TRADE AGREEMENTS ACT EXTENSION THURSDAY, JUNE 26, 1958 UNITED STATES SENATE, The committee met, pursuant to recess, at 10:05 a. m., in room 312 Senate Office Building, Senator J. Allen Frear, Jr., presiding. Present: Senators Frear (presiding), Long, Flanders, Carlson, and Bennett. Also present: Elizabeth B. Springer, chief clerk. Senator FREAR. The committee will come to order. The first witness this morning is Mr. A. B. Sparboe, of the Chamber of Commerce of the United States. Mr. Sparboe? STATEMENT OF A. B. SPARBOE, VICE PRESIDENT, PILLSBURY MILLS, INC., REPRESENTING THE CHAMBER OF COMMERCE OF THE UNITED STATES Mr. SPARBOE. Mr. Chairman and members of the committee, my name is A. B. Sparboe, and I am vice president of Pillsbury Mills, Inc., of Minneapolis. Senator FREAR. That is a pretty big company. Mr. SPARBOE. It is a little outfit in Minnesota. I think Senator Carlson is familiar with it. Senator CARLSON. Yes; I would agree to that statement. Mr. SPARBOE. I appear on behalf of the Chamber of Commerce of the United States to present its views on renewal of the Reciprocal Trade Agreements Act. I am a member of its Foreign Commerce Committee. The Chamber of Commerce of the United States is a national federation of over 3,450 trade and professional associations and State and local chambers, with an underlying membership of 2,500,000 businessmen, and over 22,000 direct business members. The chamber membership has supported the reciprocal trade agreements program since its inception 24 years ago. Recognizing the diverse and sometimes conflicting interest of our membership, we have sought a common denominator to serve as the basis of our recommendations. This common denominator is the national interest. The Trade Agreements Act, by lowering barriers to trade, results in a net gain to the economy and hence is in the national interest. That is why the chamber supports it. Those policies which encourage and foster the growth of international trade lead to increased productivity and more efficient production, and bring about lower costs and lower prices. Thus trade raises the level of real income and our standard of living. The concept of the national interest in trade policy must start with the principle that the objective is to strengthen the national economy. Beyond that, the national interest must be concerned with the relation of trade to the defense and security of the United States, including its effect on foreign relations. H. R. 12591, as passed by the House, would renew the Reciprocal Trade Agreements Act with certain changes. The national chamber makes the following recommendations: 1. That the act be extended for 5 years as provided in H. R. 12591. This is essential for consistent adherence to a policy of expanding world trade. 2. That the President also be granted authority to lower tariffs on a gradual and selective basis in return for trade benefits from other countries. The alternative methods of reduction set forth in the bill appear sound. Action under this authority would, of course, be subject to the peril point procedures of the law and to the escape-clause safeguards. 3. That the proposal (contained in sec. 3 of the bill) not be approved which would authorize the President to raise duties as much as 50 percent above the duties in effect January 1, 1945, as in present law. The present Trade Agreements Act already provides considerable authority in this direction. The new proposal would use the base rates of July 1, 1934, the highest in our history. This would not seem to be realistic, necessary or desirable. The existence of such authority would increase the element of uncertainty in United States trade policy. To include in the act a provision essentially capable of vitiating the program's objective of fostering the healthy expansion of trade seems inconsistent. 4. That the proposal for technical change in peril-point action, directed to achieving more prompt and effective consideration of serious injury cases, be approved. With reference to the proposal by which the Congress may, within a 60-day period and by a two-thirds vote of each house, overrule presidential disapproval of the Tariff Commission's recommendations making them final-the chamber finds no essential objection. Such a provision would not be inconsistent with implicit authority which the Congress now has. But the President's responsibility for full consideration of questions affecting the national interest in escape clause actions should be maintained. Such considerations as the requirements of the domestic economy and the effect of the findings and recommendations of the Tariff Commission on other producers and consumers in the United States, including their effect upon the jobs of those producing for export, as well as foreign policy implications, are of vital importance to the proper and effective administration of the Trade Agreements Act. The effect that one coures of action or another would have upon the best interests of the United States is peculiarly within the province of the President, as a constitutional responsibility. The Tariff Commission, on the other hand, has only a limited responsibility-to find whether or not in its opinion there is injury to a domestic industry as a result of imports and to make recommendations to the President based upon such findings. It should be kept in mind that the act contains provisions to insure that tariff reductions are carried out on a selective basis in such a way as not to seriously injure domestic industry. These limitations on the President's authority are contained in the peril-point amendment which requires Tariff Commission investigation of all concessions before they are made, and in an escape-clause provision which permits the President, upon the recommendation of the Tariff Commission, to withdraw or modify a concession after it has gone into effect. Further, both the Tariff Commission and the President are at present required to report separately to the Congress annually on the program, with divergent decisions reported as they occur. The reciprocal trade agreements program is the means through which the Ûinted States is able to participate in cooperative measures to expand international trade by reduction of tariffs and other trade barriers on a mutually advantageous basis. International trade is a powerful weapon for peace. Moreover, it is essential to the continued expansion of the economy of the United States. It benefits the consumer, spurs long-term economic growth and conforms to the spirit of a free enterprise economy. The program, a basic segment of United States foreign economic policy for a quarter century, faces new challenges, bringing new urgency for maintaining effective negotiating power and making the extension of a workable Trade Agreements Act most imperative. An aggressive offensive in the economic field is a new and dangerous weapon in the Soviet's quest for world domination. Russia seeks to tie other areas to the Soviet orbit and to exploit any possible trade difficulties of the free world. It must be remembered that many of the countries friendly to the United States must trade to live. If they cannot trade with us on mutually agreeable terms, they will surely trade with others. This is evident in the fact that the U. S. S. R. sold $2.1 billion worth of merchandise last year to the free world-a startling increase of 70 percent in 4 years. In no area is there perhaps a sharper contrast between the policies and practices of the U. S. S. R. and the United States than in the trade field. Their efforts to expand trade with the free world have been primarily through bilateral trade agreements and specific barter deals— completely government controlled. The United States, on the other hand, is dedicated to the concept of free nations bound together by peaceful trading relationships. Its foreign trade is carried on by private traders whose decisions are based on consideration of the market place-not by political motivations. The objective should be to minimize Government controls over trade so that the influence of free competitive enterprise can have maximum impact. 27629-58-pt. 1—42 A competitive system, responsive to the market, serves to stimulate efficient production, lower costs, and lower prices. It serves also to raise real income and standards of living. Today the United States has a unique role among the free nations. With only 6 percent of the world's population, the United States produces about 40 percent of the world's goods and services. Our output is almost twice that of the United Kingdom, France, West Germany, and Italy combined. We buy 15 percent of the world's imports, and we account for 20 percent of the world's exports. The Reciprocal Trade Agreements Act, conceived as a means of easing the barriers to United States exports and imports, has become a symbol of international trade cooperation. Ås the world's greatest trading Nation, the United States has a tremendous stake in maintaining the most effective negotiating authority and bargaining power possible. In 1957, for example, United States exports were valued at $19.5 billion, with imports amounting to $13.2 billion. It has been officially estimated that 4,500,000 United States workers are dependent on foreign trade for their jobs. The United States consistently exports more than it imports. Generally speaking, foreign countries can pay for United States goods only to the extent that they can earn dollars by selling to the United States. In recent years, however, a large part of the dollar difference has been covered by various foreign assistance and mutual defense programs. While these may be justified, it is nevertheless true that a consistent and continuously large export surplus financed out of the tax revenue is neither economic nor in keeping with the position of the United States as a creditor nation. It must be remembered that in addition to increasing the dollar exchange available abroad for potential buyers of United States exports, a primary national economic gain from foreign trade centers. in the imports for which our exports are exchanged. Furthermore, not all payments for imports go to other countries. Few people seem to realize that a considerable percentage of many of our imports come from foreign subsidiaries and branches of United States companies. Many United States corporations in an effort to meet the expanding raw material needs of modern industry, have risked capital and have explored and developed new and rich resources in many parts of the world. For instance, in 1955 (the latest figures) United States producers abroad supplied 88 percent of crude oil imports; 96 percent of aluminum imports (including bauxite); 87 percent of nickel imports; 72 percent of copper imports; 85 percent of iron imports; 50 percent of lead imports; and 78 percent of imports of paper-base stocks. In total, United States companies abroad provided 23 percent of our 1955 commodity imports. Thus, many American companies benefit by being able to sell imports to the United States. Our own resources are not sufficient to afford the wastes that come from general and grievous departures from the principles of liberal trade policy. Criticism of the Reciprocal Trade Agreements Act has centered largely on the matter of serious injury to domestic industries by competitive imports. While the producers who may be affected ad versely by imports represent a relatively small segment of American production, they are nonetheless an important segment and the incidence of injury cannot be disregarded. It is, therefore, vital that a means for affording reasonable relief for injury to such producers be continued in the law. For this reason, also, the chamber has stressed the need for the gradual and selective adjustment of tariffs, with provision for modification or withdrawal of concessions in order to deal with unforeseen developments seriously injurious to domestic producers. We believe that proper safeguards exist in the present law and that tariff relief for industries during a period of adjustment is adequately provided. The proposal to speed up escape-clause action is a desirable one. In all cases, determination of injury due to imports should be judged in the light of the national interest. Only in this way can the sound objectives of reciprocal trade be attained, and all segments of our economy best be served. We face still another challenge today-the European Common Market and free-trade area. The threat of being shut out of traditional European markets by high tariffs is a matter of acute concern to United States businessmen and labor. The gradual elimination of trade barriers among the six Common Market countries, coupled with the maintenance of a common tariff against the outside world, will place American exporter to the area at an increasing disadvantage vis-a-vis their competitors within these countries. Some leading United States industries plan a partial shift from exporting to the area to investing within the area by setting up branches or subsidiaries in Europe or by licensing processes to existing European firms. In this way, United States firms may produce for the Common Market area and at the same time avoid the tariffs which may be imposed against our exports to the Common Market countries. American investment will be attracted, also, by the advantages of large-scale operation in a new market of 160 million consumers. But a continuing flow of United States foreign investment abroad cannot take place indefinitely unless earnings from such investments can be withdrawn in dollars. The longer run solution lies in expanded trade. The United States must be willing to import on a sufficient scale to enable other countries to meet dividend, interest, and amortization requirements, as well as to pay for the goods they currently buy from the United States. Both the initial and long-range gains to the United States economy can only be realized by effectively bargaining with the Common Market on a reciprocal basis. Representatives of the European Common Market have stated: The European Economic Community stands ready to negotiate reductions in the common tariffs provided other countries meet us half way. Thus, it is more important now than ever to maintain the President's negotiating authority in an effective form. Since policies regulating foreign trade so strongly influence many sectors of the economy they are bound to arouse controversy. |