotiations (Roth) to President Johnson/1/

Washington, August 19, 1966.

/1/Source: Johnson Library, National Security File, Subject File, Trade--General, Vol. I [2 of 2], Box 47. Confidential. An attached undated discussion memorandum is not printed.

SUBJECT
New Trade Legislation

Summary

1. The negotiating authority of the Trade Expansion Act of 1962 runs out on June 30, 1967. Assuming that a moderately successful Kennedy Round has been concluded by that time, legislative authority to take care of continuing routine tariff matters would be required in 1967. There may also be certain agreements reached on an ad referendum basis in the Kennedy Round (i.e., dumping, American selling price, and possibly grains) that will need Congressional approval next year.

2. We do not, however, recommend a major trade bill in 1967, since the Congress probably would not be willing to move so quickly after completion of the Kennedy Round. Rather, we should begin developing a longer range and more comprehensive trade program that would bridge over the following election year and be submitted in 1969.

3. In preparing such a major effort, it will be necessary to study the changed conditions of world trade since 1962. The growing pressures of the less-developed countries, the development of regional trading blocs, and the growth of U. S. investment abroad, all have had their impact on the current posture of trade. Consultations both domestically and abroad and close cooperation with Congress would be essential in the preparation of a new program.

4. The development of such a program could be handled either by a citizens', Randall-type commission, or internally, through this Office. The latter course is probably easier to control, particularly as the channels for consulting with both industry and the Congress already exist.

Recommendations/2/

/2/There is no indication whether President Johnson approved or disapproved these recommendations.

1. If agreement is reached in the Kennedy Round on matters requiring additional Congressional authority (dumping, American selling price, and possibly grains) that such legislation be submitted in the late spring of 1967.

2. That legislation to replace the expiring Trade Expansion Act (June 30, 1967) should be limited to an interim two to three year author-ization designed only to take care of routine tariff adjustments. This bill would include the new adjustment assistance provision agreed upon by the Executive branch this year, and should be submitted in March or April.

3. That the possibility of resubmitting an East-West trade bill be reevaluated after further discussions with Chairman Mills in November.

4. That you authorize this Office to explore with your staff and the other agencies concerned, procedures leading to the development of major trade legislation for 1969. This new effort, which would include a proposal to give serious consideration of the granting of general preferences to the less-developed countries, could be announced by you in the spring of 1967.

William M. Roth

[Continue with Document 320]

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