the returns from it are not exceeded by the new investment that goes in year by year.

Mr. FULTON. One short question on the position of General de Gaulle: The comment is that he has not participated in the European Economic Community discussions leading to unity. Do you believe that lack of participation is simply having no position, or preparation, or is it a position taken as a leverage for an economic purpose? What is the reason behind General de Gaulle's position? I think we would be interested in that.

Mr. HERTER. If I may be very frank, I think that the reason that he held everything up and really stepped out of the Common Market for a considerable number of months was due to the fact that he had suddenly discovered that under the Rome Treaty, which is an obligation that France has undertaken, there are certain supranational consequences which arose from the powers that have to be given to the Commission, and he didn't like the way they were exercising those powers.

He wanted to teach them a lesson-that they couldn't operate with the veto of France still in existence. Under the Treaty of Rome the French veto had disappeared as of the first of January 1966, in the sense that most important decisions were to be taken by a weighted vote. That is, the veto of any one single power, whether it be France, Germany, or Italy, the larger powers, couldn't stop the progress within the Commission itself.

Mr. FULTON. This was a method of maintaining a veto that they were losing under the Treaty of Rome?

Mr. HERTER. I think it was really an effort to show that it wasn't a practical thing to try to operate if you didn't get unanimity among the six countries.

Mr. FARBSTEIN. Governor, why did we initiate these negotiations when both the United States and the Common Market were not nearly ready to present offers? Why didn't we suspend the negotiations for a couple of years, say 2 years, until the negotiations could take place fruitfully?

Mr. HERTER. We were ready to present offers long before. Actually the industrial offers were presented a long time ago. Then a lot of countries said they wouldn't go into the negotiations until agriculture was included. We were one of them. We said agriculture had to be included.

Last September, almost a year ago, was the time when it was agreed that the agricultural offer would be put down. This was the time that the French walked out of the Common Market. Nothing was done. The agricultural offers were laid on the table on I think the 24th of July of this year or just a very few days ago.

We agreed that we would put our agricultural offers that were of interest to the Common Market on the table at the same time they laid theirs down. This was done. These are being examined very carefully now and the negotiations on them will begin early in September.

Mr. FARBSTEIN. From a psychological standpoint supposing we suggested that there be a suspension for a period of years, say 2 years, until the parties got together more or less, until there appeared to be some degree of unanimity. What do you anticipate would have resulted?

Mr. HERTER. It would have meant the end of our own authority. Our authority ends next June.

Mr. FARBSTEIN. I understand that. But you say we just put our offers on the table July 24. This thing has been going on for 3 years. Nothing has been happening. As a matter of fact, everybody has become discouraged as to the possibility of this thing, the Common Market, being effectuated. France, through President de Gaulle, took an intransigent attitude.

I would like to repeat my question of course you may not be ready to answer it--but it would seem to me if I can make it rhetorical, as such, that it might have been better from a psychological standpoint if we had just taken as intransient an attitude as Mr. de Gaulle took and say "Well, now, all right, let's suspend these things," and maybe if we took the position that we are just as well satisfied to suspend them as he is, perhaps the effect might have been a bit more salutary.

What is your reaction to that?

You don't have to answer that.

Mr. HERTER. This is an ex post facto conclusion. I have always felt that going backward and putting ifs in-"if one had done this, what would have happened"

Mr. FARBSTEIN. I will accept that.

Mr. HERTER (continuing). Is not a useful form of sport.

Mr. FARBSTEIN. Any other questions?

Mr. MONAGAN. Governor, one of the things that frightens many people are the statistics on the decline of our gold supply. I don't remember the figures. Probably a 50-percent reduction in the last 10 years. I realize of course that it is not only the mercantile balance of trade that is involved in this but other somewhat unpredictable factors as well, the maintenance of our military, the Vietnamese war, but I was wondering, Governor, do you have any kind of a rule of thumb as to the proportion of trade, the volume of trade that we are seeking to maintain as a relatively permanent thing for this country?

Mr. HERTER. Obviously with our commitments in the military field, with our desire not to cut down on our citizens opportunity of seeing the rest of the world, probably a $6 billion favorable trade balance would be a good thing.

It has gone down to nearer $4 billion. We still have a favorable balance of trade. A hard thing always in dealing with other countries where we have a favorable balance of trade is that they say, "Look, you are trying to squeeze us. You want more trade with us and have us do less trade with you to improve your balance of payments when we are already pretty far overboard." As far as the Common Market is concerned, I think it is nearly $2 billion.

Mr. MONAGAN. How would you characterize your own reaction to our experience with these negotiations as compared to what your anticipations might have been when you first entered your job?

Mr. HERTER. That is pretty hard to say. I think I can say we have had some pretty frustrating years. I think at the very outset we hoped the negotiations would go faster and go better than they have. That has been due to the confusion on the other side. During this time we have talked a great deal to our Canadian friends, we have talked a great deal to our Japanese friends. They in many cases say: "Look, we can't commit ourselves until we know what the Common

Market is going to do. That is the biggest trading area in the world. and until we know what they are going to do we can't set anything specific and definite with you fellows." For there are a lot of commodities that are of interest to us and the Japanese or to the Canadians and ourselves that are not of primary interest in Europe at all. We haven't wasted time. We have become very familiar with the trade problems of these other big trading partners.

Mr. MONAGAN. Thank you very much, Governor. Thank you, Mr. Chairman.

Mr. GROSS. Mr. Herter, a New York firm is presently reported moving to establish in Communist Rumania the production of 300,000 head of hogs a year, process them in Rumania, and ship the pork products to this country, this being financed in part through the ExportImport Bank.

This appears to be a foot in the door to further operations in other countries. Would this sort of operation have your blessing insofar as you are able to affect it?

Mr. HERTER. We would have nothing to do with that whatsoever. Mr. GROSS. Nothing to do with it at all?

Mr. HERTER. No. The question as to whether those products. could come into the United States would be up to Department of Agriculture and other agencies.

Mr. GROSS. Some of us have long taken a dim view of importation of products from Poland and now we certainly take a dim view in the Midwest of opening processing plants in Europe with our financial assistance for this purpose. I would hope that if there is any way to get at this through these negotiations that you would do so.

Let me ask one final question if I may, Mr. Chairman. What part does the council, the Manhattan-based Council on Foreign Relations have to do with these negotiations? Anything as an organization? Mr. HERTER. Absolutely nothing that I know of.

Mr. GROSS. The members of the council

Mr. HERTER. The Council on Foreign Relations?

Mr. GROSS. Yes, sir.

Mr. HERTER. Nothing.

Mr. GROSS. The members are interested, is that not true?

Mr. HERTER. As they are in foreign relations problems. They are a very distinguished membership, most of them.

Mr. GROSS. You are one of them.

Mr. HERTER. I think I was one of the charter members.

Mr. GROSS. I think so, too.

Mr. FARBSTEIN. The meeting is adjourned. I want to thank very kindly, Governor, for having appeared here this morning. I certainly enjoyed your appearance. I hope at a future time you will feel free to again come before us.

Mr. HERTER. I hope you don't take my caution too seriously. I want to be as optimistic as I can.

Mr. FARBSTEIN. Thank you very much. I am sure you do.

(Whereupon, at 11:55 a.m., the subcommittee adjourned, subject to call.)

THE FOREIGN POLICY ASPECTS OF THE KENNEDY

ROUND

WEDNESDAY, AUGUST 17, 1966

HOUSE OF REPRESENTATIVES,
COMMITTEE ON FOREIGN AFFAIRS,

SUBCOMMITTEE ON FOREIGN ECONOMIC POLICY,

Washington, D.C.

The subcommittee met, pursuant to adjournment, at 10:35 a.m., in room 2172, Rayburn Building, Hon. Leonard Farbstein (chairman of the subcommittee) presiding.

Mr. FARBSTEIN. I will start these hearings now. I expect there will be some more members that will attend, although there are other subcommittee hearings this morning. It is 10 minutes past 10 now and I think we ought to get started because we will only work until about noon or a little bit before.

We continue our hearings this morning to review the results to date and what we might anticipate in the near future regarding the Trade Expansion Act of 1962 and the Kennedy Round of trade negotiations at Geneva.

The witnesses this morning are Mr. Robert L. McNeill, Deputy Assistant Secretary for Trade Policy, Department of Commerce; and Mr. Howard L. Worthington, Deputy Assistant Administrator for International Trade, Department of Agriculture. Mr. Garland of the Department of Commerce is also present.

We will begin by having both statements read and then we will ask you gentlemen questions and whoever feels he is best qualified may

answer.

Mr. McNeill, do you want to proceed?

STATEMENT OF ROBERT L. MCNEILL, DEPUTY ASSISTANT SECRETARY FOR TRADE POLICY, DEPARTMENT OF COMMERCE

Mr. MCNEILL. Thank you, Mr. Chairman. At the suggestion of your committee's staff, I am pleased to appear before you today to discuss the Department of Commerce role in implementation of the Trade Expansion Act of 1962 and certain other of the Department's activities in support of promoting exports from the United States.

My statement is factual and does not address itself to the area of policy. However, I would be pleased, should there be any questions of the nature that you indicated, to attempt to answer them following the reading of my statement.

Since passage of the Trade Expansion Act of 1962, the Commerce Department has played a very broad and active role in the preparations for and in the conduct of the Kennedy Round of trade negotiations at Geneva. The nature of the Department's role includes not