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TRADE AGREEMENTS ACT EXTENSION

TUESDAY, JUNE 24, 1958

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

The committee met, pursuant to recess, at 10 a. m., in room 312 Senate Office Building, Senator Harry Flood Byrd (chairman) presiding. Present: Senators Byrd (chairman), Kerr, Long, Anderson, Douglas, Gore, Martin, Williams, Flanders, Malone, Carlson, Bennett, and

Jenner.

Also present: Elizabeth B. Springer, chief clerk.
The CHAIRMAN. The meeting will come to order.

Senator KERR. Mr. Chairman, I have the pleasure this morning of presenting to the committee Mr. W. A. Delaney, Jr., of Ada, Okla., who is scheduled to appear before the committee at a later date, but who has had a business trip and a trip with his family scheduled to Europe for some weeks and leaves tomorrow, and I certainly appreciate the indulgence of the committee in letting him appear here this morning and having his statement appear in the record of July 3, the date he was scheduled to appear along with other witnesses who will testify on the oil imports.

Mr. Delaney is accompanied by Congressman John Jarman of Oklahoma, of the Fifth District.

Did you want to accompany the witness up here, Mr. Jarman? The CHAIRMAN. Mr. Delaney and Mr. Jarman, if you would come forward, please.

Mr. JARMAN. Thank you, Senator.

The CHAIRMAN. Gentlemen, we are pleased to have you.
You may proceed, sir.

Senator KERR. I will explain to Mr. Delaney that the time of the committee would not permit the reading of his entire statement and will tell him he can summarize it and put his entire statement in the record, Mr. Chairman, if that is agreeable.

The CHAIRMAN. The procedure will be agreeable.

(Mr. Delaney's oral remarks and prepared statement appear as part of the proceedings of the hearing on July 3.)

The CHAIRMAN. The first witness is Mr. Harry S. Radcliffe.

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STATEMENT OF HARRY S. RADCLIFFE, EXECUTIVE VICE PRESIDENT, NATIONAL COUNCIL OF IMPORTERS, INC.

Mr. RADCLIFFE. My name is Harry S. Radcliffe, and I am the executive vice president of the National Council of American Importers with headquarters at 45 East 17th Street, New York City.

I appear this morning in favor of the extension of the Reciprocal Trade Agreement Act and in order to give the approval of our organization to the pending bill, H. R. 12591, with some changes that we hope will make a constructive improvement in the bill.

Although the National Council of American Importers has advocated that in these critical times the program be given stability by an 11-year extension, we now strongly support the proposed 5-year extension.

We do, however, respectfully submit that in view of the anticipated developments arising from establishment of the European Common Market and the possible creation of free trade areas in Europe and other parts of the world that 5 years should be the minimum period for the extension of the act.

We also support the proposed new bargaining authority permitting the gradual reduction of tariff rates by 25 percent of the rates in effect on July 1, 1958; or, alternatively, by 2 percentage points; or, if higher than 50 percent ad valorem or its equivalent, down to that tariff level. We oppose, however, two features now in the bill:

(1) The provisions permitting a sudden increase as a result of an escape clause case of any existing rate to a duty rate 50 percent higher than the rate which was in effect on July 1, 1934.

(2) The provision authorizing the President to establish a duty at a rate not in excess of 50 percent ad valorem on articles which are free of duty.

As to the proposal to authorize duty rates to be increased 50 percent above the July 1, 1934, rates, we wish to point out that those rates are, with few exceptions, the Hawley-Smoot traff rates of 1930.

Where a given rate was reduced by the full 50 percent authorized by the original Trade Agreements Act of 1934, and by another 50 percent authorized by the act of 1945, and by an additional 15 percent authorized by the act of 1955, the rate that will be in effect on July 1, 1958, represents 2114 percent of the July 1, 1934 rate.

An increase from 2114 to 150 percent of the July 1, 1934, rate means a sudden rise in the duty rate of slightly over 700 percent.

To subject any rate of duty that has been reduced by trade agreement negotiations since 1934 to an increase, as a result of an escape clause investigation, to a protective level 50 percent above the notoriously high Hawley-Smoot rates is a preposterous proposition.

Under such an intolerable situation, even a rumor in the market that a domestic industry was thinking of making an application to the Tariff Commission under the escape clause would cause importers to run for cover.

I can assure this committee that the adoption of such a drastic provision will cause so much uncertainty among importers that it stands. to reason that our import volume will be adversely affected.

When that happens, our export trade volume is bound to suffer to a corresponding degree at the very time when the contribution that

both exports and imports are making to domestic employment is so important to our economy.

We, therefore, wish to suggest that the escape clause be completely rewritten to restore its original purpose, that is, to permit the last trade agreement concession made to be withdrawn in whole or in part; that the section specifically provide in no case shall the duty rates existing on July 1, 1958, be increased by more than 50 percent above such rates; and that the authority to impose import quotas be deleted from this section.

The proposal to authorize the President to impose a duty as high as 50 percent ad valorem on articles on the free list is alarming and should, we respectfully submit, be rejected by your committee. We believe that an increase from no duty at all to a rate as high as 50 percent ad valorem or its equivalent, is entirely too drastic.

If articles are to be transferred from the free list to the dutiable list, we urge that the change be limited to a rate of duty no higher than the rate of duty on a similar dutiable article. Classification by the similitude rule in paragraph 1559 of the Tariff Act of 1930 should be required.

To give one illustration to make our point clear: Barbed wire is now on the free list. If the President should ever impose a duty on this article under the proposed provision, it is our suggestion that the rate should not exceed the duty rate on fencing wire, which is onefourth cent per pound, equivalent at the present time to about 4 percent ad valorem.

Since the Trade Agreements Act was enacted in 1934, there has always been a prohibition against the transfer of goods between the dutiable and free list. If, as now proposed, authority is to be included in the act to impose a duty on duty-free articles, we submit that, in all fairness, corresponding authority should be written into the law to remove the duty on certain imported articles.

Specifically, we propose that the Congress direct the Tariff Commission to prepare at once a preliminary list of articles which it finds are not produced at all, or which are commercially produced only in insignificant quantities, in the United States.

Under our proposal, the preliminary list should be made public by the Tariff Commission, and prompt hearing should be called to permit any interested party to suggest additions to or deletions from such preliminary list.

On the basis of these hearings, we suggest that the Commission be directed to submit a final list of articles that it finds should be duty free to the Congress for consideration.

We then respectfully suggest that the Congress, after making any changes in the list deemed necessary, should authorize the President to transfer any article on such approved final list to the free list of the Tariff Act as a concession in future trade agreement negotiations.

We should like to offer some specific suggestions for changes in the bill which we believe are necessary for clarity and for the more effective operation of the act:

1. The bill adds new wording to section 7 (a) of the Extension Act of 1951, to permit "organizations or groups of employees" to file applications for escape clause investigations. We assume the word "organizations" was meant to refer to trade unions.

We wish to point out, however, that the word "organization" standing alone could mean any organization, even our own.

Although we would hardly be expected to request escape clause investigations, some other organizations that I can think of might do so. We, therefore, suggest that the language be amended to read "trade unions, locals, or other groups of employees."

2. We strongly recommend that the escape clause provisions be amended to give the Tariff Commission discretion to institute formal investigations upon applications by interested parties. We, therefore, further suggest that the words in section 7 (a) of the act of 1951 reading "upon application of any interested party" be changed to read "when in the judgment of the Commission there is a good and sufficient reason therefor upon application of any interested party."

Our suggested language, by the way, is taken from section 336 of the Tariff Act of 1930 relating to cost of production investigations by the Commission.

In this connection, we wish to point out that when the Tariff Commission receives an application from an interested party under section 336 or 337, it always conducts a thorough preliminary investigation to determine whether or not a formal investigation is required.

That was also the practice of the Commission in escape clause cases prior to 1951.

It is my impression that this point was not generally understood when the Congress inserted the escape clause provisions in the Tariff Act of 1951 including language making it mandatory that a formal investigation be instituted upon every application by an interested party.

3. We suggest that the same discretion be given to the Director of the Office of Defense Mobilization by substituting the words "when in the judgment of the Director there is a good and sufficient reason therefor upon application of an interested party" for the words "upon application of an interested party" in the amendment contained in the present bill to section 2 (b) of the act of July 1, 1954.

4. We suggest that the escape clause be further amended to provide that the Tariff Commission shall not entertain any application for an investigation on an imported article that has been subject to a complete investigation with findings of no threat of serious injury until after a period of two years has elapsed.

The Tariff Commission is now required by Executive Order 10401 to review all escape clause cases in which the trade agreement concession was withdrawn, modified, or suspended, not more than 2 years after such action was taken.

5. Peril points: We note that the amendment to section 2 (b) of the act of July 1, 1954, requires the Director of the Office of Defense Mobilization to "seek information and advice from other appropriate departments and agencies" in the couse of investigations he makes to determine the effects on the national security of certain imports.

We respectfully suggest that section 3 (a) of the Trade Agreements Extension Act of 1951 be similarly amended to require the Tariff Commission to seek information and advice from other appropriate Departments and agencies in the investigations it makes to determine peril points.

6. The proposed new section 350 (f) provides that during the course of negotiating any foreign-trade agreement-and this is a new provision-the President should seek information and advice with respect to such agreement from representatives of "industry, agriculture, and labor."

It is not clear whether or not the word "industry" includes United States exporters and importers. We, therefore, suggest that the words "exporters and importers" be inserted after the word "industry” in this subsection, in the interest of clarity.

7. Next, with reference to section 350 (e) (1), relating to the President's annual report on the operation of the trade agreements program, we approve the amendment requiring that such report include information regarding the results of actions taken to obtain the removal of foreign trade restrictions against United States exports.

We do wish to call attention to the fact that the most effective way to obtain the removal of such foreign trade restrictions against our exports is the continued active participation by the United States in the General Agreement on Tariffs and Trade (GATT).

8. Minor changes are made in section 336 of the Tariff Act of 1930, relating to equalization of cost production. We suggest that a further amendment be made to this section to provide some procedure for the review by the Tariff Commission of cases in which the duty rates were increased many years ago as a result of investigations under this section.

Certainly, in the past 20 years or more, the differences in cost of production of domestic articles, and like or similar foreign articles have changed materially.

In the few cases where the President proclaimed duty increases as a result of investigations made under section 336 over 20 years ago, we submit that new cost-of-production investigations involving present-day conditions are in order, notwithstanding section 2 (a) of section 350 of the Tariff Act of 1930, as amended.

The original Trade Agreements Act of June 12, 1934, which is section 350 of our Tariff Act, has been amended many times. In addition, the provisions of the Trade Agreements Extension Act of 1951 and of the Act of July 1, 1954, relate to this legislation. The present bill proposes to amend all three of these acts still further. This makes for confusion.

Consequently, in conclusion, we would suggest that a clean bill be presented containing the original 1934 Trade Agreements Act as amended by subsequent legislation, including the changes in the pending bill which are finally adopted.

Thank you very much. That completes my statement.

The CHAIRMAN. Are there any questions?

Senator LONG. I would like to ask about one matter here, Mr. Chairman.

The CHAIRMAN. Senator Long?

Senator LONG. You make the statement that you think certain articles, which are either not produced at all or produced in very small quantities in this country should be duty free?

Mr. RADCLIFFE. Yes, sir.

Senator LONG. What is the point in making them duty free if we do not produce them in this country? It would just deprive the Treasury of some income.

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