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The application of the higher or lower schedules of duties to the imports of any country is determined by the terms of the commercial treaty with that country. Europeans claim that such bargaining tariffs lead to better international relations, since in negotiating commercial treaties, concessions may be made on both sides, thus promoting a spirit of good will.
In actual operation, however, the concessions granted in bargaining are usually illusory. Generally, the minimum rates are placed at the level considered necessary to protect the domestic industries. Above this schedule are set one or more additional schedules at artifically high levels. Concessions from the higher rates for bargaining purposes, in reality, give little advantage to the country obtaining them. It is well known that European countries make a practice of raising the general level of their tariff rates before they begin the negotiation of new commercial treaties.
This difference in the basic plan of the tariff laws of the United States and of Europe has caused some misunderstanding. However, since these fundamental differences do exist between the tariff policies of the United States and those of European countries, it is essential that they be well understood and taken into consideration in discussing tariff and commercial policies. It appears now that if this fundamental difference between the European and the American tariff laws had been fully appreciated by all concerned, some of the difficulties that have arisen between the United States and other countries might have been avoided. Accurate information available to the general public on such subjects would be a great aid to the maintenance of friendly relationships. It is probably too much to hope, but certainly it would help the commercial relations of the world, if all nations were given equal tariff treatment by all other nations. It would greatly simplify the making of commercial treaties.
WORLD TARIFFS HIGHER
Since the World War, tariffs in most countries of the world have been increased. The general tariff trend has been upward, vet international trade has continued to expand. Decreases in import duties have been comparatively few.
Tariff duties, however, have not been the most decisive factor in determining the volume of trade carried on with a given country. The extent to which ta riffs have restricted imports has depended largely on the buying power in the importing country, on the producers' costs of production, and on the importers' profit margins. In most countries, the duties on manufactured articles have been increased much more than on agricultural products. Duties on raw materials throughout the world are comparatively low and the cases in which they have been raised are not numerous, though in a few countries, agricultural rates especially have been raised. The general upward trend of tariff rates has been due in the majority of cases wholly to the imposition of higher rates on finished manufactured articles.
Immediately after the war, nearly all European tariffs were increased. Even before the United States passed the emergency tariff act of 1921, France, Germany, Italy, and Great Britain had increased their customs duties. Since 1922, most European countries, for their own reasons, have increased their tariffs several times, But the evidence does not show that, after the United States tariff act of 1922 was passed, European countries passed retaliatory tariffs.
Neither does the available evidence show that foreign countries, either in Europe or elsewhere, have adopted higher tariff rates in retaliation for the increased rates in the tariff bill under discussion. There have been numerous and conspicuous increases of import duties by foreign countries on export products of the United States since May, 1929, when the tariff bill, 11. R. 2667, was made public. Such increases, however, have not been more numerous than over like periods in previous years when no tariff increases were contemplated in the United States.
A careful examination of the changes made in foreign import duties during the past nine months shows that in the great majority of cases the increased duties were not directed exclusively or even primarily against the United States, because the increased rates apply equally, or even more heavily, against the same articles imported from other countries. In many cases, the articles subject to the increased duties are imported from some other country in larger quantities than from the United States.
As a measure of farm relief Germany, for the third time in nine months, has recently raised her tariff rates on grain and fodders, and France has just increased the duties on automobiles and automobile parts. There has been much talk about this recent action of France as being retaliatory for the increased duty on laces voted by the United States Senate. However, the action by the French tariff committee of the Chamber of Deputies was taken befure the word of the Senate increase in the lace tariff could have possibly been received in Paris, and action by France appears to have been taken quite independently and without thought of retaliation. In fact, it has been reported that the French rates originally proposed were reduced 30 to 50 per cent after the lace-duty increase became known.
The United States committee of conference on the tariff bill, H. R. 2667, however, struck out the Senate provision increasing the duty on lace. It remains to be seen what will happen to the recent French increase in the duty on automobiles.
TREATY STATUS SHOWS FRIENDLY RELATIONS
The treaty status of this country indicates that friendly commercial relations now exist between this country and all other countries of the world.
At the present time the United States has commercial treaties or agreements in effect with the following 44 countries, assuring to products of the United States the most favorable tariff treatment accorded to similar products of any other country: Argentina, Austria, Belgium, Bolivia, Borneo, Brazil, China, Colombia, Costa Ricil, Cuba, Czechoslovakia, Denmark, Dominican Republic, Egypt, Estonia, Ethiopia, Finland, Germany, Great Britain, Greece, Guatemala, Haiti, Honduras, Hungary, Italy, Japan, Latvia, Liberia, Lithuania, Moroco, Muscat, Nicaragua, Norway, Paraguay, Persia, Poland, Portugal, Rumania, Serb-Croat-Slovene State (Yugoslavia), Siam, Spain, Switzerland, Turkey, Zanzibar.
Some of these treaties make specified exceptions to most-favored-nation treatment. Our treaty with England assures the most-favored-nation treatment only in European territories of Great Britain." The United States excepts its commerce with Cuba, the Panama Canal Zone, and any territory or possession of the United States; and some of the other countries reserve the right to make special concessions to certain neighboring States, or to States with which they have special relations. For example, Spain excepts its trade with Portugal, and Portugal excepts its trade with Spain or Brazil.
In the following 19 countries, which have no tariff treaty or agreement with the United States, American products receive the same tariff treatment as similar imports from all other foreign countries: Afghanistan, Albania, Arabian States (except Muscat), Australia, Bulgaria, Chile, India, Luxemburg, Mexico, the Netherlands, Newfoundland, New Zealand, Panama, Peru, Russia (except treaty concessions to Latvia), Sweden, Union of South Africa, Uruguay, Venezuela. Of these countries, Australia, India, Newfoundland, New Zealand, and the Union of South Africa give tariff preference to British products.
Only three countries-Canada, France, and Salvador-give more favorable tariff treatment to other foreign countries than to the United States,
This review shows that friendly relations exist between the United States and other countries.
PENDING BILL UNLIKELY TO DISTURB FRIENDLY STATUS
There appears to be little ground for anxiety about the peace between the United States and other countries being upset by the new United States tariff rates. The mutual advantages of trade are too great to be entirely thrown away. No foreign country wants to lose the American market, for no other market in the world is able to purchase and pay for as large a volume and variety of imported products. And no foreign country wants a tariff war with the United States, nor does this country want a tariff war with any other country.
The United States admits free of duty a greater volume of products than any other nation in the world, with the possible exception of Great Britain. Two thirds of all United States imports enter free of duty. The average and valorem equivalent on all imports free and dutiable under the tariff act of 1922 is 13.8 per cent and on dutiable items alone it is 38.7 per cent. Such average tariff rates have not been so excessive as to disturb the peace of the
world, and conditions in general will not be greatly altered under the new law.
If the tariff act of 1930 does raise the average rate on comparable dutiable articles 6 to 8 per cent higher than under the act of 1922—from 35 to 41 or 43 per cent depending upon what is done with lumber, shingles, cement, sugar, and silver-it is quite improbable that such an increase will disturb the friendly relations now existing between the United States and foreign countries.
On the other hand, building up the purchasing power of the American market may result in a further increase in imports of foreign commodities, such as followed the passage of the tariff act of 1922.
As American cit.zens-producers and consumers—we are all naturally hoping for the most desirable results to follow the new tariff law.
In conclusion it may be pointed out that the world in general is enjoying quite peaceful international relations at the present time, though there is unrest in India and in a few other places. Modern methods of communication and peace-promoting activities like the Kellogg peace pact and the London treaty. for the limitation of naval armament may consolidate the gains toward world peace.
Although international commercial rivalry is keen and all countries are using the tariff, commercial treaties, aggressive foreign sales policies, cartels, international banking, and every other legitimate means to 'further their own interests, often at the expense of competing nations, yet the peace of the world is sound and is not in danger of being upset at the present time, certainly not by the tariff and commercial policies of the United States.
Since most governments now represent the will of the pecple of their respective states, accurate information about the tariff and commercial policies of all nations, and the actual effects of those policies clearly fixed in the minds of all people, would tend to insure a happy sclution of the problems arising from such policies. In a word, education is the best method of promoting world peace.
Senator SHORTRIDGE. You are more or less familiar with the present tariff law?
Mr. BROSSARD. Yes, sir.
Senator SHORTRIDGE. If confirmed and continued, would you be guided by the law!
Mr. BROSSARD. Yes. I hope I do not have to go by anything else.
Senator SHORTRIDGE. Exactly. And you will endeavor to get at the truth, the facts, and make a proper deduction from the facts in any findings that you might join in?
Mr. BROSSARD. Yes. That is my purpose.
Senator SHORTRIDGE. And in any conclusion, followed by a recommendation to the President?
Mr. BROSSARD. Yes.
Senator HARRISON. May I ask you about this report that was issued through your publicity department up there, about which we had considerable discussion this morning!
Mr. BROSSARD. Yes.
Senator Harrison. Do you think it truly represented your viewpoint?
Mr. BROSSARD. Yes; my viewpoint.
Senator HARRISON. Do you think agriculture was greatly benefited by it?
Mr. BROSSARD. Yes.
Senator HARRISON. Why was the change effected from the first draft that was shown to Commissioner Dennis, to the last draft!
Mr. BROSSARD. Do you mind if I make that perfectly clear to you?
Mr. BROSSARD. I have a statement here which I would like to show you. There is a copy of each of those speeches I referred to, and I will give you the press release on the other one.
Senator King. Senator Harrison, would you object to my asking one question before you leave the statute?
Senator HARRISON. I have no objection.
Senator King. Doctor Brossard, you mentioned a moment agoand I did not quite understand you—as a basis of determining tariff rates, the cost of production, and the equalization of other factors. You used the word “equalization." I was in doubt as to what you meant, whether, in determining the costs, you would feel justified in taking into account all conceivable economic conditions, or industrial conditions that might have a bearing upon the cost of productionlabor conditions, the cost of obtaining money for plant purposes, and a thousand things that I could conceive of.
Mr. BROSSARD. Those are all reflected, Senator, in the cost of production, but the law also says, “any other relevant factors affecting the competition,” between the articles in the principal market or markets of the United States. In other words, not only the measure of difference of costs of production, but any other relevant factor in competition would be included. That is what the law says. Of course, we would have to take into consideration any other relevant factor, as I see it.
Senator King. Do you not think that would give you a wide range to roam over, in which the views of every man might be different, and no two would agree upon what was a relevant factor?
Mr. BROSSARD. It does leave the field pretty wide, I must say.
Senator King. Does it not leave room for a tremendous amount of speculation, so that there is absolutely no certainty, the result of which would be that the findings of the commission would be so vitiated as to be wholly unreliable?
Mr. BROSSARD. I think, Senator, that in the application of the statute, what the commission would probably do would be to exercise its best judgment in the first place as to what was relevant, and what was measurably different, and if it could not be measured in figures or in any way, it may be so ethereal as to be quite unthinkable to incorporate it as a factor in the report. It might throw it wide open, so that the law itself, as it is now written, would be declared unconstitutional if we exercised such privileges as that. My idea would be to limit the findings generally to the measurable differences, including all other factors of competition that we can actually measure and bring down somewhere near a figure or a fact.
Senator King. Do you understand the law now to be as it was in the form when it was attacked by Congressman Beck in the House, when he showed, as I think, in a very comprehensive and conclusive way, the futility of attempting to reach a basis for fixing tariff rates upon the competitive plan which was suggested in the original bill?
Mr. BROSSARD. My own personal views about it are that, as it is now written, it is almost like it was in the House bill.
Senator KING. That confirms the wisdom of my vote in voting against the bill.
Mr. BROSSARD. When you say, “any other factor in competition," it means that you might take any factor that affects competition into consideration.
Senator Kixg. Competition in production, or competition in sale?
Mr. BROSSARD. Competition means in the principal markets. That includes, of course, the selling and the laying of the product down in the market or markets of the United States.
The CHAIRMAN. Is there anything else? Senator HARRISON. I wanted him to explain this statement. Mr. BROSSARD. The Tariff Commission prepared a report entitled Compensatory and Protective Duties," at the request of certain members of the House and of the Senate. I do not remember how many of them there were, and I am not sure but one of the committees requested that report. This report was prepared by the experts on the staff of the commission, and approved by the advisory board and by the commission for transmittal in response to those requests.
As was the custom and the general practice of the commission, Mr. Conrad, about whom you have heard something this morning, who is the expert on the staff and whose work it was to prepare press releases from the reports of the Tariff Commission, and on the current work of the commission, prepared the original draft of the press release on that report entitled "Compensatory and Protective Duties ” mentioned just a moment ago and submitted that draft to me. The committee of the commission, elected by the commission to take charge of all such statements
Senator HARRISON. You and Doctor Dennis?
Mr. BROSSARD (continuing). And to go over them, was Commissioner Dennis and myself. When Mr. Conrad brought that statement in to me—and this, as I understand, is the original statement [indicating]-the first time I saw it and I revised it as shown here by these marks on the statement.
Senator HARRISON. That does not affect the first part of it.
Mr. BROSSARD. The first paragraph I revised and dictated it to my stenographer in the following shape. The first sentence of the controversial press release is the sentence which, evidently, the Senators took exception to. That first sentence, in the revision which I suggested and dictated, states, “Agriculture will benefit by the new tariff bill."
The word “greatly” was omitted. Then the rest of the paragraph is about as included in the first paragraph, the only change being the taking out of the first paragraph as originally drafted what seemed to me to be the kernel and the central thought in the paragraph, and putting it as the topical sentence in the paragraph.
Senator HARRISON. You thought the public would read that and form their conclusions from it.
Mr. BROSSARD. And would not read the other one, because the other one was a long, clumsy paragraph of something like nine lines in one sentence and with about three different ideas in it.
Senator HARRISON. You wanted to start with a punch, and said that agriculture would benefit.