TRADE AGREEMENTS ACT EXTENSION SATURDAY, JUNE 21, 1958 UNITED STATES SENATE, The committee met, pursuant to recess, at 9 a. m., in room 312 Senate Office Building, Senator Clinton P. Anderson presiding. Present: Senators Anderson, Malone, and Carlson. Also present: Elizabeth B. Springer, chief clerk. Senator ANDERSON. The committee will be in order. Mr. Secretary, we are sorry that we have to have a Saturday session for you, but there are some members of the committee who did not get a chance on the opening day. We did not finish with Senator Malone yesterday so we appreciate the fact that we are here early this morning. I believe when the committee terminated yesterday it was engaged in examination by Senator Malone. Senator, do you have additional questions? Senator MALONE. Mr. Chairman, you know that you and I are not too high on the totem pole. Senator ANDERSON. I found that out many times. Senator MALONE. So they did not get to me yesterday. Senator ANDERSON. I beg your pardon? Senator MALONE. It was 6:30 and the Secretary had been on the stand all afternoon and you and I had been trying to attend two committee meetings, the Senate Interior and Insular Affairs Committee, in addition to the Finance Committee and also attend the Senate. The record may show just how efficient a job we did yesterday on all the fronts, but I could see the Secretary was tired and so we adjourned until 9 this morning. Senator ANDERSON. I want to say, Mr. Secretary, if this goes on to 6:30 this afternoon, whoever examines you will be alone. Senator MALONE. Some of us started our day at 6 o'clock yesterday morning and at 6 o'clock last night I suggested to the Senator from Louisiana, who had just finished cross-examination, that we might start at 9 this morning and finish in time to take Mr. Dulles at 10. Everybody agreed. Senator ANDERSON. If there is no objection, then, when Secretary Dulles comes, we will start with him at 10 o'clock. Senator MALONE. Mr. Secretary, you and I have been acquainted for a long time. I have admired you for a long time; the work that you have done in your manufacturing, in private business, and now in Washington as a member of the Cabinet of the first Republican administration we have had in the memory of some of the younger Republican voters. I wish you the best of luck in your work. Whether you and I always agree or not, I want you to have a successful tenure in office. I will try not to repeat too many of the questions that I have already asked Mr. Dulles because I presume that you and Mr. Dulles are in agreement on practically everything, at least on this bill. STATEMENT OF HON. SINCLAIR WEEKS, SECRETARY OF COMMERCE, ACCOMPANIED BY HENRY KEARNS, ASSISTANT SECRETARY OF COMMERCE FOR INTERNATIONAL AFFAIRS; J. ALLEN OVERTON, JR., DEPUTY GENERAL COUNSEL; ROBERT SIMPSON, DIRECTOR OF OFFICE OF ECONOMIC AFFAIRS, BUREAU FOREIGN COMMERCE; AND CARL BLACKWELL, DIRECTOR, INTERNATIONAL ECONOMIC ANALYSIS DIVISION, BUREAU OF FOREIGN COMMERCE Resumed Secretary WEEKS. Yes, sir. Senator MALONE. For 100 years the Republican Party always advocated a duty or tariff to equalize wages and the cost of doing business here and in the chief competing nations on each product. I am saying this to emphasize saying the fundamental difference in the philosophy of the two parties. What was our policy in regard to foreign trade-trade with foreign nations since the inception of the party, starting with Abraham Lincoln? Secretary WEEKS. You mean as between the two political parties? Senator MALONE. No, not between the parties. Just what was our philosophy? Secretary WEEKS. You mean the country's philosophy? Senator MALONE. Ours, Republicans, whether we were in power or not, it was the country's policy when we were in power. Secretary WEEKS. Generally speaking as our industries developed over the years we leaned more to the protectionist side. However, almost every President, Republican Presidents I speak of now, from McKinley on, urged the establishment of reciprocal trade agreement legislation. Senator MALONE. Could you tell me what McKinley's policy really was? He has been quoted quite a few times. Do you know actually what it was? Secretary WEEKS. I only know what he said about reciprocal trade. Senator MALONE. What did he say? Secretary WEEKS. I haven't got the quotation here, sir. Senator MALONE. Would you mind, then, looking it up and inserting it in the record? Secretary WEEKS. I certainly will, yes, sir. Senator MALONE. I ask permission that the Secretary be allowed to do that and I will do the same thing. Senator ANDERSON. We Democrats are glad to welcome into the record any reference to McKinley. (The Secretary of Commerce subsequently forwarded to the committee for insertion in the record the following excerpt from the last speech of William McKinley, delivered at the Pan-American Exposition at Buffalo, September 5, 1901.) By sensible trade arrangements, which will not interrupt our home product, we shall extend the outlets for our increasing surplus. A system which provides a mutual exchange of commodities is manifestly essential to the continued and healthful growth of our export trade. We must not repose in fancied security that we can forever sell everything and buy little or nothing. If such a thing were possible, it would not be best for us or for those with whom we deal. We should take from our customers such of their products as we can use without harm to our industries and labor. Reciprocity is the natural outgrowth of our wonderful industrial development under the domestic policy now firmly established * * *. The period of exclusiveness is past. The expansion of our trade and commerce is the pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times; measures of retaliation are not. If perchance some of our tariffs are no longer needed for revenue or to encourage and protect our industries at home, why should they not be employed to extend and promote our markets abroad? Senator MALONE. As a matter of fact, McKinley was a protectionist, was he not? Secretary WEEKS. Generally speaking I guess he was. Senator MALONE. You do not need to guess. I think you know he was, do you not? Secretary WEEKS. I think he was, yes. Senator MALONE. Will you just answer that "yes" or "no"? I think it can be done. Secretary WEEKS. To the best of my knowledge and belief, yes. Senator MALONE. That is a little better. It will save time in this committee and I do not want to subject you to a long grilling here, but the record we are about to make is important. Now as a matter of fact, do you know what the 1930 Tariff Act, passed by the Congress and signed by the President in 1930 under Republican guidance really was? Do you know what the 1930 Tariff Act provided? Secretary WEEKS. I know in a general way of course. Senator MALONE. Don't you know a little better than in a general way? Secretary WEEKS. I cannot recite every rate that was cited in the Smoot-Hawley bill. Senator MALONE. I did not ask for specific rates. Do you know what the general policy was? Secretary WEEKS. Yes, sir. Senator MALONE. What was it? Secretary WEEKS. It was a protectionist policy. Senator MALONE. It protected American workingmen's jobs and investors investments with a flexible tariff adjusted to represent the difference in such costs. What did it say in general, not the specific language, but can you tell me the policy laid down by the act? Secretary WEEKS. Not without referring to the Senator MALONE. Would you mind if I tell you just to refresh your memory. Secretary WEEKS. No, sir. Senator MALONE. It was a protective policy, section 336 of the 1930 Tariff Act, called Equalization of Costs of Production, excerpts from section 336, Tariff Act 1930, Public Law 3621. I will quote pertinent parts of the section and ask that it be put in the record. Senator ANDERSON. That will be done. (The excerpts from section 336 and the letters from the Tariff Commission are as follows:) THE TARIFF ACT OF 1930, PUBLIC LAW 361 (Excerpts from sec. 336.) SEC. 336. EQUALIZATION OF COSTS OF PRODUCTION. (a) CHANGE OF CLASSIFICATION OR DUTIES.-In order to put into force and effect the policy of Congress by this Act intended, the commission (1) upon request of the President, or (2) upon resolution of either or both Houses of Congress, or (3) upon its own motion, or (4) when in the judgment of the commission there is good and sufficient reason therefor, upon application of any interested party, shall investigate the differences in the costs of production of any domestic article and of any like or similar foreign article. In the course of the investigation the commission shall hold hearings and give reasonable public notice thereof, and shall afford reasonable opportunity for parties interested to be present, to produce evidence, and to be heard at such hearings. The commission is authorized to adopt such reasonable procedure and rules and regulations as it deems necessary to execute its functions under this section. The commission shall report to the President the results of the investigation and its findings with respect to such differences in costs of production. If the commission finds it shown by the investigation that the duties expressly fixed by statute do not equalize the differences in the costs of production of the domestic article and the like or similar foreign article when produced in the principal competing country, the commission shall specify in its report such increases or decreases in rates of duty expressly fixed by statute (including any necessary change in classification) as it finds shown by the investigation to be necessary to equalize such differences. In no case shall the total increase or decrease of such rates of duty exceed 50 per centum of the rates expressly fixed by statute. (b) CHANGE TO AMERICAN SELLING PRICE. -If the commission finds upon any such investigation that such differences cannot be equalized by proceeding as hereinbefore provided, it shall so state in its report to the President and shall specify therein such ad valorem rates of duty based upon the American selling price (as defined in section 402 (g)) of the domestic article, as it finds shown by the investigation to be necessary to equalize such differences. In no case shall the total decrease of such rates of duty exceed 50 per centum of the rates expressly fixed by statute, and no such rate shall be increased. (c) PROCLAMATION BY THE PRESIDENT.-The President shall by proclamation approve the rates of duty and changes in classification and in basis of the value specified in any report of the commission under this section, if in his judgment such rates of duty and changes are shown by such investigation of the commission to be necessary to equalize such differences in costs of production. (d) EFFECTIVE DATE OF RATES AND CHANGES.--Commencing thirty days after the date of any presidential proclamation of approval the increased or deceased rates of duty and changes in classification or in basis of value specified in the report of the commission shall take effect. (e) ASCERTAINMENT OF DIFFERENCES IN COSTS OF PRODUCTION. In ascertaining under this section the differences in costs of production, the commission shall take into consideration, in so far as it finds it practicable: (1) IN THE CASE OF A DOMESTIC ARTICLE. (A) The cost of production as hereinafter in this section defined; (B) transportation costs and other costs incident to delivery to the principal market or markets of the United States for the article; and (C) other relevant factors that constitute an advantage or disadvantage in competition. (2) IN THE CASE OF A FOREIGN ARTICLE. (A) The cost of production as hereinafter in this section defined, or, if the commission finds that such cost is not readily ascertainable, the commission may accept as evidence thereof, or as supplemental thereto, the weighted average of the invoice prices or values for a representative period and/or the average wholesale selling price for a representative period (which price shall be that at which the article is freely offered for sale to all purchasers in the principal market or markets of the principal competing country or countries in the ordinary course of trade and in the usual wholesale quantities in such market or markets); (B) transportation costs and other costs incident to delivery to the principal market or markets of the United States for the article; (C) other relevant factors that constitute an advantage or disadvantage in competition, including advantages granted to the foreign producers by a government, person, partnership, corporation, or association in a foreign country. *** UNITED STATES TARIFF COMMISSION Hon. GEORGE W. MALONE, United States Senate. DEAR SENATOR MALONE: Reference is made to your telephone request to Mr. McCauley of our legal staff, on January 28, 1958, for a statement of the provisions of the several trade agreements to which the United States is a contracting party governing termination of such agreements. You are particularly interested in the procedures available for terminating our outstanding trade agreement concessions on petroleum and petroleum products so as to accomplish the reinstatement of the statutory rates of duty on such articles. Subsection (b) of section 2 of the Trade Agreement Act of 1934, as amended, provides: "Every foreign trade agreement concluded pursuant to this Act shall be subject to termination, upon due notice to the foreign government concerned, at the end of not more than three years from the date on which the agreement comes into force, and, if not then terminated, shall be subject to termination thereafter upon not more than six months' notice." All existing bilateral trade agreements to which the United States is a contracting party are now subject, in accordance with the terms thereof, to termination upon the expiration of 6 months after either the United States or the respective foreign country gives notice to the other party of its intention to terminate the agreement. Any contracting party to the General Agreement on Tariffs and Trade (GATT) (including the United States), in accordance with the terms of the protocol of provisional application of the General Agreement on Tariffs and Trade, is free to withdraw from the agreement upon the expiration of 60 days after notice of such withdrawal is received by the Secretary General of the United Nations. The United States could, under the above-mentioned procedures, eliminate all trade agreement obligations. In these circumstances, the statutory rates of duty (or in certain instances, the rates established pursuant to sec. 336 of the Tariff Act of 1930) for the articles currently covered by trade agreement concessions would become effective. With respect to those articles covered in the GATT and not previously or presently covered in a bilateral agreement, the reinstatement of the effectiveness of the statutory rates of duty thereon could be accomplished solely by withdrawal from the GATT. With respect to those articles covered in the GATT, which are also covered in a bilateral agreement between the United States and a foreign country that is now a contracting party to the GATT, and the bilateral agreement has not been terminated, termination of the bilateral agreement in question, in addition to withdrawal from GATT, would be necessary to bring about the effectiveness of the statutory rates. Finally, with respect to those articles covered only in a currently effective bilateral agreement, termination of the said agreement would be necessary for the reinstatement of the statutory rates of duty. Petroleum, crude, fuel, or refined, and all distillates obtained from petroleum, including kerosene, benzine, naphtha, gasoline, paraffin, and paraffin oil, not specially provided for, are free of duty under paragraph 1733 of the Tariff Act of 1930. However, under the Internal Revenue Code of 1932, as amended, the following import taxes (duties) were provided for: Crude petroleum, one-half-cent per gallon; fuel oil derived from petroleum, gas oil derived from petroleum, and all liquid derivatives of crude petroleum, except lubricating oil and gasoline and other motor fuel, one-half-cent per gallon; gasoline or other motor fuel 21⁄2 cents per gallon; lubricating oil, 4 cents per gallon; paraffin and other petroleum wax products, 1 cent per pound. These taxes were continued in the Internal Revenue Code of 1939. In 1939, pursuant to concessions granted by the United States in the bilateral trade agreement with Venezuela, the rate of tax on crude petroleum and fuel oil derived from petroleum was reduced to one-fourth cent per gallon, applicable to imports of such products which were not in excess of 5 percent of the total quantity of crude petroleum processed in continental United States refineries during the preceding calendar year. All imports in excess of this amount remained subject to the one-half-cent-per-gallon tax. In 1943, in a bilateral trade agreement with Mexico, the 5-percent-tariff-rate quota was superseded by a concession tax rate of one-fourth cent per gallon on an unlimited quantity of imports of such articles. In addition, the tax on kerosene and liquid petroleum asphaltum, including cutbacks, and road oil was reduced to one-fourth cent per gallon pursuant to the Mexican agreement. |