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TRADE AGREEMENTS ACT EXTENSION

MONDAY, JUNE 30, 1958

UNITED STATES SENATE,
COMMITTEE ON FINANCE,
Washington, D. C.

The committee met, pursuant to recess, at 10:00 a. m., in room 312, Senate Office Building, Senator Clinton P. Anderson presiding. (The chairman was absent due to illness in his immediate family.)

Present: Senators Anderson, Kerr, Frear, Douglas, Martin, Williams, Carlson, and Bennett.

Also present: Elizabeth B. Springer, chief clerk.

Senator ANDERSON. The committee will be in order.

Before we take the other witnesses, Senator Carlson has a statement that he wishes to put in the record.

Senator CARLSON. Mr. Chairman, I wish to introduce Mr. Gordon P. Boles, who is director of the export program for the Millers' National Federation. It is necessary that Mr. Boles leave for another meeting and I ask that he may be permitted to file his statement.

The reciprocal trade agreements program and our foreign program, generally, are most important to the wheat producers and the flourmilling industry of this Nation. Mr. Boles will discuss this in detail.

For some years I have been interested in expanding the exports of flour, based on what I call a truly reciprocal trade program. For instance, we have several countries in the Caribbean area from which we import sugar and they in turn have been taking milled products from the United States. This has worked to the advantage of both the foreign country and our own domestic economy.

During recent months, barriers against the importation of flour are threatening this fine relationship we have enjoyed. This is particularly true with Haiti and Cuba. In Haiti, for instance, the duty on imported flour has increased 211⁄2 times, from $5.46 to $13.65 on a 200-pound bag, making it among the highest, if not the highest, in the world. Obviously, no exporting miller could compete with local operations under these circumstances.

I mention this particular instance because Haiti is one of the countries where we have enjoyed a very fine trade of sugar imports and flour exports.

Mr. Boles will discuss the importance of flour milling and foreign markets for flour in his appearance before us.

1043

STATEMENT OF GORDON P. BOALS, DIRECTOR OF EXPORT PROGRAMS, MILLERS' NATIONAL FEDERATION

Mr. BOALS. The chairman and members of the committee, the Millers' National Federation welcomes this opportunity to record its position in support of H. R. 12591, an act to extend the authority of the President to enter into trade agreements under section 350 of the Tariff Act of 1930, as amended, and for other purposes.

The federation is the national trade asosciation of the wheat flour milling industry of the United States. Its members account for approximately 85 percent of the flour produced in the United States and almost 100 percent of the flour exported from this country. There are flour mills in 39 of the 48 States and in the District of Columbia which in 1957 processed around 550 million bushels of wheat.

The federation has had a long and consistent record in support of the reciprocal trade-agreements program. Its continuing support is based primarily on its belief that a high level of foreign trade is in the national interest of the United States and that the trade-agreements program helps to maintain and expand United States foreign trade.

It is also based on much practical experience in developing foreign markets and with the many difficult problems associated with trade restrictions and import controls throughout the world with which the federation and its members doing export business are frequently confronted.

In this connection, it may be useful to point out that wheat flour has been exported regularly from the United States for over 100 years so that it may truly be regarded as a traditional export based on economic advantage. It is also one of the few commodities that is shipped regularly each month to an unusually large number of foreign markets.

Some wheat flour is exported monthly to around 90 to 100 countries or island areas in the free world. Thus from the standpoint of the long historical period of export, the frequency of shipments, and the large number of countries involved, wheat flour provides an unusual example of a United States commodity that has been and continues to be on the frontline in facing all types and descriptions of trade problems and restrictions and in the day to day operations of the trade-agreements program.

Based on this experience, the federation would like to make the following specific observations and recommendations regarding H. R. 12591. It will be noted that they are directed to two aspects about the trade-agreements program that our industry believes should receive special attention at this time. The first relates to the need for renewal for a 5-year period while the second emphasizes the need for a more coordinated United States economic policy regarding foreign trade.

1. Need for renewal for a 5-year period.

The federation favors the 5-year extension of the act. This is an important and necessary feature in order to accomplish the constructive objectives of the program.

We have noted repeatedly the difficulties of trade negotiations, particularly on a multilateral basis, when the act has been renewed for a limited period.

With the limited negotiating authority for tariff rates as provided under the bill, the longer effective period of the act appears even more necessary. Our experience with the 1955 act, for example, which provided for a maximum negotiating authority of 15 percent during the 3-year period of the act (of which 5 percent per year was permissive), was that relatively few significant concessions could be obtained by the United States. Other countries were not interested in granting many significant concessions if the maximum United States concession amounted to 10 or 15 percent.

The federation submitted requests for many country adjustments in trade restrictions in regard to wheat flour. We believe that they were practical and constructive but the results of the 1956 GATT negotiations in Geneva were certainly disappointing in this regard. The 5-year extension would permit the possibility of making some further progress in negotiating with foreign countries about many of our existing trade restrictions and barriers.

There are continually new problems and country situations also arising that are not covered by existing trade agreements. Without the possibility of supplemental or new negotiations, as would be permissive under the extension of the act, there is presently no way in which the United States can effectively deal with such trade problems.

While the United States has trade agreements with most of the larger trading countries, there are numerous smaller countries not covered by the program at the present time.

Many of these areas are presently or potentially important markets for wheat flour and many other United States surplus products but without a trade agreement or their membership in GATT, it is very difficult to deal with the trade problems that arise.

A case in point is the new British federation that is being formed in the Caribbean area. This Commonwealth federation includes about a dozen islands of which Jamaica and Trinidad are significant markets. They also are important sources for many noncompetitive imports as well as a growing tourist area. The island federation government is now getting organized and will be considering tariff rates for import commodities as well as trade-policy matters during the period ahead.

It would be most unfortunate in our opinion if the United States were denied the opportunity of establishing its trade on a sound basis with this new federation area which lies almost at our doorstep. Without an extension of the act and negotiating authority, there would appear to be no possibility of dealing with new trade problems of this kind.

Another example is the developing Common Market area in Europe. Almost constant attention will be required during the next several years in order that United States trade with the area may be handled on a practical basis.

While trade agreements exist with all of the individual countries, there will need to be supplemental negotiations in order to take ac

count of changes that are likely to develop in connection with the tariff adjustments called for in the Common Market. Without an extension of the Trade Agreements Act and adequate negotiating authority, the United States will have its hands tied in dealing ef fectively with this new type of problem.

Similar Common Market or special trade-area proposals are being suggested for many other regions of the world. Also, a number of important countries which are markets for United States products, from which we obtain many import items, are requesting changes in existing tariff rates, exchange controls, and other features affecting the foreign trade of the country.

Likewise, the United States frequently finds itself in a position of modifying or wishing to change some of its previous tariff rates established under earlier agreements.

While limited adjustments are possible under existing authority, we are informed that it is not possible to deal adequately with the many new adjustments without an extension of the act and additional negotiating authority.

2. Need for a more coordinated economic policy regarding foreign trade.

Scarcely a day or week passes without one or more new trade restriction problems for wheat flour arising in some foreign market. Similar trade problems are also developing on many other United States export products. In some cases unilateral action in raising duties occurs; in others it may involve the imposition of licenses or quotas, often discriminating against the United States; elsewhere foreign-exchange controls are instituted to restrict imports, or special taxes and charges are added to tariff duties.

Numerous other methods are noted that affect trade, such as bilateral or barter types of trade agreements, artificial exchange rates, special pricing, or subsidy arrangements, and so forth.

One of the newest forms of restriction that appears to be on the increase is associated with so-called economic developing projects in many countries. Capital investment is obtained from United States Government or international agencies or private sources for new industries and then prohibitive barriers or other restrictions to imports are imposed to hurt United States exports especially when such projects are uneconomic for the country.

Such restrictions are being imposed in many cases even on trade agreements items for which the United States has already granted concessions to the other country so that not only has the value of the original concession been lost but further exports of the commodity to that country are prevented or greatly restricted.

Perhaps a specific example or two will help illustrate this serious and growing type of trade problem. The United States has been the major supplier of flour for decades to most of the islands of the Caribbean. It has been part of a mutual form of two-way trade with sugar, coffee, or other items being imported, often on the same boats on which the flour was shipped.

Flour, because of its regular and frequent movement, has done much to promote mutually advantageous two-way trade by encouraging better shipping service especially with additional ports of call.

During the past year new flour mills have been built in a couple of the islands both of which have requested and received sugar quotas

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