201(b) of this Act; except that the President, in taking action pursuant to section 203(b),

"(1) shall, if there is no affirmative finding under section 201 (b) of this Act without regard to this subsection, adjust imports of the article from the country in question without taking action in respect of imports from other countries; and "(2) may, if there is both an affirmative determination of the Tariff Commission pursuant to subsection (a) of this section, and pursuant to section 201(b) of this Act without regard to this subsection, either adjust imports of the article from the country in question without taking action in respect of imports from other countries or may adjust imports from all countries.

Rationale.-Section 405 provides easier access criteria for the provision of import relief than does section 201. Thus, if a non-market economy country is causing import injury, action can be taken under section 405 to restrict the import from that country (or several non-market economy countries receiving nondiscriminatory tariff treatment under Title IV if findings are made with respect to each of those countries) without taking action to restrict imports from all countries. However, under section 405 as currently drafted, imports from one country receiving nondiscriminatory treatment under Title IV could be causing all the injury and the President would be given the option to impose restrictions on imports from all countries. The proposed amendment remedies this defect by allowing the President to impose selective measures where injury is caused only from imports from one or more Title IV countries and to impose measures on all countries only where imports from both Title IV countries and other countries are causing the import injury.

TITLE V. GENERALIZED SYSTEM OF PREFERENCES

SEC. 504. LIMITATIONS ON PREFERENTIAL TREATMENT

Purpose of Amendment.-To provide for redesignation of articles from a country where the competitive need formula (sec. 504 (c)) has caused termination of eligibility of the article for preferential treatment.

Text of Amendment.—(1) Section 504 (c), p. 143, line 14ff., is amended by adding to the end thereof (page 144, line 6) the following new sentence:

"A country which has ceased to be eligible for treatment as a beneficiary developing country with respect to a particular article by reason of this section, shall be eligible for redesignation with respect to such article under the procedures set forth in sections 502 and 503, provided that, unless the President determines that paragraphs (1) and (2) of this subsection no longer apply to such country with respect to the article in question, he must determine that it is in the national interest to redesignate such country as a beneficiary developing country with respect to such article, and provided further, that the applicable period within which the Tariff Commission shall advise the President pursuant to section 131 (b) shall be 60 days.

(2) Section 504 (c) is amended by striking the phrase on p. 143, line 22, which reads "50 percent of the value", and inserting in lieu thereof "50 percent of the appraised value", and striking the words "not later than 60 days" on p. 143, line 25, and inserting in lieu thereof "not later than 90 days".

Rationale. These technical amendments are designed to accomplish three purposes: (1) to clarify the method by which articles which cease to become eligible for preferential treatment granted to a particular country can regain eligibility; (2) to clarify what value the 50 percent formula is to apply to; and (3) to provide sufficient time for statistics to become available to apply the competitive need formula.

Purpose of Amendments.-(1) To clarify that the term modification of duties includes conversion from specific to ad valorem rates of duty; (2) to define duties existing on July 1, 1934; and (3) to clarify the applicability of the term "nondiscriminatory treatment".

Text of Amendments.—(1) Section 601 (6), p. 146, lines 16-18, is amended by adding at the end thereof "and the conversion of specific rates of duty to their ad valorem equivalents on the basis of the most recent representative period for which statistics are available."

30-229 - 74-23

(2) Section 601, p. 144ff., is amended at p. 147 by adding a new paragraph (8) and renumbering existing paragraphs (8) and (9), as (9) and (10) respectively. The new paragraph (8) shall read as follows:

"(8) For the purposes of this Act, duties existing on July 1, 1934 shall mean the duties existing in Column 2 of the Tariff Schedules of the United States." (3) Section 601(9), p. 147, line 8, as redesignated by paragraph (2) hereof, is further amended to read as follows:

"(10) For the purposes of this Act, the term 'nondiscriminatory treatment' means most-favored nation treatment."

Rationale. (1) The first amendment is designed to expressly include within the definition of "modification" the conversion of specific rates of duty to their ad valorem equivalents. While the authority to modify a duty or import restriction implicitly includes such authority, it is preferable to define modification to make express provision therefor.

(2) The second amendment is included to for convenience of reference. By providing that Column 2 of the Tariff Schedules is to be "duties existing on July 1, 1934" for purposes of the TRA, no confusion will arise as to whether or not a Column 2 rate was actually in existence as of July 1, 1934.

(3) The final amendment is designed to foreclose the possibility that the meaning of nondiscriminatory treatment as used in the TRA be confused with the same phrase as used in many other U.S. laws in a different sense.

SEC. 602 (D). RELATION TO OTHER LAWS

Purpose of Amendment.-To correct a typographical error.

Text of Amendment.-Subsection 602 (d) is amended by deleting thereform the words "repealed by subsection (d)" and by inserting in lieu thereof "repealed by subsection (e)" on p. 148, line 15.

SEC. 602 (G) AND (H). RELATION TO OTHER LAWS

Purpose of Amendment.-To repeal the Johnson Debt Default Act and the embargo on furs and skins from the Soviet Union and Communist China.

Text of Amendment.-Section 602, p. 147ff., is amended to add the following new subsections:

"(g) The Johnson Debt Default Act (62 Stat. 744; 18 U.S.C. 955) is hereby repealed."

"(h) Headnote 4 to Schedule 1, Part 5, Subpart B of the Tariff Schedules of the United States (77A Stat. 32, 19 U.S.C. 1202) is hereby repealed."

Rationale.-The Johnson Act no longer serves the purpose for which it was intended and unnecessarily inhibits U.S. financial relations with certain countries. By prohibiting loans and similar financial transactions with countries in default of their official obligations to the United States, the Act was designed to protect the American investor. However, Congress subsequently exempted all members of the World Bank and International Monetary Fund. This has had the effect of restricting the Act to certain indebted communist countries, those not members of the Bank or Fund. Various rulings of the Attorney General have also excluded the financing of export and export-related transactions from the prohibitions of the Act but have left a gray area where financing could result in the encouragement of U.S. trade but could not be defined as export-related under the Attorney General's rulings. Thus, the Act has the effect of discouraging sales of U.S. plant and equipment which might otherwise be exported.

The embargo on certain furs is also a measure that was passed in far earlier times and should not be maintained in the changed circumstances of today. The Administration does not believe that the repeal of the fur embargo would have a significant effect on domestic procedures because, of the seven types of fur under embargo, only mink and muskrat are produced in the United States in significant commercial quantities. Muskrat is relatively out of fashion and most of our production has been exported for a good many years. About half of the U.S. mink production is now being exported in successful competition with SovietCanadian and Skandinavian mink. It is most unlikely therefore. that lifting the embargo would result in harmful increased competition with domestic producers.

ATTACHMENT B

PROVISIONS OF THE TRADE REFORM BILL, H.R. 10710 WHICH RELATE TO SHORT SUPPLY PROBLEMS

SEC. 2. STATEMENT OF PURPOSES

The purposes of this Act are, through trade agreements affording mutual trade benefits

(1) to stimulate the economic growth of the United States and to maintain and enlarge foreign markets for the products of United States agriculture, industry, mining, and commerce; and

(2) to strengthen economic relations with foreign countries through the development of fair and equitable market opportunities and through open and nondiscriminatory world trade.

Agreements which provide for supply access (or agreements limiting export restraints) would serve the quoted purposes. Whether the United States has the role of supplier or consumer, supply access agreements can "stimulate the economic growth of the United States", strengthen economic relations with foreign countries through the development of fair and equitable market opportunities, and strengthen these relations through "open and nondiscriminatory world trade". The phrase "market opportunities" covers United States producers' presence in the market both as a seller and as a buyer. Economic relations are strengthened by buying from others as well as selling to them.

To further focus the purpose section of the bill on problems of short supply, the Administration is proposing that a new paragraph (3) be added to the quoted language. It reads as follows:

"(3) to promote fair and equitable access to supplies needed for orderly economic growth and development."

SEC. 101. TARIFF AUTHORITY

(a) Whenever the President determines that any existing duties or other import restrictions of any foreign country or the United States are unduly burdening and restricting the foreign trade of the United States and that the purposes stated in section 2 will be promoted thereby, the President

(1) during the 5-year period beginning on the date of the enactment of this Act, may enter into trade agreements with foreign countries or instrumentalities thereof; and

(2) may proclaim such modification or continuance of any existing duty, such continuance of existing duty-free or excise treatment, or such additional duties, as he determines to be required or appropriate to carry out any such trade agreement.

This authority could be used to lower tariffs where United States import barriers are impeding inflows of needed raw materials or other materials in short supply. Presumably, the foreign concession could be in the form of a commitment to maintain supplies or not to impede their exportation.

SEC. 102. NONTARIFF BARRIER AUTHORITY

(a) The Congress finds that barriers to (and other distortions of) international trade are... diminishing the intended mutual benefits of reciprocal trade concessions, and preventing the development of open and nondiscriminatory trade among nations. . . . The President is further urged to . . . negotiate trade agreements with other countries and instrumentalities providing on a basis of mutuality for the reduction or elimination of such barriers to (and other distortions of) international trade.

(b) (1) Whenever the President determines that any existing barriers to (or other distortions of) international trade of any foreign country or the United States are unduly burdening and restricting the foreign trade of the United States and that the purposes stated in section 2 will be promoted thereby, the President, during the 5-year period beginning on the date of the enactment of this Act, may enter into trade agreements with foreign countries or instrumentalities providing for the reduction or elimination of such barriers or other distortions.

"Existing barriers to (or other distortions) of trade" includes export controls, both as a matter of economics and according to the legislative history of the House bill. The material on NTB's submitted to the House by the Administration included citations of foreign export barriers in the lists of NTB's.

The section 102 agreement could reduce or eliminate the barrier, for example, by limiting the conditions under which export controls could be imposed in the future. In the tariff area, a binding of duty-free treatment is a valid subject for a trade agreement. This is a precedent for binding NTB-free import, export, and internal treatment.

The section 102 authority could be used for specific concessions under agreements, commodity by commodity, where, for example, U.S. market or supply access is traded for foreign supply access or market access.

The Administration is proposing that a new phrase be added to section 102(a) to sharpen the focus of the section with respect to problems of supply access. The subsection as it would be amended, would read as follows:

"(a) The Congress finds that barriers to (and other distortions of) international trade are reducing the growth of foreign markets for the products of United States agriculture, industry, mining, and commerce, diminishing the intended mutual benefits of reciprocal trade concessions, preventing fair and equitable access to supplies, and preventing the development of open and nondiscriminatory trade among nations." (new language italics).

SEC. 121. GATT REVISION

(a) The President shall, as soon as practicable, take such action as may be necessary to bring trade agreements heretofore entered into, and the application thereof, into conformity with principles promoting the development of an open, nondiscriminatory, and fair world economic system, including (but not limited to):

(3) the extension of GATT articles to conditions of trade not presently covered in order to move toward more fair trade practices,

While this section does not refer explicitly to supply problems, one of the major areas of weakness in the current GATT rules is that of supply access and export control regulation. Thus, section 121 (a)(3), coupled with legislative history of Senate concern over supply problems, would constitute a directive to negotiate on supply. However, to assure that proper emphasis is given to supply problems in the forthcoming negotiations, the Administration is proposing the addition of the following additional objective for inclusion in section 121:

(7) the improvement and strengthening of GATT and other international rules and procedures with reference to problems of supply access, to promote principles of fair access to supplies, and effective consultative procedures on problems of supply shortages."

SEC. 122. BALANCE OF PAYMENTS AUTHORITY

(d) Import restricting actions proclaimed pursuant to subsection (a) shall be of broad and uniform application with respect to product coverage except where the president determines, consistently with the purposes of this section, that certain articles or groups of articles should not be subject to import restricting actions because of the needs of the United States economy. Such exceptions shall be limited to the unavailability of domestic supply at reasonable prices, the necessary importation of raw materials, avoiding serious dislocations in the supply of imported goods, and other factors.

These exceptions to BOP import restrictions clearly cover two important short supply situations: where domestic supplies are scarce, and where the United States is dependant upon foreign sources for supply.

SEC. 123. ANTI-INFLATION AUTHORITY

(a) If, during a period of sustained or rapid price increases, the President determines that supplies of articles, imports of which are dutiable or subject to any other import restriction, are inadequate to meet domestic demand at reasonable prices, he may, either generally or by article or category of articles

(1) proclaim a temporary reduction in, or suspension of, the duty applicable to any article; and

(2) proclaim a temporary increase in the value or quantity of articles which may be imported under any import restriction.

Proclamations under this section in effect at any time shall not apply to more than 30 percent of the estimated total value of United States imports of all articles during the time such actions are in effect.

This is the principal short supply authority in the bill. During a period of general inflation, it covers suspensions of import barrers for articles for which there are shortages manifested by price increases. If price controls prevent price increases from occurring, the statutory criterion for use of this authority could still be met-there might be no adequate supply at the (fixed) reasonable price. There will be situations in which an article which is imported is in short supply, will be subject to antidumping or countervailing duties. In such cases, the Administration suggests that there should be authority to reduce temporarily or suspend those additional duties. In addition, more time is necessary to evaluate the effect of the suspension of duties or increase of imports under a quota before the Congress must act to preserve the duty suspension or quota liberalization. There would be much better information on which to evaluate the experience under the short supply action if a year were the maximum period then an action could be maintained prior to obtaining legislation.

To meet these concerns, the Administration will suggest several Amendments including allowing the suspension of antidumping and countervailing duties and providing that a shot supply action may remain in effect for one year before a legislative extension is required.

SEC. 125. SUPPLEMENTAL TARIFF AUTHORITY

For two years after the main tariff authority has expired, the President can lower duties by 20 percent, provided that the section 101 limits are not exceeded with respect to any article, and that not more than 2 percent of U.S. imports are covered by these agreements in either of the two years. As in section 101, the conditions for the exercise of the authority permit a reduction of U.S. import barriers which are unduly burdening and restricting the foreign trade of the United States, e.g., by slowing the inflow of imports of articles in short supply.

SEC. 131-134. TARIFF COMMISSION ADVICE, OTHER ADVICE

The Tariff Commission is to advise on the effect of U.S. import duty modifications on consumers (which would include industrial consumers). This advice should include the alleviation of domestic short supply situations. In addition, advice received from the departments (sec. 132) and from the public through hearings will include information on the effects of increasing access to foreign supplies by lowering U.S. import barrers.

SEC. 135. ADVICE FROM PRIVATE SECTOR

The entire public advisory committee structure can serve the purpose of funneling information to the negotiators on supply problems.

(a) The President, in accordance with the provisions of this section, shall seek information and advice from representative elements of the private sector with respect to negotiating objectives and bargaining positions before entering into a trade agreement referred to in section 101 or 102.

(b) (1) The President shall establish an Advisory Committee for Trade Negotiations to provide overall policy advice on any trade agreement referred to in section 101 or 102. The Committee shall be composed of not more than 45 individuals, and shall include representatives of government, labor, industry, agriculture, consumer interests, and the general public.

(c) In addition to the Committee established under subsection (b), the President shall, on his own initiative or at the request of organizations in a particular product sector, establish such industry, labor, or agricultural advisory committees as he determines to be necessary for any trade negotiations referred to in section 101 or 102. Such committees shall, so far as practicable, be representative of all industry, labor, or agricultural interests in the sector concerned . .

(i) In addition to any advisory committee established pursuant to this section, the President shall provide adequate, timely, and continuing opportunity for