Restrictions Under the Sugar Act

Beginning with the Sugar Act of 1934 51 and continuing with the Sugar Acts of 1937 52 and 1948,53 all sugar for the United States market, whether domestic or imported, has been limited by absolute quotas, except during periods of emergency when the President has exercised his authority to suspend the quotas. On September 1, 1951, the President approved legislation, which became effective January 1, 1953, to extend the Sugar Act of 1948, in amended form, for 4 years. On May 29, 1956, the President approved legislation which further amended the Sugar Act of 1948 and extended it for a period of 5 years from January 1, 1956.55

Under the system of restrictions employed, the Secretary of Agriculture determines the quantity of sugar needed each year to meet the requirements of consumers in continental United States, taking into account "prices which will not be excessive to consumers and which will fairly and equitably maintain and protect the welfare of the domestic sugar industry." The quantity is then allocated, in the manner specified by law, among the producing areas in continental United States and its outlying territories and possessions and in the Republic of the Philippines, Cuba, and other foreign countries.

57

Except for the Philippines," the allocations have been apportioned according to the shares of domestic consumption that were supplied by the respective sources before the controls were imposed. Under current legislation, the allocations are made in two stages. First, for a quantity of sugar determined by the Secretary of Agriculture in each year up to 8,350,000 tons, the quotas for domestic areas (continental United States, Hawaii, Puerto Rico, and the Virgin Islands) and the Philippines are absolute quantities. The remainder of the total amount determined by the Secretary of Agriculture (up to 8,350,000 tons) is allocated proportionately to Cuba (96 percent) and to other foreign countries exclusive of the Philippines (4 percent). Second, for any part of the quantity of sugar determined by the Secretary of Agriculture that is in excess of 8,350,000 tons, domestic areas are allocated a 55-percent share and foreign countries other than the Philippines, a 45-percent share. Beginning in 1957,58 the share allocated to

56 Under the Philippine Trade Agreement Revision Act of 1955 the Philippine quota on sugar is fixed at 952,000 short tons. This quota, expressed in terms of 96° sugar (the basis of quota allocation in the Sugar Act of 1948, as amended), is equivalent to about 980,000 short tons.

67 The amount of 8,350,000 tons was that initially determined by the Secretary of Agriculture as United States consumption requirements for 1956.

58 In 1956 any quantity in excess of 8,350,000 tons allocable to foreign countries other than the Philippines was to be prorated to Cuba (96 percent) and other foreign countries (4 percent).

foreign countries other than the Philippines has been prorated to Cuba (29.59 percent), Mexico (5.10 percent), the Dominican Republic (4.95 percent), Peru (4.33 percent), and other countries (1.03 percent). Under the legislation in effect immediately before January 1, 1956, any increment in total estimated United States requirements as a result of expanded consumption was conferred on Cuba (96 percent) and on other foreign countries except the Philippines (4 percent). Under current legislation, however, domestic areas are granted 55 percent of future increments in total estimated requirements, and foreign countries other than Cuba and the Philippines are granted considerably larger shares of such increments than they previously had (15.41 percent, compared with 4 percent). The allocation to the Philippines, as noted above, is a fixed amount.

The sugar act provides for reallocation of deficits from any supplying area, and for areas other than continental United States limits the quantity that may be supplied as refined (direct-consumption) sugar. The act also provides for separate and additional quotas on imports of liquid sugar from foreign countries.

Restrictions Under the Philippine Trade Agreement Revision Act of 1955

The Philippine Trade Agreement Revision Act of 1955 59 modified substantially the provisions of the Philippine Trade Act of 1946. Under the 1946 act, most United States imports from the Philippines were dutiable at progressively increasing percentages of the United States rates, but some imports from the Philippines (including a few of the above) were subject to either declining duty-free quotas or absolute quotas.60

Under the 1955 revised agreement between the United States and the Philippines, the absolute quotas established in the 1946 agreement on imports of Philippine sugar 61 and cordage were continued, but those on imports of Philippine rice, cigars, cigar filler and scrap tobacco, coconut

69 Stat. 413.

The United States-Philippine trade agreement was not concluded under the authority of the Trade Agreements Act of 1934, as amended. Both the Philippine Trade Act of 1946 and the Philippine Trade Agreement Revision Act of 1955, which authorized the President of the United States to enter into the original and revised agreements with the Philippines, specifically prohibited the United States from entering into a trade agreement with the Philippines under the authority of the Trade Agreements Act as long as the United StatesPhilippine trade agreement remained in force. Because of the preferential duty arrangement between the United States and the Philippines, and the quotas established by the trade agreement on imports of Philippine products entering the United States, however, the quota provisions of the United States-Philippine trade agreement are discussed briefly here. "The Philippine Trade Agreement Revision Act of 1955 provides that "the limitations on the amounts of Philippine raw and refined sugar that may be entered, . . . shall be without prejudice to any increases which the Congress of the United States might allocate to the Philippines in the future."

oil, and pearl or shell buttons were eliminated. United States imports of Philippine rice ceased to be subject to any quota under the revised agreement; imports of cigars, cigar filler and scrap tobacco, coconut oil, and pearl or shell buttons, however, continued to be subject to declining dutyfree quotas. The schedule of declining duty-free quotas in the revised agreement followed the same pattern as the schedule of increases in United States import duties-that is, the quantity of each of the categories of Philippine articles that is entitled to duty-free entry was reduced, not at the uniform rate of 5 percent of the base quantity each year as provided in the 1946 agreement, but by the same progression as United States import duties were to be increased. The base quantities of the articles on which the annual quotas were to be calculated were the same in the revised agreement as in the 1946 agreement.62

For a detailed discussion of the provisions of the Philippine Trade Agreement Revision Act of 1955, including the schedule of declining duty-free quotas, see Operation of the Trade Agreements Program (9th report), pp. 107-110.

Chapter 4

Developments in Trade Restrictions, Exchange Controls, and Tariffs in Countries With Which the United States Has Trade Agreements

INTRODUCTION

For most of the countries with which the United States has trade agreements, the year from July 1, 1957, to June 30, 1958, was one of considerably greater uncertainty than other recent years. Political disturbances and economic recession in many parts of the world were the basic factors that contributed to the generally unsettled state of affairs. However, uncertainty as to how their economies might be affected by the European Economic Community (Common Market) and by the proposed European free-trade area also contributed to the feeling of uneasiness in many countries. An outstanding development of a positive character was the greatly improved external financial position of the United Kingdom and the renewed prospect of sterling-dollar convertibility to which this improvement gave rise.

During the period covered by this report, a strong feeling developed in many countries that are contracting parties to the General Agreement on Tariffs and Trade (GATT)—especially those that are members of the Organization for European Economic Cooperation (OEEC)—that they had virtually reached the limit in freeing their trade from quantitative import restrictions. Although General Agreement countries that maintain quantitative restrictions for balance-of-payments reasons are obligated to abolish such restrictions when they are no longer justified on balance-ofpayments grounds, some countries have lagged in fulfilling this obligation. In fact, most countries have expressed a determination to employ import quotas or licensing indefinitely to protect a "hard core" of domestic products-particularly agricultural products-regardless of how satisfactory their external financial position may be. Within OEEC, in particular, this attitude has created something of an impasse. The OEEC has not yet fully attained its objective of removing quantitative restrictions on intra-OEEC trade, as called for in the OEEC trade-liberalization schedule. It is, therefore, confronted with the question of what direction its next major steps should take. This element of uncertainty among OEEC countries directly involves the future of the European Payments Union (EPU), which was established in 1950 to make the currencies of the OEEC countries mutually

exchangeable so that they could free their trade of quantitative restrictions and place it on a sound multilateral basis. Several years ago plans were developed to terminate EPU and to replace it with a European Monetary Agreement. The proposed European Monetary Agreement is designed to retain one important feature of EPU-the granting of credits to members of OEEC that require such assistance. However, the life of EPU has been prolonged each year, and the organization's future has now become involved in that of the European Common Market and that of the proposed European free-trade area.

The contracting parties to the General Agreement on Tariffs and Trade and the members of the International Monetary Fund-particularly the former are also deeply involved in any plans for the future of OEEC and EPU, and in the developments relating to the Common Market and the proposed European free-trade area. The General Agreement permits contracting parties to form customs unions or free-trade areas, and establishes rules to assure that the operation of such country groupings will conform to the basic polic ies laid down in the agreement.1

The United States not only is a contracting party to the General Agreement and a member of the International Monetary Fund but also has special relationships with the OEEC countries. It therefore is vitally interested, together with the other GATT and Monetary Fund countries, and with the OEEC countries, in solving the various problems that have arisen in the last year or so. It continues its efforts to persuade the OEEC countries to accord to dollar imports the same degree of trade liberalization that those countries accord to their trade with each other. The United States also supports the International Monetary Fund's efforts to achieve more orderly foreign-exchange practices, particularly the simplification or abolition of multiple-exchange-rate systems. These systems, which are inherently discriminatory in their treatment of the trade of different countries and different commodities, are still employed by about 10 countries with which the United States has trade agreements.

Partly because of uncertainties about the future of trade liberalization and currency convertibility, and partly also because of the 1957-58 economic recession, a few countries have tended to return to the use of bilateral trade-and-payments agreements, which were such a prominent feature of world trade before the creation of OEEC and other multilateral trade organizations. Although there is no strong evidence of a general return to bilateralism, there has been, on the other hand, no continuation of the general advance toward multilateralism such as that which took place between 1950 and 1957. This slowdown in the advance toward multilater

1 See Operation of the Trade Agreements Program (10th report), pp. 116-117.