Half-Free Trade

One of the chronic afflictions of the U.S. economy is the limp state of the nation's textile industry. U.S. textile production is growing at only one-third the rate of manufacturing output as a whole; since 1948, textile companies have closed down more than 800 mills employing 250,000 people. Many of the industry's ills stem from obsolete equipment and the loss of markets to plastics, paper and synthetic fibers, but most textile makers choose to blame their troubles primarily on foreign competition and to clamor for protective quotas. Two months ago, when President Kennedy unveiled a vaguely worded "assistance program" for the industry, many textile men jumped to the conclusion that their hopes were about to be fulfilled. Last week they learned that the cloth was not cut their way.

Twin Targets. Meeting in Washington with industry spokesmen and Congressmen from textile states, Under Secretary of State for Economic Affairs George W. Ball made it plain that the Administration had no intention whatever of putting unilateral U.S. quotas on imports of foreign cloth. Instead, the U.S. was trying to work a squeeze play.

Ball let the U.S. textile men know that in talks last week with representatives of the major textile-importing nations,* he pushed for greater textile imports into their countries from underdeveloped nations. Simultaneously, the U.S. sought to persuade textile-producing areas with low labor costs--Japan, Formosa, Hong Kong, India, Pakistan and the U.A.R.--to agree to put voluntary limits on their exports so as to avoid complete disruption of the already glutted world textile market. The scheme had twin purposes: 1) to divert some Asian textiles from U.S. to European markets, and 2) to give the underdeveloped nations an economic boost in the form of European trade rather than U.S. aid.

In part at least, the U.S. was likely to get its way. Hong Kong textile makers, who have upped their U.S. exports just about enough to offset the effect of the voluntary quotas accepted by Japan four years ago, were vocally indignant at a Washington demand that they cut their shipments to the U.S. by 30%. But most Asian producers would almost surely accept voluntary quotas rather than risk provoking the U.S. to formal tariff discrimination against them. As for the textile-importing nations, all the participants in last week's Washington conference tentatively endorsed the U.S. plan, presumably will help install it as a binding trade agreement at a conference to be held in Geneva next month under the auspices of the 38-member General Agreement on Tariffs and Trade (GATT).

Less Than Ideal. However successful it might prove at the international conference table, the Administration's artful compromise was unlikely to win many friends at home. Both the U.S. textile industry and its friends in Congress loudly proclaimed "shock" that no stronger action was to be taken against imported textiles. To free traders, increased U.S. reliance on quotas--imposed or voluntary --seemed a dangerous retreat from the international economic aims professed by every U.S. Administration, Republican or Democratic, since 1932. Admitted Under Secretary Ball: "These arrangements represent a severe departure from the ideal of unrestricted trade toward which we would like to be working."

*Participating in the conference: Belgium, Canada, France, Great Britain, Italy, The Netherlands, and West Germany.

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