Crucial We could not, for example, produce automobiles without imported imports manganese, nor aluminum ware without imported bauxite. In fact, we depend on imports for all or part of about 30 of the 39 minerals considered essential to our industrial plant including 100 percent of the tin and industrial diamonds we use and 90 percent or more of our ferromanganese, platinum metal, mica, manganese ore, antimony and chrome ore. Other material you will see on chart 4 which indicates some of the ideas we have. Nor should we overlook the bananas, coffee, tea, cocoa, spices and other food products which we must buy from abroad. And our dependency upon imports is growing as the requirements of our national defense and living standards continue to rise. As chart 4 shows, imports supply materials essential to industrial growth and exports come from this growth. This gives you some idea of the industrial materials we get. We export twice as much finished manufactures as we buy, and we export roughly the same amount of industrial materials and food stuffs as we import. (Chart No. 4 referred to follows:) CHART 4 IMPORTS SUPPLY MATERIALS ESSENTIAL TO INDUSTRIAL GROWTH-EXPORTS COME FROM THIS GROWTH Exports and Imports by Economic Class-Millions of Dollars-1961 Secretary HODGES. Chart 5 has references to other kinds of raw materials. I mentioned tin, and you have nickel, bauxite, newsprint, and so forth, which indicates the idea of how much we have to get in, that we do not make it all or we make a limited quantity. At the right hand side there are raw wool and sugar on the agricultural side. We can see also in chart 5 more information as to how the United States relies on imports of industrial and agricultural raw materials. Raw Material imports (Chart No. 5 referred to follows:) CHART 5 U.S. RELIES ON IMPORTS OF INDUSTRIAL AND Per cent of new supply provided by imports-1960 Import Fertilizer Mill Colors, Raw Sugar Wool Secretary HODGES. Too many of us have felt that all imports inevitably compete with things produced in the United States. This is far from true. Out of the $15 billion of imports brought into the United States annually, roughly 60 percent, or $9 billion, have little or no significant competitive effect on our producers. Competition As for the remaining 40 percent of our imports involving some significant degree of competition with domestic production, it is important to recall that they represent only about 22 percent of the value of all transportable goods produced in the United States in 1961. Another constructive effect of imports is the role they play in the competitive process of our economic life, stimulating the competition that is vital to our system, giving us new and different products, and holding the line on costs. They even help make us more competitive and effective in our own exporting. I am thoroughly aware that Members of Congress have constituents in some field of production who feel they will be hurt by imports if our tariffs are reduced, or even if they are not raised to higher levels. We in the Commerce Department deal with these problems every day. I firmly believe that the basic and ultimate answer to this problem is to create new and more attractive opportunities here and in foreign markets for our native business initiative and employment. The Trade Expansion Act of 1962 can make a great contribution to this goal. In considering matters of trade policy, it is important to keep in mind not only the vital role of exports in our national economy-but the vital role played by imports as well. BALANCE OF TRADE: BALANCE OF PAYMENTS Considerable discussion of the national balance-of-payments deficit has been in the newspapers in recent years. It has led many readers to believe that American industry and consumers are importing more goods from abroad than they are exporting. This impression is quite in error. Our balance of trade the term ce that compares exports and imports of goods-shows a consistent export surplus. In 1961, the surplus was $5.6 billion. If we eliminate exports financed by Government programs from the calculation, our export surplus was still $3.2 billion. Our export surplus has not been large enough, and we can do much better. But the deficit in our balance of payments must not be mistakenly interpreted as showing that our industries and farmers are unable to compete in the markets of the world. The deficit in our balance of payments arises not from imbalance in our export and import of merchandise, but from intangible accounts such as overseas military expenditures, payments for economic assistance, tourism of U.S. citizens abroad, and flows of foreign and American capital investment in and out of the United States. Secretary of the Treasury C. Douglas Dillon will shortly discuss with this committee the balance-of-payments issue in more detail, and will enlarge upon the relationship of the Trade Expansion Act to the delicate and central problem of preserving the value of the dollar in international transactions. The significant point is this. We must look to expanding our export surplus (and increased tourism of foreigners in the United States) to make up for the deficit in the balance of payments created by other expenditures. Chart 6 shows clearly that a high export surplus is the major factor countering a balance-of-payments deficit. The Trade Expansion Act will open the doors of opportunity for us to achieve a higher export surplus. tracke (Chart No. 6 referred to follows:) CHART 6 EXPORT SURPLUS IS THE MAJOR FACTOR COUNTERING Balance of Payments compared with the surplus of nonmilitary exports over TEA+ Вобр 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 Secretary HODGES. I point out that one chart follows the other. The balance of payments follows the top chart, excepting around 1959-60, when because of particular conditions on outflow of gold, it turned the other way. I want to be very clear, however, in noting that this act deals with long-term trade relations and that complex tariff negotiations and adjustment usually require considerable time to carry out. The Trade Expansion Act is a precondition to a long-term solution of our balance-of-payment problems; but neither it, nor any other, legislation on tariff negotiating authority can offer immediate shortrun solutions to this issue. Passage of the act will, however, have some immediately favorable effect on the problem. It will demonstrate our confidence that we can compete abroad and increasingly draw the attention of the American business community to the profitable opportunities offered for exports. Further, the prospect of a Common Market with a substantial common external tariff which puts us at a competitive disadvantage is today motivating some U.S. firms to put their capital into additional plant facilities in Europe which they might not do if the external tariff were substantially reduced. The Trade Expansion Act will establish the prospect of lower Common Market tariffs and thus reduce one of the incentives for this capital outflow that currently adds to our imbalance of payments. THE FUTURE OF FOREIGN TRADE AND ECONOMIC GROWTH I have so far been discussing the role that international trade plays in our present economy and has played in the past. I should like to ask you now to join me in looking ahead at what international trade will mean in the years to come. Look, for example, at chart 7 which shows that many other countries are far more export-oriented than we are. This chart shows, gentlemen, that 4 percent of our gross national product exported is virtually the lowest of any industrialized nation in the world. Forgetting Venezuela, which exports petroleum products, take the Netherlands at 35 percent and Germany at 17 percent, which shows how very low we are in the percentage of what we could do. (Chart No. 7 referred to follows:) CHART 7 THE U.S.ECONOMY IS NOT AS EXPORT ORIENTED AS Exports as a per cent of Gross National Product - 1960 XP potentrif d us economy *36% 23 Secretary HODGES. This gives us a target to shoot at. The soaring levels of demand for consumer goods now spreading throughout the world, and often boosted by the world population explosion, presents an enormous new opportunity for sales of American products. And the phenomenal developments of new markets in Europe and the rest of the free world is not in any sense limited to consumer goods. Nation after nation has consciously embarked upon programs for economic development. These programs call for enormous quantities of construction, machinery, replacement parts, power installations, housing, transportation, and communications systems-things that the American economy can produce so well. 81843-62-pt. 1 |