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Secretary DULLES. Yes, I think we can do that.

(Secretary Dulles subsequently supplied the following for the record:)

MEMBERS OF THE COMMITTEE FOR RECIPROCITY INFORMATION, 1956-58 Edgar B. Brossard, Chairman, United States Tariff Commission. Charles W. Adair, Jr., Chief, Trade Agreements and Treaties Division, Depart

ment of State. George H. Willis, Director, Office of International Finance, Department of the

Treasury. Prentice Ñ. Dean, Associate Chief, Foreign Economic Policy Division, Office of Foreign Economic Affairs, Office of Assistant Secretary of Defense (Interna

tional Security Affairs), Department of Defense. Harry Shooshan, International Activities Assistant, Technical Review Staff,

Office of the Secretary, Department of the Interior.
A. Richard DeFelice, Deputy Assistant Administrator, Agricultural Trade Policy

and Analysis, Foreign Agricultural Service, Department of Agriculture. Robert E. Simpson, Director, Office of Economic Affairs, Bureau of Foreign

Commerce, Department of Commerce. Leonard R. 'Linsenmayer, Associate Director, Office of International Labor

Affairs, Department of Labor. Katharine Jacobson (Miss), trade policy adviser, Office of the Deputy Director for Technical Services, International Cooperation Administration.

Senator MALONE. That is where you think that the industries have been consulted.

In other words, they tell you what their situation is?

Secretary DULLES. More importantly, in the hearings before the Tariff Commission.

Senator MALONE. Whenever the Tariff Commission is asked to determine a peril point, is that it?

Secretary DULLES. That is correct, but we do not reduce tariffs without first getting a peril-point finding.

Senator MALONE. Now that peril point, as long as you brought it up, I had it on the list for a little later. What is the peril point? What does it represent?

Secretary DULLES. It is defined in the law. It is a point beyond which, just using popular language, there would be peril, the imports would imperil the American industry.

Senator MALONE. Then it is not a point at which a domestic industry could make a profit, a reasonable profit, but it would be at a point that could endanger the industry, perhaps cut below their cost of production, is that it?

Secretary DULLES. I do not think the cost of production element is brought in. It is a more broad aspect:

Causing or threatening serious injury to the domestic industry producing like or directly competitive articles.

That is the main test.
Senator MALONE. Yes.

In other words, if it causes serious injury. It is not a question of making any money but the peril point would be at a point where there would be serious injury done the industry.

Secretary DULLES. That is what the act provides.
Senator MALONE. That is what I wanted to clear up in the record.
Secretary DULLES. Yes.

Preceded, in 1956-57, by Carl D. Corse, then Chief, Trade Agreements and Treaties Division, Depart. bent of State.

Preceded, in 1956-57, by Philip Arnow, then Associate Director, Office of International Labor Affairs,

Department of Labor.

Senator MALONE. Now, as a matter of fact, is the President bound by the peril point?

Secretary DULLES. No.
Senator MALONE. That is right. Now I will ask another question.

Secretary DULLES. Let me say, in fact he complies with it, but technically I think under the law he could disregard —

Senator MALONE. He could do anything he wants to do but the last time it was extended in 1955 the law provided he must consult the Tariff Commission, did it?

Secretary DULLES. That is correct.

Senator MALONE. Do you know how a peril point is often destroyed as far as an industry is concerned? Can it be done by a manipulation of a competitive nation's money value in terms of the dollar or can it be done by inflation?

Secretary DULLES. No, I do not think so.
Senator MALONE. Well, how?

Secretary DULLES. The peril point is determined by the actual consequences of the goods coming into this country.

Senator MALONE. That is right, of course.

Secretary DULLES. And inflation abroad does not have any bearing on that of itself.

Senator MALONE. The cost. Now then, if you have not thought of this, maybe I might put an idea in your head. I am not very hopeful, but I want to mention it to you; that the chief competing country can determine their cost of manufacture by manipulation, that is, the paper cost of their manufacture by manipulation of the value of their money in terms of the dollar, can it not?

Secretary DULLES. Yes.

Senator MALONE. Then wouldn't that have some bearing on what the peril point might be after that manipulation?

Secretary DULLES. If in fact the goods come in here under terms which carry serous injury, then the peril point is taken into account.

What the cause of it is, it could be any 1 of 20 things.

Senator MALONE. Not the peril point. Once the peril point is set, that is what you use in negotiating the treaty.

Secretary DULLES. That is right.
Senator MALONE. Now let's get-

Secretary DULLES. Because then you are talking now of escape clause.

Senator MALONE. No, I am not.

I am asking you about the peril point, and I want your answer, if that could not be obviated by simply a manipulation of the value of that chief competing nation's money in terms of the dollar, change their costs which would change the peril point, if you again ask the Tariff Commission to investigate.

Secretary DULLES. There are possibilities of evasion, and of course, that is the reason why we wanted to get the OTC to police these things, and we get much better results if we had an organization to police these things and stop the evasion you are talking about.

Senator MALONE. Let's leave the OTC out of it until you answer my question. Could you answer it "yes" or "no”, that if by manipulation of the value of a competitive nation's money it can change the cost of its product?

Secretary DULLES. Yes, it can.

Senator MALONE. All right, that is good, and I am going to get along a lot faster there—Mr. Weeks took up quite a little time by conversation, and I do not like to do it. Now I know you are talking about the escape clause so I will ask you about that.

The escape clause can be invoked by the President if he wants to invoke it.

Secretary DULLES. Yes, sir.

Senator MALONE. And if he thinks his foreign policy demands that be keep the trade agreement the way it is, he can do that, can't he?

Secretary DULLES. Yes, sir. Senator MALONE. Now then, what the President can do is to sacrifice a part of any industry that he may think is necessary to carry out and make effective his foreign policy, can he not?

Secretary DULLES. Yes, sir.

Senator MALONE. You are improving right along. I appreciate it. We are going to make progress."

Now I will ask you about the GATT. You have the rules and regulations of GATT. You corrected me yesterday and I stand corrected.

However, there are so many rules and regulations of GATT, General Agreement on Tariffs and Trade. This does not have a date, apparently, but I notice your assistant there has one of them, so we will identify it for the record by the title “General Agreement on Tariffs and Trade, Present Rules and Proposed Revisions."

This is article XII. I will not read this at all unless it is necessary. I will just ask you the flat question, and I know you will understand it, is it necessary for a foreign nation to keep its part of the trade agreement if they can show they are short of dollar balance payments?

Secretary DULLES. The answer is, of course, in the article, which says that they shall not maintain import restrictions or quotasexcept to forestall the imminent threat of, or to stop, a serious decline in its monetary reserves.

Senator MALONE. I can read it and I have read it a hundred times, and so have you, no doubt.

Secretary DULLES. Yes. Senator MALONE. But are they bound to keep it as long as they can show they are short of dollar balance payments? Are they bound to keep the agreement they have signed, the trade agreement?

Secretary DULLES. They are bound to keep the agreement they have signed, yes, but the agreement itself has a provision allowing them to alter their position if necessary. Senator MALONE. That is good enough, right there.

Secretary DULLES. To stop a serious decline in their monetary reserves.

Senator MALONE. It does not say serious in here. What it says is that if they can show-that is not the language either. Secretary DULLES. Pardon me, sir, the word "serious” is there. Senator MALONE. Where is it? It is in the first one here?

Secretary DULLES. “To forestall the imminent threat of, or to stop a serious decline in its monetary reserves."

Senator MALONE. Let's read some more of it. It is not in all these provisions:

Notwithstanding the provisions of paragraph 1 of article XI, any contracting party--may restrict the quantity or value of merchandise permitted to be imported subject to the provisions of the following paragraphs of this Article. Paragraph 2. (a) No contracting party shall institute, maintain, or intensify import restrictions under this Article except to the extent necessary paragraph (i) to forestall the imminent threat of or to stop, a serious decline in its monetary reserves, or paragraph (ii) in the case of contracting party with very low monetary reserves, to achieve a reasonable rate of increase in its reserves.

There is no "serious” in that one, and these are separate.

Secretary DULLES. That is correct. Subsection (1) has the word "serious" in it.

Senator MALONE. That is right.
Secretary DULLES. In terms of decline.
Senator MALONE. But section 2 does not.

Secretary DULLES. If you are already down, then you can invoke this in order to get a reasonable rate of increase.

Senator MALONE. What you can do is to just do anything you want to do to prevent keeping this agreement as long as they can show they have

Senator ANDERSON. May I just ask that the committee be in order so the reporter can hear this?

Senator MALONE. What this actually says here regardless of any detail is that they do not have to keep the agreement as long as their financial situation is not up to par, what they believe is necessary in meeting dollar balance payments in a general exchange of payments. They do not have to keep it; do they?

Secretary DULLES. It is hard to say that they do not have to keep their agreement when this is part of the agreement.

Senator MALONE. I stand corrected. You are a lawyer and I was an engineer for 30 years before I came to the Senate. My meaning is that they just do not have to keep the agreement if they can show that they are short of dollar balance or that they are not up to par in the trading and exchange payments.

Secretary DULLES. That is substantially correct.
Senator MALONE. That is enough.

Let's just go on to the next point and I will ask unanimous permission at this time, Mr. Chairman-no, I have already put it in the record, but I will refer to the record.

Senator MALONE. Now, Mr. Chairman, we have two things. First, the act passed by the Congress in 1934 and extended 10 times for from 1 to 3 years. It has never been extended for more than 3 and twice it was cut to 1 year. Second, the State Department in all of its testimony has referred to a committee called the Policy Committee. How long has this Policy Committee been in effect under other administrations?

Secretary DULLES. This particular Policy Committee with its present structure was set up, I think, about a year ago.

There has been a comparable committee for sometime. The procedure was reversed, I think, about a year ago.

Senator MALONE. What was it before?

Secretary DULLES. The only committee that existed before that was the Interdepartmental Trade Agreements Committee, and it does not have quite as high a level of representation as the President had come to believe to be desirable for policy review purposes.

Senator MALONE. In other words, we have been improving it since you have been in office, since Mr. Eisenhower has taken office as President of the United States.

But did they have some kind of a committee of this kind from the beginning in 1934?

Secretary DULLES. Yes, and I think it was set up from the initiation of the act.

Senator MALONE. And in this Committee, made up of lesser individuals—for reciprocity information, and the record will be corrected for the technical name—they hear industries' testimony prior to opening negotiations in Geneva.

Secretary DULLES. Yes.

Senator MALONE. And this testimony may or may not be abided by but you do hear it?

Secretary DULLES. Yes, sir. Senator MALONE. I was consulting engineer for the Senate Military Affairs Committee in World War II. I was sent into Dutch Harbor and later out to the South Seas with MacArthur. One thing that sticks in my mind and may have made me decide to run for the United States Senate. I was asked by a member of that committee when he was busy on the Senate floor or in the committee, to go down to the floor of this Reciprocity Committee and hold them in session if I could until he got there. He was interested in tungsten. It was Big Ed Johnson of Colorado. And when he got there, and they were kind enough to hold it in session, I backed away and Big Ed took over. That image of Big Ed standing there before a committee not composed of assistants to Cabinet officers, but of people nine-tenths of whom you wouldn't hire in a Senator's office, and Big Ed stood there with his hat in his hand, begging to let his industry survive for a few more months. There are certain things in your life that are etched in your memory, and that is one of them. And that is what industry has to do now, and is not very often listened to. Now we have established that the President can trade a part of all of any industry for a foreign policy if he so desires.

We have established that these 36 foreign competitive nations sitting in Geneva, do not need to keep their agreements if they can show that their finances are in any way in danger.

Mr. Secretary, are you familiar with the proposal that has been made by certain Cabinet officers, notably the Secretary of the Interior, to subsidize certain minerals by paying the difference between the world price and the domestic cost up to a certain proportion of the American market?

Are you familiar with the proposal that has been made? Secretary DULLES. I am not an expert on them, but I know in general that there are such proposals; yes.

Senator MALONE. I have a very high regard for Secretary Seaton, and I congratulated him when he came in with this subsidy proposal. I told him that I was for his program as an interim program until Congress could decide how it was going to handle its business, and the Constitution does say this is its business; does it not?

Secretary DULLES. Yes, sir.

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