appropriate, provided that such changes do not materially alter the total of duties collected pursuant to any group of rates affected by such simplifying changes when calculated on imports in a specified base period.

The Department of the Treasury should formulate proposals designed to simplify the problem of classifying articles not enumerated in our tariff schedules. To that end, consideration should be given to elimi nating the multiple and conflicting standards which now apply in the classification of such articles, such as "similitude" and "component of chief value," and developing a single standard of classifications for the widest practicable application.

The Senate should promptly consider H. R. 6584 now before it,' which would amend and improve the customs valuation provisions of our law by eliminating so-called "foreign value" as a basis of valuation and by other simplifying changes. In addition, the Department of the Treasury should be directed to make a study and report to the Congress on the feasibility and effect of making greater use of the actual invoice price of imported goods for valuation purposes in transactions between a buyer and a seller who are independent of each other. In that connection it should also consider and report upon the feasibility of making more efficient use of the "antidumping" law.

The Department of the Treasury should be directed to make a continuing study of difficulties and delays in customs administration and to report the results of its studies each year to the Congress, together with any proposals for legislative action.

a. The first of the regular reports herein recommended should indicate those detailed administrative provisions of the tariff laws which should be modified so that adequate discretion can be granted to the Secretary of the Treasury to insure the greatest possible speed and efficiency of administration in the operation of customs.

b. The first report should also set forth progress made through recent administrative action in simplifying customs procedures, including measures taken in accordance with the Customs Simplification Act of 1953.2

In connection with the application of antidumping duties, the task of determining, in accordance with the provisions of existing law, "that an industry in the United States is being or is likely to be injured' . by foreign dumping, should be transferred from the Department of the Treasury to the Tariff Commission. The Department of the Treasury should be directed to study and report to the Congress on any statutory amendments which may be needed to permit the continuance of shipments pending investigation of suspected dumping; and at the same time it

1 This measure did not reach the Senate floor.

Act of Aug. 8, 1953; 67 Stat. 507-521.

should report on any measures needed to effect speedier and more efficient operation of antidumping provisions in proper cases.

The President should study appropriate methods to assure that American industry is not injured by embargoes upon or other impediments to exports of raw materials to the United States for use in processing here. In this connection, he should direct the Department of the Treasury to review the effectiveness of existing countervailing-duty provisions of the law, should consider any alternative measures which may be available for achieving this purpose, and if necessary should make appropriate recommendations to the Congress.

Our policy of nondiscrimination in trade matters, as reflected in our unconditional most-favored-nation policy, should not be changed.

The United States should continue its traditional policy of nondiscrimination in its trade relations with other free nations. Only the unconditional most-favored-nation doctrine is consistent with this policy. If the United States were to give preferential trade treatment to certain countries, such action would itself constitute discrimination and be inconsistent with the position of the United States in the free world. Our present unconditional policy has been in effect for 30 years. Its reversal now would probably defeat our efforts to induce other countries to eliminate preferential arrangements that discriminate against us.

The organizational provisions of the General Agreement on Tariffs and Trade should be renegotiated with a view to confining the functions of the contracting parties to sponsoring multilateral trade negotiations, recommending broad trade policies for individual consideration by the legislative or other appropriate authorities in the various countries, and providing a forum for consultation regarding trade disputes. The organizational provisions renegotiated in accordance with this recommendation should be submitted to the Congress for approval either as a treaty or by joint resolution.

2

The President's power to negotiate trade agreements under the Trade Agreements Act and to place them in force should be extended for not less than 3 years, with appropriate safeguards. Such a period should give time for considering the effects of the recommendations for action here and of the actions taken abroad to restore multilateral trade and payments as in the past, and for Congress to give adequate consideration to the renegotiated organizational provisions of the General Agreement on Tariffs and Trade, as recommended above. Consideration should then be given to extending the Trade Agreements Act for a longer period than 3 years, with such safeguards as experience then indicates to be necessary. In the past, the repeated short-term renewals of the President's

1 See infra, docs. 7 and 8.

2 See the Trade Agreements Extension Act of 1955; infra, doc. 9.]

powers to negotiate trade agreements have created an aura of instability in our trade policy which it would be desirable to avoid for the future. However, any permanent or long-term delegation of tariffchanging power by the Congress, while including limitations on maximum permissible changes, must also be accompanied by adequate standards, more specific than those which have accompanied the earlier delegations of such power for limited periods of time.

The President should be delegated broad powers under the Trade Agreements Act to enter into multilateral negotiations looking toward a reduction of tariff rates on a gradual basis. The President's power to increase rates should not thereby be curtailed. The President should be authorized for the 3 years following the renewal of the act to reduce tariff rates to the following extent:

a. Pursuant to multilateral trade agreement negotiation, the President should be authorized to reduce existing tariff rates by not more than 5 percent of present rates in each of the first 3 years of the new act.

b. On the basis of information provided by the Tariff Commission, the President should be authorized, with or without receiving reciprocal concessions, to reduce tariffs by not more than one-half of rates in effect January 1, 1945, on products which are not being imported or which are being imported in negligible volume. Any such reductions should be made in steps spread over a period of 3 years.

c. The President should be authorized to reduce to 50 percent ad valorem, or its equivalent, any rate in excess of that ceiling, except that any such reduction should take place by stages over a period of 3 years. d. Reductions in rates pursuant to the foregoing should not be cumulative as to any commodity.

e. In the exercise of these powers, the existing prenegotiation procedures, including public notice and hearings before the Tariff Commission and before an interdepartmental committee, should be followed and peril point determinations should be made. Moreover, the provisions of the escape clause should apply to tariff reductions made under this authority.

In extending the tariff-negotiating authority of the President, the Congress should direct that in future negotiations subdivisions of classification categories which would give rise to new confusion or controversy over classification be avoided to the maximum extent possible.

The President should make an annual report to the Congress on the operation of the trade agreements program including information on new negotiations undertaken, changes made in tariff rates, and reciprocal concessions obtained.

The escape clause and the peril point provisions should be retained. However, the statute should be amended expressly to spell out the fact that the President is authorized to disregard findings under these pro

visions whenever he finds that the national interest of the United States requires it.

There

To date, the escape clause has been applied by the President with respect to only 3 products, despite the fact that there have been over 50 applications for the use of that clause in the past 5 years. is no similar body of experience as yet with respect to the application of the peril point provisions. The application of these provisions on the basis of the national interest should provide adequate reassurance as to the stability of United States trade policy.

The same standards of sanitation and health should be applied to imported as to domestic goods. Plant and animal quarantine provisions should be maintained. The desirability of consulting with other countries, with a view to creating greater understanding abroad of the standards being enforced by the United States, should be studied.

RELATED PROBLEMS OF TRADE ADJUSTMENT

While the major solutions to trade and payments imbalance must be found in the fields of foreign investment, currency convertibility, and trade policy discussed elsewhere in this report, important contributions can be made in other fields. Contributions can be made in East-West trade, in shipping, and by tourism, each of which will now be discussed.

EAST-WEST TRADE

On the problem of what the United States should do toward the growing desire of some Western European nations who are our allies to trade with the countries involved in the Communist bloc, two points seem entirely clear.

First, the present ban on exports by the United States to Communist China and North Korea and our efforts to secure similar action by others must continue until the present threats to our security and that of other free nations in those areas have been removed. 1

1

Secondly, our present efforts to prevent exports to the European-Soviet bloc that might contribute to its military strength must continue until genuine peace is assured.2

But over and above these two categories of shipments there lies a possible area of trade between the East and the West in Europe in commodities which do not strengthen the forces of military aggression, a trade from which net advantage might accrue to the West. It is this area of commerce that presents the dilemma to the United States.

For many generations there has existed a broad historic pattern. of trade in Central Europe that served to support the economies of countries that are now our allies. These nations traditionally drew from the Soviet Union, Poland, East Germany, and the lower Danube

1 See supra, pp. 2614-2615 and 2622-2626.

2 See supra, pp. 1989–1993 and infra, pp. 3101-3105.

valley, foodstuffs, feeds, fuels, and raw materials. They sold in return the products of their factories.

Since the unmasking of the Soviet designs against western civilization, in conjunction with other free nations we have sought to restrict that trade. This weakened the economies of friendly countries and increased their need for our aid.

When we terminate that aid there is grave question as to whether we should attempt longer to prevent such friendly nations from availing themselves of their normal and historic trade pattern.

It may well be, moreover, that more trade in goods for peaceful purposes would in itself serve to penetrate the Iron Curtain_and advance the day when normal relationships with the peoples of Eastern Europe may be resumed.

The Commission therefore recommends that, so far as it can be done without jeopardizing military security, and subject to the embargo on Communist China and North Korea, the United States acquiesce in more trade in peaceful goods between Western Europe and the Soviet bloc.

The Merchant Marine Shipping Act of 1936 declared it to be necessary "for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (a) sufficient to carry its domestic waterborne commerce and a substantial portion of the waterborne export and import foreign commerce of the United States and to provide shipping services on all routes essential for maintaining the flow of such domestic and foreign waterborne commerce at all times, (b) capable of serving as a naval and military auxiliary in time of war or national emergency, . . . The act provided for construction-differential subsidies to compensate American owners for the excess of the cost of building ships in the United States over the cost of building them abroad, for operating subsidies for ships employed in regular liner routes between the United States and other countries, upon approval of the Maritime Administration, and for exemption from income tax of earnings allocated to special reserves for ship building by companies receiving the operating subsidies.

A large part of the foreign commerce of the United States always has been carried in foreign vessels. During World War II, the services of the merchant ships of our allies were available to us through the operation of an inter-Allied shipping pool. Participation in the carriage of United States foreign commerce is an important source of dollar earnings to the foreign maritime nations.

The Commission recommends that the determination of the active merchant fleet requirements of the United States for the purposes of the Merchant Marine Shipping Act of 1936 take account of the availability of foreign vessels and of the importance to the balance of payments of foreign maritime nations of their dollar earnings from shipping services.

1 Act of June 29, 1936; 49 Stat. 1985-2017.