PREFACE This committee print contains the President's foreign economic policy message of January 10, 1955, a copy of H. R. 1 (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), a section-by-section analysis of the bill, a composite draft of section 350 of the Tariff Act of 1930 as it would be amended by H. R. 1, and related material. H. R. 1 extends the trade-agreements authority of the President for another 3 years. The President is authorized to negotiate tariff reductions of up to 5 percent in each of those years. An alternative authority permits him to reduce tariffs by 50 percent of the rate prevailing on January 1, 1945, either unilaterally or in a negotiated agreement, on those products not being imported, or being imported in negligible quantities. Thirdly, the President is authorized to negotiate reductions in those rates which are higher than 50 percent of the value of an import to a rate equivalent to 50 percent. The various methods cannot be used cumulatively. In 1934 Congress empowered the President to enter into trade agreements with other countries for a period of 3 years. The President's tariff-reducing authority was limited to 50 percent of the rates. then in effect. This authority was extended by Congress in 1937, 1940, and 1943. Between 1934 and 1945 trade agreements were negotiated with 29 countries. In 1945 Congress extended the President's authority and increased it. He was authorized to reduce tariffs to 50 percent of the rates prevailing on January 1, 1945. At the present time the United States has trade agreements with 42 countries of which 32 are parties to the General Agreement on Tariffs and Trade. These countries and the United States carry on at least 80 percent of world trade. The agreements negotiated cover approximately 58,000 items with a trade probably surpassing $40 billion in 1953. In 1953 President Eisenhower asked Congress for a 1-year renewal of the trade agreements authority, pending a comprehensive reexamination of the economic foreign policy of the United States to be undertaken by a bipartisan commission. The Commission on Foreign Economic Policy, under the chairmanship of Mr. Clarence B. Randall, was established, with members drawn from both Houses of Congress and from the public. After extensive investigations it presented its recommendations to the President on January 23, 1954. Based on these recommendations, the President outlined his foreign economic policy to Congress in his message of March 30, 1954. One of the recommendations was the extension of the trade agreements legislation as outlined in H. R. 1. The present act was extended for 1 year. The President has again, on January 10, asked that Congress provide the legislative authority contained in H. R. 1. The bill does not affect either the peril point or the escape clause provisions of present law. The peril point provides that before any reduction in a tariff rate on a specific product can be made, the President must obtain the advice of the Tariff Commission as to the rate below which it believes a reduction could not be made without causing or threatening serious injury to domestic industry producing the product. Moreover, the President, before entering into any trade-agreement negotiations, obtains the views of the Departments of State, Agriculture, Commerce, Defense, Treasury, Interior, Labor, Foreign Operations Administration, and a representative of the Tariff Commission to get advice on all aspects of the problem. Furthermore, before making any agreement to alter tariff rates, public hearings must be held in which American industry, labor, agriculture, exporters, importers, producers, and consumers have a full opportunity to present their information and views. In the event that tariff concessions result in such increased imports as to cause or threaten serious injury to the domestic industry, the concession may be withdrawn or modified in accordance with a provision, known as the "escape clause," which must be incorporated in every agreement. Upon petition any interested party may request the United States Tariff Commission to make an investigation and report to the President whether or not a concession has been the cause of serious injury or the threat thereof. As does the present law, H. R. 1 continues to provide that no duty shall be reduced on any article "if the President finds that such reduction would threaten domestic production needed for projected nationaldefense requirements." PRESIDENT'S MESSAGE ON FURTHER DEVELOPING THE FOREIGN ECONOMIC POLICY OF THE UNITED STATES To the Congress of the United States: THE WHITE HOUSE, For the consideration of the Congress, I submit my recommendations for further developing the foreign economic policy of the United States. Although largely based upon my special message to the Congress of March 30, 1954, these proposals are the product of fresh review. The Nation's enlightened self-interest and sense of responsibility as a leader among the free nations require a foreign economic program that will stimulate economic growth in the free world through enlarging opportunities for the fuller operation of the forces of free enterprise and competitive markets. Our own self-interest requires such a program because (1) economic strength among our allies is essential to our security; (2) economic growth in underdeveloped areas is necessary to lessen international instability growing out of the vulnerability of such areas to Communist penetration and subversion; and (3) an increasing volume of world production and trade will help assure our own economic growth and a rising standard of living among our own people. In the worldwide struggle between the forces of freedom and those of communism, we have wisely recognized that the security of each nation in the free world is dependent upon the security of all other nations in the free world. The measure of that security in turn is dependent upon the economic strength of all free nations, for without economic strength they cannot support the military establishments that are necessary to deter Communist armed aggression. Economic strength is indispensable, as well, in securing themselves against internal Communist subversion. For every country in the free world, economic strength is dependent upon high levels of economic activity internally and high levels of international trade. No nation can be economically self-sufficient. Nations must buy from other nations, and in order to pay for what they buy they must sell. It is essential for the security of the United States and the rest of the free world that the United States take the leadership in promoting the achievement of those high levels of trade that will bring to all the economic strength upon which the freedom and security of all depends. Those high levels of trade can be promoted by the specific measures with respect to trade barriers recommended in this message, by the greater flow of capital among nations of the free world, by convertibility of currencies, by an expanded interchange of technical counsel, and by an increase in international travel. From the military standpoint, our national strength has been augmented by the overall military alliance of the nations constituting the free world. This free-world alliance will be most firmly cemented when its association is based on flourishing mutual trade as well as common ideals, interests, and aspirations. Mutually advantageous trade relationships are not only profitable, but they are also more binding and more enduring than costly grants and other forms of aid. Today numerous uneconomic, man-made barriers to mutually advantageous trade and the flow of investment are preventing the nations of the free world from achieving their full economic potential. International trade and investment are not making their full contribution to production, employment, and income. Over a large area of the world, currencies are not yet convertible. We and our friends abroad must together undertake the lowering of the unjustifiable barriers to trade and investment, and we must do it on a mutual basis so that the benefits may be shared by all. Such action will add strength to our own domestic economy and help assure a rising standard of living among our people by opening new markets for our farms and factories and mines. The program that I am here recommending is moderate, gradual, and reciprocal. Radical or sudden tariff reductions would not be to the interest of the United States and would not accomplish the goal we seek. A moderate program, however, can add immeasurably to the security and well-being of the United States and the rest of the free world. TRADE AGREEMENT AUTHORITY I request a 3-year extension of Presidential authority to negotiate tariff reductions with other nations on a gradual, selective, and reciprocal basis. This authority would permit negotiations for reductions in those barriers that now limit the markets for our goods throughout the world. I shall ask all nations with whom we trade to take similar steps in their relations with each other. The 3-year extension of the Trade Agreements Act should authorize subject to the present peril and escape-clause provisions: 1. Reduction, through multilateral and reciprocal negotiations, of tariff rates on selected commodities by not more than 5 percent per year for 3 years; 2. Reduction, through multilateral and reciprocal negotiations, of any tariff rates in excess of 50 percent to that level over a 3-year period; and 3. Reduction, by not more than one-half over a 3-year period, of tariff rates in effect on January 1, 1945, on articles which are not now being imported or which are being imported only in negligible quantities. THE GENERAL AGREEMENT ON TARIFFS AND TRADE For approximately 7 years the United States has cooperated with all the major trading nations of the free world in an effort to reduce trade barriers. The instrument of cooperation is the General Agreement on Tariffs and Trade. Through this agreement the United States has sought to carry out the provisions and purpose of the Trade Agreements Act. The United States and 33 other trading countries are now reviewing the provisions of the agreement for the purpose of making it a simpler and more effective instrument for the development of a sound system of world trade. When the current negotiations on the revision of the organizational provisions of the general agreement are satisfactorily completed, the results will be submitted to the Congress for its approval. CUSTOMS ADMINISTRATION AND PROCEDURE Considerable progress has been made in freeing imports from unnecessary customs administrative burdens. Still more, however, needs to be done in the three areas I mentioned in my message last year: (1) the simplification of commodity definitions, classification, and rate structures; (2) improvement in standards for the valuation of imports; and (3) further improvement of procedures for customs administration. An important step toward simplification of the tariff structure was taken by the Congress last year with the passage of the Customs Simplification Act which directs the Tariff Commission to study the difficulties of commodity classification of imports. The interim report of the Tariff Commission to be made by next March 15 should help enable the Congress to determine whether further legislative steps should then be taken or should await submission of the final report. The uncertainties and confusion arising from the complex system of valuation on imported articles cause unwarranted delays in the determination of customs duties. I urge the Congress to give favorable consideration to legislation for remedying this situation. The improvement of customs administration requires continuous effort, as the Congress recognized by enacting the Customs Simplification Acts of 1953 and 1954. The Treasury Department in its annual report to the Congress will review the remaining reasons for delay or difficulty in processing imported articles through customs and will propose still further technical amendments to simplify customs procedures. UNITED STATES INVESTMENT ABROAD The whole free world needs capital; America is its largest source. In that light, the flow of capital abroad from our country must be stimulated and in such a manner that it results in investment largely by individuals or private enterprises rather than by government. An increased flow of United States private investment funds. abroad, especially to the underdeveloped areas, could contribute much to the expansion of two-way international trade. The underdeveloped countries would thus be enabled more easily to acquire the capital equipment so badly needed by them to achieve sound economic growth and higher living standards. This would do much to offset. the false but alluring promises of the Communists. To facilitate the investment of capital abroad I recommend enactment of legislation providing for taxation of business income from foreign subsidiaries or branches at a rate 14 percentage points lower than the corporate rate on domestic income, and a deferral of tax on income of foreign branches until it is removed from the country where it is earned. I propose also to explore the further use of tax treaties with the possible recognition of tax concessions made to foreign capital by other countries. Under proper safeguards, credit could be given for foreign income taxes which are waived for an initial limited period, as we now grant credit for taxes which are imposed. This would give maximum effectiveness to foreign tax laws designed to encourage new enterprises. 57600-55-pt. 1- 3 |