§ Economic Measures
§ In discussions with representatives of the U.S. Administration Her Majesty's Government has made clear its position on the economic measures which the Administration has adopted or proposed and which affect U.S. imports from Britain. Her Majesty's Government would wish to restate its view on one of the measures which the U.S. Administration has proposed, namely the discriminatory feature of the proposed job development tax credit.
§ In explanatory material released by the office of the White House Press Secretary on 15th August, 1971, it was stated:
§ "The limitation on the credit for machinery and equipment which is predominantly produced abroad will create a preference in favour of United States produced machinery and equipment. This will give our capital goods producers an opportunity to strengthen their capacities to meet the increased level of foreign competition which they are experiencing".
§ The consequential amendment of U.S. law in order to provide more favourable tax treatment in respect of the purchase of products made in the U.S.A. would appear to be a clear violation of Article III, paragraph 4 of the General Agreement on Tariffs and Trade. By creating a 10 per cent, price preference available to U.S. taxpayers who purchase United States produced machinery and equipment the 23W tax credit could not fail to take a heavy toll of the legitimate exports of the United Kingdom. In conjunction with the 10 per cent. import surcharge, with which the discriminatory clement in the tax credit would be linked it would create a virtually prohibitive new trade barrier. In addition, the effect of the proposed tax credit could be that the law of the United States would continue for a time to discriminate against imports even after the creation of conditions in which the temporary import surcharge is withdrawn.
§ A discriminatory tax credit in favour of domestically produced goods will, if enacted, seriously undermine the fundamental principles of world trade and would weaken one of the major safeguards which protect trading countries against the widespread adoption of unfair trading practices. Her Maejsty's Government strongly sympathise with the desire of the U.S. Government to strengthen the world trading system and free it of such practices to the fullest possible extent. It will be greatly to be deplored if the United States itself is seen to give its support to an unfair and discriminatory measure.
§ For these reasons Her Majesty's Government earnestly hopes that the United States Government will not proceed with proposals which would distort and disrupt the import trade of the United States by introducing tax privileges which are acquired by virtue of the purchase of goods produced in the United States.
§ BRITISH EMBASSY,
§ WASHINGTON.
§ 13th September, 1971.