Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

290. Telegram From the Mission in Geneva to the Department of State¹

Geneva, October 22, 1965, 1142Z.

TAGG 3507. For Governor Herter from Blumenthal. Subject: Cotton Textile Sector Meeting, October 19–20. Ref: TAGG 3506.² Meeting attended by dels from US, UK, EEC, Canada, Sweden, Japan, Hong Kong, India, Pakistan, and UAR. Discussion opened with Wyndham White’s explanation of three elements of package deal as outlined in his proposal (reftel). Most discussion centered around lengthy interventions by Amb. Lall (India) criticizing conception of package deal which precludes changes in LTA and involves liberalization LTA administration instead. Importing countries indicated readiness begin negotiations on basis WW’s suggestions, making clear this does not constitute commitment on any one part of package unless satisfactory agreement reached on all parts of package.

On exporters’ side, Japan indicated it prepared to accept WW paper and urged sustained pace of meetings so that negotiations could pro-gress rapidly. Hong Kong (Haddon-Cove) at first seemed support India in opposing basic concept of no change in LTA language, but after US, supported by other importers (and notably EEC), clearly emphasized unwillingness renegotiate language LTA, Hong Kong joined Japan in indicating readiness start package deal discussions on basis WW proposal. HK asked, however, that specific reference to extension of LTA “in its present form” be deleted (para II (B) reftel) primarily for presentational reasons. While recognizing that no essential change in LTA text acceptable to importing countries, HK argued that small changes might be indicated later and insistence on precluding change of even a comma of present LTA seemed a bit rough at outset. HK also supported Japan in urging rapid progress of talks.

Pakistan made only one short intervention seemingly supporting Indian arguments that basic concepts of cotton textile trade need restudy. Added, however, had no instructions permitting acceptance of WW’s proposal at present meeting.

UAR remained silent throughout (but WW reports UAR previously informed him they agreeable start discussions on basis package deal). Neither Pakistan nor UAR gave any other support to lenghthy objections and interventions by Lall who was main and essentially only problem at meeting.

Main line of Lall’s argument during meeting was that it too early agree on any specific form of negotiations. Whole problem of cotton textile trade should first be debated, including question of whether continuation of LTA needed and, if so, in what form. Did not see need for any particular hurry in all this, and argued that Cotton Textile Committee review of LTA in late 65 would be good occasion begin this debate. KR sector discussions might resume early next year in light outcome LTA review. Lall did not exclude possibility of eventual Indian agreement to package deal, but this would come only much later after other alternatives explored and, in any case, only after exporters had clear idea from each major importer what more liberal administration of LTA might mean.

In private talks Lall further elaborated on this line of argument revealing number of probable reasons for his tactic. (1) It clear that Indians have not done much recent thinking about problems and practical possibilities re cotton textiles trade. Their initial position being taken in absence clear understanding of what is negotiable. (2) Indians still unhappy over turn down by us on suggested changes in LTA (see Delhi’s 1038 to Dept).³ (3) Lall claims Indian Minister of Trade and Industry personally involved and very critical of LTA, hence some time needed bring him around. (4) Indians look forward to further bilateral discussions pressing their viewpoint and exploring possibilities with US, EEC, and possibly other importing countries. They unwilling accept package deal negotiations until results these consultation clear to them. (5) Indians are aware limitations their ability expand volume cotton textile exports, and therefore less anxious than other exporters push forward with negotiations focused on increased access to import markets.

Re consultations with US, it evident that Lall anxious handle these personally in Washington. He is hoping have such talks while in US between November 1 and 3. Also intends have discussions with Hijzen next week in Brussels.

In view position expressed by Indians and uninstructed Pakistan delegation, meeting adjourned until November 8 when India may be ready acquiesce start up sector discussions on basis WW proposal.

Comment: We should try use time before Nov 8 to try to bring India and Pakistan around to accepting WW proposal as negotiating guideline. Since Lall anxious have US-Indian bilateral in Washington, do not believe we should insist this be done in Geneva although we should emphasize it important as general rule keep future negotiations re package deal one place. (Except for eventual negotiation of detailed bilaterals, pursuant to package deal agreements; these can of course be done elsewhere.)

In Washington we expect Lall to concentrate on 3 issues: (1) Continue probe USG willingness to open up text of LTA. (2) Failing this, to seek commitments re specifics of more liberal US treatment of India in bilateral agreement. (3) In view limitations on Indian ability expand volume of exports, to focus on improving prices received. In this connection he may float idea of complete tariff elimination on textile items under restraint.

In replying to Lall, and in any discussion in New Delhi, Karachi, and elsewhere, suggest following points be stressed:

(1) There is no chance that US or other importing countries willing open up language LTA at this time.

(2) What counts is administration of LTA and not language of LTA. Most if not all importing countries have severe limits on what they can do in cotton textile field. This, however regrettable, is practical fact of life and no UNCTAD-type speeches about needs of LDCs likely make much impact on domestic industries in importing countries. Best and only practical way bring about improvements in cotton textile trade for exporting countries, including reductions of tariffs, is in context KR package deal where renewal of LTA can be exchanged by exporters as quid pro quo for tariff cuts and more liberal administration of LTA.

(3) Postponement package deal discussions, and lengthy debates about fundamentals of world textile trade and LDC needs, will only have practical result of delaying implementation agreement on tariff cuts and more liberalized administration but will not change basic attitudes of importing countries.

(4) WW proposal comprises negotiating desiderata. In accepting this approach countries in no way commit themselves in advance either to renew LTA, or to liberalize its administration, or to make tariff cuts. Countries under no obligation to accept some elements of the package unless satisfactory arrangements negotiated with respect to all aspects of package. Nevertheless, under WW’s proposal structure of cotton textile sector negotiations would be based on formula: what amount of liberalized administration plus tariff cuts, on one hand, would justify LTA renewal on other.

(5) Many exporting countries want fast implementation of more liberal LTA administration (as first step, more liberal bilaterals for coming year). Only way to secure this liberalization is through WW “package” approach. Considerable pressure, therefore, on importers, and Lall, to move forward quickly.

(6) We recommend that Washington not get involved in negotiating changes in text WW proposal. This should be discussed before and at Nov 8 meeting in Geneva.

(7) Re specifics of new US-Indian bilateral, suggest Lall be given indication of areas in which to expect improvement (e.g. swing, carryover, growth, possible elimination certain ceilings within groups, etc.). But precise details to be negotiated later.

(8) Re possible Lall request to eliminate tariffs on restricted items, assume we would point out value to India of 50 percent cut and lack of authority to go to zero.

Tubby

1. Source: Department of State, Central Files, INCO–COTTON GATT. Limited Official Use; Priority. Repeated to Bonn, Brussels for USEC, Cairo, Hong Kong, Karachi, London, Luxembourg for USEC, New Delhi, Ottawa, Paris for USOECD, Rome, Stockholm, The Hague, and Tokyo and passed to the White House for Herter at 3:10 p.m.
2. Document 289.
3. Dated October 22. (Department of State, Central Files, INCO–COTTON 17 US–INDIA)