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RECIPROCAL TRADE AGREEMENTS

THURSDAY, MARCH 8, 1934

HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D.C.

The committee met at 10 a.m., Hon. Robert L. Doughton (chair

man) presiding.

(The committee had under consideration H.R. 8430, which is here. set out in full, as follows:)

[H.R. 8430, 73d Cong., 2d sess.]

A BILL To amend the Tariff Act of 1930

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Tariff Act of 1930 is amended by adding at the end of title III the following:

66 PART III-PROMOTION OF FOREIGN TRADE

"SEC. 350. (a) For the purpose of expanding foreign markets for the products of the United States (as a means of assisting in overcoming domestic unemployment and the present economic depression, in increasing the purchasing power of the American public in the present emergency, and in establishing and maintaining a better relationship among various branches of American agriculture, industry, mining, and commerce) by regulating the admission of foreign goods into the United States in accordance with the characteristics and needs of various branches of American production so that foreign markets will be made available to those branches of American production which require and are capable of developing such outlets by affording corresponding market opportunities for foreign products in the United States, the President, whenever he finds that any existing duties or other import restrictions are unduly burdening and restricting the foreign trade of the United States or that the purpose above declared will be promoted by the use of the powers herein conferred, is authorized from time to time

"(1) To enter into foreign trade agreements with foreign governments or instrumentalities thereof; and

"(2) To proclaim such modifications of existing duties and other import restrictions, or such additional import restrictions, as are required or appropriate to carry out any foreign trade agreement that the President has entered into hereunder. No proclamation shall be made increasing or decreasing by more than 50 per centum any existing rate of duty or transferring any article between the dutiable and free lists. The proclaimed duties and other import restrictions shall apply to articles the growth, produce, or manufacture of all foreign countries, whether imported directly or indirectly: Provided, That the President may suspend the application to articles the growth, produce, or manufacture of any country because of its discriminatory treatment of American commerce or for other reasons; and the proclaimed duties and other import restrictions shall be in effect from and after such time as is specified in the proclamation. The President may at any time terminate any such proclamation in whole or in part.

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"(b) As used in this section, the term ' duties and other import restrictions' includes (1) rate, form, and classification of import duties, and (2) import limitations, prohibitions, charges, and exactions other than duties."

SEC. 2. (a) Subparagraph (d) of paragraph 369, the last sentence of paragraph 1402, the provisos to paragraphs 371, 401, 1650, 1687, and 1803 (1), and section 336 of the Tariff Act of 1930 are repealed. The third paragraph of section 311 of the Tariff Act of 1930 shall not apply to any agreement concluded pursuant to this act.

(b) Every foreign trade agreement concluded pursuant to this act shall be subject to termination, upon due notice to the foreign government concerned, at the end of not more than three years from the date on which the agreement comes into force, and, if not then terminated, shall be subject to termination thereafter upon not more than six months' notice.

The CHAIRMAN. The committee has assembled this morning to consider H.R. 8430, and the first witnesses to be heard will be those representing the administration, or those favorable to the legislation. After that, opportunity will be given for any who oppose the legislation, if there be such, to be heard.

The witnesses will be permitted to complete their main statement, if they prefer, without interruption, after which we trust they will be willing to be interrogated by members of the committee.

The first witness on the calendar this morning is Hon. Cordell Hull, Secretary of State.

Mr. Secretary, we will be pleased to have you come forward and present your statement.

Mr. TREADWAY. Mr. Chairman, before the Secretary begins his statement, would it be out of place for me, in behalf of the minority members of the committee, to welcome our former colleague as a witness before the committee. We have sat with him so many years and enjoyed his knowledge and ability so long and well, that the pleasure of hearing him from our own rostrum is enhanced by this

remembrance.

The CHAIRMAN. I am sure you are not denying to the majority members the right to share in that feeling.

Mr. TREADWAY. A hearty welcome, Mr. Secretary.

Mr. HULL. Mr. Chairman and gentlemen, let me say I cannot begin to express the sense of appreciation I feel for the most generous words of my old colleague. I might say I spent 18 of the best years of my life sitting on this committee.

The CHAIRMAN. We welcome you, Mr. Secretary, and you may proceed.

STATEMENT OF HON. CORDELL HULL, SECRETARY OF STATE

Secretary HULL. The proposed bill, H.R. 8430, is designed to meet unprecedented economic conditions which are causing the greatest possible concern to our 125,000,000 population. The bill would authorize the executive branch of the Government to enter into reciprocal commercial agreements with other governments for the purpose of restoring international trade. If it is once agreed that a normal amount of trade among nations is a vital and necessary factor in the restoration of full and stable prosperity, the conclusion seems clear that the proposed policy of bilateral trade agreements offers virtually the only feasible and practicable step in this direction. Since 1929 the peoples of every part of the world have experienced economic distress and suffering without a parallel in peace time. I

need not here undertake an analysis of the vastly confused and dislocated business and general economic conditions which have prevailed during the past four years on each of the five continents. Most all countries have been invoking every conceivable domestic policy, method and device in desperate efforts to extricate themselves from well-nigh unbearable depression conditions.

The field of international trade, however, upon the existence of which the economic lives of scores of nations depend, and the economic well-being of all nations in important measure depend, is hopelessly clogged and obstructed by prohibitions, embargoes, quotas, restrictions, and numerous other economic and currency impediments. The processes of exchange and distribution have broken down and adequate relief imperatively requires the restoration of confidence, employment, normal commodity prices, and normal trade, both internal and external.

In the effort of our Government to offer leadership with a program calculated resolutely and as soon as possible to bring about these vast humanitarian accomplishments, there need be no occasion for partisan difference. President McKinley had the welfare of every American citizen uppermost and exclusively in his mind when in his last utterance he said:

The period of exclusiveness is past. Commercial wars are unprofitable; reciprocity treaties are in harmony with the spirit of the times; measures of retaliation are not.

This broad utterance of a noble statesman was never more thoroughly vindicated than during the past 4 years and today.

More than 4 years' experience undoubtedly has demonstrated that broader economic plans and remedies are absolutely necessary for that full and stable measure of business prosperity required to promote and preserve the comfort and welfare of the American people. Extreme obstructions to international trade inevitably result in serious economic controversies or wars, the minimum of commerce between nations, constant overproduction through lack of facilities for distribution, together with every sort of artificial device to deal with the domestic price situation, vast idleness of labor, and emigration of capital into thousands of foreign industrial plants, to say nothing of the difficulties of effecting transfers of debt service due from one country to another. The alternative policy would appear to comprise a liberalization of the existing obstructions and restrictions by degrees and over a period of time through careful trade arrangements, to a more moderate and reasonable basis.

During recent years most of the nations of the world have suffered much from a collapse of domestic and international economic structures. The exports of the United States have gone from $488,000,000 in January 1929 to $120,589,000 in January 1933, and to $172,000,000 in January 1934. Our imports have gone from $368,000,000 in January 1929 to $96,000,000 in January 1933. The total exports of the United States fell from $5,157,000,000 in 1929 to $1,149,000,000 in 1933, while the imports fell from $4,339,000,000 in 1929 to $1,122,000,000 in 1933. The trade of the world, measured by total imports, fell from $35,606,000,000 in 1929 to $11,937,000,000 in 1933 (provisional figures).

According to reliable estimates, if world trade had gone forward with the annual ratio of gain existing before the war, the nations

during the intervenng years would have had some $275,000,000,000 more than they have actually enjoyed. And according to these estimates, if world trade had thus progressed there would be today an annual international commerce of near $50,000,000,000, instead of the pitiable figures of less than $12,000,000,000 for 1933.

International trade has steadily grown less each year since 1929. The reduction of international trade in the amount of $40,000,000,000 means the reduction of world production by $40,000,000,000, and this means a reduction in consumption of a like amount, and this means correspondingly lower standards of living.

The theory that to shut out international trade results in an increase of the sum total of domestic trade is dispelled by all the facts and figures.

In our domestic business situation the business index fell from 112.9 in 1929 to 63 in 1933, while our domestic or national income produced fell from $83,037,000,000 in 1929 to $38,349,000,000 in 1933. Instead of increasing as our foreign trade decreased our domestic trade decreased at a similar huge rate.

Perhaps no country was ever more fully equipped to expand its commerce than ours, in the light of the great variety and extent of our natural resources, and the unsurpassed extent and efficiency of our productive capacity. Our vast transportation and other facilities for distribution and trade are a matter of pride to every one.

It should be kept in mind that American labor at good wages produces the billions of commodities we export, while our imports chiefly comprise commodities we do not produce in this country at all or in sufficient quantities, with the result that American labor is helped rather than hurt by most of our imports.

Unfortunately, too few persons stop to study and understand the mechanism of international finance and commerce. The entire policy as proposed by the pending House bill, would rest upon trade relationships that would be mutually and equally profitable, both to our own and other countries. While naturally no detailed plans and methods relative to the proposed negotiations have been formulated, it can be stated with emphasis that each trade agreement undertaken would be considered with care and caution, and only after the fullest consideration of all pertinent information. Nothing would be done blindly or hastily. The economic situation in every country has been so thoroughly dislocated and disorganized that the people affected must exercise patience while their respective governments go forward with such remedial undertakings as the proposed bilateral bargaining agreements.

The primary object of this new proposal is both to reopen the old and seek new outlets for our surplus production, through the gradual moderation of the excessive and more extreme impediments to the admission of American products into foreign markets. At the same time by force of example we would be encouraging the advance of a world-wide movement for the readjustment downward of excessive trade barriers.

The favored-nation doctrine in its unconditional form, or the principle of equality of treatment, would be continued as a policy of our Government. There would be no occasion therefore, for the denouncement of existing treaties before our Government could proceed with negotiations. The United States has 48 most-favored

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