Mr. VORYS. Is that what you would call a nice cartel, as opposed to a naughty cartel?

Mr. THORP. I think there is this main difference, the cartels to which I objected before are cartels operated by private interests. This would be an arrangement in which the various governments would be the participants and from there on you will have to take up how you would label it.

Mr. LODGE. In other words, there is a basic assumption here that a government cartel is all right but a private cartel is all wrong? That is just a question. I am not stating it as a fact.

Mr. FULTON. Is there not a basic assumption that this is a cartel when it is not?

Mr. THORP. This is based on the assumption that the governments will move in on their surplus problems and that it is better to move in on their surplus problems on some kind of agreed program rather than to have them all move ahead independently and crossing each other up quite possibly by having separate programs.

Mr. FULTON. May I comment that cartels mean restrictive action for a selfish or predatory interest. Now if the cartel of a private nature is for that purpose, it is bad. If a government, which is a dictatorship of either the right or the left, uses that kind of a cartel for a restrictive purposeful nature for its own gain and not for the advancement of these general principles in which we believe, then it too is bad. I just do not want to see you get hooked into saying every government cartel is good.

Mr. THORP. We have a couple of products, notably rubber and tin, where we are on the consumer side and where I think we would be very much concerned by a government agreement which represented only the producers.

Mr. VORYS. In the case of rubber and tin, governments are involved in the present cartels, are they not?

Mr. THORP. That was true in the past, but there are no operating international cartel organizations in tin or rubber today.

Mr. LODGE. Mr. Secretary, would you be inclined to say that one of the motivating factors is that we are one of the few remaining nations who do not sanction state trading, and what we are trying to do is to accommodate ourselves to what other nations are doing instead of trying to get them to accommodate themselves to us? Mr. THORP. May I have the next chart?

(The chart referred to was entitled "ITO Assists Private Enterprise.")

Mr. THORP. This has to do with the problem of state trading, which is a particularly difficult problem. Obviously, if a particular commodity is handled entirely by a government, it is very difficult to know the basis on which its prices are being determined and whether or not there are actual discriminations involved in its operation. In general, we of course are great believers that private enterprise, rather than state trading, is the way in which things should be done. But in the face of this problem we either had to take a position that the countries should agree to give up state trading, which may be an end which we would like to see some day, but on which it certainly would be difficult to get agreement. We ourselves are involved substantially in government operation. Therefore, the principle is established in

the charter that, where state trading exists, the state-trading agencies shall be guided by commercial considerations. That means that they have to give opportunities to bidders from various countries and they have to be prepared to sell in the markets where the prices that are offered are the highest. There are certain tests, in other words, that you can get in terms of their behavior in the market, which represent at least an effort to put the state-trading operations on an economic basis so that trade will tend to flow from the places where the efficient producers are, to the markets where things are needed the most.

Mr. LODGE. Mr. Secretary, may I just interpose a question there. Just as a matter of theory do you feel that state trading acts as a

stimulus to multilateral trade, or do you feel that multilateral trade and international trade would be more stimulated if there were less state trading?

Mr. THORP. I am a believer in the processes of competition and private enterprise.

Mr. LODGE. Then does it not seem to you that, since the American taxpayers are bearing such a burden in this connection, what with the Marshall plan and so on, it would be appropriate for us to express our convictions on that matter quite forcefully through the appropriate authorities?

Mr. THORP. I think we have expressed our convictions. I hope it is clear to the rest of the world as to how we feel on this point.

Mr. LODGE. But we are not prepared to impose any conditions in that connection? Conditions to our aid, I mean.

Mr. THORP. I think our position in general has been that from the point of view of our imposing conditions, we were limited to the cases where we could see quite clearly that some particular use was inefficient or high cost, or something of that sort, but that unless you had a clear case, that you were not in the position of making it an "or else" kind of situation. On the other hand, we are free and it is part of the duty of American representatives everywhere to point out the advantages that one gets when individuals are given a chance to use their energies with relative freedom. I might say that that ties back in a broader way, to the notion of the ITO. Because what we are essentially trying to do here is to open up trade channels and get rid of a lot of these arbitrary interferences and make it more possible for businessmen to function in what is at the present time an exceedingly difficult area in which to carry on business at all.

Chairman KEE. What is the sense of the committee? Shall we continue the session this afternoon or suspend after we conclude with this morning's testimony.

Mr. LODGE. I suggest we suspend.

Mr. BURLESON. It seems we could take advantage of the present situation on the floor and continue through the afternoon.

Chairman KEE. Mr. Secretary, could you come back tomorrow morning?

Mr. THORP. I could come tomorrow morning; yes, sir.

Chairman KEE. To settle the matter, we will continue for 10 or 15 minutes longer and then we will adjourn until tomorrow morning. I think we should come here at 10 o'clock.

Mr. VORYS. I think while this appropriation bill is down there, we will have trouble enough getting a quorum. We better meet at 10 o'clock and try to work a half day and work hard, but we trail off into nothing if we try to meet in the afternoon.

Chairman KEE. You may proceed, Mr. Secretary, and we will conclude in about 10 minutes until tomorrow morning at 10 o'clock. Mr. THORP. I would like to speak briefly about the way in which the charter deals with the problem of cartels.

(The chart was referred to entitled "ITO Helps Control Cartels.") Mr. THORP. You will realize this is the first effort that has been made internationally to deal with the problem of cartels. As a matter of fact, in the past, cartels have been quite permissible and acceptable in the policy of most countries. It has only been since the end of the

war that the British, for example, have moved in on the problem and of course in Germany through our occupation we have been in the process of breaking down what were some of their strongest cartels in the past.

There is a decided recognition of the problem which never was true before. The question is just what can be done in dealing with cartels. The procedure as outlined in the charter is as follows: A member claims to the ITO that there is some cartel which it feels is affecting its trade. The ITO investigates. The various members are obligated

to furnish information concerning it. The ITO, on the basis of its investigation and the information, recommends steps which should be taken. The members have an obligation to take action in dealing with the problem in accordance with whatever their own national techniques and devices may be. This is a tremendous step forward, but I think in all frankness I should say it is not a step which carries in it much in the way of teeth. This opens up cartel situations. It permits discussion of them in the ITO. On the point of remedial measures, it is impossible to forecast at the present time the kind of action or the extent of action which members would take.

From our point of view in terms of our dealing with cartels it is believed there is a good deal we can do in the United States under our legislation to be helpful and that this process will be very helpful to us in dealing with the problem as it directly affects us.

Chairman KEE. It at least turns the light upon them.

Mr. THORP. It very decidedly does turn the light upon them. Mr. JUDD. As I understand they are not required to take step 5, where the members take action?

Mr. THORP. No.

Mr. JUDD. They do not even have any moral obligation on that. Mr. THORP. I will ask Mr. Brown to speak on that.

STATEMENT OF WINTHROP G. BROWN, DIRECTOR, OFFICE OF INTERNATIONAL TRADE POLICY, DEPARTMENT OF STATE

Mr. BROWN. The members take an obligation under the charter to prevent practices such as dividing up markets and restraining competition and so forth which are listed in the charter. However, they are not bound to follow the particular recommendation in a particular case. They are obligated to pay due regard to it and they are obligated to eliminate the practices whenever they have harmful effects. But they could conceivably disagree with any recommendation in a particular case.

Mr. JUDD. Under step 3 members are to furnish information. Suppose they do not want to do that. Just as some people who might be asked what their income was for the census are unwilling to make such information available, the nations might say, "What we are doing under our steel cartel or chemical trust, or oil combine, we are not going to give you that information."

Mr. BROWN. That was discussed at the conference and we considered it a considerable gain to get in the charter an obligation that members would furnish the information necessary.

Mr. JUDD. Then every firm would be under obligation under this charter to make any information available which the international order requested?

Mr. BROWN. There is a procedure set up for safeguarding legitimate business secrets and that kind of thing. But there is a general obligation on the part of the members to give enough information about the operation of the cartel so that the organization will have a basis. for decision. The present powers of the Federal Trade Commission would be ample to permit us to fulfill our obligation under the charter. Mr. VORYS. Is there any requirement in the charter for a vote on any matter other than by unanimous vote? Is there a majority vote for any action?