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General Counsel Of The Department Of Defense,

Washington, D. C., Jun€ 18, 195, Hon. Habbt F. Bybd,

Chairman, Committee on Finance,

United States Senate.

Deab Mb. Chairman: Reference is made to your request for the views of Department of Defense with respect to H. R. 12591, 85th Congress, the profx Trade Agreements Extension Act of 1958.

The Department of Defense has consistently supported the trade agree mi program, which has been in effect since 1934. It considers the extension of authority for 5 years to be highly important, and favors the enactment of legislation in question.

The Bureau of the Budget advises that there is no objection to the submin of this report and that the enactment of this proposal would be in accord tin- program of the President. Sincerely yours,

Robert Decheb

Statement By Secretary Of Agriculture Ezra Taft Benson In Srpi* Of The Renewal Of The Trade Agreements Extension Act or 19S

I welcome the opportunity to appear before this committee in support of 5-year extension of the authority of the President to enter into trade agreema I endorse without reservation the bill as it passed the House of Representau

Here is our position:

1. American farmers are among the most efficient in the world. They annu produce more agricultural products than we can use at home. This is particull true of certain crops and products. Thus, if American agriculture and its faro are to continue to use their resources to the fullest extent we must maintain expand both domestic and foreign outlets for farm products.

2. We believe the proposed legislation supports an increasing market for Uo States farm products.

This ability to outproduce domestic needs has been with us for several ye It still confronts us today. The "crop prospects" map in the Departmen Agriculture's June 10 crop report shows "good to excellent" in much of United States.

The 1958 wheat crop, for example, now gives added promise of reaching a record total of 1,271 million bushels. For winter wheat the prospect surp* the previous record 1952 crop which took nearly 9 million more acres to prod!

I'm sure wheat growers are rejoicing over the prospects of a good crop, bco they have suffered from drought in the past few years. Nevertheless, the w* crop in prospect is more than twice our domestic requirements.

There is a real need for this wheat, as well as other excess United States fr products, in foreign areas, especially where economic development is on upsurge.

Our high level of agricultural exports in the past 2 years has helped boL farm income, even though industry has experienced some domestic setha We need to pursue an enlightened foreign trade policy to maintain and esp< this high level of exports, because high exports relieve the burden of big ai cultural production at home. Such a course is to the mutual interest of United States and its trading partners.

Let us examine why we in the Department of Agriculture believe that favoM action must be taken on the proposed Trade Agreements Extension Act.

REASONS WHY AMERICAN AGRICULTURE NEEDS AN EFFECTIVE TRADE AGHEBMS

FBOGRAM

1. Abundant farm production.— American farmers live and move in an atr phere of striving to do things better. Our farmers are the most efficient in world. Our farm population of 20 million people, less than 1 percent of world's population, produces one-fifth of the world's output of red meai, nearly one-third of the world's milk.

The technological revolution in American agriculture has brought us Btoa rising output per acre and per animal. Since 1940 our per-acre yield of cotl has risen 67 percent; corn, 56 percent; and wheat, 40 percent. The 1957 vielAl all major United States crops averaged 27 percent above the 1947-49 United States total agricultural output last year was one of the highest, on reoorc yet it was produced on the smallest acreage since 1919.

This increased output has mainly resulted from the expanded use of science and technology by American farmers. They are using three times as much machinery and equipment and more than twice as many motor vehicles as they were in 1940.

The American farmer today produces as much in 1 hour as he did in 2 hours in 1940, and in 3 hours in 1910. The prospects are good for further increases in our future agricultural production.

The technological explosion of American agriculture has made foreign markets an essential outlet. Without such an outlet, American farmers literally would smother in their own commodity production.

2. Limited market outlets in United States for farm products.—Although 85 to 95 percent of our total agricultural production is consumed domestically, foreign markets provide an important outlet for such "problem" crops as wheat, cotton, tobacco (particularly flue-cured types), oilseeds, feed grains, and many other farm products.

In the most recent marketing year, for example, foreign markets absorbed the equivalent of over half the wheat, cotton, and rice crops; over one-third of the soybean production; one-fourth of the tobacco; almost one-half of the tallow; and one-fifth of the lard production.

The United States supplied one-fifth of the world's fresh citrus fruit; one-tenth of the world's fresh deciduous fruit; more than one-third of the world's canned deciduous fruit; and about one-fourth of the world's dried fruit. This represented exports of $230 million worth of fruit. It equaled about one-tenth of United States production.

Exports of American farm products help to bring about a better balance between domestic production and markets. In fiscal year 1957, the Commodity Credit Corporation investment was reduced by almost $1 billion. Over 70 percent of CCC stocks that moved were exported.

3. High-level agricultural exports help the economic position of American farmers.— In the midst of a nationwide recession, American agriculture's position is remaining relatively strong. Large exports are one of the contributing reasons.

In contrast to the recent downturn in United States industry, mainly attributable to a falling off in domestic demand, a slump in United States agricultural exports came about in 1953, an aftermath of the Korean conflict. Since then aggressive efforts have been made to rebuild agricultural exports, and results have been impressive.

United States agricultural exports during the 1957 fiscal year reached an alltime high value of $4.7 billion, an increase over 1953 of 68 percent in value and about 94 percent in volume. New export records were estabished for wheat, soybeans, soybean and cottonseed oils, and rice. Exports of cotton were the highest in 25 years.

A heavy flow of farm products to foreign markets is being maintained this year. In the current fiscal year, ending June 30, we expect United States agricultural exports to total around $4 billion. Though this would be down somewhat from last year, due mainly to reduced exports of wheat and cotton, it would still be the second, or possibly the third, best export year in history for American farm products.

It is well to note, in this connection, that the dollar sales of United States agricultural products this fiscal year are expected to be at least as high as the near-record $2.8 billion of fiscal year 1957. Percentagewise, dollar sales this year are expected to be about 70 percent of total agricultural exports as compared with 60 percent in fiscal 1957. It should also be recognized that special Government programs, particularly Public Law 480, contributed substantially to the record level of agricultural exports in fiscal 1957.

What we hope to do in the years ahead is to increase further the portion of United States agricultural exports that moves for dollars. We think that there is good possibility of doing this for many commodities. Despite increasing foreign competition, dollar sales of tobacco should do quite well. We anticipate substantial increases in dollar sales of cotton, wheat, rice, feed grains, fats and oils, and most fruits.

We believe that dollar exports of American farm products could reach $4% billion by 1965, or more than 50 percent above the present level of $2.8 billion. This projection is based on a continued expansion of the world economy, in an environment conducive to a mutually profitable exchange of products.

But trade expansion does not come about automatically. The future of our dollar exports will depend on the kind of judgment on trade matters that we as a nation are able to exercise. Successful foreign marketing has three basic requirements. One in that our farm products must have access to foreign marke so that foreign consumers have the opportunity to buy them. The secoDd that foreign consumers are able to earn dollars with which to buy from us. T] third is that we operate constructive market development programs abroad.

It is our sincere belief that the type of legislation we are considering tods more than any other single program, supports these basic requirements; givii access to foreign markets for our exports, and giving foreign customers, in tw the opportunity to earn dollars. Under Public Law 480 we are expanding o market development work. We should all take careful note that the inevitafc result of lower exports is lower acreage allotments for the basic crops.

4. What the trade agreements program has meant, and what its continuation a mean, to American agriculture.—American agriculture today is maintaininc high level of exports within the framework of the trade agreements profr&i Nearly four-fifths of United States agricultural exports go to countries with wfaii the United States has trade agreements, either under GATT or under bilaUf agreements.

In fiscal 1957 almost two-thirds of these exports—roughly the equivalent $2.5 billion worth of farm product—moved under some form of trade conoesai granted to the United States under trade agreements. Nearly 80 percent United States cotton exports, 90 percent of soybean exports, about 75 percent unmanufactured tobacco exports, and about 80 percent of fruits and fruit produ exports were moved under trade agreement concessions.

During 1957, and thus far into 1958, many trade agreement countries ha liberalized their import policies on one or more agricultural products from ti dollar area. This easing of quantitative restrictions has resulted in part from i multilateral consultations held in Geneva under the auspices of the GAT Many American farm products have benefited from this easing of restrictioi Examples are numerous in such commodity groups as fruits and vegetal>!i cotton, live-stock and its products, grains, fats and oils, and poultry product*.

The trade agreements program acts as a restraining influence on the tended of countries to increase trade restrictions on agricultural products. A roemb country is inhibited from taking arbitrary action to exclude products from anoth country; it must be guided bv the rules of the program.

If we did not have the trade agreement* program, there would be no imp*llii reason why many nations could not arbitrarily go as far as they wanted in limiti imports of our farm products. The program is our best single hope—throw] international cooperation—of keeping open and of deepening the channels of tm through which our farm products flow.

American farmers recognize that two-way trade in farm products helps expand foreign outlets. That is why many farm organizations in past r« have testified in support of the continuation of the Trade Agreements Extensa Act when it has como up for renewal before Congress.

You and I know that we must buy from other people if we expect them buy from us. The trade agreements program supports and encourages tl basic necessity. The United States today is the world's largest importer of I goods; we are the second largest importer of agricultural products. Examples such imports are coffee, rubber, tea, bananas, sugar, and wool. These pnxlun contribute to a higher level of living for the American consumer. To provii substitutes for such products would entail an uneconomic use of our resourW A similar situation prevails in other countries. Moreover, these imports into tl United States provide an important source of dollar earnings for our customf abroad. Thus, a relatively free exchange of goods among countries based on tl law of comparative advantage results in mutual gain.

There is a new element of urgency as we look toward the extension of t] Trade Agreements Act. On January 1, 1958, the European Economic Commup.i became a reality. The six governments of Germany, France, Italy, Belgium, tl Netherlands, and Luxembourg arc now establishing a common market. T) truly revolutionary step has received the support of the United States. As tl nations work toward a common external tariff, which will involve several rrjU it is important that countries outside the common market be able to negotia freely. Only by keeping tariffs at the lowest possible level, and by eucournft.i the six members to do likewise, can they achieve an outward-looking polic rather than become a restrictive and inward-looking group. Beyond this effci lies a larger European free-trade area, involving 11 additional nations. To bril these various trade changes into fruitful operation will require years of putiei negotiations. A liberal policy, stable and definite, on the part of the VniU States, can contribute much to the common advance in world trade.

I should add that the trade agreements legislation we are considering today is consistent with our domestic agricultural program. It does not prevent the use of export subsidies, provided such subsidies are not used to capture an undue share of world trade.

American agriculture is fully capable of continuing to move large supplies of farm products to foreign areas. In fact, it must do so if we are to prevent large and undesirable surplus accumulations. It is a fortunate coincidence that the abundant supplies from American farms can be one of the free world's great resources in support of political stability and economic development. (As you gentlemen well know, the Communists are making a determined effort to penetrate the less-developed free countries of the world with a strong economic offensive. Two-way trade is one of the weapons they are using. I have brought along today an analysis made by our people regarding this offensive. I recommend that you read it carefully. I think it shows clearly that we must strengthen our own trade ties with these countries.)

By using our farm supplies judiciously now, in pursuit of these objectives, we can build stronger commercial markets for the American farm products of tomorrow. This we hope to achieve with the help of the Trade Agreements Extension Act of 1958.

I have appreciated this opportunity of expressing my sincere thoughts about this important legislation.

Department Of The Interior,

Office Of The Secretary, Washington, D. C, June 2B, 1958. Hon. Harry F. Byrd,

Chairman, Committee on Finance,

United States Senate, Washington, D. C. Dear Senator Byrd: Your committee has requested a report on H. It. 12591, a bill 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. We recommend the enactment of this bill.

This legislation, which has been acted upon favorably by the House of Representatives, will enable our Government to continue to pursue a course that will promote our commerce with other countries of the free world. We are in general accord with the provisions of this measure which includes the extension, for an additional 5 \-ears, of the authority of the President to enter into foreign trade agreements under section 350 of the Tariff Act of 1930, as amended.

We have been advised by the Bureau of the Budget that the enactment of H. R. 12591 would be in accord with the program of the President. Sincerely yours,

Hatfield Chilson, Under Secretary of the Interior.

Department Of State, Washington, June 30, 1968. Hon. Harry F. Byrd,

Chairman, Committee on Finance, United Slates Senate.

Dear Senator Byrd: The Department is pleased to respond to your letter of June 13, 1958, requesting a report on H. R. 12591, 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.

H. R. 12591 as approved by the House has the full support of the administration. It provides that during the next 5 years the President shall have available, under existing procedures further developed by amendments, adequate authority to conclude reciprocal trade agreements in the interest of the United States. It is based on an administration proposal which the President has described as essential to our national economic interest, to our security, and to our foreign relations and as a powerful force in waging total peace.

Events have moved rapidly in recent months, lending added force and urgency to the President's words. New and disturbing incidents bear witness to growing uncertainty concerning the trade outlook on the part of some of our best neighbors. The Soviet trade drive among uncommitted developing nations has continued to grow. Altogether, it is difficult to overstate the importance of approval of H. V.. 12591, which more than any other single act would affirm this country's determination to support and lead a free-world movement to liberalize trade for w time to come, as it has done over the past 24 years.

We believe that this affirmation alone would so encourage advocates of tn liberalization the world over that it would contribute materially to the furtl reduction of barriers which presently restrict United States exports and ham world trade in general. It could not help but have a salutary effect upon future trading policies and practices of our friends and allies.

The safeguards of trade-agreement procedure, developed over the years i further implemented by the provisions of H. R. 12591, provide against I unforeseen adverse import developments that may threaten American inten In the escape clause, domestic producers have access to a procedure safeguard particular industries against serious injury from imports. In section 22 of Agricultural Adjustment Act there is a procedure to safeguard against imp interference with governmental agricultural programs. In the national-eecul amendment, ample scope exists to take necessary action to prevent imports h\ threatening to impair the national security.

The national security provisions in particular are substantially amended the new bill (sec. 8), so as to clarify the procedures to be followed and assure a broad scope of investigation. On the procedural side, it is made eipli that ODM will investigate upon the application of any interested party: furtt investigation by the President after the Director of the ODM has reported opinion that the national security is being threatened, is made optional rat? than mandatory; a report on each case is to be published. Furthermore, one-time summary report on administration of the amendment is to be submit! to the Congress by February 1, 1959. As to the scope and character of I investigation and the basis for decision, the law would retain all of its esst-nt flexibility, but it would make clear that not only the quantity but also the c cumstances under which imports are entering, including their character sod u are to be studied. In arriving at determinations whether imports are threaten! to impair the national security, the Director of ODM and the President »re include in their consideration domestic production needs, capacity of domes industries to meet these requirements, existing and anticipated availabilities human resources, products, raw materials and other supplies and services esstnt to defense, the growth requirements of such industries and supplies and servio including the investment, exploration and development necessary to assure sd growth. A consideration of imports in terms of quantities, availability, charactl and use is also explicitly required.

The purpose and anticipated effect of the amendments is to strengthen I Executive in taking necessary action to avoid a threat to our national swan through imports. Although special attention has been given, in the debates, the position of extractive industries, it is also plain that the provision is c limited to any particular class or kind of product but may apply to any produ Finally, the President is not limited to a specific kind of action affecting impor which may not be workable, in dealing with a threat of this kind, once be t determined that a threat exists. Thus, maximum procedural safeguards t coupled with maximum flexibility in action.

This Department strongly supports the President's position in favor of renf of the Trade Agreements Act with the full authority contained in the Houm h

American economic interest and American foreign policy objectives alike ma it of utmost importance that the United States not only "pro vide reassurance the continuance of a trade policy appropriate to the times, but also that t legislation enable the President to prepare at once for a new general tariff m-c»' tion with the countries which are in process of establishing a Common Market Europe, to bring the new common tariff down to the lowest possible level so t: American exports may compete with minimum difficulty with goods prodiH within the area. In order to succeed in this effort, it is essential that the Prt dent's authority be extended for the full 5 years as provided in H. R. 12591.

The Bureau of the Budget has advised that there is no objection to the preset tion of this report and that enactment of H. R. 12591 is in accordance with '• program of the President. Sincerely yours,

William B. Macomber. Jr.,

Assistant Secretary (For the Secretary of State).

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