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The League testified 10 months ago in general support of the Trade Reform Act. We also commented on some aspects of the bill which were of concern to League members and recommended changes in several provisions. On the whole, we were satisfied that the bill, H.R. 10710, which emerged from the Ways and Means Committee and was passed by the House incorporated many of our recommendations. We think it is a sound bill, far from obsolete, and even more necessary today than it was in April 1973 when it was introduced.
I would now like to point out some of the positive features of this bill and also comment on selected provisions which are still in need of revision.
TRADE NEGOTIATING AUTHORITY The League supports the systematic reduction of tariff and nontariff barriers through multilateral negotiations. The Trade Reform Act would authorize the President to enter into trade negotiations for a period of 5 years and, pursuant to trade agreements, to increase or decrease tariffs. This grant of authority is extensive, but not unlimited.
The League thought that the original Administration request in H.R. 6767 was excessive. But we disagree with those who, in response to Watergate, want to deny this Administration the necessarily broad authority which the Executive must have in trade matters. The bill passed by the House, H.R. 10710, recognizes the need for broad authority to ensure negotiating flexibility. At the same time, it carefully checks Presidential actions by setting limits on the power to raise or lower tariffs.
The bill provides that, in international trade agreements the President can reduce tariffs by (a) 60% for tariffs between 5% and 25%; (b) 75% for tariffs over 25%; and (c) eliminate tariffs of 5% or less. The President can increase tariffs to a level 50% above the rate existing on July 1, 1934 or 20% ad valorem above the existing rate, whichever is higher. In response to the criticism that the latter provision is still excessive, we want to point out that the increases could be made only pursuant to trade agreements and could not be used to raise tariffs across-the-board.
More important checks on Presidential actions are the procedures in H.R. 10710 for Congressional consultation, surveillance and veto. For example, Section 102 (f) subjects nontariff barrier agreements to a 90-day Congressional veto. Section 123(d) requires the President to notify Congress when he suspends import barriers in order to restrain inflation. Chapter 5 contains procedures for Congressional resolutions to disapprove a trade agreement. And Chapter 6 provides for Congressional delegations to negotiations. Our support for these provisions is consistent with our efforts to strengthen the role of Congress vis-a-vis the executive.
CONSUMER INTERESTS The League is convinced that the public interest is best served by a trade policy which promotes the freest possible exchange of goods and ideas across national borders. A liberal trade policy brings benefits to consumers by increasing their choice of products and prices. To the extent that they are cheaper they stimulate the economy by increasing the disposable income consumers have to spend on other products. Imports also supply products not produced in the United States and supplement materials in short supply. Finally, import competition serves as an incentive to efficiency and productivity in domestic industry. As Congressman Charles W. Whalen, Jr. noted in a speech last December, “Trade barriers diminish the welfare of all the people. ... Trade barriers are an anachronism in this Age of the Common Man,"
The League is pleased to see numerous provisions in HR 10710 relating to consumer interests. The most important of these provisions is, or course, Section 123 which authorizes the suspension of import barriers to restrain inflation. The League's interest in international trade grew out of a consumer study League members undertook in the 1920's. Their conclusion—that import competition serves a valuable function in combatting inflation-was a factor in moving the League to speak out for liberal trade policies ever since. Now, when the consumer is strapped with high prices and a shortage of many products and materials, Section 123 is an appropriate addition to Presidential authority. Other provisions relating to consumer interest in Title I include:
Sec. 131(b)-Requires the Tariff Commission to advise the President as to the probable economic effect of modifications of duties on, inter alia, consumers. 30–229—74-pt.
Sec. 131(c)-Requires the Tariff Commission to include in its report to the President its advice on the probable economic effects of modifications of NTBs on purchasers.
Sec. 131(d) (4)-Authorizes special studies to include descriptions of impacts of modifications of trade restrictions on consumers.
Sec. 135(b)(1)-Establishes an Advisory Committee for Trade Negotiations which is to include individuals representing consumer interests.
Sec. 135(i)-Requires the President to provide continuing opportunities for private organizations to give information and advice on trade negotiations Perhaps not all of these provisions will be taken equally seriously. There are indications that at least one of them-Section 135(b)(1)-may not be. Although there has already been extensive consultation with business on the proposed negotiations, there has been no attempt to seek information and advice from consumer interests or the general public. The vehicle for consumer consultation, the Advisory Committee for Trade Negotiations, is thus far, a purely cosmetic feature of the trade bill. Meanwhile, consumers—the fictitious Jane and John Dee continue to be neglected. With few organizations to speak in their behalf, they are either stepped on or sidestepped. This is unfortunately the case in spite of the fact that the ultimate reason for trade, for all economic activity, is to bring benefits to people. We hope this committee will plead the case for the consumer and press the Administration to abandon the traditional policy of not-even-benign neglect. In Title II, consumer interests are taken into account in two provisions :
Sec. 202 (c)(4)--Requires President, in determining whether to provide important relief, to take into account the effect of import relief on consumers.
Sec. 203(g)-Requires President before providing import relief to notify persons potentially adversely affected and to hold public hearings. In Title V, dealing with generalized tariff preferences, the President is given complete freedom to withdraw, suspend or limit the application of duty-free treatment with respect to any article or any country. To protect domestic producers and consumers, we recommend that a provision be included requiring the President to hold public hearings before he takes such action.
ADJUSTMENT POLICIES Import relief
We recognize that a trade policy which benefits most people may injure some. As a result of a recent trade study, the League modified its long-standing opposition to the use of trade restrictions to protect industries adversely affected by import competition. We accept the need for temporary relief but we want to emphasize that import relief should be granted only under exceptional conditions. While the criteria for import relief in current law may be too rigid, we fear that the criteria in the Trade Reform Act may be too loose.
Under current law, the criterion for determining injury is the so-called "Double major.” To qualify for relief, an industry must show that the major cause of increased imports is past tariff concessions and that the major cause of injury is an increase in imports. The Trade Reform Act proposes to revise these criteria by dropping the link between increased imports and trade agreement concessions; and by requiring that increased imports be a substantial cause of injury, a less severe test.
We are aware of the pressures which led to the liberalization of the escape clause, but we feel that the language of HR 10710 has gone too far in accommodating these pressures. Import relief to any industry in the form of tariffs, quotas, tariff-rate quotas and orderly marketing agreements imposes a great burden on the consumer. The test for import relief should be drawn so that this burden is imposed only in cases of severe injury. We think that adequate access to import relief would be assured with the elimination of the causal link between increased imports and tariff concessions and do not think there is a need to go beyond that. Adjustment assistance
The most sensible and humane alternative to trade restrictions is a reasonable program of adjustment assistance for workers and firms. I know the word "reasonable” means different things to different people. The Administration's original proposal in HR 6767 was criticized for being inadequate by most groups testifying before the Ways and Means Committee. The program proposed in HR
10710 is considered unreasonable by the United Auto Workers—a union which has not yet abandoned efforts to improve the program as an alternative to protectionism. More extensive programs are considered unreasonable by those who fear the high cost.
The League urges the Senate Finance Committee, as it examines various proposals which have been or will be made, to make generosity the central concept in its definition of what is reasonable
not only because it is right, but because that is what will make the program work. We have been generous with cotton growers, sugar producers and oil companies in the hidden costs we have paid for trade restrictions. We can afford to be more generous with workers. The adjustment assistance program in HR 10710 is estimated to cost $350 million the first year-a small sum compared to what consumers now pay for tariffs and other restrictions each year.
The League supported the adjustment assistance provisions in HR 10710 because they were an improvement over current law. But I think we can do even better. The eligibility requirement to make access to benefits easier was an important change. We would prefer higher weekly allowances than the percentage established in the Trade Reform Act, but are aware of the political obstacles in a budget-minded Congress. We do think, however, that the committee could make some changes in the program benefits.
The provisions for training are still inadequate. There is no reason why allowances should not be paid for the entire period of training instead of an arbitrary cut-off of 26 weeks after the 52 week time limit. Supplemental assistance is provided to defray transportation and subsistance costs when training is provided in facilities not within commuting distance. The amounts provided $5/day and 10¢/mile—are identical to the amounts in the Trade Expansion Act enacted 12 years ago. In face of the rising cost of living and with gas costing more than 50¢ a gallon, surely this is an unreasonable proposal.
The relocation allowance is also inadequate. HR 10710 would grant 80% of the expenses of relocation plus a lump sum equivalent to three times the workers' average weekly wage up to a maximum of $500. In a mobile society such as ours, losing one's job and becoming uprooted is a painful process. We agree with the DAW that incentives for relocation must be increased and that providing reimbursement for "community prospecting” would contribute to the program's success.
The relocation allowance provisions also specify that such allowance shall not be granted to more than one member of the family. The explanation for this provision is not logic but sexist. If husband and wife are both working--and two thirds of the women in the labor force work because they have to-then both pay a price when one of them is forced to relocate. And if both become unemployed because of import competition, if both have to relocate, both should be compensated. There is no rationale here for talking about family units rather than individuals.
RELIEF FROM UNFAIR TRADE PRACTICES Title III provides for several changes in statutes to give U.S. industry relief from unfair foreign trade practices. Mainly, these involve strengthening the President's authority to retaliate against unjustifiable and unreasonable foreign restraints on U.S. trade, imposing time limits on investigations under antidumping and countervailing duty laws, and clarifying the definition of various terms and criteria in U.S. trade laws. In general, we support the notion of making our trade laws work more effectively and fairly and believe the changes recommended by the House are reasonable.
We are, however, concerned about an amendment to the countervailing duty law which would give the Secretary of the Treasury discretion to refrain from imposing countervailing duties for only one year from the date of enactment of the Trade Reform Act on imports subsidized by facilities owned or controlled by governments of developed countries. Limiting U.S. discretion to refrain from imposing countervailing duties unilaterally for only one year, while negotiations presumably were underway to work out an international agreement, is unwise and unnecessary. We recommend that the one-year provision be deleted and that the Secretary of the Treasury have the full four years in which to complete the negotiations.
The question in international trade no longer is whether it should be subsidized-all countries do, including the United States—but which subsidies should be permitted or prohibited under international rules. The League strongly sup
ports the idea of negotiating an international code on subsidies that would define what should and should not be permissible. Otherwise we might find ourselves in a subsidy race that could touch off another trade war.
EAST-WEST TRADE Title IV would make the extension of nondiscriminatory tariff treatment to non-market economy countries contingent on changes in their emigration policy. The proponents of this title tell us that it is a means to the realization of high humanitarian principles; the opponents tell us that it places world peace in jeopardy. We do no know if these provisions will accomplish all that the proponents would wish or have all the consequences the opponents fear. We do know that there has been little rational debate over this issue and that the fate of the trade bill hangs in the balance.
The League's position on this issue must be stated in two parts: 1) In accordance with our liberal trade position we have, since 1965, favored the expansion of East-West trade, including nondiscriminatory tariff treatment. 2) We have not abandoned this position, but neither have we been dogmatic in promoting it. In the House, we supported the trade bill as reported by House Ways and Means, including Title IV. Similarly, in the Senate, our focus will be on the entire trade bill and we would oppose a veto of the bill. We do, however, urge Congress and the Administration to continue the dialogue and work toward a compromise which reflects profound concerns of both sides.
SHORT SUPPLY PROBLEMS AND THE DEVELOPING COUNTRIES In the past few months, we have all become aware of a new dimension of international trade policy—the problem of supply shortages and the need to assure fair access to supplies of food and raw materials. The recent oil embargo demonstrated that every nation is a potential "have not" and that interdependence is, therefore, a fact of life.
It is clear that we need policies to deal with similar situations in the future. For one thing, we must learn to conserve and manage our domestic resources better. For another, we need to develop international rules to assure nondiscriminatory access to scarce raw materials. The trade bill should include provisions which address this problem in two ways: 1) by making supply access one of the major goals of trade negotiations; and 2) by directing the President to seek international agreement on new rules governing supply access.
More important than these specific proposals is the need to reevaluate our policies toward the less-developed countries (LDC's). The negotiation of international rules on supply access will be of limited value unless the producing countries, which are primarily LDC's, have a stake in playing by those rules. The United States can help give them that stake by using its trade and aid policies to bridge the gap between rich and poor nations.
As a step in that direction, we support the provisions of Title V which would give the President authority to extend duty-free treatment to imports from ine less-developed countries. In an interdependent world, it is in our national interest to fulfill this international obligation.
Thank you for this opportunity to present our views. The League is prepared to work with you for enactment of this important legislation.
The CHAIRMAN. Now we will hear from Mr. Strackbein. We are very pleased to have you with us today, Mr. Strackbein.
STATEMENT OF O. R. STRACKBEIN, PRESIDENT, THE NATIONWIDE
COMMITTEE ON EXPORT-IMPORT POLICY
Mr. STRACKBEIN. Mr. Chairman. I have a summary and a full statement, and also, I would like to offer from the record to be printed after my statement the paper that I wrote in 1968 on the "Competitive Plateau of the United States.” 1
1 See p. 1252.
The CHAIRMAN. That will be done.
Mr. STRACKBEIN. Mr. Chairman, my name is 0. R. Strackbein, president of the Nationwide Committee on Import-Export Policy.
I think we are all aware, Mr. Chairman, that the profile of our foreign trade has changed radically in the past 2 or 3 years. Four or fire departures from the previous conditions have marked the great changes that have occurred:
No. 1 was the imposition of the 15-percent tariff in 1971 and the devaluations of the dollar since that time. Two, the rapid rise in the exports of agricultural products since 1972. That is also a new departure. Three, the vast increase in our petroleum imports hand in hand with the energy crisis. Four, the world inflationary trends of the past several years. Five, the inclusion in the House-passed trade bill of provisions that are, in my opinion, extraneous to trade policy in the form of political considerations that were best left to seperate treatment on their own merits.
Now, these subjects I shall treat in the above order. The imposition of the 15 percent additional tariff was in recognition of the untenable competitive position in world trade, both in the export field and in the domestic market in relation to imports. We were incurring heavy merchandise trade deficits and this turnabout from previous so-called surpluses greatly aggravated our balance-of-payments situation. We were in fact in a much worse position in the matter of trade balance than our official trade statistics revealed. The causes of this self-deception lay in the manner in which we reported our imports, on the one hand, and our exports on the other. Our currency was facing collapse.
The devaluation which followed the elimination of the tariff surcharge represented a general increase in the tariff and was designed to put us on a more nearly equal competitive position with a number of other countries, but especially with Japan and West Germany.
Resource to realinement of our currency merely represented a different way of skinning the cat. Devaluation of the dollar made imports more expensive to our consumers, just as higher tariffs are designed to do. It was merely a matter of method. At the same time, our exports would cost consumers in foreign countries fewer dollars, just as a tariff reduction by them would have accomplished.
The whole maneuver was confession of an erroneous tariff policy since the days when our principal foreign trading partners were catching up with us technologically while the labor costs lagged behind those prevailing in this country.
We have had a phenomenal increase in our agricultural exports. This increase helped greatly in reversing the disastrous trend in our trade balance. In 1973, our agricultural exports reached $17.6 billion, which was $8 billion more than in 1972. The increase took place principally in our grain exports-wheat, corn and sorghums-and in soybeans. Grain exports alone increased by nearly $5 billion. It should be noted, however, that the value increased distinctly more than the quantity, because of the increased prices, of course.
Altogether agricultural exports increase 80 percent in 1973 over 1972, while nonagricultural exports rose less than half as much, or 32 percent. That the high level will continue is open to serious question,