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not altogether accurate. It is true that Mr. Farrell is the chairman of the foreign commerce department committee of the Chamber of Commerce of the United States. He appeared before your committee, however, not in this capacity, but in the capacity which I have described above.

Appearing to present the position of the Chamber of Commerce of the United States, as declared by its board of directors, Mr. Farrell prepared in advance a statement. As Mr. Farrell's method of presentation to the committee did not result in this statement appearing in the hearings as an entirety, with the different parts in consecutive order, we shall be most grateful if it can be arranged to have the statement placed in the record in the form in which it is attached to this letter.

You will permit me to add, I am sure, that Mr. Farrell's statements, appearing on page 42 of part 2 of the hearings, are entirely accurate respecting the capacity in which he appeared before the committee. He there said that he had been delegated by the chamber to make a presentation for it on the subject of the principles it supports. I need scarcely add further that the chamber is greatly indebted to Mr. Farrell for the service he has performed for it, and also to the committee for the very courteous hearing extended to Mr. Farrell.

Very truly yours,

JOHN M. REDPATH,
Executive Manager.

STATEMENT ON TARIFF LEGISLATION MADE TO THE WAYS AND MEANS COMMITTEE OF THE HOUSE OF REPRESENTATIVES MARCH 9, 1934, BY JAMES A. FARRELL, REPRESENTING THE CHAMBER OF COMMERCE OF THE UNITED STATES

Mr. Chairman and members of the committee: I appreciate the opportunity to present to you some of the views of the Chamber of Commerce of the United States respecting principles which it considers of importance in the drafting of tariff legislation.

The bill before the committee, H.R. 8430, is for the purpose of promoting foreign trade. Its provisions, however, affect materially some of the basic principles of tariff making and it is to those principles primarily that I shall direct my remarks.

RECIPROCAL TARIFF NEGOTIATIONS

In May of last year, the chambers of commerce and trade associations constituting the membership of our organization voted in favor of the initiation of negotiations for reciprocal tariff agreements, as follows:

"The safeguarding and advancement of our foreign trade should be the purposes of a vigorous foreign commercial policy of our Government. Adaptation of our American economic structure to present world conditions calls for most careful scrutiny of existing policies. Keeping in mind always the necessity of assuring stability to our internal industrial and agricultural enterprises, through reasonable protection for American industry, our Government should have power to initiate reciprocal tariff arrangements with foreign countries where such bargaining would be clearly in our national interest. Such agreements would complement our existing flexible tariff in establishing for our country a tariff policy fair alike to our home industry and our competitors abroad."

OUR INTERNATIONAL TRADE RELATIONS

The national chamber's interest in reciprocal trade negotiations has been due in large part to the belief that the United States has been slower than other leading industrial nations to recognize the important place that foreign trade occupies as a stimulant to domestic recovery and as a permanent reinforcement of our national economic structure. The depression, since 1929, being one of drastic decline in buying power throughout the world, resulting in serious curtailment of international trade, has affected the United States more acutely than most countries and created a serious problem of unemployment.

Seven million persons, it is estimated, are dependent for their livelihood on our foreign trade. It is impossible, therefore, to deal effectively with the problem of unemployment without taking into account the vital importance of our overseas commerce as a means indispensable to the success of the National Recovery Act.

The policy of bargaining our way to the markets of the world by means of reciprocal trade agreements is one to which Congress should give careful consideration. Other countries have delegated these powers to the Executive and

have already, as in the case of Great Britain and her dominions, made considerable progress ahead of the United States in making foreign trade promotion instrumental to national economic recovery.

Our reciprocal trade agreements should be based on the unconditional mostfavored-nation principle, and for this reason should avoid quotas and other artificial plans inconsistent with this principle. While our large excess of exports over imports amounting last year to $226,000,000-supplies a field for investigation regarding the extent to which the United States, without injury to our essential domestic industries, may absorb an increasing volume of imports, the principle of reasonable and adequate protection of our home market is closely related to the problem of unemployment and the maintenance of our standard of living.

Bilateral trade agreements, as a long-range view of foreign-trade promotion, should be entered upon with the conscious aim of harmonizing each agreement with our trade relations with other countries. It has been urged, for example, that if we sell Russia dairy cattle, cotton, and hogs on a long-term credit basis, we should arrange at the same time for imports of enough Russian manganese, furs, gold, platinum, or other products to offset the sale. This has been recommended by some as barter on a refined basis. While it may be possible to buy from Russia an increasing proportion of some of these goods we cannot, without serious injury to United States interests, import, for example, Russian manganese in any quantity. Of the 500,000 tons of manganese required by our steel industries, 50,000 tons are obtained from domestic sources. The balance is imported from mines in Brazil, Cuba, and the West Coast of Africa, owned and operated by companies in the United States. Any diversion of this trade to Russia would mean the closing down of these mines, dislocation of labor, and loss to American investors. I refer to this as an example of loose thinking by some who profess to see in barter of this kind a return to international prosperity.

The fallacy that international trade means a dollar-for-dollar trade between two countries is the false premise upon which this idea of barter rests. A glance at the statistics relating to our foreign trade will indicate how impossible it is for the United States to agree to the proposition that she must buy from each country in value the equivalent of what she sells to that country. Our visible balance of trade is unfavorable with Latin America as a whole and with China, but favorable with Europe as a whole. If we follow the path of sane internationalism in our trade policies, we shall avoid in negotiations with any country deals that discriminate against other countries with whom it is necessary to maintain satisfactory trade relations.

METHODS OF BARGAINING

Too frequently in discussing tariff bargaining emphasis is laid upon the reduction of rates of duty as the main instrumentality at the disposal of our negotiators. Too often, however, we shall find that the foreign negotiator is bargaining from a level made artificially high in advance of bargaining negotiations.

I should like to present for the record a study on "Reciprocal Tariff Negotiations" made by the foreign commerce department of our organization outlining 14 varieties of considerations involved in tariff bargaining, with special information as to our trade and tariff relationships with Argentina, Brazil, Colombia, Portugal, and Sweden-countries with which the United States has already undertaken to negotiate reciprocal agreements. These serve to bring out the fact that reciprocal tariff negotiation should envisage a much wider field than just reduction of rates.

In tariff bargaining between nations there enter, in addition to agreements to reduce rates, the following:

The maintenance or "binding" of rates over a definite period;

The maintenance of a free-list status of products over a given period (and it is here that our own Government has a wide field of operation, due to the fact that 63 percent of our imports in 1933 came in duty-free);

A threat to impose higher rates of duty in case of countries discriminating against American products;

Maintenance or increase of a percentage of imports (an offer which will doubtless be made to our Government by countries resorting to quotas);

Special rates of duty on seasonal imports during the off season in the importing countries (especially applicable to Latin America);

Modification of foreign-exchange controls (an offer which may possibly be made us by countries now maintaining such restrictions);

Imposition or relaxation of duties to cover depreciated currency imports; Concessions on international debts;

Modification of arbitrary customs valuations (such valuations are especially burdensome in Canada);

Modification of enforced use of domestic products (applying particularly to agricultural product in Europe);

Outright financial and other assistance;

Modification of existing colonial preferences;

A direction toward favored countries of government-controlled orders by countries such as Russia.

A discussion of these 14 considerations is given in greater detail in the accompanying pamphlet, which I hope will prove of interest to the committee.

Previously in these hearings the committee has expressed interest in commodities which might be of special interest to foreign countries and to ourselves in reciprocal negotiations. The pamphlet herewith lists our leading exports to and leading imports from Argentina, Brazil, Colombia, Portugal, a id Sweden. The pamphlet shows the share which each product constitutes in our total trade with each particular country, and also shows whether or not the product is dutiable in the country of destination.

The significant fact emerges from this study that of the products listed in the statistical tables, most of our exports have a dutiable status in the foreign tariffs, and most of our imports from these five countries have a duty-free status in the United States tariff.

PROTECTION FOR AMERICAN AGRICULTURE AND INDUSTRY

I have read with special interest the following paragraph contained in the message transmitted to the Congress by the President on March 2:

"You and I know, too, that it is important that the country possess within its borders a necessary diversity and balance to maintain a rounded national life, that it must sustain activities vital to national defense and that such interests cannot be sacrificed for passing advantage. Equally clear is the fact that a full and permanent domestic recovery depends in part upon a revived and strengthened international trade and that American exports cannot be permanently increased without a corresponding increase in imports."

I think it significant and also intentional in this and in other portions of the President's message that special emphasis was placed upon the importance of 'assurance that no sound and important American interest will be injuriously disturbed.'

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Our organization has long adhered to the principle that there should be “reasonable protection for American industries subject to destructive competition from abroad and which are of benefit to any considerable section of the country.' This, we think, should be the first consideration. Reciprocal tariff negotiations should be secondary to it.

We would call attention, therefore, to the fact that the proposed bill, while placing a 50-percent limitation upon the authority to modify duties, and also prohibiting the transfer of any article between the dutiable and free lists (both of which are part of the present flexible provisions of the tariff), does not contain the much more essential basic tariff formula of basing rates of duty, applying to any commodity, on the principle of equalizing foreign and domestic production costs plus transportation. When Congress delegates to the Executive authority to modify rates it is of first importance that Congress give indication to the Executive of its idea as to a "consistent tariff policy." In laying down a controlling formula, such as the equalization of production cost formula, to which the Executive should conform, whether changes be under a flexible tariff or under reciprocal negotiations, the Congress is contributing the composite views of its Members as to what should constitute the basic tariff policy of the United States. And, further, by setting down such a formula it is supplementing the mathematical limitation of 50 percent with a much more fundamental and desirable limitation, which, in my opinion, would, as it has done in the case of the flexible tariff, help to assure the constitutionality of such delegation of authority.

I would therefore submit for your consideration that there be some provision whereby changes made in tariff rates, in connection with reciprocal negotiations, should not be below such reasonable protective levels as may be determined under a formula established by Congress.

FLEXIBLE TARIFF

Might I also draw your attention to a change proposed by this bill which in our opinion is not necessary; that is the repeal of the flexible provisions, section 336 of the Tariff Act of 1930. In bringing about a rounded "national life", which the President urges in his message, it is important that we have some machinery for adjusting tariff rates to the fundamental tariff policy established by the Congress. I see nothing inconsistent with retaining the flexible provisions of the present Tariff Act and accomplishing the objectives set forth in the President's message. There may be changes necessary to make the functioning of the flexible provisions clearer and simpler in getting results. There is great merit in preserving for American agriculture and industry the opportunity to present its case in connection with tariff modifications. Likewise our tariff law-in contrast to the laws of most foreign countries-is particularly generous in permitting the foreign producer also to have his day in court, in connection with changes affecting his exports.

I understand that already it has been suggested in these hearings that the bill will be amended so as to retain the flexible provisions, but to provide that the flexible provisions should not be operative as respects products included in reciprocal trade agreements.

Assuming, as suggested above, that reciprocal negotiations would not reduce rates below reasonable protective levels, I can see no objection to this compromise provision.

Our organization has been in favor of the establishment of a tariff adjustment board to administer adjustable rates under the flexible provisions. In taking this position we have felt that there was a wide field of activity for the existing Tariff Commission in the determination of facts pertinent to all tariff matters. The judicial function of receiving testimony and formulating recommendations in accordance with the tariff law, under the flexible provisions, we have felt, might well be entrusted to a tariff adjustment board.

Insofar as changes are to be made in connection with reciprocal negotiations it is also our feeling that a board of this sort could be of constant value in receiving the testimony of American businesses affected by proposed modifications of rates in connection with the demands and bargains being discussed with foreign governments.

We would recommend, therefore, that section 336 should not be repealed and that careful consideration be given to the establishment of a Tariff Adjustment Board with a view to expediting action under the flexible tariff.

OPPORTUNITY FOR HEARING AND INVESTIGATION

A feature of the pending bill which will, I am sure, meet with opposition on the part of American industry is the failure of the bill to provide any opportunity for hearing and investigation. It is beyond the power of any bureau or commission to know from day to day, in a world of constantly changing economie conditions, what will be the effect upon our economic life, upon our national defense, upon employment, upon recovery activities, of changes which might be proposed by foreign negotiating nations. It has long been recognized as "fair play" that both the American producer and the foreign producer have a chance to present facts bearing upon tariff changes. This has been part of our flexible tariff. It is also part of our customs law affecting the imposition of duties and classification of commodities. It is part of our procedure under the import provisions of the National Recovery Act.

I would recommend therefore that adequate provision be made in this legislation for hearings and investigations in connection with contemplated changes under reciprocal agreements.

NATIONAL INDUSTRIAL RECOVERY ACT

Under the National Industrial Recovery Act_manufacturers have increased rates of pay and have shortened hours of work. These cooperative acts upon the part of American industry have increased costs and have in proportion decreased the amount of protection represented by rates of duty in the existing schedules. I appreciate the fact that, on the other hand, the revaluation of the dollar has for the time being increased the dollar laid-down cost of foreign merchandise. We are thus confronted with these and many other interrelated factors bearing upon the ability of American producers to hold their domestic markets against foreign competition.

In his message to Congress the President states that due heed must be paid to the requirements of the various branches of the recovery program, such as the National Industrial Recovery Act.

This would appear to be a situation where careful investigation by an expert Government body and the presentation of testimony by interested parties would be highly important.

BOARD RESOLUTION

At this point may I incorporate in my statement the following resolution adopted on March 3, by the board of directors of the Chamber of Commerce of the United States, after consideration had been given to changes called for in the bill which is before you.

"The board of directors of the Chamber of Commerce of the United States again emphasizes the importance of retaining in American tariff legislation the principle of flexibility, that is, adjustment of tariff rates by administrative authorities within limits prescribed by Congress for the purpose of maintaining a consistent tariff policy. The chamber, by referendum, has favored the creation of a tariff-adjustment board to administer such adjustable rates. In connection with such modifications and with respect generally to tariff making, the chamber favors close adherence to a policy of providing reasonable protection for American industries and agriculture subject to destructive competition from abroad and of benefit to any considerable section of the country.

"In the interest of promoting our overseas commerce reciprocal tariffs are commendable but they should be regarded as tariff instrumentalities that are secondary in importance, supplementing rather than replacing the more fundamental principles of protection and flexibility. The chamber from its early years has favored the maintenance of a permanent Tariff Commission. Such a commission provides opportunity for affected American industries and agriculture to make their views known on proposed tariff changes in advance of the effective date of such changes-a principle which we believe should at all times be embodied in our tariff legislation.'

RECOMMENDATIONS

And in closing may I reiterate the three recommendations we have to make. (1) That, in granting authority to make tariff changes in the interest of reciprocal tariff negotiations, the Congress write into the law the definite limitation that no rate be lowered to a point where American industry and agriculture shall be subjected to destructive foreign competition.

(2) That the flexible provisions of the tariff act be maintained, embodying a basic controlling formula, laid down by the Congress, according to which shall be determined the adequate protective level at which individual tariff rates shall be set; and

(3) That, through a tariff adjustment board or other instrumentality, and in advance of such board making its recommendations to the President, there be full opportunity for American businesses, likely to be affected by contemplated reciprocal tariff or other tariff changes, to present testimony as to the incidence upon their respective enterprises of such changes.

Finally, may I say that the above-expressed attitude on this bill is not one of antagonism; rather is it one of a desire to put forward some suggestions which in our opinion would make the proposal more in keeping with reasonable coordination of our national and our international interests.

Mr. TREADWAY. Mr. Crowther, there has been considerable reference made to your being an isolationist, and I do not know whether that fails to conform with the views of some of our committee, or not, but, at any rate, it has created quite a little interest in the committee, the fact that you made that admission, but did you not say that you perhaps are more or less of an isolationist, but you did not like the word?

Mr. SAMUEL CROWTHER. I think it got down to a question of definition, and we all had different definitions of the word, and I had my own. It means something different to me. Isolationist means sort of a belligerent, cocky, don't-come-near-me attitude. That is not the attitude which I take.

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