Senator MALONE. In other words, if you have an import permit which cuts the amount of goods that they allow to come in at any time, they can allow a certain type to come in if they want them, and if they do not want them they can just refuse a permit; is that it?

Mr. TREVOR. That seems to be the way it works.

Senator MALONE. And it is done by Executive order in most cases. They do not have to go through a Congress like we have to do here, in most cases, do they?

Mr. TREVOR. I really could not answer that.

Senator MALONE. Well, I will answer that for you: That it is done by Executive order in about 98 percent of the cases.

Now then, if the only way you can sell in that market is to have your plant located there, then it is an incentive for American plants and others to operate there if they want to get into the market, is it not?

Mr. TREVOR. It certainly is.

Senator MALONE. If we, on the other hand, have a virtually free trade policy, and we live up to it, lowering our tariffs and not having such import or exchange permits or manipulation of the price of our money in terms of their money, then they know they can have this market, also.

Mr. TREVOR. That is right.

Senator MALONE. With their lower cost labor. And the machinery, of course, is just the same as we use here and in some cases, when it is a later plant, it is better machinery than they have in the plants here, is it not?

Mr. TREVOR. That is right, and I think that is one of the reasons these companies are moving to Scotland. They paid less, they are building brandnew plants, and ultimately they are going to ship their products back to this country.

Senator MALONE. The ECA, then, finds it is not advantageous to recommend that they buy American goods with American money, is that it?

Mr. TREVOR. Well, the ECA is trying or was trying to strengthen the European countries, and their theory of strengthening seemed to be that they should not import anything from the United States. Senator MALONE. You mentioned imported steel. As to these lower wages and lower costs for the higher grade steel, is that having its effect in imports in this country?

Mr. TREVOR. Well, apparently. Barbed wire, 60 percent coming in from abroad now. I am not too familiar with all the different grades of steel, how it affects each grade separately. I could not answer that question.

Senator MALONE. Have we, in the last little while, made it very clear that we intend to divide our markets with certain European and Asiatic nations; in other words, preserve only a certain percent of it, if any, for the United States?

Mr. TREVOR. I have never seen anything which indicated we really planned to preserve any of it for our domestic manufacturers.

The ECA policy is to buy abroad wherever possible, and not buy anything in this country.

Senator MALONE. Well, there is some pending legislation which I approve only because there is no other way of keeping our Amer

icans in business. This morning I think a bill was reported out of the Interior and Insular Affairs Committee on certain minerals, whereby the Government will pay a subsidy on several minerals up to a certain amount, which proves to be about 25 to 30 percent of the market. Then they do not subsidize beyond that. So it means our own producers would have a maximum of that amount of the market, and the prices set would seem to be inadequate, so they may not even get that much.

So that in carrying out what was announced many years ago— by "many years," I mean 10 or 15 years ago that it was necessary to divide the American market with the nations of the world to preserve peace and have the tranquillity that everybody wants so badly.

You were not aware of that bill?

Mr. TREVOR. Well, it slipped my mind at the moment. I have seen it.

Senator MALONE. It is a start, but it is a policy that naturally the only way we can sell anything abroad is to subsidize it, like our grain and other materials; is that about right?

Mr. TREVOR. I think so. I think somebody testified before the House Ways and Means Committee that 42 percent of our agricultural exports are subsidized.

Senator MALONE. Well, we have given them approximately $70 billion. There is some argument about it, 1 or 2 billion either way, which does not seem to make much difference but that is since World War II, to build plants for them to gain dollar balances against our gold, and for other purposes.

A good deal of it is going to keep certain dictators in power, or at least that is the effect of it.

You talked about certain credits they were building up with the money we give them, and its effect on the gold supply and investments of this country. I think that should be made a little clearer.

Mr. TREVOR. Well now, I had a clipping just a couple of days ago from the Wall Street Journal of June 24, 1958:

Foreign nations hike gold dollar reserves in first period by cutting buying in the United States. Foreign countries increased their holdings of gold and dollar reserves by $546 million in the first 3 months of 1958, largely by reducing their purchases in the United States, the Commerce Department reported.

Senator MALONE. Well, that seems to be very clear, and you are familiar with the investigation this committee is carrying on on the status of our economic structure. Both Secretary of the Treasury Humphrey, then Secretary last fall, and Mr. Martin, the Chairman of the Federal Reserve Board, testified that if all of the dollar balances which could be converted to nations' balances abroad and come under the policy of our paying dollar balances in gold, if they were all presented within a reasonable time, we would have about $5.7 billion worth of gold left out of the $22.4 billion held in our Federal depositories.

You are familiar with that testimony?

Mr. TREVOR. I saw a statement, I think it was in the U. S. News and World Report-I do not have it with me-to the effect if all of the foreign balances were taken out in gold, there would be a deficit of $1.7 billion in gold as cover for our currency; that a con

traction would have to be made, and the outstanding currency or the gold coverage of the currency would have to be reduced by that

amount.

Senator MALONE. I think it would be at least that bad. But we get a report every so often from this Federal Reserve Board that we have on deposit $22.4 billion (it varies slightly from time to time) indicating we own that much gold, which of course we do not.

The Russian cold war-of course, I do not see anything cold about it, because these European nations have recognized Communist China; they have traded with them ever since World War II. They had a list of strategic and critical materials, a copy of which I secured when I was in Paris in 1955, but these materials were all going to these countries.

We were shipping these materials to European countries, who in turn shipped them to the Iron Curtain countries. Then if Russia wanted them they were shipped right on through. That was proven here, like on copper, before the committee.

Do you know anything about this situation, or do you think there is anything cold about this war we are supposed to be having on trade? Mr. TREVOR. Well, I gave you some data in my prepared statement about the opinion of the financial editor of the New York JournalAmerican which seems to be borne out, as far as I can make out, by other evidence. I haven't got any with me.

Senator MALONE. Well, is it not a peculiar situation when every European nation has to export to some other nation to live, and we furnish the money to build their manufacturing and processing plants, and to build mines?

There was no substantial market in any of those nations, even for their own products, was there, with their low wages? Do they not have to export in order to live? Is that the argument?

Mr. TREVOR. Yes, I think so. I think they specialized in different things. They are smaller countries than we are.

Senator MALONE. I mean like England. They have lived off exports to their colonials for 300 years; have they not?

Mr. TREVOR. Well, they have lived off their income of their investments abroad to a large extent. Actually, the exports of England have been inadequate without the investments made very early in the game in South America and Africa. That income is coming back. They invested in this country. I think there are still large British holdings of real estate, in the South particularly.

Senator MALONE. That came about through controls of the markets of lesser nations abroad, did it not?

Mr. TREVOR. Well, I can say originally it came about by conquest. Senator MALONE. That is right.

Mr. TREVOR. That gave them control of the market.

Senator MALONE. The colonial system died, of course, when the airplane dominated the British Fleet in World War II. They have been living on momentum since that time through trade agreements where they can get the markets of such a nation as America. We broke away from the colonial system and the interminable trade wars of Europe in 1776, but now we have joined them again through this system of free trade for the United States while allowing them to protect their own markets-so we are becoming an economic colonial again; are we not?

Mr. TREVOR. Well, we are heading in that direction. Senator MALONE. And with them having no responsibility for our welfare at all.

Mr. TREVOR. Well, they want, according to Butler, the Chancellor of the Exchequer, they want to sell $800 million more than they buy. Senator MALONE. Well, that is a terrific ambition, and it would be wonderful if every nation in the world could do that.

I do not want to prolong the examination. You have made a very fine statement. What do you recommend in regard to this act? Mr. TREVOR. I recommend that some provision

Senator MALONE. Your Patriotic Societies.

Mr. TREVOR. That some provision be made to restrict the money that is obtained by selling goods in this country in such a way that it would be spent on our exports. That is what the President says the money does, and of course it doesn't. It seems to me the advocates of this legislation should not object to any provision which made the law do what they say it does do but does not do.

Senator MALONE. How did we get in this situation to start with? For 150 years we seemed to do pretty well. We just had a tariff or a duty, as provided in article I, section 8 of the Constitution, regulating it so that it evened or balanced the wages and taxes, the cost of doing business, here and in the chief competing country so that there was no advantage of low wages.

Mr. TREVOR. That was the intention of all recent tariff Acts, certainly.

Senator MALONE. For 150 years under that policy Congress did not go into how much of our market they were going to give to a foreign nation or whether or not they should let you survive in whatever business you were in, or when you had reached a peril point where you were being destroyed that they would then take up a collection for you or give you some specific advantage. When did Congress get into all this business? What put them in it?

Mr. TREVOR. That seemed to start in 1934, I think, when the trade agreements started.

Senator MALONE. Do you know what happens if the Trade Agreements Act is not renewed?

Mr. TREVOR. Well, I believe it goes back to the Smoot-Hawley legislation, if we denounce our agreements and break off all the GATT arrangements.

Senator MALONE. We revert to the 1930 Trade Agreements Act, which was a flexible import fee or tariff act. Upon 2 months' notice to the Secretary-General of the United Nations all of the articles covered by multilateral trade agreements revert to the Tariff Commission, an agent of Congress, on a statutory rate; and on 6 months' notice to nations party to bilateral treaties that the State Department has made, all those products revert on the same basis.

Do you know what that so-called Smoot-Hawley Tariff Act really provided?

Mr. TREVOR. I believe it provided for an equalization of the ge rate costs of products in the United States as against the world. Senator MALONE. Against the chief competing nation on each product.

Mr. TREVOR. Yes.

Senator MALONE. Well, is that not exactly what you need?

Mr. TREVOR. Well, it would seem so if you want the American workmen to have the jobs.

Senator MALONE. In other words, if you want the American workingmen and the American investors to have equal access to their own market then you would just revert to the flexible adjustment of the duty or imposts or tariff, whatever you want to call it, and let it equalize the wages and the cost of doing business here and in the chief competing nation abroad; would you not?

Mr. TREVOR. That is right.

Senator MALONE. Is that not what everybody is trying to say, only just afraid to say they are against this monstrosity that was passed in 1934?

Mr. TREVOR. Well, I suppose there are some people who just want to help the foreigners and don't care about this country; I don't know. Senator MALONE. Well, I am not so sure of that.

I have been in all these countries and I have tried to analyze it. I thought I had to see all our star boarders before I could vote intelligently. I think you hit the nail on the head a while ago when you said it was a phenomenon in this country for American producers to be asking for free trade. But aren't they Americans that are interested in these plants abroad, to furnish this market?

Mr. TREVOR. That is right.

Senator MALONE. Well, isn't it just that simple?

Mr. TREVOR. It certainly is simple.

Senator MALONE. Then it is the international investor versus the American workingman and American investors; isn't it about that simple?

Mr. TREVOR. It certainly seems so.

Senator MALONE. Then would the Tariff Act of 1930 need any substantial improvement if we reverted to it as we know we can do just by sitting still and not extending this act?

Mr. TREVOR. I should not think so.

Senator MALONE. Mr. Chairman, I think that Mr. Trevor has made a fine witness, and I think it ought to set some of our Members of the House and Senate thinking very seriously about this act.

Senator CARLSON. Senator Bennett?

Senator BENNETT. I have just one question.

As I read your statement on the bottom of page 9 you believe the American price for gold at $35 an ounce is actually holding up the world market and that if we cease to buy gold freely that the price of gold would go down?

Mr. TREVOR. That is apparently the view of the Canadian Federal Minister of Finance.

Senator BENNETT. Well, you present it as your view.

Mr. TREVOR. It is my view too.

Senator BENNETT. I think that will be of interest to our friend from Nevada because the gold miners of America figure that if we would just set the price of gold free it might double, and that the American Government is actually keeping the price of gold down and preventing the development of local gold resources. What do you have to say to that?

Mr. TREVOR. Well, my personal opinion is that the price of gold would not go up. I think the market should be free in this country