value of currencies and in tariffs. You well know in foreign trade the stability of international currency has a great deal to do with a matter of what rates you may set up in reciprocal trade agreements.

I understand from your first statement that there exist interdepartmental committees that get together and discuss all of these subjects. Mr. SAYRE. Yes, sir.

Mr. DEWEY. Would this subject that Mr. Morgenthau has before him now come before the State Department for consideration?

Mr. SAYRE. Yes. In answer to your question, let me say this: A representative of the Treasury sits on, I believe, all of the interdepartmental committees, and when a question such as you suggest arises, it is the Treasury Department representative who is at once looked to. If it is a matter concerning high policy, at once he confers with the Treasury, and perhaps brings over Treasury representatives. I think I am betraying no confidence when I say that one of the Treasury men as instrumental as any other for formulating the stabilization scheme to which you refer used to sit with us regularly in our Commercial Policy Committee discussing trade agreements.

Those questions, as you point out, are intimately connected. You have got to have stabilized currencies if you are going to have successful foreign trade. One is dependent on the other. The two questions interlock. So that there is the closest kind of working together and coordination of thought between the Treasury and those working out the trade agreements.

Mr. DEWEY. Now, I would like to go a little further in exploring this matter with regard to the possible necessity of extending credit to certain countries that are or will be placed in an embarassing position after the war is over, due to lack of foreign exchange or gold, to reestablish themselves in international trade.

I haven't heard of any proposals for that. They attempt, in Mr. Morgenthau's paper, to stabilize currencies. I don't think you can stabilize currencies unless you can arrange some credit means by which countries will start their commercial operations. The chips that will be issued under either Mr. Keynes' plan or the Treasury's plan will certainly go into the hands of the greatest creditor country. What thought has been given to this question in this interdepartmental commission? Much thought?

Mr. SAYRE. I agree with you that there is another question which has to be thought through. That, of course, is quite outside of the province of the operation of the trade agreements.

Mr. DEWEY. I believe, however, that international credit is the basis of international trade.

Mr. SAYRE. In trade agreements we are concerned with barriers which obstruct the flow of trade. Agreed that we can't increase international trade without proper stabilization arrangements, and quite conceivably without various forms of international financing, yet those latter questions are Treasury questions, with which, or over which, we lack jurisdiction in our trade-agreements organization un-der the Trade Agreements Act. I believe that such questions are primarily the concern of the Treasury Department to take the initiative. Of course, Congress is the one which must determine the general policies in this matter.

Suffice it to say that these matters do lie outside of the field of our trade-agreements work as carried on under the Trade Agreements Act. Mr. DEWEY. I am only trying to bring out one thing, and that is, the necessity of looking

Mr. SAYRE. At the whole picture.

Mr. DEWEY. And you have got to have all three legs of the tripod. Mr. SAYRE. And more legs, more than three.

Mr. DEWEY. And working together.

Mr. SAYRE. More than three.

Mr. DEWEY. At least those three. You have got to have the goods to exchange, you have got to have the currency for payment, and you have got to have the credit facilities that generally go along with international trade.

Mr. SAYRE. I am in entire agreement with you, sir.

Mr. DEWEY. It does strike me that all of those should be considered, and while I am a humble member of this committee, I was somewhat surprised to find that this committee doesn't have anything to do at all, or wasn't even asked to be a participant, of so important a matter as this stabilization plan discussion.

Mr. SAYRE. When you say "this committee," you mean the Committee on Ways and Means?

Mr. DEWEY. Ways and Means. I was wondering how many more things of that nature would be developing that were going along with your trade agreements, hand in hand, that this committee knew nothing about. Is there a coordination down in your own Department? Mr. SAYRE. There is. We work very closely, so far as the State Department is concerned-and intimately-with the Treasury Department and with the Department of Commerce and with the Department of Agriculture, the Tariff Commission, and other agencies of the Government.

With respect to the questions which you raise there is the closest kind of coordination, because most of those problems have to be taken up with foreign representatives, so that the Treasury Department works through and with the Department of State in doing so.

Mr. DEWEY. I would like to ask one or two more questions, Dr. Sayre, along this general line, and that is looking toward our very good friends and neighbors, the Republics of South and Central America.

There is, I understand, eredit machinery now resting over in the other body in the form of an Inter-American Bank. Has that anything to do

Mr. SAYRE. Not with trade agreements.

Mr. DEWEY. Would that be beneficial at all in extending your trade? Mr. SAYRE. Yes; it has to do with extending trade. I hope the effect will be to extend trade. But we have no power in our tradeagreements organization over such matters.

Mr. DEWEY. No; but as I recall, the Inter-American Bank idea emanated from the State Department.

Mr. SAYRE. I believe so.

Mr. DEWEY. Do you think the time has yet come to press to have that bank considered? It has been in committee for about a year and a half.

Mr. SAYRE. That is a question which I fear you must ask someone other than myself.

Mr. DEWEY. That is just it. I can't ever run these things down. The State Department was the father of the idea. I am very sure of that.

Mr. SAYRE. It lies outside of my jurisdiction, so I don't dare tread on that point.

Mr. DEWEY. I won't embarrass you by pressing the point. But may I ask you this: If it was set up and doing business it would be beneficial, would it not?

Mr. SAYRE. I think it would.

Mr. DEWEY. To the trade to be carried out in your reciprocal-trade agreements?

Mr. SAYRE. Of course, in the same way the Export-Import Bank directly and closely affected foreign trade. We worked, and do work, in the closest conjunction with Mr. Warren Pierson, president of the Export-Import Bank, and others.

All those questions are related, and intimately related questions, and there is a close coordination among the executive departments in trying to solve those problems. But so far as I myself am concerned, in answering questions here, I cannot step outside of the trade agreements.

Mr. DEWEY. I realize that, but at the same time I believe that they are very important.

Mr. SAYRE. They are.

Mr. DEWEY. In carrying out of your work?

Mr. SAYRE. Exceedingly.

Mr. DEWEY. I wanted to be sure there was coordination.

Mr. SAYRE. There is.

Mr. DEWEY. I thank you very much.

The CHAIRMAN. The committee will take a recess until 2 o'clock. (Whereupon the committee took a recess until 2 p. m.)

AFTERNOON SESSION

(The hearing was resumed at 2 p. m.)

Mr. COOPER..The committee will please be in order.

The chairman said that he might be detained a moment or two. Are there any further questions?

STATEMENT OF HON. FRANCIS B. SAYRE, SPECIAL ASSISTANT TO
THE SECRETARY, DEPARTMENT OF STATE-Resumed

Mr. GEARHART. I desire recognition in my turn.
Mr. COOPER. Mr. Gearhart, of California, is recognized.

Mr. GEARHART. Sir, we have had to wait a long time to have our little exchange of ideas on this very important subject.

Mr. SAYRE. I do not think that our ideas are very far apart, sir. Mr. GEARHART. So far as reciprocal trading is concerned, I do not think that they are either. I think that our disagreements are largely as to method and largely as to philosophy. The urges which you feel to negotiate, are urges which I would utterly disavow, and some

of the objectives that you have in mind are very, very far from the objectives that I would entertain, but I think it would be agreed that the party that I belong to has been as interested through the years as the opposing party has been in developing our foreign markets.

We have not done so bad, even without reciprocal trade agreements. Although we represent but 6 percent of the world's population, we have hardly ever had less than 15 percent of the world's business.

Mr. SAYRE. Mr. Gearhart, I was born and brought up a Republican, until after I got to college. I was a stanch Republican, so I can sympathize with and understand your viewpoint.

Mr. GEARHART. You would have me believe that you were a Republican until you learned to read?

Mr. SAYRE. That is not necessarily so.

Mr. GEARHART. Because so much has been said on the subject and so many unfortunate inferences have been aroused I think that we ought to start in by reading that which President William McKinley said in 1897 about this subject.

The end in view is always to be the opening up of new markets for the products of our country by granting concessions to the products of other lands, that we need and cannot produce ourselves, and which do not involve any loss of labor to our own people but tend rather to increase their employment.

Now, I think that that illustrates to a measure, at least, the difference in the philosophy that controls your thinking and that which controls mine.

I place a great emphasis upon-in fact, I find that I have underlined in red-this phrase "products of other lands that we need and cannot produce for ourselves."

You would go still further and let trade be carried on between nations, our own being one, in things that we are entirely capable of producing here, things we don't need

Mr. SAYRE. May I comment on that or would you prefer to finish your question?

Mr. GEARHART. I am perfectly willing to suspend and let you proceed at this point, because I am quite sure that you anticipate accurately that which I was going to say.

Mr. SAYRE. I think that I do; and I think that it does raise a pretty fundamental issue. I take it, Mr. Gearhart, that you are familiar with the very last speech which President McKinley made in which he comes out strongly with his views on foreign trade. I think that my comment would be this:

That there are comparatively few articles in which you have a straight, head-on collision between foreign-produced and Americanproduced, where the introduction of the foreign articles will work real injury to the Americans. By that I mean this:

That trade movements are so largely guided by questions of quality, style, and a thousand other considerations that you seldom have precisely the same article produced both abroad and in this country. Now, take the question of automobiles, for instance. We make automobiles and France makes automobiles, and Italy makes them or did before the war, but they are a different kind of automobile.

The British automobile is altogether a different style of product from the American automobile. It uses, at least the most common British automobile uses, less petrol or gasoline than ours. Likewise, the Italian Fiat car is altogether a different breed of animal from

ours.

The uses, the qualities, the customs, with regard to many articles, are so different that there are many, many cases with respect to the same general article in which there is no real competition to the extent that importation of the foreign article would mean injury to the producers of the American article.

Again one might cite instances of many other types and kinds of things-cheeses, for instance, where you have all kinds of different types of cheeses which do not directly compete with the,American. Now, if with respect to such a commodity you can control your importation so that that particular kind of goods can more freely come in which does not compete directly with the American, where there is not a head-on collision, you may be making a foreign concession win an advantage for American export articles by lowering the foreign barrier with respect to some other commodity, and if you can confine your activities to allowing importations of those articles where there is not this head-on collision, where there is not direct injury, you are so much the gainer.

Now, can we do that? Is that practicable?

Mr. GEARHART. I do not think it is.

Mr. SAYRE. The proof of the pudding is in the eating. Of course, one may take the view that it is not practical. On the other hand, I point to the 31 trade agreements which have been made since 1934, in which there has not been worked serious injury to any American branch of production, either agriculture or industry, and yet we have found innumerable instances where by reason of seasonal arrangements or taking care of the classifications in such a way that we avoid these head-on collisions of which I speak, where we have been able to make concessions without injury to domestic producers, and as a result have been able to secure valuable advantages for our exports.

Mr. GEARHART. Well, now, about the automobile, the automobiles are not in our market for the reason that we have a tariff that keeps them out and, therefore, the American automobile industry has built up one of the greatest and most successful industries in our country

Mr. SAYRE (interposing). Not because of the tariff, Mr. Gearhart. Mr. GEARHART. Our automobile manufacturers have been protected in the best market of the world for many years. They have been able to go successfully into second- and third- and fourth- and tenthrate markets on the other side of the world simply because their article is better than any similar article produced in any other

country on earth

Mr. SAYRE. And made more cheaply.

Mr. GEARHART. And because of a superiority in the performing ability of the article. That is why I am in favor of protection. Our automobile manufacturers have demonstrated in a very, very practical