The CHAIRMAN. So an escape that might be taken today might appear as a very bad mistake a year from now, due to the very factors that you mentioned. Mr. RYDER. That is right. The CHAIRMAN. You are aware of the provisions in the multilateral trade agreement which generalize escapes and permit all countries that are parties to the agreement to make their own compensatory escapes not limited to the precise article on which we escape? Mr. RYDER. Oh, yes. The CHAIRMAN. So, when you start to figure an escape, you also have to figure what escapes all these other countries might take; is that correct? Mr. RYDER. That is right. The CHAIRMAN. That would tend to give a lot of pause; would it not? Mr. RYDER. It would not to the Tariff Commission. Of course, our work under the escape clause is to determine, which is a difficult enough task, whether the injury has occurred or is threatened. The CHAIRMAN. I quite agree. Mr. RYDER. The President would, of course, have to take into account other factors. He would no doubt take into account the kind of things that you have mentioned. The CHAIRMAN. Exactly. You might well advise that under the material under which you are operating there should be an escape. The President, on the other hand, might look over the whole field of compensatory escapes which others might take and decide that we cannot, for that reason, take this escape. Mr. RYDER. That is right. The CHAIRMAN. The consequence of that being that perhaps a domestic industry might be injured, might be put out of business due to that cerebration of the President regarding other compensating escapes which might be taken. Mr. RYDER. There is one point I would like to bring out in regard to that, Senator: I had something to do with the drafting of the escape clause as it was originally drafted, and put in the Mexican Agreement. It was drafted because of the very obvious difficulty of foreseeing what would be the situation at the end of the war. The Mexican Agreement was made in the midst of the war. Manifestly, what looked safe then now might in conditions after the war be entirely unsafe. So in solving that problem, we hit upon, at my suggestion, the present escape clause which is written into the Mexican Agreement. There had been in preceding agreements escape clauses of various kinds, but they had been either of limited character or, in the case of the Argentine Agreement, which was also made during the war, an escape there which would only result in withdrawing particular concessions specified in the agreement. The merit of the escape clause that we have at present is that you can use under that clause quotas for emergency purposes. Although I don't like the use of quotas as a general thing. For emergency purposes they are probably the best solution. You can frequently set a quota which will allow a fairly liberal increase in trade to the foreign country and prevent injury to your industry. In other words, you can satisfy the wishes of the foreign country so that it will not retaliate and at the same time give at least a large measure of protection to your industry. The CHAIRMAN. The quota is the most efficient of all controls, but it has under the view of those who do not like quotas certain repercussions which are undesirable. Mr. RYDER. As a permanent policy or permanent solution it has many objections. The CHAIRMAN. In other words, you can get in a race for quotas just the same as you can get in a tariff raising race or a tariff cutting race. Mr. RYDER. Oh, yes; if you have because of a decline in exchange rate or for some other reason very large import of an article threatening injury to an industry, you can check that import by a quota and at the same time put the quota liberal enough so as to give relative satisfaction to the country involved. The CHAIRMAN. Is it not a fact that under this bill, under the present system, in the escape clause, fluctuations in exchange can frustrate everything you are trying to do? Mr. RYDER. It is conceivable that they might. The CHAIRMAN. Mr. Clayton, I want you to note that especially. Mr. CLAYTON. I have, sir. The CHAIRMAN. Thank you very much, Mr. Ryder. Are there any questions? Mr. Ryder, before you leave I would like to read a letter which is dated May 28, 1948, addressed to me by Mr. John Gregg, Commissioner of the Tariff Commission. He says: Hon. EUGENE D. MILLIKIN, UNITED STATES TARIFF COMMISSION, Chairman, Committee on Finance, United States Senate. DEAR SENATOR MILLIKIN: I am taking the liberty of writing you about H. R. 6556, the Gearhart bill, which I understand is now before the Finance Committee of the Senate. The comments and suggestions which follow express only my personal views and do not necessarily reflect any opinions which may be held by the other members of the Tariff Commission. I am led to do this both in order that any suggestions this letter may contain may receive such consideration as you may desire to give them, and to correct any impression which may have arisen that the views expressed by the Chairman of the Tariff Commission in his personal letter to Mr. Doughton of May 17, 1948, represent the views of the entire Commission.1 My principal difficulty with Chairman Ryder's letter to Mr. Doughton arises from the discussion in paragraph 7 as to whether H. R. 6556 will enable the Commission to render a better public service than it now performs. I do not agree that to charge the whole Tariff Commission with responsibility for giving advice to the President as to the extent to which a rate may be raised or lowered without serious injury to a domestic industry, if carried out, would be incomsistent with the Commission's present functions and obligations or damaging to its position as a bipartisan, fact-finding agency of the Government. The Trade Agreements Act itself requires the President to seek the information and advice of the Tariff Commission prior to the negotiation of any agreement. As you know, the Commission and its staff already make available to the President and the negotiating authorities detailed information with respect to each of the products upon which changes in rates in the negotiation of a trade 1 The letter referred to also has been referred to in this hearing during the testimony, Mr. Ryder. agreement are considered. Certainly this part of the law can reasonably be interpreted also to require that the Tariff Commission advise the President how much of a change in a rate of duty can safely be made without serious injury to American industry. The expressed views of the President and the State Department throughout the past 14 years have been to the effect that it is not proposed to make changes in rates which would seriously damage domestic producers, and that principle is clearly implied in Executive Order 9832 which resulted from the discussions last year between the President, Senator Vandenberg, and yourself. Obviously it would be practically unwise to proceed with negotiations without having the best judgment available on this critical subject. As a matter of fact, however, the procedure and machinery established under which advice is made available to the President and the negotiating authorities do not provide that the Tariff Commission as such shall give advice of this character to the negotiating authorities. Recommendations on this matter are made by the Interdepartmental Committee on Trade Agreements on which, to be sure, a member of the Tariff Commission sits. Such advice, however, as he may give as a member of the Interdepartmental Trade Agreements Committee is his own individual opinion and is not the result of Commission action; so far as I know, it never has been during the 14 years that the Trade Agreements Act has been in operation. The bill now before your committee corrects this situation and it is my opinion that this should be done. I feel strongly that the President and the negotiating authorities should have the advice of the whole Commission and not that alone of one or more individual members. I further believe that, once the negotiations are completed and the agreement has been made, the views of the Tariff Commission should be available to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate as a measure, at least, of the way in which the Commission carries out its obligations. On the other hand, I think H. R. 6556 limits the work of the Tariff Commission in connection with trade-agreement negotiations to a degree which will detract from its usefulness. It seems to me inadvisable to preclude the Commission from giving its advice to the President or to the negotiating authorities with respect to the so-called "general provisions" of these agreements, for example, which in my judgment might prove of equal if not greater importance in their effect upon domestic industry and foreign trade than the changes in rates or other import restrictions which may be made. Certainly the Commission has contributed in the past in an important way with respect to such matters as valuation and customs administration, the effect of the most-favored-nation clause and preferential treatment, and the regulations affecting quantitative restrictions and foreign exchange. I would hope too that the bill may be so worded as to permit negotiations to go forward to completion in the event the Commission should submit to the President a divided opinion. Sincerely yours, JOHN P. GREGG, Commissioner. I thought I would read that while you were here, Mr. Ryder. I am not asking you to make any comment, because I assume that you might wish to avoid having an open fight with members of your own Commission. Mr. RYDER. My own views have been made clear to the committee, and I do not think the letter was necessary in order to say that I did not speak for the Commission. I never assumed to do so. I made that clear in my letter to Mr. Doughton and I made it clear in the beginning of my statement to you. Mr. CHAIRMAN. Mr. Clayton, before the hearing concludes, I believe it would be well to have about a two-page memorandum from the State Department, giving us its view of its legal authority to include the general provisions which it did include in the multilateral trade agreements. Mr. CIAYTON. All right, sir, (The memorandum will be found on p. 470.) The CHAIRMAN. Any questions? Thank you very much, Mr. Ryder. Mr. RYDER. Thank you. The CHAIRMAN. The next witness is Mr. Morris S. Rosenthal of the National Council of American Importers, Inc. Be seated and make yourself comfortable and identify yourself to the reporter. STATEMENT OF MORRIS S. ROSENTHAL, PRESIDENT, NATIONAL COUNCIL OF AMERICAN IMPORTERS, INC. Mr. ROSENTHAL. My name is Morris S. Rosenthal. I am president of the National Council of American Importers, Inc., and also president of Stein, Hall and Company, Inc., importers and manufacturers. The National Council of American Importers is an organization of American citizens consisting of more than 600 members in 22 States importing something over 200 different types of raw materials, crude materials, foodstuffs, semiprocessed goods and finished goods. The Council feels very strongly that H. R. 6556 does not continue the trade agreements program as it has been in effect under section 350 of the Tariff Act, and we would like to recommend extension of section 350 of the Tariff Act for a period of three years without change. Inasmuch as the Congress has already recognized the importance of American participation in world economic and political matters and even more importantly, has recognized that American leadership in those affairs is vital in order to achieve stability and peace in the world, I do not think it is necessary for me to discuss in detail the economic aspects of the trade agreements policy. Furthermore, in reading the Congressional Record of the House debate on H. R. 6556, I sense that both sides, with very few exceptions, approved of the principle of trade agreements as a democratic and efficient means of increasing our exchange of goods with other countries. Hence, I would like to consider the legislation that is needed which will best implement that policy and which will best enable the executive branch of our Government to put it into action. The Senate now has before it H. R. 6556, and I would like to discuss that bill in relation to Section 350 of the Tariff Act. This legislation in particular should have two basic objectives. First, it should enable us to arrive at trade agreement efficiently and speedily which will stimulate the foreign trade of the United States with other countries of the world so that our economy as a whole, as well as the economy of other nations, benefits from an increased flow of goods. The CHAIRMAN. Just trade for trade's sake. Mr. ROSENTHAL. No, sir. Trade for the sake of putting goods into consumption for the benefit of all people who need them, not only in the United States but elsewhere. The CHAIRMAN. You would not base your argument on the suggestion that we should put our goods into a country which is able to supply the same goods for its own needs? Mr. ROSENTHAL. I think competition is part of the free enterprise system, Mr. Chairman, and I think that only through healthy com petition will technological improvements take place, will add to the system which moves goods into distribution among all peoples. The CHAIRMAN. It can be assumed, can it not, that a country to be the objective of that kind of trade would protect itself to prevent injury to its domestic industry? Mr. ROSENTHAL. I think all countries have gone too far in their attempt to protect their industies, sometimes without regard to their own efficiency of production, without regard to the character of the goods that they can produce to better advantage, and without regard to the cost of goods to ultimate consumers. I think an attempt must be made within reason to increase the flow to the cost of goods to ultimate consumers. The CHAIRMAN. Every country in this world today is controlling its imports either by tariffs or by quotas or by exchange license or some other device. I assume that they all do it as meaurses of self-protection. Mr. ROSENTHAL. I think they have all done it in what they have considered self-protection. I have frequently questioned the wisdom of the extent to which it has been done. The CHAIRMAN. There is a school of thought that just unrationalized trade in ever-increasing volume all over the world is in and of itself a desirable objective. Do you subscribe to that theory? Mr. ROSENTHAL. I don't think that is possible today, Senator. That takes us back to the very early thesis of comparative advantage of each country producing that which it can produce most efficiently and at lowest cost. I think the economic situation in all part of the world has grown too complex to be able to go back to that simple element. At the same time I think if we and other countries of the world work intelligently toward lowering all types of trade barriers and so increase the flow of goods, it will be beneficial. The problem then is the efficient operation of such a policy to lead to the greatest good of the greatest number. The CHAIRMAN. It comes back to the fact that each nation must necessarily judge the protection of its own vital interests. Mr. ROSENTHAL. That is correct. The CHAIRMAN. And that necessarily drives you into wise or unwise selective trade, does it not? Mr. ROSENTHAL. Yes, sir; which leads me to my second point, which is that this legislation must give American industry and agriculture protection from serious injury to the extent warranted, considering the welfare of our economy as a whole, and that does include the efficiency of industrial units in various industries. It includes protection of the consumer, and it includes consideration as to how some of our mass production industries can achieve a satisfactory volume of exports abroad. There are a number of other factors. All of these factors enter into a sound policy of what constitutes sound protection, and not merely protection for the sake of protection without regard to all other phases of our economy. The CHAIRMAN. I do not think there is any substantial school of thought that would go back to a Chinese wall protection view. Mr. ROSENTHAL. No, sir. Therefore the legislation comes down as to how we can best accomplish these two objectives. |