Today our consumer group is up to nothing so startling. They merely seek early passage of badly needed trade legislation, that is seven years overdue. The House bill: (1) provides for increased U.S. exports and imports, better jobs and economic growth at home; (2) protects legitimate U.S. domestic interests; (3) lays a basis for opening up new export markets and sources of needed raw material supply; (4) provides for the establishment of improved rules of the road and guidelines for harmonization in international trade which can help us become more competitive abroad; 5) provides, in an increasingly interdependent world, the authorities and the negotiating framework necessary for effective international responses to disruptions and imbalance in supply as well as markets; 6) and it does provide for increased consumer consultation in the formulation of trade policy. Finally, and we believe this is of overriding importance to all groups-not just consumers-we are convinved that a good trade bill will advance peace and security by helping to reduce international economic and commercial irritations which can so easily lead to major international disruptions.

The following national organizations, participating members of the Consumer Education Council on World Trade, have approved these statements: American Association of University Women, Americans for Democratic Action, Church Women United, Friends Committee on National Legislation, Japanese American Citizens League, Lutheran Church in America, National Board, Young Men's Christian Association in the U.S.A., National Board, Young Women's Christian Association in the U.S.A., National Council of Churches, National Council of Jewish Women, National Council of Negro Women, National Federation of Settlements and Neighborhood Centers, United Church of Christ-Center for Social Action, and United Presbyterian Church in the U.S.A. [Whereupon, at 12:30 P.M., the committee recessed, to reconvene subject to the call of the chair.]

TRADE REFORM ACT OF 1973

WEDNESDAY, APRIL 3, 1974

U.S. SENATE,

COMMITTEE ON FINANCE,
Washington, D.C.

The committee met, pursuant to recess, at 10:05 A.M., in room 2221, Dirksen Senate Office Building, Hon. Walter F. Mondale, presiding. Present: Senators Mondale, Nelson, Bentsen, Fannin, Hansen, Dole, Packwood, and Roth, Jr.

Senator MONDALE. Our hearings will come to order.

We have a very long list of witnesses today and if the committee agrees, we will confine each of them to a 10 minute oral statement and then the written statements will appear in the record as though read. The 5-minute rule which was earlier approved will remain in effect throughout the hearings for questioning witnesses.

Our first panel will be Professor Richard Gardner of Columbia University and Dr. Fred Bergsten of the Brookings Institution, and I wish to thank each of you to your contribution to the development of my amendment which seeks to deal with short supply problems. It was something that I had been thinking about for some time, and then I read an article reporting on a speech by Professor Gardner of Columbia University and also saw some data which had been developed earlier by Fred Bergsten. On that basis I developed my amendment, which is now pending as part of the administration's Trade Bill.

I am very pleased to have the two of you here this morning, and I would ask Mr. Gardner to proceed.

STATEMENTS OF RICHARD N. GARDNER AND C. FRED BERGSTEN

Statement of Richard N. Garner

Mr. GARDNER. Mr. Chairman, in the interest of time I shall not read my prepared statement, but simply touch a few highlights that I hope may be of interest to this committee.

At the outset I would like to say that I believe the Trade Reform Act of 1973 on the whole to be a very good piece of legislation and that its enactment would serve the national interest for two main

reasons:

The first is that the rules and institutions of world trade are now badly in disarray. They must be revised and strengthened if we wish to preserve an open international trading system. Without the authority to negotiate that this bill provides, we simply cannot do that.

The second reason is that the energy crisis has added new urgency to these negotiations. Faced with large trade deficits from higher oil costs, virtually all of the major trading nations in the world will be under severe pressure to resort to trade restrictions and push the burden of adjustment on to others. This would be a serious problem even in a world with strong trade institutions and rules. It could be an unmanageable problem in the present world with a weak GATT and with outmoded, ambiguous and, on some subjects, nonexistent trading rules.

So without this bill one would have to be very pessimistic about the prospects of finding cooperative solutions to the trade problems caused by the energy crisis.

Now turning to the Mondale-Ribicoff amendments, I need say little about the basic rationale because, Mr. Chairman, in your speech on December 3 you spelled out the case for amending the bill along these lines.

Senator MONDALE. I would ask the staff to put that speech in the record following Professor Gardner's remarks.

Mr. GARDNER. Thank you. It is a case with which I fully agree. As you pointed out, some 30 years ago President Roosevelt and Prime Minister Churchill proclaimed as a war aim of the United States and the free world the goal of access on equal terms to the trade and raw materials of the world. As you also pointed out, we forgot about that for nearly 30 years in our preoccupation with access to markets. And now, in a world of burgeoning populations and dwindling resources and accelerating inflation, we have got to come back to this concept of access to materials.

There are two very basic reasons for this, it seems to me. One is that it is morally, economically and politically inconceivable that nations which by an accident of nature have a virtual monopoly over materials the world desperately needs should have the right to hold the world up for ransom as a result. We must accept, all of us, including the United States, the moral, economic and political implications of interdependence.

The second reason is that we cannot clear away import restrictions unless we also deal with export restrictions. One will breed the other. And if we are in a world in which we can all be cut off without redress at a moment's notice from access to vital supplies, we are all going to be thrust into a new attempt to gain self-sufficiency. We see this happening already. So eliminating export controls is an indispensable element in our strategy to clear away import controls.

Having said this, I think we should recognize that the goal which you have set, Mr. Chairman, will involve very complex and difficult international negotiations, because when we talk about export restrictions we are talking about a wide variety of things. There are export controls put on for political purposes, which is what happened at the outset of the Arab oil embargo. There are export controls established to preserve access for the domestic population to commodities in short supply (we have the bakers of America now asking for export restrictions on wheat for that reason). There are export restraints put on for conservation reasons. There are export restraints put on for price

raising reasons by a producers' cartel. And finally, there are export restrictions of a so-called voluntary kind put on by one country, Japan, for example, at the request of another, such as the United. States.

Now these five kinds of controls all need to be dealt with analytically in a different way. So what I am suggesting is that while fully supporting the amendments that you and Senator Ribicoff have introduced, I think we should give the executive branch sufficient flexibility to negotiate rules about all of these things, and this will inevitably require reforming our own practices. We cannot have it both ways. I think we could well show the world an example with respect to the raw material system which we control food, that we understand the obligations of interdependence. The forthcoming World Food Conference, in which I know you, Mr. Chairman, have a very deep personal interest, seems to be a splendid opportunity for us to present the kind of example in this raw material which we control that we wish to see others follow on raw materials where we have a degree of dependency.

I would like to suggest also that we should try to act multilaterally in this area, wherever possible. Your amendments, as I understand them, call for amending the purpose clause of the bill to stress access to raw materials as a basic objective. They ask the executive to seek to negotiate strengthened rules in the GATT and other institutions on raw material access. They call for multilateral reprisals against countries that fail to live up to these rules, both members of these agreements and nonmembers as well. And finally, they authorize the President to retaliate as necessary to protect the national interest against those who do not play the game.

I would urge that in implementing a new international economic policy of access to supplies we seek to act multilaterally, not bilaterally, for at least three reasons.

The first is that in most cases the threat of reprisals against raw material cutoffs will have little practical significance unless we have our OECD partners with us-and we know they have not been with us in the case of oil.

Second, unilateral U.S. action will look to others as a destructive act of nationalism unless it is related to multilateral rules and multilateral procedures.

Third, such an effort of collective economic security could easily degenerate into a north-south economic war unless it is based upon principles that are acceptable to a substantial number of both developed and developing countries.

So I would hope that your amendments in their final form would specify that the President should exercise his authority to retaliate in conformity with GATT or other multilateral agreements once these have been renegotiated to deal adequately with supply access.

Pending such renegotiation, of course, the United States would reserve the right to retaliate without multilateral approval, but it should be understood that the President would use this authority only as a last resort and in conjunction with other consuming countries wherever possible.