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occupied up to that time; it caused unnecessary duplication of effort; and it required the Tariff Commission to prepare peril-point reports which would have had the effect of unduly limiting the scope of benefits we could hope to obtain through the reciprocal-trade-agreements program.

On the first point, I believe that it was the intention of the drafters of the 1948 act to give the Tariff Commission a larger role than it had enjoyed up to that time, but the real effect of the bill was the reverse. True, in the provisions for peril-point reports, the Commission was assigned a job of its own, to be performed without the collaboration of the other interested agencies. At the same time, the Commission was specifically denied a continued place as a collaborator in the planning for and the carrying out of negotiations. Its staff could no longer participate in country subcommittees of the Committee on Trade Agreements; a Tariff Commissioner could no longer sit as a voting member on the Committee itself, and its staff must not be included on the teams of negotiators who actually bargain with the representatives of other countries at international conferences. stead of having a vote in all recommendations respecting trade agreements made to the President, the Commission was forced to confine its activity to the one function of preparing peril-point reports. The Tariff Commission and its staff are experts in this field, and have played a most important part in the past. The United States Government should enter into these negotiations with all the wisdom and skill which it can command, and that is not possible under the 1948 act. H. R. 1211 will restore the Tariff Commission to its former position of influence and usefulness.

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The second major objection to the new act is the duplication of effort it has caused. The act obliged the Tariff Commission to hold public hearings in the course of preparing its reports. However, as no provision was made for the tariff Commission to receive views of exporters regarding concessions to be obtained or views of persons interested in the over-all aspects of the program, the Tariff Commission hearings did not eliminate the need for the regular hearings by the Interdepartmental Committee for Reciprocity Information. At the same time, many people interested in possible reductions in United States tariffs who appeared before the Tariff Commission, which had responsibility for determining peril points, also thought it necessary to appear before the Committee for Reciprocity Information, which consists of the officials who actually have responsibility for recommending concessions to the President. Thus, most of those who were concerned with possible reductions in United States duties appeared twice. The result was a substantial duplication and an unnecessary burden on all concerned.

The third major objection to the 1948 act is that the peril-point reports of the 1948 act are necessarily unduly restrictive. In them the Tariff Commission is reqiured to report what it finds to be the minimum tariff and other import restrictions, or the increases in tariffs or import restrictions necessary to avoid the threat of serious injury to domestic industry producing any article under consideration for trade-agreement concessions by the United States. The determinations by the Commission are to be made without regard to any national or international considerations, such as benefits to be obtained from other

countries, long-term needs of our economy for expanding markets, the necessity of obtaining the best possible use of domestic resources, including consideration of conservation, possible strategic considerations, and the possible repercussions of our actions upon policies of other countries toward us.

It is important that the Tariff Commission be brought into the team as soon as possible. Less than 2 months from today the United States will take part at Annecy, France, in an international conference which will have as its task the negotiation of reciprocal tradebarrier concessions. All 23 parties to the 1947 General Agreement on Tariffs and Trade will be there, negotiating with some or all of the 13 additional countries looking toward their becoming parties to the agreement. The new countries, with all of which we shall be negotiating, are Colombia, Denmark, the Dominican Republic, El Salvador, Finland, Greece, Haiti, Italy, Liberia, Nicaragua, Peru, Sweden, and Uruguay.

At Annecy, countries are expected to agree that some of the trade barriers now maintained by each country will not be increased; that others will be reduced or eliminated, and that certain preferences will be reduced or eliminated. At the same time, more nations will join in an agreement to extend to each other the best treatment they accord to any nation in customs matters; they will agree to keep quantitative restrictions to a minimum and see that these operate with as little discrimination as possible; they will undertake not to frustrate tariff concessions by the use of internal charges and restrictions which operate as invisible tariffs. We want the best possible results from these negotiations, and for that purpose we want full Tariff Commission participation in the months ahead.

I should not like you to gain any impression that the trade-agreements program has not involved consideration of its probable effect upon individual industries. The program has been administered with care, and with appropriate safeguards. The record of 14 years has not brought forward evidence of injury to domestic industry, although a few industries have consistently expressed fear that they would be hurt. Among these is the domestic jeweled-watch industry. Since witnesses are to appear who will present various views on this special problem, I would like to say a few words about it, although I will not try to go into the subject in detail.

The jeweled-watch industry consists in the United States of four firms, soon to be joined by a fifth. Three firms engaged only in domestic manufacture. The fourth, though a large domestic producer, is also an importer. Of the three firms which engaged only in domestic manufacture, two enjoyed record sales in 1947 and 1948, with net income comparing favorably with that of any previous year. One of them declared an extra year-end dividend in 1948. The third company, though it also had large sales through 1947, recently filed a petition for reorganization under chapter 10 of the Bankruptcy Act. The claim has been made that competition from imports was the cause. However, there is abundant evidence of causes of a different nature. The company has had a history of financial difficulties and reorganizations. Witnesses familiar with the situation at Waltham indicated in their testimony before the House Committee on Ways and Means that not only poor manufacturing methods, lack of advertising, and outmoded distribution methods but also financial mis

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management were the cause of deficits in spite of the fact that sales had been high in recent years. The company itself made no mention of foreign competition as a contributing factor in its reorganization petition and stated that "the debtor's present financial condition is due primarily to lack of working capital. * *The debtor believes that the enterprise is fundamentally sound and that its stability will be restored as a result of reorganization." Subsequently, the Reconstruction Finance Corporation agreed to lend what is considered a sufficient amount of working capital, providing certain conditions are met. It would appear, then, that the industry is not being seriously injured by imports and, second, the problem of the one company which is in trouble is on the way to solution by appropriate

means.

Because much has been said of the essential role of the watch industry in wartime, I should like to add a word on that subject. The National Military Establishment is represented in the Trade Agreements Committee and has always followed the watch situation carefully. It is in complete agreement with the other agencies in the Committee that the national security is in no way threatened by imports of watches at present, and the Secretary of National Defense recently wrote to Mr. Doughton to that effect. There is no question but that we must maintain a pool of skilled watch workers for future emergencies, but there is no prospect that imports will either eliminate or seriously injure the watch industry. New capital is going into domestic watch production even now, notably in one of the three domestic firms and in a firm hitherto engaged exclusively in importing. With reorganization at Waltham, there is every reason to expect an expansion rather than a contraction of employment in the manufacture of jeweled watches.

It is, of course, important to have the record clear as to the fact that the trade-agreements program has been carried out without serious injury to domestic industries. However, it is equally important to stress the benefits which the program is bringing to American exporters and so, indirectly, to all domestic industry and agriculture. However, this leads into a consideration of the principle of reciprocal trade agreements and the objective of the expansion of trade, and that is not really the issue before this committee.

There is no doubt but that the program presents the best means available for securing a needed increase in American imports. There is no doubt but that it will help to maintain domestic production and ability to consume by supporting the demand for agricultural and industrial products which depend upon export markets.

However, the issue before this committee is a procedural one. We believe the old procedures were better. Every effort has been made in the past to negotiate trade agreements so as to avoid serious injury to industries in the United States. We believe that we have been successful in that effort, and we hope to maintain our record. Every effort has been made to include as broad and comprehensive safeguards as possible in the agreements, so that, if events prove that mistakes were made, there will be ample means of correcting them. This will continue. And we hope that the Senate will join the House in permitting the executive agencies of the Government, where skill and experience in this field are to be found, to work fully together

in carrying out the program. We wish to carry out this program as effectively and as wisely as possible.

The CHAIRMAN. Senator Connally, have you any questions?

Senator CONNALLY. I have one brief question: What are the views of Mr. Clayton, who I understand has been in charge of most of these international conferences on the subject of trade agreements? Does he favor this bill?

Mr. THORP. Yes; I believe Mr. Clayton is going to appear as the next witness.

Senator CONNALLY. That is all.

The CHAIRMAN. Senator Millikin?

Senator MILLIKIN. Mr. Thorp, you, of course, appreciate that this whole subject matter is within the direct, primary, expressed constitutional power of the Congress.

Mr. THORP. Yes; I do.

Senator MILLIKIN. That whatever power the President has results from our delegation of that power to him.

Mr. THORP. That is correct.

Senator MILLIKIN. Therefore, he is our delegate in this matter. Correct?

Mr. THORP. That is my understanding of the legal situation.

Senator MILLIKIN. Last year, when the matter was before us, proceeding on that theory, we asked for the minutes of the Interdepartmental Committee, and I, as chairman of the committee at that time, received a letter from Mr. Clayton. I will read it.

Hon. EUGENE MILLIKIN,

Chairman, Senate Committee on Finance.

DEPARTMENT OF STATE,
Washington, May 5, 1948.

DEAR SENATOR MILLIKIN: I have taken up again with the Department your request that the minutes of the Trade Agreements Committee be made available to the Committee on Finance. The Department has considered this matter further, and directs me to say, with regret, that it considers that it would not be in the public interest to comply with your request, for the following main reasons: 1. The minutes in question contain information obtained from business in confidence and upon the assurance that it would not be disclosed.

2. They contain information which, if known to other countries, might prejudice the position of the United States in future negotiations, and which might embarrass this country in its relations with countries with which the negotiations to which the minutes refer took place.

3. The minutes are the records of the deliberations of the President's advisers. The President is the one responsible for decisions on tariffs under the act, and is entitled to the opinions of his advisers expressed fully and freely without the constraint which would inevitably come from the knowledge that they might be made public.

The Department would not feel authorized to make these records available to the Congress without the consent of the President.

Yours very truly,

WILLIAM L. CLAYTON, Special Adviser to the Secretary of State.

Does that continue to be the viewpoint of the Department of State? Mr. THORP. Yes; that still is the viewpoint.

Senaor MILLIKIN. Has the President been consulted in the matter? Mr. THORP. I am not aware that he has been consulted in the matter since this letter was originally written; and I think you would have to ask Mr. Clayton whether he was consulted at that time.

Senator MILLIKIN. Well, would you mind taking it upon yourself to see that the President is consulted and that we may have his opinion on whether he wants to continue this secrecy in this matter?

Mr. THORP. Yes; I will be glad to forward that request to the President.

Senator MILLIKIN. You understand that the Tariff Commission is bound by specific law to report to this committee and to the House Ways and Means Committee on all of its actions.

Mr. THORP. I am not familiar with their legal requirements.

Senator MILLIKIN. I suggest to you that it follows that, since the President is merely acting as an agent of Congress in this matter, the Congress having the primary constitutional authority over the subject, he is obligated to give information to the Congress, just the same as any legislative agency would be.

On June 15, 1934, President Roosevelt wrote Representative Buck of the House as follows. This may be found in the records of the hearings, at pages 377 and 378:

MY DEAR CONGRESSMAN BUCK: I am somewhat surprised and a little amused at the fears you say have been aroused in California because of the enactment and possible administration of the Reciprocal Trade Agreements Act. Certainly it is not the purpose of the administration to sacrifice the farmers and fruit growers of California in the pursuit of the will-o'-the-wisp of foreign markets, as published reports would make believe. I trust that no Californian will have any concern or fear that anything damaging to the fruit growers of that State or of any other State will result from this legislation.

Very sincerely yours,

FRANKLIN D. ROOSEVELT.

That was one of the early Presidential expressions that domestic industry shall be safeguarded.

In President Truman's message to Congress of March 1, 1948, on the subject of reciprocal trade-agreements extension, he said:

In addition, the interests of domestic producers are carefully protected in the negotiation of each trade agreement. I assured the Congress when the Reciprocal Trade Agreements Act was last extended in 1945 that domestic producers would be safeguarded in the process of expanding trade. That commitment has been kept. It will continue to be kept. The practice will be continued of holding extensive public hearings to obtain the view of all interested persons before negotiations are even begun. The practice will be continued whereby each agreement before its conclusion will be carefully studied with the Departments of State, Treasury, Agriculture, Commerce, and Labor, the National Military Establishment, and the Tariff Commission.

Finally, each agreement will continue to include a clause which will permit withdrawal or modification of concessions if, as a result of unforeseen developments and of the concessions, imports increase to such an extent as to cause or threaten serious injury to domestic producers.

I invite your attention to that as a further reiteration of the Presidential policy of safeguarding domestic industry.

In connection with the hearings on the extension of the reciprocaltrade agreements in 1945, Mr. Clayton testified as follows: I am reading from page 7 of that report, and from page 378 of the hearings before the Senate Finance Committee:

A rumor has freely circulated that certain American industries have been singled out as inefficient industries and that if the additional authority provided for in the bill is granted the State Department will use such authority to trade off these inefficient industries for other industries which can compete in the world market. Nothing could be further from the truth than this. The State Department has never construed the Trade Agreements Act as a license to remake the industrial or agricultural pattern of America. The record of 11 years of

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