EXTENSION OF RECIPROCAL TRADE AGREEMENTS ACT

TUESDAY, APRIL 13, 1943

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The committee met at 10 a. m., Hon. Robert L. Doughton (chairman) presiding.

The CHAIRMAN. The first witness this morning is the Honorable Jesse Jones, Secretary of Commerce for the United States. Mr. Secretary, do you prefer to make your main statement free of interruption and answer questions later?

STATEMENT OF HON. JESSE JONES, SECRETARY OF COMMERCE

Secretary JONES. If it is satisfactory to the committee, Mr. Chairman, I would like to read a little statement I have prepared and then answer any questions.

The CHAIRMAN. Proceed in your own way, Mr. Secretary.

Secretary JONES. First, I want to say how pleased I am to appear before you. There is very little I can add to the testimony of Secretary Hull. His life has been along this general line. I have great confidence in him, great admiration for him, as Secretary of State. I confess I believe in his principles with regard to our international problems.

As for these trade agreements, I am strongly of the opinion that the trade agreements have been very helpful in connection with our foreign trade and that their continuation is highly desirable. The Department of Commerce cooperates with the State Department and other agencies in aiding exporters and importers through the dissemination of such technical information as is essential to an adequate understanding of foreign market conditions, as well as other factors pertaining to the international exchange of goods and services. Trade agreements encourage production, increase employment, and generally stimulate our national economy.

Our foreign trade reached the low figure of $2,934,000,000 in 1932. This was increased to $5,495,000,000 in 1939. At the depth of the depression our foreign trade had suffered a 70-percent decline from the 1929 level. By the end of 1939, more than half of this lost ground had been regained. Further substantial increases came in 1940 and 1941, but these were war years, and the abnormal influence due to the war affected the character and volume of our international trade. Some countries were cut off and others added.

In my view, some reasons for a continuation of the reciprocal trade agreements are:

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1. I believe the trade agreements have been successful in accomplishing their main objective, that is, the expansion of our foreign trade. 2. I believe the agreements have aided materially in creating hemisphere solidarity and in strengthening friendships with many nations outside the hemisphere, and this influence is a major contribution to the war effort.

3. I believe the trade agreements will be of great value after the war in rebuilding world trade on a sound and lasting basis.

4. I believe trade barriers are generally harmful and that a continuation of the trade-agreements program will go a long way toward lowering these barriers and encouraging foreign trade.

5. I am convinced that failure to extend the trade agreements at this time might be regarded by friendly countries, free and occupied, as a definite step toward isolation, a policy followed by the United States and other countries after the last war with bad results.

In my opinion, there is no doubt that the trade agreements contributed materially to the increase in our foreign trade between 193435 and 1938-39. Our figures show that in this period our exports to trade-agreement countries increased by 63 percent, while our shipments to nonagreement countries gained by only 32 percent. In these same years, our imports from agreement countries increased by 22 percent, as compared with an increase of only 12 percent for nonagreement countries. These facts prove to me that trade agreements build trade, and that is what we want to do, not only in our own interest, but in the interest of other countries with which we must live in peace after the war.

Our figures for 1939-40 show even greater proportionate gains in our exports to agreement countries, but not much relative change with respect to imports, due of course to the war and a lack of shipping.

Then, to refer to my second point-the value of trade agreements in a wartime economy. The practical effect of existing agreements on our foreign trade, though materially reduced by the war, continues to be felt, especially with our closest neighbors. Shortages of civilian goods and shipping space and the relative unimportance of delivered cost have, for the present, lessened the relative importance of import duties and other peacetime obstacles to trade. The agreements, however, continue to have some economic effect, and a decided psychological effect, on our relations with other countries. They have aided substantially in developing hemisphere solidarity, and in building friendships with nations outside this hemisphere.

My third and fourth points involve the value of trade agreements to our post-war economy. The great service that the present network of agreements can render, plus others which may be negotiated, will be to avoid artificial barriers and to further cement friendships.

The Department of Commerce, with the State Department, endeavors to reflect and interpret the attitude of business in foreign trade, and in recent weeks there seems to be some uneasiness as to the probable extent of the Government's participation in, and regulation of, post-war foreign trade-how soon after the war will Government agencies now active in this field find it possible to withdraw. Since trade agreements are essentially a means of removing or lowering Government-imposed obstacles for the purpose of expanding exports and imports in private trade, failure to extend the authority under which they are negotiated might naturally be construed by business as

an indication that private enterprise will not be expected to play a major role in post-war foreign trade, for at least some little time. And that I can see is a possibility.

My fifth point concerns the probable effect on friendly nations of the termination or curtailment of the trade agreements. The peoples of these countries might properly consider such action on our part a step in the direction of isolation. And that, I think, is of the greatest importance.

To foreign businessmen the termination of the program would bring a fear of rising trade barriers in a post-war period when the world will be desperately in need of our goods, and our friendly cooperation readjusting world trade and world conditions.

That, Mr. Chairman, is my prepared statement. I will be glad to answer any questions that I can answer; but I warn you I do not know any too much about the subject.

Mr. COOPER. Mr. Secretary, of course as Secretary of Commerce you are vitally interested in and concerned with the business activities of the country?

Secretary JONES. I am. The charter of the Department of Commerce is to promote commerce; that is what the Department is there for.

Mr. COOPER. It is your opinion that the trade-agreements program is in the interest of the commerce and business of the country?

Secretary JONES. Decidedly so.

Mr. COOPER. And you feel that the extension of the Trade Agreements Act is necessary and important?

Secretary JONES. I do.

Mr. COOPER. In the interest of the business and commerce of the country?

Secretary JONES. Very strongly.

Mr. ROBERTSON. Mr. Secretary, I believe you believe in the American principle of private enterprise?

Secretary JONES. I most certainly do.

Mr. ROBERTSON. The Government, of necessity, is now exercising governmental control over exports and imports? Secretary JONES. Yes.

Mr. ROBERTSON. You tell us that in recent weeks concern has been expressed as to when those controls will be released after the war is over?

Secretary JONES. If I understand you correctly; yes.

Mr. ROBERTSON. And you recommend the continuation of the Reciprocal Trade Agreements Act as the best means of returning, in the post-war era, foreign commerce to private enterprise.

Secretary JONES. Very strongly.

Mr. ROBERTSON. And if we cannot in the post-war era return foreign commerce to private enterprise, we would then have to trade on the basis on which totalitarian nations traded before and during the war?

Secretary JONES. Obviously.

Mr. ROBERTSON. That means, of course, the regimentation of international trade?

Secretary JONES. Yes; that is correct.

Mr. ROBERTSON. And if we regiment international trade, would not we run the risk of ultimately being forced to regiment domestic commerce?

Secretary JONES. I think we certainly would.

Mr. ROBERTSON. Are you opposed to special privilege?
Secretary JONES. Yes, sir.

Mr. ROBERTSON. We celebrate today the two hundredth anniversary of the greatest interpreter of democracy the American Nation has ever produced, the man whose life was devoted to expounding the theory that democracy means equal rights, equal benefits, equal burdens for all, and special privilege for none.

Secretary JONES. I subscribe to all those.

Mr. ROBERTSON. If we have a tariff the rates of which are so high that it protects inefficient industry, do we not in that way provide saddles for the backs of the masses and boots and spurs for the favored few?

Secretary JONES. I would think so.

Mr. ROBERTSON. Is it not a fact that under the 27 reciprocal trade agreements that have been negotiated through the State Department in cooperation with the Department of Commerce and the Department of Agriculture, we have reduced the rates of the Hawley-Smoot tariff on some 900 items of manufacture an average of about 25 percent? Secretary JONES. There has been a reduction. I have not the exact figures nor the proof. I can get and supply them for the record, if you would like.

Mr. ROBERTSON. As a Southern Democrat, you know that the tariff for years was a political issue and should never have been because we are dealing with an economic problem. You will recall that the Hawley-Smoot tariff was a major political issue in the campaign of 1932. Is not that correct?

Secretary JONES. I remember a little about it; I do not know enough about it to give intelligent and accurate answers.

Mr. ROBERTSON. Well, I do not know how it was in Texas, but it was a political issue wherever I spoke.

Mr. REED. We will all agree to that. [Laughter.]

Mr. ROBERTSON. And I thought I had made out in that campaign. a pretty good case against the Hawley-Smoot tariff and, since that time, I have been frequently twitted with the charge "If you were so much opposed to the Hawley-Smoot tariff, why have not you brought in a bill to rewrite the Hawley-Smoot tariff?" My answer to that and I want your confirmation of it-is that we have done the job in a different, more efficient, and more effective way through the enactment of the Reciprocal Trade Agreements Act, and the scientific lowering and modifying of the rates of the Hawley-Smoot tariff which, we charged, constituted special privilege in that they protected not the American standard of living, but the operation of inefficient units of industry. Mr. Hull told us yesterday he was satisfied that the inordinately high rates of the Hawley-Smoot tariff had been lowered through the negotiation of reciprocal trade agreements without doing violence or injury to American industry. Was he correct in that statement?

Secretary JONES. As far as I understand it, he was.

Mr. ROBERTSON. During the entire period that these trade agreements have been in effect, industry has become more and more prosperous, has it not?

Secretary JONES. I think so.

Mr. ROBERTSON. During the entire period, the cash income of agriculture has continued each year to rise until 1942, when it reached the highest figure in our history. Is that true?

Secretary JONES. I assume so; but I guess you can get that confirmed by the Department of Agriculture better. I will be glad to supply an answer for the record.

(The cash farm income referred to above is outlined in table appearing on p. 72)

Mr. ROBERTSON. When we passed the A. A. A. Act, which we called the farmers' domestic tariff and calculated to offset the domestic tariff given organized labor in the Fair Labor Standards Act and the domestic tariff on bituminous coal to aid both the operators and the miners in the coal fields, we promised the American farmer parity prices. Is it not a fact that, notwithstanding that domestic tariff for agriculture and the bounties that were given to the farmer in an effort to hand him out as much bounty as we handed out to organized labor under a tariff system affecting domestic commerce, our farmers did not actually receive parity until an outlet for the surplus of farm products was found under the lease-lend program?

Secretary JONES. I will have to supply the answer. I would like to do that.

(The information requested is as follows:)

Agricultural prices, 1925-43

Source: U. S. Department of Agriculture--"The Agricultural Situation," March 1943.