COMMITTEE ON FOREIGN AFFAIRS THOMAS E. MORGAN, Pennsylvania, Chairman CLEMENT J. ZABLOCKI, Wisconsin ARMISTEAD I. SELDEN, JR., Alabama L. H. FOUNTAIN, North Carolina CORNELIUS E. GALLAGHER, New Jersey RONALD BROOKS CAMERON, California JOHN C. CULVER, Iowa ROY H. McVICKER, Colorado FRANCES P. BOLTON, Ohio WILLIAM S. MAILLIARD, California E. Y. BERRY, South Dakota BOYD CRAWFORD, Staff administrator HELEN L. HASHAGEN, Staff Assistant MARY LOUISE O'BRIEN, Staff Assistant MARY M. LALOS, Staff Assistant DORIS B. MCCRACKEN, Staff Assistant JEAN E. SMITH, Staff Assistant ROBERT J. BOWEN, Clerical Assistant UNITED STATES OF AMERICA CONTENTS LIST OF WITNESSES Ball, Hon. George, Under Secretary of State.. Solomon, Hon. Anthony M., Assistant Secretary of State for Economic Worthington, Howard L., Deputy Assistant Administrator for Inter- STATEMENTS, MEMORANDUMS, AND TABLES SUBMITTED Memorandum submitted by the Department of State re customs law pro- Background paper on the Kennedy Round submitted by the Office of the Special Representative for Trade Negotiations (includes list of Kennedy Memorandum submitted by Governor Herter on the consideration of a possible antidumping agreement in the Kennedy round.. Table submitted by Governor Herter re data on exports and export- Chart submitted by Department of Commerce showing organization and 18 THE FOREIGN POLICY ASPECTS OF THE KENNEDY ROUND TUESDAY, AUGUST 9, 1966 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FOREIGN ECONOMIC POLICY, Washington, D.C. The subcommittee met at 10:30 a.m., in room 2172, Rayburn House Office Building, Hon. Leonard Farbstein (chairman of the subcommittee) presiding. Mr. FARBSTEIN. The subcommittee will come to order. As chairman of the Subcommittee on Foreign Economic Policy, I have called these hearings to review the consequences on our foreign policy as they relate to the Trade Expansion Act of 1962. President Kennedy, in calling upon Congress to pass this item of legislation and in designating it No. 1 on his priority list, promised a great deal from it. Our objective is not to study what President Kennedy foresaw as the domestic consequences of this act. It is rather to see whether the act has succeeded or failed in its foreign policy objectives and to examine the state of the foreign policy problems which provoked consideration of this measure 4 years ago. I quote from President Kennedy's 1962 message on trade to illustrate the areas which we propose to explore: The success of our foreign policy The President said depends in large measure upon the degree of Western economic unity. In the next few years the nations of Western Europe will be fixing basic economic and rading patterns vitally affecting the future of our economy and the hopes of our ess developed friends. Basic political and military decisions of vital interest to our security will be made. Unless we have this authority to negotiate and have this year if we are separated from the Common Market by high tariff barriers in either side of the Atlantic-then we cannot hope to play an effective part in hose basic questions. I might say that on the face of it, in view of the apparent setbacks 9 our political and military policies in Europe in recent years, we eem to have misgaged the impact that this legislation would have. would like to explore the status of these policies and the reason why ur trading positions have had so little apparent impact on them. I am concerned at the growing investment of American industry Europe, to the detriment of the sale of American products to Europe. [any Europeans, as I understand this, resent this penetration. Our lance-of-payments problems remain severe. Yet we do not seem be able to reach agreement with our European friends at the conrence table in Geneva. I wonder if there is not a close relationship tween the political differences and the economic differences we are currently having with Europe. I am anxious for some enlightenmen: on these matters. We are privileged to have as our first witness the distinguished Under Secretary of State, Mr. George Ball, and also the Honorable Anthony M. Solomon, Assistant Secretary for Economic Affairs. Mr. Ball was one of the leading figures in the enactment of this bill 4 years ago. No one is more qualified than he to comment on the foreign policy implications of this act. Mr. Ball personally sparked debate on this bill in a speech delivered in 1961 in which he said: We are coming to the close of a familiar era in our world trading relations and entering another that is not familiar at all. Some see this new phase as filled with opportunity and challenge. Some, on the other hand, are apprehensive. But few question the proposition that pervasive change will be the dominant characteristic of the years that lie ahead. Four and a half of those years have now passed. I am pleased to have the Under Secretary tell us what has transpired and why and what is likely to follow. Thank you. You may proceed. STATEMENT OF HON. GEORGE BALL, UNDER SECRETARY OF STATE Mr. BALL. Thank you very much, Mr. Chairman. I would like, if I might, to make some background comments, picking up the reference to the pervasiveness of change, in a speech that I made myself which you have just quoted. I think what we are confronted with in the world trading environment is a whole new structure of trading relationships and in fact a whole new character of world trade. This is a function of the new interdependence which has been a very conspicuous feature of the postwar period-economic interdependence. particularly among the great industrial nations of the world, most of whom, so far as the free world is concerned, lie on the littoral of the North Atlantic. In this complex of nations, the Western European nations and North America, there is perhaps as much as 80 to 85 percent of the industrial capacity of the free world. So that the problems of trade necessarily must focus in the first instance on the trading relations among these nations. Now, when I say there has been a qualitative change in trade among nations, I think we have to understand the degree to which international trade has bolted upwards even faster than the productive capacities of the nations themselves. As I recall the figures within the past 12 years, free world trade has increased something like 2% times, while the growth in gross national products of the nations concerned had been nothing like this. If the level of prosperity which we have managed to achieve through this industrialized sector of the world in the past few years is to be sustained, trade has to become progressively more free so that the nations can take the fullest advantage of the great economic benefits that derive from the most effective use of resources. When I say "most effective use of resources," I mean the use of resources which is dictated by the operation of a relatively free world marketplace. This is why, in 1961, when we had a very long and searching look at the position of the United States in world trade, we came to the conclusion that a major new step toward trade liberaliza |