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We are concerned over the apparent lack of standards in the setting of tariffquotas (for example, standards limiting the tariff to be applied beyond the quota), and we oppose the authorization of escape-clause tariff increases as high as 50 percentage points. In the latter connection, 50 percent above the existing tariff seems more appropriate, particularly if escape-clause action is only part of a coherent, comprehensive, constructive industry-adjustment policy-a context not required in the bill (or any time in the past) but should be.

ADJUSTMENT ASSISTANCE

We endorse the bill's easing of eligibility criteria for adjustment assistance. The procedures in the existing administration of this program need simplification, but we regret the bill's limitation of the Tariff Commission's role to conducting investigations at the Administration's request and without being called upon to assess the results of its investigation.

We note with sadness and alarm that every labor union that has spoken out on trade policy is opposed to this trade bill, The opposition of the United Automobile Workers (UAW), completing the circle of outspoken opposition by organized labor, is the most recent and most disturbing, particularly since the UAW was and remains an advocate of freer world trade. A basic reason for UAW opposition is the union's strong dissatisfaction with the adjustment assistance provisions. Organized labor was the prime mover behind the adjustment assistance concept (back 20 years ago), but regards not only the existing program but the proposed changes in the trade bill as woefully unresponsive to today's needs.

We urge the Senate to raise the sights of the trade-adjustment policy and make a credible effort to win at least UAW support for the trade bill and for overall progress toward a freer world economy.

The Amtrak model proposed by the United Auto Workers deserves attention as a possible standard to be used in adjustment assistance to trade-impacted workers. If this is not suitable, an approximate alternative should be sought. We also recommend that adjustment assistance be authorized, not only (as in the bill) to workers, and firms injured by imports, but also to workers, firms and communities injured by the restriction of imports. And beyond this legislation, the nation needs an adjustment/conversion strategy addressed to all forms of dislocation, including injury that may result from the shifting of a production line from a U.S. plant to facilities abroad. Retaliatory and balance-of-payments import controls

Adequate standards, indeed international standards involving the General Agreement on Tariffs and Trade or the International Monetary Fund, are needed for recourse to import controls for retalitory or balance-of-payments purposes, respectively. This is particularly important with respect to balance-of-payments import controls invoked against particular countries. Import control as a balanceof-payments device is unsound in the first place, at least for the United States. It is the wrong approach even for dealing with trade account disequilibrium.

The right road to international monetary adjustment is not through an arsenal of trade restrictions penalizing “surplus" countries, where the "deficit" country may itself not be making a suitable contribution to solving the disequilibrium. Besidess a suitably flexible system of exchange rates and adequate reforms in domestic policy, the right approach is emphasis on a multilateral, enforceable commitment to an "open world economy" involving all the developed countries and entailing accelerated schedules for the "surplus” countries. U.S. trade policy should be seeking such a "grand design" as a fundamental reform whose time has come. But this is not the game plan today.

If import controls are imposed for balance-of-payments reasons, the President should be required to report to Congress-through oral testimony by the Secretary of the Treasury before appropriate Congressional committees—no less fequently than every 90 days on progress being made toward removing such restrictions.

NATIONAL SECURITY One of the reforms desirable in trade legislation concerns the national-security provisions of existing law. The Administration's trade bill continued intact the present national-security provisions. The House bill adds a requirement that the President explain to Congress his reasons for using the import-control authority, and report annually to Congress on his use of such authority. These changes are

not enough, for they do not require constructive attention to the substance of action dealing with trade-related impairment of national security.

We recommend that, where the President finds that imports are impairing the national-security stake in dependable domestic supplies of the particular product, he should develop a special assistance program to strengthen this sector of the mobilization base. At present (and as envisaged in the trade bill), the only action the President is required to take if he finds impairment is restriction of the imports. Import controls may be necessary, but they should be very selective (to the extent needed at all), and should be only a marginal part of a balanced assistance policy aimed at coherent objectives and emphasizing domestic economic remedies. This policy should be systematically monitored by the Congress, and the President should report to Congress every year on its progress.

It is amazing that the only section of trade legislation that has intimately affected petroleum, and in this connection has worked so poorly as a policy instrument, has escaped the attention of government, business and virtually the entire liberal-trade community. Tarif preferences to developing countries

The long-delayed step to fulfill this commitment is made inadequate in many ways.

The exemption of products covered by special import controls is understandable. But there is no deliberate effort to phase out these import controls. The proposal is weakened even more by (a) the quantitative limits restricting the eligibility of supplying countries, (b) the burdensome requirement calling on the President to judge whether particular industries in particular developing countries need such preferences, (c) the overly permissive "import relief": (escape clause) criteria capable of penalizing foreign producers impressively successful in attracting American consumers to their products, and (d) overly permissive Presidential authority to withdraw tariff preferences. Moreover, tariff-preference authority should not be limited to zero tariffs as the only option, Gradations of preference should be permitted, left to the President's discretion.

These shortcomings in the authorization of tariff preferences to the developing countries should be carefully reviewed for correction. This is, among other things, a foreign-policy issue of very high priority. America needs a new, dramatic Third World strategy. This bill does not provide the trade dimension so urgently needed. Foreign access to the American market for both goods and capital is not only a major instrument of U.S. assistance to the developing countries. It can also be of both carrot and stick utility in developing the new and equitable economic partnership essential to repairing the worsening fault line in relations between the advanced countries and the world's less-developed areas.

Freest access to the American market is America's best economic weapon. America should use it with great skill and vaulting statesmanship. The nation has the resources and resourcefulness to adjust fully and effectively to such an initiative. Title IV (trade with Russia etc.)

We urge the President and Congress to negotiate a mutually acceptable accommodation on this issue—an accommodation that (a) gives the President the moral support and legislative authority he needs for his highly desirable but very delicate diplomatic initiatives in relations with Communist countries, (b) finds an appropriate way, consistent with these objectives, to send the human-rights message which large majorities in Congress and supposedly in the country want to send, and (c) provides for frequent, effective Presidential accountability to Congress on these issues.

CONSULTATION WITH CONGRESS In his trade message, the President said:

"I invite the Congress to set up whatever mechanism it deems best for closer consultation and cooperation to ensure that its views are properly represented as trade negotiations go forward."

An effective mechanism for such consultation and cooperation is crucial for progress in trade negotiations and for Congressional action to backstop agreements reached. For this purpose, particularly for effective consultation between the President and Congress on industry-adjustment measures pursuant to the new dimension of an effective trade policy proposed above, a joint "select committee" should be formed, roughly on the following lines :

Alternating chairmen: the chairman of the House Ways and Means Committee and the chairman of the Senate Finance Committee. Other members would include the chairmen of the following committees (or their alternates) : House :

Senate: Labor

Labor Banking

Banking Agriculture

Agriculture Foreign Affairs

Foreign Relations Interstate and Foreign Commerce Commerce Interior

Interior

ANNUAL REPORT TO THE PRESIDENT In addition to the report required in the bill (the same kind required in existing legislation), the bill should also require the President to report annually to Congress on the progress of national adjustment and conversion across the board, and on the international competitive position of the American economy. Such a vehicle for better understanding of these issues (first proposed by CNTP in the 1962 trade hearings) would contribute immeasurably to the more dependable free-trade policy so urgently needed.

SUSPENSION OF IMPORT RESTRICTIONS FOR ANTI-INFLATION OR BALANCE-OF-PAYMENTS

REASONS This authority to suspend import restrictions is commendable in principle. We doubt seriously that it should be restricted to an arbitrary percentage of total U.S. imports, to the time limitations specified in the bill, and to situations where, in the President's judgment, the suspension would not injure "firms or workers". Suspension essential or helpful to the overall national interest should not be sacrificed to the short-run interest of certain firms or workers, whose needs should be dealt with by domestic policies addressed to the imperatives of their particular situations. A coherent industry-adjustment policy of the kind proposed in this testimony would augment the flexibility the President seeks for dealing with inflation or persistent balance-of-payments surpluses through suspension of import controls.

OTHER RECOMMENDATIONS We recommend for anti-inflationary purposes the immediate suspension of import duties on as many products in short supply as possible, including all imported meats.

We also urge, as an amendment to the trade bill, the immediate repeal of the 1964 legislation triggering quota controls on meat imports. The President's suspension of these quotas is not enough. There is a world shortage of meat, and mere suspension of the quotas does not provide a firm basis for stepped-up commitment of foreign supplies to the U.S. market. The fact that over 90 percent of imported meat does not compete with U.S. production, but supplements U.S. supplies going into hamburgers, hot dogs and luncheon meats, should convincingly complete the case for repealing this import-control legislation.

We recommend authorization to the President to terminate the ban on imports of seven furs and skins from the Soviet Union and the People's Republic of China.

[Whereupon, at 3 p.m., the committee adjourned, to reconvene at 10 a.m. Thursday, March 28, 1974.]

TRADE REFORM ACT OF 1973

THURSDAY, MARCH 28, 1974

U.S. SENATE,
COMMITTEE ON FINANCE,

Washington, D.C. The committee met, pursuant to recess, at 10 a.m., in room 2221, Dirksen Senate Office Building, Hon. Russell B. Long (chairman) presiding.

Present: Senators Long, Curtis, Fannin, Packwood, and Roth.
The CHAIRMAN. This hearing will come to order.

Today, we shall hear from representatives of the U.S. chemical industry. These witnesses have graciously agreed to appear as a panel in order to conserve the committee's time. We very much appreciate their cooperation.

The 5-minute rule will be imposed today. Each Senator may have 5 minutes to question the witnesses, and if any Senator has additional questions, he may utilize the executive conference room after the witness has been interrogated by all other members of the committee.

The panel this morning will consist of David H. Dawson, formerly with Du Pont, and now the chemical industry trade adviser; Richard M. Brennan of Union Carbide, representing the Manufacturing Chemists Association, as well as Robert Barnard, counsel for the Synthetic Organic Chemical Manufacturers Association.

We welcome you gentlemen, and we will be very pleased to hear your suggestions regarding this trade bill.

STATEMENT OF DAVID H. DAWSON, CHEMICAL INDUSTRY TRADE

ADVISER; RICHARD M. BRENNAN, DIRECTOR, INTERNATIONAL TRADE AND TARIFF, UNION CARBIDE CORP., AND CHAIRMAN, INTERNATIONAL TRADE COMMITTEE OF THE MANUFACTURING CHEMISTS ASSOCIATION, AND ROBERT C. BARNARD, COUNSEL, SYNTHETIC ORGANIC CHEMICAL MANUFACTURERS ASSOCIATION

Statement of David H. Dawson

Mr. Dawsox. Thank you, Mr. Chairman.

My name is David H. Dawson. I am a director of the Du Pont Co., and upon retirement late last year as senior vice president of that company, I became a trade adviser to the chemical industry, looking forward to the negotiations scheduled to begin under the GÁTT late

this year.

I am accompanied by Mr. Richard Brennan, director of international trade and tariff for Union Carbide Corp., and chairman of the International Trade Committee of the Manufacturing Chemists Association and by Mr. Robert Barnard, substituting for Harold C. Whittemore, vice president of Sun Chemical Corp., and president of Synthetic Organic Chemical Manufacturers Association. He will present Mr. Whittemore's testimony.

In an effort to establish and maintain a concerted industry point of view, five trade associations established the Office of the Chemical Industry Trade Adviser. These are the Manufacturing Chemists Association, the Synthetic Organic Chemical Manufacturers Association, the Society of the Plastics Industry, the Dry Color Manufacturers Association, and the Fertilizer Institute.

The office of the trade adviser will serve to permit communications between the negotiators and the industry. I have agreed to lead this effort representing the five cooperating trade associations with the hope that my 40 years of experience in the industry and my participation in the frustrating and inadequate coordination between Government and industry in the Kennedy round might lead to better results for our industry and the national interest.

We have a full-time technical adviser, Mr. Myron T. Foveaux, also a participant in the industry's futile attempts to assist in the Kennedy round. A policy committee of 12 top industry executives has been formed, and 14 product group task forces are already active in the development of the detailed data which our negotiators will need.

Although we are fully aware that our negotiators cannot utilize industry advisers in the same intimate ways practiced by their adversaries, we are hopeful that between us Government and our industry can find mechanisms which will mitigate our negotiating disadvantage and allow significant improvements over the Kennedy round experience.

I am sure you are all aware that the chemical industry is an extremely heterogeneous one. It manufactures literally tens of thousands of products varying from commodity chemicals selling for a few cents a pound to highly complex compounds selling for many dollars per gram. This heterogeneity has resulted in a multiplicity of trade associations and you have consequently at times heard a variety of viewpoints, particularly in the trade area.

We believe that we have largely reconciled these variations in point of view and we can speak with one voice in urging passage of the bill before you and simultaneously urging some important modifications in it.

The chemical industry is a $66 billion industry employing over one million workers. Last year it had a $3.3 billion trade surplus. For many years it has been one of the largest contributors to our export surplus and even during the dark years of 1971 and 1972, when many of our products were not priced competitively with those of some of foreign manufacturers, succeeded in maintaining a substantial surplus.

Since the Congress first started consideration of this trade bill the whole character of world trade has changed dramatically and with great suddenness. Oil embargoes, sharp price increases in oil and oil derived products, the need to protect our imports rather than our ex

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