Special Message to the Congress Transmitting Trade Agreements With the United Kingdom and Japan

To the Congress of the United States:

I transmit herewith to the Congress copies of a trade agreement negotiated with the United Kingdom to compensate for the creased import duties placed on certain carpets and glass in an escape clause action which affected concessions previously granted by the United States on these products. I am also transmitting an agreement negotiated with Japan to correct the inadvertent omission of part of one concession previously negotiated. The agreement with the United Kingdom was signed on behalf of the United States on December 10, 1962 and that with Japan on December 18, 1962.

The agreements are submitted in accordance with section 4(a) of the Trade Agreements Extension Act of 1951 which requires that the President report to the Congress his reason for breaching any peril point findings of the Tariff Commission. Annex A, attached to this message, lists those instances in which I decided to accord tariff concessions at levels below those found by the Tariff Commission, together with reasons for my decision.

In the agreement with the United Kingdom, the United States granted tariff concessions to compensate for the increases in United States tariffs on certain carpets and glass. The action to increase the carpets and glass tariffs was taken under section 7 (the escape clause) of the Trade Agreements Extension Act of 1951. Under the commitments in the General Agreement on Tariffs and Trade the United States is obligated to consult with contracting parties adversely affected by the escape clause action and to accord compensation for impairment of such country's trade as a result of the action.

The consultations with the United Kingdom began shortly after the United States had completed large-scale, multilateral negotiations in the 1960-61 tariff conference, in which it had nearly exhausted the authority for reducing tariffs contained in the Trade Agreements Extension Act of 1958 on the products on which public notice had been issued, except for a number of products on which the Tariff Commission had found that rates could not be reduced without in its judgment causing or threatening serious injury to the domestic industry concerned. These consultations began against the background of unsatisfactory consultations concerning the carpets and glass action with the European Economic Community which decided to make compensatory withdrawal of concessions against imports from the United States rather than to continue negotiations to obtain new compensatory concessions from the United States.

An agreement with the United Kingdom is clearly desirable not only to sustain our record as a country recognizing its obligations but also to avoid a possible "snowballing" of withdrawal actions. The only feasible way that agreement could be achieved within the framework of authority existing at the time consultations were held was by granting concessions below the peril point levels found by the Tariff Commission.

As explained in my message of March 7, 1962, the Tariff Commission in preparation for the 1960-61 tariff conference was required to make hurried predictions as to future market conditions for thousands of individual articles. This necessarily resulted in the establishment of peril points at the existing tariff level, for a large number of products.

In preparation for the compensatory negotiations with the United Kingdom, the agencies concerned examined with care these earlier findings of the Tariff Commission on products of interest to that country to determine whether there then appeared to be valid reasons for excluding all of these products from negotiations or whether in fact some could be offered as concessions to compensate the United Kingdom without threatening serious injury to the domestic industry. In selecting products as possible offers, two main criteria were used: their value in reaching settlement with the United Kingdom and the extent of competitive adjustment likely to be placed on American industry by tariff reductions. In applying the second of these criteria, the interdepartmental organization determined that the items selected all met one or more of the following conditions: they are not produced in the United States or are not produced in significant quantity; the ratio of imports to domestic production is small; imports in recent years have declined, have been stable or have increased very slightly; they consist of raw or semi-finished materials required for United States industries or a reduction in the rate of duty could be expected to have relatively little effect on imports.

In the agreement with Japan, the United States corrected an error consisting of the omission of a part of a concession it had agreed to grant Japan in the 1960-61 tariff conference but which it had inadvertently failed to include in either the relevant preliminary agreements with Japan or the United States schedule to the tariff conference protocol. It was necessary either to correct this error by including the concession, which involved breaching a peril point finding of the Tariff Commission, or granting Japan another concession of equivalent value. The latter course would have complicated already difficult negotiations in progress concerning compensation for increased United States tariffs on carpets and glass. It was the opinion of the interdepartmental trade agreements organization that the concession was justified on economic grounds since United States imports of the item in question (discharge lamps) are less than 1/4 percent of domestic production and imports have declined while consumption is increasing.

Both agreements were entered into pursuant to section 257(c) of the Trade Expansion Act which extends until December 31, 1962 the period for concluding, under section 350 of the Tariff Act of 1930, trade agreements based on public notices issued in connection with the 1960-61 tariff conference.

JOHN F. KENNEDY