U.S. TRADE STRATEGY ISSUE PAPERS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00109R000100070003-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 19
• Document Creation Date: December 20, 2016
• Document Release Date: December 14, 2007
• Sequence Number: 3
• Publication Date: November 18, 1982
• Content Type: MEMO

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ACTION INFO DATE INITIAL
TO:
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DCI
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EXDIR
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D/ICS
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DDI
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DDA
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DDO
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DDS&T
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Chm/NIC
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GC
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IG
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Compt
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D/EEO
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D/Pers
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D/OEA
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C/PAD/OEA
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SA/IA
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Not referred to FTC. Waiver
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Copied to:
OGI STAT
O EA STAT
Route:
C/NIC
VC/NIC
NI0/AL - Hans
Not referred to FTC. Waiver
applies.
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4P THE WHITE HOUSE
WASHINGTON
CABINET AFFAIRS STAFFING MEMORANDUM
DATE: Nov. 18, 1982 NUMBER: 098383SC
SU]JECT: U.S. Trade Strategy Issue Papers
ACTION FYI
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense
Attorney General
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Counsellor
OMB
CIA
USTRTR
IV/
0
OV
CEA
OSTP ^
RE]NIARKS:
ACTION FYI
Baker ^ ^
Deaver ^ ^
Clark ^ ^
Darman (For WHStafj`ing)or+ s&([3 ^
Harper ^
Jenkins ^ ^
^ ^
^ ^
^ ^
^ ^
^ ^
^ ^
^ ^
................................................................... ................
CCCT/Gunn i ^
CCEA/Port er ^ ^
CCFA/Boggs ^ ^
CCHR/Carleson ^ ^
CCLP/Uhlmann ^ ^ '
CCMA/Bledsoe ^ ^
CCNREBoggs ^ ^
Please provide any comments/recommendations by Monday, November 29.
These papers will be discussed in an upcoming Cabinet Council
meeting.
RE' URN TO: S/ Craig L. Fuller
Assistant to the President
for Cabinet Affairs
456-2823
^ Becky Norton Dunlop
Director, Office of
Cabinet Affairs
456-2800
/'~DCI
RE
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DUE BY: c. o. b. Monday,
ove er 29
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. 0
THE UNITED STATES TRADE REPRESENTATIVE
WASHINGTON
20506
November 10, 1982
MEMORANDUM FOR THE PRESIDENT//
FROM: William E. Brock`
On the basis of our discussion of the U.S. Trade Strategy
paper in the Cabinet Council on Commerce and Trade on
November 8, my staff has prepared a set of decision memo-
randa for the key issues. I submit them to you for
decision.
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ADMINISSTION LEGISLATIVE TRADE PJ1k1,AGE
ISSUE
The Administration must be prepared to present to the Congress
a legislative package of trade bills early in 1983. Several
Administration authorities and statutes are due to expire in
the coming two years, and thus extension of such measures
must be sought. In addition, it is expected that Congress
will initiate many new proposals on which the Administration
will be required to react.
ANALYSIS/BACKGROUND
The new Congress can be expected to be less supportive of
free trade policies and more aggressive in its demand for
"fair and equitable treatment" by our trading partners.
In addition to anticipated opposition to much of the necessary
renewal legislation, Congress is expected to take up such
issues as increased export financing, a new trade adjustment
and retraining program, local content requirements for
selected industries, and stronger reciprocity trade measures
designed to restrict access to the U.S. market. In addition,
attempts will be made to limit the President's discretion
under existing import relief mechanisms so as to make the
process for relief more automatic.
In an effort to retain our traditional constituency of free
trade supporters so that the Administration will be successful
in accomplishing the legislative trade objectives in the 98th
session of Congress, it is suggested that a legislative package
be prepared in coordination with Congressional leaders.
Such a package would be a joint Administration-Congressional
initiative and would be comprised of new proposals as well
as "must" renewal legislation.
Specific items to be included in the legislative package are:
1.
Improved, more aggressive export financing plan.
(Treasury/EXIM/USTR)
2.
Reform of the Foreign Corrupt Practices Act. (USTR)
3.
Reform of U.S. anti-trust laws for trade purposes.
(Justice)
4.
New research and development (R&D) investment inventives
for targeted industries in lieu of trade protections.
(Commerce/USTR)
5.
New trade adjustment assistance and retraining initiative.
(Labor/USTR)
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6.
Reform of U.S. import relief laws and procedures, including
section 201, 301, 406, dumping and countervailing duty.
(USTR/Commerce)
7.
New Presidential negotiating authority, including
124 - like tariff authority (tariff to tariff), a
and investment mandate (non-tariff), and possible
"North-South" authority (tariff and non-tariff).
section
services
broad
(USTR)
in addition to the above list of new proposals, the following
renewal or extension legislation must be considered during
the new 98th Congress:
1.
Legislation providing for a GATT legal substitute for
Domestic International Sales Corporation, DISC.
(Treasury/USTR)
2.
Amendments to the Export Administration Act. (Commerce)
3.
Renewal of the Export-Import Bank Charter. (Treasury/EXIM)
4.
Legislation to implement the new Harmonized tariff
classification. (USTR)
5.
Renewal of the Generalized System of Preferences.
(USTR)
Members of Congress have already begun to develop ideas on
many of these issues, and therefore consultations with Congress
are expected to produce an outline of the necessary legislation.
Further, the Administration will seek the assistance of Congress
in drafting the specific legislative language at the appropriate?
time.
In this manner, both the Administration and Congressional leaders
will share "ownership" of the legislative trade package and
broad-based, bipartisan support will be easier to gain.
That the Office of the United States Trade Representative
consult with the Congress in drafting a preliminary outline
for a legislative trade package, and report the results to
the Trade Policy Committee and the Cabinet Council on Commerce
and Trade by December 10.
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I
EXPORT FINANCING
ISSUE
U.S. companies have lost major export sales as a result of
government subsidized financing abroad. The business community
has lost confidence in the Administration's willingness to assure
that U.S. exporters are not disadvantaged by foreign credit
subsidies. The Administration needs an export financing policy
and Ex-Im budget that will restore the confidence of the business
community.
ANALYSIS/BACKGROUND
Many of our major trading partners provide government-subsidized
credits-to their exporters. Such subsidies have put U.S.
exporters at a serious disadvantage during the past year when
interest rates soared. While the return of interest rates to
more normal levels has reduced the dimensions of the financing
problem, Administration export financing policies remain an issue
of major concern to the business community.
Competition among governments on export credit subsidies is kept
within bounds by the OECD Export Credit Arrangement. During the
past year the United States has been able to achieve some major
improvements in that agreement and there is a consensus within
the Government on further negotiating efforts to strengthen the
agreement. While the agreement reduces the scope for foreign
government export credit subsidies, it does not eliminate
subsidized credits.
Ex-Im loans and guarantees have traditionally served to offset
government export credit programs of other countries as well as
to assure the availability of financing for capital projects too
large for private sector funding. If interest rates do not rise
and if progress continues in improving the OECD Export Credit
Agreement, a modest expansion of the Ex-Im Bank's resources
will be adequate.
The business community is extremely concerned that if interest
rates should rise, other governments will again provide liberal
export credit subsidies which will not be offset by the U.S.
Government. This apprehension has contributed to a significant
erosion of public support for our open trading system, and has,
led some firms to source major contracts through their overseas
subsidiaries where competitive financing appears more likely.
In order to address this concern, the Administration needs to
provide assurances that we will not allow our exporters to be
disadvantaged by foreign. government export credit distortions.
This could be done by providing assurances that Ex-Im will provide
comparable interest rate subsidies from its reserves or by seeking
a larger budget authorization for the-direct credit program, if
the potential for foreign credit subsidies reoccurs.
To minimize the budgetary outlay expense of a competitive
financing program, Ex-Im Bank could increasingly shift from
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its present role of providing direct credits to providing guarantees
and insurance of private credits and direct subsidies, where that is
necessary to offset the export credit subsidies of foreign govern-
ments. As U.S. interest rates fall, use of financial guarantees
will enable many exporters to secure long-term financing from
PEFCO at rates competitive with the financing packages of our
major trading partners. Financial guarantees will also be-required
as commercial banks reach credit limits for specific countries
and/or feel unable to assume additional risks associated with
overseas lending. Credit subsidies, provided through either the
direct credit program or by discounting commercial or PEFCO lending
rates, could be used on a more limited basis to match foreign export
credit subsidies.
To boost confidence that resource management of Ex-Im Bank programs
is firm, Ex-Im Bank could be provided with more specific criteria
as to how its program resources -- interest support and guarantee --
should be used. These criteria could be developed by an interagency
committee.
To restore private sector confidence in the Administration's
willingness to neutralize foreign export credit subsidies, the
following approach is recommended:
Statement of Policy. The Administration should firmly and
publicly state that while we will continue efforts to reduce
and eliminate export credit subsidies through reform of the OECD
Export Credit Arrangement, the Ex-Im will be given adequate
resources and authority to neutralize the distortions created
by foreign credit subsidies that disadvantage U.S. exporters.
Ex-Im Budget.
Option 1: The FY 1984 Budget for Ex-Im would include $12
billion in guarantee and insurance authority and $3.8 billion in
direct credit authority. Ex-Im Bank would be authorized to use
its reserves to provide an interest subsidy on commercial loans
where that is necessary to offset foreign credit subsidies.
Option 2: The FY 1984 Budget for Ex-Im would include $12
billion in guarantee and insurance authority and $3.8 billion in
direct credit authority. The Ex-Im would be authorized to
provide direct credits above the $3.8 billion level if that
becomes necessary to.offset foreign credit subsidies.
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? ?
AGRICULTURAL EXPORT SUBSIDIES
Foreign'agricultural export subsidies are reducing U.S. markets
abroad. This has become a major political issue because
bountiful crops worldwide have depressed U.S. farm income and
increased the competition for foreign sales. The United States
needs a strategy that will depend on agricultural trade interests
and obtain support of the farm community for U.S. trade policy.
ANALYSIS/BACKGROUND
The European Community (EC) has become the world's second
largest-exporter of agricultural products with sales outside
the Community valued at $22 billion in 1980. Because EC domestic
prices in virtually every commodity area are higher than world
prices, these sales are possible only with the assistance of
direct export subsidies.
High domestic support prices protected by variable import
tariffs effectively isolate EC domestic production from import
competition. There are almost no controls on domestic production
and, as a consequence, the EC is more than self-sufficient in
virtually every commodity area except fruits and vegetables.
Production in excess of domestic needs is exported with the
assistance of subsidies in order to protect domestic prices.
There is no limitation on the amount of monies which can be
spent to subsidize exports. In 1982, $6 billion, or 50 percent
of the EC's budget for agricultural market support, will be spent
on direct agricultural export subsidies. Fifty percent of these,
monies are used to subsidize exports of dairy products alone.
Aside from the $500 million in blended credit which you recently
announced to assist U.S. agricultural exports, the United States
has no direct export subsidy programs. U.S. agricultural
exports valued at $40.5 billion this year will be slightly below
last year's sales. This will be the first time in 13 years that
the value of U.S. agricultural exports has not shown a year-to-year
increase.
The United States has sought to discipline the EC's use of export
subsidies by challenging the practice on a product-specific basis
in the General Agreement on Tariffs and Trade (GATT); i.e., wheat
flour, sugar, poultry and pasta. The GATT process has been
particularly slow, and there is no guarantee that the cases
will be adjudicated in favor of the United States. This is
because the GATT rules permit export subsidies on primary products
so long as the subsidies do not result in the country obtaining
more than an equitable share of world trade, displacement in
individual markets, or material price undercutting.
At the November 29 meeting of the GATT Ministerial, the United
States will be seeking a commitment on the part of the Ministers
to a standstill on the introduction of new subsidies and a
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phase-out of current subsidies on primary products. While a
number of countries are prepared to support such a proposal,
including Australia, New Zealand, Canada and key developing
countries, the EC has made it clear that it will agree only to
study the definitions underlying the current GATT rules on
agricultural export subsidies. While we agree that a discus-
sion along the lines proposed by the EC could lead to some
improvements in the discipline on agricultural subsidies over
the long run, we have no indication that the EC has developed
the political will to reach concrete agreements on the. issues
involved any time soon. Given the EC's intransigence in the
area of agricultural export subsidies, we feel that the only way
the EC can be led to alter its practices is for us to engage in
an active export subsidy program aimed at specific markets and
commodities so as to affect EC exports.
1. The United States should create a war chest for the purpose
of meeting EC subsidized competition. The initial funding should
come out of the $75 million that is left out of the $175 that
was appropriated in the last session. In addition, if necessary
for negotiating purposes, USDA should be authorized to supplement
these funds from their monies available in other USDA programs,
up to an amount of $900 million. USDA and USTR would develop a
mechanism to see that the funds are used in the best manner so
as to obtain the desired objective.
2. Sell U.S. dairy products stocks on the international market.
USTR should be authorized to consult with Australia and New
Zealand about appropriate compensation since unsubsidized dairy
sales from these countries are likely to be displaced as a
result of U.S. action. Some of the U.S. sales may eventually
end up in the Soviet Union; this could be minimized if sales to
the Soviet Union were prohibited when the U.S. tenders were
announced.
APPROVE DISAPPROVE
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9
U.S. GOVERNMENT IMPOSED DISINCENTIVES TO EXPORTS
ISSUE
The business community remains concerned about a number of
export disincentives. Useful progress has been made during
the past two years, but the business community remains
concerned about certain aspects of the Foreign Corrupt
Practices Act, the Export Administration Act, the antiboycott
laws and various government regulations.
ANALYSIS/BACKGROUND
The Administration decided in February 1980, to reduce or
eliminate a number of export disincentives. Priority was to
be given to passage of legislation to (a) liberalize the
method of taxing foreign earned income by Americans working
abroad, (b) facilitate the formation and operation of export
trading companies, and (c) eliminate uncertainties over the
meaning and application of the Foreign Corrupt Practices Act
(FCPA).
These objectives have now been achieved, except for legislation
to amend the FCPA, which has not yet cleared the House. The
progress that.has been made has been viewed positively by the
business community. The following issues remain to be
addressed:
1. The Foreign Corrupt Practices Act - Legislation to
clarify ambiguities in the Act has passed the Senate but
not the House.
2. The Export Administration Act (EA-P.) - Scheduled for
renewal in 1933, under this Act, export controls may be
imposed for reasons of national security, foreign policy and
inadequate supply. In many cases such sanctions have not
been effective in changing the policies of those governments
they are aimed at and have resulted in lost U.S. export sales.
A number of U.S. industries believe that unilateral U.S.
imposition of export controls has seriously weakened their
ability to compete. These industries accept the need for
national security controls, although they want them held to
the necessary minimum and imposed on a multilateral basis.
With regard to foreign policy considerations, the black
community. supports controls vis-a-vis South Africa, and the
Jewish community supports controls vis-a-vis the more extreme
Arab States on terrorist grounds; the business community
generally opposes such controls.
Developing an Administration position on renewal of the'EAA
will require reconciliation of often-conflicting trade
policy, national security and foreign policy objectives.
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3. Antiboycott laws - Two separate statutes (the Export-
Administration Act and the Tax Reform Act) administered
by two different agencies (Commerce and Treasury) govern
U.S. antiboycott behavior. Behavior permissible under one
act may be restricted by the other, and vice versa. The .
business community strongly feels these differences should
be reconciled. This issue will be very difficult to deal
with, however, since there is no indication that the Jewish
community in the United States would support legislative
changes. Because the Export Administration Act is the most
recent statutory provision and because it faces renewal
next year, consideration of the EAA provides an excellent
opportunity for removing conflicts among these provisions.
4. Deregulation - Numerous government regulations impede
exports. USTR and OMB have recently agreed to work together
to try to reduce these regulatory burdens on a case-by-case
basis. To date, USTR has recommended elimination of regula-
tions that (1) impose an artifically low ceiling on agent
commissions for commercial sales under DOD's Foreign Military
Sales program, and (2) requires extraterritorial environmental
reviews by Government agencies for export transactions. USTR
and OMB should conduct a broader interagency examination for
other subjects that might be candidates for deregulation.
RECOMMENDATION
A. The TPC should initiate a work program to liberalize the
Foreign Corrupt Practices Act, antiboycott laws, and burdensome
regulations; the trade advisory committees (and the Jewish
community on antiboycott) should be consulted in developing
the Administration's position.
B. Because the Export Administration Act is principally
administered by the Department of Commerce, that agency
should lead an interagency review to develop the Administra-
tion's position on renewal of the EAA early next year. The
trade advisory committees should be extensively consulted
as this position is developed.
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4P DISC ?
The Administration must propose an amendment to DISC legislation-
designed to address the finding of a GATT panel that the existing
DISC is inconsistent with U.S. obligations under the GATT. The
primary issue is whether an amended DISC program should provide
the same level of benefits as the current DISC program. The
business community views a reduction in the level of DISC
benefits as an increase in business taxes.
ANALYSIS/BACKGROUND
The DISC issue remains a serious irritant to U.S.-EC trade
relations. The DISC dispute has become an obstacle to
progress in the GATT Council on other issues of major concern
to the United States. In order to remove this obstacle,
the United States announced at the October 1 GATT Council
meeting that it would propose to the next Congress an amend-
ment to DISC designed to make it consistent with the GATT.
The Congress is anxious to hear the Administration's views
on a DISC alternative. Hearings will be scheduled on DISC
in the Senate and possibly the House when Congress returns on
November 29. The Administration will be invited to testify
and must develop a position on DISC before Congress reconvenes.
The Treasury Department now is preparing the analysis upon
which an Administration position will be based.
The business community is willing to accept changes in the
DISC that would make it clearly GATT consistent. There is
strong opposition in the business community and in the Congress
to any change in DISC that would increase taxation of export
income because U.S. exporters already carry a greater tax
burden than do their foreign competitors.
Making a proposal that is acceptable to the business community
is critical because DISC has become a highly visible element
of the Administration's export policy. Almost 8,000 U.S.
companies currently have DISCs. The Administration was
severely criticized by business interests last year for re-
ducing DISC benefits by 15 percent in the Tax Equity and
Fiscal Responsibility Act of 1982. There would be strong
opposition in the business community and the Congress to a
new DISC program that would increase the taxation of export
income.
RECOMMENDATION
That the Treasury Department complete its analysis of DISC
alternatives by November 29 and the Administration adopt a
DISC proposal which does not increase the taxation of export
income.
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? ANTITRUST .
How can the Administration clarify and modify its antitrust
policies in a manner which will promote the competitiveness
of U.S. goods and services in world markets?
BACKGROUND
U.S. antitrust policies increasingly need to take account of
international competition. The Justice Department has
recognized this need, and has increasingly modified its
policies in light of international competitive factors. As
can be expected during a period of change, however, there is
a great deal of ambiguity which bothers the business community.
Of particular concern to businessmen are the following:
U.S. law is ambiguous on the extent to which companies can
form arrangements to share their research and development
efforts. In some sectors, particularly high technology,
the lack of cooperative research and development has put
the United States at a competitive disadvantage internationally.
In contrast to U.S. policy, the Japanese Government encourages
intercompany sharing of research and development. There is
a widely held view that this has facilitated their worldwide
success in the semiconductor market at the expense of U.S.
manufactures.
Another issue concerns the definition of a competitive market.
While interpretations of our antitrust laws by the Justice
Department have been moving towards a broader global market
concept, a clear statement on this issue would be helpful in
guiding public policy and achieving a national consensus.
Another issue concerns the degree to which U.S. foreign .
subsidiaries may conform to local rules of competition without
being subject to liability under U.S. antitrust laws.
An Interagency Task Force, chaired by the Department of
Justice, should be established to formulate a clear state-
ment of U.S. antitrust policy with respect to cooperation
on research and development, applicability of L' S. antitrust
standards to U.S. subsidiaries abroad and the definition of
a competitive market.
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INDUSTRIAL ADJUSTMENT
ISSUE
America's basic manufacturing industries are experiencing
high and rising unemployment (in some cases approaching 50
percent) and major financial losses which could result in
significant bankruptcies. At the same time, imports are
increasing in many of these same industries; pressures for
import protection are growing and may get out of control.
To resist growing protectionism, we must develop an easily
identifiable, trade-related adjustment program that helps
industries and workers adjust to changing economic circumstances.
ANALYSIS/BACKGROUND
Plant closings and layoffs in America's basic industries
have increased dramatically over the past year. This is the
third year of recession in these industries. Forecasts for
1983 and 1984 do not suggest substantial improvement. While
investment and employment in these industries have fallen
precipitously, imports of the products they manufacture have
continued to increase. As a result, we can expect growing
demands for import protection in coming years that will
prove increasingly difficult to resist.
U.S. law requires that government provide import relief
where industries are injured. Our only real alternative in
cases of import-impacted injury is to provide adjustment
assistance. Yet, the existing trade adjustment programs for
firms and workers have lost their creditability and, as a
result, their funding. We must design and adequately fund
viable trade adjustment programs that encourage firms to
adjust positively and workers to seek alternative jobs, and,
if necessary, retraining. _
At the level of the firm, the government needs to help
encourage private investment, innovation and adaption
without telling industry what to do. Industrial planning
should be left to the private sector. One critical need is
for federal R&D spending to be redirected or for new funds
to be provided for commercial R&D relevant to trade-impacted
firms and industries. (Today, most federal R&D funding goes
into noncommercial research. U.S. funding of commercial
research lags far behind Japan and other developed countries.)
Funds should be committed in ways relevant to the nature of
the adjustment problems facing particular sectors. Waste
could be minimized by requiring matched private sector.
funds. In some sectors, current lines of production could
be made more competitive through additional investment in
industrial innovation. In such cases, funds would be used
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to support research and development to improve competitiveness.
In other cases, where an old line of production is not
economical, R&D funds may be used to promote innovation in
new lines of activity.
For workers, we need a well-conceived, adequately-funded and
effectively-managed program which focuses on adjustment
rather than income maintenance. The program should
-- emphasize job search before training,
-- improve job search through job clubs, etc.,
-- reduce training costs with vouchers,
grant blanket worker TAA certifications when providing
import protection to spur desired adjustment, and
-- shorten the certification process.
Estimates are that 60 percent of all structurally displaced
workers are trade-impacted. An effective, trade-related job
search and training program will help these workers adjust
to structural changes and, at the same time, will be of
significant benefit in resisting protectionism. Although
requests for job search and training assistance were low in
the past, changes in the program and the growth of permanently
displaced workers should increase demand for the program.
RECOMMENDS-T ION
Action Item 1: We should develop a program which will
provide trade-impacted firms with matching federal funds for
R&D and market research. Such a program should be based on
adjustment plans prepared by impacted industries. $1 billion
should be budgeted for this purpose.
APPROVE DISAPPROVE
Action Item 2: We should develop a worker adjustment program
that will provide training and job search services for
trade-impacted, structurally displaced workers. $170 million
should be budgeted for this purpose.
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? IMPORT RELIEF S
ISSUE
While the Administration has been opposed to protectionist
actions, it recognizes that there are occasions when temporary
trade relief is desirable and has granted relief in such cases.
Trade relief may be ineffective in some instances, however,
because non-trade factors may pose more fundamental problems
to the industry, and no provisions are made for dealing with
such problems on a comprehensive basis. Moreover, current
procedures, which require approximately eight months before
relief is granted, may not adequately deal with problems
created by import surges.
ANALYSIS/BACKGROUND
Section 201/203 of the Trade Act of 1974 provides that the
President may grant an industry import relief, not to exceed
five years, with a possible three year extension, if he
determines that such relief would be in the national economic
interest, and if the International Trade Commission (ITC)
has found that imports are a substantial cause of serious
injury. A principal rationale for granting such import
relief is that temporary protection gives industries time to
make an orderly adjustment to import competition.
Administration of the import relief statute has been criticized
on two major grounds: (1) Because the decision whether or
not to grant relief is made without considering other causes
for the industry's problems, protection frequently fails to
result in increased industry competitiveness, and (2) the
decision whether or not to grant import relief takes about
eight months, during which time the industry may be vulnerable
to sizeable import surges of foreign goods.
With regard to the adjustment issue, industries injured by
import competition typically face a broad range of problems
that affect their basic competitiveness, such as excessive
federal regulations or wages significantly out of line with
productivity factors. Historically, in granting temporary
import protection, the Executive Branch has not considered
this broad range of problems. As a result, industries are
frequently still unable to. compete even after protection of
three to eight years.
With relatively little difficulty, the government could give
greater emphasis to adjustment factors in considering peti-
tions for import relief. The ITC could request more informa-
tion on broader competitive factors in accepting the initial
petitions for relief and could analyze these factors as part
of its report to the President. The Executive Branch
could examine whether or not government programs, particularly
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0 -2- is
of a regulatory nature, are also causing injury to the industry,
and whether or not there are other measures that might be-
taken to promote adjustment. Additionally, the Executive Branch
could require the private sector to consider how it proposes
to use relief to become competitive. Finally, if an industry
takes measures to lessen its competitive posture while it is
being given import protection (such as granting clearly ex-
cessive wage increases), the President could immediately
terminate relief.
A staff level subcommittee of the Trade Policy Committee is
reviewing broader consideration of adjustment issues. Its
work, to be completed by early December, could be incor-
porated in a broader trade package.
Interagency work on the need for "fast-track" relief in
emergency situations has not yet been launched, although the
issue was raised in the context of the Caribbean Basin Initia-
tive. As a general rule, the deliberative process set out
by Section 201, which requires eight months from the time of
petitioning for relief to the Presidential decision, is desirable.
Because import relief represents a tax on consumers, all
affected parties need the opportunity to make their views known.
Further, these deliberative procedures ensure that protection
will be granted only in those limited cases where it is
appropriate.
In some situations, however, more immediate relief is needed,
since an industry may suffer severe injury while the deli-
berative process is being carried out. (The GATT currently
provides for such a "fast-track," although U.S. law does not.)
For example, the growing season for some agricultural products
would be over before the eight month process would have elapsed.
Our institutional process for considering import relief helps
to assure that such relief is granted only where it is truly
needed. In order to assure that a new "fast-track" process
did not become merely an easier way of obtaining import
relief, strict ~criteria would have to be established. for
determining whether an. import-surge situation exists.
The TPC should be asked to develop by January 1 an approach
for dealing with import surges.
The TPC should be asked to develop by January 1 proposals
for a more comprehensive approach to adjustment problems
faced by industries injured by import competition.
APPROVE DISAPPROVE
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REV W OF LONG-TERM TRADE ISSU10
The increased importance of trade to the United States has
increased the domestic economic impact of the industrial and
regulatory policies of other governments. The world economy
will go through major structural adjustments in the years
ahead that will intensify the domestic debate over the appropriate
future course of trade policy. The United States needs to develop
a new public consensus on how it can best deal with the changing
realities of the world market place.
ANALYSIS/BACKGROUND
The United States finds its competitive position in world trade
increasingly challenged. Partly this is due to the growing
competitiveness of other countries. Partly it is due to the
more active and aggressive support of other governments for
their own industries.
The United States, as other developed countries, is also
experiencing difficult structural adjustment problems which
are putting severe pressure on many basic industries.
There is developing in the United States a greater sense of
vulnerability to the outside world, and this has led to a
growing public debate over U.S. trade policy. Traditional
supporters of an open trade policy are questioning the wisdom
of that policy, and this now threatens the bipartisan nature
of U.S. trade policy.
There is a need to forge a new domestic consensus, taking
account of the new realities of the world economic environment.
One approach to facilitate this objective would be to appoint a
public commission that could examine the requirements of an
effective trade policy to meet the challenges of the world
market during the next decade. The membership of such a commis-
sion would be drawn from industry, agriculture, labor, the
Congress, the academic community and the Administration.
Bill Brock should be authorized to put together a public commis-
sion, and. a small support staff, with the mandate of reviewing
the position of the United States in the world economy and
evaluating the implications for U.S. trade policy. The commissio
n
would be asked to report its conclusions within a year of its
establishment. A budget of $500,000 would be made available for
this purpose.
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