years and, in this connection I would like to quote what the Supreme Court said of the intention of Congress in enacting the flexible tariff:

"Its plan was to secure by law the imposition of customs duties on articles of imported merchandise which should equal the difference between the cost of producing in a foreign country the articles in question and laying them down for sale in the United States, and the cost of producing and selling like or similar articles in the United States, so that the duties not only secure revenue, but at the same time enable domestic producers to compete on terms of equality with foreign producers in the markets of the United States." (Hampton v. United States, 276 U.S. 394, 404.) [Italic added.]

In asking Congress to enact the Trade Agreements Act in 1934, President Roosevelt gave "assurance that no sound and important American interest will be injuriously disturbed." Secretary of State Hull testified that the agreements would not be negotiated "in a way that would result in injury or hurt to our own country." In reporting the bill, the Ways and Means Committee said: "Legislation is necessary for the protection of American industries, many of which employ only a few hundred American laborers. *** It is clear that the authority which H.R. 8687 would delegate to the President must be very carefully exercised so as not to injure manufacturers or domestic producers." (H. Rept. 1000, 73d Cong., p. 13.)

President Truman made a similar declaration in asking Congress to expand the tariff-cutting power in 1945 and, in 1947, backed this up with an Executive order establishing the escape-clause procedure.

Congress took the logical next step in 1951 when it enacted the escape clause into law, along with the peril-point procedure.

The United States has not been alone in espousing the protective tariff principle. Most other foreign countries, including especially the Common Market countries, both individually and collectively, have followed and continue to follow, the principles of tariff protection.

From 1931 to 1934, U.S. import duties averaged about 50 percent ad valorem. In 1960, they averaged about 121⁄2 percent. While our tariff system was being pretty well dismantled, the Common Market countries made much smaller reductions in their tariffs, and often nullified even these reductions by quotas and exchange controls. So when I say that other countries, like the United States, employ tariff protection, I mean they use much more protection than we do.

ADMINISTRATION PROPOSAL TO REVERSE POLICY

With no recognition of the fact that American industries and their employees have prospered under the policy of tariff protection, the President asks Congress to repudiate that policy and give him the power to dismantle what is left of our tariff system.

Section 102 of the bill proposes a new system of free trade, with temporary subsidies to American industries and workers that will be put out of business by the new policy. Section 201 gives the President carte blanche power to enter into trade agreements, without any standard as to whether or when to do so, and to proclaim reduction or elimination of duties. This section says duties should not be lowered more than 50 percent, but other sections provide for complete elimination of duties. Probably the most important is section 211 which provides for free trade in broad categories if the President determines that the United States and the European Common Market account for 80 percent of world exports, not counting Communist exports to Communist countries. The President could probably find a statistical base for such a determination on steel, but he could make such a determination without a statistical base, and his determination is "final and conclusive" and not "subject to review by any court" (sec. 404).

Section 248 repeals our present policy that trade-agreement concessions shall not continue in effect when they cause serious injury to domestic industry. (Sec. 6(a), Trade Agreements Extension Act of 1951.) It also repeals the present peril-point and escape-clause provisions.

Title III contains the new subsidy provisions. It purports to establish a new escape clause (secs. 305, 306, 351) which we think is a sham and a delusion. From here on, the President, not the Congress, will determine what is "in the national interest." (Sec. 351.)

BASIS FOR TARIFF BARGAINING

From 1934 to 1961 the basis of the trade agreements program for tariff bargaining was one of selective product-by-product negotiation which was supposed to avoid injury to the industries of the negotiating countries. The United States negotiated agreements with 58 countries, including those which have more recently formed the European Economic Community or Common Market. Since the average of U.S. tariffs on dutiable imports has declined by around 75 percent, it can scarcely be said that this basis was not effective in cutting our tariff. Now the President says the old basis is inadequate.

In his December 6, 1961, speech to the National Association of Manufacturers the President said: "We can no longer haggle over item-by-item reductions with our principal trading partners, but must adjust our trading tools to keep pace with world trading patterns-and the EEC cannot bargain effectively on an itemby-item basis." In his January 25, 1962, message to Congress, the President asked for authority to negotiate on broad categories of products.

The Common Market countries have backed up the President's demands with a warning that the President's tariff-cutting efforts may be futile if the bill contains peril-point or other escape clauses which would permit the United States to protect its industries by withdrawing prior concessions (Congressional Record, Feb. 8, 1962, p. 1902; N.Y. Times editorial Feb. 9, 1962).

This Common Market warning raises some interesting questions, such as whether they are now dictating U.S. policy. It also confirms that their economic conditions have improved, and that they are now "eating plenty of red meat." It would be interesting to learn when it was discovered that the Common Market cannot bargain effectively on an item-by-item basis, and what were the probative facts leading to that discovery. As noted above, all of the countries that compose the Common Market have previously bargained with us on an item-by-item basis. Our State Department has told us these negotiations were successful and mutually beneficial.

The selective product-by-product basis has been formally incorporated in GATT in article 28 bis. Although the basis is itself old, going back to 1934, article 28 bis was not of ancient heritage that was forced down the throats of the Common Market countries as a condition of their admission to GATT. Rather, it was negotiated several years after all of them were in the general agreement and almost contemporaneously with the negotiation of the Common Market treaty. Article 28 bis of GATT took effect October 7, 1957, less than 3 months before the Common Market treaty.

The Common Market has itself bargained on an item-by-item basis in the formulation of its common tariff. GATT provides that the duties imposed by a customs union "shall not on the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce applicable in the constituent territories prior to the formation of such union * *." (Art. 24, par. 5.)

For many products France and Italy had high duties (and small imports), Germany had intermediate tariffs (and moderate imports), and the Benelux countries had lower duties (and substantial imports) at the time the Common Market treaty took effect. Some thought that in determining the general incidence of these duties, account should be taken of the size of the import trade so that something like a weighted average tariff should be computed. This course would favor imports into the EEC, but it was rejected by the EEC which adopted for most products a simple average of the four rates previously applied by the four constituent customs territories (Belgium, Netherlands, and Luxembourg, already being a single customs territory). The basis used resulted in higher duties than would have resulted from a weighted average.

In the 1956 tariff negotiations at Geneva, the United States negotiated itemby-item with the High Authority of the European Coal and Steel Community, the constituent members of which are the same as the members of the EEC. Of this, our State Department said: "This development will strengthen the position of the High Authority and the concessions made by France, Italy, and Germany through the High Authority will be the first step toward the harmonization of the external tariffs of the Community." (Department of State Publication 6348, p. 1.)

Finally, in the 1960-62 negotiations at Geneva, we bargained on an item-byitem basis with the Common Market and have been told by the administration that these negotiations were highly successful.

In view of this series of successful item-by-item negotiations by the members of EEC, by the Coal and Steel Community, the precuror of EEC, and by the EEC itself, it is amazing to hear it now declared that EEC cannot bargain effectively on an item-by-item basis. Is it now considered that the concessions we granted in 1956 to the Coal and Steel Community were inconsequential, or that the negotiations culminating in the Common Market were ineffective? We doubt it.

In the absence of a plausible explanation of the about-face with regard to itemby-item bargaining, we are constrained to regard it as lacking in logic, and an effort to stampede Congress into a radical abdication of its constitutional function by delegating it to the President.

It would seem that the EEC has, with the endorsement of our own President, repudiated article 28 bis of GATT. They now reject item-by-item negotiations as provided in article 28 bis.

It would also seem that the EEC has also repudiated article 19 of GATT with which our escape clause procedure is in agreement. At least, they have repudiated it so far as use by the United States is concerned. This action is in sharp contrast to the regulation of the Common Market regarding the importation of fruits and vegetables which was adopted just before they warned the United States against escape clauses. The Common Market fruit and vegetable regulation provides in part: "to insure the maintenance of stable prices on the markets of the Community, the quality norms shall apply to products originating in third countries; and that it is, moreover, appropriate that escape clause action may be taken with respect to abnormally low-priced imports from these countries." (Foreign agricultural circular, U.S. Department of Agriculture, FDAP 2-62, February 1962, p. 2.)

Thus, although warning the United States against escape clauses, the Common Market freely adopts them. Who was it that said, "We must seize the initiative for free trade before the Common Market becomes protectionist"?

ESCAPE CLAUSES COMPARED

Appended to this statement is a parallel-column comparison of the present escape clause and the escape clause as provided in H.R. 9900. To give a brief presentation, we have had to paraphrase some of the language. In his message to Congress, the President said escape clause relief will continue to be available with more up-to-date definitions. What he meant was that protec tion of American industry is not up to date. The comparison shows that all the protective features of the escape clause are eliminated by H.R. 9900.

It should be noted that the bill repeals the provision for initiation of escape clause action by Congress. This is in line with the philosophy that the President should have unbridled control (par. 1 of tabulation).

The present test is whether imports have increased as a result of the existing tariff rate. The bill makes it necessary to prove that imports have increased as a result of the trade agreement concession. In 1951 the Chairman of the Tariff Commission testified that the burden of proving that a concession had caused increased imports was very difficult. This was the reason for adoption of the present language in 1951. Now the administration wants to saddle American industry with an impossible burden of proof (par. 2 of tabulation) (hearings before Senate Finance Committee on H.R. 1612, 82d Cong. p. 1349 et seq.).

The bill eliminates the possibility of action unless imports are increasing in absolute volume as distinguished from a relative increase, such as would exist when imports maintain their level in the face of a decline in domestic production (par. 3 of tabulation).

Present law establishes as evidence of injury alternative criteria of factors that are crucial to the private enterprise system-downward trend of profits, employment, prices, wages, and sales. The bill establishes cumulative criteria, including "prolonged and persistent inability of firms to operate at a profit" (par. 4 of tabulation). It looks as though the industry has to be dead before it can be determined to be injured. If, as we hope, the committee decides to retain the substance of the present escape clause, we suggest that its report emphasize that the criteria are alternative. The 1951 legislative history includes a statement by the Tariff Commission that profit-and-loss data on individual products are sometimes not available (hearings, Senate Committe on Finance, H.R. 1612, 82d Cong., p. 1327). More recently, there seems to be some thought at the Tariff Commission that there can be no relief unless profit-and

loss data are supplied on the individual product.

See, for example, dissent

ing view in escape clause report on straight pins, March 1962.

The bill does not require a hearing by the Tariff Commission (par. 5 of tabulation).

The bill does not provide for recommendations for relief from the Tariff Commission to the President (par. 6 of tabulation).

The bill does not provide for publication of the report of the Tariff Commission (par. 7 of tabulation). Before 1951, there were bitter complaints that industries were given the brushoff without statement of reasons. The administration does not want statements of reasons.

Under present law, the President must report to Congress if he rejects a Tariff Commission recommendation for relief. The bill omits this provision. Congress is to have no function on the tariff (par. 9 of tabulation).

The bill also omits provision for congressional review. We discuss this subject a little later.

While it is not entirely clear, the bill apparently contemplates that there shall be no relief unless the industry suffers a prolonged and persistent loss on an overall basis. Thus, there could be no relief even if all our mills were losing money on tool steel, so long as the profits on other products enabled the industry to break even. Does Congress really want to present this highly strategic industry with the alternative of ceasing production of tool steel or producing it at a loss?

Thus, in bringing the escape clause up to date, the administration proposes to eliminate any real basis for relief from injury caused by imports. We hope Congress will not fall for this snow job.

EMPLOYMENT

In his January 25, 1962, message to Congress, the President said: "Moreover, we must reduce our own tariffs if we hope to reduce tariffs abroad and thereby increase our exports and export surplus. There are many more American jobs dependent upon exports than could possibly be adversely affected by increased imports. And those export industries are our strongest, most efficient, highest paying growth industries.

"It is obvious, therefore, that the warnings against increased imports based upon the lower level of wages paid in other countries are not telling the whole truth."

At about the same time as the President sent his message to Congress, the Department of Labor released a report entitled "Domestic Employment Attributable to U.S. Exports, 1960." In this report, it is estimated that our 1960 exports made jobs for 3.1 million workers.

The report included both direct and indirect employment, and it included the servicing, merchandising, and transporting of the goods to foreign countries. It apparently assumed that all of the materials and components in the exported articles were of U.S. origin. It assumed that the bunker fuel taken on by both U.S. and foreign vessels was of domestic origin. It added Government export payments for farm products, and ocean transportation, insurance, etc.

The report treated goods shipped to Puerto Rico as exports. Of course, Puerto Rico is part of the U.S. customs territory. Goods are shipped between the mainland and the island duty free, and goods imported into Puerto Rico from foreign countries are subject to the same tariffs as goods imported into the mainland. By virtue of the "Puerto Rico adjustment" about 105,000 jobs were added to the total claimed to have been generated by exports. Do we, or do we not, want to tell the whole story?

The report translates depreciation of domestic facilities into export jobs. It includes unpaid family workers on farms.

One cannot accept the conclusion that the 1960 exports generated 3.1 million jobs without rejecting the President's statement that the workers in our export industries are the highest paid.

Table 1 of the report shows $22,055.3 million as the total value of industry output attributable to exports. Table 2 shows a total of 3,081,700 workers producing that value. This comes to $7,114 per export worker.

In 1960 our "private sector" gross national product was $457.1 billion. Table 2 of the report shows 52,865,000 workers in that sector. This comes to $8,646 per worker, or 21 percent more than the average for our export workers, if 3.1 million workers owed their jobs to exports.

It is recognized that these figures are estimates of value of output, rather than wages, but wages are, on an average basis, so closely related to value of output that the value ratios would approximate the wage ratios.

Thus, either the estimate of jobs generated by exports is substantially inflated, or the President was wrong in saying the export workers are higher paid than the average.

In his testimony on March 13, 1962, Secretary of Labor Goldberg said that about 60 percent ($9 billion) of our imports are raw materials, supplies, and semimanufactured goods which are necessary for the U.S. economy, and that only 40 percent ($6 billion) are of types that might affect sales of U.S. products. He said that if all the $6 billion were excluded from our market, no more than 900,000 jobs would be needed to fill the gap.

He said, on the other hand, that the $9 billion of materials made jobs for 900,000. Adding this to the 3.1 million jobs he estimated as flowing from exports, he gets a total of about 4 million jobs resulting from foreign trade.

Having found that the 3.1 million job estimate is substantially padded, we wonder if the Secretary may not have underestimated the jobs that would be needed to replace the $6 billion of competitive imports. But since we have no data on how the estimate was derived, let us accept it for the present and examine the Secretary's logic.

He says that if we excluded the $6 billion of competitive imports to create 900,000 jobs, we would lose up to 4 million jobs, making our loss 3 or 4 to 1.

The Secretary assumes that if we cut down on competitive imports, other countries will refuse to sell us raw materials, so that we will lose all of our foreign trade. Is this realistic? We think not. As long as the United States is a profitable outlet for coffee, tin, crude rubber, etc., foreign producers will continue to sell here.

A

To our knowledge, no one suggests we should exclude all competitive goods from importation. What the Secretary has done is to give a slick statistic exaggerating the benefits of foreign trade. Such a numbers game is not worthy of serious consideration.

GETTING THE UNITED NATIONS INTO THE ACT

The bill (sec. 211) provides that tariff bargaining be done on the basis of broad categories of goods, as determined by the Standard International Trade Classification "in the edition current" when the President asks the Tariff Commission for advice about proposed negotiations. This is a United Nations publication. The idea of using broad categories is the antithesis of the idea of protecting small industries, such as the tool steel industry. For example, SITC category 673 is for "iron and steel bars, rods, angles, shapes, and sections (including sheet piling)." While trade in tool steel is most important to our tool steel industry, it is minuscule when tonnage steel is in the same group. For example, in 1960 when U.S. imports of tool steel were about 12,000 tons, total U.S. imports of steel were 3.3 million tons. Thus, if Congress thinks the strategic tool steel industry should have an opportunity for protection, the broad category basis of bargaining must be rejected.

Under the bill, the U.N. classifications would control. Thus, by its power to change its classifications, the U.N. would, in effect, be determining the basis for U.S. tariff classification. Thus, would Congress be delegating to the United Nations part of its constitutional power of tax classification.

Any idea that the U.N. would shirk from such activity is pure fantasy. We have recently seen the OECD telling the United States we should raise our budget (New York Times, Jan. 1, 1962).

We are not against the United Nations, and we are not against cooperating with friendly countries on both economics and political matters, but we are convinced the United States should not give up its right, in the final analysis, to determine what is good for us.

CONGRESSIONAL REVIEW OF TRADE DECISIONS

When the President enters into a treaty under the powers granted to him by the U.S. Constitution, the treaty has no validity until two-thirds of the Senate give their advice and consent (Constitution, art. II, sec. 2). This process has not been followed in the negotiation of tariff-cutting trade agreements, because these agreements have not been considered "treaties" in the constitutional sense. The theory is that the President's power to cut tariffs comes not from the Con