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tively. The lending, guaranty and insurance authorities of the ExportImport Bank have been increased and operations have been extended to include a short-term discount loan facility. The Department of Commerce has reorganized its facilities for promoting exports and has expanded its services for exporters. The Department of State, in cooperation with the Department of Commerce, is giving increased emphasis to commercial service programs in our missions abroad.

In addition, I am today submitting separate legislation which would amend the Export Trade Act in order to clarify the legal framework in which associations of exporters can function. One amendment would make it clear that the act applies not only to the export of goods but also to certain kinds of services-architecture, construction, engineering, training and management consulting, for example. Another amendment would clarify the exemption of export associations from our domestic antitrust laws, while setting up clear information, disclosure and regulatory requirements to ensure that the public interest is fully protected.

In an era when more countries are seeking foreign contracts for entire industrial projects—including steps ranging from engineering studies through the supply of equipment and the construction of plants-it is essential that our laws concerning joint export activities allow us to meet our foreign competition on a fair and equal basis.

THE GROWTH OF INTERNATIONAL INVESTMENT

The rapid growth of international investment in recent years has raised new questions and new challenges for businesses and governments. In our own country, for example, some people have feared that American investment abroad will result in a loss of American jobs. Our studies show, however, that such investment on balance has meant more and better jobs for American workers, has improved our balance of trade and our overall balance of payments, and has generally strengthened our economy. Moreover, I strongly believe that an open system for international investment, one which eliminates artificial incentives or impediments here and abroad, offers great promise for improved prosperity throughout the world.

It may well be that new rules and new mechanisms will be needed for international investment activities. It will take time, however, to develop them. And it is important that they be developed as much as possible on an international scale. If we restrict the ability of American firms to take advantage of investment opportunities abroad, we can only expect that foreign firms wil seize these opportunities and prosper at our expense.

I therefore urge the Congress to refrain from enacting broad new changes in our laws governing direct foreign investment until we see what possibilities for multilateral agreements emerge.

It is in this context that we must also shape our system for taxing the foreign profits of American business. Our existing system permits American-controlled businesses in foreign countries to operate under the same tax burdens which apply to its foreign competitors in that

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country. I believe that system is fundamentally sound. We should not penalize American business by placing it at a disadvantage with respect to its foreign competitors.

American enterprises abroad now pay substantial foreign income taxes. In most cases, in fact, Americans do not invest abroad because of an attractive tax situation but because of attractive business opportunities. Our income taxes are not the cause of our trade problems and tax changes will not solve them.

The Congress exhaustively reviewed this entire matter in 1962 and the conclusion it reached then is still fundamentally sound: there is no reason that our tax credit and deferral provisions relating to overseas investment should be subject to drastic surgery.

On the other hand, ten years of experience have demonstrated that in certain specialized cases American investment abroad can be subject to abuse. Some artificial incentives for such investment still exist, distorting the flow of capital and producing unnecessary hardship. In those cases where unusual tax advantages are offered to induce investment that might not otherwise occur, we should move to eliminate that inducement.

A number of foreign countries presently grant major tax inducements such as extended "holidays" from local taxes in order to attract investment from outside their borders. To curb such practices, I will ask the Congress to amend our tax laws so that earnings from new American investments which take advantage of such incentives will be taxed by the United States at the time they are earned-even though the earnings are not returned to this country. The only exception to this provision would come in cases where a bilateral tax treaty provided for such an exception under mutually advantageous conditions.

American companies sometimes make foreign investments specifically for the purpose of re-exporting products to the United States. This is the classic "runaway plant" situation. In cases where foreign subsidiaries of American companies have receipts from exports to the United States which exceed 25 percent of the subsidiaries' total receipts, I recommend that the earnings of those subsidiaries also be taxed at current American rates. This new rule would only apply, however, to new investments and to situations where lower taxes in the foreign country are a factor in the decision to invest. The rule would also provide for exceptions in those unusual cases where our national interest required a different result.

There are other situations in which American companies so design their foreign operations that the United States treasury bears the burden when they lose money and deduct it from their taxes. Yet when that same company makes money, a foreign treasury receives

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the benefit of taxes on its profits. I will ask the Congress to make appropriate changes in the rules which now allow this inequity to

occur.

We have also found that taxing of mineral imports by United States companies from their foreign affiliates is subject to lengthy delays. I am therefore instructing the Department of the Treasury, in consultation with the Department of Justice and the companies concerned, to institute a procedure for determining inter-company prices and tax payments in advance. If a compliance program cannot be developed voluntarily, I shall ask for legislative authority to create one.

THE CHALLENGE OF CHANGE

Over the past year, the Administration has repeatedly emphasized the importance of bringing about a more equitable and open world trading system. We have encouraged other nations to join in negotiations to achieve this goal. The declaration of European leaders at their summit meeting last October demonstrates their dedication to the success of this effort. Japan, Canada and other nations share this dedication.

The momentum is there. Now we-in this country-must seize the moment if that momentum is to be sustained.

When the history of our time is written, this era will surely be described as one of profound change. That change has been particularly dramatic in the international economic arena.

The magnitude and pace of economic change confronts us today with policy questions of immense and immediate significance. Change can mean increased disruption and suffering, or it can mean increased wellbeing. It can bring new forms of deprivation and discrimination, or it can bring wider sharing of the benefits of progress. It can mean conflict between men and nations, or it can mean growing opportunities for fair and peaceful competition in which all parties can ultimately gain.

My proposed Trade Reform Act of 1973 is designed to ensure that the inevitable changes of our time are beneficial changes-for our people and for people everywhere.

I urge the Congress to enact these proposals, so that we can help move our country and our world away from trade confrontation and toward trade negotiation, away from a period in which trade has been a source of international and domestic friction and into a new era in which trade among nations helps us to build a peaceful, more prosperous world. RICHARD NIXON.

The WHITE HOUSE, April 10, 1973.

SUMMARY OF TRADE REFORM ACT OF 1973

Title I-AUTHORITY FOR NEW NEGOTIATIONS

Title I contains the basic authorities required for trade negotiations. The President is provided authority for a period of five years to increase or decrease tariffs without limit in order to carry out trade agreements. Any proposed changes in duties are subject to prenegotiation procedures, including public hearings. Duty reductions will be phased over a minimum of five equal annual stages or by maximum annual reductions of three percent ad valorem, whichever is greater.

The President is provided advance authority to implement agreements relating to methods of customs valuation, certain matters relating to assessments and marking of origin requirements. A new procedure is also established under which the President can implement agreements on other types of trade barriers if he notifies the Congress 90 days before concluding such an agreement and if neither House of Congress disapproves of the agreement within ninety days of its submission.

Title II-RELIEF FROM DISRUPTION CAUSED BY FAIR COMPETITION

Title II contains major changes in existing provisions relating to import relief for industries seriously injured by increased imports, and provides new adjustment assistance provisions for workers displaced by import competition.

Chapter I liberalizes existing criteria for determining that injury to domestic industries is due to imports. Upon petition, request, or on its own motion, the Tariff Commission will conduct an investigation to determine whether increased imports are the "primary" cause of serious injury, or threat thereof, to the domestic industry producing like or directly competitive articles. A finding of market disruption constitutes prima facie evidence that imports are the primary cause of injury.

The President can provide import relief in the form of increases in duties, quantitative limitations, orderly marketing agreements, and suspension of items 806.30 and 807.00 of the Tariff Schedules. Consistent with adjustment purposes, import relief is limited to five years and must be phased out during this period. The relief may be extended for one two-year period.

Chapter II on adjustment assistance provides for supplemental payments to workers in cases where the Secretary of Labor determines that increased imports have been a "substantial" cause of unemployment or underemployment. The supplemental payment benefits are based on those which will apply under State law for all workers fol

(15)

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lowing enactment of compansion legislation establishing minimum State standards for unemployment insurance benefits. The chapter also provides continuing programs of worker benefits in the form of training and relocation and job search allowances.

Title III-RELIEF FROM UNFAIR TRADE PRACTICES

Title III revises the four principal statutes which provide authority to respond to foreign unfair trade practices.

Chapter I revises and expands the President's authority under section 252 of the Trade Expansion Act to take action against foreign countries which maintain unjustifiable or unreasonable import restrictions and other policies which burden, restrict, or discriminate against United States trade.

Chapter II amends the Antidumping Act of 1921. The amendments include placing time limits on investigations and withholding of appraisement and providing for hearings.

Chapter III contains major amendments to the countervailing duty law. Countervailing duties will apply for the first time to duty-free goods, subject to a determination of material injury by the Tariff Commission. The application of countervailing duties is not required, however, if such action would be significantly detrimental to United States economic interests or an existing quantitative limitation is an adequate substitute. The Secretary of the Treasury must determine within one year whether a bounty or grant is being paid or bestowed. Chapter IV amends section 337 of the Tariff Act relating to foreign unfair practices in import trade by expanding the procedures in the statute relating to patent infringement. Companion legislation will provide the Federal Trade Commission authority to investigate and regulate other unfair methods of import competition.

Title IV-INTERNATIONAL TRADE POLICY

MANAGEMENT

Title IV contains various permanent authorities to provide the President with more flexible means to manage trade policy.

It provides explicit and flexible authority for the President to deal with serious balance-of-payments situations, including authority to impose a temporary import surcharge or other import limitations to deal with a serious balance-of-payments deficit, or to cooperate in correcting an international balance-of-payment disequilibrium. The President is also authorized to reduce or suspend tariffs or other import restrictions temporarily in the case of a persistent balance-of-payments surplus.

Other permanent authorities enable the President to exercise fully United States rights and obligations under trade agreements, to implement supplemental tariff agreements of a limited scope, to compensate countries for increases in United States import restrictions, and to reduce import restrictions temporarily to restrain inflation.