Mr. KILLHEFFER. After my education was finished, I got a job with one of the so-called German I. G. chemical companies and was with them until the outbreak of the First World War at which time I disassociated myself from them and formed a company in the United States and went out to China and gathered up a lot of dyes that I knew were stored up out there and which I knew we were short of in the United States.

Returning from that venture, I started a dyestuff manufacturing plant in the United States. A little later, another much larger company wanted to start the same business and they needed some advice and they were kind enough to think that I was the right person to give it to them so I sold out to them.

I later became president of that company, which was the Newport Chemical Works and then a little later on, the du Pont Co. purchased part of the assets of the Newport Chemical Works and at that time I was moved over into the du Pont Co., from which company I retired nearly a year and a half ago. Now I am a retired farmer, living up in the southeast corner of Pennsylvania, hoping that I can sell that farm and go to live in Florida and have a lot of fun. That brings you down to date.

Mr. SMITH. I understand that you were at the Habana conference. Mr. KILLHEFFER. Yes, sir.

Mr. SMITH. Whom were you designated by to attend the conference?

Mr. KILLHEFFER. I was one of the advisers to the delegation, which the United States delegation I believe carried for the first time at the Habana conference. They asked the larger organizations in the United States each to designate one man, and I was designated by the United States Chamber of Commerce.

Mr. SMITH. How long were you there?

Mr. KILLHEFFER. I was there from November 21 to February 8. Mr. SMITH. And during all that time you were participating in the daily sessions that were held?

Mr. KILLHEFFER. Much to my own discomfort; yes, sir.

Mr. SMITH. So I take it from your experience in Habana that you got a feel of the situation through these meetings and in your contacts with those who were in attendance.

Would you mind telling us just how you felt on this question, or what reaction you got from this question of the possibility of agreement between the parties. I think that is so important.

Mr. KILLHEFFER. I think there will be no disagreement with the statement I make that all of us-not just me-on the United States delegation-were very pessimistic in the early days of the Conference, or maybe a little later than the early days and it did look for a while as though the Conference might collapse because of the violence of some of the disagreement.

Personally, as you can see from my statement, I never came to the view that any real agreement was reached because I would sit in the committees where supposed settlements were made and it is my feeling that many of those settlements will again lead to further differences of opinion.

Mind you, we had at the Habana Conference, 57 nations which were invited-they did not all show up-but well over half of those had never participated in one of those conferences before. Many of them had

not seen the earlier drafts of the charter. I will leave it to any of you gentlemen, the first time that you have picked up the charter and read it through, it was a very fearsome document and I doubt if you could get a very good comprehension of what it was all about at any first reading.

I think that was the position of more than half of the delegates who were there and the result was somewhat inevitable in my opinion. Perhaps many of the objections they voiced were for the purpose of trying to find out and get explanations of what many of these provisions meant.

Mr. SMITH. Now you referred to the objective of lowering tariffs and eliminating preferences. What chance do you think there is of real agreement on that proposition?

Mr. KILLHEFFER. Well, as to the first one, the reducing of tariffs, the United States has, as I believe is usually the case, adhered strictly to its obligations. We have in this country made drastic reductions of our tariffs since 1934.

Now in other countries, most of them have long since ceased to rely on tariffs because tariffs are too mild for them. Tariffs are only regulators of trade. They do not want to regulate trade, they want to stop it in many cases. So they have long ago ceased to rely on tariffs and instead they rely on much more restrictive practices-quotas, exchange controls, import permits and all that sort of thing. I do not want to put myself in the position of accusing other nations of bad faith but you can see it is possible at least for them to make tariff reductions pretty much tongue-in-cheek because it does not mean anything. They still retain these much more restrictive controls. A tariff, you can pay the tariff and get into the country with your goods. With some of these other controls, you cannot unless they tell you

you can.

Mr. SMITH. What about the matter of preferences, now?

Mr. KILLHEFFER. I would like to let the British answer that. They are the fellows who are most concerned with preferences and in the London Economist in November of 1947 they had this to say:

Though some reductions have been made in Imperial preference, the citadel is still substantially intact. Seventy percent of the Imperial preferential rates are completely untouched and only 5 percent of them are eliminated.

On the other point I made about tariffs, they talk about the imports into the United States still being limited only by tariffs and how that is not of great importance to Britain, but they conclude with this sentence:

But for the present, reductions in the British tariff and in many other tariffs are no more than symbolic gestures.

Mr. SMITH. Was there pretty much one mind between the British and ourselves on these questions, or were they far apart?

Mr. KILLHEFFER. I wish, sir, I could answer that in the affirmative, but there was not. I think that must have been one of the great disappointments of the Conference to the United States delegation, the fact that the British so much and so consistently lined themselves up in opposition to the position taken by the United States.

I would say that it seemed to me terribly annoying, and I often marveled at the patience of the representative of the United States who happened to be occupying the chair for the United States when

some of these exchanges took place. I think they were possessed of great patience. I am afraid I would not have been able to hold myself in check so long, many times.

I

Mr. SMITH. Mr. Chairman, I think I have taken 5 minutes. would like to come back to the witness for just a few more moments. Mr. FULTON. I yield my 5 minutes to Mr. Smith.

Mr. SMITH. Thank you.

I believe, Mr. Killheffer, you prepared a rejoinder to the statement prepared by our valued colleagues, here, Messers. Javits and Fulton. I wonder if you have such a copy with you. I have seen it. Mr. FULTON. You should do this on my time, Mr. Smith.

Mr. SMITH. We want to get both sides of this story, and I know you approve of that.

Mr. KILLHEFFER. Here is a copy.

Mr. SMITH. If there is no objection, I would like to offer that in the record.

Mr. CARNAHAN (presiding). Without objection, it will be inserted as part of the record.

(The document referred to is as follows:)

A REJOINDER BY ELVIN H. KILLHEFFER TO THE REPORT BY CONGRESSMAN JAMES G. FULTON OF PENNSYLVANIA AND JACOB K. JAVITS OF NEW YORK ON THE HABANA CHARTER FOR AN ITO

I. THE DEVELOPMENT OF THE CHARTER

A. The origin

Postwar settlements.-Reference is made (p. 4) to concurrence in the purposes of the charter by several governments. Is it not a fact that in each of the occasions cited these governments were receiving considerable financial aid from the United States? One would have to be naive indeed not to connect these benefits with their professed agreement with the purposes of the proposed trade organization. Nor need one be cynical to suggest that the United States was paying a very substantial price to get what it now appears was largely lip service to certain objectives, illustrative of this statement is the concurrence in the view that there should be elimination of all forms of discriminatory treatment in international commerce, payments, and investments. That was an objective. It still remains only an objective, for when we get to the point of implementation, these nations go along only if there are exceptions permitting their noncompliance with the objectives.

B. The drafting stages

Reference is made (p. 5) to the public hearings conducted in six United States cities at which time the public was invited to present its views on the Trade Organization. These hearings did take place, but if one stops to reflect on the date of the hearings and the complexity of the charter, it should be obvious that there were few people in the whole of the United States at that time who were well enough informed on the proposals to have a qualified opinion. The hearings doubtless had great propaganda value.

The Geneva agreement.-There is described (p. 6) what is now incorporated in the General Agreement on Tariffs and Trade, ordinarily called GATT. In the course of this recital, it is said:

"Preferences affecting a large part of the trade of the United States with countries in the British Commonwealth were substantially reduced, and preferences on a long list of products which the United States exports to the various › countries of the Commonwealth were eliminated."

This is a very sweeping statement conveying an erroneous impression. Perhaps the British estimate, as published in the London Economist of November 22, 1947, would be enlightening:

"Though some reductions have been made in imperial preference, the 'citadel' is still substantially intact; 70 percent of the imperial preferential rates are completely untouched and only 5 percent of them eliminated."

The Economist goes on to say that it should be remembered that: "Imports into the United States are still limited by tariff duties only; that for many of the countries involved-and not least for the United Kingdomcustoms tariffs are at present without any influence on the volume of trade. The British customs tariff is a mere fiscal formality and if it were abolished in its entirety, the effect on the volume of British imports, which is determined by quantitative licensing, would be imperceptible. In the future this may not be so; the agreement contains an article providing for the removal of quantitative restrictions, followed immediately, however, by another granting exemption so long as balance-of-payments difficulties remain. But for the present reductions in the British tariff, and in many other tariffs, are no more than symbolic gestures."

The Economist is primarily discussing preferential rates affecting imports to the United Kingdom. But what about the long list of products on which preferences in the Commonwealth countries were eliminated? The principal such countries are Canada, Union of South Africa, Australia, and New Zealand. United States exports to the last two named have long been limited by drastic import licensing restrictions by these countries. These have not been lifted.

Canada and the Union of South Africa are substantial markets for United States goods. The Union of South Africa recently found it necessary to estab lish quotas limiting imports from the United States to 50 percent of what they had been previously. This is enforced through the requirement of import licenses. Even Canada, the most important market for United States products among the commonwealth countries, has found it necessary to place restrictions because of a shortage of dollars. As to the long list of commodities on which preferences were eliminated, it might truly be said that this list can be best characterized by mentioning one of the commodities on it, namely peanuts. There were only 18 such commodities on the Canadian list and these accounted for only six onethousandths of a percent of our total business with Canada in 1939 ($28,694 out of a total of $497,000.000).

Some preferences applying to British colonial areas were to be reduced in exchange for an agreement by the United States to limit the amount of generalpurpose synthetic rubber consumed under regulation in the United States in any one year to 25 percent of the combined consumption of natural, synthetic, and reclaimed.

As a matter of fact, these reductions were to be inoperative only in a year following a year in which the United States did not comply with the percentages established for rubber consumption. The British did not wait. They made them inoperative immediately and in the very year that they made them inoperatitve, the United States did comply with the percentages above referred to. Actual instances of this kind are of considerable value in their illustration of intent.

A little later, under the same heading, it is said:

"The concessions on tariffs and preferences contained in the agreement were safeguarded by general provisions designed to prevent participating countries from nullifying such concessions by resorting to other forms of restriction or discrimination."

The italics are mine, the point being that regardless of what the provisions were designed to do, there are sufficient exceptions to permit other countries to resort to such other forms of restriction or discrimination as they may find necessary or advisable.

It is also said that these general provisions "required the general application of the principle of most-favored-nation treatment in international trade." This would be true if it were not for the exceptions which permit noncompliance. Immediately following that statement is another. to the effect that any gov ernment may withdraw from GATT on 60 days' notice. That statement seems to be in error because such withdrawal on 60 days' notice is only possible after 1951.

Then at the top of page 7, it is said that:

"GATT is to be regarded as an agreement entered into in anticipation of “ early acceptance of the charter of the International Trade Organization. It is to be assumed that the agreement would be generally abandoned if the charter should be put aside."

The first part of this assertion appears to be correct, but the last sentence appears to be wholly incorrect. The facts seem to be just the opposite of those stated that is to say, GATT would not be wholly superceded by the charter if and when it comes into force. In fact, it seems quite evident that great reliance

has been placed on the continuance of GATT in case the charter is not ratified. That is why it is frequently referred to as "little ITO."

C. The Habana Conference

Task of the United States delegation (p. 7).-The description of the great diversity of views is a correct one. This diversity extended even to those countries of whom it was said that they had come to substantial agreement previously. In other words, there had not been genuine agreement previously. The way in which these differences were dealt with leaves reason for grave doubt as to the sufficiency or the permanency of the solutions found. To be more specific, there were many instances where words or phrases were added to cover points raised in proposed amendments. In many instances these were accepted as "substance," whereas they were only offered as words, and thus not entirely in good faith. This will inevitably lead to considerable difficulty in the future when the Organization is called upon to make interpretations. These interpretations may satisfy no one.

The comment on the role of the nongovernmental advisers recites the theory of their presence, but the fact is that there was only a minimum use of the advice that could have been available. While the advisers could not themselves participate in the actual discussions in committees, subcommittees, etc., they could and some did regularly attend meetings of these groups.

Eventual agreement (p. 8).-The charter was signed ad referendum by 54 of the delegations, but it is not correct to say that there had been agreement. The language of the charter itself is the best evidence of the fact that there was no genuine meeting of minds on many subjects. There were a great many reservations and while they were not attached to the charter, neither were they disposed of.

Prospective action (p. 9).—In a discussion of how the document should be submitted for ratification, it is said: "Since it is a contractual agreement among states, it might appropriately be considered to come within the treaty-making process." The Habana Charter is a contractual agreement among governments and of such importance that full compliance with its terms will necessitate changes in their domestic laws by member nations. If an international document of this nature is not a treaty, it would be difficult to conceive of any reason for having treaties at all.

II. THE CONTENTS OF THE CHARTER

It is said that the changes required in the domestic laws of the United States are negligible (p. 9). Agreement with this statement might turn upon the definition of the word "negligible."

A few instances requiring changes in United States laws, or regulations are mentioned:

Compliance with charter provisions regarding United States rubber policy. (See pp. 11 and 12 of this document.)

Obligation to take action to maintain full employment. (Charter, art 3, par. 1.)

Countervailing duties not applicable unless injury proven. A change to conform to charter opens the door to the very evil the existing United States law prevents, i. e., the ruin of some production by unfair means before the slow legal processes necessary to proof of injury could be completed.

Change of valuation basis for customs purposes. (See p. 13 of this document.) In a recital of general objectives of the charter (top of p. 10), it is referred to as an international code of principles to liberate world trade, embodying four principles: Equal treatment, tariff reduction and preference elimination, elimination of quotas, and curbing of restrictive business practices. As we examine some of the specific provisions, we see how the charter achieves exactly the opposite in most instances.

Strengthening of internal economies (p. 10).-Here it is said that a faltering economy in one country endangers the economic welfare of the others and that the remedy is the development of the potentials of each as sources of supply and as markets for goods.

This sounds quite innocent and it is intended that it should. As a recital of aims or objectives for individual countries, it is fine. But surely we are not so blind that we fail to realize that this is to be accomplished through an international bureaucracy that will plan and administer such a program. Such a plan is one of socialism, not of freedom of private enterprise. Just such a policy is throttling Britain.