competition. conspiracies, or monopolies which restrain commerce by destroying or restricting Interstate and international commerce should not be vexed by combinations,

seeking nor granting exclusive preferences. Our commercial policy should hold an equal and impartial hand, neither

In the Supreme Court, Justice Harlan :

sented in our thinking. George Washington's farewell address: There are a few quotations here from the past which are still repreMr. THORP. We have a number of historical United States policies.

Cordell Hull speaking in Congress in 1917 for a permanent international trade congress, and Mr. Hughes in 1923 inaugurating the unconditional most-favored-nation policy.

The principles of the ITO are reflections of established United States policies.

One could not demonstrate that the ITO represents something which introduces new elements into American policy, except the new element of doing it through an international organization. The things this organization is directed toward represent an extension of policies which I think we can regard as well-established policies.

Taking this chart on barriers and the other chart on discriminations, the policy is very clear in the ITO charter, that the trade of every member will be treated alike. In other words, unconditional mostfavored-nation treatment will be generalized by the various countries to other members. This has been an American policy for over 25 years. It is required of us as a matter of fact in the Reciprocal Trade Agreements Act that we do this but it is not an established policy on the part of many other governments and it therefore is exceedingly important that the most-favored-nation principle be established. That is a principle of course which strikes directly at this notion of preferences or discriminations.

Now on the tariff item, I have already, in answer to Mr. Lodge's question made a brief statement on it. I think I should merely repeat this much of that statement, that the obligation in the charter is an obligation to enter into negotiations with respect to an adjustment of tariff rates. There is no statement as to what procedures must be followed nor is there any obligation with respect to achieving some particular target as a result of the negotiation. As I said before, the Trade Agreements Act would give all the authority necessary to carry out this part of the ITO operation, but one would not be bound by the charter to have that. It could be carried out, and by many countries will be carried out, by the executive branch of the country and then referring it to their congresses for approval if that is necessary. Mr. FULTON. Could I interpose a point there? Is it not correct that the administration of the General Agreement on Tariffs and Trade is one thing, and the principle which it is operating under-that is the principle of reciprocal trade-is another? You have a reciprocaltrade principle which you will work out by tariff teams, what the agreement should be on the agreement level on various commodities, but within the principle, the administration carries out certain agreements and enters into GATT. If there is a distinction made, then, this is not GATT-the General Agreement on Tariffs and Tradebut the elucidation or setting up of the general principles or a constitution of trade?

Mr. THORP. That is correct.

I think it may interest the committee to know that at the last negotiation which we had with respect to reciprocal trade agreement, in the case of Colombia, we negotiated with Colombia for some period of time and were not able to arrive at what we felt was a satisfactory conclusion and therefore no trade agreement developed from it. However, we did negotiate and I think that is an indication of what can perfectly well happen from time to time under the obligation that one has in connection with the ITO Charter.

Mr. BURLESON. May I ask a question there, Mr. Secretary?
Mr. THORP. Yes.

Mr. BURLESON. Something new has been added. You gave the historical background. If I understand Point IV, we hope to develop some of the undeveloped areas with whom we can do business through private investments of capital from this country and in so doing we will be dealing with our own people.

Now what happens under reciprocal trade or under the ITO, in dealing with our own business people, with our own Americans who are producing, whether it be the raw product or the finished product, in a foreign land and importing it here to the injury of the domestic economy?

Mr. THORP. We can make no distinction from the point of view of regulations, such as tariff regulations and so forth, sanitary regulations, as to whether it was an American producer or a native producer in a foreign country.

Mr. BURLESON. However, it does make a difference in dealing with our own people, does it not, and dealing with the Nation. It is produced in the foreign country and imported into this country by American business. We will not be simply dealing with a foreign government?

Mr. THORP. We have a particular interest in that enterprise, but the problems that come up in connection with that enterprise would be mostly, at any rate, problems that would be dealt with through commercial treaties rather than through trade arrangements.

Mr. BURLESON. But you are dealing with our own people. I thought Mr. Lodge was going to mention petroleum products when he was talking about watches. Of course I am thinking of oil imports. I bring that up very subtly.

Mr. THORP. It has been a most interesting development that we now have from time to time brought to our attention in developing our policies, the special considerations of foreign countries, by Americans who are operating in those countries. I can conceive of a situation in which the issues tend to be issues affecting primarily Americans, Americans who operate abroad and Americans who operate at home. Mr. SMITH. You might mention Standard Oil.

Mr. THORP. That is a large part of the oil problem.

As to the domestic preferences, that approach in controlling foreign trade is ruled out under the charter. A country under the charter, if it wishes to put an impediment with respect to the import of foreign goods, is required to do it by some other device rather than by a device of domestic taxes or domestic preferences. That means that instead of having a hidden tariff, which is what a domestic tax amounts to, instead of having a hidden tariff through that device, it should be handled openly and clearly and recognized for what it is.

As I say that is not a problem which so far as I know affects our own processes, particularly.

As to the customs procedures; in connection with the negotiation of the ITO charter, experts from the various countries got together and discussed what might be done to streamline and simplify customs processes. That has been a matter in which the Treasury in this country has been active for some time and I think it is clearly known that a bill is about to be presented to Congress which deals with

this matter of customs procedures, the result of a long and elaborate study on the part of the Treasury Department.

I might say that this bill corresponds to the requirements in the ITO charter. It is legislation which, regardless of what happens to the ITO charter, the Administration feels is desirable and important, because this customs red tape is one of those things which is a disturbing influence without being what one might call a planned degree of control. The uncertainties which it creates makes life very miserable for those men who operate in foreign trade. So that on this particular aspect of it, we, and we hope other countries as well, will be moving ahead and it is something which clearly should be done, regardless of what our international commitments may or may not be. The quota point is also clear in the charter. It requires that quotas be abolished except in certain specified circumstances. I will talk about that a little bit later when I talk about the exceptions.

The difficulty with quotas is the fact that quotas are so absolute. The tariff does represent an equalization and therefore permits a degree of economic elements to operate. But the quota is an arbitrary matter and is completely limiting with respect to foreign trade.

(A chart was referred to entitled "ITO Helps Solve Commodity Problems.")

Mr. THORP. Now there are certain other matters which were considered at the Habana Conference. I think this is a chart which Mr. Vorys might think Mr. Goldberg helped us to prepare. This is the chart which relates to the handling of commodity surplus problems. You are all familiar with the fact that in the past, in such fields as rubber and sugar and now wheat, there have developed surpluses, and in a number of cases international arrangements for dealing with them. Historically those international agreements have usually been agreements among the producers and they have been agreements aimed primarily to keep the price up.

In the ITO charter there is a chapter relating to commodity agreements, and special procedures are set up whereby there can be intergovernmental action, if it is appropriate, with respect to commodity surpluses. There are certain principles which are very important to which any agreement would have to conform, that both producers and consumers should be in it, that there be a time limitation on the duration of the agreement, it isn't a permanent arrangement; that it should relate to primary commodities only, and that it should not merely be something that holds the price up, but that it should have a program or some way of getting a program for removing the basic causes of the surplus.

The danger, of course, in the world at the present time is that the various countries in which there are surpluses will develop their own separate and independent programs and you might even reach a point of competitive dumping around the world, in the very disorderly way in which these surpluses might be handled if there were no agreement on principle to which they should conform.

Any country may believe action to be necessary and may bring the matter into the ITO. The ITO would set up a study group which would examine it and issue a report. The report might say, "We feel this situation does not require action," or it might propose some kind of action. If it proposed action, there would be an intergovernmental

conference convened. The ITO in a sense steps out at that point. The Government representatives would be called together and they would work out a commodity agreement which finally would then have to be ratified, just as the Wheat Agreement had to be ratified by the Congress.

This is in recognition of the fact that one of the real disturbing elements in international trade can be these situations in which in primary commodities, substantial surpluses develop. And this provides an orderly way, and some agreed principles with respect to the way in which the problem would be approached.