POLITICAL AND MILITARY CONSIDERATIONS With the world practically shrinking in size because of progress in communications and transportation, and with the United States finding itself responsible for leadership of the free world, our foreign economic policies have strong repercussions in many other countries and areas. Not only are we now the largest world trader, as a Nation; the United States is the principal market for the exports and imports of many others. For example, around 50 percent of the export trade and 50 percent of the import trade of some 15 countries is between those countries and the United States. Along with this practical shrinkage in distances is the disintegration of former political and financial ties, and the evolution of a number of independent countries, many with strong nationalistic tendencies and a desire to lift themselves by their bootstraps. Paralleling this development, so pronounced in the last decade, the United States has followed a generous program of foreign aid and technical assistance, one objective of which has been to step up production in certain countries. But the need for exporting this production has posed other problems dealing largely with foreign commerce of all types. Closely related to this is the stimulation of foreign investment by United States interests through governmental guaranty of convertibility of earnings, and protection against expropriation without prompt and adequate compensation. The United States, moreover, has taken the lead in forming a number of international agencies dealing directly with international commerce, or rather directly affecting or being affected by such commerce. The economic side of military alliances must also be considered in our foreign economic legislation; for example, the strength of the North Atlantic Treaty Organization is certainly influenced by the ability of its members to sustain themselves economically. The concept of hemispheric solidarity, which the United States supports, also calls for continued peacetime access to United States markets by certain industries abroad processing items of strategic importance in time of war. A reexamination of legislation affecting our foreign commerce must take into account these developments and institutions. They make the position in which we find ourselves far different from that prevailing at the time of passage of our basic overall tariff act. RELATED DOMESTIC POLICIES In the United States, as well as in other countries, there is an increased disposition to look to the Government to control economic fluctuations; but national economies do not exist in vacuums. Is it practical, for example, to expect a policy of freer trade to exist side by side with domestic programs designed to minimize fluctuations in the domestic economy? Can domestic programs logically be exposed to the risk of competition from foreign sources? Insulating the domestic economy against competition from abroad is closely related to the as yet unclear specific responsibilities of the Federal Government under the Employment Act of 1946. For example, if unemployment should develop in Philadelphia but not in San Francisco; in Atlanta but not in Milwaukee; in the textile industry but not in the electronics industry; in the Corn Belt but not in the lumbering or mining industries, is it the responsibility of the Federal Government to protect the local positions taken? If so, how, when, to what extent, and with what assurance that recommendations made in the interest of reducing the cost of Federal assistance would be mandatory, assuming them to be economically sound? PROBLEMS OF WITHDRAWING PROTECTION Action toward reducing restrictions on trade must be effected in the face of established positions, that may be said to have been taken as a result of prior protection from foreign competition. To aid in adjusting to changed policies, the suggestion is sometimes made that governmental assistance be provided businesses or labor that may be adversely affected by withdrawal of former protection. While the idea is generous, the practical difficulties of determining exactly how much assistance to give, and to whom, and for how long, and for what purposes, and what degree of compul sion would be involved in relocating or in reconverting or otherwise becoming reestablished, present major obstacles to the plan. Similar difficulty would occur in determining secondary effects of industrial relocation; companies reducing or discontinuing production of items faced with competition from imports might, through increased production of other items, bring severe competition to some other industry producing primarily for the domestic market. The issue is further complicated by the difficulty of determining precisely what constitutes an industry, and how much consideration ought to be given multiple-product companies, any one of whose separate products may not be equally profitable or may not be equally faced with competition from abroad. What should possibly be considered is whether restrictive legislation should be primarily for the purpose of continuing protection to already established businesses, or for encouraging new domestic investments of certain types by keeping out specific goods of foreign origin. PROTECTION AGAINST EXCESSIVE CONCESSIONS, UNSEEN HAZARDS, AND EXCESSIVE RESTRICTIONS Over two decades of experience with reciprocal trade agreements have brought forth refinements designed to provide additional protection to domestic interests both before a trade agreement is negotiated and afterward. The first is generally referred to as the peril-point provisions, whereby detailed concession limits are recommended by the Tariff Commission within the overall limits specified by Congress. The second is incorporation of the escape clause, to provide correction of excessive injury as a result of concessions made through negotiated trade agreements. International House favors both of these arrangements. The first is endorsed because the setting of an actual rate of duty involves considerable analysis of the potential impact of such duty, and the requirement that the Tariff Commission pursue the factual investigation and make its recommendation places the responsibility where it can most scientifically be carried out. The second, escape clauses, also call for a factual determination that serious injury to the domestic industry has been caused or is threatened. International House favors retention of this instrument and favors continuation of the arrangement that the Tariff Commission's recommendations be solely points of advice to the President, which he may accept in whole or in part, or reject, as provided in section 6 (c) of the Trade Agreements Extension Act of 1951. Just as it may be possible to overextend concessions, to the detriment of domestic producers who have taken positions under a protective wing, it is also possible to overextend protection, to the detriment of importers who have taken positions not requiring restrictions on competition. In the 1955 extension of the Trade Agreements Act, for example, imposition of restrictions on foreign commerce was authorized for purposes of national defense. Without questioning defense essentiality as a basis for imposing restrictions, International House desires to point out the lack of provision for explicit procedures in connection with the investigations called for by this particular section. Perhaps the procedures should be made subject to the Administrative Procedures Act insofar as it deals with public hearings, subpena of witnesses, and the like. This amendment is potentially so far-reaching that it would appear to call for attention to the possibility of defining criteria as to defense essentiality; such a guide would protect both those seeking restrictions on imports and those desiring to retain import opportunities. In the absence of such criteria, the door is opened for a multitude of claims resulting in investigations that are expensive, time-consuming, and possibly productive of nothing but nuisance value. A related obstacle to trade, which may be looked on as type of excessive protectionism, is the possibility of prolonged uncertainty with respect to liquidation of duties; businessmen are thus unable to effect a prompt and definite determination of their costs. A correction of this situation might be accomplished by imposing a reasonable statute of limitations on the time allowed for final liquidation of customs entries. CONTINUING NATURE OF PROBLEM The task placed before your committee has no end. Evaluation of adequacy, coordination of legislation, and the review of administration of laws related to foreign commerce are in themselves a continuing function. International House therefore recommends that consideration be given to establishing a permanent subcommittee, possibly of joint membership because of the broad purview required. Such a subcommittee could function under terms of reference calling for a continuing appraisal of the adequacy of legislation, 83979-56-pt. 3-19 of the administration of current legislation, and of its operational impact on the foreign commerce of the United States. DETROIT BOARD OF COMMERCE, Hon. HALE BOGGS, Chairman, Subcommittee on Trade Policy of the House Ways and Means House Office Building, Washington, D. C. DEAR CONGRESSMAN BOGGS: Due to the fact that I have been out of the country, the Detroit Board of Commerce has been unable to participate in the hearings that were held by your subcommittee in September. With the understanding that your subcommittee will consider written statements from interested parties before writing the final report of your subcommittee, we are pleased to send you herewith four copies of the recently revised policy position of the Detroit Board of Commerce in the field of interest of your subcommittee. We believe that much of the material in this pamphlet will be of interest to the members of your subcommittee. Sincerely yours, CARLOS E. TORO, Manager, World Trade Department. THE DETROIT BOARD OF COMMERCE VIEWS UNITED STATES FOREIGN ECONOMIC POLICY, JUNE 1956 INTRODUCTION Almost 4 years have passed since the Detroit Board of Commerce issued its first integrated statement of policy on United States foreign trade and foreign aid. The views expressed in 1952 were the result of years of careful study and thought by competent and experienced businessmen. Some of the recommendations made then have been implemented, but the greater part of the objectives is still to be attained. The passage of time requires a fresh look at problems old and new. World productivity and world trade have reached new heights, an achievement in which liberalization of trade policies was partly cause and partly result. Although hopeful strides have been made in attaining greater prosperity and economic opportunity for many peoples, much remains to be accomplished. Believing that the world economy requires greater opportunities for trade and investment, the following reaffirmation of the 1952 policy statement has been issued. STATEMENT OF POLICY The Detroit Board of Commerce, representing many diversified business enterprises operating in Detroit, holds that world peace and security are inseparably linked with a prosperous and growing world trade. As one of the major industrial centers of the world, as a world port of growing importance, and as the home of 31⁄2 million people, Detroit buys from the far corners of the earth and sells to the world the products of its factories and the genius of its technology. Detroit's commercial interests range from extensive foreign investments by our business enterprises to reliance on vital sources of supply, from profitable and necessary markets abroad to a need for greater diversity of goods for our consumers. For these reasons, Detroit business, through committees on world trade and affairs established by its board of commerce, has studied the vital questions in international affairs and the economic policies affecting them. The Detroit Board of Commerce, representing Detroit business, believes that the United States has been thrust into a position of economic and ideological partnership with the free nations of the world. We can neither vacate this position nor can we ignore it. We, therefore, must recognize certain fundamental facts and build on these facts a consistent framework of policy. The facts are these: 1. The United States cannot exist in political or economic isolation without endangering our heritage. 2. The United States, as the world's most productive power, is also the world's largest buyer and seller. 3. What we do here at home has a profound influence on the rest of the world. 4. The maintenance of a healthy, dynamic, and growing economy is essential to our own well-being and security, as well as to the economic growth and stability of the rest of the world. 5. To an ever-increasing degree, the United States economy is dependent on foreign sources of supply and on markets abroad. Based on these and other facts, we advocate a foreign economic policy which recognizes the true status of the United States in the world economy. However, the task of freeing trade from uneconomic and discriminatory shackles cannot be that of the United States alone. For this reason, we call on the business and Government leaders of the other nations of the world to disband the web of restrictions on trade and facilitate the freer flow of currencies with utmost dispatch. Only in that way can the maximum benefits be obtained from the international flow of goods and services, and only then can man's aspirations to greater economic liberty be realized. To this end, we also urge the United States Government to obtain maximum reciprocal benefits for any concessions made by us. We continue to believe that the commercial policy of the United States should be so formulated as to lead gradually to free trade, that is, toward the ultimate complete lifting of tariff barriers and other obstacles to the importation of goods, if such obstacles have no other genuine purpose than the protection of uneconomic domestic industries from normal foreign competition. This belief is based on the conviction that protectionism is not in harmony with our competitive free-enterprise system and works against the long-range interests of the American consumer, labor, and industry. Achievement of this goal cannot and should not be brought about overnight. Surrender of protection will require adjustments in certain industries which will take time. While the United States economy must remain dynamic, major upheavals must be avoided. To further this long-range goal, we are convinced that United States foreign economic policy should reflect economic realities. Our views on specific phases of trade policy are as follows: Tariffs The Tariff Act of 1930, still the basic tariff law of the United States, is no longer geared to the developments in the second half of this century. Its classification structure is obsolete and it leads to illogical and confusing rate determinations. We advocate a further revision of this statute under a system which would prevent burdening the Congress with the time-consuming task of detailed ratemaking, without, however, preventing congressional approval, in keeping with the provisions of the Constitution. For this reason, we urge a speedy completion of the study being made by the United States Tariff Commission on the classification and rate structure of the Tariff Act, and hope for early action on liberalization and improvement of the tariff law. Trade agreements The highly protectionist sentiments underlying the Tariff Act of 1930 have been modified since 1934. This has been done under the authority granted the executive branch of the United States to enter into trade agreements with other nations for the reduction of tariffs and other import restrictions on a reciprocal basis. We fully support the principles of the "Reciprocal Trade Agreements Act and therefore, welcome the continued extension of its authority. Without denying the need for periodic review by Congress, we advocate extension of this legislation for more prolonged periods of time. We also recommend greater Executive authority to negotiate effectively for the reduction of trade barriers. We are concerned over recent changes in the Trade Agreements Act which make the use of the escape clause unpredictable and which extend unwarranted protection to fragments of industries, setting the specific over the national interest. We believe that negotiations under the authority of the Trade Agreements Act should lead to more genuine and more strictly enforced concessions by other countries. We approve of United States membership in the multilateral trade agreement known as the General Agreement on Tariffs and Trade, and its proposed administrative organ, the Organization for Trade Cooperation. Neither the GATT nor the OTC are a threat to our sovereignty. Rather, they are instruments for the friendly negotiation and amicable settlement of trade disputes among its members, through the force of world opinion. They are a welcome step forward in united efforts to reduce and stabilize excessive barriers to world trade. Nontariff trade restrictions In much of the world, trade barriers other than tariffs still present a formidable array of hurdles to the foreign trader. Quota restrictions, import surcharges and taxes, elaborate import and export licensing procedures, and above all, continued reliance on restrictive and excessive exchange controls, have frequently outlived their original intent of preserving foreign exchange and are being used for discriminatory and protective purposes. We oppose the use of such devices except for legitimate and essential purposes and believe that the General Agreement on Tariffs and Trade is a useful and proper instrument to use for reducing these trade barriers to a minimum. We are convinced, moreover, that United States leadership is essential in reducing such barriers to world trade. Providing such leadership, however, requires the United States to abstain from imposing restrictive barriers of its own, since this country is rarely justified in imposing them. Therefore, we strongly oppose quota restrictions on imported goods. We believe that such quotas on imports are the most restrictive of trade barriers. Their imposition and use would require government intervention, in minute detail, in the affairs of American business. Customs procedures United States customs laws, despite welcome efforts at simplification in recent years, continue to be in need of further streamlining. This process requires both administrative and legislative action. The elimination of the unfair and obsolete provisions dealing with the valuation of imported merchandise for assessment of duties is of vital importance. The permanent substitution of the more equitable valuation on the basis of export value, exclusively, although approved by the House of Representatives four times, has yet to be approved by the United States Senate. We urge prompt passage of this legislation believing that a firm tariff rate is much to be preferred over the uncertainties facing the importer under present valuation procedures. We welcome United States ratification of the International Convention To Facilitate the Importation of Commercial Samples and Advertising Material. We urge prompt passage of legislation permitting this convention to take full effect. Buy American legislation It is shortsighted for the United States to maintain legislation requiring the rejection of lower foreign bids on purchases by the Federal Government, unless the prices quoted by domestic bidders are unreasonable. The so-called Buy American Act, reinforced in various other legislative measures, not only ignores the interest of the taxpayer, but also represents a formidable barrier to enhanced foreign trade. While in the past the dollar values involved have been relatively small, no one knows how many foreign firms have been discouraged from attempting to bid by the very existence of this legislation. We welcome the administrative changes which have tended to make the Buy American Act less onerous. We firmly believe, however, that this legislation should be repealed and that, in principle, higher domestic bids should only be accepted by the Federal Government if there are overriding defense or security reasons for such action. Administration of the Anti-Dumping Act We approve and fully support the purposes of the Anti-Dumping Act of 1921 which was intended to control discriminatory pricing policies by foreign suppliers. |