Mr. TREZISE. Yes. Our exports went up a great deal more, of course; our exports went from $380 to $654 million.

Senator HARTKE. The increase at that time under the duty remission plan or scheme or whatever you want to call it, was intended, as to all intents and purposes to aid the Canadian automotive industry and the parts manufacturing industry there; isn't that true?

Mr. TREZISE. I perhaps shouldn't put motivations into the mouths and minds of Canadian officials. My understanding is, Senator, that it was aimed primarily initially at the balance of trade in automobiles rather than the industry as such but obviously it had that effect.

Senator HARTKE. That is a question into which I don't want to go. But there was a statement made at that time before this remissions plan went into effect; isn't that true?

Mr. TREZISE. A statement?

Senator HARTKE. A statement in Canada by their Minister of Automotive, whatever his title is.

Mr. TREZISE. Minister of Industry.

Senator HARTKE. Ministry of Industry?

Mr. TREZISE. Yes.

Senator HARTKE. What was his name, prior to the time the remissions plan went into effect? What was his name?

Mr. TREZISE. I am afraid, Senator, I can't answer that. I don't recall.

Senator HARTKE. I am correct, am I not, that his statement was that they intended to increase their imports?

Mr. MCNEILL. I am not sure, of the specific statement you refer to. I have discussed this whole matter with Minister Drury, and know him, and a statement of his was to increase employment and production in a very important sector of the Canadian economy through the utilization of the remission program.

Senator HARTKE. Then as a result of that, there were some repercussions on the American side; isn't that a fair statement?

Mr. MCNEILL. Yes.

Mr. TREZISE. We had some letters from some of your colleagues, I believe, and from parts manufacturers.

Senator HARTKE. In fact, legal action was instituted when we couldn't persuade the State Department to follow the law; isn't that true?

Mr. TREZISE. Well, I would have to say, Senator, that the countervailing duty statute falls under the Treasury and not State Depart

ment.

Senator HARTKE. Treasury is not here, are they?

Mr. TREZISE. No.

Senator HARTKE. Mr. Chairman, I call to the attention of the chairman that I do not see the Treasury, scheduled to be a witness, and I would think they probably ought to be here in view of the fact that the balance of payments

Mr. BOYETT. I represent the Bureau of Customs, and I will do my best to respond.

Senator HARTKE. Are you prepared to testify on the balance of payments, too?

Mr. BOYETT. No, sir.

Senator HARTKE. Mr. Chairman, I just want to renew my observation that the Treasury is not here, although we have the Secretary of Labor, the Secretary of Commerce, the Secretary of State, whose jurisdiction is not generally before us in the Finance Committee.

Secretary CONNOR. Mr. Chairman, I am prepared to talk about any question of the balance of payments.

Senator HARTKE. Mr. Chairman, I am interested in the Treasury's position on the balance of payments, because we evidently have two policies here, one for the Commerce Department and one for Treasury. I would like to find out which policy the Government intends to follow, and I would like at this time to make an official request that the Treasury be asked to testify.

My time has expired.

Senator SMATHERS. May I not suggest to the chairman that this matter be discussed at the end of this meeting and the chairman, let the chairman get in touch with the Secretary of the Treasury and see what his wishes are.

Senator HARTKE. I am perfectly willing to do that.

The CHAIRMAN. No objection.

Senator WILLIAMS. There is no objection to calling the Secretary of the Treasury, but the administration should know if this bill is going to be delayed it is not going to be passed. We hope to adjourn before Christmas with or without this bill.

Senator SMATHERS. The Senator from Indiana is not filibustering this bill, but if the chairman would contact the Secretary of the Treasury to see if something could not be worked out

Senator HARTKE. That is perfectly all right with me. I am willing to come back. I want to come back to the fact that the so-called first blow really in effect was unilateral action primarily directed at the United States according to the Ministry of Canada, primarily to increase employment in Canada, and increase exports to the United States.

Isn't that true?

And it had that effect, did it not?

Mr. MCNEILL. Yes.

Senator HARTKE. The net result was to decrease employment, or at least decrease the share of the market in which some of our domestic people were involved. This was complete unilateral action taken illegally, and nothing was done by the State Department to rectify this matter. Isn't that true?

Mr. MANN. Senator, I wonder if I might say something.

Senator HARTKE. I would like to have a clarification of that. It appears to be that what Canada did here was strictly illegal, and what we have done is to compound the illegality and make it legal without any, well, maybe I had better listen.

Mr. MANN. The GATT, as a practical matter, works very well in terms of highly industrialized nations, nations which do not have infant industries and which are incapable of becoming competitive with the outside world.

The GATT in practice and in reality has not been applied in a great number of countries in the developing world simply because if they exposed their infant industries to unlimited competition by the highly industrialized economies, they would never be able to industrialize.

All economists that I know anything about agree that the countries which are developing new industries, particularly in competition with an industry as highly efficient as our automobile industry is, needs to have some time in order to be able to compete.

Now, essentially, the Canadian protective attitude toward their developing automobile industry is no worse than, and in many respects is more liberal than, government policies of a half dozen or a dozen countries around the world which are trying to develop automotive industries.

The proof of that lies in trade figures that we have talked about in this hearing.

Our favorable balance in automotive products trade is about $500 million a year net to us, and our total favorable balance in our $9 billion two-way trade on the commercial account, is running at about $657 million.

So that the problem that you are talking about, Senator, you are quite right, that many countries of the world, including Canada, are protecing infant automotive industries.

Senator HARTKE. Yes. But the point is that the remissions scheme itself—well, let me ask you a question-was a remissions scheme submitted to us at any time in advance? Was it agreed to at any time by anybody in our Government?

Mr. MANN. The remissions scheme was never agreed to by anybody in this Government, and in fact we registered strong objections.

Senator HARTKE. What I am trying to determine is wasn't this unilateral action taken by the Canadian Government without prior consultation with our Government?

Mr. MANN. I believe that is correct. I think it was unilateral action. As far as I know, there was no consultation with the United States.

Senator HARTKE. In all fairness, if the State Department had acted under the law countervailing duties would have had to have been imposed legally, if some agreement hadn't been reached; isn't that true?

Mr. MANN. Well, I think, not that I want to apologize for being with the State Department, but I think we ought to talk about the U.S. Government on the countervailing duty matter, because that is a Treasury function.

Senator HARTKE. You see, that is the difficulty right here.

Here we are with the Treasury Department absent. They did not impose countervailing duties. But as I understood the testimony here from some of the other witnesses from yesterday and today, that this action was taken because the remissions scheme was in effect and it was not working satisfactorily.

Mr. MANN. Senator, I think our position was that we did not like the Canadian remission plan. We made our views known to the Canadian Government. Actually the document before you here was largely born out of our desire to get rid of discriminatory treatment and to move toward liberal trade instead of more protection.

Senator HARTKE. Let me ask you here concerning this document. Was the remissions scheme the germ which started its growth, or was this document in negotiation prior to the time that the remission scheme was first put into effect and announced?

Mr. MANN. Well, certainly the remissions scheme was one of the factors that led both governments to discuss

Senator HARTKE. Well, was there any negotiation in this field whatsoever prior to the time that the remissions scheme was in operation?

Mr. MANN. No, I believe not.

Senator HARTKE. In other words, in all fairness, and I mean to be quite objective about it, whether you agreed with the legislation or the agreement or not, the truth of it is the remissions scheme was the germ or the initial stroke which required some action on the part of our Government one way or the other.

Mr. MANN. It was one of the factors. We don't rely on that for justification of the agreement. We justify the agreement on the ground that it serves U.S. interests-but certainly the remission

Senator HARTKE. Certainly the President said and I commend him for it, that his approach to this matter was rather than go ahead and impose countervailing duties a procedure which according to the Treasury information to us they agreed with

The CHAIRMAN. The Chair is very sorry to interrupt you, but your 15-minute questioning period for the first round of questioning has expired. That was an agreement made before the chairman arrived. Senator HARTKE. As I understood, it was so that other people could ask questions.

Fine.

Senator SMATHERS. You will get another chance.

The CHAIRMAN. You will be allowed unlimited time on the second round of questioning.

Senator HARTKE. Fine.

The CHAIRMAN. I am very sorry to interrupt the Senator.

Senator MORTON. I yield the balance of my time, Mr. Chairman. Senator WILLIAMS. I yield the balance of my time.

Senator SMATHERS. Senator Dirksen is the only one who hasn't had a chance to ask questions.

The CHAIRMAN. Senator Dirksen?

Senator DIRKSEN. Mr. Chairman, I have only one question.

I wonder why article 5 was inserted in the text of the treaty. It is only a single sentence and it reads:

Access to the United States and Canadian markets provided for under this agreement may by agreement be accorded on similar terms to other countries. Now, if the objective of this agreement is to bring about a better trade relationship with Canada why should a comparable benefit be extended to every other country, because, as I read that, the President could negotiate with Britain, and with France, with Italy, with Germany, and with Japan for equivalent benefits so that they would all come in duty free. Is that necessary for the protection of this treaty?

Mr. TREZISE. Senator, this article was placed in the agreement essentially to make it clear to our other trading partners that if they wished to negotiate mutual duty-free access on automobiles, that we would be prepared to consider their position.

Now, this was intended, quite frankly, to give them the opportunity to do the same kind of business with us as the Canadians are doing. We don't, equally frankly, expect we will have any takers here.

The truth is that our duty structure is about the lowest in the world, we don't quite expect that other countries whose duties generally are higher than ours and who in many cases have other so-called nontariff barriers, protecting their industries, will be coming to our doorstep and asking to negotiate.

But the opportunity, we thought, should be there, and the Canadians felt the same way. So this is really intended to give an opportunity to our other trading partners who are interested in this area. Senator DIRKSEN. But the agreement begins by reciting that the Government of the United States and the Government of Canada will strengthen the economic relations between their two countries, and that is the whole burden and the whole emphasis, so why article 5, why include the whole wide world?

Mr. TREZISE. This was, as I say, Senator, intended to meet expected questions and possibly objection from third parties. As I say, we did not expect a third party would feel it in their interest to take advantage of this proposal, this possibility of negotiation. In practice, we have not had any inquiry from our other trading partners about this clause, and I don't expect we will have any. But it was considered, I may say, on advice of a number of people, that this would be a useful element to have in the agreement. It obviously has little practical significance in the present circumstances.

Senator DIRKSEN. Well, if it has no practical significance, why

include it?

If

Mr. MCNEILL. Senator Dirksen, if I may add to what Mr. Trezise has just said, it does have, I think, a practical aspect and it is this. other groups of countries, say the EFTA countries and the EEC countries chose to enter into an agreement among themselves on a particular commodity, pulp paper, aluminum, whatever you like, that we would have established in our legislation and in our request for a waiver from the GATT, a precedent in the agreement with Canada, that such agreements between two industrialized groups should be opened for others to later adhere to. So it does have that very important aspect.

Senator DIRKSEN. As I read this language, do you agree that if such agreements can be entered into and benefits accorded on similar terms to other countries, can't you negotiate those agreements without having to come back to the Congress? It is not a treaty.

Mr. MANN. As the Senator knows, the House has inserted a provision on this point requiring that all agreements entered into would have to lie in the Senate and the House for a period of 60 days to give the two Houses of Congress the opportunity to register their disapproval if they wish to do so.

If the issue is whether we should come to Congress in advance, as far as I am personally concerned, we wouldn't want to make a great issue of that, Senator.

Senator DIRKSEN. Well, Mr. Secretary, I would assume that the Congress could express its disapproval but the executive branch could go ahead with any such agreement.

Mr. MANN. This was a condition, as I understand it this was a condition, the amendment inserted in the House, was a condition or a limitation on the right of the Executive to enter into such agreements if the Congress did take action.