to capital, to technology, to management skills, and to an adequate voice in decision-making in international economic forums. The challenge facing U.S. foreign economic policy in the next few years is to help fashion the "world order bargain" that will make access to resources a negotiable element in a new system of collective economic security that works in the interests of developed and developing countries.

OTHER FEATURES OF THE BILL

The trade bill could be strengthened by a number of other changes, the most important of which are suggested below:

1. Tariff authority

Section 101 gives the President authority to eliminate tariffs of 5% or less, to cut by 60% tariffs of from 5% to 25%, and to cut by 75% tariffs which are over 25%-provided that no rate over 25% is reduced below the level of 10%. I believe the national interest would be better served by replacing this formula with the zero-tariff authority contained in the original Administration bill. This would enable us to work more effectively for the objectives of the legislation set out in Section 2, particularly the goal of "open and non-discriminatory world trade." Zero-tariff authority is particularly important if we are to reduce the margin of discrimination against American trade by bargaining down the common external tariff of the enlarged European Community and the tariffs of other countries in association with it. As the President's Commission on International Trade and Investment Policy stated in its Report (p.14):

"Our objective should be the progressive elimination of most tariffs over the next 10 years, and of all tariffs over the next 25 years. Progress toward this objective would gradually eliminate the discriminatory effects on the United States and other nonmember countries of the European Community and its preferential trading arrangements."

Even if the goal of tariff elimination proves impossible, it is still in our interest to reduce world tariff levels as far as possible. We have a comparative advantage in many products, such as agricultural produce and high technology manufactures, that are currently subject to a high rate of protection by other nations. If we are restricted in the concessions that we can make in other areas, we may not be able to achieve the necessary competitive opportunities for our export industries or reach the general level of reciprocity in overall reductions that is so essential to a successful trade negotiation. Trade negotiations are a two-way street; and if one partner will go only a certain distance, the other partner cannot be expected to go any further. We should not jeopardize the trade negotiations by limiting unduly the negotiating authority of our representatives.

If the Senate is not prepared to grant zero tariff authority in the form originally proposed by the Administration, a useful compromise would be the formula adopted in the Trade Expansion Act of 1962 authorizing the elimination of duties on products for which the Community and the United States account for 80% or more of world trade. That formula was of little use in the Kennedy Round when the U.K. failed to join the Community, but it could be extremely valuable now.

2. Nontariff barrier authority

The otherwise excellent formula for negotiating on non-tariff barriers is flawed by the provisions for "sectoral equivalence" inserted by the House Ways and Means Committee. Section 102 states that a principal negotiating objective in the field of non-tariff barriers is to obtain, with respect to "each product sector of manufacturing" and with respect to the agricultural sector, "competitive opportunities" for U.S. exports to developed countries that are "equivalent" to the "competitive opportunities" afforded to these products in the U.S. In pursuit of this objective, the President is required to negotiate trade agreements "to the extent feasible" on a sector by sector basis and to indicate with respect to each trade agreement submitted to Congress the extent to which equivalent access in each sector has been achieved. Although these provisions do not appear in the section of the bill covering the President's tariff-cutting powers, the report of the Ways and Means Committee states (on page 19) that the objective of sectoral equivalence is also to be applied "to the extent feasible" in the tariff areas as well.

I believe it would serve the national interest if these provisions for "sectoral equivalence" could be removed from the legislation or at least substantially modified. In the forty years since the trade agreements program was inaugurated, we have conducted our trade negotiations on the basis of overall reciprocity, permitting concessions in one product sector to be reciprocated by concessions in another, subject only to the requirement that there be a balance of advantage in the total package. Trade-offs between product sectors have been and will continue to be necessary for the achievement of substantial progress in the reduction of trade barriers-particularly non-tariff barriersbecause in individual product sectors we and our trading partners differ in trading interests, productive efficiency, and the type of trade barriers we employ. It might conceivably be appropriate to require that the President seek reciprocity within the manufacturing sector as a whole in order to prevent excessive concessions here on behalf of our agricultural and service exportsalthough even this kind of requirement would need careful examination. But requiring that equivalence must henceforth be achieved in thirty or forty product sectors-which is apparently the way the legislation is interpreted by the Ways and Means Committee and the Executive Branch-risks placing unsuperable handicaps on our negotiators before the negotiations even begin. It would make it extremely difficult-perhaps impossible to negotiate new rules in GATT on such non-tariff barriers as subsidies and government procurement, since the competitive effects of such new rules will inevitably differ from one product sector to another. In one product, we may gain somewhat greater than equivalent competitive opportunities from the new rules; for another product, somewhat less, depending on our comparative advantage or disadvantage in production.

It is significant that the idea of sectoral equivalence was carefully considered and firmly rejected by the President's Trade Commission in 1971. I believe the reasons given by the Commission's Report (p. 12) are as timely now as they were then :

.....

"Reciprocity should be conceived in terms of the whole set of negotiations rather than as an objective to be achieved within self-contained compartments. . . . . . In some cases, of course, it may be possible to arrive at mutually advantageous solutions within specific industrial sectors, and efforts should be made to find such solutions. On the other hand, in many cases a country will have to give more than it gets in one sector or functional area, and recoup by securing an equivalent advantage in another."

If the Senate is not prepared to drop the sectoral equivalence provisions or to modify them substantially, I would recommend, as an absolute minimum, that Section 102 (c) be amended to make it clear that its provisions are to be implemented only to the extent consistent with the overall objectives of the legislation laid down in Section 2.

3. GATT revision

Section 121 (a) directs the President to take such action as may be necessary to bring trade agreements to which the U.S. is a party-primarily the GATT— into conformity with certain "principles." GATT urgently needs revision, and this Section would raise no problem if the "principles" subsequently enumerated were limited to broad statements of the kinds of rules sought to be achieved. Unfortunately, however, some of the numbered paragraphs appear to prejudge the question of what specific institutional means should be employed to improve the trade rules.

For example, Article 121 (a) (1) requires "the revision of decision-making machinery in the GATT to more nearly reflect the balance of economic interest" and Section 121 (a) (3) requires "the extension of GATT articles to conditions of trade not presently covered in order to move toward more fair trade practices." Given the fact that GATT now has more than 80 members and follows the rule of one-nation one-vote, amendments of the GATT articles to achieve U.S. objectives in these areas are not likely to prove feasible. A more practical approach would be to negotiate a new Code of Trade Liberalization, supplementary to GATT and supportive of it, open to participation by those relatively few key trading nations economically capable of assuming the new responsibilities, as has been proposed by the Special Advisory Panel to the Trade Committee of the Atlantic Council under the chairmanship of Ambassador John Leddy. The GATT members accepting the Code (which would deal, among other things,

with non-tariff barriers not now adequately covered in GATT) could then apply between themselves in its administration such new and more realistic decision-making arrangements as they would agree upon.

I would, therefore, recommend revising Section 121 (a) along the following lines: "The President shall, as soon as practicable, take such action as may be necessary to strengthen the GATT and other trade agreements heretofore entered into to make them more effective instruments for the development of an open, nondiscriminatory and fair world economic system, including (but not limited to) . . . ." The six numbered paragraphs that follow would then be reworded to eliminate specific references to the GATT articles individually or as a whole, leaving the President sufficient negotiating flexibility to accomplish the objectives laid down in the opening paragraph of Section 121 (a) by whatever means proved most practicable.

4. Import relief under the “escape clause"

Title II of the bill is too permissive in allowing U. S. industries to resort to tariff and other forms of protection in the face of import competition. True, this part of the bill does emphasize adjustment to import competition, provides more ample assistance for this purpose than ever before to workers and firms, and favors relief through tariffs and tariff quotas over quantitative limitations and orderly marketing agreements. But other innovations in the bill could substantially increase the number of successful applications for escape clause relief which will go from the Tariff Commission to the President.

For example, the existing requirement that imports be the "major" or principal cause of injury to a domestic industry is changed to a requirement that they be only a "substantial" cause-a cause defined as "important and not less than any other cause." Alongside the existing law's tight definition of "serious injury"-the significant idling of productive facilities, the inability to operate at a reasonable profit, significant unemployment, etc.-we have a new standard relating to a "threat" of serious injury on the basis of which relief can be granted. The "threat" can take the form of a decline in sales, a growing inventory, and a downward trend in production, profits and employmentobviously a much easier test to meet.

Those who believe in freer world trade might be reconciled to these new provisions if relief in the form of higher tariffs or other restrictions were clearly limited to a short time period. Unfortunately, the legislation provides for a five year period of protection renewable by an additional two years-with the opportunity to apply for yet another period of relief after a two year interval. If the concept of the legislation is to grant temporary protection to permit industries to become more competitive or to change into another line of production, one seven year period ought to be enough.

No less disturbing is the legislation's ambiguity on the key question of whether the more permissive standards for import relief are to constitute the exclusive mode of protecting domestic industries-or whether such industries will continue to have access to non-legislated methods such as the special international arrangements on textiles and steel. If we are going to set a new and easier standard by which industries are to get temporary relief from imports for the purpose of making competitive adjustment, I believe these standards should apply to everyone. At the very least, the bill should provide that no new restrictions, "voluntary" or otherwise, should be imposed to take care of industries that are unable to satisfy the new standard, and existing special arrangements that are not embodied in multilateral agreements under the GATT should be rapidly phased out. This would mean phasing out the steel agreement but not the multilateral textile agreement.

The American people are justifiably fed up with a double standard of law and justice-one standard for the rich and powerful and another for the rest of us. One place to start rectifying the double standard is in this new trade bill.

Some loosening of the current escape clause provisions is obviously necessary as the price for passing a trade bill, but I fear the loosening in the House version has gone too far. The new provisions would mean many more recommendations for trade restrictions by the Tariff Commission-and much more political pressure on the President under the escape clause than he has faced in recent years. I hope the Senate will tighten up the escape clause both with respect to the criteria of causality and injury and with respect to the other matters mentioned above. And it is absolutely essential to retain the discretion

the President has under existing law and in the proposed legislation to deny the application of an industry for new trade restrictions in the light of broader national and international considerations.

5. Countervailing duties

There is no valid national interest in countervailing against foreign subsidies which neither cause injury to an American industry nor prevent one from being established. Other countries recognize this fact and require that injury be shown before countervailing duties are imposed. The prevailing practice in this regard is embodied in Article VI of GATT, which requires "material injury" as a prerequisite to the imposition of countervailing duties. Yet the United States continues to apply a countervailing duty law that has no injury requirement, taking advantage of the "grandfather clause" of GATT permitting contracting parties to maintain pre-1947 legislation inconsistent with the GATT rules.

I would favor amendments to Section 331 of the bill bringing us into line with GATT standards by requiring proof of "material injury" before countervailing duties are applied. On the other hand, I can understand the argument that in order to maximize our negotiating leverage, we should postpone such a change in our legislation pending the negotiation of new rules on subsidies that are consistent with our national interests. But if we are to follow that negotiating strategy, we should certainly provide the Secretary of the Treasury with the temporary discretionary authority included on page 123 of the bill not to impose countervailing duties which would jeopardize the satisfactory completion of the trade negotiations. The provision beginning on the bottom of that page requiring the mandatory application of countervailing duties with respect to articles produced by a government-owned subsidized facility in a developed country could complicate our negotiating problems and should be removed. 6. Preferences for developing countries

Title V of the legislation constitutes an important step forward by recogniz ing the important national interest of the United States in assisting the developing countries to increase their export earnings and thus accelerate their economic development. However, tariff preferences are not available with respect to articles that are subject to "escape clause" actions under old or new legislation, nor will they have much value with respect to articles subject to "voluntary" or other forms of quantitative restrictions. This underlines the importance of tightening up our policies for "import relief" along the lines outlined earlier. We should not be in the position of taking back from the developing countries with one hand what we are giving with the other. In the long run, we should be moving with our developed trading partners toward a system of one-way free trade on behalf of the developing countries.

I would also recommend deleting paragraph (c) (1) of Section 504, which makes preferential treatment unavailable for the product of a beneficiary developing country when that country supplies more than $25 million of that product during a calendar year. It is inconsistent with the purposes of tariff preferences to limit the trade benefits so severely.

On the other hand, I support the provision in Section 504 (c) (2) withholding preferential treatment from the product of a developing country when that country secures more than 50 percent of U.S. imports of that product in a calendar year. The 50% limitation serves a useful purpose in preventing a few relatively advanced developing countries from gaining most of the benefits of tariff preferences at the expense of all the others.

[From the Congressional Record, Dec. 3, 1973]

TRADE REFORM ACT OF 1973

Mr. MONDALE. Mr. President, I intend to submit several amendments to the Trade Reform Act of 1973. I am pleased that Senator Ribicoff, chairman of the Trade Subcommittee of the Finance Committee, is joining me as a cosponsor of these amendments. The amendments update the trade bill to address the new challenge which confronts us today-the use of export controls on scarce raw materials and perhaps even manufactured products as a new weapon in international politics.

The Trade Reform Act, as reported by the House Ways and Means Committee, would provide authority necessary to achieve greater access for American products to overseas markets. While this is a necessary objective for meaningful trade negotiations, it must not be the exclusive aim of trade reform. Yet, the bill in its present form does not deal with the equally pressing need to assure access to supplies of the raw materials we need for a stable and growing economy.

Under the Export Administration Act of 1969, the President has the authority to curtail the shipment of our products overseas. But the use of export control authority cannot be viewed solely within a domestic context, as the oil embargo clearly shows. Agreements to prevent the unjustified use of export controls must be a major goal of international trade negotiations, and the President must have more explicit and precise authority to respond to export embargoes against the United States.

During the last World War, President Roosevelt and Prime Minister Churchill dedicated our two nations to the defense of several major principles which form the basis for the collection security of Western countries. Enumerated in the Atlantic Charter, these principles include under title IV the goal of "access, on equal terms, to the trade and to the raw materials of the world." The principle articulated by Secretary of State Cordell Hull, the father of the trade agreement program, that "if goods cannot cross borders, armies will," was ignored before the war. In the postwar decades, international trade negotiations concentrated almost exclusively on the problem of surplus production and on access to markets, and virtually ignored the problem of access to supplies of raw materials.

However, today we face new problems of resource scarcity and accelerated inflation in which producing countries are withholding supplies of a wide variety of products for purely economic reasons or, in the case of oil, to extract political concessions.

The United States, Japan, and the Common Market countries are all suffering from intolerable rates of inflation. This inflation poses a threat to our political institutions. For the continual increases in the cost of living tend to erode public confidence in government.

When prices spiral out of control, people may reach out for government which can effectively halt inflation even at the expense of their democratic traditions.

Inflation is eating away at the real earnings of working people in the United States. Shortages of food, fuel, timber, cotton, scrap iron, cement, and many other products are a major cause of rapid inflation this year.

At the present time, many U.S. companies are facing difficulties in obtaining raw materials, and a number have asked that authority under the Export Administration Act be invoked to curtail shipments overseas.

While in some cases such controls may be justified, I believe we must begin to view export restrictions in a broader international context. For instance, if we prohibit all exports of America's oil, would the Canadian Government-the single largest supplier of oil to the United States-be encouraged to follow our example?

The imposition of the Arab embargo over oil is the most clearcut example of the unreasonable use of export controls, and it has greatly intensified the economic difficulties we face. Our factories and farms depend upon petroleum to operate. Unless adequate supplies of fuel are made available, shortages and higher prices will spread throughout our economy next year.

Although we need fuel, American foreign policy cannot yield to blackmail over oil. At stake is not only our firm and longstanding commitment to Israel but also our best strategic and economic interests. A taste of success from extortionist tactics will only increase the appetite for more concessions. For the long-term lesson is that blackmail could easily be employed by countries that are monopoly suppliers of other products.

The United States is already more than 50 percent dependent on imports for 6 of the 13 major raw materials required by our industries, and projections show that by 1985 we will be dependent on imports for 9 of these materials.

A senior Brookings economist, Fred Bergsten, recently noted in Foreign Policy magazine:

"Four countries control more than 80 percent of the exportable supply of world copper, two countries account for more than 60 percent of world tin