MEMBERSHIP AND PARTICIPATION BY THE UNITED STATES IN THE INTERNATIONAL TRADE ORGANIZATION WEDNESDAY, APRIL 26, 1950 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met, pursuant to adjournment, at 10:15 a. m., in the Foreign Affairs committee room, United States Capitol, Hon. Mike Mansfield presiding. Mr. MANSFIELD (presiding). The hearing will come to order. Mr. Strackbein, will you proceed with your testimony. STATEMENT OF 0. R. STRACKBEIN, CHAIRMAN, THE NATIONAL LABOR-MANAGEMENT COUNCIL ON FOREIGN TRADE POLICY Mr. STRACKBEIN. Mr. Chairman, I am the chairman of the National Labor-Management Council on Foreign Trade Policy and also executive secretary of America's Wage Earners Protective Conference. In addition to that, I represent this morning the Board of Governors of the International Allied Printing Trades Association, which is the governing body of the five standard printing trades affiliated with the American Federation of Labor. I must say that their interest in this charter comes from the possible impact of the charter, if it were adopted, upon the so-called manufacturing clause of our copyright law. I have a statement here, Mr. Chairman, which I would like to make, if I may. Mr. MANSFIELD (presiding). Proceed. Mr. STRACKBEIN. The objectives of the International Trade Organization as set forth in the Habana charter are very broad. The first goal is the assurance of (a) "a large and steadily growing volume of real income and effective demand," and (b) an increase in "production, consumption, and exchange of goods" as a contribution to "a balanced and expanding world economy." This grand objective is integrated with article 55 of the United Nations Charter which aims at the attainment of "higher standards of living, full employment, and conditions of economic and social progress and development.' The remaining five objectives in the Habana charter are given equal weight to this first one, but they appear in fact to be subsidiary to it and merely expressive of the means by which the real goal; that is, the first one, is to be achieved. These other objectives include the 'industrial and general economic development" of backward countries and encouragement of the "international flow of capital for productive investment." This proposal has subsequently emerged independently and substantially as the President's Point IV program. Then there is to be enjoyment "on equal terms" by all countries "of access to the markets, products, and productive facilities needed for their economic prosperity and development." All the foregoing is to be accompanied and no doubt fostered by a reciprocal reduction of tariffs and other trade barriers and the elimination of discrimination in international trade. The various nations are to avoid measures which "would disrupt world commerce, reduce productive employment or retard economic progress." Finally, the ITO is to help solve problems relating to international trade in the fields of employment, economic development, commercial policy, business practices, and commodity policy. The charter is thus seen to be extremely inclusive, and comprehends virtually the whole scope of national and international economics. Implicit in these broad objectives are controls to bring them to pass. To the extent that such controls are not expressly provided for in the charter or to the extent that exceptions open the way to nonconformance, the objectives are mere exercises in rhetoric or expressions of a particular brand of economic philosophy. To the extent to which controls and compliance are provided, the question of the alienation of national economic sovereignty or autonomy grows in importance. The remainder of the charter is devoted principally to the details of the objectives listed above. Thus article 3 provides that each member country shall take action looking toward (1) the achievement and (2) the maintenance of full and productive employment, no less than a large and steadily growing demand within its own territory through measures appropriate to its political, economic, and social institutions. This is followed by a chapter on economic development and reconstruction. The reconstruction in question relates to the countries whose economies were devastated by the war. ECA under the Marshall plan was designed to carry out this phase of the charter, or in any case whether it was consciously so designed, that is actually the function that it is performing. The part relating to economic development is directed particularly toward the countries which are still relatively undeveloped. Article 11 points out that progressive industrial and economic development requires adequate supplies of (1) capital funds, (2) materials, (3) modern equipment and technology, and (4) technical and managerial skills. The members pledge their cooperation to provide such facilities within the limits of their power. As previously stated, this objective has made its appearance in the President's Point IV program. The charter's article 12 is addressed to international investment for economic development and reconstruction. It pledges the members to undertake to provide reasonable opportunities for investments acceptable to them and suggest bilateral or multilateral agreements relating to the opportunities and security for investments. With respect to the countries in which investments would be made, the charter is more specifically protective in character than it is with respect to the investing sources. For example: Foreign investment is not to be used as grounds for interfering in the internal affairs or national policies. These undoubtedly would include expropriation, nationalization, or similar measures. The other country agrees not to interfere with the country in which the investments are made. The right to determine whether and to what extent and upon what terms future foreign investments will be allowed in its own borders is retained by each member. Also recognized is the right to enforce, on just terms, requirements as to ownership of existing and future investments and to prescribe and enforce other reasonable requirements with respect to existing and future investments. The charter in article 13 also recognizes the need of protective measures "to promote the establishment, development, or reconstruction of industries, or branches of agriculture" in backward and wartorn countries. This would, of course, not include the United States, because we do not fall into any one of those categories. However, the use of such protective measures are so carefully circumscribed that their value might be exceedingly doubtful even to the countries to which they would apply. Whether investments can be attracted to undeveloped countries under such dubious conditions of protection is questionable. Yet the charter is so weighted against trade barriers in principle that it could not logically concede that protective measures might have any but the most limited and transient merits. Of particular interest to domestic producers who face foreign competition in the United States is article 17. Each member is enjoined under this article, upon the request of one or more of the other members, to enter into and carry out negotiations for the substantial reduction of the general level of tariffs and other charges on imports and exports, on a reciprocal and mutually advantageous basis. Article 17 thus represents a commitment to make further tariff reductions on a "selective product-by-product basis." This provision of the charter is being quite faithfully carried out through the mechanism provided by GATT (General Agreement on Tariffs and Trade). Article 20 reinforces article 17 by establishing a general prohibition against quotas and import or export licenses. This condemnation of quotas is relaxed, however, in recognition of certain circumstances under which they might be imposed. Among the exceptions are quotas on any agricultural or fisheries products as may be necessary to enforce certain governmental limitations on the production or marketing of the domestic product; or to remove a temporary surplus of the competing domestic product. No such basis for a quota on industrial products is recognized. However, a further relaxation of the prohibition of quotas is found in article 21, where account is taken of balance-of-payment difficulties. Under present circumstances this would not make the United States eligible to the use of quotas. This article authorizes members to "institute, maintain, or intensify import restrictions" to forestall or stop "a serious decline in its monetary reserves" or "to achieve a reasonable rate of increase in its reserves" if these are very low. Such import restrictions would not be limited to agricultural or fisheries products, and they are very common today in countries that are faced with a shortage of dollar exchange. Restrictions on imports from the United States take on the color of discrimination because the most effective method for conserving dollars is to restrict imports of those commodities that come from hard-currency countries and require dollars for their purchase. This is done most effectively by import quotas or import licenses. As we all know, these are being used very extensively throughout the world today. The International Monetary Fund is already dedicated to attainment of the fiscal objectives of the ITO charter. Also, the Economic Cooperation Administration (ECA) is devoting its time and talents to the same end. The Export-Import Bank and the so-called World Bank (Bank for International Development and Reconstruction) also make contributions toward the ITO charter's fiscal goals. The charter has a section devoted to state subsidies. Any such subsidies are to be reported to the Organization by the member granting it. As in the case of import quotas, particular exceptions are made for the subsidization of primary commodities to stimulate their exportation under stated conditions. State trading, when carried on by a member and when involving importation or exportation is to be conducted "in accordance with commercial considerations, including price, quality, availability, marketability, transportation," and so forth, and "shall afford the enterprises of the other member countries adequate opportunity in accordance with customary business practice, to compete for participation in such purchases or sales." This represents sublime faith indeed. These provisions are not to apply to imports of products "purchased for governmental purposes" and not with a view to use in the production of goods for commercial sale. However, where industries or some of them are nationalized, purchases for them would seem to be for governmental purposes if they consist of capital goods or goods destined for maintenance, and distinguished from goods offered for resale. A chapter entitled "Restrictive Business Practices" provides in article 46 that private or public commercial enterprises are to be prevented from engaging in business practices affecting international trade which restrain competition, limit access to markets, or foster monopolistic control. This is in the nature of an international antitrust program. No machinery of enforcement is provided or suggested. The Organization is authorized instead to "conduct studies" into conventions, laws, and procedures concerning incorporation, company registrations, investments, securities, prices, markets, fair-trade practices, trade-marks, copyrights, patents, and the exchange and development of technology insofar as they are relevant to restrictive business practices affecting international trade. Intergovernmental commodity agreements regulating the output, imports, exports, and prices of primary commodities may be entered into under the charter, as provided in chapter VI. Primary commodities are defined in article 56 as "any product of farm, forest, or fishery or any mineral, in its natural form or which has undergone such processing as is customarily required to prepare it for marketing in substantial volume in international trade." The commodity agreements are to provide for "adequate participation" of such countries substantially interested in the importation or consumption of the commodity as well as those substantially interested in its exportation or production. If a "burdensome surplus" of a primary commodity has developed or is expected to develop or if widespread unemployment or under employment in connection with a primary commodity arises or threatens, a commodity-control agreement may be entered into among the affected members. The objective of such agreements-article 63-is to assure the availability of supplies adequate at all times for world demand at prices that "are fair to consumers" and "provide a reasonable return to producers"; so that more and more "world market requirements" can be supplied from sources from which they "can be supplied in the most effective and economic manner." Such commodity-control agreements would be administered by a commodity council on which each participating country would have one representative. Implicit in the objective is the eventual redistribution among world areas of the sources of primary materials. The ruling concept would be the theory of comparative costs and comparative advantages. Free trade alone could lead to the objective, but the commodity-control agreements would represent conscious channeling of trade and development of sources of supply. This would be the very opposite of free trade. Quite aside from the very broad and highly ambitious economic aspirations of the charter, there may be found in section E of chapter IV certain provisions entitled "General Commercial Provisions." Article 33 in this section is devoted to the subject of freedom of transit, article 34 to antidumping and countervailing duties, while subsequent articles relate to valuation for customs purposes, formalities connected with importation and exportation, marks of origin, publication and administration of trade regulations and information, statistics, and trade terminology. The foregoing are the principal provisions of the charter through which the first stated objective would be sought, namely, to assure a large and steadily growing volume of real income and effective demand, together with an increase in production, consumption, and exchange of goods as a contribution to a balanced and expanding world economy. This is indeed a large order. It would have been more appropriate to name the proposed organization the World Economic Council rather than giving it the more modest name of International Trade Organization. Beyond the substantive provisions already cited, the charter has a number of articles related to organization, voting, and administrative procedures. The charter would inspire greater confidence and would lead to greater hope of success for an international organization based upon it if it limited itself substantially to the various subjects contained in section E, mentioned above, relating to general commercial provisions. It would then avoid the highly controversial questions of economic and political philosophy which it seeks to solve according to the tenets of one particular school and to impose as a finished product in the form of a charter. It would limit itself to ground where experience has produced guideposts to practical action and would avoid farreaching commitments in fields that are obscure and relatively unexplored, except in the theoretical sense. The bold and ambitious program envisioned by the charter assumes. for its success infinitely greater competence in diplomats, economists, |