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I shall not do so in great detail. In our testimony before the House Ways and Means Committee, a rather complete picture of Japan's trade position was set forth. The committee is referred to these hearings at page 927 for this material.

The most striking feature of United States-Japan trade is the gross imbalance, unfavorable to Japan. In 1957 total United States exports to Japan were $1,226,600,000 whereas total imports from Japan were only $602,200,000, making a deficit in commodity trade of $624,400,000.

In other words, Japan bought over twice as much from us as we bought from Japan. In the past this deficit has been made up by special dollar expenditures, such as payments for the maintenance of United States troops and offshore procurement by ICA. In 1957, however, the special payments were not enough to cover the dollar gap, and United States defense policies call for further reductions of forces stationed in Japan and hence a decrease in special dollar expenditures. Japan must in the long run look to commodity trade as a means of earning necessary foreign exchange.

Trade figures also reveal that trade with the United States is dominant in the overall Japanese trade picture. The overwhelming portion of Japan's deficit was with the United States.

These figures demonstrate clearly that if the United States is to continue to maintain present levels of exports to Japan and to increase these exports, we must be prepared to import more goods from Japan, always provided, of course, that these goods find buyers in the American market place. Restrictions upon Japan's ability to export to the United States will have inevitable and serious repercussions upon the earnings of American industry, agriculture, and mining, dependent in part upon exports to Japan.

Let me now refer briefly to the political stake of the United States in the health of Japan's economy. Japan is the workshop of Asia. It is also the major American naval and airbase in the Far East.

A strong Japan is the keystone of the free world position in Asia. To be strong, Japan must be economically viable. And economic strength, for an island nation poor in resources, means trade and more trade—with all markets, including the United States. Tims for Japan—and for all of us whose business depends upon the Japanese trade—the need for liberal United States trade policies is imperative. With this background in mind, the council would like to comment specifically upon the legislation before the committee. We appear in general support of H. R. 12591, although it contains several provisions which we feel tend to restrict trade and which we urge the committee to drop.

We are in favor of the extension for 5 years. Secretary of State Dulles and Secretary of Commerce Weeks both eloquently testified to the necessity of a 5-year period to facilitate negotiations with the European Common Market.

The formation of the Market has implications for Japan's trade as well. In 1956 Western Europe absorbed about 10 percent of Japan's exports. The direction which the Common Market will take is as yet unclear.

On the one hand, it could develop into a protective union which would exclude goods from outside nations. On the other hand with

27629—58—pt. 1 32

the increased economic strength gained from cooperation among then selves, the western European nations could develop into an erpandin market for imports from other countries. Which direction the mark] will take is in large measure dependent upon negotiation with tl United States, the only other aggregate of economic power capalj of bargaining with Europe on equal terms.

Japan looks to the United States, as do other nations not member^ economic blocs, for leadership in trade negotiations with the Conitm Market.

We also endorse the grant of authority to the President to redu< present tariff rates by 25 percent, together with allied provisions, ovt the next 5 years in return for reciprocal concessions from other D tions. This authority has been wisely used in the past to the benel of all Americans; we believe it will continue to be so used in fl future.

Our third specific observation relates not to the reduction of exi^ ing barriers, but to the possibility of erecting new ones. It is iroq that the escape clause has come to be as important or more imports! in public and legislative consideration than the authority to entl into trade agreements. The attention of the members of the Unit* States-Japan Trade Council is inevitably focused much more on tl escape clause than on any possibility of further reduction of tarifl It is difficult to exaggerate the concern generated by this sword I Damocles in international trading circles. In the opinion of ti United States-Japan Trade Council it is unfortunate that the atuni istration has seen fit to recommend measures tending to tighten t escape clause. We would hope that it would be changed rather make it less severe.

In particular, the council submits that the segmentation of i provision has no justification in reason or policy. The escape as it now reads, defines industries in a completely theoretical way th has nothing to do with real workers or real plants and equipment.

If a particular commodity meets serious import competition, reli can be granted under the escape clause, even though every compal making it had done well in its total production and no workers hi suffered loss of pay or jobs.

Indeed, the escape clause itself is hardly reconcilable with the thaol and purposes of the reciprocal-trade program, or of our free compe tive system.

We want our industries to meet the challenge of competition greater efficiency or by diversifying to lines of production where tin enjoy greater comparative advantage. Hence, the emphasis on » justment found in the Douglas and Humphrey bills, with which we a m sympathy.

If help to industries affected by foreign competition is needed, assi ance to adjust seems clearly the best method. The escape clause, the other hand, tends to protect the unprogressive and unimaginatii industries which do not move with the times.

We are not urging repeal of the escape clause, because we recopi'i that there may be situations where temporary tariff relief to grant tiu for adjustment is justified.

We do urge rejection of the provision which would permit increase of duties based upon the 1934 rather than the 1945 rates.

This is a step backward in tariff philosophy, unjustified by any developments of which we are aware. And, for the reasons just indicated, we strongly oppose efforts to deprive the President of discretion to look at the entire national interest, not just the narrow issue of injury to a few producers, in passing upon escape-clause cases.

The decrease in time from 9 months to 6 months for escape-clause investigations should be carefully scrutinized by this committee. Past experience would indicate that 6 months is not always enough time to make a thorough investigation.

If the committee decides to retain this feature, serious thought should be given to an increase in staff and appropriations for the Tariff Commission.

We fully support the grant of explicit subpena power to the Tariff Commission. We believe this will be of material aid to the Commission in carrying out its investigations, and will tend to insure that its finding are based on complete data.

This provision permitting duty increases up to 50 percent ad valorem on duty-free items is a break with the traditional separation between items on the dutiable list and on the free list. We oppose this on the ground that deletion of commodities from the free list is a matter important enough to require legislative rather than administrative action. It should be considered that most free-list items are raw materials for the use of American industry, or foods not produced in the United States.

While we are somewhat dubious, in the light of modern developments in the waging of total war, about the need for the national-defense provision, we have no specific objection thereto.

It seems, nevertheless, that the Executive has, or should be provided with, other authority that would be more effective and appropriate than tariff manipulation to support lagging defense industries, if their continued capacity is considered vital. Certainly, the procedural changes in H. R. 12591 are an improvement over the vague language of the present act.

It is sincerely hoped that abuse of the national-defense section will not be permitted. This feature of the law should not be used as a substitute for, or an appeal from, escape-clause proceedings.

Because of the imperative need for United States leadership in liberalizing and expanding world trade, we trust and believe that this committee, in its wisdom, will confine its attention to improvement in the biH now under consideration, refusing to be distracted by demands toinjeotprotectionist devices into its provisions.

The United States-Japan Trade Council appreciates this opportunity to convey its views on this important matter to the Senate Finance Committee.

I, personally, thank all of you for your kind and courteous attention.

(Table entitled "Exports to Japan in 1957, by States" is as follows:)

Exports to Japan in 1957, oy States (in order of magnitude)

1. 2.

.'!. 4. 5. (i. 7. S. !). 10.

11.

12. 13.

14. 15. 16.

17. IS. 19. 20. 21. 22. 2:!. 24. 25. 26.

Texas

Ohio

Illinois

Pennsylvania

California

New York

Michigan

Indiana

New Jersey

Mississippi

Alabama

Arkansas

Missouri

Minnesota

West Virginia

Louisiana

Tennessee

Georgia

Kansas

Massachusetts

Washington

Wisconsin

Arizona

Iowa

Kentucky

Montana

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330,000 357,000 036,000 491,000 028,000 744,000 172,000 278,000 685,000 266,000 917,000 071,000 526,000 621,000 166,000 886,000 370,000 059,000 944,000 668, 000 370,000 353,000 497,000 372,000 425,000 166,000

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The Chairman. Thank you, Mr. Stitt.

Any questions?

Mr. Carlson. Only this, Mr. Chairman. I had the pleasure of visiting Japan and several Far East countries last fall, and I agree with you regarding the importance of Japan as far as it being what you say it is, a keystone of the entire free world in that area.

I think what happens to Japan and India will affect that entire section.

Mr. Stitt. I am in complete agreement with you, sir.

The Chairman. The committee then will recess until 10 o'clock tomorrow morning.

(By direction of the chairman the following is made a part of the record:)

Gallard-sohlesinger Chemical Manufacturing Corp.,

Long Island City, N. 7., June 25,1958. Re Trade Agreements Act of 1958. Hon. Harry F. Bryd,

Chairman, Committee on Finance,

United States Senate, Washington, D. C.

Dear Mr. Senator: This company is engaged in both the manufacture and import of chemicals and, in this dual role, we would like to express our opinion of the Trade Agreements Act of 1958.

The benefits to be obtained from reciprocal trade in terms of international understanding and international prosperity, have been stated before you many times, by people more qualified than ourselves. All we can do at this point, is to reiterate that this is not merely a theory but is actually the case. We cannot continually export merchandise to the various countries of the world without giving them an opportunity to sell some of their merchandise in this country. It is still very significant to us that, in most areas of the world, the United States still sells more than it buys. It is also true that a very large portion of the things we import are commodities which are just not available in this country; such as coffee, cocoa, etc., etc.

In the chemical industry, it is true that imports have grown during the last few years. However, even at this point, imports are insignificant as compared with the overall chemical industry. Imports have done a very constructive job in reestablishing competition where very little existed. We keep reading in the newspapers about the high cost of vitamins and antibiotics. Imports have helped to bring the price for these raw materials to a more realistic level, which can only benefit the ultimate consumer.

Some of the most vociferous opponents of reciprocal trade only object to Imports insofar as these imports compete with items that they, themselves, produce. The president of one of our largest chemical companies, who has been most outspoken in his desire to have imports curtailed, has been the largest importer of Russian benzol. As a matter of fact, not only have they been importing this benzol from behind the Iron Curtain, but they have been bringing it in by the tankerload. The fact that they have been encouraging the Communist economy and taking unfair advantage of their fellow producers, has not disturbed them in the least. However, the minute importations of chemicals that compete with his company, he finds to be very distressing.

We believe that the partisan approach to this problem is not the proper one. We must consider the worldwide implications of our actions and, in this regard, we feel that we either cooperate with our allies throughout the world or, we will find ourselves alone and shunned. We will then be concerned about what has happened to our friends and where we are going to sell our machinery, our automobiles, our chemicals, and the products of our farms.

We recommend Senate approval of H. R. 12591 in its present form, without amendments to debilitate its intent and its workability. Tours respectfully,

P. E. Gallard.

Xew Orleans Cotton Exchange,

New Orleans, June 26,1958. Hon. Habet F. Bybd,

Chairman, Senate Finance Committee,

Washington, D. C.

Dear Senator: Throughout its long history of service to the cotton trade, the Xew Orleans Cotton Exchange has always been mindful of the welfare of the producer. Believing that a renewal of the Reciprocal Trade Agreements Act would assist the cotton farmer particularly in disposing of his surplus, the exchange, on October 9, 1957, adopted the enclosed preamble and resolutions, for which we now bespeak your favorable consideration.

H. R. 12591, authorizing the President to renew these agreements is now before the Senate Finance Committee. We are convinced that a renewal of these agreements will greatly benefit the producers of cotton and assist materially in solving the present cotton problem.

We therefore earnestly urge that H. R. 12591 be reported without amendment, and sincerely request your strong endeavors to prevent crippling amendments on the Senate floor.

Thanking you in advance for your kind cooperation, I am,
Sincerely yours,

Wm. J. Lodwiok, President.

Copy Of Preamble And Resolutions Adopted By The Board Of Directors Of The New Orleans Cotton Exchange October 9, 1957

Whereas the reciprocal trade agreements program, inaugurated in 1934, has been successful in promoting international trade throughout the world and lias resulted in progress and prosperity in our own and all friendly foreign nations; and

Whereas cotton is a surplus commodity and for many years has been an important part of trade between the United States and foreign nations; and

Whereas in order that the purchasers of American cotton in foreign countries may be able to buy our cotton surplus, it is necessary for the citizens of these countries to be able to sell their products to the people of the United States; and

Whereas this board is of opinion that the reciprocal trade agreements program is therefore of great benefit to the cotton producers of the United States

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