in 1934 to more than $20 billion in 1957, while imports have increased from about $12 billion in 1934 to almost $13 billion in 1957. For these reasons, the Port of New York Authority endorses a foreign-trade policy which encourages the freer movement of goods to and from the United States as best serving the economic welfare and security of the Nation. We respectfully urge therefore that your committee act favorably to extend for a 5-year period the Reciprocal Trade Agreements Act. Sincerely, Senator HARRY BYRD, Chairman, Senate Finance Committee, DONALD V. Lowe, Chairman. GETZ BROS. & Co., San Francisco, Calif., June 17, 1958. DEAR SIR: With reference to the forthcoming meeting of the Senate Finance Committee to consider the passage of the administration bill for the renewal of the Reciprocal Trade Agreements Act, due to the fact that I am unable to appear before the meeting to testify in favor of the passage of this act, I am taking this opportunity of writing you my thoughts in this connection. This act is of great importance since it means a strengthening of our own economy and consequently the strengthening of the economy of the free world. I am urging your support and that of your committee for the extension of the Reciprocal Trade Agreements Act for a minimum of 5 years because this means expanded United States export trade and consequently millions of jobs, a strong United States bargaining position for negotiating tariff and trade problems during European Common Market developments, aid in our drive toward lower costs and lower prices of consumer goods through competitive imports, and finally, the necessary presidential authority for dealing with United States trade policy as an integral part of United States foreign policy. I sincerely hope that you and your committee will give this matter your most favorable consideration since it is in my opinion the most important legislative matter on the agenda at present. Very truly yours, Hon. HARRY F. BYRD, Chairman, Committee on Finance, United States Senate, Washington, D. C. LESTER GOODMAN. GULF OIL CORP., Pittsburgh, Pa., June 23, 1958. DEAR SENATOR BYRD: This letter, the attached statement and summary are submitted to you in connection with the Senate Finance Committee's consideration of H. R. 12591, Trade Agreements Extension Act of 1958. Last November, and again in February, Gulf Oil Corp. presented a statement of its longstanding views on this vital legislation, first, to the Subcommittee on Foreign Trade Policy, and then to the House Committee on Ways and Means. We should like this letter and the attached statement to be part of the record of your hearings. Gulf has consistently supported a 5-year renewal of the Reciprocal Trade Act as a necessary weapon in the coming struggle for world economic and political leadership. It is our firm belief that world trade is necessary to our domestic prosperity, to the growth and development of our free world friends, to win the cold war and to prevent a hot one-for trade may become our most critical battle with international communism. We were greatly encouraged by the recent action taken by the United States House of Representatives on this legislation and urge that the Senate Finance Committee recommend to the full Senate its speedy passage. Very truly yours, R. O. RHOADES. SUMMARY, TRADE AGREEMENTS LEGISLATION AND THE PETROLEUM INDUSTRY, STATEMENT OF GULF OIL CORP. Gulf, because of its long and extensive experience in both domestic and foreign operations, feels itself qualified to comment on international trade. PURPOSE AND ACCOMPLISHMENTS OF THE TRADE AGREEMENTS ACT 1. The purposes of the 1934 act to expand foreign markets for the products of the United States and to support prosperity have been successfully achieved. 2. Free foreign nations have been aided by the promotion of increased trade. 3. Reversal of the policy established to minimize trade barriers would be most likely to bring about both domestic and foreign economic distress and to lose us friends. 4. Failure to renew the Reciprocal Trade Act would tend to forfeit gains made through foreign aid. POSSIBLE ABUSE OF THE ESCAPE CLAUSE IN THE ACT 1. Minimum criteria should be added to the law to define positive injury to be shown before escape clauses apply. 2. Loose interpretation of the escape clauses could nullify the act. PETROLEUM IMPORTS 1. Both imports and domestic production should share increasing demand. 2. As long as domestic production is increasing, imports are supplementing and not supplanting domestic production. 3. Temporary short-term fluctuations in production and demand should not govern the establishment of import policy. 4. The voluntary oil imports program is acting as a brake on the rate of increase of oil imports. 5. Restrictions in petroleum imports are likely to jeopardize free access of American citizens to their oil concessions abroad. 6. The United States has been so thoroughly explored for oil that most major oil pools probably have already been discovered. Recent findings tend to be smaller and have higher cost per barrel. 7. Increase in oil reserves in the United States is not keeping pace with the increase in demand; we will have to depend more and more on foreign oil. CONCLUSION The Trade Agreements Act should be extended to insure continued domestic prosperity and national security. TRADE AGREEMENTS LEGISLATION AND THE PETROLEUM INDUSTRY 1. PURPOSE AND ACCOMPLISHMENTS OF TRADE AGREEMENTS ACT For more than 45 years Gulf Oil Corp. has engaged in foreign operations. It was one of the earliest of the American oil companies to enter Mexico, around 1912, and since that time its geologists and geophysicists have prospected for petroleum in many parts of the world. As a result, the corporation today has substantial oil production in Venezuela, Canada, Sicily, and the Middle East, and is in the process of developing discoveries in other countries. During much of the same period, Gulf has also made substantial investments in the construction and development of marketing facilities in many European and Latin American countries. However, Gulf is by no means merely an American-owned company engaged in foreign operations. Traditionally it has maintained a position as a major petroleum producer in the United States, and by far the largest share of its investments in leases, land, and equipment needed to carry on its business as a producer, refiner, transporter, and marketer of petroleum and petroleum products has been made in the United States. It is thus a company engaged in both domestic and foreign trade, and this fact lays upon its management the necessity and duty of formulating, advocating, or supporting those policies which seem best calculated to promote and maintain the healthiest possible conditions for both foreign and domestic commerce. Because of the company's position, Gulf's 87,000 shareholding owners have a direct and real stake in any legislation affecting domestic or foreign trade, and because of its experience Gulf's management feels itself peculiarly well qualified to offer the observations and comment that follow. Looking back, we find the legislation that initiated the reciprocal trade agreements program in 1934 stated its aims as follows: "For the purpose of expanding foreign markets for the products of the United States, as a means of assisting in the present emergency in restoring the American standard of living and overcoming domestic unemployment and the present economic depression, in increasing the purchasing power of the American public." The reciprocal trade agreements, together with other programs, have proven remarkably successful in achieving these objectives. They have been valuable and helpful through subsequent economic recessions (although no depression has occurred since), through World War II, through the Korean war, and in the period of uneasy peace and cold war following World War II. The objectives of the foreign economic policy, including the reciprocal trade agreements, have been broadened to include contributions to the rebuilding of our Allies, to strengthening the economic health of the free world and to preserving their freedom from Communist subversion. Of course, many influences have contributed to the increase in United States exports and in free world trade, and the exact contribution of each cannot be precisely determined, but the fact remains that a very large degree of success has been attained. Public opinion in the United States, and particularly in the trading community abroad, attributes a large part of this success and the growing prosperity of the free world to the leadership which the United States has shown in reducing tariffs and removing other impediments to trade on a reciprocal basis through the trade agreements acts. From time to time the acts have been extended and amended, including the addition of a peril-point procedure (first included in the Trade Agreement Act of 1948), which provided that trade commitments should not be made that may seriously injure domestic producers. In 1955, the national security amendment was added. These changes have been for the purpose of insuring that excessive imports will not seriously injure any domestic industry. The national security provision emphasized this with respect to any industry vital to the national security. With these safeguards, there is no reason to believe that extension of the Reciprocal Trade Act would do harm to the objectives previously outlined. On the contrary, failure to extend this act could cause grave harm to the prosperity of ourselves and our Allies, and to the cohesion of the free world. The most important reason and the summary of all reasons for extending the Recriprocal Trade Act is the great success which has attended the efforts of the United States to lead the free world toward increased trade, which has, in turn, helped to promote a mutual increase in prosperity, and a strengthened defense posture of all free nations. The Trade Agreements Act has served as a clear signal to all the world that our country wishes to encourage the growth of industry and trade between the nations. With it in operation, the war-damaged countries have recovered remarkably and world trade has reached new heights. Since the first act in 1934, United States exports have increased 800 percent, and imports about 700 percent, and foreign trade now gives employment to about 42 million Americans. A reversal of this policy would be a terrible blow to those nations that buy our goods as well as our supplying nations. It would lead to economic distress in countries which depend to any considerable extent on exports to the United States. It would bring about import and currency restrictions and discrimination in all countries which are short of foreign funds. Since dollars are the currency most in demand, these restrictions would fall more on United States exports than on any other. Therefore, if by failure to extend the Trade Agreements Act we embark on a policy of restricting trade, we will be responsible not only for economic distress in foreign countries but also in our own. A worldwide recession would be the most probable result. Our postwar trade policy has helped lift the hopes of the entire free world. It would be a terrible blow to the unity of the allied front toward the Soviet Union if we reversed our helpful policy by increasing trade restrictions. This consideration is, and should remain, paramount. Trade is healthiest when all of those nations contributing to its flow are, each in its own way, enjoying the best of economic well-being. In any contemplation of a return to re strictive tariffs, however, there are other considerations of very considerable importance. In the next place it should be recognized that, whatever mistakes may have been made, the general effect of the outright gifts under the foreign aid program have constituted a sort of strategic pump priming by which many nations have been helped to help themselves. As a result, the concept that lies behind the slogan, "Trade, not aid," is one of continuously increasing vitality. Nations, like individuals, have their pride; they can be expected to be grateful for help when help is most needed but they cannot be expected to stand forever with outstretched hand, mumbling apologetic thanks for whatever may be dropped into it. An increasing volume of international trade is the only alternative to outright giving. It is immediately beneficial to the traders, it creates mutual respect while promoting mutual self-esteem. It is the one base on which we can build strong and lasting friendships in a world where the need for such friendships is urgent. It is not necessary, it may not even be desirable, for trading nations to come to a meeting of minds on intellectual, political, or philosophical matters for the basic language of trade is older, and better understood than any other. Since even a completely altruistic United States, with its relatively small percent of the world's population and raw materials could not possibly hope to support the whole free world's economy indefinitely with gifts, and since the alternative is the promotion of trade, it follows that any moves now to raise restrictive barriers must serve to destroy the benefits we hoped to gain through foreign aid, and on which many billions of dollars have already been spent. There is, finally, still another reason why a return to a high tariff policy, however selective it may be, would, at least by this time, be unwise. Our recent months through the development of common marketing areas and other types of pooling arrangements, European nations and industries have been showing a growing will to win for their products a larger share of those markets, such as Latin America, in which, due to the disruptions of World War II, they have been considerably displaced by United States products. This creates the prospect of intensely sharpened competition for United States exports, and it is axiomatic that competition thrives most where it is least trammeled. Historically, the raising of high tariff barriers by one country against the products of another inevitably invites retaliation. It would appear self-evident that a return to high tariffs by this country now can only result in a loss of some, and possibly of a very large amount, of the export trade the United States now enjoys. Regardless of the arguments made by some industries, or individuals, in favor of increased tariff protection now, it would appear that the national welfare stands to be seriously, and possibly grievously harmed by an abandonment, or even a sweeping revision of the reciprocal trade program now in effect. 2. POSSIBLE ABUSE OF THE ESCAPE CLAUSES IN THE TRADE AGREEMENTS ACT Since, at this stage of history a return to high tariffs would be assuredly harmful, and possibly disastrous, it will be useful to consider how the present laws may be modified to better accomplish the aims toward which they were originally directed. The escape clauses which permit any industry that thinks it is threatened with injury due to imports to appeal to the Tariff Commission could be used to largely nullify any lifting of trade restrictions, depending on the manner in which the Tariff Commission and the President choose to interpret and administer the law. In 1955, the act authorized the President, whenever he deemed it necessary, to reduce the level of imports of a commodity whenever that level threatens national security. The Trade Agreements Extension Act of 1958 further modifies this point by including the so-called perfecting amendment. In order to avoid having these provisions used to nullify the act, Congress should include in the act a definition of injury and some basic criteria to be used in determining that an imported item is injurious either to a particular industry or to the national security. Almost any imported item competes directly or indirectly with United States produced goods. Any increase in imports at all, therefore, could be interpreted as reducing the potential domestic business of United States firms. A basic criterion for determining injury to an industry should be that the sales of an industry are reduced in absolute terms, and not only as a percentage of the total domestic market. As long as an industry's total sales in the United States are increasing, or are not appreciably reduced, it should not be held that imports are seriously injuring the domestic industry. Again, almost any item produced relates in some way to the national security. Loose interpretation of this term could readily nullify all the good effects hoped to be achieved through any Trade Agreements Act. Therefore, the law should contain some minimum criteria to be used in determining that an imported item threatens the national security. The party pleading for import restrictions on the basis of national security should be required to produce positive evidence showing: (a) actual injury to a particular industry and to the Nation's defense potential due to the Trade Agreements Act, and (b) that curtailment of the subject import will not prejudice the continued free access of United States citizens to essential raw materials which the United States will need to import in increasing quantities in the future. With this positive definition included in the Trade Agreements Act, which is designed to facilitate rather than to restrict international trade, there is no reason to believe that its extension will not continue to provide the good results that have been obtained to date. 3. PETROLEUM IMPORTS With respect to petroleum, the best method of handling the import situation is to permit imports and domestic production to share in the increasing demand. There is no question but that imports should supplement and not supplant domestic production. The only question lies in the interpretation of both supplement and supplant. It would seem to be clear that so long as the domestic industry is increasing its production, imports are supplementing and not supplanting domestic production. This is true even though imports might be taking over a large part of the increase in demand and, therefore, could be increasing at a faster percentage rate than domestic production. This is illustrated by the changes in the petroleum situation 1957 over 1948. Domestic demand increased by 3,028,000 barrels daily. During the same period, United States production has increased by 2,057,000 barrels daily, while imports have increased by 1,012,000 barrels daily. It is apparent that the imports have not prevented a very healthy rate of growth in domestic production, which amounts to 35 percent in 9 years. This growth occurred in spite of the fact that imports increased by 197 percent, although, of course, the volume of import increase was only half the increase in domestic production. Under these conditions, it is impossible to hold that imports are injuring the domestic industry, or that through such injury im ports are threatening the national security. In determining whether or not domestic production is being reduced by increasing imports, short-term fluctuations in demand and those restrictions in production which are necessary to correct temporary excessive inventories resulting from previous excessive production, should not be taken into account. The petroleum industry is characterized by violent seasonal swings in demand and by widely varying demands from one winter season to the next, as one winter may be considerably warmer than another. After a warm winter, the industry is usually left with excessive inventories of finished products which must be liquidated by curtailment of production. Also, the conditions under which the industry works are such as to require considerable time to reduce excessive production rates, such as may occur in order to meet an unusual export demand. This occurred during the Suez Canal shutdown. Production and imports were maintained at unusually high levels for some time after the Suez Canal was reopened, resulting in a period of very heavy inventories. The industry is now undergoing a period of low production, and imports also are being voluntarily restricted in order to bring about a more normal inventory situation. This adjustment period has been relatively short, yet inventory levels are steadily improving. The fact domestic production is less than it was at this time last year should not be taken as proof of injury either to the domestic industry or to the national security. Only if the reduced production continued over a period of at least a year could this position of injury be supported, and current indications are that domestic production will reverse its down trend before the year is out. The petroleum industry is undergoing another adjustment which will probably be of longer duration. In the 10 years ending in 1956, the United States domestic demand increased at an average rate of nearly 6 percent per year. This high rate of increase occurred because of the replacement of the United |