"3. Exchange controls. "4. Exchange clearing and compensation agreements. "Supplementary administrative devices which limit importation include: "1. Milling or mixing regulations which require that in the process of manufacture certain proportions of domestic products must be combined with imported goods. "2. The raising of consular, import, and other administrative fees, On the scope intended by the term "foreign trade agreements" reference may be made to testimony by Assistant Secretary of State Sayre before the Ways and Means Committee on the original 1934 legislation, tracing the history of executive action based on legislation in the field of foreign trade, including the agreements concluded under the Tariff Acts of 1890 and 1897 (House hearings, 1934, 310 to 312), and to the summary on this subject in the discussion by the Ways and Means Committee, in its report, of the constitutionality of the proposed legislation '73d Cong., 2d sess., H. Rept. 1000, 9 and 10; ibid., S. Rept. 871, 12 and 13). The Committee referred specifically to the two series of trade agreements entered into under the Tariff Acts of 1890 and 1897. A number of these agreements contained general provisions as well as the tariff concessions specifically referred to in the two tariff acts. Although the relevant provisions of the Tariff Act of 1890 made no reference to the use of agreements to give effect to its flexible provisions (sec. 3, 26 Stat. 612), numerous agreements were entered into under the section in order to give effect to its purpose of removing "unequal and unreasonable treatment of American exports". In the first of these agreements, concluded by Secretary of State Blaine with the Brazilian Minister in 1891, for example, the two countries undertook that "laws and regulations to be adopted shall place no undue restrictions on the importer nor impose additional fees or charges upon the articles imported", while recognizing the right of the 2 governments to take action "necessary to protect the revenue and prevent fraud in the declarations and proof" (For. Rel. 1891, 43-47; 2 Finance Committee (Senate), Extension of Reciprocal Trade Agreements Act: Hearings on H. R. 1211, 1949 (hereinafter referred to as Senate hearings, 1949) 1095–1098). It was also agreed that no export taxes would be imposed by one country on products on which concessions had been granted by the other. One of the more important of the agreements in this series was that signed by Mr. John W. Foster, later Secretary of State, with the German Chargé, in which the German Government undertook to remove sanitary restrictions which it had been applying to United States pork products and the United States Government recognized that this would remove the occasion for the exercise of authority under its meat inspection legislation to exclude certain imports from Germany (2 Senate hearings, 1949, 1117--1119). The relevant provision in the Tariff Act of 1897 was generally comparable to that in the 1890 Act, but specifically authorized the conclusion of agreements in order to give effect to it (sec. 3, 30 Stat. 203 and 204). The agreement concluded under this provision by Secretary of State Root with the German Ambassador in 1907 included undertakings by the United States with respect to the modification of "customs and consular regulations” relating to the definition of dutiable value, to the conduct of proceedings by the Board of Appraisers (now the U. S. Customs Court), to the documentation given consular officers in connection with importation, to the cooperation of special Treasury agents with Chambers of Commerce in Germany, and to the acceptance by Customs appraisers of certificates of value issued by such Chambers (1 Treaties (Malloy) 563-578; 2 Senate hearings, 1949, 1127-1129). One agreement under that act, with Bulgaria, merely provided for the granting of most-favored-nation treatment to "commerce" (agreement of 1906, 1 For. Rel. 1906, 141 and 142; 34 Stat. (pt. 3) 3231; 100 Brit. For. St. Paps. 826). At another point in the report of the Ways and Means Committee on the original trade agreements legislation, when discussing the application of the generalization provisions of the Trace Agreements Act, the committee observed that it "would be necessary" to extend trade agreement benefits to countries "to which United States is, by treaty or agreement, pledged to accord equality of treatment by virtue of the most-favored-nation clause," and stated that there were then 48 such treaties "and agreements" and that others might be added (73d Cong., 2d sess., H. Rept. 1000, 15; ibid., S. Rept. 871, 18). Thus the committees recognized that, in addition to formal commercial treaties containing most-favored-nation commitments to extend trade agreement reductions, there were a number of executive agreements relating to trade matters also containing such commitments. In fact, following a discussion of most-favored-nation treatment during the Ways and Means Committee hearings, Secretary of State Hull had inserted in the record a memorandum on such treatment containing the texts of most-favorednation provisions in a number of such treaties and agreements. One of the latter was an agreement with the Government of Greece concluded in 1924 while Mr. Charles Evans Hughes was still Secretary of State (House hearings, 1934, 43-45; USTS 706). This agreement provided for most-favored-nation treatment with respect to "import, export, and other duties and charges affecting commerce as well as in respect to transit, warehousing and other facilities, and the treatment of commercial travellers samples". It also provided "in the matter of licensing or prohibitions of imports and exports" that each country shall accord mostfavored-nation treatment to the commerce of the other "with respect to commodities, valuations, and quantities". The most favored-nation clause was further spelled out to cover any concession that might be granted to another country "with respect to any duty, charge, or regulation affecting commerce.' These commitments were subject to specified exceptions. Several agreements of this nature were in effect at the time of the enactment of the Trade Agreements Act. One of the more recent of these was that signed by Ambassador Culbertson with the Government of Chile in 1931 providing for most-favored-nation treatment with respect to "customs duties and other fiscal imposts as well as import licenses and measures of customs restrictions" (47 Stat. (pt. 2) 2682 to 2684). Thus it is clear that not only did the committee have before it testimony as to the need for authority to include in trade agreements provisions dealing with a wide variety of barriers to or restrictions on the foreign trade of the United States, but it also recognized the then existing practice of including provisions relating to various types of restrictions in agreements relating to trade matters. As the statute and the report of the committee disclose, it was the intention of Congress that the President should be able to obtain and make commitments in trade agreements relating to such matters. Legislative history since 1934 In recommending renewal of the trade agreements authority in 1937, the report of the Ways and Means Committee argued strongly for the continuation of mostfavored-nation treatment, stating that "the exchange of nondiscriminatory treatment between the United States and another country is itself a bargaining transaction just as is the exchange of a particular duty or other concessions" (75th Cong., 1st sess., H. Rept. 166, 12). This language not only justifies the inclusion of most-favored-nation provisions in trade agreements, but also recognizes that in addition to particular duty concessions the United States could also grant in such agreements "particular other concessions" relating to other trade restrictions. Again, in recommending renewal of the trade agreements authority 6 years later, the report of the same committee stated that "no one now seems to question seriously the desirability of including a reciprocal pledge of most-favored-nation treatment in agreements with particular countries" (78th Cong. 1st sess., H. Rept. 409, 42). Neither of these references to most-favorednation treatment specifically limit the provisions for such treatment to import duties. The report of the Senate Finance Committee recommending renewal of the trade agreements authority in 1937, in discussing the authority to bind excise taxes against increase in order to protect tariff concessions, recognized the practice of including in trade agreements provisions for national treatment regarding internal taxation. In explaining the inadequacy of such national treatment provisions alone under certain circumstances, the report pointed out: "In the case of products which are produced in considerable commercial quantities in the importing country tariff adjustments accompanied by the pledge of national treatment in regard to internal taxation (i. e., taxation of imported products and like domestic products on an equal, nondiscriminatory basis) afford adequate protection against discriminatory or excessive internal taxes on imported products; such a pledge, of course, does not place any definite restrictions on the height of internal taxes.' (75th Cong., 1st sess., S. Rept. 111, 5.) The most recent reference to such matters took place in 1955 in connection with the consideration by the Ways and Means Committee of H. R. 1. The original version of H. R. 1 which was considered by the committee contained 75018-56-6 language specifying the kinds of general provisions which the President might include in trade agreements. This language read as follows: "containing provisions with respect to international trade, including provisions relating to tariffs, to most-favored-nation standards and other standards of nondiscriminatory treatment affecting such trade, to quantitative import and export restrictions, to customs formalities, and to other matters relating to such trade designed to promote the purpose of this section similar to any of the foregoing: Provided, That, except as authorized by subparagraph (B) [the proclaiming authority] of this paragraph, no such provision shall be given effect in the United States in a manner inconsistent with existing legislation of the United States." (Ways and Means Committee, Trade Agreements Extension-1955, 19.) This language was retained in the bill as reported by the Ways and Means Committee, except for the modification of the proviso and the insertion of an additional proviso, neither of which are relevant to the question of the scope of the trade agreements authority now being considered. The report of the Committee in discussing the general scope of this language explained: "As under present law, the President would be authorized to enter into foreign trade agreements with foreign governments or instrumentalities thereof. The language continuing this authority has been expressed so as to spell out in the section the fact that the President can in entering into foreign trade agreements include general provisions of the kind which have heretofore been included in such trade agreements since the inception of the trade-agreements program in 1934. In the past it has been necessary to make various changes in such general provisions in order to keep pace with the changes of devices and practices in foreign countries. The provisions specified in this subparagraph are illustrative of types of provisions which are necessary in order that the President may be able to meet effectively new methods of discrimination and other barriers against American exports. An important purpose of these provisions is to protect against impairment the tariff concessions which the United States obtains in trade agreements." (84th Cong., 1st sess., H. Rept. 50, 3.) Thus it is clear that the committee considered the language as merely confirming the existing scope of the President's authority.1 The report of the Senate Finance Committee on H. R. 1 recommended the deletion of this language. Without questioning the views of the Ways and Means Committee as to the effect of such language, the Finance Committee merely stated that this deletion, together with another amendment which it proposed in the House bill, "were made in the light of the fact there is a pending House bill (H. R. 5550) authorizing United States membership in the Organization for Trade Cooperation which would administer the General Agreement on Tariffs and Trade" (84th Cong., 1st sess., S. Rept. 232, 3). H. R. I thus became law without this language. The foregoing summary of the legislative history of the Trade Agreements Act, both in 1934 and since, shows that the appropriateness of including general provisions in trade agreements was recognized by the Congress. The Ways and Means and Finance Committees, when considering the original trade agreements legislation, had before them emphatic statements as to the need for authority to include in trade agreements provisions relating to other trade barriers as well as to tariffs. The report of the Ways and Means Committee, which also became part of the report of the Senate Finance Committee, not only supported this need in general language, but also referred to earlier agreements on trade matters containing such general provisions dealing with nontariff barriers. The broad authority to "enter into foreign trade agreements" which was set forth in the act must be read in the light of this legislative record. Subsequently, the committees, in renewing the trade agreements authority, referred favorably to the inclusion of such provisions in trade agreements. Thus the Trade Agreements Act itself and its legislative history firmly support the proposition, reaffirmed by the Ways and Means Committee in House Report The minority of the committee also came to the conclusion, albeit indirectly, that the language was unnecessary: "We have been unable to determine the intended purpose of this new language. We have been told that it is merely descriptive of the authority which the State Department already assumes it has and which it has already exercised. If this is, in fact, the case, we see no necessity for its inclusion in this legislation. The specific grants of authority which are now mentioned for the first time, such as "quantitative import and export restrictions" and "customs formalities" are themselves so vague as to furnish no clear guide as to what is meant. However, the grant also extends to "such other matters relating to such trade designed to promote the purpose of this section similar to any of the foregoing." No one knows to what this refers. Is it intended to constitute authorization or approval for the substantive provisions of GATT? Absolutely no need for this new language has been demonstrated. It should be eliminated as unnecessary." (84th Cong., 1st sess., H. Rept. 50, 24.) 50, 84th Congress, that the act confers ample authority for the inclusion in trade agreements of general rules relating to nontariff trade barriers. Judicial decisions Although no case has been found in which the validity of such general provisions has been clearly passed on by the courts, there are a number of cases in which the Court of Customs and Patent Appeals has referred to such provisions, without questioning their validity, in deciding issues before it. In United States v. Rathjen Brothers (31 C. C. P. Å. (Customs) 70), the court had before it a trade agreement provision comparable to that part of article III, paragraph 1 of the General Agreement prohibiting under certain circumstances the increase of internal taxes imposed on or in connection with importation. Subsequent legislation had increased such internal taxes. Without questioning the authority for the inclusion of such a provision in the trade agreement, the court held that the trade agreement provision and the later statute were "absolutely irreconcilable," and that, consequently, the later legislation prevailed. In at least two instances the court has discussed most-favored-nation provisions in trade agreements (George E. Warren Corp. v. United States, 25 C. C. P. A. 462; Balfour Guthrie & Co. v. United States, 31 C. C. P. A. (Customs) 63). Although in the first of these cases the court qualified its discussion of the most-favorednation clause by stating, "assuming that in every instance full authority existed for including" the clause in trade agreements, in the latter the court considered the most-favored-nation clause in the bilateral trade agreement with the United Kingdom without any such qualification. In a more recent case the same court referred to the allocation of a tariff quota "in accordance with the basis specified in article III of the Canadian Trade Agreement" for most-favored-nation treatment in the case of quota restrictions, without in any way questioning the appropriateness of the inclusion of such provisions (Greene Cattle Co. Inc. v. United States, 36 C. C. P. A. (Customs) 52). Thus the courts, although never squarely confronted with the question of the authority to include general provisions in trade agreements, have never questioned the authority and have treated them as being valid parts of the agreements. Scope of GATT compared with trade agreements authority The functions of the General Agreement on Tariffs and Trade and of the proposed Organization for Trade Cooperation are limited to those which relate to trade. Thus, while article I of the General Agreement refers, in its first paragraph, to "economic endeavour" in addition to trade, and continues with references to "full employment," "real income and effective demand,' ""use of resources of the world in expanding the production and exchange of goods," and "development of the economies of contracting parties," the second paragraph of article I states that the contracting parties desire to contribute to these objectives "through this agreement" by "arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce." Thus, it is clearly stated that, regardless of the earlier reference to ultimate objectives (to which some countries have considered it particularly desirable to refer), any activity under the General Agreement directed toward accomplishing those objectives shall be undertaken only through the specified methods relating to trade. This differentiation between ultimate economic objectives, and immediate undertakings in the field of trade, is also carefully retained in article 1 of the Agreement on the Organization for Trade Cooperation. This article states that the Organization is established to further the achievement of the purposes and objectives set forth in the General Agreement, but it may act only "as provided for in the General Agreement and herein." The purpose of this clause "as provided for in the General Agreement and herein" is set forth in the report of the working party of the review session of the General Agreement which recommended establishment of the new Organization. This report states that the phrase was inserted because it was felt that otherwise article 1 of the Organizational Agreement might be construed as referring only to that paragraph setting forth the ultimate objectives, rather than to the preamble as a whole, which includes the 1 The question may be asked why, if GATT action is related solely to trade barriers, was the broad lan. guage relating to other objectives included in the first paragraph of article I. The answer is that some governments do not consider that the reduction of trade barriers is an end in and of itself, regardless of consequences such as reduced employment in their countries. They would not wish the argument to be made, for example, that trade barriers ought not to be increased (as under the waiver provisions of article XXV of the existing General Agreement and parallel article 13 of the Agreement on the Organization for Trade Cooperation) because such an increase would be "contrary to the objectives of GATT," unless the objectives also took account of the ultimate objectives of raising living standards, etc. specification that the undertakings of the Agreement were directed to the attainment of such ultimate objectives only through specified action in the field of trade (GATT Basic Instrs. & Sel. Docs., 3d Supp., 233; the report refers to the preamble of the General Agreement, which originally embodied the provisions which were included in article I as a result of the review). As under the General Agreement the functioning of the Organization is limited to activity relating to trade as specified in the second paragraph of article I of the General Agreement. Article I, paragraph 2 of the General Agreement uses the term "barriers" whereas the Trade Agreements Act in some places uses the term "restrictions." The Trade Agreements Act itself, however, in specifying the finding which the President shall make before entering into a trade agreement uses the term "burdening *** the foreign trade of the United States," as well as "restricting" such trade. The Ways and Means Committee, in its report on the original trade agreements bill in 1934, used the term "retardation of trade" (73d Cong., 2d sess., H. Rept. 1000, 16; ibid., S. Rept. 871, 19). Representative Treadway in his discussion with Mr. Hull, referred to above, spoke of the latter's statement as to "obstructions to international trade" and then asked what "these trade barriers" were (House Hearings, 1934, 19). Viewed against the legislative history of the Trade Agreements Act, discussed above, including the various terms used in 1934 in discussing its scope, the authority granted by the Trade Agreements Act is indeed sufficiently broad to cover the provisions relating to "barriers to trade" referred to in article I, paragraph 2 of the General Agreement, and contained in the subsequent articles of that Agreement. The relation between the first paragraph of article I of the General Agreement (mentioning u.timate objectives) and the second paragraph of that article (mentioning the scope of the undertakings in the Agreement directed toward the attainment of such ultimate objectives) is quite comparable to the situation under the Trade Agreements Act. Although the authority in the Trade Agreements Act is limited to duties and other matters relating to trade, the opening language of that act itself refers to the ultimate objective of such trade action as being directed toward "establishing and maintaining a better relationship among various branches of American agriculture, industry, mining and commerce." The original Trade Agreements Act also referred as its ultimate objective to "assisting in the present emergency in restoring the American standard of living, in overcoming domestic unemployment and the present economic depression" (deleted by Trade Agreements Extension Act of 1949, sec. 4, 63 Stat. (pt. 1) 698). Furthermore, in recommending renewal and extension of the trade agreements authority in 1945, the report of the Ways and Means Committee stated five objectives of the law. Some were immediate objectives specifically mentioning the reduction of trade barriers both in the United States and abroad, whereas the last two were broader ultimate objectives. They were as follows: "(4) To contribute thereby to an increase of production, employment, consumption, and general prosperity in the United States and foreign countries, and to rising levels of living and material welfare in this country and abroad; and "(5) By the whole process to contribute to making more solid and enduring the partnership of the United Nations on which security and peace depend." (79th Cong., 1st sess., H. Rept. 594, 3.) Thus the question of scope is treated in a parallel manner in both the Trade Agreements Act and in the General Agreement. Although, against the background of its legislative history the Trade Agreements Act authorizes the inclusion of general provisions relating to various types of governmental controls which directly affect trade, nowhere is there a basis for construing it to authorize the inclusion in trade agreements of provisions relating to other methods of attaining the ultimate objectives mentioned in the statute and in the committee report quoted above. The situation is comparable under the General Agreement, in view of the limitation, in paragraph 2 of article I, to the use of trade action as a means of working toward the ultimate objectives. Thus the Trade Agreements Act contains ample authority for the provisions of the General Agreement as it now exists, but does not contain authority for an extension of the existing scope of the General Agreement beyond that envisaged by paragraph 2 of article I, such as providing for general codes relating to full employment, investment and various types of direct assistance for economic development, private restrictive business practices, and commodity control schemes closely regulating international trade and prices. In fact, it has always been the policy of this government that United States participation in such commodity agreements as the Inter-American Coffee |