Neither I nor our company desires to take any extreme position in the age-old argument of protective tariff versus free trade. Admittedly, this subject is in need of sound and unbiased study to bring about real clarification, but I know that this is not the purpose of the present hearings, which I understand to be limited to the single question of whether or not the so-called Reciprocal Trade Agreements Act should be continued or discontinued, and if so, for how long and with what amendments.

Neither I nor our company desires to take the position that our company has been hurt in recent years by the reductions in tariff under the so-called Reciprocal Trade Agreements Act, although I recognize fully that some important companies in our vital industry have been seriously hurt by such tariff reductions.

I do wish to take the position, however, that our company has been handicapped in carrying on its business in foreign countries through the restrictions that have been imposed by many foreign countries through import licenses and other restrictive measures quite apart from tariff rates.

Specifically, I wish to express as strongly as I can the feeling that the purpose of the Trade Agreements Act has been misrepresented to the public by its proponents.

By repeated emphasis on the reciprocal features of the act the public has been led to believe that in return for our Government reducing tariff restrictions on imports of foreign countries into the United States, producers in the United States producers to those countries. Actually, it has not worked out that way and quite apart from tariff restrictions many foreign countries bar United States goods by the use of import licenses and other restrictive measures, apart from tariffs, so that our products are not allowed to enter notwithstanding that United States tariff concessions have been made to those countries.

In other words, the United States public has been badly deceived on the manner in which the reciprocal feature of the Trade Agreements Act actually works.

I know that this is not a new question and that it was discussed at some length in the hearings held in January and February 1955, before the Committee on Ways and Means of the House of Representatives in connection with H. R. 1 of the 84th Congress.

In those hearings Secretary of State John Foster Dulles presented a comparison of United States import restrictions with those of other countries, and this showed that most other countries require import licenses whereas the United States, in addition to its tariff restrictions, has only some quota restrictions limited to agricultural products. With reference to such licensing and other nontariff restrictions, Secretary of State Dulles stated:

These and similar practices, unless checked, could vitiate the tariff concessions by reducing the increase of American exports bargained for and expected as a result of securing decreases in foreign tariffs.

Also, Secretary Dulles stated:

"However, the General Agreement on Tariffs and Trade and the articles of agreement of the international monetary fund have committed member governments to use trade and exchange restrictions

only if they are in balance of payments difficulties or in other specific limited situations."

Apparently this general commitment, not to use such restrictions except in special cases, is ineffective, probably because it is always easy for foreign governments to take the position that they have a "dollar shortage."

It should like to make it clear that I am not adversely criticizing these other governments for imposing licensing restrictions. I think they have the right and duty to take steps that are in the best interests of their own counties provided these do not actually violate agreements with other countries.

It seems clear that the commitments under the General Agreement on Tariff and Trade are not adequate to protect the interests of the United States in its granting of tariff concessions.

I feel that the remedy is to make lower United States tariffs available to all countries when those other countries wish to apply for them and actually qualify by removing all restrictions which would otherwise vitiate the reciprocal effect of such concessions as are received from the United States.

This approach has another and very important feature that it leaves the decision up to the other countries as to whether or not they wish to take advantage of the United States concessions and avoids the unfriendliness that results from our attempting to apply retaliatory measures when any nonreciprocal restrictive treatment is applied to the United States.

Hon. Samuel C. Waugh, Assistant Secretary of State, in a letter of October 20, 1954, addressed to Hon. John D. Dingell, of the House of Representatives, stated as follows:

The reciprocal trade agreements program which the United States has followed is based upon experience in attempting to obtain tariff reductions. This experience has proved that retaliatory measures to bring pressure upon a country for tariff concessions are more apt to lead to increasing restrictions upon trade than to tariff reductions and trade liberalization.

I heartily subscribe to this statement.

While on the subject of friendly relations with other countries, I believe that very much can be done by improving the procedures relating to admission of foreign-made products to our country.

After reasonable tariff and other control measures have been established to permit the entry of certain foreign made products, I feel that when these products arrive at our shores we should, in effect, "roll out the red carpet" just as we do when officials from those countries visit our shores, and we should avoid awkward procedures which introduce delays and unpleasantness in admitting the goods to our country.

The Congress and the Treasury Department are to be highly commended for their efforts in this direction through the sponsoring of legislation included in the Customs Simplification Act.

There is one specific provision in the proposed trade agreements extension bill, H. R. 12591, to which I should like to voice very strong objection, and that is the provision that when the President of the United States has vetoed a recommendation of the Tariff Commission, a two-thirds majority in both Houses of Congress is required to overrule such veto.

This provision seems to be at variance with the basic law of our land giving the Congress control of foreign trade. As a practical matter, neither the Congress nor the President should be burdened with details of individual tariffs.

As a matter of practical fact, some appointed group must deal with the details and present proper recommendations regardless of whether the President or the Congress takes final action. The Tariff Commission is charged with such responsibility.

I am quite sympathetic with the idea that the President should be given the power to approve or veto the recommendations of the Tariff Commission in order to give the President a freer hand in working out relations with other governments, aimed at creating a more friendly and peaceful world.

But when the recommendations of the Tariff Commission are vetoed, then the final decision should go back to the basic authority on foreign-trade control; namely, the Congress, and this final provision should not be made unworkable by requiring a two-thirds majority in each House.

Only an ordinary majority should be required. The requirement of a two-thirds majority, in effect, would really prevent Congress from having final authority in the matter.

I am keenly aware of the disturbance to our foreign relations that might be caused by not renewing the Trade Agreements Act. Accordingly, I am in favor of renewing it for 1 or 2 years, during which interval the whole matter should be given further study in order to eliminate the defects in the present proposal and still retain the real virtues of the act.

In the 1 or 2 year interval in which the act should be given further study, the public should be kept fully informed of the real meaning of the provisions of the act.

I have great confidence in the views of our citizens when they are fully informed; and I think it is contrary to the best interests of our country for the public to be misled or misinformed on important legislation.

In saying, this, I hasten to add that I am not one of those who believe that our Government must always operate in a goldfish bowl. I think that in security matters we must have confidence in those who have been elected or appointed to defend our country, and we should not ask them to carry on all of their operations in public.

With this single exception I believe that the public should be kept fully and correctly informed.

I greatly appreciate the opportunity to submit this statement.
Senator KERR. Thank you, sir.

Are there questions?

Senator MARTIN. Mr. Chairman, may I ask just one question?
Mr. BEGGS. Yes, Senator Martin.

Senator MARTIN. You make the statement there that you think it is contrary to the best interests of our country to be misled or misinformed. Who do you figure is misinforming or misleading the public? Mr. BEGGS. I think Mr. Stein's intent, sir, in that statement was that in stating that the act is a reciprocal act, many of of the public do not realize that there are quota and import license restrictions applied by foreign countries which vitiate the reciprocal part of the actual customs percentages involved.

And he feels that this situation should be more widely publicized. Senator MARTIN. All right. Thank you.

Senator KERR. I want to say I agree with Mr. Stein in that regard. The act is presented by its proponents and even I who have been opposed to much of what we have done for several years talk about the reciprocal trade agreements and I think it is a misnomer.

I think that is the gist of what he was trying to say.
Mr. BEGGS. That is the gist of his statement; yes, sir.

Senator KERR. I do not think there is anything reciprocal about it.
All right, sir.

Mr. Hansen?

All right, Mr. Hansen.

STATEMENT OF RICHARD F. HANSEN ON BEHALF OF THE

MANUFACTURING CHEMISTS ASSOCIATION, INC.

Mr. HANSEN. Mr. Chairman, my name is Richard F. Hansen. I am chairman of the international trade and tariff committee of the Manufacturing Chemists Association, whose 169 members produced more than 90 percent of the chemicals produced in the United States. I appear at the direction of the association's board of directors to express its views on H. R. 12591.

The record will show that when I testified before your committee. on March 8, 1955, I asserted three objections to H. R. 1, the proposed Trade Agreements Extension Act of 1955, namely:

(1) That it did not require that the powers it would grant must be exercised on a moderate, gradual, selective, and reciprocal basis;

(2) That it was drawn to authorize wide discretionary powers and was almost devoid of any standards to govern the action which might be taken under it; and

(3) That both the actions and attitudes of the administrators of the Trade Agreements Act raised doubts that the powers granted would be exercised moderately, gradually, selectively or reciprocally, unless the law so required.

Senator KERR. Let me get your identity a little better now.

Does this mean that companies like Monsanto and Dow are all of this group that you are talking about?

Mr. HANSEN. They are all members, yes, sir.

Senator KERR. All right.

Mr. HANSEN. Although this committee made a number of valuable amendments to H. R. 1 which were later enacted, we now feel obliged to raise the same objections to H. R. 12591 because it has the same basic shortcomings.

As a matter of fact, the objections appear even more valid now because of our experience over the past 3 years and because the administration seems to have abandoned the thesis that the powers sought will be exercised on a moderate, gradual, and selective basis, although it continues to emphasize the elusive goal of reciprocity.

PRIOR DUTY REDUCTIONS

To bring the provisions of the bill into focus, it is necessary to consider the sweeping reductions in duty rates which have already been effected under the trade agreements program.

Approximately 88 percent of all dutiable imports have had their rates reduced, many to the full 7834 percent limit authorized.

Senator KERR. Let me get myself more oriented on that right there; 7834 percent, you mentioned?

Mr. HANSEN. Yes, sir.

Senator KERR. Is the amount which Congress has authorized?
Mr. HANSEN. That is correct.

Senator KERR. That rates in existence in 1930, let's say

Mr. HANSEN. In 1934.

Senator KERR (continuing). Have been reduced?

Mr. HANSEN. Yes, sir. That is right.

Senator KERR. In other words, you are telling us that 88 percent of all dutiable imports have had their rates reduced but you do not say how many of them have been reduced 7834 percent.

Here is what I would like to know. I would like to know, if you know, how much, percentagewise, as applied to the total tariff structure of 1934, has been reduced.

Mr. HANSEN. I think we can calculate that figure.

Senator KERR. Fine.

Mr. HANSEN. I do not have it.

Senator KERR. Do I make myself clear?

Mr. HANSEN. Yes, sir, I understand entirely.

Senator KERR. In other words, I am under the impression actually that the overall reduction had been greater than these figures would indicate.

I had thought that the overall tariff structure had been reduced approximately pretty well to the 7834 percent of the base that was in effect when this program started.

Mr. HANSEN. I think that is true and I think we can develop the figures that will prove it.

Senator KERR. Fine. I think it would be very helpful to me.
Mr. HANSEN. Yes, sir.

Prior to the last 15 percent reduction, the Department of Commerce reported that the average effective rate for dutiable imports had been reduced from over 50 percent to approximately 12 percent.

Senator KERR. Well, that now, you see, would be

Mr. HANSEN. About three-fourths.

Senator KERR. That would be a little over 75 percent.
Mr. HANSEN. That is right.

Senator KERR. All right, sir.

Mr. HANSEN (continuing). And the Commission on Foreign Economic Policy (Randall Commission) was able to state

*** it seems clear by any test that can be devised that the United States is no longer among the higher tariff countries of the world.

But even these deliberately authorized reductions amounting to nearly 80 percent, tell only part of the story, as the actual incidence of customs duties has been fortuitously diminished by other forces. Wholly apart from rate reductions, the impact of specific duties— which apply to over 70 percent of all dutiable imports-has, on average, been reduced 60 percent since 1933, and 40 percent since 1946, by inflation; and the amount of ad valorem duties has been further

1

1 The domestic wholesale price index for 1956 was over 21⁄2 times that of 1933, and 11⁄2 times that of 1946.