The capacity of the Communist nations to export and therefore to trade is strictly limited. And yet in the last 2 years 71 trade agreements have been concluded between the Communist nations and the non-Communist world. Our comparative performance is not reassuring. The fourth staff paper of the Commission on Foreign Economic Policy notes that the trend in Congress has been to place more barriers in the path of increased foreign trade.

It states of the 1953 Trade Agreements Act:

This version of the act made it more difficult for the President to negotiate reductions in tariff duties. In fact, no important trade agreement activity took place under the act as modified by the 80th Congress or under the Extension Act of 1951. Some of the proponents of the trade agreements program in fact maintain that it is not likely that any action could be taken under the Trade Agreements Act in its modified form. They maintain that the Trade Agreements Act in its present form is more important as protectionist than as tradeliberalizing legislation.

Mr. Chairman, it is the deep and sincere conviction of the American Veterans Committee that this trend, if true, is incompatible with the dynamic and successful leadership of the United States of the nonCommunist world.

It is our further conviction that if this trend continues it will set in motion a similar reversal of recent trends toward trade liberalization that has been one of the more hopeful developments in the free world. We cite as examples the new interest shown by Turkey and Greece in "peril points" of their own.

We base our opinion on events as recent as the annual meeting held in Washington this last autumn, of the Governors of the International Bank and International Monetary Fund.

That meeting, according to the London Economistbrought home * * * as perhaps no other meeting would have the extent to which the plans of the sterling area and of Western Europe for liberalization of both trade and currency restrictions are at present paralyzed by uncertainty about the future course of American foreign economic policy and of the American economy itself.

We cite as evidence of the urgency with which our allies view the issue now before you, the speech of the Australian delegate, Sir Arthur Fadden, at the autumn meeting of the bank and the fund. He was protesting against the comfortable generalities voiced by Secretary Humphrey. He said:

We still await action. We have never doubted that the President's head and heart were in the right place. But as practical men, responsible to our own people for their welfare we are obliged to focus not upon words and hopes but upon capacity deeds.

H. R. 1 is one such deed, Mr. Chairman; as such we heartily endorse it. But we cannot pretend to the supporters or the opponents of the bill that we regard it as more than one step.

We share the opinion of the Committee for Economic Development that a 3-year extension is not long enough to permit the businessmen and exporters of our allies to develop new plants, new products, and new sales campaigns directed at the American market. We regret in particular the expiration of the act in an election year.

We further agree with the Committee for Economic Development that the President's authority to reduce tariff rates should be extended by permitting the President to exchange tariff reductions for other

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kinds of economic concessions, for suspending the tariffs on goods not produced in substantial quantities in this country.

More important in our opinion is the confusion built into the act by the peril-point and escape provisions. We share the opinion of the Committee for Economic Development that these provisions are serious limitations on the President's ability to lower tariff rates. We agree with the criticism of the chamber of commerce that the peril-point provision sets up

a prejudgment of the effect of a duty reduction even though there is also in the present law provision in the escape clause for reconsideration in the light of actual experience under the concession.

We recall that while the escape clause has not resulted in a large number of tariff increases thus far, 51 applications for escape clause action have been filed in the past 5 years. We note the opinion expressed in the staff papers presented to the Randall Commission:

The threat of an escape clause action cannot be ignored by domestic importers and foreign exporters. The fact that few tariffs have been increased in the past as a result of the escape clause is no guaranty that successful exporters will not in the future have tariffs raised against them by this device. This is particularly true since the Tariff Commission has frequently rejected requests for escape clause relief by narrow majorities.

We further recall the words of an ardent champion of allied unity, the London Economist, on this same point.

In criticizing the report of the Randall Commission, the Economist declared, on January 30, 1954:

The report's sin of omission *** is that it makes no proposal that America's "escape clause" and "peril point" provisions-under which tariffs can be raised if domestic industries get into difficulties-should be removed; foreign exporters who shoulder the considerable initial expense needed to establish themselves in American markets will therefore still be advancing across a perpetual trap door. Thus while it is clearly implied that the nondollar countries' approach to full convertibility and nondiscrimination is to be a one-way street with no question of return, America itself is to be allowed to beat a retreat at any time.

Mr. Chairman, we share the opinion of the chamber of commerce that

No body of scientific criteria for injury which can be applied to all cases under the escape clause has yet been developed by the Tariff Commission.

We doubt if any such criteria can be applied. We believe that President Eisenhower was entirely sound in challenging the "share doctrine" on which the Tarift Commission based its opinion that serious injury had been done the American watch industry by imports from Switzerland, and in holding that the Tariff Commission's decision, if upheld, would have created "a dangerous precedent."

It is a matter of great regret to us that President Eisenhower has made his recommendation for new authorizations under the Trade Agreements Act "subject to the present peril and escape clause provisions."

Given these provisions the President will do well, in our judgment, if he can reduce tariffs by 10 percent in the lifetime of the 3-year extension of the Trade Agreements Act.

We find that achievement wholly inadequate when we balance it against the gains in the field of international trade which we anticipate will be made by the Communist world.

Mr. Chairman, we share, of course, the concern of many Congressmen for the employment that may follow lowered tariffs. Like any

national organization our members are spread through areas and industries which still benefit from protection today.

The fallacy we see in the protectionist argument is that the great imbalance in trade is a stable and permanent condition and that the dollar gap will be filled indefinitely by dollar aid. We share the view of Howard Piquet and other experts that some adjustment toward balanced trade is inevitable; either our imports must increase or our exports are bound to fall. In offsetting the disadvantages of both developments we recall the importance of exports in our economy: Between a quarter and a half of our entire production of cotton, tobacco, corn and wheat is exported.

We export 23 percent of our tractors, 27 percent of our textile machinery, 19 percent of our typewriters, 17 percent of our trucks and buses, 13 percent of our refrigerators, 13 percent of our diesel engines, and 12 percent of our agricultural machinery.

We attach great significance to the contrast drawn by Mr. Piquet between employment for the export market and the probable displacement of workers due to lowered tariffs.

Nonetheless, we share the view expressed in the staff papers presented to the Randall Commission that the dislocation caused by lowered tariffs

even if too small to be of substantial significance nationally would nevertheless be of tremendous importance to the companies, workers, and often the communities concerned.

The readjustments, as the study of the Committee for Economic Development has shown

are basically no different and have ordinarily been far less severe than those which are continually taking place within our competitive domestic economy. And yet it seems clear to us that positive action by the Federal Government to minimize the hardship of readjustment is the constructive alternative to the peril point and escape clause provisions in the Trade Agreement Act.

For this reason we wish to endorse the legislative proposals introduced by two members of the American Veterans Committee, Representative Williams of New Jersey and Senator John Kennedy of Massachusetts.

We understand that no direct compensation for losses due to import competition is provided for in this legislation. We realize that while the problem of tracing disclocation in any area of industry to lowered tariffs is difficult, it is no more difficult than the standard of determination imposed by the peril point and escape clause provisions.

We grant the administrative problems in getting Federal aid for retraining and diversification through to the firms, the communities and the individuals involved. But we share, nevertheless, the confidence of our two members, Congressman Harrison Williams and Senator John Kennedy, that: This legislation will permit tariff reductions as prompt and as drastic as the international situation demands. That, Mr. Chairman, is my prepared statement. I am very much obliged to the committee for taking the time to hear our point of view. The CHAIRMAN. We thank you for your appearance and the very helpful information given the committee.

Are there any questions?

Mr. Mills, of Arkansas, will inquire.

Mr. MILLS. I just want to congratulate Mr. Straight on his very fine statement.

I would now like to call your attention to your statement on page 6, that

we believe that President Eisenhower was entirely sound in challenging the share doctrine on which the Tariff Commission based its opinion that serious injury had been done the American watch industry by imports from Switzerland, and in holding that the Tariff Commission decision if upheld would have created a dangerous precedent.

The share doctrine to which you refer as one of the criteria that must be taken into consideration in reaching a determination as to whether or not there is threat of the injury to an industry, and so on, has been a part of such determinations.

Mr. STRAIGHT. I understand, sir.

Mr. MILLS. I wonder if this is President Eisenhower you are talking about.

Mr. STRAIGHT. I am quoting there from the President's decision in this case, his recommendation. I am frank to say that I did not go back and check his recommendation against the law.

Mr. MILLS. As I recall, President Eisenhower did decide that the importation of watches constituted a threat to the American watch industry.

Mr. STRAIGHT. That may be quite right, sir. I am simply quoting his direct reference here in saying it is a dangerous precedent. That is from his opinion.

Mr. MILLS. I thought maybe you meant President Truman, because he had once declined to act on the watch question.

Mr. STRAIGHT. I do not think I have that paper with me, sir. You may be perfectly right.

Mr. MILLS. I do not want to take your time, but I thought maybe you would want to check back on it.

Mr. STRAIGHT. I will, and, if I am wrong, I would like to correct my testimony on that point.

The CHAIRMAN. Are there any other questions?

Mr. Byrnes of Wisconsin will inquire.

Mr. BYRNES. Mr. Straight, I take it that the general position as expressed by this statement is for free trade, generally?

Mr. STRAIGHT. For a progression toward free trade, yes, sir.

Mr. BYRNES. Do you think you can ever arrive at free trade in an environment, an atmosphere, where the rules of production are not the same for all producers? Here is the thing that concerns me all through this whole picture:

In many of the countries of the world, you do not have, for instance, a minimum wage. You do not have requirements for workmen's compensation. You do not have requirements for unemployment compensation. All of these are conditions of competition which affect the cost of the item.

As far as the producer in this country is concerned, these are all pretty much the same, so we can have pretty much of a free interchange of goods.

All of the competitors are competing under the same rules of the game. But you certainly do not have that intentionally today, and I wonder if you will ever have it, throughout the rest of the world.

Therefore, I am wondering if you do not have to have some kind of a mechanism to protect your own producers against unfair competition from producers who do not have to operate under as stringent regulations or regulations that are as costly.

Mr. STRAIGHT. Well, in general, of course, my understanding is that free trade will turn under a high-wage economy that depends not only on the level of wages but on the level of productivity and the relationship between the two. But the tendency is that free trade will cause a shift.

Mr. BYRNES. Cannot it work just the opposite, though? If you do not have a peril point and an escape clause to protect things, might it be different? Let me put it this way: Would it insure the producer in the high cost of production area against the unfair competition of a producer in a low cost of production area? In the first instance, do we not create a climate which simply says an industry in this country that cannot compete just simply goes out of existence?

Does that not mean then that what industry is left has to come down to meet the level of their competitors elsewhere?

Mr. STRAIGHT. What I was going to say is that the general view of economists, I believe, is that given free trade and the different wage level, this country, with a high-wage level will tend to produce those goods which require relatively more capital and relatively less labor cost per unit.

A country with a very low wage will tend to produce and ship to this country goods with their low relative capital cost and low relative wage cost.

Mr. BYRNES. When the Government of the United States says to its producers "You have to do certain things; you have to pay your labor, for instance, a minimum wage; you have to manufacture dairy products under certain sanitary standards," all of which costs money, how can we then just turn around and leave an industry like that to the absolute mercy of a foreign competitor who does not have to operate under any of those rules of the game?

Is it fair? Is it decent? Is it honest? Is it for the economic good of the world? I have a serious question in my mind.

Mr. STRAIGHT. It is a very serious question, and it is precisely in recognition of that question that the organization which I represent has said that Federal aid is necessary here.

Personally, in the summertime, I come from a little community in New Hampshire in which the town of Nashua was almost ruined when the local industry was shifted from Nashua down South, and finally to the Caribbean area, in favor of a lower labor cost market.

That little town had to start over again from scratch, and it did. It managed to accomplish it without much Federal aid. I think Federal aid is very necessary under those circumstances. I share the CED view which I quoted that the kind of adjustment which you are speaking of is going on all the time within this country, and is one of the laws of competitive private enterprise in which we all believe. On the first point, on the issue of free trade, I mentioned Mr. Piquet, and I think he answered the point you mentioned. The issue, he said, is no longer protection versus free trade. It is, rather, which imports from which countries should be allowed to increase in the national interest, and to what extent should such increases be permitted.