AMEND SECTION 2 OF THE EXPORT CONTROL ACT

OF 1949

TUESDAY, MAY 25, 1965

U.S. SENATE,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON INTERNATIONAL FINANCE,

Washington, D.C.

The subcommittee met at 10:15 a.m., in room 5302, New Senate Office Building, Senator Harrison A. Williams, Jr., presiding. Present: Senators Williams, Proxmire, and Tower.

Senator WILLIAMS. I am honored that my senior member, Senator Proxmire, waited until I got here to start this hearing.

Our first witness is a colleague and great friend from New Jersey, Congressman Paul Krebs.

STATEMENT OF PAUL J. KREBS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

Mr. KREBS. First of all, I want to say, Mr. Chairman and members of the committee that I am sorry that I do not have copies of my remarks, but I will leave my one and only copy with the secretary when I finish reading it.

I want to take this opportunity of thanking Chairman Muskie and the other members of this subcommittee for the time and effort being devoted to the legislation concerning our Nation's export policy and machinery. And, of course, that goes for my good friend, Senator Williams, and Senator Proxmire.

I am appearing before this committee as a sponsor of H.R. 4364, one of the bills which would amend the Export Control Act of 1949. I might say parenthetically this is the House counterpart of Senator Williams' S. 948.

My bill is one of several bills introduced in the House to afford American business and investors the protection of their Government in dealing with boycotts by nations with which our Government maintains friendly relations.

Its most immediate effect would be on the Arab boycott that has been maintained against Israel during the past several years.

There are, of course, those who maintain that the boycott, aimed at private American business dealings with Israel, is inoffensive because it has not been entirely successful in drying up trade with Israel, and that adoption of measures against the boycott would harm our Government's friendly relations with one of the parties. to the dispute. But I maintain that to leave Americans at the mercy of such a boycott is an empty gesture of good will to a nation that

65

will merely shout in louder denunciation of the free-trade principles which our Government has sought to foster in recent decades.

It is generally recognized that our Government has maintained an attitude of friendliness not only to the State of Israel but to the Arab nations as well. And I am, therefore, confident that the enactment of legislation such as mine would not be necessarily construed as an unfriendly act to those nations participating in the boycott against Israel. Our Government must make its position undoubtedly clear by enacting an amendment that will nullify effects of a boycott against Americans not only by current detractors, but by any other nation that would attempt to place obstacles among trading nations friendly to our Government.

I understand that one source, the Business International, has placed the number of American firms affected by the boycott at over 150. At a time when the administration, and indeed Congress, is courageously trying to deal with the so-called gold drain, it would appear that these 150 or more firms would be afforded an opportunity of selling American goods abroad which would have the effect of reducing foreign-held claims to American gold.

It is not enough to say that adoption of this amendment would somehow have a "pragmatic" effect on our own Government's "economic denial" programs against such countries as Red China, Cuba, and North Vietnam. There should be no doubt that our country's foreign policy is one of encouragement for trade among friendly nations. Both Israel and Egypt are nations with which we maintain friendly relations. Adoption of this amendment would merely remove any shadow of doubt about our Government's position and at the same time would strengthen the practical application of our stated objectives of free trade among our friends. This amendment would prohibit American firms from supplying the information demanded by a boycotting nation and would therefore place all of our American firms on equal footing. None would have to kowtow for fear of alienating prospective markets. All would be equally defended in their inability to cooperate in a scheme to disrupt the American Government's policy of encouraging trade among nations friendly to our country.

The possibility that less reliable information would be used against American firms would indicate a weakness in our Government's adherence to principle, and I for one cannot agree that since blackmail may be continued under a sloppier fashion we should hence withdraw from attempts at ending this despicable practice.

Regardless of how one looks at this obnoxious boycott against Israel, it is a challenge to our Government's determination. We must continue to widen trade among nations of the world. We cannot do less than insist on it among our friends.

Thank you, Mr. Chairman.

That concludes my testimony, and I want to thank this committee for giving me the special attention which I had to request because of other commitments and committee meetings I have in the House. I will happily leave this with the secretary but would appreciate getting it back when you are finished with it.

Senator WILLIAMS. You are one of the 30 cosponsors?

Mr. KREBS. Yes. I am one of the cosponsors in the House.

Senator WILLIAMS. The subcommittee has acted over there, I gather. Have they?

Mr. KREBS. I understand the subcommittee has acted.

Senator WILLIAMS. Yes. We had some strong testimony yesterday from Under Secretary Ball and Secretary Connor, testimony in which they abhorred this Arab boycott and then found reasons to disapprove this bill, which is an amendment to the Export Control Act.

Mr. KREBS. Well, of course, one of the virtues of America is you are allowed to disagree, and certainly I think that

Senator WILLIAMS. But their strong objection to the boycott, followed by their reasoning against this bill, rather surprised me.

Mr. KREBS. Well, it shouldn't. I even disagree with my wife at times, but this doesn't change the substance of the issues I think. The facts still warrant

Senator WILLIAMS. When you agree in principle, you shouldn't be in disagreement about something that abides by the principle. Mr. KREBS. No.

Senator WILLIAMS. That is my point.

Mr. KREBS. No, I think in this case, though, the principle is clear cut.

Senator WILLIAMS. I certainly agree.

Senator Proxmire, any questions?

Senator PROXMIRE. Let me just ask one question. Secretary Connor said in the conclusion of his statement, and let me read the last couple of sentences:

The American businessman today is free to choose between the twothat is, between Israel and the Arab League

The

in accord with his own judgment and the requirements of his business. bill if enacted would deprive him of this choice since he would be probibited by law from satisfying the boycott * * *. It seems to us that the administration of the basic policy objectives in the Export Control Act would be adversely affected by the enactment of the bill, that the bill would not bring to an end the boycott efforts which we deplore, and in fact consider despicable, and that it would have undesirable and undiagnosed "side effects" for many American business firms.

The crux of it is that these firms would still remain or would go on the Arab blacklist, although they had no trade with Israel and no reason to suspect that they might have trade with Israel. They might have trade with one of the 13 or 14 Arab countries.

Secretary Connor's position is that this would automatically disqualify them from trading with the Arab countries and do them economic damage.

for

What is your answer to that?

Mr. KREBS. I don't believe it would, and I say that with full respect my friend from the chamber of commerce to whom I was introduced before.

This is the same identical position that industry is taking against amending the labor law by repealing section 14(b). I don't believe it would at all.

And I feel privileged to comment on the Secretary's testimony, because he comes from the State of New Jersey, and I know him and I have the highest respect for his judgment, but in this case I think this far transcends the record speaks much more loudly than the judgment of Secretary of Commerce Connor.

Senator PROXMIRE. Your answer then is that the Arab countries would not be able to maintain a boycott under these circumstances, that if a firm complied with the American law that under these circumstances they would simply not be a blacklisted firm? Mr. KREBS. This would be my hope.

Senator PROXMIRE. The Arab countries would not do this, because if they did, they would be hurting themselves economically by cutting off their supplies?

Mr. KREBS. This would be my hope.

Senator PROXMIRE. Thank you.

Mr. KREBS. Thank you, sir.

Senator WILLIAMS. Thank you very much, Congressman Krebs. Mr. Maxwell M. Rabb, from the American-Israel Chamber of Commerce and Industry from New York City.

Mr. Rabb, we appreciate your being here and know full well how you were in on the launch of this particular measure.

STATEMENT OF MAXWELL M. RABB, PRESIDENT, AMERICANISRAEL CHAMBER OF COMMERCE AND INDUSTRY, INC., NEW YORK, N.Y.; ACCOMPANIED BY PARKE W. W. MASTERS, DIRECTOR

Mr. RABB. Senator Williams and Senator Proxmire, my name is Maxwell M. Rabb, of New York City, and I very much appreciate the opportunity you are giving me to appear here today on behalf of what I consider to be very important legislation.

The American-Israel Chamber of Commerce and Industry Inc., which I represent here today as its president, is an independent organization incorporated under the laws of the State of New York, with the basic objective of expanding commercial and economic ties between the United States and Israel.

Our membership, which is composed of leading American businessmen and firms, is nationwide with many chapters in principal cities in the United States.

Our organization is not one that favors political objectives. What it is is an independent American association solely concerned with the building of a healthy commercial and industrial relationship between two friendly countries.

The concern of the American-Israel Chamber of Commerce is that in its efforts to develop increased American exports, it encounters unwarranted foreign intervention that attempts to dictate to American businessmen with whom they shall or shall not conduct their business. We are not advocating any economic reprisals against Arab nations that seek to coerce American firms to engage in restrictive trade practices. On the contrary, as an organization of American businessmen, we wish for expanded American economic relations with both the Arab nations and Israel.

The issue is not whether some nations are right or wrong in boycotting a third nation, or whether or not the aggrieved nation is in fact injured. The issue is simply whether our Government should permit American firms to be pressured into becoming parties to a foreign economic war.

The measure you are presently considering seeks to prevent this and to give U.S. companies the shield against such involuntary involve