the other side, we must have the facts and figures on which we can base a retaliatory program in the event that they will not talk meaningfully about things that are important to us. Senator FANNIN. Well, I asked previous witnesses if they would give us in writing what we need in this bill to accomplish that, because, really, to me the gap has been almost a barrier to us rather than assistance. I have talked to the negotiators who always seem to be complaining, so we would like to know what can we do to turn that around. Mr. INGERSOLL. I believe we need a marriage of the business community with the Government as we have seen in Japan, and as we are now seeing in the Common Market. I think we ought to provide some way for the business community to assign its top people in a given industry to serve the Special Negotiators Office for the period of these negotiations even if they last for 2 or 22 years, so they are intertwined, so industry can't say it was not properly represented. The information we in the business community have is that these are going to be most difficult negotiations. And when you get down to the last wire, we are fearful that when they get down to the wire, some segment of the industry, because they weren't properly represented, may be sold down the river in order to conclude negotiations. We want to be as tough as we can right down to the wire. Senator FANNIN. I say amen to you. Unfortunately, in Congress we have an attitude we don't want anybody in any place or position where they can influence what is being done that is associated with industry or has a knowledge of it. As to petroleum problems we have today, when we wanted somebody in the Energy Office to handle logistical problems, the answer was, no we cannot have anybody from the petroleum industries. It is like having a chiropractor do a brain operation. Mr. INGERSOLL. We are trying to protect the country. I hope Congress will recognize that so it can be accomplished. Mr. STAINBACK. We would subscribe to that thought and another business organization has expressed somewhat the same view. You will find support from other business organizations and business in general. Senator MONDALE. Would you include farmers in there? Mr. INGERSOLL. Absolutely. Mr. STAINBACK. I think you would absolutely want them. You need expertise. It is not going to come from government as much as from the industries or agricultural interests that are involved. Senator MONDALE. I would ask the staff to include the Herbert Gold article. [The prepared statement of Mr. Ingersoll and the Newsweek article referred to by Senator Mondale follows:] PREPARED STATEMENT OF JAMES INGERSOLL, VICE PRESIDENT, WORLD TRADE REPRESENTING THE CHICAGO ASSOCIATION OF COMMERCE AND INDUSTRY Good morning, I am James Ingersoll, representing the Chicago Association of Commerce and Industry as Vice President for World Trade. I am also a vice-president of Borg-Warner Corporation. With me is A. Robert Abboud, Vice Chairman, First Chicago Corporation, who is Chairman of the World Trade Policy Committee of the Chicago Association of Commerce and Industry. Our association represents some 5000 business and professional organizations in the Chicago area, with a gross annual product of $65.5 billion or roughly 5.1% of this nation's GNP. Metropolitan Chicago ranks second among U.S. metropolitan areas in industrial exports, and the state of Illinois ranks first in agricultural exports. Estimated total export-related employment in Illinois for 1971 amounts to more than 325,000 jobs. Within a 400 mile radius of Chicago, more than 30% of the nation's exports originate, and three companies within this area-GM, Caterpillar, and Cargil-are the top three exporters in the country. So you can see Mr. Chairman and members of the Committee, we in the Midwest have a vital interest in the maintenance of a healthy, rational and orderly international trading system. I would like to speak on several aspects of the pending trade legislation: 1. The need for a well cordinated national trade policy; 2. The need to obtain equitable access to foreign markets; 3. The authority to extend Most Favored Nation status to the USSR and other Eastern-bloc countries, and; 4. The extension of U.S. Export-Import Bank credits to these same countries. The Chicago Association of Commerce and Industry has long supported the objective of free trade, for a simple economic reason: The lowering of trade barriers permits freer flow of goods and services across national borders, thereby assuring consumers everywhere the best product at the best price. And now that American goods and services are more price-competitive, removal of foreign barriers should mean continued growth for U.S. exports. This consideration is particularly important today, when the U.S. must significantly increase its exports to help offset the rising costs of its energy requirements. THE NEED FOR A WELL COORDINATED NATIONAL TRADE POLICY Mr. Chairman, our country is currently swept by complex cross currents, which could have a profound effect on our status as a world power. At last disentangled from 10 years of war in Southeast Asia, many Americans feel strongly that we should deemphasize our role in international affairs, and concentrate on domestic issues. Other factors have supported this attitude: The most recent Mid-East conflict, when our troops were placed on alert against the possibility of large-scale Russian intervention; the ensuing oil embargo which caused inconveniences for many and hardship for some; the apparent "go-it-alone" attitude of some of our allies; the huge sale of grain to the USSR and the attendant increase in domestic grain prices; recent turmoil in the international monetary system. All of these factors, I believe, have contributed to the isolationist mood now prevalent in our country. This mood is even more understandable in light of our nation's intense, historic pride in independence our freedom from constraints imposed by outsiders. But historically, that freedom has rested on America's storied abundance of natural resources, including fertile farm land. Moreover, our oceans have physically insulated us from crises of Europe and Asia. All of that has changed now. Strategically, the Atlantic and Pacific no longer protect us against spillovers from the disputes of other nations. The most recent Mid-East conflict demonstrated that all too clearly. Equally important, we are no longer self-sufficient in resources-today we import not only oil, but nickel, tin, zinc, and chromium. Whether we like it or not, the U.S. is inextricably involved in world affairs. It cannot stand alone, or separate itself from the actions of other nations. It cannot cut off its ties with its traditional trading partners. It cannot cease to improve relations with former adversaries. In short, there is a global interdependence. And that interdependence to the U.S.-means that we must look outward. Our need for imports in energy, raw materials, and some food stuffs is obvious. And to pay for these imports we must export. But in order to export, we must have a universally accepted trading system which assures that our goods, and the goods of our overseas competitors, are accorded equitable access to all markets. A system that protects us all from discriminatory treatment or un-fair tariff and non-tariff barriers. And of course, Mr. Chairman, this is what the Trade Bill is all about. Among our citizenry, indeed among some of our leaders in both the private and public sectors, there seems to me an inadequate awareness of the need for a well-directed, national trade policy. This public nonchalance is a mater of great concern to me and the members of our association. To see why, one has only to view the commitment to trade of our major trading competitor-the European Community. They maintain a large and sophisticated commercial staff in Brussels supplemented by the expertise of nine different governments. As I understand it, this effort is directly supported by active private sector participation. In the United States, however, there does not appear to be a comparable commitment. The U.S. negotiating team-though headed and staffed by capable people may not be adequate in size or in technical background to make certain our objectives are achieved. Mr. Chairman, we hope soon to be entering into long and tedious negotiations with the GATT nations, negotiations which will require a great deal of not only bargaining skill but background work and preparation. I therefore urge the Committee to study this matter closely, to make certain that the Office of the Special Representative for Trade Negotiations has sufficient re sources and authority to meet the challenge. Otherwise the effort will fail, and we will suffer the consequences for some time to come. I have spoken briefly on the need for a well-directed national trade policy. The Members of the Committee know that to develop that policy, there must be enabling legislation. And we need that trade legislation now, more desperately than ever before. The events of the past year or two make this painfully clear. For example. the drought in Africa, the poor crop conditions in China and the USSR, and the change in ocean currents off the cost of Peru, all combined to increase world demand for agricultural products, and this led to substantial pressures on our domestic capacity. As a result, we briefly imposed export controls on some commodities-a move that surprised some, and angered others, but mostly shattered confidence in the ability and willingness of the U.S. to provide agricultural goods at reasonable prices. The recently lifted oil embargo had a similar effect. This nation now knows it can no longer rely so heavily on the Mid-East region for petroleum products. Other nations have drawn similar conclusions. The danger of these reactions, as I see it, is that some industralized nations are moving to secure critical supplies of food, energy and other basic commodities for themselves, regardless of the cost or the adverse impact it may have on others. This obviously can lead to dangerous results, and I believe we must act quickly to prevent this movement from accelerating. We must obtain international cooperation on a wide spectrum of issues including trade. And while trade is only one of several areas in which cooperation and agreement must be reached, it is nevertheless an essential area. It is for this reason, Mr. Chairman, that I believe we must have a strong and effective trade bill, and we must have it soon. I now would like to discuss briefly several aspects of the pending trade bill. During the past decade, the trend toward regional trading blocs has fostered a system of trade preferences and agreements within and among various bloc members. Perhaps two of the better-known arrangements are the common agricultural policy and common external tariff of the European Economic Community. In addition to these internal arrangements the EC has also been extending preferential treatment to other groups and non-bloc members, and in turn has been seeking and indeed obtaining reverse preferential treatment from these parties. In fact, it is my understanding that the EC is presently review. ing its various preferential arrangements with non-EC countries, and if the proposed preferences currently under consideration are implemented, upwards of 80 countries will be eligible for various types of preferences. Two examples may help illustrate how these practices can harm U.S. suppliers. The first deals with the common agricultural policy. In early May of 1973 the CIF Rotterdam price of U.S. wheat was $105.15 per metric ton, but the landed price to the European buyer was $158.96. The difference, of course, was the result of the EC variable import levy of $53.81 imposed under the common agricultural policy. And this $5381 was just enough to encourage EC purchasers of wheat to buy primarily from EC suppliers, leaving U.S. suppliers as a secondary source. I am aware that agricultural prices have since risen, so that now world prices are above EC supported prices. Thus it could be argued that variablelevies are no longer a problem, and that if the U.S. were really concerned about promoting agricultural exports it would not have imposed controls last summer. Notwithstanding these statements, it should be recognized that as supplies increase, prices will drop. And if we were to have a bumper crop in the next year or two prices could drop significantly-so much so that our farmers would again be confronted with the issue of variable levies. The Agriculture Department stated in 1972 that in the 10 years since inauguration of the Common Agricultural Policy, EC variable import levies have held the rise in exports of affected U.S. commodities to the EC, to 23 per cent-compared with a 94 percent gain for commodities not subject to the levies. Put another way, the U.S. share of the EC agricultural market has decreased from 12% to 9% during the period from 1962 to 1972. With the enlargement of the EC, the application of the Common Agricultural Policy could place even further constraints on our agricultural exports. My second example is in the area of manufactured products. Caterpillar Tractor Co. in our area has stated that trade agreements between the EC and the five non-acceding EFTA countries will result in an eventual reduction to zero of duly rates on products similar to Caterpillar's. Meanwhile, the duty rates on Caterpillar's products exported to EFTA and EC countries will remain the same. Thus, according to Caterpillar-based on its 1972 exports of $24.3 million to the EC for which comparable equipment is manufactured by EFTA competition-Caterpillar will incur a weighted average 10.8 per cent duty disadvantage. Similarly, based on its 1972 exports of $14.5 million to EFTA, for which comparable equipment is manufactured by EC competition, Caterpillar will incur a weighted average 5.9 per cent duty disadvantage in that market. From this it seems reasonable to conclude that other U.S. manufacturers will suffer similar duty disadvantages. The point in both cases, Mr. Chairman, and Members of the Committee, is that we must have a trade law which provides our negotiators the authority to work toward removal of these harmful practices and the establishment of an equitable trading system. With regard to the extension of preferences, I am not opposed to providing generalized preferences to all eligible nations. But such preferences should be granted only on a non-discriminatory basis-not on the basis of some special historical relationship such as that of a former colony. Moreover, developing countries should not be permitted to extend reverse preferences to certain industralized nations and not others. But such practices not only hurt U.S. suppliers but are inconsistent with the provisions of GATT. I am pleased that the proposed legislation does not permit the extension of a generalized preference to any developing country which affords preferential treatment to the products of a developed country and not the United States. And I would hope that our negotiators will work towards the removal of all but generalized preferences, extended on a non-discriminatory basis to eligible developing countries. THE AUTHORITY TO EXTEND MOST FAVORED NATION STATUS To get the barriers removed abroad, we must be willing to reciprocate and remove our own barriers. In particular, we must deal with the question of equal tariff treatment for non-market economices. I firmly support the goal of human rights for all individuals, including the right of freedom of emigration. Moreover I believe this to be a legitimate goal for the Government of the U.S. to pursue. But I do not believe that requiring free emigration as a condition of equal tariff treatment or the extension of credits will in fact ensure that freedom. Such action could, in fact, have quite the opposite effect. I believe there are more effective means of accomplishing this very important goal. It would seem that such a complex issue could be better handled through a continued broad range of diplomatic efforts. Moreover, such conditions could have an adverse effect on U.S. exports. It seems unlikely that the governments of non-market economies could contine to purchase U.S. goods in significant amounts if they were not assured, at the minimum, equal access to U.S. markets and a reasonable balance of trade. In addition, the withholding of equal tariff treatment would most likely benefit other industrialized nations, particularly the EC and Japan, by allowing them to improve their already significant penetration of these markets. As this penetration continued, it would become increasingly difficult for U.S. suppliers to break into these markets, for it is likely that the USSR would become more and more accustomed to acceptable European and Japanese alternatives. THE EXTENSION OF U.S. EXPORT-IMPORT BANK CREDIT The last point I would like to touch upon today deals with the activities of the Export-Import Bank, and in particular, Eximbank credits to non-market economies. Eximbank's enabling legislation emphasizes the need to promote exports in order to contribute to the economic well-being of our nation. This language is couched in economic and commercial terms, with only occasional references to political considerations. In this respect, the Eximbank is obviously quite different from AID. Eximbank is used to promote and facilitate exports and thereby contribute to our economic well-being, while AID is a bilateral assistance program which, among other things, serves as a means to achieve our foreign policy objectives. I believe both activities perform a vital function, but I also believe the two should be kept quite separate separate in the sense that I think we should avoid, whenever possible, using Eximbank as an extension of our foreign policy objectives. While I recognize the difficulty of adopting this approach in all situations, I nevertheless believe the primary criteria employed by Eximbank in reviewing credit applications should be economic and commercial. While the extension of an Eximbank credit may be regarded as a form of assistance to the borrower, it also enables the borrower to purchase products from a U.S. supplier. Moreover now that Eximbank's direct lending rate has been increased to a fixed 7 per cent, it would be difficult to argue that such credits were being extended on a concessional basis (March 8 rates for 3-5 year Government securities were 7.05%). We must remember that every borrower from Eximbank pays the same fixed 7 percent. Thus it would appear that in the long run the benefit flows to the U.S. in general, and the U.S. supplier in particular. Moreover, the extension of such credit could lead to the development of a solid, pragmatic business relationship which in turn could help pave the way toward improved political relations. Besides assisting the U.S. supplier, the extension of credits to the USSR, in instances such as financing the sale of energy-related goods and services, could result in other benefits. In particular it could help assure that the output of these projects would be shipped to the U.S. This supplement to our own energy sources could serve to provide some balance in our dependence on foreign supplies of energy. In closing, let me stress again that I believe the United States Government should actively pursue the goal of freedom of emigration for all people. But I feel that this goal can be best achieved through continued bilateral diplomatic contact with the governments of the non-market economies. Indeed, Mr. Chairman, I believe much progress has been made to date in this entire area through diplomatic initiative. And I have no reason to believe that such progress should not continue. Thank you. [From Newsweek Magazine, Apr. 8, 1974] MY TURN: THE DISSENTERS SOLZHENITSYN LEFT BEHIND (By Herbert Gold) Recently I returned to the Soviet Union to visit the dissenters Solzhenitsyn left behind. On my last trip, nine years ago, almost everyone paid the police the extreme deference of fear. Now a curious alteration has taken place. Whole groups-intellectuals, nationalists, religious people of various convictions, Jews, even mere admirers of jazz or contemporary films or the clothes that go with more hair-seemed almost blithe about the cops tailing them and me. A blitheness of desperation; nothing more to lose. |