10. That the Congress take the necessary steps to enable the United States to join in establishing an international organization to promote the objectives of the General Agreement on Tariffs and Trade (GATT); that active participation be continued in other international organizations to promote fair-exchange and fair-labor practices and the flow of investment capital.

Mr. COOPER. Mr. Secretary, I will ask you this question, in conclusion: Is it your conviction that the extension of the present Trade Agrements Act for 1 year, as recommended by the President and recommended by you here, is in the best interests of the United States in dealing with international affairs?

Secretary DULLES. Yes, sir. I have no reservations whatever on that point.

Mr. COOPER. Thank you, sir.

The CHAIRMAN. Mr. Kean will inquire.

Mr. KEAN. Mr. Secretary, if no new trade agreements are contemplated, what objection would there be to just letting the Trade Agreements Act expire by limitation on June 12? Personally, I believe this would have a very bad psychological effect on foreign nations, but I would like to have your views on it.

Secretary DULLES. Yes, sir. As I said before, we do not have in contemplation any exercise of power under that act during the next year to conclude any major new agreement of any kind, although I am told there may be some technical modifications of existing agreements which would be appropriate.

The reason we recommend that the act be continued is because to allow it to lapse at this time would be widely interpreted abroad as an abandonment of the principle which is represented by that particular act. The decision as to whether or not to abandon that should not, we believe, be made at this time or seem to be made at this time, because of the fact that it would have serious repercussions and would jolt very severely the economies and the political programs of some of these other countries.

Let me say that most of these governments are extremely nervous as to what the future policies of the United States are going to be. They have been told for 20 years that a Republican administration would be an isolationist administration and that there would be a sharp cut in all forms of economic relations, not only in terms of foreign assistance programs, but trade and the entire network of relations. They feel that if that happens, and happens abruptly, they would then be unable to survive as separate members of the free world, and they might have to think in terms of appeasement, neutralism, and things of that sort. In other words, we would lose them as vigorous, strong allies, which they are today, and which we want to keep them.

Therefore, I believe that any action at this time taken abruptly which would be interpreted or, if you will, misinterpreted by thembecause it makes little difference whether it is a correct or incorrect interpretation; the fact is it is an interpretation-in a way which leads them to panicky changes in their own policy and their relations with us, would be very unfortunate.

Mr. KEAN. I want to congratulate you upon what you said about your position as Secretary of State having only one-half the influence on what we ought to do. I believe that in the past administration, the interests of American business have been largely forgotten, and more consideration was given to what was important with refer

ence to foreign relations, and of course, that is the reason that we put in that "peril point" amendment which you voted for

Secretary DULLES. Yes, sir.

Mr. KEAN. Which at least meant that the President, when negotiating, had to do so with his eyes open.

Mr. Jenkins stated that recommendations in this field should be made by the Secretary of the Treasury rather than by you, representing your Department. I think you have somewhat answered that by saying that you think it ought to be on a 50-50 basis. With the present world situation, it is true, is it not, that tariff is no longer merely a local issue? The State Department, of course, must be vitally interested in the whole subject of foreign trade. Does not the factor of where we trade have important implications on the subject of war and peace and the economic health of our own country?

Secretary DULLES. Yes, sir. You speak of the fact of where they trade, which raises, of course, a very delicate point, because under the Battle Act we are taking steps to prevent their trading with the Communist world, which today represents about one-third of the world. We represent a very large part of what is left. If they cannot trade either with the Communist world or with us, then they really are in a bad way.

That is the kind of thing that worries me. That is the reason we need to work this thing out in a way which will take account of our various national interests, including the desire which Congress has expressed through the Battle Act that they should not trade with the Communist world.

What we would like to have, of course, is foreign countries which do not trade with the Communist world, which do not export to us, which do import largely from us, which have very vigorous economies, which do not need aid from us, and which are able to make a very large contribution to a military establishment which will be allied with us.

That creature does not exist in the world today, and we have to sit down and decide which of those qualities we are willing to give up in order to retain some of the others. That is the kind of thing this commission has to study for the next few months.

Mr. KEAN. I understand from the answers to the questions of Mr. Cooper that these speeches which were made by your assistants and the Under Secretary represent in general the policy of the administration and of the Department, but that, of course, neither the President nor you has been able to go over every detail of the speeches, and therefore you are not vouching for every word that was said. But in general the statements made by these assistants do represent the administration's policy.

Secretary DULLES. They represent a point of view, Congressman Kean, which the administration believes ought to be presented to the American people as one of the elements which they should have in mind before they reach a final decision. I believe that Under Secretary Smith and Assistant Secretary Morton, in presenting that, did what was properly their job to do in the positions which they hold. Certainly that is a point of view which the administration believes should be brought to the attention of the American people.

Mr. KEAN. That is the point of view of the 50 percent that you talked about, and we will hear the point of view of the other 50 percent when we hear Secretary Humphrey this afternoon.

Secretary DULLES. Yes; and you have been hearing some of it from other witnesses.

Mr. KEAN. Thank you, Mr. Secretary.

The CHAIRMAN. Mr. Curtis will inquire.

Mr. CURTIS of Nebraska. Mr. Secretary Dulles, I followed your paper very carefully, and there are 1 or 2 things that I want to inquire about that were not in there.

Do you feel that the matter of the national defense and the raw products, the skills, the know-how and the factories to be maintained in this country, are one of the important factors that must be taken into account in determining our trade policy?

Secretary DULLES. Yes, sir.

Mr. CURTIS of Nebraska. Likewise, do you feel that we have a special problem that must be considered in reference to agriculture? I refer specifically to those particular products where our Federal Government supports the price, and where we perhaps have a surplus. Do you agree that that poses a problem, too, where some attention has to be given to the import of that particular commodity?

Secretary DULLES. Yes. I know few problems that are more difficult to resolve than the problem of our Government on the one hand supporting prices, and on the other hand imports of those same products coming into this country. That is a very, very difficult problem.

Mr. CURTIS of Nebraska. Without solution, it means that sometimes the Federal Government is supporting the world price as well as their domestic price, or at least it is leaning in that direction.

Secretary DULLES. Yes, sir.

Mr. CURTIS of Nebraska. Would you say that all of our foreign trade is acutely related to communism and the threat of communism, or just parts of it?

Secretary DULLES. You are referring now

Mr. CURTIS of Nebraska. To our world trade.

Secretary DULLES. Exports and imports, the whole business?
Mr. CURTIS of Nebraska. Yes.

Secretary DULLES. I would not go so far as to say that there are not segments of our trade which cannot be altered without a serious effect upon our international position. I believe that there can be a reshaping of our foreign trade without serious international consequences if we go about it in the right way.

What the free world cannot stand today are what I refer to as shocks. They are extremely nervous. They tend to misinterpret whatever we do. Some of them are rather jittery because of the advance of communism in Asia, developments such as are going on in Laos today. I have found in such international experiences as I have had that the most important thing of all in maintaining good relations is to try, as far as possible, to sit down and talk things over with your friends and allies before you act. If you act first and try to explain afterward, you never catch up with the consequences of what you do. If you can sit down and say, "Now it looks as if we have to do this, and this is why," and if you have a good case, and if they can make adjustments in their own economy to take it into account, you can shift things around quite a bit without any bad consequences.

The thing that is disturbing of international relations is abrupt action which seems arbitrary and not the kind of action taken in the

way that would be normal between countries who are close friends and want to remain such.

Mr. CURTIS of Nebraska. The really sound and effective trade policy is one which takes into account the effects of imports and exports on both countries involved, is that not right?

Secretary DULLES. Yes, sir. The President has made clear in relation to his budgetary program that we are probably making, are going to propose to continue at least, some pretty sharp cuts in various forms of our budget, particularly in defense. Why are we doing that? Not because we do not need all the defense that we can get, but because the President said the heart of the free world is a vigorous and strong United States. Whatever we do which destroys the vigor, the health of the United States would be a disservice to the whole free world. Everybody else recognizes that, too, including our friends and allies. It would not make any sense to have a budgetary policy, a defense policy which was designed to bring our expenditures into such shape that we could have a strong, vigorous and healthy United States, and then gut the whole thing through a foolish trade policy. That is perfectly clear to me. You have to take all these factors into account, and the basic position of the President, which is that you must have a strong, vigorous, healthy United States, is the heart of everything which he is trying to do. It relates itself to defense. It will relate itself to tariff, to the whole picture.

Mr. CURTIS of Nebraska. In other words, we have to keep ourselves strong to maintain the confidence and respect of other nations.

Secretary DULLES. Yes, and I believe that can be done compatibly with the strength and vigor of others, if we go at it the right way, just as I believe that the cuts which we plan in the way of foreign aid can be absorbed. If we give them a little time, a little advance notice, they can adjust their economies, I believe, to take account of it, and we can find other ways of compensation, perhaps in the form of offshore procurement, which does not involve either a grant-in-aid or having to take unwanted imports into this country, because we are getting defense items which they can manufacture.

That may be a way around it. There are ways around these situ ations if you go at it carefully, judiciously, and with consideration for others.

Mr. CURTIS of Nebraska. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Boggs will inquire.

Mr. BOGGS. Mr. Secretary, in line with the questions of Mr. Cooper, I have a statement submitted to the committee by Mr. Roger Kent, General Counsel of the Department of Defense, in which he says, among other things, the following:

The imposition of quotas on the importation of all petroleum oils and of residual fuel oil would seriously affect the national security. Its effect would be a substantial dislocation of a segment of our national economy and would create a barrier to the development of Western Hemisphere oil resources which are vital to our national security.

Do you agree with that statement?

Secretary DULLES. I believe that is a correct analysis; yes, sir.

Mr. BOGGS. A correct analysis of the situation. Are you in agreement with it?

Secretary DULLES. I was trying to find it.

Mr. BOGGS. On page 2 of Mr. Kent's report, the fourth paragraph. Secretary DULLES. That is a conclusion which I would accept on his authority. I cannot make an independent assessment of it because I am not familiar enough with the subject.

Mr. BOGGS. That, of course, gets back to the pending bill before the committee, which you have testified as being against. Mr. Kent is referring to the Simpson bill and the provisions with respect to the imposition of quotas.

Did I understand you to say that you were opposed to the imposition of quotas?

Secretary DULLES. No, sir. What I intended to say was that I was opposed to any change at this time, of our basic trade legislation. Mr. BOGGS. Would that mean that you are in disagreement with the position of the Department of Defense?

Secretary DULLES. It does not mean that I am in disagreement with that conclusion. As I say, that is a subject which is primarily or very largely within the competence of the Defense Department. They are very familiar with the utilization of fuel oil, the degree to which our defense, particularly our Navy, is dependent upon fuel oil, access to Venezuela, and so forth. That is their business, and if he says it, I am prepared to go along with it. I do not have any independent judgment about it, and my present position is limited just to this: that I believe it would be a serious mistake now to adopt this bill. I have an open mind as to what may come out of such a study.

Mr. BOGGS. You would not indicate, would you, that the Department of State has no interest in the imposition of import quotas? Secretary DULLES. No, sir.

Mr. BOGGS. You say this is the business of the Department of Defense?

Secretary DULLES. I said the Department of Defense is uniquely qualified to know the dependence of the Navy, for example, upon fuel oil along the Atlantic seaboard.

Mr. BOGGS. I agree with you on that, but the Department of State is uniquely qualified to examine the effect of such a limitation upon the economy of the country involved, as well as this country, is it not?

Secretary DULLES. Congressman, I am not prepared now to take a position based upon what is a partial presentation of any case. This is a very powerful statement coming from the Secretary of Defense, which carries a great deal of weight. There are other elements in the situation which I would want to know more about before I came to a final conclusion.

M. BOGGS. Mr. Secretary, what I am trying to find out is whether or not you are for or against the Simpson bill.

Secretary DULLES. I am against the Simpson bill at this time. Whether I will be against it a year from now, I do not know.

Mr. BOGGS. Are you against the provision in the Simpson bill having to do with zinc and lead?

Secretary DULLES. I am against the Simpson bill at the present time. Whether I will be against it a year from now, I do not know. Mr. BOGGS. What is your feeling about the provisions in the Simpson bill limiting the authority of the President of the United States with respect to negotiation of trade agreements?

Secretary DULLES. In the exercise of my constitutional rights, I must make the same answer. [Laughter.]