Mr. EGAN. That is right.

Senator THOMAS of Utah. This treaty, of course, does not deal with immigration or emigration. It is purely commercial. That is right, is it not?

Mr. THORP. That is correct, although I think a treaty of this kind nowadays is broader than commercial in the sense that it covers. certain human rights that I am sure you would not want to include as under the general commercial heading.

Senator LODGE. It does not have anything to do with immigration? Mr. THORP. It does not have anything to do with immigration. Mr. BROWN. There is a specific provision which says it does not. Senator THOMAS of Utah. That is what I understand. It is just as tight as the Chinese treaty so far as the immigration question is concerned.

Mr. EGAN. Forgive me for bringing it in.

Senator THOMAS of Utah. I think this is a good place to pray that Italy will find an outlet in some other countries than ours. Our quota system has been operating now for a generation, and about the only sentiment I have heard around here is to live up to the quota. Senator LODGE. I do not know. You hear all kinds of opinions. about that.

Senator THOMAS of Utah. Do you have any questions?

Senator LODGE. No.

Senator THOMAS of Utah. Thank you very much, Mr. Egan, for coming.

Mr. Blaisdell. Have you a statement, Mr. Blaisdell?

Mr. BLAISDELL. I have a brief statement, Senator, which I am prepared either to present orally or to present for the record, if you wish.

Senator THOMAS of Utah. I think we would like to hear it, if we

may.

STATEMENT OF THOMAS C. BLAISDELL, JR., ASSISTANT TO THE SECRETARY OF COMMERCE FOR INTERNATIONAL TRADE

Mr. BLAISDELL. The treaty before you will form a comprehensive legal basis for carrying out our commercial relations between the United States and Italy. It is intended to replace a previous treaty of friendship, commerce, and navigation concluded with Italy in 1871 following the unification of that country. The 1871 treaty was terminated by mutual agreement on December 15, 1937, and subsequent efforts to work out a more modern and comprehensive treaty prior to the war proved unsuccessful. A temporary commercial agreement, or "modus vivendi", was effected in December 1937 by an exchange of notes signed in Rome, but it is no longer recoginized as legally operative by the present Italian Government. Italy has voluntarily continued to provide most-favored-nation treatment with regard to customs duties. However, we urgently need an agreement on many other matters if we are to have a satisfactory legal framework for commercial relations between the United States and Italy.

TRADE WITH ITALY

Our trade with Italy is substantial. It decreased considerably during the immediate prewar period because of the depression, and

the self-sufficiency policies of the prewar Italian Government. Since the war our exports to Italy, at least, have reached levels, in current dollars, far in excess of those of the 1920's. United States exports to Italy, in 1946, amounted to $327,000,000 as compared with an average of only $185,000,000 in the early 1920's and $58,000,000 in 1938. Imports from Italy in that year amounted to $69,000,000 as compared with $79,000,000 in the early 1920's and $41,000,000 in 1938. In 1947, our exports to Italy had increased further to $479,000,000 while our imports from there decreased to $44,000,000. Although the large United States exports to Italy during 1946 and 1947 have been primarily made up of shipments under the aid programs, there has been a substantial flow of commodities of a type which will probably continue to be shipped from this country to Italy in the years to come, and to be handled more and more through ordinary commercial channels.

The treaty under consideration is the first comprehensive commercial treaty to be concluded by the United States with a European country since 1934 and the first treaty of its type signed by Italy after the war. Its early ratification would help stabilize our postwar commercial relations and be a further step in recognizing the efforts of the Italian Republic to establish itself firmly in what we call a democratic way of life.

The treaty represents acceptance by republican Italy of a number of democratic principles in trade and navigation. The "national" treatment accorded to corporations, for example, is the most liberal ever specified in any treaty entered into by the United States.

The treaty is based in general upon the principle of mutuality, and establishes standards to govern the relations between the two countries in many fields of activity. It includes articles relating to the status and activities of persons and corporations, protection of persons and property, landholding, freedom of information, treatment of vessels, and commercial principles such as those in the proposed charter for the International Trade Organization, as well as provisions concerning such matters as exchange control, transit, and industrial properties.

The treaty is not a trade agreement and contains no specific obligations as to import or export treatment of any individual commodities. It does recognize modern developments in import and export regulations and exchange controls, and seeks so to condition their application as to provide, in accordance with basic American policy, the utmost possible freedom for the pursuit through ordinary private channels, and on a nondiscriminatory basis, of commercial and cultural relations. In this connection, special attention should be drawn to the second. protocol, which relates to the acceptance of certain quota and exchange restrictions necessary to meet the special commodity and foreignexchange shortages of the present reconstruction period, but even these exceptions are carefully circumscribed so as to protect the legitimate interests of Americans transacting business with or in Italy.

In drafting this new treaty with Italy, numerous additions and changes were made to and from the original 1871 treaty which the two governments had agreed in 1936 was "antiquated and inadequate to meet modern conditions." Conditions have undergone further considerable change since that date.

NEW CONDITIONS

Treaties of friendship, commerce, and navigation have traditionally included, as the committee well knows, provisions relating to entry and residence of individuals, the protection of persons and property, the tenure and disposition of real and personal property, religious activities, customs administration, transit rights, and the treatment of shipping. Provisions of this character have been included in the new treaty. In addition, numerous recent economic developments of which we must take account in our commercial relations have made it necessary to expand our traditional form of treaty. These include such things as the development of the corporation in all of its modern ramifications, the development of workmen's compensation and other social insurance laws, and the spread of certain philanthropic, educational, and cultural activities. Since the war we have been additionally confronted with major changes in the use of import and export quotas and licenses, exchange controls, and state trading with which we must deal. The new treaty takes account of all of these developments, taking care, as I have already pointed out, to minimize the impact of any restrictive practices upon the future development of free, private, international commerce.

Let me outline, briefly, a few of the major provisions of the treaty in which I think you will be interested.

With regard to customs duties and charges on imports and exports and the formalities of customs clearance, most-favored-nation treatment is mutually granted. With regard to the taxation, internal sale, and distribution or use of imported goods, national treatment is mutually granted. This means that while Italy may lay down regulations for the most effective distribution and use within its borders of imported commodities it will not discriminate against imports from the United States in favor of those from any other country.

Another set of provisions relates to the setting of import and export prohibitions or quotas. Again, most-favored-nation or nondiscriminatory treatment is stipulated. When quantitative restrictions are imposed through quotas, licenses, or other measures, the treaty requires that, as a general rule, public notice be given of the total quality or value permitted to be imported, exported, sold, distributed, or used, during a specified period. In line with this last provision, the Office of International Trade is already publishing, wherever practicable, country quotas for United States commodities in scarce supply which are under export control. This, Senator Thomas, is the provision of our office in the Department of Commerce in our trade with Italy and other countries.

It is further specified in the treaty that if either party allots to any third country a share in the total quantity or value of any article in which the other signatory has an important interest, it shall, as a general rule, allot to this other signatory a share based upon the proportion of the total supplied to it by, or exported by it to, the other during a representative period. This provision was originally incorporated in the temporary 1937 agreement, and was designed to deal with the discriminatory channeling of imports and exports practiced by Italy and Germany before the war. To meet the present-day needs of Italy, which is suffering from critical shortages of dollars, the second protocol permits in the application of this provision a temporary

latitude. Under this protocol the paragraphs of the treaty providing for most-favored-nation treatment will not apply to quantitative restrictions which place temporary limits on the freedom of exchange operations in a scarce currency, or to temporary exchange restrictions required in the postwar transitional period on payments and transfers for current international transactions. The parties are also given leave to apply such quantitative restrictions as are necessary to secure, during the early postwar transitional period, the equitable distribution of goods in short supply, or to use accumulated inconvertible currencies for the purchase of imports. In the latter case, advantage can be taken of the protocol only if it is in fact necessary to restrict imports to protect monetary reserves or to yield a volume of imports otherwise impossible. All exchange restrictions, moreover, must be in accord with applicable provisions of the International Monetary Fund agreement.

Other provisions are designed to protect the competitive position of American enterprises in their dealings with state trading companies, to assure fair and equitable treatment in the award of concessions and other contracts, and to encourage the future conduct of business within both countries along competitive nonmonopolistic lines. There are further provisions, relating to many facets of commercial operation and the ownership, transfer, and use of property which specify treatment according to the most-favored-nation and/or national principles.

I do not propose to burden the committee by discussing all of these various provisions. Mr. Thorp has covered that. However, if I can add to what I have already said, I will be glad to answer questions concerning these.

INTERNATIONAL TRADE PRACTICES

Senator THOMAS of Utah. A general question, first of all: You are dealing all the time with these problems and have been through the International Trade Conference and the rest of it. Do you think there is any hope of overcoming in international trade the practices. which were developed by those nations before the war, channeling trade entirely to their own advantage?

Mr. BLAISDELL. Senator, if I did not believe that that were possible, I would not be doing what I am doing now. I am convinced that this is the objective that we should be driving toward all along. That might sound strange to some of my exporter friends who are on my shoulders most of the time because of the export controls which we administer in the Department of Commerce, but I assure you that it is a very sincere conviction that the kinds of regulations which we are now using to a limited extent in the United States, to a greater extent in practically all European countries and in many other countries of the world, are a function of this particular period in our economic development, when the world is seriously disrupted from the conditions that developed during the war. The development of inflationary monetary policies, which is worldwide-and we are not excluded from that has created conditions of demand in international trade which are entirely unusual. They are of an entirely different character than the directive and inhibitory practices which were used, and for which the same instruments were used, prewar. They arise from different

conditions. And the United States has taken the initiative in a great many cases and has thrown all the support of its people and its Government against the development of these practices wherever it is possible. It has played a major part in the development of the International Monetary Fund and the International Bank and the International Trade Organization because we have believed that through these devices we would eventually be able to get to a point where the restrictions that are now burdening trade can be gotten rid of and private trade can proceed with as little interference as possible. Senator THOMAS of Utah. Is there any place in the world where there is any free money today?

Mr. BLAISDELL. I do not know of any place. I do not know of any country. Even the United States has limitations on the use of gold.

Senator THOMAS of Utah. Yes. We have quite a bit of it hidden away, I think. We are told we have. I hope it is still there.

We have not in the world today anything equivalent to the old Austrian dollar, and then the old Mexican dollar, which had a way of keeping value and going places and doing things, especially when our Government was set up, have we? There is nothing like that anywhere, is there?

Mr. BLAISDELL. I know of none.

I think the last remnant of that,

Senator, was the Chinese silver unit, which was never coined.

MONETARY PROBLEMS

Senator THOMAS of Utah. I do not mean free trade in the political sense, but can you have free trade in the world without free money? Mr. BLAISDELL. I do not think so.

Senator THOMAS of Utah. Neither do I, and I am wondering if we are starting at the wrong end in these trade arrangements. Is there anyone thinking about money in the world today? Did not the Germans teach us a lesson about control in such a way that we have not yet gotten over it?

Mr. BLAISDELL. I think there is a growing recognition of the significance of monetary and financial factors in this whole problem of trade relationships.

Senator THOMAS of Utah. They are beginning to see it?

Mr. BLAISDELL. I think so. In fact, I think in connection with this treaty it would not be out of the way to point out that the very existence of the protocols, besides the treaty itself, is a recognition of something very fundamentally wrong in the monetary relationships that exist; that without the development of stabilized currencies within the countries these restrictions are almost inherent, and a necessity for working out within the financial area of an international way of doing things. This was recognized in the fund agreement, and we are living through that period of finding the practical ways of working to an international monetary system which certainly today is different from anything we have ever known before.

Senator THOMAS of Utah. There is in the Congressional Record of either Monday or Tuesday a radio talk on money and how to finance. this European recovery and contribute to the bringing about of money stability in the world by creating something that someone can hang