selective basis. This is consistent with the proposals made by Secretary Shultz to the IMF last fall.

Let me cover a few of the other authorities requested to deal with management of day-to-day trade problems.

Section 301 would give us the authority to respond in the event of unjustifiable or unreasonable foreign import restrictions. It provides a variety of responses so that we can technically have the authority to respond well beyond the agricultural provisions of section 252. We have this authority today for a limited number of products. We are asking for it across-the-board. We think we need this kind of authority if we are going to insist that all trading nations of the world live up to rules that are to be applied uniformly.

We have tried to clarify it and be more precise in the antidumping and countervailing duty areas.

Another authority that is requested provides the opportunity for the President for 1 year at any one time to cut some tariffs in the event that it would be useful in controlling inflation.

Let me now turn to another matter of considerable importance. A few provisions in the act would authorize the President to take actions which would not necessarily be in accordance with U.S. international obligations. The two principal examples are (1) section 301, which continues and expands the authority for the President to respond to unfair trade practices of foreign countries; and (2) section 401, which grants explicit and more flexible authority than that available under existing law to raise tariffs through a surcharge to deal with serious balance-of-payments problems.

The administration does not want to create any impression that we are taking our international obligations lightly. The contrary is the case. No provision of the act itself violates international obligations or requires that an international obligation be violated. In some limited cases, the act contains authority for the President which could be exercised in a way which would be inconsistent with current international rules.

Any appearance of provisions inconsistent with international obligations should be viewed in the context of proposals we are making for reform of the international rules, in the monetary system for example.

Section 252 of the Trade Expansion Act authorized actions which could be breaches of U.S. international obligations. This authority was only used once, and then in a way that was consistent with international obligations.

The argument for abiding by our international obligations is strong. If the United States were to act contrary to international obligations, this would encourage other countries to take similar action, thereby making international obligations a less effective tool of international diplomacy. The damaging effect this might have on our national interests is another major reason for the United States to conform to its own international obligations.

In sum, Mr. Chairman, although the Trade Reform Act contains some new and expanded authorities, they are consistent with and reinforce four decades of congressional-executive partnership in the trade agreements program. What is sought are not unprecedented delegations of authority, but workable solutions to the problems of trade

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negotiations and other trade matters in the context of current needs of the trade agreements program and to give our negotiators the tools, the mechanism, and the leverage to do a better job for the United States. Thank you.

[The document referred to by Mr. Eberle follows:]

TRADE REFORM ACT OF 1973

Testimony for the Record by Ambassador William Eberle, United States Special Representative for Trade Negotiations, with Ambassador William Pearce, Deputy Special Representative for Trade Negotiations, and Mr. John H. Jackson, General Counsel, Office of the Special Representative for Trade Negotiations.

Gentlemen:

In this document, designed to be tabled and inserted for the record, and not presented orally, I intend to present for your information an explanation and statement of reasons supporting each major portion of a proposed bill transmitted to the Congress by the President on April 10, 1973, entitled the "Trade Reform Act of 1973" and introduced as H.R. 6767. I will take up each major title of that bill in time, and try to indicate to you what this Administration intended by the provisions, what were the reasons and arguments which persuaded the Administration to recommend the provisions in the form contained in this bill, how they compare with prior law, and in general how those provisions are likely to be utilized by the President.

TITLE I-AUTHORITY FOR NEW NEGOTIATIONS

Some of the most important provisions of the Act are contained in Title I which is designed to reestablish authorities necessary to conduct and to implement the results of a new round of trade negotiations. These authorities are of two basic types: 1) tariffs: authority to eliminate, reduce, impose, or increase tariffs, or to maintain existing duty treatment on products, provided such changes, if any, are pursuant to trade agreements concluded with foreign countries during the next five years; and 2) other barriers: a mandate to negotiate agreements with foreign countries on other trade barriers; a new optional procedure for submitting agreements to Congress for review and possible veto by resolution of either House; and advance authority to implement agreements on a limited number of specified barriers. In addition, the Title would reenact the procedures in the Trade Expansion Act of 1962 which require the prior advice and views of the Tariff Commission, Executive agencies, and the public with respect to tariffs, with comparable Executive branch procedures on other trade barriers which are the subject of negotiations.

One of the major purposes of the Trade Reform Act is to provide the President the necessary authority and Congressional support to achieve two main overall objectives: (1) a more open and equitable world trading system through the progressive reduction of barriers which distort trade; and (2) reform of world trading rules and practices which will be accepted and applied by all major trading countries, including a multilateral safeguard guideline to provide a more orderly trading system and to assist adjustment and avoid dislocations. Barrier to agricultural and industrial trade take many forms. Tariffs continue to afford significant protection on many products, and other trade barriers and trade-distorting measures have become relatively more important as tariffs have been reduced. The proliferation of preferential trading arrangements in recent years discriminate against exports of the United States and other countries not parties to the arrangements. The negotiations will be broader in scope than the prior negotiations which focused primarily on tariffs. To achieve our objectives, they must deal with the whole complex of barriers to trade in agricultural and industrial products, and open up new approaches to deal with problems arising from discrimination.

In February 1972 the European Community and Japan joined with the United States in written declarations undertaking to seek authority for "multilateral and comprehensive negotiations" to begin this fall which "shall be conducted on the basis of mutual advantage and mutual commitment with overall reciprocity." Foreign countries with parliamentary systems of government will bring to the negotiating table broad authorities to alter their trade barriers. While

the President has the Constitutional authority to negotiate and conclude agree ments affecting tariffs, since the June 1967 lapse of authority in the Trade Expansion Act, he has not had authority to implement such agreements insofar as they affect tariffs or other domestic laws.

Since 1934 the Congress has periodically delegated the President authority to implement the results of reciprocal tariff agreements. The proposed Act would continue this precedent. This authority is necessary to ensure maximum participation and commitment by other countries to reduce their trade barriers. The goal of the negotiations should be set as high as possible. To achieve its objectives, the United States cannot afford to allow other countries to limit the scope of the negotiations at the outset by pointing to limitations in the United States authority. If the initial scope is narrowed, the opportunity to deal with barriers to our trade will be sharply reduced. The authorities requested provide the President the flexibility and bargaining leverage required to deal with all anticipated negotiating problems.

TARIFFS

Congress in the past has granted authority for the President to reduce or increase United States tariffs up to specified maximum amounts. The most recent grant of authority, in the Trade Expansion Act of 1962, enable the President to implement the results of negotiations leading to tariff reductions of up to 50 percent below the then existing duty levels. This limitation did not apply to duties of five percent or below, trade agreements with the European Community on agricultural commodities, or to certain tropical agricultural and forestry products. In these cases tariffs could be reduced to zero by agreement. In addition, the Act provided authority to eliminate all tariffs on products for which the United States and the European Community, of which the United Kingdom was expected to be a member, accounted for at least 80 percent of world trade.

These provisions in the Trade Expansion Act represented very substantial tariff reducing authorities, particularly since overall tariff levels were about 50 percent higher prior to the Kennedy Round of trade negotiations than they are today. Present tariff levels on dutiable industrial products average about eight per cent for the United States.1 Consequently, even though the statutory authority in the proposed Act imposes no lower limit on tariff reductions, the scope of the power to achieve trade expansion through tariff reductions is in practice limited by the lower tariff levels from which the new negotiations would begin. Specific percentage limitations on tariff reducing authority would result in only small percentage point reductions overall and could leave a significant number of restrictive duties largely intact.

the significance of tariffs has also been diminished by exchange rate realignments in the past two years. The Smithsonian and February 1973 monetary agreements combined resulted in an overall appreciation of the major currencies of Europe and Japan against the dollar of about 25 percent. Even if all tariffs were to be eliminated immediately, the effect would not by any means offset the benefits to United States industries in domestic and foreign markets resulting from the more realistic relationships of the major world currencies.

Limited authority to reduce or increase tariffs would be insufficient for the type of multilateral negotiations now envisaged. First, it would greatly reduce the scope of the President's bargaining leverage and flexibility at the negotiating table. Negotiations on tariffs could take several forms, employing a variety of techniques. The GATT and OECD have been considering a number of possible tariff negotiating approaches in their pre-negotiation preparations. These possibilties include an across-the-board or linear approach; negotiations on particular product sectors which would include negotiations on trade restrictions other than tariffs; harmonization of duty rates among countries overall or on particular products or product sectors, which could involve increases as well as decreases of tariffs; item-by-item negotiations; or combinations of these techniques.

If other countries were willing, a broad authority would enable the President to negotiate the phased elimination of tariffs on most products over an extended period or to negotiate a combination of actions. For example, an agreement could result in the elimination of duties on some products, reductions of tariffs

1 By comparison, tariff levels average about eight percent for the European Community, 11 percent for Japan and 14 percent for Canada.

by the same or varying amounts on others, and no reductions or tariff increases on other products.

Second, a lesser authority would not provide sufficient negotiating leverage to obtain a solution to some of the major trading problems of particular concern to the Administration and to the Congress. One problem of increasing importance is the proliferation of preferential trading arrangements in recent years. According to one study, these arrangements account for over one-quarter of most of world trade and over one-half of the imports in some of the most important markets for United States exports.

Limited tariff authority would severely restrict the bargaining power necessary to obtain a solution to problems raised by the discriminatory aspects of these trading arrangements. Foreign countries will have an excuse to continue their resistance to changes in these agreements if the scope of United States trade authority is restricted. The large number of parties to these arrangements constitutes a considerable voting power in the GATT. Solution to the problem of tariff discrimination may, therefore, be less difficult to achieve in the context of trade negotiations than through reform of the applicable GATT Article XXIV provisions.

Authority to increase tariffs contained in the Trade Expansion Act of 1962 was subject to a limit of 50 percent above the duty rates existing on July 1, 1934. Title I of the proposed Act would enable the President to increase tariffs without a percentage limit in the context of trade agreements. However, this authority is subject to agreement of the negotiating parties, which again is a practical limit to the authority. The authority would not be used to raise tariffs across-the-board. Rather, it is required for possible use in specific types of cases in the context of trade negotiations. For example, tariff relationships in particular product sectors might warrant the harmonization of duty rates among major countries involving some tariff increases as well as decreases. This approach was used in the steel sector during the Kennedy Round. The authority might also apply to the issue of tariff disparities on a number of products.

The authority to increase tariffs, in conjunction with the authority provided in section 103, could be used to convert other types of trade barriers to fixed tariffs and then to schedule their reduction. For example, quantitative import restrictions and other such measures insulate large areas of trade from the adjustment process. The conversion of such barriers to price-based measures could work toward the overall objective of adjustment, including greater responsiveness to currency changes.

While 1934 tariff levels are high on most products, it is conceivable that conversion to tariffs of other trade barriers on some products which have low statutory rates of duty could necessitate raising tariffs to more than 50 percent above the statutory levels. Practical constraints, such as agreement by our trading partners, and the inflationary impact on the domestic economy would preclude any widespread use of substantial tariff increases.

TRADE BARRIERS OTHER THAN TARIFFS

Trade barriers other than tariffs have become increasingly important restrictions to exports of all countries partly as a result of regional trading arrangements in Western Europe and the increasing influence of environmental considerations. An inventory prepared in the GATT of identifiable trade barriers in effect in member countries consists of about 800 notifications. These have been organized into 27 categories of barriers.

Some of these measures restrict imports directly, such as quantitative limitations and state trading; others, such as government procurement and product standards, give preference to domestic producers; some measures impede imports but were instituted for social reasons, such as health and sanitary regulations; some constitute additional charges at the border, such as variable levies; other subsidize exports rather than restrict imports. Some of these barriers have a major trade impact, others do not. In most cases it is difficult to quantify their impact on trade with any degree of precision. All have a cost to the countries affected.

Given the wide variety of such measures, their links to domestic legislation in all countries, and their varying impact on trade, there is no single negotiating approach for seeking multilateral solutions. Agreements on most types of measures would also require larger commitments from some countries than others. Therefore, there are few areas where solutions could be imple

mented independently of agreements on other trade barriers. Some barriers, however, might be the subject of international codes, such as product standards and government procurement practices. In other areas government regulations might be harmonized or general principles of behavior adopted. Other practices might be eliminated or converted to tariffs. It is also conceivable that agreements on some or all of these barriers might be made contingent on the successful conclusion of the negotiations as a whole.

The greater the President's authority in advance to implement agreements of mutual trading benefit, the greater will be his negotiating credibility abroad. Foreign countries have expressed little interest in negotiating future agreements without some degree of assurance that such agreements are potentially acceptable to the Congress and that procedures for implementation are clear. The Administration attaches a great deal of importance to the reduction of trade barriers other than tariffs in the forthcoming negotiations. If the trade legislation emphasizes primarily tariff authority, foreign countries may wrongly draw the conclusion that the United States attaches relatively low priority in the negotiations to other trade practices.

The primary purposes of the provisions in section 103 are two-fold: (1) to provide the President with as much negotiating flexibility and leverage as possible to meet any negotiating situation; and (2) to provide a new mechanism for liaison and cooperation with and consideration and review by the Congress with respect to agreements that require legislation for implementation. The Administration would, in addition, welcome the Congress making specific further provision for better coordination and consultation between the Legislative and Executive branches to ensure effective cooperation on all matters relating to the trade agreements program.

Section 103 contains a statement of the Congress urging the President to negotiate with foreign countries for the reduction, elimination, or harmonization of barriers and other distortions of international trade in order to provide better market access for United States exports. While the President can negotiate international agreements on any subject, a specific mandate from the Congress to negotiate on these trade barriers is very desirable for negotiating purposes. The statement would make it clear to foreign countries that the United States is serious in its intention to seek solutions to trade barriers and other trade distorting measures, and that the negotiators have the support of the Congress in seeking agreements. The reports of the House Ways and Means and Senate Finance Committees on the Trade Act of 1970 contained statements encouraging international discussion, but not a clear-cut mandate for negotiations on trade barriers.

It is difficult to frame general implementing authorty which can apply to the various types of agreements covering trade barriers other than tariffs, particularly when a number of domestic laws may apply. Consequently there are three categories of procedures for the implementation of such agreements, considered in section 103. The "mandate" in section 103 (a) and (b) does not add to the current power of the President to implement such agreements. In some cases he may already have authority (under prior statutes on the Constitution) to implement agreements. In other cases he could submit an agreement in the Senate as a treaty, or seek new legislation from the Congress.

Section 103 (c) of the Act provides a second procedure for implementing agreements. It would give the President advance authority to implement agreements without further recourse to Congress with respect to a limited list of subjects including methods of customs valuation, establishing the quantities on which assessments are made, and harmonization of requirements for marking the country or origin. Agreements relating, for example, to the American Selling Price basis of valuation, section 402 (a) of the Tariff Act of 1930 (Final List), the wine gallon/proof gallon basis of assessment, and simplification of the methods of valuation could be implemented under this authority.

Advance authority on these matters would provide some bargaining leverage to obtain concessions of significance to United States exporters. These foreign concessions would not necessarily have to be in the customs field, or on the same subject. The items selected for inclusion on the advance implementation list are not selected because they represent wrongs or weaknesses in the United States system, but rather because they are of interest to our trading partners and could lead to reciprocal offers from them on other or similar matters. It is hoped that the Congress will see fit to add categories which it believes are appropriate for this type of treatment.