Mr. E. MARTIN. I am going to ask a question that I would like for you to take all the time you want to answer-that is, up until the 15th of the month-because I do not want to trick you on it.

My question is: Do you consider that a sampling of only $42 million of United States imports in the year 1954 (which exceeded $10 billion) is an adequate sample on which to determine the value status-you know what I mean, the dutiable value status of all our imports and that $42 million sample cut across the board? It included duty-free goods and it included specific duty goods.

I would like for you to put your answer in the record before we go to press.

Frankly, the reason I ask the question is that there was some understanding that it was on that sample that the Treasury Department was going to administer the valuation provision under which they are not supposed to change the basis of value on a product if it would reduce the dutiable value by more than 5 percent, and that is the reason I do not want to press you for an answer now, because it involves the intended action of another department.

Mr. MCCLELLAN. I think, under those circumstances, I would like to be permitted to prepare a response to your question, rather than to make one off the cuff, because that is a pretty technical question. Mr. E. MARTIN. That is what I want, and that is all right.

Mr. MCCLELLAN. I would have to be more familiar with what was involved in the study.

Mr. E. MARTIN. I do not want to precipitate civil war between the two departments.

(The information requested follows:)

BUREAU OF CUSTOMS SURVEY OF DUTIABLE IMPORTS, SHOWING EFFECT OF CHANGE UNDER NEW LEGISLATION IN VALUATION PROVISISONS OF THE TARIFF ACT

COMMENTS ON ADEQUACY OF THE SAMPLE

The Bureau of Customs survey for the purpose of discovering the effect of the change in customs valuation provisions of the Tariff Act enacted by the Congress can be accepted as fully adequate in size for accurately estimating the overall reduction of 1954 customs valuations and of customs revenues which would have resulted from the new valuation provisions. The component samples of the various commodity subgroups, however, are all less adequate in size, though in varying degree, for similar accuracy by subgroups.

The relative size of the sample-3 percent of the $1.4 billion value of all 1954 dutiable imports subject to ad valorem or compound duties-is not revealing as an indication of the adequacy or inadequacy of the sample in size. It is an established fact that, where a truly random sample is taken, the possible variation of sampling results depends simply on the number of items in the sample, and not on the number in the universe. The possible variation in the estimated percentage derived from the sample decreases rapidly as the actual number of sample items is increased. For instance, the estimated percentage based on a random sample of 20,000 would be subject to a possible variation one-half as great as from a sample of 5,000.

The $42 million survey sample is amply large enough for close accuracy of sample results. If the customs sample of nearly 20,000 items can be accepted as the equivalent of a mathematically random sample, it appears to be most unlikely that the resulting estimate of a 2.5 percent overall reduction in the valuation total of entries subject to ad valorem or compound duties could vary as much as one-tenth of 1 percent from the actual true percentage.

The sample was drawn from entries through 8 selected ports, taking every 20th or every 40th entry as numbered serially. For the intended purpose this procedure was an acceptable substitute for a strict mathematically random method of selection. This point is supported by the fact that in the larger subgroups the value proportions of the sample to all entries are quite similar.

There is little reason for believing that the nonrepresentation in the sample of the 30 percent of dutiable imports through ports of entry other than the 8 covered in the survey could have led to serious error in the sample results. The ports for inclusion in the sample were carefully selected for representativeness of trade through the various regional groups of ports. Therefore, it seems justifiable to view the exclusion of all but 8 ports from the sample as only a minor qualification to a favorable judgment regarding the adequacy of the customs sample as a basis for the overall estimates.

With respect to the commodity subgroups, some are represented by such a small number of items (from 1 up to about 30) that the sample percentage change may not accurately indicate the actual change in total valuation for the subgroup. Where several hundred or more items from a subgroup were drawn in the sample, the results are likely to be fairly close. In general, however, the accuracy of the overall estimated percentages based on the entire sample is greater than the estimated subgroup percentages derived from the sample items falling within the individual subgroups.

Mr. E. MARTIN. I have some general questions, Mr. Secretary, which I would like to ask you at this time: Do you think the escape-clause legislation as presently worded is appropriate?

Mr. MCCLELLAN. May I answer the question in this way: I think the present escape-clause plan is sound. I cannot speak to the appropriateness of the language and that is what the question seems to mean to

me.

I think that the principle of having the Tariff Commission make a thoroughgoing investigation to determine the basis of and, if any, what the injury seems to be, and to make a recommendation as a result of its investigation, makes sense. Therefore, I would say that if I were give a one-word answer, it would be "Yes."

Mr. E. MARTIN. Those are hard to come by these days, Mr. Secretary-one-word answers.

Mr. MCCLELLAN. Yes, sir.

Mr. E. MARTIN. Would it be feasible to reduce the time, within which the President must act following the Tariff Commission's report in escape-clause proceedings, from 60 to 30 days?

Mr. MCCLELLAN. No, sir; I do not think so, and I think I can explain why.

In the first place, as I remember it, the Tariff Commission has a maximum of about 9 months to obtain all the facts that are within its purview in determining the basis for recommendations, and I think that it must be recognized that the President, once that recommendation has been received, in a case where injury has been demonstrated to the satisfaction of the Tariff Commission, has many other factors to take into account-international political implications and others. I think it is only fair that he have at least the 60 days prescribed to make certain that he has had opportunity to carefully review the case, because it is he, in the final analysis, who will be responsible for the action taken. Based on my experience, I do not think 60 days is an unreasonable time.

Mr. E. MARTIN. Should the President have authority to review Tariff Commission findings of injury in escape-clause cases?

Mr. MCCLELLAN. Yes, sir; I think he should.

Mr. E. MARTIN. For the reasons you have stated?

Mr. MCCLELLAN. For the same reasons. If he is to be accountable for the action taken and to exercise his judgment as to what should be done in the light of the findings and recommendations and the other factors taken into account, I think he should.

Mr. E. MARTIN. Do you think he should have the final word?

Mr. MCCLELLAN. I think he should; yes, sir.

Mr. E. MARTIN. Should the Tariff Commission include in its escapeclause report all features of the situation, including those outside the scope of its present instructions?

Mr. MCCLELLAN. My answer to that in one word would be "No," and again I am venturing an opinion. However, I think that is the basis of the question, and I would voice my opinion as "No," for this reason:

I would like to give one illustration: Any commission having the competence and the broad understanding of the economic factors could scarcely be expected to be expert in international affairs as is the State Department. It seems to me, therefore, that to put all factors which bear on the problem into the hands of a commission for study would not only be overly burdensome on such a commission-and I am sure you are aware of the difficulties that the Tariff Commission has already under its present burden-but also unwarranted, inefficient, and generally less satisfactory.

Mr. E. MARTIN. Well, suppose, Mr. Secretary, instead of calling on the Commission to be omniscient, we were to call on them to assemble on labor matters the position of the Department of Labor and on defense matters the position of the Department of Defense, and on mobilization-base matters the position, if any, of the ODM, not to be an expert on these matters-that is, the Commission would not be expected to be an expert on all these things, but to bring into one place the various considerations.

Before answering that, bear in mind that the Commission's report and the President's report to Congress where he disagrees with the Commission's conclusions are the only statements published by which the public can know for what reason the Government took the course which it did.

Some of the President's reports to Congress, without complaining about them, I think you will grant they are on the brief side.

Mr. MCCLELLAN. Well, may I again, sir, with all due respect, observe that my opinion is as follows:

I think that what you propose in terms of having the Tariff Commission or any such commission collect the reports of the Department of State, the Department of Labor, and the other agencies that might be involved, plus other factors which must be, under the present pattern, taken into account by the President, representing the executive branch, would in my judgment as a businessman and a former executive, substitute for an executive function. I think, as I have said earlier, that it would be more appropriate for a specific set of studies to be assigned to an agency established for the purpose of making such studies, and to have it then prepare a report based on them. It seems to me that it would be a mistake to make changes in the direction of having the Commission handle the whole business; that is a function which I think is executive. It is the executive side in the end which takes the responsibility for the action.

Mr. E. MARTIN. Do you think it appropriate for your Department to advise the President to reject the expert Tariff Commission's finding of injury in an escape-clause case?

Mr. MCCLELLAN. Well, sir, again may I say that if the executive branch is to take counsel with agencies within the executive branchif the chief of the executive branch is to consult with the agencies and have their views and their analyses of factors which are within their

purview, I think it appropriate that the Department of Commerce and other departments be heard.

Yes, sir; I think it is appropriate for the President to hear from the Cabinet officers around him, who are the chiefs of the several departments and agencies, as to their views and as to their recommendations. Mr. E. MARTIN. On the specific subject of injury which has been delegated to the expert commission?

Mr. MCCLELLAN. On the recommendations of the Commission that go to the President for action by him?

Mr. E. MARTIN. Yes, sir.

Mr. MCCLELLAN. Yes, sir.

Mr. E. MARTIN. Notwithstanding that we have delegated that to an expert commission that is competent, you think that it is proper for the Department of Commerce to tell the President "Well, the expert commission fell on its face here on this finding"?

Mr. MCCLELLAN. I find it a little difficult to suggest, sir, that any agency within the administration should be denied the right to disagree with another agency within the administration, regardless of the importance of its role or the specific assignment given it.

Therefore, I do not think we should deny a difference of opinion being expressed. I think the President should be, and is competent, to himself make appropriate appraisal of the source and, again, may I say that I have the highest regard for the Tariff Commission.

Mr. E. MARTIN. Well, I am glad you said that because my next question is: Why should we have a Tariff Commission report for these escape-clause matters?

Mr. MCCLELLAN. Well, sir, I am not accountable in any degree for establishing the pattern presently in use, but I am aware of the differences of opinion that emerge from time to time about our policies, and about the means of settling these difficulties and resolving the problems that appear.

But I would like to say a word on behalf of the function as presently established in the Tariff Commission, if I understand it correctly.

It is an independent agency separate either from the legislative or the executive branch which is nonpolitical and bipartisan, and whose purpose is to get the facts and to report them without bias on the basis of need, and what is right.

Now, it seems to me, sir, that in an issue which in my humble opinion should be nonpartisan-and this is the matter of our foreign trade and international policies, where we are trying to do our part, at least, in expanding trade to the mutual benefit of all the countries around the world, including and primarily our own, and to maintain relationships which encourage free countries to be our friends, it is a wise policy to have an independent, nonpartisan agency qualified to make independent studies, reports, and recommendations to the President. I think that is good.

Mr. E. MARTIN. That is good?

Mr. MCCLELLAN. Yes, sir.

Mr. E. MARTIN. And it is also good for a political department to say that the independent agency is just as wrong as rain?

Mr. MCCLELLAN. If that is his conviction, let him be judged by it. Mr. E. MARTIN. But all he is judged by, Mr. Secretary, is the conclusion. The independent agency called its shots and it published a report and gave the considerations bearing on it, but the Depart

ment of Commerce advised the President in private, and its advice never reaches the light of day or the reasons therefor.

So, there is no basis for judging the Department that I can see.

Mr. MCCLELLAN. Well, you leave me somewhere along the line, I am afraid.

I think it is all right to take counsel. I think that the executive branch and I speak of it in the broad sense-and all of us involved in it, seek to serve by doing what we consider to be right, at least, in terms of national policy and we are held accountable for it. The President and every single one of us who has a part in formulating policy and carrying it out, in accepting or rejecting the recommendations of the Tariff Commission or other agency, has a responsibility to consult, and I think we realize that.

But I think it is a service of great value to have this kind of an agency making its recommendations in this manner.

Mr. E. MARTIN. I wonder if your view about the necessity for the President to have power to review the Commission's finding of injury may be related to a view of section 6 of the Trade Agreement Extension Act of 1951 which seems to say that you do not continue trade agreement concessions in effect when they are injuring American industry. Apart from that legal problem, do you think that it is right to have the expert findings reviewed as expert findings? If the law clearly gave the President the opportunity of taking actions in contradiction of the findings on other grounds, whether they are national security or whatever grounds they want to establish, would you still think that it was important for the President to be vested with this technical review of the finding of injury?

Mr. MCCLELLAN. Well, now, you are asking a hypothetical question, if I understand it correctly, as to circumstances which do not obtain. I would not support a proposition that called on the President to be required, no matter who he would be, to accept a conclusion of one of the agencies advising him without review, if he were to be accountable for what was done about it, whether it had to do with that particular recommendation or a corollary problem.

Mr. E. MARTIN. I did not make myself clear, Mr. Secretary.

You are familiar with section 6 (a) of the Trade Agreements Extension Act of 1951?

Mr. MCCLELLAN. I cannot recall the language of the act.

Mr. E. MARTIN. May I show it to you? It is at the top of page 14 of the subcommittee print. I hope you will find this print useful. Mr. MCCLELLAN. I think we have a copy of it.

Could I ask Mr. Ostroff, our counsel, within the Department of Commerce, to speak to this?

Mr. HARRISON. Yes, sir; certainly.

Would you please have Mr. Ostroff identify himself for the record? Mr. MCCLELLAN. This is Mr. Nathan Ostroff, Assistant General Counsel in the Department of Commerce.

Mr. E. MARTIN. If we did not have section 6 (a) in the law, and if the law clearly gave the President the final say on whether the tariff should be increased or not, irrespective, shall we say, of the Tariff Commission's finding of injury, would you still think it important that the President be empowered to review that finding of injury; that is, if the President had a free hand to act on whatever basis he thought was best for the Nation, and was not bound to act to