The Congress can, by a comparatively simple measure, set in motion the preparatory machinery for the implementation of these broader commitments. There is a rather widely held idea that failure to renew the Trade Agreements Act means the cancelation of the existing trade agreements made under the authority of the act.

Your committee knows that this is incorrect and that the trade agreements now in force will so remain in accordance with their own provisions, until denounced by either party.

We want it understood that we are not suggesting blanket cancelation of existing trade agreements.

If despite our having readily at hand this more suitable vehicle for post-war economic cooperation (art. VII above referred to) the Congress nevertheless decides to renew the authority to make trade agreements, certain facts should be given careful study and safeguards provided where necessary.

CHANGES ALREADY MADE IN UNITED STATES TARIFF RATES

Under the trade agreements authority a general downward revision of the United States Tariff Act of 1930 has been made. More than 1,200 rates have been reduced, many of them the full 50 percent allowed under the act. These reductions have been made in agreements with foreign nations with whom we do two-thirds of our external trade in normal times. The reduced rates have been extended also to all other nations, except Germany, without any reciprocal concessions being made by them.

CURRENCY MANIPULATION

Your committee knows, and we repeat, that tariff rates can be, and in fact have been, nullified by exchange manipulation.

This was illustrated in the exchange fluctuations in Belgium and in France (francs) after we had made trade agreements with those countries. It is true that we could have used the escape clauses provided in the agreements. It is also true that we did not do so.

Provisions of this kind, if they are to be useful, should not be permissive. They should provide for mandatory action when the conditions arise which require such action.

Monetary stability we think is absolutely essential before changes in tariff rates can be made. Indeed, international trade will be a precarious venture without some agreed stability.

MOST-FAVORED-NATION CLAUSE

When we make a tariff reduction in a trade agreement that reduced rate has in the past become available to all the nations of the world except Germany. We believe that further reductions cannot be made in view of this general extension until agreements are reached on some very fundamental questions, including not only monetary stability but also some knowledge of the intensions of other nations in respect to their more restrictive barriers to trade. We repeat that the initial agreement providing for the acquisition of this knowledge has already been signed with most, if not all, of the United Nations. Article VII of the mutual aid agreements provides for multilateral agreement and action to remove discrimination and reduce unnecessary tariffs.

RESTORATION OF REMEDIES IN CASE OF INJURY TO AMERICAN PRODUCERS

The Trade Agreements Act canceled the flexible provision (sec. 336) and the manufacturer's right of protest (sec. 516) of the Tariff Act of 1930, as to all commodities dealt with in trade agreements.

These two important provisions of the Tariff Act should be restored as a very necessary defensive measure.

In such restoration there should be a stipulation that as to commodities dealt with in trade agreements which are now in effect use could be made of these provisions only in case of demonstrated injury to American producers.

EQUALIZATION OF COSTS OF PRODUCTION (SEC. 336, ACT OF 1930)

There is vehement denunciation of this principle and very often this is based on a lack of knowledge of the actual provision of the law.

Coffee and bananas are cited as examples showing the absurdity of the provision, apparently overlooking the fact that these are both on the free list, deliberately put there in order to recognize a climatic advantage in another country.

The principle of equalization of cost of production applies to dutiable competitive goods. As to such competitive goods, the operation of this principle gives the American producer equality of access to the domestic market.

It is not an equalization of selling price including profit-it is an equalization of cost. And if the cost of the imported commodity is lower because of greater efficiency or improved process these facts are taken into consideration in the ascertainment of the differences in cost, under the specific authorization of the law directing consideration of "other relevant factors that constitute an advantage or disadvantage in competition."

American industry does not ask to be protected against inefficiency in its operations.

It does need protection against lower wage and living standards as these are reflected in lower unit costs.

The Congress has legislated certain social gains. Are these to be broken down by actually putting a premium on imports from countries who do not practice similar standards?

MANUFACTURER'S RIGHT OF PROTEST (SEC. 516, ACT OF 1930)

Under the authorization of this section an injured American producer is provided opportunity to have his case reviewed.

We ask that this section be restored to full force and effect.

DUMPING

Most nations have laws protecting them against dumping in its various forms. In the Antidumping Act of 1921 the United States has a good law-if enforced. Unfortunately its most fatal defect is in the fact that action under the law is permissive instead of mandatory.

Ours is supposed to be a government of laws. Under this concept if certain conditions arise, as described in the law, then action should be mandatory. It should not be left to someone's discretion as to whether the law would be enforced or not.

The practice of dumping is usually prevalent following a war. It is both timely and important, therefore, to ask the Congress to make such changes as will make action mandatory instead of permissive, as at present. Respectfully submitted.

MANUFACTURING CHEMISTS' ASSOCIATION OF THE UNITED STATES.
W. N. WATSON, Secretary.

APRIL 20, 1943.

STATEMENT FROM JAMES L. FRI, MANAGING DIRECTOR AND SECRETARY, TOY MANUFACTURERS OF THE UNITED STATES OF AMERICA, INC., IN OPPOSITION TO ANY FURTHER EXTENSION OF THE TRADE AGREEMENTS ACT OF JUNE 12, 1931

To the WAYS AND MEANS COMMITTEE,

House of Representatives, Washington, D. C.:

Toy Manufacturers of the United States of America, Inc., submits, on behalf of its Nation-wide membership, its opposition to any further extension of the Trade Agreements Act of June 12, 1934.

Our industry, possibly more than any other, has felt in recent years the impact of trade discriminations and unfair trade practices from Germany and Japan. For a long time it was mainly Germany. Prior to the war it came mainly from Japan.

We understand it is the purpose of the proponents of the extension to preserve the principle of spreading to all the nations of the world any and all benefits or concessions in rates of duty which we bestow upon the nations of the world with which we have negotiated or will negotiate trade agreements. We further understand that while no trade, as such, exists today, the changes in our tariff brought about by trade agreements are intended to be reborn and made to apply to whatever state of facts exist during reconstruction and peace. We further understand that the proponents would like to keep alive and in reserve the administrative machinery created by the executive branch in order

to exercise the powers of Congress over customs duties and the regulation of foreign trade, either as a nation or for the post-war United Nations, or both. Our reasons for opposition are general and special.

Our general opposition is based on the reasons following:

1. The Congress abdicated its powers over customs duties and the regulation of our foreign commerce, and the executive branch usurped those powers in 1934 on representations that a depression and unemployment would be relieved if we did a greater import trade, and that trade agreements were a likely means by which prosperity would be restored. At the time of enactment there was a specific purpose designed for the emergency legislation. It may well have been the view of subsequent Congresses that the same state of facts continued at the times of subsequent renewals in 1937 and 1940. But we respectfully submit

that today, looking forward from June 12, 1934, the representations which actuated the Trade Agreements Act of 1934 are nonexistent, for the reason that there is no import trade and a free flow of commerce in war becomes a contradiction in terms.

2. A renewal of the law would mean that Congress is against granting judicial review of administrative practice. Not since the enactment has any case been permitted a hearing on the merits if the subject matter related to the operation of the Trade Agreements Act. Justice withheld is justice denied.

3. A renewal of the law would mean that Congress is perfectly willing to violate the constitutional mandate to preserve separation of powers in government. In operation, the law permits the powers over customs and the regulation of foreign commerce, exclusively granted Congress, to be implemented by the executive branch to carry out the power over foreign relations exclusively granted by the Constitution to the President.

4. The Constitution is violated by the law and its illegality would be perpetuated by renewal, since it is

(a) An unlawful delegation of legislative power.

(b) A constitutional mandate that all treaties of this nature require the concurrence of the Senate.

(c) A constitutional order that all legislation for raising revenue must originate in the House of Representatives.

So much for our general objections.

We oppose any further extension for the special reasons following: The reciprocal-trade agreement between the United States and Mexico, signed December 23, 1942, and made effective January 30, 1943, is extremely significant. Whatever purpose the executive branch of our Government had originally, and whatever formula it claimed to be working under in the negotiation of trade treaties, were all abandoned with complete frankness when the trade agreement with Mexico was entered into. A horizontal downward revision of tariff rates resulted. Today, the one indisputable fact concerning trade agreements is that they have brought about a general downward revision of tariff rates. The execu tive branch has reduced over 1,000 rates and in most instances the rates have been reduced 50 percent.

The Mexican treaty cuts the existing rates of 70 percent ad valorem on imports of toys and dolls provided for in par. 1513 as follows:

Dolls and doll clothing, composed in any part, however small, of any of the laces, fabrics, embroideries, or other materials or articles provided for in par. 1529 (a) of the Tariff Act of 1930, 45 percent.

Dolls, parts of dolls (including clothing), and doll heads, of whatever materials composed (except those composed wholly or in chief value of any product provided for in par. 31 of the Tariff Act of 1930, and except those composed in any part, however small, of any of the laces, fabrics, embroideries, and other materials and articles provided for in par. 1529 (a) of that act), 35 percent.

Toys, and parts of toys, n. s. p. f., wholly or in chief value of china, porcelain, parian, bisque, earthenware, or stonewear, 35 percent.

As the foregoing is read with the realization that most dutiable toys are imported from Germany and Japan, we regard it is incomprehensible that we, as a Nation in time of war, bestow a benefit on our most formidable enemies, who, during peace, have been guilty of more discriminations against our commerce and unfair trade practices than possibly any other nations of the world. The multilateral effects of our trade agreements are bound to bring about that result. Or is it, perchance, a part of a plan after the war to prevent Germany and Japan from sharing with other nations the benefits bestowed on Mexico? If so, is that a way to permanent peace?

To demonstrate the lack of ecnomic justification according to the Mexican treaty of a 50-percent tariff reduction in toys and dolls imported into the United States, we draw attention to the following statistical matter prepared by ourselves from reports of the Bureau of Foreign and Domestic Commerce.

We quote in further demonstration a description of the Mexican domestic toy industry as published in World Trade in Toys by the United States Department of Commerce in 1939:

"Domestic industry is not equipped to supply Mexico's toy requirements. The business is seasonal, with novelties greatly influencing the trade in any 1 year or season. The volume is not sufficient to justify domestic manufacture, even if high duties should prevail. Higher duties would result in higher cost to the public, and the Mexican market cannot sustain a high-priced toy. These influences, as well as the long experience with German toys, make the latter very popular. German mechanical toys, small metal toys, and dolls lead in their field. American manufacturers are abe to offer the market novelties and, in general, high-class toys. In the electrically operated toy, the American article is preferred. Children's games are also markedly American, and in the doll field popular American dolls are preferred. It is evident throughout the entire toy field that there is an overwhelming preference for the American toy. Mexico, however, is a price market, and in many instances the American toy is out of reach of the Mexican purchaser.

"Imports of toys during the year 1937 were valued at 2,098,032 pesos. If the trade is correct in its assumption, it appears that the Mexican toy market is worth about 2 million pesos annually. In practically all lines of trade, 1937 represented a peak year. Considering the adverse business conditions which existed in the first half of 1938, it is doubtful whether imports for 1938 will reach the total of the preceding year.

"Retail toy sales are highly seasonal and occur immediately preceding the Christmas holidays and on through the early part of January. Formerly it was the custom in Mexico to distribute gifts to the children on January 6, the Dia de Reyes or Day of the Kings. Custom has been changing throughout the more recent years, and Mexican children now receive gifts on December 25. Consequently, the Mexican children today have the advantage of enjoying 2 days in particular each year, when they may expect gifts from their parents and friends.

"Orders for European merchandise are usually placed in the late spring. Uncertain business conditions and particularly fluctuating exchange rates in 1938 delayed orders, with the result that when orders were decided on it was too late for toy dealers to order European merchandise. This circumstance proved favorable to American toy manufacturers, who had ample time in which to receive orders and effect deliveries.

"LOCAL PRODUCTION

"A high-class dressed doll is offered to the market by domestic manufactul es who are protected by a duty on 'dolls weighing over 300 grams each' amounting to 6 pesos per legal kilo. Behind the duty protection, several popular American dolls

are made under arrangements with the owners of the United States industrialproperty right. Domestic manufacturers also offer dolls very similar to the wellknown Italian and Czechoslovak models, but dressed, in many instances, in typical Mexican costumes. Dolls of this general description sell at retail for 20 to 25 pesos.

"The manufacture of small automobiles, pedal and otherwise, scooters, and wagons may properly be said to be a home industry. Prices on these domestic articles are not much above the level of production, and the buyer, as a rule, purchases from the home manufacturer. Established toy dealers prefer to handle the imported tricycle, scooter, or wagon because of its generally established quality and price.

"There is a growing home industry devoted to the manufacture of wooden toys. Such toys include wooden animals, dogs, bears, etc., which may be pulled, soldiers, wagons, and tenpins.

"Under 'miscellaneous' may be included the domestic manufacture of lead soldiers and tin toys, such as buckets and water pots. The lead soldiers are quite crude and are generally offered to the market unpainted. No effort is made to make other than the more simple objects. Prices, of course, are low but hardly competitive with the cheap Japanese product.

"With the exception of the better type of doll, the Mexican toy industry can be classified as a home industry.

IMPORTS

"Official figures of the Statistical Department of the Mexican Government indicate that in the year 1936, of all the toys imported into Mexico, the United States supplied 38 percent, Germany 32, and Japan 25. In 1937 the United States supplied 33 percent, Germany 42, and Japan 20. On a basis of total imports, the value for 1937 increased by 35 percent. Germany obtained by far the greatest share of this increase; in fact, German toy exports to Mexico increased by 82 percent over the 1936 value. United States toy imports in 1937 increased by only 18 percent and Japanese by but 9 percent.

"The United States share in this trade has progressively fallen off while that of Germany has increased. The participation by Japan, the third supplier, has remained more or less constant.

"Germany's exports to Mexico are particularly strong in the field of small metal toys, automatic toys and dolls, either dressed or undressed and weighing up to 300 grams each. In the toy field, dolls form perhaps the largest single item of import. Japan is particularly strong in celluloid dolls and celluloid toys, while the United States leads in the rubber-toys field, enjoying 80 percent of this business during 1937. The United States also is the leading supplier of pedal cars and tricycles. Imports of these latter items are restricted by considerations of price and competition from domestic manufacturers.

"A very cheap celluloid doll is supplied by Japan. A better quality doll is supplied by the United States, which in 1937 enjoyed 23 percent, of the field. Germany's participation for that year in celluloid dolls was only 13 percent. Germany increased its participation in mechanical toy imports from 60 to 71 percent, while imports from the United States decreased from 20 to 12 percent and those of Japan from 20 to 16 percent. The type of automatic toy supplied by Germany is well known in the United States trade. If anything, it is of somewhat better quality than previously and more sturdily constructed. The automatic toy supplied by Japan is of exceedingly poor quality, is light in weight, but sells because of its low price.

"The United States is the leading supplier of toy wheel goods. The volume is low because of the high landed peso cost and the competition of domestic manufacturers. Imported wheeled goods fall definitely within the field of luxury items, to be purchased only by a restricted few.

"Games such as checkers, lotto, and other board games are not popular among Mexican children. Very little effort has been made by toy retailers to popularize this type of merchandise. Such games are included in the Mexican customs tariff under 'toys of cardboard or paper, not specially provided for.'

"Germany is the principal supplier of these games, which include cut-outs, both of soldiers for boys and dolls for girls, as well as animal cut-outs, and various types of racing games such as horse and dog racing and animal puzzles. The United States is the second source of supply.

"Imports of rubber toys run to a considerable value, with the United States supplying 80 percent of the market in 1937, followed by Japan and Germany.