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are applicable on July 4, 1974. The act provided, however, for absolute quotas on imports of several important products. The annual quotas are: Hard-fiber cordage
-pounds. 6,000,000 Sugar---------
----_short tons 952, 000 R ice --------------
--pounds.. 1,040, 000 Cigars -
--cigars.- 200, 000, 000 Tobacco--
-pounds 6, 500,000 Pearl or shell buttons ----
-------gross 850,000 In the trade agreement with Canada which became effective January 1, 1936, the United States agreed to continue the duty-free entry of red-cedar shingles but reserved the right to impose a semiannual absolute quota on them equal to 25 percent of the combined domestic shipments and imports during the preceding 6-month period. This 25 percent approximated the share of the United States market which the Canadians had supplied over a considerable earlier period. Enabling legislation was adopted as section 811 of the Revenue Act of 1936, and the quotas were in effect from 1937 to 1939.
The second trade agreement with Canada, which took effect January 1, 1939, provided for a reduced duty on silver-fox furs. After the outbreak of the war in Europe, imports of these articles into the United States increased greatly, and there appeared considerable danger of the market's being completely de moralized. A supplementary agreement was negotiated with Canada which provided import quotas on silver foxes and silver-fox furs, effective January 1, 1940. The quota permitted the entry of 100,000 silver foxes and silver-fox furs a year, a quantity more than 150 percent in excess of the annual average imports for the period 1935–39, but represented a reduction of more than 25 percent from the 1939 imports. Details of the quota were modified in a supplementary agreement negotiated later in 1940, but the figure of 100,000 for annual imports remained in effect until the quota was ended, effective May 1, 1947. Gentlemen's agreements
Although not technically a part of United States foreign commercial policy, because of lack of official imposition, the so-called gentlemen's agreements of the later 1930's need to be mentioned in this discussion of quantitative limitations. These agreements grew out of the practices instituted under the industrial recovery program whereby bothersome imports were controlled, not by increasing import duties or imposing import quotas, but by restrictions at the source: the country of export. In 1933-35, when the immediate question was whether this Government would impose import restrictions to support its internal program, Government officials participated in the negotiations to curtail the supply from abroad. After the legal authority under the National Industrial Recovery Act had ceased, those officials ceased to be parties to the negotiations but were informally consulted by the domestic interests seeking protection and by importers and other representatives of foreign exporters. In some instances, Tariff Commission investigations which might have resulted in increased tariffs were terminated or suspended after negotiation of gentlemen's agreements. Later agreements with foreign exporters were negotiated by private domestic interests without consultation with officials of the United States Government. Some agreements have been made public by their sponsors; others have been kept secret and have not been made available even to Government officials dealing directly with foreign-trade controls.
The Japanese export restrictions on lead pencils and cotton rugs, imposed dur. ing our national recovery program, were continued after the end of that program pursuant to gentlemen's agreements. The restriction on lead pencils was terminated because of the practical disappearance of imports from Japan, but the agreement on cotton rugs was continued until 1939.
Agreements were negotiated with respect to cotton cloth, cotton hosiery, cotton velveteens and corduroys, cotton fishing netting, and slide fasteners (zippers). Prior to the agreements, imports of all these products had been increasing rapidly and had reached considerable proportions. In two cases (cotton cloth and slide fasteners), imports continued their rapid climb notwithstanding increases of nearly 50 percent in tariff duties. The quotas agreed to were generally less than the imports immediately preceding the agreements but much larger than the average imports over the previous 5 years. Cotton cloth is a notable exception to this rule in that the quota was larger than any previous import; this quota was not filled during the life of the agreement. Due principally to transshipments from China and Canada, the quota on cotton velveteens was exceeded by nearly
100 percent during its first year of operation, but the following year shipments fell off more than three-fourths. The quotas for the other products referred to above were not filled during their effective periods. Watches
As a result of representations from domestic watch producers that they were being adversely affected by imports, the United States Government entered into consultation with the Swiss Government with a view to limiting shipments of Swiss watches to the United States. In April 1946, an exchange of memoranda took place between the two Governments under which the Swiss agreed to limit shipments during the calendar year 1946 and the first 3 months of 1947. The 1946 shipments were not to exceed the total shipped in 1945, and the shipments in the first 3 months of 1947 were to be on a pro rata basis. Because of the complexity of the subject, it is not possible in this memorandum to treat all the details, but further information is available at the Tariff Commission if the committee desires.
Mr. OGG. Now, our support of this section 22 is conditioned only on the proposition that we ought to have a way by which we can safeguard our economy in agriculture against conditions that would wreck our domestic market, and defeat the purpose of these agricultural programs which Congress has enunciated. So, I would not want you to get the impression that we are in favor of using import quotas. Generally, we are in favor of getting rid of them as much as possible. But there are some circumstances where we think they should be invoked.
Senator BREWSTER. And you would not deny to industry the protection which you do desire for agriculture.
Mr. OGG. Well, I do not think that I could speak for industry.
Senator BREWSTER. I mean as a citizen you would not ask special preference for agriculture.
Jr. OGG. Well, I think that is a policy question, Senator, and I would rather not answer that, except to say that I think I could make a pretty good case for special consideration of agriculture, within a limited field, because of the special difficulties that farmers have in producing and marketing their crops, and the greater difficulty they have to regulate their price and their production. The large corporation can adjust its production very quickly to meet market requirements. The farmer, as you pointed out, produces on an annual basis. There are 6,000,000 units. There are a lot of things about agricultural production that I think do deserve some-I don't like to use the word "special"-some separate consideration. Also, the fact is that food is one of the essentials of life. We want to maintain a high level of production if we can. And, in doing that, the farmers have made a contribution to society; and, therefore, I think that, in following a policy of abundant production, they should have some safeguards that an industry which does not follow that policy would not need.
Senator BREWSTER. I did not mean in any way to challenge the peculiar position of agriculture in our economy, which is, of course, very generously recognized in the support program, and in other ways.
Mr. Ogg. That is true.
Senator BREWSTER. And it would only be in cases where the circumstances were parallel that the point would apply. My point was that, if you were going to have the protective privileges, and if the most effective means of securing the protection requires quotas, then I do not think we should confine it exclusively to agricultural products. Mr. Ogg. Well, as I understand it, in the Geneva agreement, and also in the ITO charter, there are some exceptions made, wherein they may invoke quotas both for industrial commodities and for agricultural commodities. But agriculture does have some special provisions.
Senator BREWSTER. I would certainly be the last to challenge the interest of agriculture, as we have about 20 percent of the potatoes produced up in our country. And it was only through very drastic action by the President, which I want to cordially commend, that our whole potato economy was saved from further collapse, which is costing the Government around $200,000,000 this year, and would have cost it much more if the insane policy of permitting the continuance of Canadian imports had continued. And that situation became so critical that the President, disregtrding escape clauses and everything else, forced action on a quota; for which we were very grateful.
But when the idea was advanced that it required Executive action of that character, entirely outside section 22, and also the escape clause, in order to save us from a very serious disaster, it occurs to me that we should not remove any of our present protections.
Mr. Ogg. Well, now, that is what I had reference to, Senator, earlier, when I said that there are other safeguards which can be used under the old procedure and can be used under the new; such as a quota in relation to the concession that is made. In other words, let us suppose we are going to make a concession on a given commodity. We would limit that concession to a given quantity of imports, above which the old rate would apply. That has been done on a good many commodities.
Senator BREWSTER. Well, that was done in the case of potatoes right now.
Mr. OgG. Yes.
Senator BREWSTER. And under the reciprocal trade agreement. But that was found utterly inadequate to protect us from the inundation which was occurring.
Mr. OGG. Well, at some times, those things have to be revised.
Senator BREWSTER. And the experience, I think, in that and other cases has shown that, rather than removing any of our present provisions, we probably ought to strengthen them. In that instance it was done entirely by diplomatic means; which are an unfortunate and rather tragic resort, because you have to go to a very high level to get it.
Mr. OGG. I think there is a difference as to your ability to get those changed, when you can show cause of injury rather than a mere threat of industry. I think you have that problem, of course.
Senator BREWSTER. And that would be true in agriculture particularly. By the time the imports arrived, the domestic fellow might be ruined.
Mr. Ogg. Yes, if they delayed too long. But certainly, I think, it is obvious that procedures should be established whereby we can get relief promptly under the escape clause. I certainly think it would be a great mistake to follow any kind of procedure that would result in undue delay.
But, as I understand it, the President can act quickly. I mean, there is nothing in the law, as I understand it, that would even prevent him from suspending temporarily a duty, without even waiting for the Commission's report, as far as that is concerned.
Senator BREWSTER. But that is something other than a scientific approach.
Mr. Ogg. But again, I think in a case such as you speak of, if in fact a domestic industry is in danger of being wiped out, he certainly would be justified in acting quickly; and he should.
Senator BREWSTER. You stressed these exceptions to the quotas and others in the Geneva agreement, and the ITO also, that there were exceptions contemplated to cover cases where quotas and other restrictions might be applied. Quotas were banished except, as I think your exact words are, “in specified cases."
Mr. Ogg. Yes. That is my understanding.
Senator BREWSTER. Is it not true that practically all of those cases are ones to which the United States economy would find it very difficult to repair? Mr. OGG. No; I don't understand it that way, Senator.
Senator BREWSTER. Well, take the exchange restriction. We are not having any shortage of exchange; are we?
Mr. Ogg. No.
Mr. Ogg. No; but, of course, we get pinched the other way. The rest of the world is all short of dollars now, and we are being pinched right now.
Senator BREWSTER. All of the rest of the world can very readily resort to these quotas, because they come easily within the terms of the Geneva and Habana agreements. We are in quite a different and quite an exposed position.
Mr. Ogg. That is why it seems to me that we have gained a great advantage when we get the rest of the world to agree to refrain from these practices, except under agreed conditions, one of which is the balance-of-payment difficulties.
Senator BREWSTER. Except under conditions to which every country in the world can resort except the United States; under conditions today, and, so far as we can see, in the future.
Mr. OGG. We also have this exception, in the case of agricultural commodities, and, of course, there is a general exception on economic development.
Senator BREWSTER. Well, now, on your agricultural commodities: That was the support program that you refer to.
Mr. OGG. Yes, in the Geneva agreement, there is an exception in the case of agricultural commodities.
Senator BREWSTER. Where you have a domestic support program.
Mr. OGG. Yes. It is actually in a case of production controls or subsidy programs.
Senator BREWSTER. Yes.
Now, we have 150 agricultural commodities which are not under such programs. So those would all be exposed. The five or six major crops—and potatoes are one of them—would come within this category. But all the lesser crops might well be exposed to this competition.
Mr. Ogg. I believe the language is: In order to safeguard domestic programs (1) which curtail or limit or restrict either production or marketing, or (2) where we are subsidizing consumption in order to help remove a domestic surplus. So if a surplus becomes so serious that either the Government secures a marketing agreement or an acreage adjustment program or a subsidization of consumption, our Government could invoke this escape, as I understand it.
Senator BREWSTER. You make the statement, on your page 3 that we mustdevelop the foreign trade on a sound basis, wherein the goods that we can produce advantageously are exchanged for the things which this Nation needs which can be produced advantageously by other nations.
Now, what do you mean by "advantageously”?
Mr. Ogg. Well, where they are equipped to produce efficiently, or have some product that they are skilled especially in producing, that we need and could usefully consume or utilize. That was the general idea.
Senator BREWSTER. Well, I wonder when you say “advantageously," if you mean rather "economically." Mr. Ogg. That would be another aspect of it; yes, sir.
Senator BREWSTER. In other words, if some other country could produce more cheaply than we, we should then allow them to do it?
Mr. Ogg. Yes; if we can use it here without wrecking our market, it would be of great advantage to us to do that.
Senator BREWSTER. Well, if you use the word in the same sense, then if they can produce something more cheaply than we could produce it, they should be allowed to bring it in.
Mr. Ogg. If you notice, I said in my statement, “which this Nation
Senator BREWSTER. That means quota, anything which we are short of.
Mr. Ogg. In other words, we have this great movement of goods going out of this country now, helping to maintain our employment, and we are filling the gap now with appropriations, in the ECA program, which we are for. But what is going to happen when that ends? If they do not attain the earning capacity abroad to earn dollars by selling us goods or services, one or the other, are we not going to suffer a very heavy loss in our exports when we stop making loans and grants ?
Senator BREWSTER. Well, you recognize the very abnormal conditions today, when we are advancing from 5,000,000,000 to 10,000,000,000 a year to foreign governments in order for them to purchase our goods. Mr. Ogg. It is abnormal.
Senator BREWSTER. You do not expect any such disparity is going to continue. Mr. Ogg. Not at those peak levels; no, sir.
Senator BREWSTER. We have got up now to 7,000,000,000 of imports, which is considerably above anything we had ever known before. And I guess our peak has been about 10 percent of our production that has been involved in our foreign trade.
Mr. Ogg. Well, yes. But I call your attention to Chart 1, which shows that the volume of imports since about 1938, and particularly since 1941, has been relatively far below the volume of industrial production.
Senator BREWSTER. I do not suppose you would take the period from 1940 to 1945 as in any measure having any application whatsoever to anything, would you?