CHAPTER IV-TARIFFS, QUOTAS, SUBSIDIES, STATE TRADING Chapter IV covers "Commercial policy" and is divided into several partsthe most important of which relate to tariffs, quotas, subsidies, and state trading. The sections on tariffs incorporate the principles of the trade agreements program and provide that "upon the request of any other member" signatory nations must enter into negotiations to make "substantial reduction of the general level of tariffs." We believe that this program should not be continued, but in any event, the program is now operating in high gear under the general agreement on tariffs and trade and without any ITO. The trade agreements program is, in essence, a device to remove control of United States tariffs from the Congress and place control in the State Department. The ITO would go one step further and remove control from the State Department and place it in the hands of an international group, without any compensating advantages. The United States, having achieved none of the stated objectives of the trade agreements program, has already bartered away the major part of its tariff protection in a useless attempt to induce foreign nations to relax their trade barriers. Those barriers are today higher and more restrictive than ever before. But despite our past experience it is obvious that the State Department intends to give away whatever protection remains to United States industry in a fruitless endeavor to bring foreign trade barriers back to the point where they were when we started the program. The only way the United States can exercise any effective influence in mitigating trade barriers abroad is to recover freedom of action and the power to set its own tariff rates as sound judgment dictates rather than in international "horse trading" sessions. We believe that the control of United States tariffs should be removed from the State Department, but not that it should be handed over to the ITO. It should be lodged in a properly qualified authority in this country. The section of the charter devoted to tariffs refers to most-favored-nation treatment. The United States has long adhered to that policy. Many other countries do not. The charter does nothing to change any country's policy. True, it gives lip service to the most-favored-nation principle, but it permits all existing deviations and provides for additional ones if customs unions are established. It is admitted that the ITO permits customs unions. But they are "permitted" without the ITO. The difficulties being experienced by Benelux, the FrenchItalian, the Syro-Lebanese and other customs unions are inherent in the divergency of national interests. The difficulties are not due to the lack of an ITO. The ITO could contribute nothing in this field. The section on quotas-called quantitative restrictions in the charter-is perhaps as unrealistic as anything in the charter. The charter talks about the elimination of quotas but allows them under the only circumstances whichever prompt their use. The charter provides for the use of quotas: 1. When there are quantity restrictions on domestic agricultural or fisheries products. 2. When there is a domestic surplus of such products. 3. Whenever a member has difficulty with its balance of payments. 4. Whenever a member in trying to maintain employment and develop industries suffers pressure on its monetary reserves. It is difficult to imagine any circumstances under which any country would wish to use quotas that are not fully provided for. If the exemptions proved too narrow, a country is free to embrace state trading, as many of them are doing anyway. The degree to which quotas are not prohibited is illustrated by the fact that it takes two and a half pages in the charter to provide that quotas are to be used without discrimination as between nations. The prospects of the abolition of quotas appear small indeed. The section on quotas is worthless. It may be predicted that as increased imports threaten domestic production in the United States, more and more pressure for import quotas will be in evidence in this country. The section on export subsidies must have been written before our agricultural price support program reached its full flower. A strict interpretation of articles 26 and 27 would prohibit the sale abroad of our agricultural surpluses at prices lower than those charged to buyers in the domestic market unless they were sold under a system which would result in the foreign buyer sometimes paying a higher price. It would appear difficult to satisfy this latter requirement. It is unlikely that any organization could handle the problem of export subsidies on a generalized basis. It is doubtful that the United States would be willing to abandon their use. The section on state trading is somewhat wistfully apologetic. The ITO cannot exactly frown upon state trading because a majority of the nations participat ing in the Habana Conference engage in the practice. The charter states that state trading is to be "consistent with the general principles of nondiscriminatory treatment" and that purchases or sales are to be made "solely in accord with commercial considerations" which would allow all countries "adequate opportunity * * to compete for participation in such purchases or sales." This is unrealistic. State trading might be defined as the substitution of political for economic considerations. Any one who believes that the hopes expressed in article 29 will induce state trading organizations to be guided solely by economic considerations, is indeed a trusting soul. CHAPTER IV-GENERAL COMMERCIAL PRACTICES Chapter IV also refers to a number of general commercial practices most of which are adequately taken care of as far as the United States is concerned by our many treaties of friendship and commerce. One item that is not generally covered in such treaties of friendship and commerce is the matter of valuation for customs purposes. Article 35 of the charter seeks to promote a single measure of value for the assessment of ad valorem rates. The prescribed definition is not in accord with United States policy, is badly worded, and is susceptible of more than one interpretation. It would appear that under this definition the valuation of an import from Britain might be goverened by the price of a competing import from Japan. The converse would seem equally true, thereby producing radically different results as respects different imports. Under the charter the value or price of a domestically produced item is not considered. Generally the domestic price is the one most important from the standpoint of duty levels. It seems neither possible nor desirable to try to establish a single universal definition of "value" for customs assessment. Different circumstances call for different treatment. Especially do alterations in exchange rates call for different concepts of "value." As the International Monetary Fund has discovered, there must be flexibility in the elements of foreign trade; rigidities can conceal an unbalance for a time but sooner or later must break down. If an attempt were made to impose a universal definition of value, the effect would be to promote the use of specific rather than ad valorem rates and perhaps to encourage repeated shifts from one form to the other. The proposal appears impractical and unsound. Chapter IV concludes with a general escape clause in substantially the same form as that used in United States so-called trade agreements. The clause is subject to attack on grounds of good faith since the damage to domestic producers must arise from unforseen developments. The matter is of especial interest because it spotlights one of the blind spots in the thinking of those who believe the way to set tariffs is by mutual agreement at international round tables. If the clause means obviously it is intended to imply, tariff concessions are to be withdrawn when they cause serious damage to domestic industry. If this is the case, what is the point of making the reductions? No country can rightly object to reducing tariffs or other barriers to the point where there is no damage to domestic producers-assuming that point can be determined with exactitude. If all nations reduce merely to that point, nobody is injured, nobody is benefited. No nation, except apparently the United States, has any intention of going beyond that point. That is what makes the whole trade agreements procedure so ridiculous. There is, of course, the possibility that the intention of article 40 is to coax nations to reduce tariffs below the danger point and then, through the ITO, hold them to bad bargain on the ground that the injury to domestic interests was not unforeseen. If the intent is to provide a trap of this nature, one can scarcely feel that the ITO has much chance of promoting peace and understanding in international trade. If no trap is intended, we submit that the so-called escape clause indicates the complete futility of trying effectively to reduce trade barriers by means of these international bargaining sessions. CHAPTER VANTIMONOPOLY PROPOSALS Chapter V is headed: "Restrictive business practices." The chapter is without meaning or substance. It purports to make world-wide the American concept of antimonopoly legislation, which, of course, the ITO cannot do. Aside from an endorsement of the concept, the charter provides for little more than consultation. For this, ample opportunity already exists. CHAPTER VIGOVERNMENT CARTELS Chapter VI deals with governmentally operated cartels. It is unnecessary at this time to discuss the merits of such cartels, referred to in chapter VI as "intergovernmental commodity agreements." One such international agreement, the wheat agreement, is already in effect. Whether such agreements are wise or not, it is obvious that no international trade organization is needed to bring them into being or to operate them after they are established. CHAPTERS VII, VIII, IX-ORGANIZATION Chapters VII, VIII, IX cover the organization of the proposed international body-membership, voting rights, amendments, arbitration, relations with other international agencies, et cetera. Such provisions (with changes) would be necessary if the ITO itself were desirable. In our opinion it is not. We hope that Congress is of like mind, in which case discussion of organizational matters may be eliminated. Even a brief review indicates that the proposed ITO has no prospect of achieving its stated objectives. There is no effective machinery for doing so. A review of the separate chapters leads to the conclusion that insofar as the actions contemplated can be taken at all, they can be taken with better prospect of success without developing new agencies. There is perhaps one thing-wholly undesirable that the ITO might achieve; it would provide an economic planner's paradise on an international level. The Organization could not be effective, but it might exercise a degree of power because the necessary enabling legislation would delegate a substantial degree of authority to each nation's representatives on the executive board and the conference of the ITO. The impossibility of properly limiting and safeguarding this delegated authority would make for an extremely unstable and unhappy condition and unquestionably operate to cause continued friction. ATTEMPT TO REMOVE AUTHORITY FROM CONGRESS The idea behind this proposed charter is of a piece with the thinking of our State Department over a span of many years. The idea is to remove from Congress to the Executive as much control of the economy as possible, and then delegate that acquired control to some global agency. Once lodged in such an agency the control can be used to take action far beyond the action outlined by the planners in their original plea for the delegation of authority. Such international commitments and enterprises as the United States undertakes should be made under the direction and control of Congress. They should be carefully considered and slowly and painstakingly developed one at a time. It is no solution of a problem to dump it into the lap of an international agency. For years to come the United States will have to pay the bill for the cost of international collaboration and economic improvement. We should not surrender either the right or the obligation of directing the effort. NO SHOWING MADE OF VALUE OR NEED OF CHARTER The proponents of the charter have not sustained the burden of proof that the proposed International Trade Organization should be brought into being. They have not been able to show that there is any likelihood that the Organization can accomplish any of its purported aims. They have not shown that any worth while endeavor in the field of international cooperation will be rendered impossible if the ITO is not established. Their argument that foreign countries will regard our action as respects the charter as "an acid test of our good intentions" is somewhat ridiculous. We have given and loaned abroad some $30,000,000,000 since the end of the war in an effort to help the other nations of the world. We have reduced our tariffs on the goods of other nations almost to the vanishing point while other nations have intensified their barriers against the importation of our goods. We have sponsored and supported the United Nations which, but for our action, would not be in existence. Does the world need further earnest of our good intentions? The ITO can add nothing to any of our efforts in the international field; it can only complicate them. It would still further remove control of United States economic policy from the Congress. We hope the bill to adhere to the ITO will be rejected by this committee and by the House of Representatives. GLASS CONTAINER MANUFACTURERS INSTITUTE, INC., International Trade Organization, House Joint Resolution 236. Chairman, Committee on Foreign Affairs, House of Representatives, Washington, D. C. SIR: In response to the invitation of the House Committee on Foreign Affairs for expressions of views with respect to the Habana Charter for an International Trade Organization, the board of trustees of Glass Container Manufacturers Institute, Inc., submits herewith a resolution adopted at a meeting held on April 27, 1950. The domestic glass-container industry comprises 34 companies, operating 80 plants in 18 States, extending from the Atlantic to the Pacific Oceans. For the most part the plants are located in small towns and frequently constitute the principal source of employment and purchasing power in the respective communities. Most of the businesses are locally owned. The industry employs approximately 50,000 persons and the current annual value of output is $400,000,000. Respectfully, GLASS CONTAINER MANUFACTURERS INSTITUTE, INC. RESOLUTION ADOPTED BY THE BOARD OF TRUSTEES OF GLASS CONTAINER MANUFACTURERS INSTITUTE, INC. Resolved, that the glass container industry is opposed to the adoption of the Habana Charter for an International Trade Organization and strongly urges your committee to refuse to approve H. J. Res. 236. The ITO is claimed to be a code of conduct for world trade but, in our view it appears to be in reality a detailed set of rules with a multitude of exceptions which seems to destroy any possible benefit to the United States. It substitutes Government control for free competitive enterprise in international trade. This control is centered in a board dominated by foreign governments and requires the delegation to such foreign-controlled organization of the constitutional mandate to Congress alone to regulate our foreign commerce. The charter obligates the United States to negotiate for further reductions of our import duties without limitation, although in our opinion tariffs relating to our industry have already been reduced to a dangerous level. The multitude of exceptions, special permissions, and release procedures permits substantially all countries except the United States to adequately protect their own domestic competitive industries. The charter seemingly recognizes no rights of individuals or private organizations, and prevents any possibility of relief by appeal or review before independent judicial or legislative tribunals. The charter obligates the United States to supply technical information or industrial know-how to foreign governments, persons, or corporations upon their request. Apparently this can only be made effective through what would amount to Government confiscation of this class of private property. This mechanized industry requires volume for its constant efficient operation, and displacement of any portion of its volume by imports into its domestic markets will make impossible the maintenance of the high labor rates and living standards now enjoyed by its workers. Glass container manufacturers located in the United States-Continued Gayner Glass Works-- Laurens Glass Works, Inc. Maywood Glass Co- Northwestern Glass Co-‒‒‒ Sterling Glass Co----- Thatcher Glass Manufacturing Co., Inc. Tropical Glass & Box Co- Tygart Valley Glass Co---- Universal Glass Products Co----- Representative JOHN KEE, Salem, N. J. Los Angeles, Calif. Los Angeles, Calif. Sapulpa, Okla. Los Angeles, Calif. Seattle, Wash. Port Allegany, Pa. Washington, Pa. Parkersburgh, W. Va. FRIENDS COMMITTEE ON NATIONAL LEGISLATION, Washington, D. C., May 9, 1950. Chairman, House Committee on Foreign Affairs, Washington, D. C. DEAR MR. KEE: In accordance with your request of May 6, we are submitting for the record the statement of Richard R. Wood in support of House Joint Resolution 236. It is our understanding that this statement will appear in the printed hearings. Sincerely yours, C. LLOYD BAILEY. STATEMENT BY RICHARD R. WOOD IN BEHALF OF THE FRIENDS COMMITTEE ON NATIONAL LEGISLATION My name is Richard R. Wood; I reside at 272 West Main Street, Moorestown, N. J. I am editor of the Friend, a Quaker periodical with which I have been associated since 1924. I have prepared this statement at the request of the Friends Committee on National Legislation, and have been asked also to mention the views of the National Peace Conference favoring United States membership in the International Trade Organization. The National Peace Conference is made up of representatives of 30 national organizations whose programs include an interest in world affairs. Since its beginning in 1933, the National Peace Conference has been actively supporting the reciprocal trade program. In 1938, in Washington, the National Peace Conference held a large and vigorous conference on world economic cooperation. At that conference the idea of an International Trade Organization was proposed-one of the first public suggestions of such an organization. It was enthusiastically approved by the more than 600 delegates from many national and local organizations from all parts of the country. The present International Trade Organization is, therefore, the fruit of our dreams and efforts for a good many years. Naturally it is supported by the National Peace Conference. The Friends Committee on National Legislation tries to apply to national policies the hopes and principles of the Religious Society of Friends, the Quakers. The Quakers believe in and work for peace. not because war is horrible, but |