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

294. Telegram From the Department of State to the Embassy in India¹

Washington, November 6, 1965, 12:51 p.m.

843. Refs: New Delhi’s 1150² and TAGG 3546.³ Cotton Textiles. Discussion with Lall on cotton textiles held November 3. Ambassador Roth (STR) acted as principal spokesman for USG; all other ITAC agencies represented including Chairman ITA. Roth’s points were:

1 a. USG viewed the Wyndham White package approach as the most practical way to reconcile the interests of importing and exporting countries and as compared to all other alternatives offered greatest opportunity for increased liberalization of world cotton textile trade. We are able to offer liberalized administration of LTA and persuade our domestic industry of utility of this approach only because integral part of package is extension of LTA without change for further period after its 1967 expiration date. This is reason why USG and other importing countries emphasize that maintenance of LTA without substantive change is key issue in obtaining trade benefits that GOI and other LDC’s seek and that we conceive wld be encompassed within liberalization of bilateral agreements. For same reason India may be over-emphasizing importance of formal changes in language of LTA. We believe that administering existing LTA with greater flexibility wld provide real trade benefits for LDC’s.

b. We are concerned over timing and wish maintain momentum of Kennedy Round Sector Discussions. Lall suggested at October 19–20 meetings that sector discussions might be postponed until after thorough debate held over fundamentals of world trade in cotton textiles, including the need for an extension of the LTA; this debate to take place during the major review of the LTA. We are concerned lest such a debate make agreement in sector discussions more difficult to attain, since inevitably in the process of formal debate wld be a hardening of positions. Opportunity exists now for real progress through sector discussions, this opportunity shld not be lost.

c. It appears that some misunderstanding exists in Delhi over nature of W.W. package. Use of package as negotiating framework does not involve any commitment, legal or moral, to accept any one element of package unless countries satisfied as to all elements in package.

d. We wld envisage that in discussions on specifics of Indian-US bilateral, USG wld be forthcoming. Frankly all four Indian requests, for flexibility, carryover, increase in Category 31 ceiling, and increase in overall ceiling are negotiable. Assuming acceptance of W.W. package in principle, we are prepared begin discussion specifics of our bilateral, either here or in Geneva, as soon as K.R. sector discussions reconvene, or on a date convenient to the Indian Government.

2 a. In reply, Lall stated he agreed that timing had now become an important factor and that GOI was prepared to press ahead rapidly. In view of what had happened to India under LTA it wld be superhuman for India to say now that she liked LTA. Major difficulty that India has with W.W. package is her belief that genuinely liberal solutions on tariff reductions and increased access for LDC’s products cannot be reached within the framework of existing LTA. India had no idea of negotiating changes in every concept of the LTA. She did have in mind some very specific changes in its language which wld ensure that promised liberalization on part of EEC did in fact take place. The general ideas put forward in India’s aide-memoire of September 22⁴ were “half-baked” and did not represent by any means India’s last word on the subject. Certainly, India did not intend to propose any changes which the USG wld find absolutely unthinkable. India’s accepting the LTA in principle now wld place EEC in a very “happy” position. Under LTA, as it exists, EEC can rely on extra-legal quota restrictions to curb textile imports from LDC’s and need not even go over to system of restraints envisaged by LTA itself. As a minimum, he believed it necessary to write into LTA provisions that wld ensure that what EEC promises is done, for example, a fixed time-table to eliminate non-LTA quota restrictions was necessary. Another basic problem with EEC was that present quotas were products of 10 years of restrictive practices, which have resulted in an extremely small base. The EEC does not restrict imports from such countries as Spain and Portugal or even from Peking. The US does not apply restrictions to imports from developed countries. Thus, in his Government’s view, the LTA has become an instrument to restrict the imports of 3 or 4 developing countries. Point here, he stressed, is that necessary changes in language of LTA to prevent discriminatory treatment against LDC’s shld not be debarred from discussions.

b. Whatever the Indian Govt’s predilictions about the LTA may be, they are now prepared to discuss specifics. It is possible that India might be able to get through bilateral discussions as much in dollars and cents as she wld obtain from desired changes in language of the LTA. She is therefore prepared to discuss specific liberalizations in administration of LTA by importing countries. If in the course of these discussions, India becomes convinced that the fruits of liberalization wld come to her, she wld not press for changes in LTA. Test wld be pragmatic one, of balancing off value of trade concessions obtained through bilateral negotiations against possible gains for India through pressing for changes in LTA that may be unattainable. Only commitment that Lall could make at present is agreement that some types of restriction on trade in cotton textiles is necessary; he cannot agree that extension of present LTA is only possible form restriction can take. He can assure us, however, that in sector discussions no Indian proposals wld be put forward that wld necessitate substantive change in the text of the LTA. Changes which might have to be made in text of LTA wld be “consequential”, i.e. wld result from bilateral discussions.

With regard to major review in GATT Cotton Textiles Committee, Lall said that he could not agree to its postponement until after completion of sector discussions. He wld, however, seek to avoid temptation to use this as a forum for attacking importing countries or LTA in an inflammatory fashion.

3. Roth said that he did not believe that we were too far apart. USG believes that LTA is flexible enough to accommodate within present framework purposes Lall has in mind. Only “rigidity” in US position is rigidity of form. We want to maintain umbrella of LTA unchanged, but underneath that umbrella, we can move responsively towards liberalizing trade.

4. One possibility discussed by ITAC Chairman at meeting was regulating US-Indian trade by means of a comprehensive bilateral agreement covering all trade in cotton textiles as opposed to present limited bilateral. Lall said he wld be prepared, were its terms reasonable to India, to recommend to his Govt. that “it walk into that trap”.

5. In summarizing results of meeting, Lall stated that it was his understanding that trade problem between US and India could be sufficiently resolved through bilateral negotiations so that the problems of general principles wld be reduced to manageable proportions. He was concerned over EEC liberalization. Bilateral negotiations in Geneva, could not begin, however, prior November 15th since Indian textile experts wld not be available before that date. Roth stated that we believed that problem of general principles might become academic and that GOI could expect the USG to be forthcoming in Geneva discussions. Lall asked in conclusion that the Emb. in Delhi not detail his position in their discussions with the GOI, stating that he wld like to have GOI briefed only by himself.

6. We would summarize results of meeting as follows:

(1) India now prepared to enter into sector discussions.

(2) Perhaps US and India may be able to settle problem of cotton textile trade through a comprehensive bilateral agreement covering trade in all categories.

(3) India doubtful that she can get liberalization from EEC without changes in LTA.

(4) Whether India will insist on changes in language of the LTA will depend on results of her bilateral discussions with the US and EEC.

(5) If India satisfied with other elements of package she would agree to extension of LTA in some form.

(6) Both parties agree that no parts of package are binding unless all parts agreed.

However, subtleties and nuances of Lall’s presentation as reported in foregoing should be borne in mind.

For New Delhi

Foregoing is on FYI basis, since we believe focal point US-Indian discussions textile problem shld be shifted to Geneva.

Rusk

1. Source: Department of State, Central Files, INCO–COTTON GATT. Confidential. Drafted by Harald B. Malmgren and Charles T. York (E/OR/ICD/FTD) on November 4; cleared by Henry Hopp (FTD), Herbert N. Blackman (Labor), and Arthur C. Bauman (SOA/E), and in substance by Thomas W. Wolfe (Treasury), Tendler (Commerce), and Hornbeck (Agriculture); and approved by George R. Jacobs (ICD). Repeated to Geneva for GATT.
2. Dated October 30. (Ibid.)
3. Dated November 2. (Ibid.)
4. Not further identified.