In connection with the announcement of import quotas on beef, Agriculture
intends to issue in the next day or so a regulation concerning meat
shipments through Foreign Trade Zones. As presently drafted by
Agriculture, the regulation would take effect immediately and thus would
apply to Australian beef shipments now being processed at Mayaguez,
Puerto Rico.
State has sent a letter to Agriculture pointing out that the proposed
regulation is inconsistent with the terms of our various meat restraint
agreements and would have a damaging effect on our relations with
Australia and other supplying countries. Jules Katz has also discussed
this matter with Dick Bell, but Agriculture has thus far refused to
budge. Bell contends that the Administration must make a further gesture
to the domestic cattle industry and thus is pushing this regulation,
which will in effect force Australia to absorb approximately 11 million
pounds of beef now in Mayaguez into its overall import quota.
The Australian Government has, however, made it clear that any action
taken by us to reduce its quota below the negotiated restraint level
would be viewed as discriminatory and would likely provoke a strong
reaction in Australia. Prime Minister Fraser wrote the President on
October 11 concerning this matter (Tab B). He alluded to possible
consequences for our bilateral relations if we move to cut the
Australian quota. He said that ". . . the Australian Government could
not accept, and the Australian people will not be able to understand,
any decision which penalizes, or appears to penalize, Australia for
failure on the part of others." Fraser stressed that our meat import problem stems from
above-estimate shipments by Canada, which is not a party to the US
voluntary restraint program.
I share State's concern about this matter, particularly with respect to
the possible impact on our relations with Australia. The regulation
should apply prospectively not retroactively. We should not penalize
Australia at this late date for taking advantage of a loophole in our
legislation especially when we told the Australians officially that we
had no intention of doing so. The Australians are on solid legal grounds
and will hold us accountable in the GATT
and elsewhere if we force them to count the recent shipment to Mayaguez
under their 1976 quota.
There are some precedents for dealing with situations such as these. For
example, when we recently raised the duty on sugar, we exempted
shipments in transit from the higher tariff. Also, the Senate this year
passed the Curtis Amendment concerning Foreign Trade Zones. The
amendment would have required that only those meat shipments which
entered a Foreign Trade Zone after the effective date of the act be
counted as part of an individual country's quota. Although the amendment
died in the House, it does give us some idea of what might be acceptable
to the Congress. Domestic cattlemen supported the amendment.
I recommend that you call Acting secretary of Agriculture Knebel and
explain to him the broader policy implications of the proposed
regulation and request that his Department give consideration to its
modification so that it applies only to future shipments through Foreign
Trade Zones. At Tab A are suggested talking points for your call to
Knebel.
RECOMMENDATION That you phone Knebel and discuss with him the
proposed meat import regulation.
Concur: W.R.
Gleysteen
1 Source:
Ford Library,
National Security Adviser, Presidential Correspondence with Foreign
Leaders, Box 1. Confidential. Sent for action. Concurred in by
Gleysteen. Attached but not published at Tab A is
Scowcroft’s
undated talking points; attached but not published at Tab B is
Fraser’s
undated letter to Ford. Fraser’s letter concluded, “it is my firm view that
the quantity of Australian meat to be permitted entry to the USA this year, should be in no way
reduced below the level of 632.2 million pounds previously agreed
between our two governments.” On November 6, Deputy Executive
Secretary Frank Ortiz notified Scowcroft that Australia
had been informed that its quota for 1976 was 632.2 million pounds.
(ibid.)