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uation of this nation and that of Hun So far as the balance of trade is con- the superiority of our system of economic gary, Czechoslovakia, or other countries cerned, I would refer to the remarks of freedom to their system of economic enwhich are under the control of these the distinguished Senator from Okla- slavement. In the long run that is the people.

homa [Mr. MONRONEY), who, as a rep- way we must whip communism if we are They say they have broken away from resentative of this body, was in Yugo- to do so. That is the way we need to the Communist philosophy, and that this slavia only a few weeks ago. He told us do it. The arguments that were admatter of trade encourages better rela- what the effects of American imports vanced here today by the Senator from tions with this country. Well, Hungary into that country were.

Idaho (Mr. CHURCH), the Senator from went through that process, at one time. I also point out that, as contrasted Oklahoma (Mr. MONRONEY], the Senator Perhaps such things are weakening; but with other satellite countries, there is from Missouri [Mr. SYMINGTON), the as I said in discussing the wheat deal, not a Russian soldier on Yugoslavian chairman of the committee, the Senator we have no assurance that this will solve soil. Yugoslavia is not a member of the from Arkansas [Mr. FULBRIGHT], the the problems.

Comicon organization, nor is it a mem- majority leader, the Senator from MonThen came the autobahn incidents and ber of the Warsaw Pact.

tana [Mr. MANSFIELD], and others, have the Khrushchev threats and his state This is a coldblooded proposition. Do almost put us in an unanswerable posiments to the businessmen that he is de- Senators desire that Yugoslavia veer to- tion in support of the committee amendtermined to take us over; and recently ward us or go toward Moscow ? Do Sen ment. we have seen Tito make a complete turn- ators want the 70 percent of Yugoslavia's I shall support the language of the about. At one time he was trying to trade with the West retained or in- committee for the reasons stated. But I export the Communist philosophy; but creased, or do they want to reverse the wish to stress that we have made it perwhenever it became expedient for him percentage? That is all

. Senators must fectly clear to the world that we are not to change, he changed; but now he is make up their minds on that question.

supporting Tito. We have made it clear back in that camp. Where will he be

Mr. HARTKE. Mr. President, will the to the world that we have faith in our tomorrow? Senator yield?

system of economic freedom manifested I was talking with my 12-year-old son

Mr. MORSE. I wish to make a brief by our private enterprise trade. about this matter; and he said to me: statement and then I shall yield the

Imagine the good that we do when we Daddy, I guess we are going to help build floor. We are greatly indebted to the get our goods behind the Iron Curtain. them up, so they can

turn around and kill Senator from Ohio for bringing up the What do Senators suppose those people us.

amendment because, in my judgment, do? They do not take the goods mutely.

this is the first time, within my memory, They talk about them. They arouse a Perhaps he is mistaken; but I see no

we have really had the question clarified reason for giving special treatment to in debate in the Senate. I believe that leads to a recognition of the superiority

good deal of discussion. This process nations with this brand of ideology, un- we now understand the issue as we never of our economic system over others. til we see in them a complete change of understood it before. heart.

Although there was a very helpful dis

Furthermore, as was pointed out by As for the claim that they want to cussion in the Foreign Relations Com- the chairman of the committee, we have trade in the way that Czechoslovakia and mittee, I understand it here even better had the trade-treaty relationship for a Hungary have, those people once thought than I'did in the Foreign Relations Com- long time. As the Senator from Illinois they would change and that the Commu- mittee.

[Mr. DOUGLAS) has said, we are not givnist control would ease up; but the Russian tanks made them hold the Commu- from Ohio, that we have taken care of ence is involved. No nation would get

I point out to my friend, the Senator ing anyone any preference. No prefer

Tito in the amendments already adopted long existing so-called favored-nation. Some say there is a weakening insofar

The Senas Italy is concerned; but we must re- as far as AID is concerned.

clause program, which will prove to be of member that this same man was the ator's amendment offered yesterday in

benefit to peoples. It is the people that greatest exponent and the real lifeblood regard to Communist nations handles

we ought to be interested in, so long as of spreading communism throughout the a question of trade and not aid. There the AID matter. We are dealing with

we place in the bill the necessary checks world. He did it in the true Communist- is all the difference in the world between

upon Soviet governments themselves. Chinese fashion. the two. I cannot see how we can take

And we are doing a pretty good job of Personally, I think he is not deeply the position that we should trade with

that. steeped in any philosophy; I think prob- Russia

in wheat, with Hungary In corn,

Several Senators addressed the Chair. ably he is just a dictator, pure and sim- and other nations behind the Iron Cur

The PRESIDING OFFICER. The ple. But certainly he is not my kind of tain, and then support the amendment. Chair recognizes the Senator from Ohio. .

Mr. LAUSCHE. Mr. President, the Mr. MORSE. Will the Senator tell me

I support that kind of trade for several how many members of the Finance Com- reasons. I wish to mention two very issue has now resolved itself into the

important ones now. mittee shared his view?

responsibility of determining where Tito Mr. HARTKE. I cannot say at the

First, I supported the wheat program, stands. I wish to read to the Senate present time. I know there were more and I shall support the corn program statements made by Tito and Khruthan myself. I wish it clearly under- with Hungary because I think we should shchev at their latest meeting of the stood that the action was not unanimous. stop cheating the American people. That Supreme Soviet of the Russian Republic

Khrushchev I know that what I have said is con- is exactly what we would do if we did not on December 11, 1962.

declared: trary to the opinion of some of my older enter into trade relations, because either

Someone started to assert that Yugoslavia advisers. They counseled and told me the wheat of some other nation, or, in

is not a socialistic country. May we please that I should not do this, that I had the many instances, our own wheat or corn, wrong idea. I hope I am in error. would reach them anyway, though not

ask one question. If Yugoslavia is not a

socialistic country, what kind of country Mr. MORSE. The letter of the Sen- sold by us. We know that a good deal

is it? ator from Virginia (Mr. BYRD) at least of it is converted into flour by our allies

That was Khrushchev speaking. He represents the majority opinion of the and sold behind the Iron Curtain, and committee.

we do not benefit as a result of the continued: Mr. HARTKE. There is no question process.

We know that there are no feudal landabout that. It represents a substantial So from the standpoint of merely the owners nor capitalists in Yugoslavia. We majority of the committee. materialistic trade features involved, I know that Yugoslavia has no private capital,

no private enterprise, no big landowners, and Mr. MANSFIELD. Mr. President, will do not think we can justify cheating the

no private banks. the Senator yield?

American people out of trade behind the Mr. MORSE. I yield to the majority Iron Curtain in nonstrategic, noncom I am reading Khrushchev's statement leader. batant goods.

about Yugoslavia. Still speaking, KhruMr. MANSFIELD. First, the proposal Second, we are not aiding Tito. We shchev said: of the committee would not give any are trying to get to the Yugoslav people. We see that the Communist Party of special or preferential treatment.

We are trying to demonstrate to them Yugoslavia and its leaders are directing their

efforts toward economic development with obedient service Tito is given partial

obedient service Tito is given partial provide that the President may not give the final goal of solidifyingautonomy in internal affairs.

special tariff concessions for imports into What?

In support of what I said a moment this country from a Communist country.

ago I wish to quote Khrushchev. This Since when has the United States the institution of socialism. is what Khrushchev said:

adopted a position of writing into its Khrushchev went beyond that to state:

It is understandable that between us there laws special tariff concessions for comTherefore, if we start from the impartial can be no perfect congruence in our answers munist countries? That is what we shall laws of Marxist-Leninist theory, it is im- to all the questions we meet in our com be doing unless we adopt something simipossible to deny that Yugoslavia under to- munist Party work. Since the problems in

munist Party work. Since the problems in lar to the amendment offered by the day's regime is not a socialistic country. the struggle to build the new socialistic Senator from Ohio. This fact is a starting point in our politics, society differ in each country, different ap

This procedure would not cut trade. and on this fact we base our relations with proaches and methods are necessary in prac

It would not affect the basic situation. Yugoslavia as a socialistic country. tical life.

If the amendment should be adopted, Though I stand alone, and every Sena These words were spoken in December all it would do would be to say that we tor continues to argue that Yugoslavia 1962 at the Moscow meeting between

1962 at the Moscow meeting between will not give to the Communist countries is not socialistic, I will not change my Khrushchev and Tito.

special tariff concessions. position.

What did Tito answer at that same It seems to me that there has been no All I ask is that Senators consider the meeting to the words of Khrushchev? explanation given-neither our imbalevidence presented by Khrushchev at He said:

ance of trade nor anything else—which that meeting of December 11, 1962, in

We agree with Comrade Khrushchev's re bears on this point. If we should inMoscow.

port on the relationship between our coun crease our imports from Communist I delve a bit further into the state tries. We aim toward the same goal, to countries we would not help in respect to ments of Khrushchev made at a Com- build a new socialistic society first and then

our loss of gold and we would not help munist Party meeting in East Germany a Communist society.

in respect to our balance-of-trade probin January 1963. At that meeting Yugo

Senators who argue that there is no lem. All we would do would be to make slay delegates were considered per

purpose to build a Communist society them worse. sona non grata, but as active members in the world are stretching their think It seems to me that the least we can with equal rights their speeches were ing and speculating without taking into do is to say that although we may trade greeted with special warmth.

consideration the words either of Khru with the Communists we are not going The meeting of January 1963 followed shchev or of Tito.

to give them special concessions, to make the December meeting of 1962 in Mos

I quote further the words of Tito: sure that they can expand and grow. cow. At the meeting in East Germany

Because world peace is a condition for the

I thank the Senator from Ohio. in January of 1963 Khrushchev stated:

attainment of our goals, our positions on Mr. MCGOVERN. Mr. President, if We believe that it would be in the interest all international problems are identical. the Senate were to pass the amendment of our parties and in the interest of international communism to reestablish the unity That is Tito speaking, declaring that offered by the Senator from Ohio to cut

off our trade with Yugoslavia and Poland, of the Communist Party of Yugoslavia with the positions of Red Russia and of Yugoits brother" parties in ideological problems slavia are identical on all international

it would be a major disaster of American on a Marxist-Leninist basis. Our duty problems.

foreign policy, I can think of nothing

that would make the Kremlin happier This is Khrushchev speaking

On all the problems which are serious

than for us to drive Poland and Yugotroublemakers in the world, such as peace, is to help a party which has made an error peaceful coexistence, disarmament, colonial

slavia closer to Moscow and away from or has deviated from the principles of inter

the West. ism, and Germany, our points of view are national communism as set forth by Marx identical.

I do not approve of the regimes in and Lenin. We should help such a party

Poland and Yugoslavia, but if we are ever understand its error and, when correction I ask Senators how, by any stretch of has been made, this party should again be the imagination, it can be said that there

to encourage the cause of freedom in given a dignified place in the family of is a separation between the thinking of is a separation between the thinking of ing these countries from the West.

Eastern Europe, it will not be by isolatbrother parties. Tito and of Khrushchev, between the

I ask unanimous consent that backThe Senator Senator from from Indiana (Mr. Communist Party of Yugoslavia and the

ground material on this subject prepared HARTKE), with all his humility, and his Communist Party of Red Russia ?

by the State Department and an article objective to decide this question on the On one thing they are in agreement;

by former Secretary of State Christian basis of what he believes is a course in that is, they wish to block the establish

Herter be printed at this point in the the best interest of the United States, ment of the center of communism in

RECORD. has refused to be dominated by immedi- Peiping instead of in Moscow. That

There being no objection, the backate expediency and has refused to be fight, of course, is serious. I believe it

ground material and article were ordered duped by the words of Khrushchev and is a fight which will eventually inure to

to be printed in the RECORD, as follows: the words of Tito.

our benefit. What is the arrangement between If we take all the foregoing statements

THE U.S. INTEREST IN MOST-FAVORED-NATION Khrushchev and Tito? I will give my into consideration, how can an argument

TREATMENT FOR YUGOSLAVIA AND POLAND understanding of it. It is that Tito shall be made that Yugoslavia is different,

INTRODUCTION have some semblance of independent that Yugoslavia does not want a Com Since World War II the United States has liberty within Yugoslavia, and that he munist nation in the world? My an

been faced with a critical choice of two

tenable alternative lines of policy in dealing shall not be obligated directly to Moscow swer is that it cannot be that way.

with the problem of Eastern Europe. The by what is done within Yugoslavia. But

Mr. DOMINICK and Mr. HARTKE

first was to assume that the Soviet Union from that point on there is a different addressed the Chair.

and the countries under its domination conpicture. Tito's responsibility is to go

Mr. LAUSCHE. I yield first to the

stituted a permanent monolithic bloc-a bloc to Africa, to the Far East, to the Carib- Senator from Colorado.

so cemented together with the dogma of bean, and to South America, and there Mr. DOMINICK. I appreciate the militant communism that all hope of weanto state, “We are a neutralist, nonde- courtesy of the Senator from Ohio in

ing the Eastern Europeans away from Sopendent nation of Red Russia, and we yielding to me. I wish to add my voice

viet domination was hopeless. The conse

quence of such a policy decision would be urge you to adopt our system of gov- to what he said on the relationship be

to throw in the towel, to abandon the peoernment.” The ultimate end will be tween Tito and Khrushchev. I do not

ples of Eastern Europe to the mercies of a socialization in South America, in Africa, believe there is any doubt of that, if we Soviet tyranny and limit ourselves to pious in the Middle East, and in the Far East. examine the historical documents.

platitudes about our confidence in their And after a brief pilgrimage into a so I should like to go a little further than ultimate independence and freedom. cialistic era there will come an era of that in connection with the pending

The other course was to assume that the communism inescapably. amendment, if I may.

instinct for freedom runs strong in the Looking at the Tito-Khrushchev re The amendment is not designed to ing alive and expanding our contacts with

hearts of men everywhere and that by keeplationship from the other side, we can affect our export trade in any way whatsee that in return for his absolute subor- soever.

the Eastern European countries we could

It would not stop our export encourage their inherent national and indidination to Soviet interests and for his trade in any way whatsoever. It would vidual aspirations and leave open to them

the road to the West. This was a difficult political, and cultural fields. It would crip- than Soviet-style collective farms, are being and complex course to follow, for among ple our objective to reduce the dependence formed to increase farm size and efficiency. other things it required that we approach of these peoples on the U.S.S.R. and to make The regime in Yugoslavia, of course, conthe subject peoples through their authori- it possible for a nation under a Communist tinues to be Communist. But there are imtarian governments. But it is the choice we government to achieve political independ- portant differences from the Soviet-style made, and the history of Eastern Europe in ence from Soviet domination. It would sap communism. Yugoslavia is not insulated or recent years gives ample evidence that it was those measures which can contribute ulti- isolated from the West. It permits a measure the right choice.

mately to the freedom of these peoples from of freedom unknown to the Soviet Union. As Secretary of State Rusk pointed out in the Communist yoke.

Significantly, it is not part of the internaa statement before the House Foreign Affairs If, on the other hand, we keep these links tional Communist conspiracy. Intensely naCommittee on April 5, 1963: open, there will be a continuing opportunity tionalistic itself, it encourages nationalism

elsewhere among the captive peoples and has “Trends toward diversity—and fragmenta- to develop good will for this country, ention--are evident in the Communist move

courage the growing assertion of nationalism also cautioned other nonalined countries ment generally. Trends toward 'destaliniza

in Eastern Europe, and increase the margin against becoming too dependent upon the tion' are visible in all the Eastern European

for action independent of Moscow. Let us U.S.S.R. Communist states except perhaps Albania. look at some of the results of this positive

Trade with the United States Nationalism remains a vigorous force in policy in both Yugoslavia and Poland and

Yugoslavia's current patterns of trade are Eastern Europea force which we need to

the danger posed to those results by this take into full account in our own attitudes new restrictive aspect of the trade legisla- 70 percent of its total trade has been with

Western-oriented. In recent years more than and policies.” tion.

free-world countries. In 1962 this figure had Today, however, the pursuit of such a

YUGOSLAVIA

risen to 77 percent. The United States is one policy is threatened by a new development of

The 1948 break

of Yugoslavia's most important trading partour own making-a clause in the Trade Ex In 1948 Yugoslavia refused to submit to ners. In 1962 the United States was the pansion Act of 1962. Section 231 of that new the discipline of the Soviet-dominated in leading exporter to Yugoslavia and Yugolegislation instructed the President of the ternational Communist movement and broke slavia's third largest market. The following United States as soon as practicable to deny with the Cominform. Until then the world table indicates the recent pattern of United trade agreements benefits to any country had been led to believe that the Soviet bloc States-Yugoslav trade: "dominated or controlled by communism.” was monolithic, sharing the same aims, purUnder this law the "most-favored-nation"

United States-Yugoslav trade poses, methods, and ideas. Yugoslavia's actreatment which we had hitherto granted to tion shocked the Soviet world and gave hope

[Millions of dollars] Yugoslavia and Poland would now have to be

and strength to nationalist forces inside the withdrawn. Soviet bloc. Yugoslavia's determination to

1960 1961 1962 What is MFN treatment?

run its own Government in its own way enUnder the most-favored-nation (MFN) couraged greater independence of Moscow

U.S. exports (including U.S. policy the United States extends to all coun among other members of the Communist bloc

aid shipments).

85.7 153.9

154, 1 tries any tariff concession which has been and has continued to act as a divisive in U.S. imports (for consumpfluence. The uprisings of 1956 in Poland and tion).

40.2 negotiated with a single country or a group

39.2 47.8 of countries, provided they do not dis Hungary, Albanian defiance of the Soviet criminate against us. MFN treatment has Union, and disputes between the U.S.S.R. and

Effect of denial of MFN treatment been a cornerstone of the nonrestrictive Communist China all have been influenced

There can be no doubt that the denial of trade policy of the United States since 1934. by Yugoslavia's independent action.

most-favored-nation treatment will have a A nation which is denied such treatment by

The results

severe impact on Yugoslavia's trade and will us is at a considerable trade disadvantage in

Let us examine some of the effects within consequently influence Yugoslavia's ability relation to all other nations which deal with us on an MFN basis.

Yugoslavia of that country's independent to pay off her debts to the United States.

course. Under U.S. law since 1951 the Soviet Un

Yugoslav payments to this country in 1963 ion, Communist China, and all Soviet

will amount to an estimated $10 million. English has replaced Russian as the most

Under our mutual MFN agreement Yugodominated countries have not received MFN widely taught foreign language. American treatment. However, under a determination and other free-world books are freely avail

slavia has developed a substantial trade in

products on which the United States has made by President Eisenhower in 1960, MFN able. A wide variety of American news

made tariff reductions to other countries in treatment was restored to Poland as an ele papers and magazines are also available on

trade agreements. Denial of MFN now means ment of our determined national policy to newsstands and in libraries. Voice of Amer

that rates on these products return to the increase that country's ties with the West. ica broadcasts are not jammed. In 1953 a

high tariffs established in the restrictive Yugoslavia and the United States extend law attempting to normalize relations be

Tariff Act of 1930. Of the total Yugoslav MFN treatment to one another under an 1881 tween church and state provided for state exports to the United States of -$39.2 million treaty.

assistance to religious communities, which in 1961-the most recent year for which the To deny MFN treatment to Poland and are thriving. Church ceremonies following complete figures are available the rate of Yugoslavia now would threaten the U.S. civil marriages are now permitted. Only 12 duty will be increased on 94 percent; the policy 'of more than a decade which has percent of the farms were socialized; the rate will remain the same on only 6 persought to keep alive active relations with rest remained in private hands. Private co cent. Some of the principal products on the peoples of Eastern Europe in economic, operatives similar to those of the West, rather which the rates of duty will increase are:

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We will be hurt too

of the American market, particularly since A second consequence of this action will be The effects of withdrawing MFN treat

the same products from other countries the grave effect to be expected in Yugoslavia

would continue to pay the lower rates of ment will hurt both Yugoslavia and our

itself. At the same time we profess to be selves. First, our own sales to Yugoslavia producer, and consumer would all suffer in duty. Indirectly, the American worker, trying to encourage Yugoslav nationalism

and independence from Moscow, we would will undoubtedly be substantially cut, since

some degree as a result of this action. And, be withdrawing the economic means which Yugoslavia's ability to earn dollars to pay

as previously noted, Yugoslavia's ability to makes this possible. We would, in effect, for them would be drastically reduced. A repay its financial obligations to the U.S. be driving the Yugoslavs closer to the sofourfold increase over present rates of duty Government and to U.S. citizens would be viets, who are eager for an opportunity to would price Yugoslav goods completely out impaired.

break Yugoslavia's ties with the West and CIX1355

draw that nation back into the Soviet contact with the people of Poland; the numorbit.

ber of Polish visitors to the United States has POLAND

risen from a few dozen in 1955 to almost Encouraging independence

2,000 during 1962, many times the number of

visitors from the other European Soviet-bloc Out of upheavals in 1956 in Eastern countries. About 10,000 Americans visited Europe, the Gomulka regime came to power. Poland during 1962. While loyally Marxist and a full participant Polish agriculture has not been extenin the Soviet bloc, the Polish leadership sively collectivized. Actually only about 13 sought a measure of independence in in- percent of the land has been put into state ternal policy and also sought to develop farms, and much of this land had not earlier closer relations with the West. President been in peasant hands. Eisenhower, faced with the policy choice of Basic freedom of worship is possible for ignoring this trend or seeking to encourage Roman Catholics, who make up 95 percent of these nationalist efforts, chose to give them

the population. Religious education for limited support. As a result, from 1957 to

children as well as a Catholic university and 1959, we provided $61 million to Poland seminaries are permitted. A number of through the Export-Import Bank as credits religious holy days are observed as national to purchase raw materials, agricultural holidays. commodities, and machinery. Under our

To an extraordinary degree Poles young Public Law 480 from 1957 to 1963 we made

and old freely and openly express their it possible for Poland to purchase $477 mil

sympathy for the West, for Western culture lion worth of our surplus agricultural com

with which Poland has abiding links, and modities. Finally, in December 1960 we they enunciate those aspirations for freedom granted Poland MFN tariff treatment.

which have inspired the Polish people for How successful?

centuries. Clearly, it is necessary to look on our

One indication of the effectiveness of our Polish policy as a calculated risk similar to policy in Poland may be gleaned from the that we took in regard to Yugoslavia. The outraged reaction of the Russians. Premier results of this policy could, in time, greatly Khrushchev on April 19, 1957, viewed our further U.S. and free world interests. So far, policies in these terms: we have achieved considerable success. The

“Poland is now being wooed like a bride. United States operates an information pro. Why? Because the wooers want something. gram in Poland. American books, films, and they want to find elements in Poland that magazines can circulate. The Voice of can be used against the people's government, America broadcasts are not jammed as they against the building of socialism, against the are in the Soviet Union. We maintain free Soviet Union.”

Probable effect of MFN withdrawal Since most of Poland's exports to the United States are products on which the rates of duty have not been lowered in trade agreements, removal of MFN treatment would affect a relatively small percentage of Poland's sales to us. An analysis of Polish trade with the United States in 1961, the first year since the restoration of MFN treatment to Poland, indicated that about 12 percent of Poland's sales to the United States would be affected. This does not reflect accurately, however, the trade Poland has continued to build up in 1962, for which only preliminary figures are available. The percentage of Poland's exports to be affected would therefore be somewhat higher.

The following table indicates the volume of United States-Polish trade in recent years:

United States-Polish trade

[Millions of dollars)

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Withdrawal of most-favored-nation treat- ability to obtain dollars, and trade earnings

ability to obtain dollars, and trade earnings million, or 63 percent. But no tariff concesment from Poland will not have as marked an are the source. Additionally, the granting of sion has ever been made on the ham prodeffect on Polish trade with the United States most-favored-nation treatment did under ucts, and the tariff rate on Polish hams would as is the case with Yugoslavia. But its effects write our faith that Polish nationalism could not be increased even though most-favoredwill nonetheless be serious. The granting of intensify and develop. Withdrawal is not nation treatment is denied. The following most-favored-nation benefits to Poland in only a financial but a psychological blow to chart presents an interesting analysis of December 1960 followed upon an agreement such hopes.

U.S. pork and ham production, and the relaby Poland to pay $40 million over a 20-year

About Polish hams

tion of our purchases from other countries. Sale of Polish hams in the United States

The quantity of Polish hams imported into period to American nationals whose property

the United States in recent years has been was nationalized in Poland. With other obli- has been much publicized. Our imports from

about 10 percent of total U.S. ham producgations to us, Poland's payments reach al Poland in 1961 amounted to $41.2 million. tion. All canned hams and other canned most $11 million annually. The capacity to Of this amount, canned hams and other pork products coming into the United States pay these dollars to us depends on Poland's canned pork products accounted for $26.1 have to pay a duty of 32 cents per pound.

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1 Not available. CONCLUSION

rapidly diminishing importance in our rela project in Poland. We anticipate that Public U.S. security interests demand that we tions with Yugoslavia and Poland. As Pres Law 480 assistance, too, will diminish sharply not write off the countries of Eastern Europe. ident Kennedy said in his foreign assistance in the future, as these countries become inRather, it is in our basic national interest message of April 2, 1963, "It is my convic creasingly able to buy our agricultural comto seek to further the U.S. presence and in- tion that trade and other forms of normal modities on commercial terms. fluence there wherever possible. If we are relations constitute a sounder basis than Our ability to develop and maintain normal to do so, the President must have at his aid for our future relationship with these

commercial trade relations with Yugoslavia disposal various foreign policy tools and countries. The only assistance programed

and Poland is essential if we are to preserve discretionary authority to use them. Until for either Yugoslavia or Poland, apart from

the gains of our past policy toward these now we have relied primarily on economie Public Law 480 sales in the current year, countries and to continue to advance U.S. assistance, with cultural contacts and trade will be U.S.-held Polish currency in support

will be U.S.-held Polish currency in support objectives in Eastern Europe. If the Presias subsidiary tools. Aid, however, is of of a privately sponsored children's hospital dent is denied discretionary authority to ex

tend MFN treatment to Yugoslavia and Po The Yugoslav Government has reduced the U.S. trade reflected in these statistics has land, we must anticipate rapid deterioration number of its bilateral trade and payments been built on the basis of a reciprocal extenof our relations

with these two countries and agreements, and it is seeking, where possible sion by each country of most-favored-nation the loss by the United States of its position to replace clearing arrangements under treatment to imports from the other. Our there. There is little doubt that the forces those agreements with agreements to settle commercial exports to Yugoslavia have confor freedom in both countries would be in convertible currencies. It has eliminated sisted primarily of general industrial maseriously damaged, as these countries are state monopolies from its foreign trade sys chinery and parts, and of metalworking abandoned to the Soviets.

tem, and there is substantial competition machinery. The alternative to our present policy of between enterprises to buy and sell in the If we withdraw MFN treatment for Yugoengagement in Eastern Europe can only be most advantageous markets. In all of these slav goods, we would dry up a needed source one of withdrawal. Such a negative and respects, Yugoslavia has committed itself to of foreign exchange for Yugoslavia and defeatist policy cannot serve U.S. interests. a policy of gradual trade liberalization on would impair her ability to repay her debts Our quarrel after all is not with the people the pattern of free world countries.

to the United States. The repayments of Poland and Yugoslavia but with commu

scheduled over the next several years will

THE YUGOSLAV TARIFF nisman alien political system which pres

run in excess of $10 million.

As a major step in its reforms, Yugoslavia ently controls their Governments. Cutting

Moreover, if we were to withdraw MFN off the President's authority to extend MFN adopted a provisional system of tariffs based

treatment from Yugoslav goods, Yugoslavia on the Brussels nomenclature. This provi- would almost certainly refuse any longer to treatment only reduces our capacity to deal

sional tariff structure is a reasonable one with these Governments in ways that can

extend MFN treatment to our goods. benefit the people and serve free-world and not exceptionally high as compared with

What would this mean in trade terms? interests. those applied by other developing countries.

EFFECT ON YUGOSLAV EXPORTS OF WITHDRAWAL Christian Herter, former Secretary of State

Under it, approximately 36 percent of total
1961 imports entered Yugoslavia duty free.

OF MFN TREATMENT BY UNITED STATES and currently President Kennedy's special Most of the balance was subject to duties Termination of representative for trade negotiations, stated ranging from 10 to 40 percent.

most-favored-nation

treatment to Yugoslavia by the United the danger in this manner in a recent article in the New York Times: “Surely this is not

PROVISIONAL GATT MEMBERSHIP

States would mean that the tariff rates on

most products that Yugoslavia exports to the the time to walk away from the competition. Yugoslavia is thus in an intermediate stage

United States would return to the rates I can think of few actions on our part that in the process of trade liberalization. The

established in the Tariff Act of 1930. A would be more welcome in Moscow than that. reforms it has taken so far has been sup

study based on trade data for 1961 has shown If I were Mr. Khrushchev, I would surely ported and endorsed by the International

that-but for MFN treatment-94 percent heave a sigh of relief if I knew that Poland's Monetary Fund, of which Yugoslavia is a

of the total value of Yugoslav exports to the and Yugoslavia's windows to the West were full member. Since May 1959, it has been

United States in that year would have been being bricked over. Never have the signs consulting with the members of the General

subject to increased rates of duty. The inof internal disarray been more obvious within Agreement on Tariffs and Trade (GATT).

creased rates would have doubled the rates the Soviet empire than they are today. On November 13, 1962, Yugoslavia was grant

of tariff on about 20 percent of Yugoslavia's Never have the forces of autonomy and in ed provisional accession to GATT. This ac

exports to the United States and would have dependence been more evident." tion was taken in recognition of the liberal

raised those rates by 250 to 400 percent on ization of the Yugoslav trading system YUGOSLAVIA'S FOREIGN TRADE SYSTEM AND THE

the remainder of the affected items. which had already been achieved on condiECONOMIC EFFECTS OF WITHDRAWING U.S. tion that the system be further liberalized

Tariff increases of this magnitude would MOST-FAVORED-NATION TREATMENT FROM

undoubtedly price most Yugoslav exports and that Yugoslavia accept GATT obligaYUGOSLAVIA

out of the U.S. market, since the same prodtions. Those obligations, of course, include

ucts from other countries would continue EVOLUTION OF THE YUGOSLAV ECONOMY the commitment to remove quantitative im

to pay the lower rates of duty. With the Ever since it broke with Stalin and with- port restrictions as soon as balance-of-pay

consequent loss of dollar earnings, Yugodrew from the bloc in 1948, Yugoslavia has ments obstacles are removed.

slavia would certainly reduce its purchases been moving away from centralized direction

In our judgment, Yugoslavia has made

of U.S. products. It would be forced to conof its economy toward a system in which commendable progress in moving toward full

serve any direct dollar earnings it still might market forces play a predominant role. This participation in the liberal world trading

be able to realize from exports to the United has meant a progressive shift from the eco system envisaged by GATT. Its progress has

States in order to make its scheduled debt nomic practices that prevail in the Soviet

followed the general pattern of Western Union. Today it is clearly evident that the European countries during an earlier stage

repayments to this country. Most probably,

it would have to draw upon its earnings of Yugoslav economy, which incorporates a of the postwar period. It has shown a far

other convertible currencies to meet those number of capitalist features and allows for greater determination to liberalize than most the increased play of market forces, has sigother less developed countries.

payments. nificantly evolved away from the Soviet bloc Since it broke with the bloc, Yugoslavia

EFFECT ON U.S. EXPORTS OF WITHDRAWAL OF model. has looked to the West for its commercial

MFN TREATMENT BY YUGOSLAVIA Until recently the evolution of the Yugo- opportunities. Over the past decade, it has The Yugoslav tariff provides that mostslav internal economy was not reflected in

conducted three-fourths of its foreign trade favored-nation treatment will be extended the international economic policies pursued with the free world. Assuming a continu to all countries extending most-favored-naby the Yugoslav Government. During the

ance of MFN policies on both sides, Yugo- tion treatment to its exports. Nations repostwar period Yugoslavia insulated its econ slavia is likely to continue to maintain ceiving MFN treatment pay Yugoslav tariffs omy from the outside world by a complicated around 70 percent of her total trade with the at rates about 40 percent lower than would system of multiple exchange rates and quan- free world.

otherwise be the case. There are over 300 titative controls.

NATURE OF YUGOSLAV TRADE

duty-free items included on the most-faEarly in 1961, however, the Yugoslav Gov Today the United States is free to compete

vored-nation country tariff list, but only 17 ernment began a series of major reforms, on equal terms with other free world coun

such items on the standard list. If U.S. designed to integrate its economy more close tries for the Yugoslav market. This market,

goods were subjected to the full Yugoslav ly with the cost and price structure of the while not of major dimensions, is still a

tariff, our exports to Yugoslavia would drop world market. These reforms were in the best useful outlet for our exports.

to a very low figure. It is clear that our tradition of liberal trade. They were intend Over the past several years our trade with

exports will be replaced with the goods of ed to increase efficiency by exposing Yugoslav Yugoslavia has been as follows:

other countries. production to the progressively increasing

Value of U.S. trade with Yugoslavia

GENERAL CONSEQUENCE OF WITHDRAWAL OF pressure of international competition.

MFN TREATMENT This process of reform is by no means

[Millions of U.S. dollars)

The consequences of withdrawing mostcompleted. However, it has already led to

favored-nation treatment to Yugoslavia a unification of the Yugoslav exchange rate

1960 1961 1962

should not be overstated. Such action on at a settlement rate of 750 dinars (equal to

our part would not by itself reverse the YuU.S.$1) and has resulted in a significant Value of U.S. imports for consump

goslav trend toward a system of economic reduction in quantitative import restrictions, tion...

40.2 39.2

48.3

administration approaching that of the free trade discrimination, and bilateralism.

Value of U.S, commercial exports.. 41.8 57.6 2 22.8
U.S. Government-financed exports 1 - 44.2 96.3

world economies.

131.3 In contrast with the system of total import

The Yugoslavs have

learned-in great part as a result of their controls imposed before 1961, about 25 per

1 Estimated value of shipments under AID programs

relations with the West over the past deccent of Yugoslav imports now enter the (including DLF), Public Law 480 (all titles), and Ex

ade-that rigidly planned Soviet-type econocountry free of controls. As in the case of port-Import Bank loans (over 77 percent of the funds mies have their built-in inefficiencies. Western European countries after World War authorized under these sources of financing during the At the same time, our withdrawal of MFN II, Yugoslavia can remove the remaining last fiscal years (fiscal year 1960-fiscal year 1963) rep- treatment would certainly discourage those quantitative controls only gradually, because

2 The effects of the 1961 foreign trade reform as well as elements in Yugoslav life that are moving of its low line of foreign exchange reserves the effects of successive droughts on agricultural produc the country toward Western ideas. The and high debt repayment obligations. In tion, produced a severe balance-of-payments deficit, Yugoslavs today tend to think and look tothese respects it also reflects the general Slav imports, excluding u.s. Government-financed

ward the West-particularly the younger problems of a developing country. commodities.

generation. They are anxious to play a

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