So this whole American selling price is one of our great headaches in our negotiations, because it is a variable levy of the worst kind. Nobody ever knows what the tariff is going to be.

Mr. MONAGAN. In this field of footwear the price was in effect for 30 years, and it was the highest price, which was something like $2.60 a pair and that is suddenly reduced by this unilateral action to one that is around 90 cents a pair. That may be an interpretation of what the American selling price is, but so far as the practical effect is concerned, it is a tariff reduction of at least 50 percent.

Mr. HERTER. This was an administrative act by the Treasury Department and was not negotiated within our own office.

Mr. MONAGAN. I am not criticizing your organization on this. But it is a part of the problem because this is something which has taken place prior to your possible negotiations on the basis of this new price which has already been lowered 50 percent. That is the reason that I mention it. I think it would be fine if Congress did act on it. I think one of the difficulties with the Trade Act was that we took away some of the remedies, some of the appeals that were available, even though they didn't mean too much in practice. Those have been removed and now we find that the executive branch is dealing in these areas without relation to the Congress.

There is one other question that concerns me and I would like to ask what your thoughts are in this regard. At the present time and for the past years, with the massive defense budget that we have, a great deal of industry in your State and mine has been in the defense field. I suppose that United Aircraft in Connecticut employs 50,000 workers.

To what extent in bargaining and in agreeing to reductions do you take into account the fact that there may be a time in the not too distant future when this cushion of defense activity will not be there, when our more traditional industries will have to provide the employment that we need in those States?

Mr. HERTER. This is something that has not been a part of our mission, to try to look ahead to the days when the Buy American policy in connection with defense procurement is no longer a factor in our industrial production. That day may come.

We have gone through it with the Korean war, with World War II, World War I. We have come out of it pretty successfully, so that today, entirely aside from our war production, our industry is in a very healthy condition. It varies, of course, a lot. We have Raytheon, for instance, in Massachusetts. There are a lot of spotty areas where defense operations are very important. This is also very true in the airplane field and in a great many different fields. But until we know what is going to happen from the point of view of our war requirements, I don't think anybody can begin to speculate as to how you take up the slack. Whether Pratt & Whitney-United Aircraft-is going to continue manufacturing engines for civilian purposes on a very much larger scale than anything we have ever thought of up to now, nobody knows.

Mr. MONAGAN. Wouldn't it make a difference in the degree to which there should be a reduction in our tariff with the resulting economic effect on a particular industry because of a lessened demand, let's say table flatware, in the future if there were to be a sudden reduction of this 50,000 employees, if suddenly you had 30,000 or

40,000 on the labor market? You would want to preserve your international business to the greatest extent possible in order to provide for that employment?

Mr. HERTER. Yes, and generally speaking I think the New England States are doing very well in the export business.

Mr. MONAGAN. They have done fairly well, but you see the increased employment and the increased activity from the international field and they would not want to reduce it any. I think that is what the concern is.

Mr. HERTER. I think we all have the same concern.

Mr. MONAGAN. I am sure you are well familiar with this problem. Would you tell us, Governor, what the effect of the agreement on agricultures in the Common Market now is going to have on our capacity to export our agricultural products to the Common Market?

Mr. HERTER. This is something that we are studying very carefully at the present time. You have to divide our agricultural exports into different classes. Today the two items that are of the most importance to us in connection with the Common Market are soybeans and feed grains.

In connection with soybeans we have a GATT agreement whereby it has a duty-free classification. That cannot be violated, and there is no indication as yet that it might be violated by the Common Market's putting a tariff on soybeans.

If it were done it would be in violation of the GATT and we would be free to take retaliatory action of a comparable nature. It might mean excluding all wines or something of that kind from our imports. However, I am not anticipating this will happen.

With regard to feed grains, we have a special committee working on a grains agreement at the present time. We have two problems, one is feed grains and the other is wheat. There again we are not sure how this is going to come out. The feed grain shortage in Europe is very great.

They are moving more and more toward the production of meat, whether it be through poultry or whether it be through hogs or whether it be through cattle. This means that they require a greater amount of feed grains all the time, and our recent sales have been very large to the Common Market. There are a great many other agricultural products, some of which are protected by traiffs particularly the manufactured products like the canned goods and canned fruits. This has to be traded out.

It would be premature for me to say whether we are optimistic about the outcome or not.

Mr. MONAGAN. Are you concerned about the number of items that the Europeans propose to exclude from the bargaining?

Mr. HERTER. Very definitely. That raises the whole question of reciprocity. While they have not been made public, the United States has laid pretty generous offers on the table. We may find ourselves during the negotiations this fall just withdrawing and withdrawing. In order to achieve reciprocity we are not going to be in a position of giving much more than we get.

Mr. MONA GAN. Thank you very much.

Thank, you, Mr. Chairman.

Mr. FARBSTEIN. Mr. Fulton?

Mr. FULTON. I would like to welcome you especially as a former Member of Congress and a graduate of the Foreign Affairs Committee

of the House, as Secretary of State and a personal friend of many of us over the years. We are honored to have you serve in this capacity because we need people of your abilities and background to represent the United States on these negotiations.

With the chairman's permission, could I just ask that there be inserted in the record the dollar figures on some of these negotiations, that we have total value of trade on what is being handled so it shows the importance to the country. And then coming from Pittsburgh, could we have a further explanation in the record of the possible procedures for antidumping code?

Thank you very much. I have no questions.

(The information requested follows:)

CONSIDERATION OF A POSSIBLE ANTIDUMPING AGREEMENT IN THE KENNEDY

ROUND

From the beginning of the Kennedy Round of trade negotiations under the General Agreement on Tariffs and Trade (GATT), it has been generally acknowledged that non-tariff as well as tariff barriers to trade should be under consideration. Indeed, it was for this reason that the GATT Ministers determined that the Kennedy Round should be considered a "trade negotiation" rather than merely a "tariff negotiation". Accordingly, a Sub-Committee on Non-Tariff Barriers was established as part of the GATT framework for the trade negotiations in the Kennedy Round. A number of working groups were set up under this SubCommittee through which various non-tariff barriers issues could be raised. such group established was the Group on Anti-dumping Policies.

One

We believed that the establishment of this Group could serve important U.S. interests. Based on study within the Executive Branch and discussion with interested parties, it was concluded that, particularly if tariff restrictions were significantly reduced as a result of the Kennedy Round, many countries might resort to antidumping laws as protectionist devices. There was evidence that some countries were taking new interest in antidumping laws. The European Economic Community, for example, is developing a new Community antidumping regulation. Moreover, U.S. exporters have had considerable difficulty with certain foreign antidumping laws in the past. These difficulties might be expected to intensify in the future.

Within the GATT Group on Anti-Dumping Policies, an extensive exchange of views has taken place regarding the antidumping provisions of the GATT as well as the content and administration of national antidumping laws. In these discussions, the United States has pointed to difficulties encountered by U.S. exporters in the application of foreign antidumping laws and expressed concern that such laws will increasingly be used as unjustifiable barriers to trade.

We noted, among a number of other issues, the absence in foreign laws of open procedures which are necessary to protect against arbitrary use of dumping laws. We expressed concern regarding the levying in some laws of actual provisional duties, which unduly impede trade, rather than permitting entry bonds as in U.S. practice during the period of withholding of appraisement. In addition, we pointed to a number of substantive antidumping standards in foreign laws which differ from the U.S. law, and which are undesirable. We also noted, with reference to Canadian law, the absence of any injury finding before imposition of antidumping duties and certain unjustifiable valuation practices in determining the existence of dumping.

Other countries, in the course of these meetings, criticized certain aspects of the U.S. administration of its antidumping laws. In particular the U.S. provisional measure of withholding of appraisement was criticized. Under U.S. law there is a separation of functions between the Treasury, which investigates the existence of price discrimination, and the Tariff Commission, which investigates injury. Withholding of appraisement is applied based only on a finding by the Treasury that there is reason to suspect sales at dumped prices. The case is referred to the Tariff Commission for investigation as to possible injury to the domestic industry only after Treasury has found sales at dumped prices. Other countries asserted that this procedure-whereby withholding is imposed without consideration of injury-leads to excessive and unjustified use of withholding of appraisement and that the separation of functions between Treasury and the Tariff Commission creates undue delays in disposing of cases.

Following these discussions, it was agreed within the Group that the possibility of an international agreement on antidumping should be further explored. Based on our prior study and consultations, we concluded that international discussion of the possibilities of an international antidumping agreement would serve a useful purpose, since the development of uniform practices in this area could afford protection to U.S. exporters against present and potential problems they might encounter in connection with the antidumping regulations of other countries.

The GATT Secretariat, in March 1966, prepared a checklist of antidumping issues both procedural and substantive-which might be relevant to any consideration of an international antidumping agreement. At meetings in May and in July a number of countries, including the United States, submitted papers exploring in a general manner the issues identified by the Secretariat checklist. It was clearly understood that in these papers neither the United States nor any other country was taking a formal position on any issue.

At the last meeting of the GATT Group on Anti-dumping Policies, in July 1966, the GATT Secretariat was instructed to prepare a paper drawing upon these earlier papers and discussions which would outline under appropriate headings the possible elements of any antidumping agreement. The Secretariat paper is designed to facilitate consideration by the participating countries at the next meeting of the Group which will take place in early autumn, of the possibility of negotiating an international antidumping agreement.

The Executive Branch is now at the point where it must consider the advisability of taking formal positions on the issues which might be involved in a possible international agreement. To assist us in this consideration, the Trade Information Committee (TIC), an interagency committee chaired by a member of this Office, has scheduled a public hearing to begin on September 12 at which interested persons are invited to give their views on these issues. No formal position will be taken until the views expressed at the TIC hearing have been fully considered and approval has been given by the President.

Any antidumping agreement would be negotiated under the President's Constitutional authority regarding the conduct of foreign relations. If such a negotiation is undertaken, it is hoped that it would be concluded by the end of the Kennedy Round on July 30, 1967. Any such agreement would, however, be concluded in an agreement separate from the overall Kennedy Round agreement. Any antidumping agreement would not necessarily involve amendments to the U.S. Anti-Dumping Act of 1921. If any agreement did involve such amendments, however, then only Congress could implement the agreement, and Congress would be free to accept or reject any proposed amendments to the U.S. Anti-Dumping Act based on its evaluation of the intrinsic merit of the agreement. Moreover, since any antidumping agreement would be separate from the Kennedy Round agreement, it is clear that Congress could reject any proposed amendment without jeopardizing the overall Kennedy Round results.

Regardless of whether legislative action would ultimately be required to implement any antidumping agreement, the Congress will be kept fully informed at every step of any negotiation. The September 12 TIC hearing will inform the Congress, as well as the Executive Branch, regarding the views of interested persons. Moreover, the Congressional Delegates to the Kennedy Round would be able to observe the conduct of any negotiation in Geneva.

(Mr. Fulton also requested the following information, concerning the dollar value of U.S. exports and the number of American employees participating in the export field):

The estimated number of American workers whose jobs were directly and indirectly attributable to merchandise exports in 1965 was 3.3 million, according to calculations of the Department of Labor.

Mr. FARBSTEIN. Mr. Frelinghuysen.

Mr. FRELINGHUYSEN. Thank you, Mr. Chairman. I should like also to join in welcoming you here this morning, Mr. Herter. I have two brief questions. One is, do you think it will be necessary to extend the authority to negotiate? The present law of course provides such authority until June 30 of next year. I would assume that negotiations, even if they proceed rapidly and are reasonably successful, would require authority continuing beyond that time. Do you anticipate that further legislation is going to be required in order to continue this authority?

Mr. HERTER. Very frankly I have been ducking that question. Mr. FRELINGHUYSEN. Maybe I shouldn't have asked it if you are ducking.

Mr. HERTER. I have been ducking it for a very good reason. Until we see just what we can accomplish this fall and the early months of next year, I would hesitate making any recommendations with regard to the continuation of the Trade Expansion Act. If the Trade Expansion Act comes before the Congress, I doubt very much whether it would be extended without a great many reservations of one kind or another. Whether those would cut into the existing negotiations, I wouldn't know. Furthermore, I think 5 years is a pretty long time in which to find out whether or not you can really do business or not. This fall and the early winter months are going to be the test. I think that we can accomplish as much as could be accomplished at the present time, given the present stage of development of the whole European community, under the deadline that has been set by our own act. If we don't succeed, we will want to know why we didn't succeed. Then we will want to put the whole matter before the Congress and leave the determination there with such recommendations as we may have.

As of now I would hesitate very much to indicate whether I wanted an extension of the act or not. Obviously if we are being successful and we are just short a month or two, or something of that kind, a temporary extension would be an obvious thing. If it meant an extension for a long period of years and fruitless negotiations that are likely to lead to more let's say pain from the point of view of international relations rather than benefit, I would be hesitant. I would say sit and wait a while.

As I say, I am just not prepared to answer that question at the present time.

Mr. FARBSTEIN. Would the gentleman yield for a moment?
Mr. FRELINGHUYSEN. With pleasure.

Mr. FARBSTEIN. Governor, when you talk of cautious optimism, it would seem that the emphasis is on the "cautious" rather than on the "optimism."

Mr. HERTER. It has been for 4 years, Mr. Chairman.

Mr. FARBSTEIN. Mr. Frelinghuysen.

Mr. FRELINGHUYSEN. I don't mean to push you, Mr. Herter, but I gathered from what you say that as a practical matter the legislative deadline, the termination of authority next year, may be temporarily an advantage to you in pressing for some progress, concrete progress within the time period that is available to you?