to prevent surpluses from developing and exercising a depressing effect on prices is of benefit both to domestic producers and foreign suppliers. Both are subject to a curtailment of their operations in the interest of obtaining better prices for what they sell. Moreover, there is likely to be no serious objection on this account by foreigners if they retain their share of the market. Import restrictions without production control on the other hand become sheer agricultural protectionism whereby the foreigners' usual share of the market is turned over to their domestic competitors. This is wholly at variance with the basic purposes of GATT, and accordingly the exception in favor of agricultural import restrictions is subject to the condition that they must be accompanied by corresponding production or marketing controls. This condition is obviously of vital importance to all agricultural exporting countries, including the United States. Difficulties of Applying the Exception It is ironic that the United States, a country with a very large stake in freer international trade in agricultural products, has had the greatest difficulty in keeping within this exception. This difficulty arises largely from the pressures of a relatively small segment of agricultural producers who are not on an export basis and who have concentrated on improving their position at home without much regard for the interest of American agriculture generally. The problem arises from provisions in our agricultural pricesupport legislation. Before 1948, the President was empowered under Section 22 of the Agricultural Adjustment Act, to impose import restrictions on a product when necessary to prevent interference with a domestic agricultural program. Our agricultural programs usually provided for similar restrictions on the domestic product. 8 When GATT was negotiated, therefore, the expectation was that government price support programs would be accompanied by some form of domestic production control. Consequently, the condition in the agricultural exception in GATT would be met, and our law and practice would in general be in harmony with our international commitments. The only question would be what limitation on imports would correspond to limitations on domestic production. In order to make it legally clear that future domestic agricultural programs would be consistent with the GATT exception, Section 22 of the Agricultural Adjustment Act was amended in 1948 to provide that: “No proclamation under this section should be enforced in contravention of any treaty or other international agreement to which the United States is or hereafter becomes a party." 10 Change in United States Law and Practice In 1948, Section 22 of the Agricultural Adjustment Act was also amended to make the scope of products covered practically limitless. This was done by making Section 22 applicable to "any loan, purchase, or other program or operation undertaken by the Department of Agriculture, or any agency operating under its direction . . ." " Under this wording, virtu. ally all major agricultural commodities became subject to possible import controls. Having thus changed the scope of Section 22, the Congress in 1950 amended that part of the Agricultural Adjustment Act (paragraph f) which provided that no proclamation under Section 22 should be enforced in contravention of any treaty or agreement. The new law read: "No international agreement... shall hereafter be entered into which does not permit the enforcement of this section... 12 (italics added). A final amendment to paragraph (f) of Section 22 was included in the Trade Agreements Extension Act of 1951. Paragraph (f) was revised to state that "No trade agreement or other international agreement heretofore or hereafter entered into by the United States shall be applied in a manner inconsistent with the requirements of this section" (italics added).13 This final enactment, to the effect that existing international commitments shall be disregarded, has created the present problem. In consequence, we now have price-support programs not accompanied by production controls but which may require import restrictions under Section 22. Moreover, the Executive seems to have so interpreted Section 22 that action is mandatory on him when there is interference from imports. Thus American legislation has come into conflict with an important provision of GATT. Present Agricultural Import Restrictions Import restrictions under Section 22 of the Agricultural Adjustment Act are now being applied, without corresponding restrictions or limitations on domestic production, on dairy products;1 flaxseed and linseed oil; rye, rye flour, and rye meal; oats, hulled or unhulled; and barley. These restrictions are therefore basically in conflict with GATT.160 The United States' Dilemma The situation in which we now find ourselves is that under our present law we cannot live within the terms of GATT 80 far as restrictions on agricultural products are concerned. We could loosen GATT to conform to our own legislation by eliminating the condition in the agricultural exception that import restrictions must be accompanied by corresponding domestic controls. But if we did this in order to obtain the needed freedom for ourselves, we would open the door to unbridled agricultural protectionism throughout the world. The cost to American agriculture as a whole might in the long run be nothing short of catastrophic. American Agriculture's Stake in Since World War II the value of American agricultural exports has equalled about one-eighth of farm cash income. We have exported the produce of one out of every ten acres or, in the aggregate, the commodities produced on over 40 million acres of arable land. Agriculture, historically, has a vital stake in foreign trade. Just over sixty years ago 80 percent of our total exports were agricultural. Even as late as 1951-52 almost one-third of our total exports was made up of agricultural products. Today, agriculture's share of our total exports is close to one-quarter. For some agricultural producers there is a striking dependence on exports. In 1952, for example, the United States exported the following proportions of domestic production: cotton, 30 percent; wheat, 43 percent; rice, 59 percent; dried whole milk, 42 percent; grain sorghums, 30 percent; soybeans, 16 percent; rye, 19 percent; tobacco, 22 percent; and lard, 24 percent.1 It is clear that the producers of these products are vitally concerned in our trade policies, but it does not follow that agricultural interest in trade is confined to these producers. If exports were curtailed, the land used in producing these exports would be shifted to other lines of production competitive with present domestic production. Mr. Allen B. Kline, former President of the American Farm Bureau Federation, made this point when he stated: "If we should have to take out of production the millions of acres now being devoted to production for export, this land undoubtedly would be shifted to the production of other commodities such as dairy products, beef cattle, fruit and vegetables, poultry, and other products. This in turn would create an oversupply of these commodities and endanger price and income of these producers. Thus, the maintenance of a high level of exports is of great impor tance to all agricultural producers." 99 17 If, therefore, the GATT agricultural exception is changed in consequence of United States laws so as to give other countries the freedom to restrict imports that we ourselves have exercised, American agriculture may suffer severely from the very legislation designed to help it. Balance-of-Payments Exception The other major exception in GATT to the rule against quantitative restrictions is the exception permitting countries to impose restrictions on imports to meet balance-of-payments dif⚫ficulties. The need for such an exception arose from the fact that after World War II many countries were faced with a shortage of foreign currencies, notably dollars, with which to pay for needed imports. Their dollar and other foreign exchange resources available to buy American and other foreign goods were small in relation to their import requirements. Their import requirements were abnormally large because of the need to repair and restore war-damaged production facilities, and to raise standards of consumption from the low level to which the stringencies of wartime economy had reduced them. Moreover, the capacity of many countries to earn dollars and other foreign currencies by exporting goods was very low when the war ended, and would remain low pending the reconstruction of damaged productive facilities and the shifting of production from munitions and other wartime uses to the production of peacetime goods. Countries in this difficult situation, even though they needed imports badly, found it necessary to restrict them. This apparent contradiction is explained by the fact that they needed some kinds of goods more than others. Not having enough foreign currency resources to buy all the foreign goods they would have liked to consume, they felt they must restrict imports of less needed goods, such as luxuries, in order to conserve their foreign exchange resources for buying the essential things they had to have from abroad, such as food, raw materials and equipment for their industries. In other words, they had to put themselves under import rationing. This gave them time, during a "transition" period, to re-establish production and exports and thereby ultimately acquire currently the foreign exchange to cover all import demands, as well as build up foreign exchange reserves as a cushion against future shortages. |