Yucatan Peninsula and the economy of the region, especially of the State of Yucatan, has been almost entirely dependent upon income from henequen. The political and social, as well as the economic, life of most of the people hinges on this one plant as it is an important source of income in the state, not only to its citibens but also of the government."

Source: World Study of Hard Fibers and Hard Fiber Products, pt. I. U. S. Department of Commerce, 1949.

CONCLUSION

Any restriction on imports into the United States of Yucatan henequen, fiber, or cordage and twines would: (1) place an unnecessary and intolerable burden on the consumers of these products in the United States-particularly, the American farmer; (2) threaten the economy of Mexico, a friendly neighbor nation; (3) materially and adversely affect the United States national security program; and (4) compel the United States Government to seek additional miscellaneous fiber production in the Western Hemisphere to replace the production lost in Yucatan, Mexico, at considerable expense to the United States taxpayer, and with no assurance as to end results.

Respectfully submitted.

J. S. MCDANIEL.

For and on behalf of Allied Cordage Co., Baltimore, Md.; Atlas Cordage Co., Chicago, Ill.; Cord-Tex Co., New Orleans, La.; H. T. Cottam & Co., New Orleans, La.; Davis Cordage Co., San Francisco, Calif.; General Twine Corp., New York, N. Y. Independent Cordage Co., New York, N. Y.; Independent Twine & Yarn Co., Philadelphia, Pa.; A. A. Krejtman & Co., New York, N. Y.; Milton L. Mintzer, New York, N. Y.; Paulsen-Webber Cordage Corp., New York, N. Y.; Schoenfeld Mills Agency, Houston, Tex.; Dan H. Shield Cordage Co., Chicago, Ill.; J. C. Shuford Co., Chicago, Ill.; Stirratt Cordage Co., New Orleans, La.; Bob Stone Machinery Co., Chariton, Iowa.

REPORT OF UNITED STATES TARIFF COMMISSION

MEMORANDUM OF THE UNITED STATES TARIFF COMMISSION CONCERNING H. R. 4294, 83D CONGRESS, A BILL TO EXTEND THE AUTHORITY OF THE PRESIDENT TO ENTER INTO TRADE AGREEMENTS UNDER SECTION 350 OF THE TARIFF ACT OF 1930, as AMENDED, AND FOR OTHER PURPOSES

H. R. 4294, if enacted, would (1) extend until June 12, 1954, the authority of the President to negotiate foreign trade agreements, (2) amend the perilpoint and escape-clause provisions of the Trade Agreements Extension Act of 1951, (3) amend the emergency-action provision of the Trade Agreements Extension Act of 1951 dealing with perishable agricultural commodities, (4) amend section 22 of the Agricultural Adjustment Act, as amended, (5) amend section 336 of the Tariff Act of 1930, the flexible-tariff provision, (6) repeal the prohibition in the Trade Agreements Act of June 12, 1934, as amended, against the application of section 336 to articles included in trade agreements, (7) amend section 337 of the Tariff Act of 1930, the unfair import-practices provision, (8) amend section 303 of the Tariff Act of 1930, the countervailing-duty provision, (9) amend the Antidumping Act, 1921, (10) provide for import quotas on crude petroleum and residual fuel oil, (11) provide for additional duties on lead and zine, and (12) increase the number of tariff Commissioners and lengthen their terms of office.

SECTION 1-NAME OF THE ACT

This section would name the proposed act the "Trade Agreements Extension Act of 1953."

SECTION 2. EXTENSION OF AUTHORITY TO ENTER INTO TRADE AGREEMENTS

This section would extend the President's authority to enter into trade agreements under section 350 of the Tariff Act of 1920, as amended, for a further period of 1 year from June 12, 1953. The existing authority for the President to enter into trade agreements under section 350 will expire on June 12, 1953, and no further agreements may be entered into pursuant to section 350 after

that date unless an extension of authority is enacted. In the absence of such extension, existing trade agreements which are in force will not be affected and will continue in force until terminated in accordance with their terms or otherwise. In addtion, there are certain trade agreements, the operation of which has been suspended but which have not been terminated. These agreements also would not be affected, and could be revived in the future under certain conditions if the President's authority to negotiate trade agreements is not extended.

SECTIONS 3, 4, 5, AND 6—AMENDMENTS TO PERIL-POINT AND ESCAPE-CLAUSE PROVISIONS Prefatory remarks

These sections would make certain amendments to the peril-point and escapeclause provisions of the Trade Agreements Extension Act of 1951. Since these provisions are based upon the President's authority under section 350 of the Tariff Act of 1930 to grant trade-agreement concessions and to carry them out, a brief preliminary statement regarding such authority will be made. Section 350 of the Tariff Act of 1930, as amended, authorizes the President (1) to enter into foreign trade agreements and (2) to proclaim "such modifications of existing duties and other import restrictions, or such additional import restrictions, or such continuance, and for such minimum periods, of existing customs or excise treatment of any article covered by foreign trade agreements, as are required or appropriate to carry out any foreign trade agreement that the President has entered into hereunder." The section imposes a limitation on (2) that "No proclamation shall be made increasing or decreasing by more than 50 per centum any rate of duty, however established, existing on January 1, 1945 ***, or transferring any article between the dutiable and free lists."

Thus section 350 authorizes the President to do two separate and distinct things: (1) to enter into foreign trade agreements, and (2) to proclaim such changes in or continuance of the United States customs treatment of articles covered by such agreements, within specified limitations, as are "required or appropriate" to carry out these agreements.

If the President enters into an agreement providing for a maximum rate of duty for a product,' which maximum rate is lower than the existing rate, he is authorized to proclaim the reduced rate under his authority to proclaim such modifications of existing duties as are "required *** to carry out" a trade agreement. Where the maximum rate specified in the agreement is higher than the existing rate, he may proclaim such higher rate under the authority granted him to proclaim such additional import restrictions as are "appropriate * * * to carry out" a trade agreement. (Since rates specified in trade agreements are maximum rates, it would not be "required" to proclaim an increased rate of duty "to carry out" a trade-agreement concession specifying a higher rate than the existing one; it would only be "appropriate.") The authority to proclaim additional import restrictions when "appropriate ** to carry out" trade agreements includes authority to proclaim quotas when so appropriate.

It is obvious that in order for the President to proclaim a customs treatment less restrictive than an existing one it must be required by some explicit provision of a trade agreement. To be so required, it must of course be provided for in the agreement. By the same token, in order to warrant the proclamation of a customs treatment more restrictive than an existing one, it also must be explicitly provided for in the agreement before it can be "appropriate *** to carry out" the trade agreement. Congress could not have intended that a more restrictive customs treatment should be proclaimed by the President whenever it is merely "not inappropriate" to a trade agreement. Such a construction of the statute would mean that the President could at will increase duties and impose quotas on all products which are not covered by trade-agreement concession, so long as there is nothing in a trade agreement which forbids it. Indeed, such a construction of the word would mean that, where the maximum rate specified in a trade agreement is not as low as the President has authority to fix it, he could nevertheless proclaim a lower rate than the trade-agreement rate on the ground that such lower rate was "not inappropriate" to the trade agreement.

1 Duties specified in all trade agreements heretofore entered into were maximum rates, i. e., the obligation in each instance is to impose no higher rates of duty than those specified.

Section 350, therefore, anthorizes the President to enter into foreign trade agreements providing for "modifications of existing duties and other import restrictions, additional import restrictions, or continuance *** of existing customs or excise treatment," and when such an agreement is entered into the President may proclaim such modification, additional import restrictions, or continuances as are provided for in such agreements. In other words, neither reduced nor increased import restrictions may be proclaimed by the President under section 350 unless they are expressly provided for in a trade agreement. Proposed peril-point amendments

The peril-point provisions of the 1951 Extension Act (secs. 3 and 4) reflect a congressional policy that the authority granted to the President by section 350 should not be used to reduce existing import restrictions below a point found by the Tariff Commission necessary to prevent serious injury or threat thereof to domestic industries and that such authority should be used to increase import restrictions when the existing restrictions are found by the Tariff Commission to be insufficient to prevent serious injury to such industries. Thus, it is provided, in effect, that before entering into trade-agreement negotiations the President shall furnish the Tariff Commission with a list of all imported articles to be considered in proposed negotiations; and that the Commission shall make an investigation (including a hearing) and report to the President with respect to each listed article the minimum tariff protection necessary to prevent serious injury or threat thereof to the domestic industry concerned. The Commission's report must be made not later than 120 days after receipt of the President's list and, if not made by that time, the President may enter into an agreement with respect to the listed articles without such report. Should the President enter into an agreement which would require a reduction in existing import restrictions below that specified by the Tariff Commission, or which does not provide for (make appropriate) additional import restrictions which the Commission found to be necessary, he must report his reasons to Congress.

Section 3 (a) of the 1951 Extension Act requires the Commission to fix a "peril point" for each article in the President's list, with a view to safeguarding against "serious injury to the domestic industry producing like or directly competitive products.” Section 3 of H. R. 4294 would change the criterion to one which would safeguard against "unemployment of or injury to American workers, miners, farmers, or producers, producing like or competitive products, or impairment of the national security."

The term "serious injury" is difficult to define, and there is much room for honest difference of opinion as to when injury is serious and when it is not.

The "serious injury" must be determined, under the present law, in relation to "the domestic industry producing like or directly competitive products.”

The new language proposed by section 3 of the bill would make the question of injury dependent upon the effect of imports on "unemployment of or injury to American workers, miners, farmers, or producers, producing like or comp titive articles," rather than to the industry producing the like or directly competitive products.

The proposed new language does not contain the word "serious" or any equivalent term. Thus, the degree of unemployment or injury would not be relevantany unemployment or injury would be the determining factor.

The criterion of impairment of the national security in the proposed change in the peril-point provision introduces an entirely new factor which the Commission would be required to consider. It is not uncommon for domestic interests opposing diminution of their tariff protection or seeking tariff relief to claim importance of their industry to the national defense. The Commission has not considered the existing law as authorizing it to consider national defense or security interests in arriving at its determinations. Consideration of national security interests would require the cooperation of defense agencies.

The proposed amendment to the peril-point provision would describe the domestic article to be compared with the imported article as the "like or competitive" article rather than the "like or directly competitive" article, as in the existing law. The problems involved in applying such terms as "like," "such,” “competitive," "similar." etc., in different types of cases are too many to enumerate here. The courts have had many struggles with such terms when used in tariff legislation. The term "directly competitive" originated in the General Agree

ment on Tariffs and Trade (GATT) and is used in the escape clause of that agreement. Escape clauses in earlier agreements used the term “like or similar." The reason for the change is not known. In any event, the words "directly competitive” exclude articles which are indirectly competitive, and the elimination of the word "directly" would, in the absence of explanation, be taken to indicate an intention to widen the scope of the law to cover articles which are either directly or indirectly competitive.

As indicated above, the present law provides that the President may not enter into a trade agreement until the Tariff Commission has made its peril-point report to him or until after 120 days have elapsed since the Commission received his list of products.

When the peril-point provision was orginally under consideration by the Congress (in connection with the 1949 Extension Act), one of the objections raised against the enactment of a peril-point provision was that it would unduly hamper and delay trade-agreement negotiations. This was the reason for the 120-day clause. If the Tariff Commission did not submit its report within 120 days, the negotiations could proceed and be concluded without the report. The Commission has made only two peril-point reports thus far, the first involving a considerable number of products and the second involving relatively few products. In each instance the Commission completed its report within the 120-day period. Under section 3 of H. R. 4294 the requirement of a Tariff Commission peril-point report within 120 days is eliminated but the President is forbidden to conclude a trade agreement until the Commission has made its report.

As indicated above, under the present peril-point provisions the President is required to report to the Congress his reasons whenever he fails to comply with the Tariff Commission's peril points. Section 4 of H. R. 4294 would eliminate the power of the President to go beyond the Tariff Commission peril points; in fact, it would prohibit the President from entering into any trade agreement under section 350 which would provide for the reduction of existing import restrictions below those specified in the Tariff Commission's report or which would fail to provide for such increase in import restrictions as may be specified in the Commission's report.

So far as this prohibition forbids the consummation of a trade agreement which provides for reductions in existing import restrictions below those specified by the Commission is concerned, it would mean that the foreign countries with which the agreements are negotiated would either have to accept concessions on the articles concerned within the limits specified by the Commission or the articles concerned would have to be dropped from the agreements. Whether this would involve serious negotiating problems would depend on the nature of the products involved and the attitude of the foreign countries concerned. If the articles are of sufficient importance to the foreign countries it could result in the entire failure of the negotiations.

The requirement that the President shall not enter into an agreement which fails to provide for such increases in existing import restrictions as have been found by the Commission to be necessary would amount to a requirement that the foreign countries concerned either agree to the imposition of the additional import restrictions by the United States or have no agreement at all. The President could not simply drop the item from the negotiations; if he negotiates at all he would have to include the items on which additional import restrictions have been found to be necessary, and if he failed to obtain the agreement of the foreign countries concerned the entire agreement would fall. A large nuraber of the products listed by the President for possible consideration in trade-agreement negotiations consist of products on which foreign countries concerned have indicated an interest in obtaining duty reductions. If the Tariff Commission should in any such instances find a need for an increase in existing import restrictions, the President would be placed in a position of having to "offer" and insist on the acceptance of an increase in the duty on a product respecting which the foreign country concerned is seeking a decrease in the duty.

An example of how the proposed amendment of the peril-point provision might operate would be the case where the President submitted a list of 100 items for possible consideration in proposed trade-agreement negotiations. The Commission finds that maximum permissible reductions may be made in the case of 99 of the items without loss of employment or injury to the American workers. farmers, etc., but in the case of 1 item the Commission finds that an increase in

duty is required. If the President fails to obtain the agreement of the foreign negotiating country to the increase in duty on the 1 item, no agreement at all could be entered into.

Proposed escape-procedure amendments

Section 6 (a) of the 1951 Extension Act established the congressional policy that no trade agreement concession proclaimed after the enactment of that act (June 16, 1951) "shall be permitted to continue in effect when the product on which the concession has been granted is, as a result, in whole or in part, of the duty or other customs treatment reflecting such concession, being imported into the United States in such increased quantities, either actual or relative, as to cause or threaten serious injury to the domestic industry producing like or directly competitive products.”

Section 6 (b) of the 1951 Extension Act requires the President "as soon as practicable" to bring trade agreements entered into prior to the enactment of the 1951 act "into conformity with the policy established in subsection (a) of this section" and requires the President to report periodically to the Congress on the action taken by him to carry out subsection (b).

As the foregoing indicates, section 6 of the 1951 Extension Act establishes an escape policy which is to be applicable to all trade agreements entered into after June 16, 1951, and to trade agreements entered into prior to that date which do not already comply with the policy of section 6 (a), as soon as the President has taken the necessary action to bring such agreements into conformity with such policy.

Section 5 of H. R. 4294 would amend section 6 of the 1951 Extension Act, make important substantive changes in the statement of policy, and establish the statement of this new policy as an absolute requirement which apparently would apply as a matter of law, whether or not consistent with trade agreements. Under section 6 of the 1951 Extension Act as it would be amended by section 5 of H. R. 4294, no trade agreement concession, whether included in previous trade agreements or in future trade agreements, "shall be permitted to continue in effect when the product on which the concession has been granted is, as a result, in whole or in part, of the duty or other customs treatment reflecting such concession, being imported into the United States in such increased quantities (either actual or relative) or under such conditions as to cause or threaten unemployment of or injury to American workers, miners, farmers, or producers, produc.ng like or competitive products, or impairment of the national security."

The standard escape clause of existing trade agreements, including the General Agreement on Tariffs and Trade, does not provide for the withdrawal of concessions under the conditions specified in the proposed new language of section 6 of H. R. 4294. Unless and until such agreements are amended to conform with new language, the President would have to comply with section 6 with respect to concessions in such agreements, by such means as may be available to him.

In any case where the conditions specified in the proposed new language are found to exist, the President might discontinue the "effect" of a concession by terminating the provisions of a proclamation carrying out the concession under his authority contained in the last sentence of section 350 (a) (2) of the Tariff Act of 1930, as amended, to terminate any trade-agreement proclamation in whole or in part. However, such action unless consistent with the trade agreement containing such concession, would be contrary to an international obligation of the United States. The General Agreement on Tariffs and Trade contains certain provisions which might be invoked so as to permit the withdrawal of a concession when found necessary in order to comply with conditions such as those set forth in the proposed new section 6 of the 1951 Extension Act. These provisions, may, however, involve time-consuming negotiations. One of these provisions is the so-called waiver clause in paragraph 5 (a) of article XXV of the GATT. This clause provides that "in exceptional circumstances" the contracting parties to the GATT may, by a two-thirds majority vote, waive an obligation imposed upon a contracting party. Another provision of the GATT which might be resorted to when necessary to comply with the proposed revised section 6 of the 1951 Extension Act is article XXVIII of the GATT which provides that on and after January 1, 1954, any contracting party may, by negotiation and agreement with any other contracting party with which such treatment was initially negotiated, and subject to consultation with other contracting parties having a substantial interest in such treatment, cease to apply the treatment which it has agreed to under article II of the agreement to any 32604-53--124