(b) (1) With the approval of the Council, the Executive Director may appoint and fix the compensation of such staff as he deems necessary.

(2) Section 5315 of title 5, United States Code, is amended by adding at the end thereof the following:

"(96) Deputy Director, Council on International Economic Policy.". (3) Section 5316 of title 5, United States Code, is amended by adding at the end thereof the following:

"(132) Assistant Directors, Council on International Economic Policy (2).". (c) With the approval of the Council, the Executive Director may procure temporary and intermittent services to the same extent as is authorized by section 3109 of title 5, United States Code, at rates not to exceed the daily equivalent of the rate now or hereafter provided for GS-18.

(d) Upon request of the Executive Director, the head of any Federal agency is authorized to detail, on reimbursable basis, any of its personnel to the Council to assist it in carrying out its duties under this Act.

AUTHORIZATION FOR APPROPRIATIONS

SEC. 8. For the purpose of carrying out the provisions of this Act, there is authorized to be appropriated for fiscal year 1973 the amount of $1,400,000.

Mr. ASHLEY. We are pleased to take testimony now from Hon. Peter G. Peterson, Secretary of Commerce, and Frank C. Carlucci, Associate Director of the Office of Management and Budget.

Mr. Peterson, we would be happy if you would proceed, keeping in mind the need to leave ample time for questioning by members of the subcommittee.

You have a prepared statement. If you wish to have that inserted in full in the record you may do so and summarize it, or if it is relatively short, as it appears to be, you can simply proceed with the full

statement.

STATEMENT OF HON. PETER G. PETERSON, SECRETARY OF

COMMERCE

Mr. PETERSON. Thank you, Mr. Chairman. I think I would like to start by making some personal comments about this whole area that I am delighted that you are looking into.

I spent a year of my life in this activity during a very pivotal period in the international economic policies of the United States. It is a subject close to my heart and I know to yours. So I would like to give you a little bit of personal background here.

In January of 1971, when the President first talked to me about this new job, this new assignment, I think he made the very important point that he thought that the United States and the world were moving into a new era and the new era in a world of increasing nuclear parity could be characterized as one in which economic competition and hopefully peaceful competition would reign and that increasingly economic power would have a larger and larger influence on the country's political power in the world. It seemed to call for a new kind of foreign diplomacy that included a larger measure of what you might call economic diplomacy. I would describe this by a series of phrases. In the first place, it seemed to me that what this kind of world called for was a policy that was assertive of U.S. interests without being hostile, a policy of protecting U.S. interests without being protectionist, a policy of looking toward an open world without living in a kind of fairy world, a policy of being a mature and constructive

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leader rather than what some would call a sugar daddy, a policy of reasserting the attitudes and points of view of the Yankee trader whom we may remember bargained hard to be sure but he also marketed hard because he was somebody that believed in more trade rather than less trade.

Now, in coming up with a new foreign economic policy you are very much aware, I know, Mr. Chairman, that one of the issues we have to deal with here is what you might call the constituency issue, if I can speak candidly with you. Traditionally, each of the departments have been expected to have a certain point of view about foreign economic matters. The Commerce Department, for example, is expected to be preoccupied with matters relating to exports.

I told somebody the other day that just because a person is Secretary of Commerce does not mean that he cannot know what is going on in the world.

But at least there was a presumption that the Commerce Department, for example, would have that point of view.

The State Department, on the other hand, would be characterized as having a view that put a great deal of emphasis on friendly relations with other people. The Treasury Department was characterized as someone that was interested or preoccupied essentially with monetary matters or technical matters. And I think the fact that each department traditionally brings a particular point of view to this problem is one of the things that may have explained what I have called in other places a kind of preceptional euphoria this country had about its position in the world, and you know that, you and I have discussed it personally, the view that we were so far out in front we did not need to worry about competition and about our economic interests and so forth.

What I am saying, Mr. Chairman, is that when particular groups look at pieces of the problem rather than looking at it for what it is, which is a highly complex interrelated problem, it is not just a balanceof-payments problem, it is just not a foreign policy problem, it is just not a domestic industry problem, it is all of these problems and more.

One of the most important functions that is needed frankly is what I would call an education function in which there is a forum in which the various departments talk to one another, learn from each other what these other issues are.

So I give you that very brief background because certainly the guidance that I got from the President was certainly confirmed by my year's experience that this kind of forum was needed.

My statement is a brief one. I think I can read most of it though I do not need to read all of it. I will introduce my associate here in a moment.

As you may know, I have been closely involved with the Council on International Economic Policy from two different positions. I served as its first Executive Director-a role in which it was my responsibility to collect and synthesize for presentation to the President the sometimes divergent views of various governmental agencies in matters of international economic policy. Now, as Secretary of Commerce, I serve as a member of the CIEP.

Someone has suggested to me that my change in positions is roughly equivalent to switching from the job of running the distillery to that of being a supplier of the mash. Be that as it may, both my earlier

position and my current experience perhaps give me a good perspective of the Council's operations. Before I give you my own views, however, I would like briefly to review some of the events and the thinking leading to the formation of the Council.

The establishment of the Council on International Economic Policy was recommended to the President by his Advisory Council on Executive Organization, chaired by Mr. Roy L. Ash, in late 1970.

The Ash council's analysis concluded that then existing structures. and procedures in the executive branch for dealing with international economic affairs were dispersed among some 60 departments, agencies, and committees with no consistent, formally structured means of providing advice to the President or insuring the development of a coherent policy considering all the facets of the various issues. In response to the Ash council's recommendation and in recognition of the growing interdependence of the world's economies and the necessity for the United States to pursue well-thought-out logical and consistent foreign trade, investment, and monetary policies, the President established the Council on International Economic Policy by memorandum, dated January 19, 1971.

The Council on International Economic Policy is chaired by the President and is composed of key Cabinet level and Executive Office officials. Its purposes, as stated in the President's memorandum are: 1. Achieve consistency between domestic and foreign economic policy.

2. Provide a clear top-level focus for the full range of international economic policy issues; deal with international economic policies― including trade, investment, balance of payments, finance as a coherent whole and consider the international economic aspects of essentially foreign policy issues, such as foreign aid and defense, under the general policy guidance of the National Security Council.

3. Maintain close coordination with basic foreign policy objectives. The Council itself meets periodically, as necessary, to fulfill its function. A "senior review group" and an "operations group" to deal with those problems which do not require the attention of the Council itself. The Executive Director of the Council is responsible for the organizing of the general secretariat of the Council and for necessary staff work and has ready access to the President.

For your examination I am providing separately a more detailed statement of the organization of the Council and its various subgroups for fulfilling its mission.

In summary, however, it is correct to say that the organization of the Council and the composition of its staff reflect its coordinative and advisory role. The Council and its staff do not duplicate the efforts of other agencies, but rather provide an organized method and a forum for delivering to the President the very best advice it is possible to obtain as the basis for his decisions in international economic matters.

It seems to me that you gentlemen, as members of this committee, are interested in answers to at least three important questions, in your deliberations with respect to this bill:

First, is there a genuine long term need for another policy advisory organization at the White House level, this one specializing in international economic affairs?

Second, what kind of performance record does the Council have to date?

Third, should it be given legislative authorization?

At the time the President created the Council on International Economic Policy on January 19, 1971, he appointed me as its first Executive Director and his Assistant to the President for International Economic Affairs. I served in that capacity until February 29, 1972, at which time, Mr. Peter M. Flanigan was named as my replacement. Everything that I learned during my assignment with the Council and all of my experiences since undertaking my current position have convinced me of the urgent need to bring a new long term emphasis and focus to international economic matters.

I believe that we have moved into a new era-that the 1970's will be a decade in which international economic matters will become increasingly important and crucial in determining not only the kind of life we live in the United States, but the kind of world in which we will exist. In the months ahead, a variety of economic issues must effectively be dealt with if we are to avoid not only troublesome domestic issues but also if we are to avoid risk to a growing, but still sensitive system of international economic relationships. We cannot afford to jeopardize this system, for it is our hope that international economic competition with cooperation will supplant the political and military rivalries of the past.

I need hardly list the international economic problems we face in the immediate future. They are many, ranging from meeting or adjusting to the competition of foreign imports, to a reform of our international monetary system and expansion of our trading relationships with the U.S.S.R. and other nations with whom our economic relationships have long been minimal.

The President deserves the very best information and advice obtainable in making crucial decisions on these and many other issues with international economic implications. The Council on International Economic Policy is, I believe, the organizational vehicle best suited to provide such advice.

I would like to turn briefly now to the second question:

"What has the Council accomplished since its inception?" In the short time that it has existed, the Council has proved to be an invaluable instrument for advising the President on international economic policies. The Council, its various suborganizations and its staff have been intimately involved in the major economic decisions which have been made in recent months.

Since its inception, the Council itself has met on several occasions. Additionally, under the Council's organizational apparatus, there have been nine senior review group meetings, six operations group meetings, and countless coordinative meetings at lower levels.

The Council is served by a small staff, now totaling 26, all of whom are on temporary detail from other Government agencies.

An early task of the Council, undertaken at the specific request of the President, was development of an overall assessment of the evolving U.S. situation in international economic affairs over the next two decades.

This study, which was subsequently published and provided to the Congress, under the title, "The United States in the Changing World Economy." I think this has been of significant value in defining the

many international economic problems we will face in the years ahead and the drawing public interest and attention to them.

In addition to this general assessment, comprehensive studies on other issues of major international economic policy importance have been undertaken. These efforts have dealt with a wide variety of topics, including such subjects as our trade relations with the U.S.S.R., Canada, the People's Republic of China, and the European community.

In each instance, the bulk of the actual study effort has been performed by the various appropriate Government agencies with CIEP staff members functioning largely in a coordinating and synthesizing role.

Additionally, CIEP staff members performed essential background work on options submitted to the President by the Assistant to the President for International Economic Affairs. These matters included a wide variety of topics such as meat import quotas, tariff rate actions on various items of interest to domestic producers, informal agreements on items such as textiles and specialty steels, and numerous other topics of importance to specific producer or consumer interests, but not requiring attention of the Council itself.

As a result of the Council's existence, the President has been better prepared and informed in meeting not only immediate international economic issues, but also in developing a strategy for dealing with our longer range concerns.

Finally, I would like to deal with the third question-"Should the Council be given legislative authorization?"

Mr. Chairman and members of the committee, as we move in the following months to prepare for major trade negotiations, as the need for new legislation in the international economic area becomes more urgent, and as we consolidate the great strides which have been made by the President's visits to Peking and Moscow, it seems to me that the great value, in fact the necessity of the Council becomes all the more evident. For too long, we have relegated international economic issues to a secondary place in our governmental organization. I believe it is crucial at this point in time that the Council be given a legislative stamp of approval, that it be given legislative authorization and funding so that it can, with even greater effectiveness, bring together for the President the varying views of individual agencies on the critical policy issues which are going to be facing us over the next few years in both our monetary and trade negotiations with our foreign partners. Obviously, the Congress will be a vital partner with the executive branch in these deliberations.

I believe I can summarize my views with a quotation from the recent report of the Commission on Trade and Investment-the so-called Williams Commission. The report states: "The Commission regards the establishment of the new Council on International Economic Policy as a significant step in providing a unified prespective on international economic policy. The Council should be given permanent status and sufficient funding through legislative action."

I would now like to let Mr. Frank C. Carlucci turn to specific provisions of the bill and advise the committee regarding the administration's views and some suggested alterations.