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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/Economic Policy Council
Box: 19
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
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Contact a reference archivist at: [email protected]
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THE WHITE HOUSE
WASHINGTON
September 12, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
JOHN G. ROBERTS JJR
ASSOCIATE COUNSEL TO THE PRESIDENT
SUBJECT:
Economic Policy Council Decision
Memorandum on Sugar Quotas
This will confirm my oral advice to your office that
Counsel's Office has reviewed the above-referenced decision
memorandum, and has no legal objection to it going forward
to the President.
ID #.
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
O . OUTGOING
H - INTERNAL
I . INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
D. Chew
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: Economic Palicy Cauncil Decision memo on
sugar Quotas
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
CILNALE
ORIGINATOR
55,09,12
/
/
-
Referral Note:
wat 18
R
85,09,12
5 $ 85,09, 12
12N
Referral Note:
/
/
/
/
-
Referral Note:
/
/
/
/
-
Referral Note:
/
/
/
/
-
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
I - Info Copy Only/No Action Necessary
A- Answered
C Completed
C Comment/Recommendation
R - . Direct Reply w/Copy
B - Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No.
WHITE HOUSE STAFFING MEMORANDUM
NOON
DATE: 9/12/85
ACTION/CONCURRENCE/COMMENT DUE BY:
2.00 pm.
today
SUBJECT: Economic Policy Council Decision Memo on Sugar Quotas
ACTION FYI
ACTION FYI
VICE PRESIDENT
LACY
REGAN
McFARLANE
WRIGHT
OGLESBY
BUCHANAN
ROLLINS
CHAVEZ
RYAN
CHEW
P
SS SPEAKES
DANIELS
SPRINKEL
>
FIELDING
SVAHN
FRIEDERSDORF
THOMAS
HENKEL
TUTTLE
HICKEY
HICKS
KINGON
REMARKS: Please give your recommendations to my office by 2.00 p.m. Noon
today. Thanks.
RESPONSE:
E
David L. Chew
Staff Secretary
Ext. 2702
THE WHITE HOUSE
WASHINGTON
SEP
September 11, 1985
MEMORANDUM FOR THE PRESIDENT
FROM:
THE ECONOMIC POLICY COUNCIL
SUBJECT:
Sugar Quotas
You must determine by Friday, September 13, a quota level
for imports of raw sugar covering FY 1985-86. The decision will
have important national security and budgetary implications, and
requires a choice between conflicting goals:
o
Reducing the U.S. base quota from the current level would
reduce the foreign exchange earnings of developing
countries, particularly in the Caribbean Basin and Central
American regions, by approximately $234 million, raising
U.S. national security concerns.
O
Maintaining the base quota at the current level would cause
excess sugar in the U.S. market, resulting in as much as
$280 million in Federal budget outlays under the domestic
sugar price-support program and potential incremental costs
to U.S. consumers.
The Sugar Program
The 1981 Farm Bill established a Federal price support
program for domestic beet and cane sugars with the congressional
intent that presidential authority be used to achieve the
specified support price without incurring budget outlays. The
Administration has accomplished this by imposing duties and fees
and, more significantly, establishing import quotas on sugar
produced overseas.
Since 1981, world sugar demand has declined, reducing world
prices from approximately 25 cents per pound in 1980-81 to nearly
three cents per pound in 1984-85. U.S. demand also has declined
due in large part to a shift by domestic users to less-costly
sugar substitutes. Despite the fall in demand and world prices,
protected domestic sugar production has increased. As a result,
U.S. sugar quotas have become increasingly restrictive.
- 2 -
International Implications of U.S. Sugar Quota
U.S. raw sugar imports have dropped precipitously -- from 4
to 5 million tons before 1981 to roughly half that level in the
current year. This has had a serious impact on strategic nations
in the Caribbean Basin Initiative (CBI) and Central American
regions which stand to lose $124 million annually in foreign
exchange. Employment also has been severely harmed -- increasing
the likelihood of social and political unrest in those regions.
Moreover, the reduced access of CBI countries to the U.S.
market has undermined the CBI trade program, one of your top
foreign policy priorities, by discouraging economic and political
development in developing areas. In addition, in the Philippines
Communist insurgency is growing in sugar areas, fed by the
existing economic crisis.
Current Dilemma
The Administration is faced with a dilemma, caught between
competing budgetary and national security concerns:
Protected domestic sugar production is fast reaching the
level of domestic sugar use.
In order to avoid budget outlays to domestic sugar producers,
the Administration will have to reduce the base quota level
from 2.6 million tons (14 month quota year) to one million
tons in FY 1985-86 (10 month quota year).
Reducing the quota for FY 1985-86 will cause severe foreign
exchange losses and internal economic dislocations in
certain countries of key importance to the U.S. Particularly
when combined with previous sugar quota cuts, these losses
absorb a very large part of the CBI's trade benefits and put
into serious question the Administration's commitment to the
program and to the region.
Escaping this dilemma through reform of the domestic sugar
program does not appear viable this year:
- Although the Administration's FY 1985 Farm Bill proposal
would scale down the sugar program, it still would
require that import quotas be imposed in FY 1985-86 to
avoid budget outlays.
- The Senate and House Agriculture Committee already have
voted overwhelmingly to continue the domestic sugar price
support level at 18 cents per pound with the continuing
intent to avoid additional budget outlays, portending the
necessity for further reductions in the base quota during
outyears.
- 3 -
The immediate decision on a sugar quota level for FY 1985-86
requires a two-step inquiry:
1. Should the Administration maintain the quota at the
current level, causing substantial U.S. budget outlays?
Or, instead, should the Administration reduce the quota,
causing harm to developing nations?
2. If the quota is reduced, can the Administration mitigate
the resultant economic harm to developing nations?
None of the options outlined below can be expected to address the
root of the dilemma: the U.S. sugar program. Competing national
security and budgetary issues can only be resolved through reform
of that program.
Policy Options
The Council has developed three options, ranging from
maintaining the current quota level to reducing the quota -- as
has been the practice to date -- but mitigating the impact of a
reduction on Caribbean and Latin American nations through a
"sugar adjustment fund."
Option 1: Reduce the quota level in FY 1985-86 to 1.03 million
tons which would balance projected domestic supply
with projected domestic use.
This option would continue quota procedures used to
date, avoiding excess domestic supplies and potential
forfeitures of domestic sugar to the CCC.
Advantages
Avoids increasing Federal spending during FY 1985-86
by $280 million.
Most nearly meets the congressional intent of the 1981
Farm Bill which called for achieving specified price
support levels for U.S. sugar producers through
non-budget means.
Disadvantages
Further harms the foreign exchange earnings of
developing nations, in particular those targeted by the
Administration's Caribbean Basin Initiative.
Reduces revenues of domestic sugar refiners by as much as
$300 million, and could increase U.S. consumer costs by
as much as $400 million.
- 4 -
Option 2: Maintain the quota for FY 1985-86 at the current level
(1.82 million tons adjusted for the 10 month quota
year) with a token reduction to 1.72 million tons.
The reduction would send a signal to sugar producing
countries of the conditions in our domestic sugar
market.
Because domestic sugar production is rising while
domestic use is declining, this option would cause
excess supplies in the U.S. market.
Advantages
Permits developing nations to maintain foreign
exchange earnings gained from sugar exports to the U.S.
market.
Permits domestic sugar refiners to maintain
current earnings, and could save U.S. consumers
substantial incremental costs for sweetened products.
Places some of the "hidden costs" of the sugar program
on budget.
Disadvantages
Causes domestic producers to forfeit as much as $280
million in domestic sugar held in loan by the CCC.
O
Would be viewed by Congress as contrary to the intent of
the 1981 Farm Bill.
Option 3: Seek to establish a "sugar adjustment fund" to
mitigate the impact of a lowered quota; lower the
quota to 1 million tons simultaneously with
implementing the sugar adjustment fund.
This option would establish a fund to offset 75
percent of the export earnings losses of CBI
designated countries and other developing nations with
per capita incomes of less than $1500, resulting from
the lower U.S. sugar import quota. Grants from this
fund would be conditioned on an eligible nation's
development of a plan for reducing its dependence on
sugar exports. Assuming a 1.03 million ton quota for
1985-86, the value of the fund would be $175 million.
Outyear values would reflect future decisions on quota
levels, and would cease when U.S. quotas are no more
restrictive than at present.
The Administration could propose the plan as an
amendment to the 1985 Farm Bill, but Congress likely
would refer it to a foreign aid committee.
- 5 -
Advantages
Complements the U.S. CBI program, giving short-term trade
assistance to strategic developing nations.
Unlikely to be opposed by agriculture interests in
Congress.
Disadvantages
Involves U.S. government in the agri-markets of
developing countries by asking those nations to make
market adjustments that the U.S. sugar industry refuses
to make, causing potentially long-term Federal
budget-commitments abroad.
Sets precedent for voluntarily compensating trading
partners for restrictions on access to U.S. markets, and
is contrary to the intent of the Caribbean Basin trade
initiative.
Decision
Option 1
Reduce the quota level for FY 1985-86 to
1.03 million tons which would balance
projected domestic supply with projected
domestic use.
Option 2
Maintain the quota for -FY 1985-86 at the
current level (1.82 million tons adjusted for
the 10 month quota year) with a token
reduction to 1.72 million tons.
Option 3
Seek to establish a "sugar adjustment fund"
to mitigate the impact of a lowered quota;
lower the quota to one million tons simul-
taneously with implementing the sugar
adjustment fund.
Recommendation
The Economic Policy Council unanimously recommends Option 2.
Janus James A. Baker III
Chairman Pro Tempore
THE WHITE HOUSE
WASHINGTON
September 13, 1985
MEMORANDUM FOR RICHARD A. HAUSER
FROM:
JOHN G. ROBERTS JOR
SUBJECT:
Economic Policy Council Policy Directives
You will recall that you asked me to examine the proposal to
have the President issue "Economic Policy Council Policy
Directives" implementing trade decisions recommended by the
Economic Policy Council. Gene McAllister submitted two such
directives for your review, on Section 301 cases and on tied
aid export credits. I discussed the issue with McAllister,
who agreed to drop the Section 301 directive (since the
decision had already been made and announced) and to send
the tied aid export credit directive through with the
decision memorandum.
In fact, that decision memorandum had already been staffed
to Hugh Hewitt, who noted no legal objection. The problem
that has arisen is that the policy directive is not an
accurate reflection of the decision memorandum Hugh reviewed.
The policy directive has the President directing the Export-
Import Bank to undertake certain actions, including the
dramatic one, for a bank, of drawing on its capital. The
decision memorandum simply noted the Bank would do this. It
is not immediately apparent that the President can direct
the Bank to do anything. The Bank is an "independent
agency, governed by a Board of Directors. 12 U.S.C.
$ 635a. In any event, apparently no one has considered the
question.
I raised these concerns with McAllister, who agreed to drop
the directive in this case. I called Chew's office to
ensure it did not go forward. McAllister and Treasury
(Darman and Cooksey) would like to set up a meeting to
consider the general question of issuing such directives. I
told them we would be pleased to participate. We should
discuss our position soon. My own view is that we should
resist setting up any new system of legally operative
documents. The problem with the tied aid export credits
directive is a good example of the potential difficulties.
CC: Hugh Hewitt
THE WHITE HOUSE
WASHINGTON
John
I spoke with David Chew last
night and he suggested that
instead of re-routing the tied
aid paper, which has already
gone through White House
clearance, I just check with
you directly on the policy
directive.
A copy of the memo for the
President, along with the
policy directive is attached.
Could you please review it
this morning, if possible.
I like to get it into
the President this afternoon.
Thanks for your help.
Gene MacCallivter.
THE WHITE HOUSE
WASHINGTON
September 12, 1985
MEMORANDUM FOR THE PRESIDENT
FROM:
THE ECONOMIC POLICY COUNCIL
SUBJECT:
Tied Aid Export Credits
A part of the overall trade strategy, which was discussed with
you at Monday's Economic Policy Council meeting, calls for
creating a $300 million fund to enhance our negotiating leverage,
particularly against the French, to eliminate predatory tied aid
export credits.
Background
France has aggressively subsidized industrial exports by offering
tied aid credits. Others have adopted this practice in order to
remain competitive. By mixing grants with official export
credits, governments can reduce the effective interest rate of
these tied aid or "mixed" credits. Our competitors, particularly
France, are increasingly using these credits to penetrate
markets under the guise of foreign aid. The OECD predicts the
volume of such credits will total about $6 billion in 1985.
The Administration has proposed an OECD agreement that would
require at least 50 percent of any such credit be in the form of
a grant. That minimum grant element would make these credits so
expensive to use that it would in effect eliminate the practice
of tied aid credits. We have succeeded in raising the minimum
grant element from 20 to 25 percent, but have been blocked by
France from further raising the minimum grant element. Nearly
all other OECD members agree that the minimum grant element
should be raised further.
Policy Considerations
In considering whether to create such a fund, you should look at
several factors.
Probability of success. What is the probability that such a
fund would succeed in discouraging other countries from using
tied aid credits for commercial advantage?
Overall trade policy. Given our overall trade policy
objectives of promoting free trade and addressing unfair
trade practices, how would such a fund fit in with our trade
strategy? To what extent would such a fund help defuse or add
fire to congressional protectionist pressures?
Budget policy. Given our efforts to reduce excessive Federal
spending, to what extent would proposing a new $300 million
program for such credits undermine such efforts?
-2-
Proposal
The Administration would immediately seek legislation to
authorize and appropriate a $300 million fund for grants that
would be tied to Export-Import Bank or private sector loans. The
$300 million in grants would be combined with roughly $700
million in Export-Import Bank regular credits, which could
support up to $1.0 billion in tied aid credit authorizations. As
an interim step until Congressional authorization of such a fund,
the Export-Import Bank would draw on its limited capital and
begin aggressively offering tied aid credits to capture
traditional French markets.
The program would end on September 30, 1987 unless expressly
renewed. Since the Department of the Treasury is the lead agency
in the OECD negotiations to restrict the use of tied aid credits,
it would control the use of the fund with the advice of the
National Advisory Council on International Monetary and Financial
Policies, comprising the Departments of State, the Treasury, and
Commerce, the U.S. Trade Representative, Agency for International
Development, Export-Import Bank, and the Federal Reserve.
Advantages
Such a fund would be perceived as an important, aggressive
trade policy initiative and could serve to defuse some of
the congressional protectionist pressures. Also, along
with your self-initiation of Section-301 cases, such a fund
would be another powerful and genuine initiative in our
overall trade strategy. In addition, this proposal would
continue our emphasis on addressing unfair trade practices.
Such a fund would increase our leverage in negotiations to
restrict further the use of tied aid credits. Despite an
OECD mandate for such a restriction, it is becoming clear
that France will not accept a significant increase in the
minimum grant element. The support of even our "allies"
(UK, FRG, and Canada) is weakening.
The current program of selectively matching French credits
does not represent a credible threat to the French in part
because the Export-Import Bank and AID do not have
sufficient funds for this purpose.
Since Congress is expected to initiate its own version of
such a fund, an Administration proposal could preempt
efforts to create a more expensive and less focused
program.
Disadvantages
Proposing such a fund could contribute to the protectionist
momentum in the Congress and perhaps serve as a "Christmas
tree" for other protectionist trade legislation.
-3-
Proposing a new $300 million program could undermine our
efforts to cut excessive Federal spending.
U.S. exporters may try to transform the proposal into an
entitlement program for big business and could succeed in
doing so.
The Congress might be tempted to reduce the funds available
for bilateral and multilateral development assistance
programs in favor of a fund for tied aid credits.
Decision
Propose creating a $300 million fund to increase our negotiating
leverage, particularly against the French, to eliminate predatory
tied aid export credits. The Treasury Department would administer
the fund, which would be financed through a supplemental
appropriation.
(Supported by Treasury, State, Agriculture, Commerce, Labor,
Transportation, USTR, NSC, and CEA. Opposed by OMB.)
Approve
Disapprove
James A. Baker III
Chairman Pro Tempore
THE WHITE HOUSE
WASHINGTON
Economic Policy Council
Policy Directive #
Tied Aid Export Credits
I hereby direct the Secretary of the Treasury to transmit
legislation to authorize and appropriate a $300 million fund for
grants that would be tied to Export-Import Bank credits or
private sector loans. The purpose of this program of tied aid
credits is to support the Secretary's negotiating efforts in
eliminating predatory tied aid credits by other countries.
I also direct the Chairman of the Export-Import Bank of the
United States immediately to begin drawing on its capital and
reserves to offer tied aid credits as an interim step in support
of this effort. This Export-Import Bank program will be
superseded when appropriated funds are available in accordance
with the proposed legislation.
I direct the Secretary of the Treasury to control the use of
these funds with the advice of the National Advisory Council on
International Monetary and Financial Policies. This program
would expire at the determination of the Secretary of the
Treasury or by September 30, 1987 unless expressly renewed by the
Congress.
THE WHITE HOUSE
WASHINGTON
October 11, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
JOHN G. ROBERTS 022
ASSOCIATE COUNSEL TO THE PRESIDENT
SUBJECT:
Economic Policy Council Decision Memo:
Initiating Unfair Foreign Trade Proceedings
Counsel's Office has reviewed the above-referenced proposed
decision memorandum for the President from the Economic Policy
Council, recommending the initiation of Section 301
investigations and a GATT subsidies code case. USTR General
Counsel Alan Holmer advised me that the consultations required by
19 U.S.C. $ 2412 (c) (2) prior to any decision to initiate a
Section 301 investigation have taken place. Accordingly, this
office has no legal objection to the memorandum going forward.
Document No.
WHITE HOUSE STAFFING MEMORANDUM
DATE: 10/11/85
ACTION/CONCURRENCE/COMMENT DUE BY: 6:00 p.m. TODAY
SUBJECT: Economic Policy Council Decision Memo: Initiating Unfair
Foreign Trade Proceedings
ACTION FYI
ACTION FYI
VICE PRESIDENT
LACY
-
REGAN
McFARLANE
MILLER
OGLESBY
BUCHANAN
RYAN
CHAVEZ
SPEAKES
CHEW
P
SS SPRINKEL
DANIELS
SVAHN
R
FIELDING
THOMAS
FRIEDERSDORF
TUTTLE
HENKEL
HICKEY
HICKS
KINGON
REMARKS: Please give your recommendations to my office by 6:00 p.m.
today.
RESPONSE:
David L. Chew
Staff Secretary
Ext. 2702
THE WHITE HOUSE
WASHINGTON
October 11, 1985
MEMORANDUM FOR THE PRESIDENT
FROM:
THE ECONOMIC POLICY COUNCIL
SUBJECT:
Initiating Unfair Foreign Trade Proceedings
On September 7, you accelerated or initiated five Section-
301 investigations of unfair foreign trading practices --
Japanese restrictions on leather and leather footwear imports,
European Community (EC) canned fruit subsidies, Korean barriers
to insurance sales, Brazilian restrictions on micro-electronics
imports, and Japanese restrictions against U.S. tobacco products.
These initiatives, along with your September 23 speech to the
President's Export Council stressing the importance of opening
foreign markets to our products, have strengthened our ability to
resist protectionist legislation that would close our borders to
imports.
To continue our efforts in attacking unfair foreign trading
practices and resisting legislation that would restrict free
trade, the Economic Policy Council has considered the possibility
of initiating unfair trade proceedings against a number of
foreign practices. We are recommending that you initiate Section
301 investigations against Taiwanese restrictions on cigarettes,
beer and wine and Korean abuses of U.S. intellectual property
rights. We are also recommending that you initiate a GATT
dispute settlement proceeding on unfair EC wheat export
subsidies.
THE UNFAIR TRADE PRACTICES
In determining which unfair trade practice investigations to
initiate, the Economic Policy Council considered several factors:
the flagracy of the practice; the amount of trade and number of
jobs involved; the degree of support from U.S. industry; the
duration of the practice; the intensity and duration of U.S.
complaints; our international competitiveness; the likelihood of
negotiating the elimination or modification of the practice; the
impact on Congress of initiation; and our political and economic
relationships with the country involved.
Taiwan - Cigarette, Wine and Beer Monopoly
Taiwan maintains monopoly controls on the import and
distribution of cigarettes, wine and beer through the use of
high tariffs and other import limitations, discriminatory
- 2 -
rules on distribution, and discriminatory pricing practices.
As a result of these barriers, U.S. cigarette exports
accounted for less than 1 percent of Taiwan's $840 million
market, beer imports are currently banned and U.S. wine
exports amounted to only 62 metric tons in 1984. Were
Taiwan a signatory to the GATT, its practices would be
illegal. Liberalizing the Taiwan monopoly has been one of
our major market access objectives in Taiwan for the last
two years.
The Economic Policy Council unanimously recommends
initiating this Section 301 investigation.
[Within the last forty-eight hours, Taiwan
officials have offered to open their markets to
these products over the next six to twelve months.
If this issue is satisfactorily resolved with the
Taiwanese in the next few days, we would plan to
announce that, because of Taiwan's action, we are
not initiating the investigation as originally
intended. However, you would instruct the USTR,
to report to you on the progress and
effectiveness of Taiwan's market opening measures
by December 31, 1985.]
Korea - Intellectual Property Abuses
Korea's laws deny effective protection for U.S. intellectual
property. Under Korean law foodstuffs, chemical compounds
and compositions are not eligible for patent protection.
Protection for chemicals and pharmaceuticals is limited to
process patents, a very weak form of protection. Works of
U.S. authors are not protected under Korea's copyright law.
Consequently, U.S. firms are reluctant to invest in Korea or
to introduce products for which misappropriation of the
underlying R&D is likely. Similarly, U.S. authors receive
no payment for the unauthorized copies of their works sold
in Korea. It is difficult to determine the effects of these
policies especially where the effect is simply a decision
not to invest. However, U.S. industry estimates losses of
over $170 million annually solely because of the lack of
adequate copyright protection. The U.S. has consulted with
Korea on these issues over the last two years. While the
Government of Korea has made a commitment to change its laws
to extend protection in these areas, no legislative changes
have yet been made.
The Economic Policy Council unanimously recommends
initiating this Section 301 investigation.
EC Export Subsidies on Wheat
The EC directly subsidizes exports of wheat. High domestic
support prices in the EC have resulted in increasing EC
- 3 -
over-production of wheat, and the EC provides direct export
subsidies in whatever amount necessary to sell this
otherwise uncompetitive surplus. The effect of these
subsidies over time has been to increase the EC's share of
the $14.5 billion world export market from less than 8
percent in the early 1970's to more than 16 percent in the
past crop year, and to depress world prices. U.S. farmers
suffer doubly: depressed prices and reduced export volume.
EC subsidies are particularly damaging in this period of
declining world trade.
International rules do not prohibit export subsidies on farm
products, but rather prohibit using such export subsidies_ to
take "more than an equitable share" of world trade.
A Section 301 investigation would be too confrontational,
particularly because of the sensitive steel negotiations
under way with the EC. An international dispute settlement
procedure involving the EC under the GATT subsidies code
however, will take the EC to task internationally, and is an
action which will be greeted with enthusiasm by our
beleaguered farm community.
The Economic Policy Council unanimously recommends
initiating this GATT Subsidies Code case.
UNFAIR TRADE INVESTIGATION PROCEDURES
The Section 301 investigations and the GATT Subsidies Code
case follow different procedures.
Section 301
After you direct the USTR to initiate the Section 301
investigations, USTR would publish notice of these
investigations in the Federal Register, solicit public
comment on the issues raised and request consultations with
the government affected. Unless these cases are settled to
our satisfaction within a reasonable period of time, but in
any case within one year, the USTR will recommend to you,
through the Economic Policy Council, specific retaliatory
action against the offending country.
GATT Subsidies Code
After you direct the USTR to initiate the GATT Subsidies
Code case, the USTR will initiate proceedings under the
Subsidies Code. Dispute settlement under the Code includes
three phases: bilateral consultations, conciliation, and
establishment of a dispute settlement panel. USTR will
first request bilateral consultations with the EC. If those
consultations do not lead to a resolution of the problem
within 30 days of the request, the U.S. may request
- 4 -
conciliation. Under conciliation, which also lasts 30 days,
the Signatories to the Subsidies Code will hear the U.S.
complaint and try to assist the U.S. and EC in resolving the
issue. At the end of 30 days, the U.S. may request
establishment of a dispute settlement panel to review its
complaint and issue findings and recommendations which must
be reviewed by all the Signatories. In theory the entire
process should take seven months. In practice the process
takes longer.
DECISION
The USTR should initiate Section 301 proceedings in the
following cases:
Taiwan Cigarettes, Beer and Wine Approve
Disapprove
(unanimously supported by the EPC)
[If this issue is resolved with the Taiwanese
within the next few days, the USTR would not
initiate an investigation. We would instead
announce the Taiwanese action and you would
instruct the USTR to report to you on the
progress of Taiwan's market opening measures
by December 31, 1985.]
Korea Intellectual Property
Approve
Disapprove
Abuses
(unanimously supported by the EPC)
The USTR should initiate GATT Subsidies Code dispute
settlement proceedings in the following case:
EC Wheat Export Subsidies
Approve
Disapprove
(unanimously supported by the EPC)
After you make a decision, and before it is announced, the
Department of State and the USTR will inform the affected
countries.
James A. Baker III
Chairman Pro Tempore
THE WHITE HOUSE
WASHINGTON
November 25, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS 82R
SUBJECT:
Economic Policy Decision Memo:
Section 301 Proceedings Deadlines
David Chew has asked for comments as soon as possible on the
attached Economic Policy Council decision memorandum for the
President. You will recall that the President, on Septem-
ber 7, directed USTR to accelerate two pending Section 301
cases, on Japanese leather and European Community canned
fruit. The President set a December 1 deadline for a
negotiated resolution of those cases. It now appears that a
negotiated settlement will not be reached by December 1.
The Economic Policy Council decision memorandum recommends
that the President retaliate by imposing prohibitive tariffs
on specified Japanese products (including products unrelated
to the dispute) and European Community canned fruit. These
actions are within the President's authority under Section
301, 19 U.S.C. $ 2411, which authorizes him to "take all
appropriate and feasible action," and in particular author-
izes action with respect to any goods "without regard to
whether or not such goods were involved in the [unfair
trade practice].' 19 U.S.C. $ 2411(a). Imposition of
duties is specifically authorized, 19 U.S.C. $ 2411 (b) (2).
It appears that the procedural requirements of Section 301
have been met. In so concluding, it is important to recall
that these two cases are very unusual. They were not
developed in response to petitions, nor were these two cases
USTR self-initiated investigations. The Japanese case arose
from a GATT proceeding. The canned fruit case was the -
subject of a petition, but according to USTR all the action
required of the President in response to a petition has long
since been taken. The petition stage of the case is,
according to USTR, concluded. These two cases fall under
19 U.S.C. § 2411(d), which authorizes the President to take
action on his own motion. That section requires an oppor-
tunity for the presentation of views. I contacted USTR
General Counsel who advised that the requirement had been
met through public hearings held by USTR.
Attachment
THE WHITE HOUSE
WASHINGTON
November 25, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
FRED F. FIELDING
Orig. signed by FFF
COUNSEL TO THE PRESIDENT
SUBJECT:
Economic Policy Decision Memo:
Section 301 Proceedings Deadlines
Counsel's Office has reviewed the above-referenced decision
memorandum, and finds no objection to it from a legal
perspective.
FFF: JGR:aea 11/25/85
cc: FFFielding
JGRoberts
Subj
Chron
"
THE WHITE HOUSE
WASHINGTON
November 25, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Economic Policy Decision Memo:
Section 301 Proceedings Deadlines
Counsel's Office has reviewed the above-referenced decision
memorandum, and finds no objection to it from a legal
perspective.
FFF:JGR:aea 11/25/85
CC: FFFielding
JGRoberts
Subj
Chron
=
ID #. 330326 CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
0 - OUTGOING
H * INTERNAL
I - INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent: Dune Chew
MI Mail Report
User Codes: (A)
(B)
(C)
Subject:
Economic Palicy Decision memo:
section 301 proceedings Deadlenes
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
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CUITOLL
ORIGINATOR 85,11,25
/ /
Referral Note:
cuat 18
D 85,11,25
85,11,25
Referral Note:
330, 330pm
/ /
/ /
Referral Note:
/ /
/ /
Referral Note:
/ /
/ /
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A * Appropriate Action
1. Info Copy Only/No Action Necessary
A Answered
C Completed
C * Comment/Recommendation
R Direct Reply w/Copy
B Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No.
330326ss
WHITE HOUSE STAFFING MEMORANDUM
3:30 P.M. TODAY
DATE:
11/25/85
ACTION/CONCURRENCE/COMMENT DUE BY:
ECONOMIC POLICY DECISION MEMO: SECTION 301 PROCEEDINGS
SUBJECT:
DEADLINES
ACTION FYI
ACTION FYI
VICE PRESIDENT
OGLESBY
REGAN
>
MILLER
RYAN
BUCHANAN
SPEAKES
CHAVEZ
SPRINKEL
CHEW
P
SS SVAHN
DANIELS
THOMAS
FIELDING
TUTTLE
HENKEL
HICKS
KINGON
LACY
McFARLANE
REMARKS:
Please provide your recommendation by 3:30 today. Thank you.
RESPONSE:
David L. Chew
Staff Secretary
Ext. 2702
THE WHITE HOUSE
WASHINGTON
November 21, 1985
MEMORANDUM FOR THE PRESIDENT
FROM:
THE ECONOMIC POLICY COUNCIL
SUBJECT:
Section 301 Proceedings Deadlines
On September 7 you directed the United States Trade Repre-
sentative to initiate Section 301 unfair trade practice
investigations of Korean barriers to insurance sales, Brazilian
restrictions on micro-electronics imports, and Japanese restric-
tions against U.S. tobacco products. At the same time you also
directed the United States Trade Representative to accelerate
existing Section 301 proceedings against Japanese quotas on
leather and leather footwear imports and European Community (EC)
canned fruit subsidies by establishing a December 1 deadline for
a satisfactory resolution of these proceedings.
Although the United States Trade Representative is engaged in
on-going discussions with both the Japanese and EC, it is
possible that neither case will be satisfactorily resolved by
December 1. If a resolution is not achieved, you are authorized
under Section 301 of the Trade Act to retaliate against Japanese
and EC products. The retaliatory measures should approximate the
value of damage inflicted upon U.S. products by the foreign
practices.
In your September 7 Radio Address to the Nation, you "directed
that a list be prepared of countermeasures which will be taken if
these disputes are not resolved by [December 1]." The Economic
Policy Council has developed recommendations for retaliation
against the Japanese and EC unfair trading practices, in the
event that our efforts to reach an agreement are unsuccessful.
You should be aware that if we retaliate, it will be the first
time we have ever done so against Japan. It is also likely that
the EC will counter-retaliate.
However, the Economic Policy Council strongly believes that
retaliation is necessary, both to respond to the unfair trade
practices and to preserve the effectiveness of Section 301 as a
tool for opening foreign markets to American products.
- 2 -
RECOMMENDATION
The Economic Policy Council unanimously recommends that you
undertake the following retaliatory measures:
Japanese Leather and Leather Footwear Quotas
Impose a prohibitive tariff of 40 percent against $277 million
of Japanese products, including leather products, lawn mowers,
air conditioners, spectacles and frames, fishing reels,
optical fibers (not including plastic products), and toys.
Approve
Disapprove
EC Canned Fruit Subsidies
Impose prohibitive tariffs on canned fruit from the EC-10
until such time as Spain and Portugal benefit from the canned
fruit subsidy program, at which time the tariffs will be
applied to them also.
Approve
Disapprove
Janes Baker III
Pro Tempore
THE WHITE HOUSE
WASHINGTON
November 26, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS
222
SUBJECT:
Economic Policy Council Memorandum:
Presidential Trade Commission
David Chew has asked for comments by Monday, December 2, on
a decision memorandum for the President from the Economic
Policy Council. Two issues are presented: whether to
establish a Presidential Commission on International Trade
and Economic Policies, and, if so, whether to include
members of Congress on the Commission.
The decision memorandum contemplates a purely advisory role
for the Commission, SO there are no legal obstacles to
establishing it and no purely legal objections to appointing
members of Congress to serve on it. In noting that we have
no legal objections, however, I think we should point out
that the Commission must be established under and must
operate in accord with the Federal Advisory Committee Act
(FACA). We should also note the more prominent requirements
of FACA, including the balanced membership and open meetings
requirements. We should insist that the Commission be
"housed" in one of the departments and not the White House.
Finally, since we often object to Congress creating mixed
legislative-executive entities, even if purely advisory, we
should weigh-in on the side of not appointing members of
Congress to the Commission.
Attachment
THE WHITE HOUSE
WASHINGTO
November 26, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
Orig. signed by FFF
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Economic Policy Council Memorandum:
Presidential Trade Commission
I have reviewed the proposed decision memorandum for the
President prepared by the Economic Policy Council, and have
no objection to it going forward to the President. Two
issues are presented: whether to establish a Presidential
Commission on International Trade and Economic Policies,
and, if so, whether to include members of Congress on the
Commission.
The President may establish a Presidential Commission on
International Trade and Economic Policies, provided that the
Commission is restricted to a purely advisory role. Such an
advisory committee, which would be established by Executive
Order, would be subject to the provisions of the Federal
Advisory Committee Act (FACA). Among other things, FACA
requires advisory committees to have a "balanced membership"
and generally to hold open meetings. The advisory committee,
if created, should be housed for administrative purposes in
one of the departments, not at the White House.
The possible appointment of members of Congress to the
advisory committee does not raise constitutional concerns
under the Appointments Clause, because the committee would
be restricted to advisory functions. Nonetheless, we often
object on policy grounds when Congress creates mixed legislative-
executive entities, even if purely advisory, and I would -
hesitate to create such an entity ourselves in the absence
of very persuasive policy or tactical reasons.
FFF: JGR:aea 11/26/85
CC: FFFielding
JGRoberts
Subj
Chron
THE WHITE HOUSE
WASHINGTON
November 26, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Economic Policy Council Memorandum:
Presidential Trade Commission
I have reviewed the proposed decision memorandum for the
President prepared by the Economic Policy Council, and have
no objection to it going forward to the President. Two
issues are presented: whether to establish a Presidential
Commission on International Trade and Economic Policies,
and, if so, whether to include members of Congress on the
Commission.
The President may establish a Presidential Commission on
International Trade and Economic Policies, provided that the
Commission 1S restricted to a purely advisory role. Such an
advisory committee, which would be established by Executive
Order, would be subject to the provisions of the Federal
Advisory Committee Act (FACA). Among other things, FACA
requires advisory committees to have a "balanced membership"
and generally to hold open meetings. The advisory committee,
if created, should be housed for administrative purposes in
one of the departments, not at the White House.
The possible appointment of members of Congress to the
advisory committee does not raise constitutional concerns
under the Appointments Clause, because the committee would
be restricted to advisory functions. Nonetheless, we often
object on policy grounds when Congress creates mixed legislative-
executive entities, even if purely advisory, and I would -
hesitate to create such an entity ourselves in the absence
of very persuasive policy or tactical reasons.
FFF: JGR:aea 11/26/85
CC: FFFielding
JGRoberts
Subj
Chron
ID #
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
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I - INCOMING
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(B)
(C)
Subject: Economic Palicy cauncel memo :
Presidential Trade commission
ROUTE TO:
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DISPOSITION
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CUHOLL
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/ /
Referral Note:
cuat 18
D 85,11,25
5 85,12,02
Referral Note:
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I
Referral Note:
/ /
/ /
Referral Note:
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/ /
I
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A - Appropriate Action
I - into Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R Direct Reply w/Copy
B Non-Special Referral
S Suspended
D Draft Response
S For Signature
F - Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No.
WHITE HOUSE STAFFING MEMORANDUM
DATE: 11-25-85
ACTION/CONCURRENCE/COMMENT DUE BY: 12-2-85
SUBJECT: ECONOMIC POLICY COUNCIL MEMO: PRESIDENTIAL TRADE COMMISSION
ACTION FYI
ACTION FYI
VICE PRESIDENT
OGLESBY
REGAN
MILLER
RYAN
BUCHANAN
SPEAKES
CHAVEZ
SPRINKEL
CHEW
P
SS SVAHN
DANIELS
THOMAS
FIELDING
TUTTLE
HENKEL
HICKS
KINGON
LACY
McFARLANE
REMARKS: Please provide any comments/recommendations by Monday,
December 2nd. Thank you.
RESPONSE:
David L. Chew
Staff Secretary
Ext. 2702
THE WHITE HOUSE
WASHINGTON
22
November 21, 1985
MEMORANDUM FOR THE PRESIDENT
FROM:
THE ECONOMIC POLICY COUNCIL
SUBJECT:
Presidential Trade Commission
The Economic Policy Council has been exploring the idea of
establishing a bipartisan Presidential commission on trade and
international economics. Such a commission, if properly
constituted, might be very helpful in developing a national
consensus on trade and international economic policies and
strengthening your position in favor of opening foreign markets,
not closing ours. It might also be helpful in defusing
protectionist political pressures when these reemerge in the
Congress next year.
The House Republicans have included a proposal to establish such
a commission in their trade initiative package and the Senate
Democrats have also called for such a commission.
This memorandum outlines for you the major issues involved in
creating such a commission, including whether members of Congress
should be members of the commission, and offers several options
for your consideration.
POLICY OBJECTIVES
The decision whether to establish a commission and how it might
be structured should reflect the following objectives:
A commission should help build a broad market-oriented
consensus in both the private sector and the Congress on
future U.S. trade and international economic policy.
O
A commission should generate new ideas for improving the
effectiveness of U.S. trade and international economic policy.
A commission should help develop support in the Congress for
supporting free and fair trade legislation.
ESTABLISHING A COMMISSION
Issue: Should the Administration establish a Presidential
commission on international trade and economics?
Option 1: Establish a commission.
-2-
Advantages
A commission could take a relatively objective view of
trade policy and develop valuable ideas for improving
the effectiveness of U.S. trade policy.
Because a commission analyzing trade issues over an
extended period of time would probably arrive at the
same conclusions drawn by the Administration, such a
commission could help strengthen the Administration's
position on trade legislative proposals.
A bipartisan commission could help generate greater
support in the private sector and the Congress for the
Administration's trade policy.
Option 2: Not establish a commission.
Advantage
Commission recommendations that conflict with
Administration policy could increase pressures in the
Congress for such proposals.
The Economic Policy Council unanimously recommends
establishing such a commission.
PROPOSED STRUCTURE OF THE COMMISSION
If you decide to establish a commission, it could be structured
along the following lines:
1. Title
The Economic Policy Council recommends that the commission be
titled: The President's Commission on International Trade and
Economic Policies.
2. Mandate
The mandate of the commission could be either general or
specific. A general mandate would provide the commission the
flexibility to adapt to changing conditions that could take
place over the life of the commission. A specific mandate
could focus the efforts of the commission on issues where new
analysis would be most useful.
The Economic Policy Council recommends the following general
mandate:
O To identify the major trends and changes which are taking
place in the international economy.
-3-
To assess the adequacy of U.S. trade laws in responding to
the major trends taking place in the international economy
and recommend changes, if any, to the U.S. trade laws.
To assess the efficacy of the GATT in meeting U.S. interests
and in promoting a free and fair world trading system, and
to evaluate the scope and coverage of the GATT and its
flexibility in adapting to the dynamics of world trade.
To determine what can be done to ensure that U.S. economic
policies, both domestic and international, as well as U.S.
efforts in international fora, contribute as much as
possible to growth and price stability in the U.S. and world
economies.
To identify the displacements which are likely to occur
within the U.S. economy in response to international trading
trends and to make recommendations for policies to
facilitate adjustment.
3. Timing
The timing of the final report of the commission should: (1)
provide the commission sufficient time to analyze carefully
complex issues; and (2) avoid plunging the commission or its
recommendations into the 1986 Congressional elections.
The Economic Policy Council recommends that you direct the
commission to issue a final report twelve months after its
establishment. December 1986 is an achievable deadline.
4. Method of Establishing Commission
The Economic Policy Council recommends that you establish the
commission through an executive order. The executive order
would specify the commission's mandate, the date by which it
should issue a final report, its membership, its staffing, its
source of funding, and how it will report its recommendations.
5. Membership
The Economic Policy Council recommends that the commission
include 15 to 21 private sector members from the following
groups: management (high technology, services, basic
manufacturing), labor, agriculture, consumers, and the
academic community.
Issue: Should the commission include members of Congress in
addition to the private sector members?
Option 1: Include six members of Congress (three
Republicans and three Democrats) on the
commission.
-4-
Advantages
Having members of Congress on the commission may help
provide Congress reason for deferring action on the
trade front until the commission makes its report.
Including the appropriate members of Congress in the
commission would involve those individuals who can
assist if the Administration decides to press for
legislative initiatives.
Option 2: Include six members of Congress as advisors to
the commission.
Advantages
This approach could still provide Congress reason for
deferring action on the trade front yet allow the
commission to take a more objective and less
political perspective to trade issues.
Congressional interests in trade are not necessarily
the same as ours. Having congressional advisors
maintains their interest in the commission, yet keeps
them at arm's length.
Option 3: Not include members of Congress on the
commission, but consult with the Congress on the
membership.
Advantages
Not including members of Congress in the commission
would avoid the risk that these members would press
for legislative action that the Administration may
not want if our trade posture improves.
Congressional leaders on trade may prefer to support
a report that is perceived as objective, rather than
defend their role in developing its conclusions.
6. Chairman
The Economic Policy Council recommends that you appoint as
chairman an individual with a national and international
reputation with an appreciation of the government process and
limitations.
Please note: The members of the Economic Policy Council feel
strongly that the value of the Commission is fundamentally
dependent upon the selection of a chairman who can both
command appropriate respect and work closely and compatibly
-5-
with you and key members of your Administration -- while being
consistent with the general approach to trade that you have
already articulated.
DECISIONS
Issue 1: Should the Administration establish a presidential
commission on international trade and economics?
Establish a commission.
Not establish a commission.
The Economic Policy Council unanimously recommends
establishing such a commission.
Issue 2: Should the commission include members of Congress?
Include six members of Congress (three Republicans
and three Democrats) as members of the commission.
Supported by Agriculture, Commerce, Labor, USTR,
NSC.
Include six members of Congress as advisors to the
commission.
Supported by Treasury, OMB.
Not include members of Congress as members of the
commission, but consult with the Congress on the
membership.
Supported by State, Transportation, CEA.
TIMING OF ANNOUNCEMENT OF DECISION
If you decide in favor of establishing a commission, it might be
well to save that announcement -- and the announcement of the
chairman -- for the State of the Union Address.
James James A. Baker III
Bahrt
Chairman Pro Tempore