The association welcomes this opportunity to express its views on H. R. 12591, the Trade Agreements Extension Act of 1958.

At its annual convention in 1953, the American Bankers Association adopted the following resolution:

A nation can sell abroad only as it buys abroad. We believe that the United States should live up to its international responsibilities as the world's greatest creditor and producing nation by continuing to open its markets increasingly to foreign goods. Such a policy will help to create a larger volume of world trade, the eventual restoration of freely convertible currencies, and stronger economies in the United States and other nations of the free world.

We endorse and approve the action of the 83d Congress in extending the Reciprocal Trade Agreements Act and enacting the Customs Simplification Act. We urge that all practicable steps be taken to demonstrate to the world our determination to lead in the cooperative effort to expand international trade for mutual benefits in prosperity and security.

Today, as the extension of the Reciprocal Trade Agreements Act is being considered once again, the association has reasserted its unequivocal support of the trade agreements program. Between our annual conventions which are held in the fall, the policy powers of the associa tion are vested in the executive council.

On April 22 of this year, upon the unanimous recommendation of the advisory committee on special activities and the economic policy commission, the executive council adopted the following resolution which I am privileged to present to you at this time:

Over the past several months, the economic decline in this country has emphasized the pervasive interdependence of the economies of the free world. If long continued, the recession here would pose a serious threat to the economic stability of friendly nations abroad, because our foreign investment outlays and our imports and exports exert on important influence on the level of economic activity of these countries.

In turn, if economic conditions abroad were to become unfavorable, this would intensify our own distress by reducing demand for the products of our export industries.

Over the past 25 years much has been achieved in the way of developing a foreign economic policy that is truly in the national interest. Our efforts to reduce restrictive and discriminatory barriers to the expansion of world trade, our mutual-security program, our economic and technical assistance programs, and our encouragement of American private investment abroad, have strengthened our own Nation economically and politically and have enhanced the economic stability and military security of the nations of the free world.

Indeed, the present strength of the free world can be attributed in large part to our foreign economic policy since World War II.

In view of the mounting economic and military challenge of the Communist nations, it would be extremely unfortunate if we were to allow domestic economic difficulties of a transitory nature to turn our foreign economic policy back toward economic isolationism.

From the point of view of our own industrial recovery, it is important that American private investment abroad continue to expand, for such investment increases the dollar purchasing power of foreign nations, thereby raising demand for the products of American industries.

Broadening the market for American exports also requires that we continue to negotiate for the reduction of barriers to the international movement of goods and currencies.

It would be fallacious and dangerous for us to try to stimulate economic recovery in the United States by placing greater restrictions on the entry of products from abroad. Such restrictions would serve to increase the impact of the current recession on other nations of the free world and to depress further the demand for products of our own export industries.

By broadening the market for our own products and stimulating world trade in general, we can make an important contribution to the economic well-being both of the United States and of the entire free world.

In view of the foregoing considerations: Therefore, be it

Resolved, That the executive council of the American Bankers Association go on record as approving the 5-year extension of the reciprocal trade agreements program, and the related legislation necessary to its effective implementation.

Senator KERR. Thank you very much, Mr. Mitchell.

Are there any questions?

We thank you for bringing us your statement.

Mr. MITCHELL. I appreciate the opportunity of appearing, sir. Senator KERR. Paul Hoffman, Pasadena, Calif.

We are glad to have you, Mr. Hoffman.

STATEMENT OF PAUL G. HOFFMAN, PASADENA, CALIF.

Mr. HOFFMAN. First of all, Mr. Chairman, I would like to thank the committee for this opportunity to appear here today in support of H. R. 12591, the Trade Agreements Extension Act of 1958, as passed by the House of Representatives.

I am appearing before the committee in my personal capacity. I am presently chairman of the board and treasurer of the Hoffman Specialty Manufacturing Co., of Indianapolis, Ind., and chairman of the American Committee on United Europe.

The decision which the Congress must take on H. R. 12591 is certain to have vital political as well as commercial results.

It may influence in a substantial way the outcome of the struggle between the free world and the Communist world. This has been called: "The struggle of the century for the century."

Those are dramatic words, but I happen to believe that they are words of great truth.

Senator KERR. If we had time, I would ask you to tell me what they meant, but, since we haven't, I will ponder it.

Mr. HOFFMAN. All right, sir. I have the deep conviction that the nations of the free world can win out in this struggle if they utilize fully their potential strength.

I also have the deep conviction that, if they are to realize on that potential, they must, among other measures, promote freer trade.

Lest there be any misunderstanding, let me say at once that I am in favor of freer trade-not free trade. Free trade is a theoretical ideal which I think cannot be realized in practice and which would, in any event, raise problems of such magnitude that it is questionable whether its advantages could ever outweigh its disadvantages.

Freer trade, on the other hand, involves quite a different concept. We all know of trade barriers which exist in every country in the free world which would better be relaxed or removed. These are the barriers which, for reasons of narrow national pressures, inhibit the expansion of world trade-world trade which brings common benefits to all nations engaged in such trade, and which represent one of the bases for the kind of economic expansion which we in the United States must have and which all the peoples of the world are seeking with great urgency. We know these barriers exist and we know they can be relaxed or removed without the kind of fundamental adjustment which might be the consequence of completely free trade.

The critical importance of freer trade for any nation was brought home to me during the period I had the privilege of being Adminis

trator of the Economic Cooperation Administration or, as it was commonly known, the Marshall plan.

In the year 1948, despite the fact that world trade had almost doubled during the 50-year period, trade among the European nations was at a slightly lower level than at the turn of the century.

I would like to repeat that statement, if I can, because it made a very deep impression on me when I first went to Europe, that in the year of 1948, despite the fact that world trade had almost doubled during the 50-year period, trade among the European nations was, that is intra-European trade, was at a slightly lower level than at the turn of the century.

It might be that it was knowledge of this fact that led to the congressional directive to the Administration of ECA to take vigorous steps to restore trade among the European nations which were to receive Marshall plan assistance.

The language of that directive is interesting. This is the language: Mindful of the advantages which the United States has enjoyed through the existence of a large domestic market with no internal trade barriers, and believing that similar advantages can accrue to the countries of Europe, it is declared to be the policy of the people of the United States to encourage these countries through a joint organization to exert sustained common efforts which will speedily achieve that economic cooperation in Europe which is essential for lasting peace and prosperity.

We in the ECA did take vigorous steps that the Congress proposed to restore intra-European trade, obtaining first agreement among the European nations for a sharp reduction in import restrictions and we later established the European Payments Union to facilitate the financing of this trade.

It might be a matter of some interest that that agreement to reduce import quotas was achieved at 3 a. m. one morning after about a 12hour session, because, of course, you had many interests in Europe that were opposed to any reduction whatsoever in quotas or trade restrictions.

Between 1948 and 1952, the 4 years of the Marshall program, Western Europe's gross national product increased by 25 percent and intraEuropean trade by 73 percent.

Furthermore, it is estimated that the mutual aid generated by the Marshall program enabled us to reduce the cost of that program by a substantial amount, perhaps as much as $2 billion.

This demonstration in the benefits that flow from the liberation of trade was not lost upon the Europeans themselves. Indeed, many of them, particularly such forward-looking leaders as Jean Monnet, Paul-Henri Spaak, Robert Schuman, and Konrad Adenauer, were determined to go further.

Utilizing the momentum generated by the Marshall plan, they launched a bold new program not only for further reducing barriers to trade, but for integrating the western European economy.

The first major step in this program was the Schuman plan for pooling Europe's coal and steel resources. Proposed by France's Robert Schuman in 1950, the European Coal and Steel Community was established in 1952, with six participating nations: Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands.

The results have exceeded even Mr. Monnet's optimistic expectations. Production in coal and steel has risen to record levels.

Trade in coal and steel within the community increased by 93 percent between 1952 and 1955 as compared with a 59 percent increase for other products. Nor have the beneficial effects of the Schuman plan been restricted to the six-nation area alone.

Imports of coal and steel into the community have risen during this period by 41 percent and exports by 34 percent.

Indeed, and this to me was interesting, the community has become our best overseas customer of American coal, buying 54 percent of our total coal exports in 1956, and even more in 1957, and yet there were many predictions made in the United States that if the community did come into being, it would restrict American imports to a point where we couldn't sell coal to Europe at all.

If that is not a striking demonstration of what an improved economy can do in providing more business for America, I do not know of one. Building upon the demonstrated success of the Schuman plan, the six nations have recently taken a decisive step toward full economic cooperation.

Senator KERR. A very important difference, if you will pardon me for interruption, you used in the text "full economic unification." Your statement was "full economic cooperation." Which do you mean?

Mr. HOFFMAN. Integration.

Senator KERR. Neither?

Mr. HOFFMAN. Integration. Neither. Well, that is a matter of words.

Senator KERR. I am just asking you. The page has "unification," the spoken word was "cooperation."

Mr. HOFFMAN. I should have said integration.

Senator KERR. You actually meant integration?

Mr. HOFFMAN. So I was wrong on all counts.

On January 1 of this year, measures for creating both a European Atomic Energy Community for peaceful purposes and a European Economic Community came into effect.

Under the latter measure, the Common Market, the 6 nations have agreed to progressively eliminate, over the next 12 to 15 years, all tariffs and quotas on trade among themselves.

At the same time, a common external tariff will gradually replace national tariffs on imports from outside the community. The external tariff will, in general, be fixed at the average of the national tariffs which it replaces.

The Common Market, like the Schuman plan before it, represents an opportunity for substantially increasing trade between Europe and the rest of the world.

This is a very great fear of mine: It could also become an inward looking, protectionist device for promoting trade within Europe at the expense of world trade. The key as to which direction the Common Market will take lies largely in our hands. If we set the right example, those in authority in the Common Market will be encouraged to do likewise.

Furthermore, of equal importance, H. R. 12591 gives us the bargaining power we need: First, the authority requested, 5-percent reduction per year, used selectively, would enable our negotiators to bargain for reductions in the external common market tariff at ap

proximately the same rate as the internal reductions will take place. This would minimize the discrimination against United States exports which will otherwise occur.

Second, a minimum renewal of 5 years is necessary in order to carry our bargaining authority through the first 4-year period of the Common Market, January 1, 1962. By that time, an overall reduction in internal tariffs of 30 percent will have been achieved and further, the first common external duties will likewise have been established.

Moreover, it is important that our bargaining authority be assured of 5 years of continuity and stability since, as the President points out, our proposals must be preceded by painstaking preparations.

The Common Market countries have already indicated their willingness to enter negotiations for reducing the external tariff in return for equivalent concessions on the part of third countries. It is now up to us to meet our European allies halfway.

In conclusion may I emphasize the central point which I have tried to suggest in this brief statement: That the European Economic Community is an historic development of major proportions, that it presents to us a challenge that is almost unprecedented in the field of our foreign trade policy.

In the rapidly moving world of today and in the face of the massive Soviet economic and political offensive, the European movement toward unification has thrust upon us a crucial decision: Do we by the policy the Congress will adopt this year take steps to bind ourselves more closely to our friends and allies in Europe and in the rest of the free world, or do we withdraw within ourselves in narrow, protective isolation?

The Common Market can greatly strengthen the free world if by building an expanding integrated economy in Western Europe, it can assure the rising standards of living for the peoples of that area that everyone in the world is seeking. But it will not strengthen the free world if the European community retires to itself in regional autarchy and neutralist self-sufficiency.

The direction it goes will depend very largely on what the United States Congress does with this trade bill. Our world leadership is involved here and upon that leadership depends our ultimate success or failure in our fateful contest with the Soviets and their system.

For more than 10 years it has been a primary objective of the Russian dictatorship to undermine our world leadership and to tear down our world prestige in every way they have found open to them. It is my frank opinion that this United States Congress could render the Russians no greater service than by failing to pass this bill in a fully adequate form.

A 5-year extension would be a tonic to the free world. It would be a direct and open declaration that the United States is prepared to cooperate with all free nations in the development of their resources and in the effort at common realization of the drive of all of us for higher standards of living. We need this declaration and the world needs it.

Now, if I can have one more minute, I would like to tell you of a decision which we made in ECA which in my opinion turned out to be of very substantial importance.

One of the very first questions we had to face was what to do about Western Germany.