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only at the time specified in legislation enacted by the

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Congress to implement the provisions of the Code.

The CHAIRMAN. Our first witness is Mr. William M. Roth, Ambassador and Special Trade Representative.

Mr. Roth, we are pleased to have you before the committee today and we will listen with interest to your statement.

STATEMENT OF AMBASSADOR WILLIAM M. ROTH, SPECIAL REPRESENTATIVE FOR TRADE NEGOTIATIONS, ACCOMPANIED BY JOHN B. REHM, GENERAL COUNSEL, OFFICE OF THE SPECIAL REPRESENTATIVE FOR TRADE NEGOTIATIONS; FRED SMITH, GENERAL COUNSEL, DEPARTMENT OF THE TREASURY; AND MATTHEW J. MARKS, DEPUTY TO THE ASSISTANT SECRETARY, DEPARTMENT OF THE TREASURY

Mr. ROTH. Mr. Chairman, thank you very much. We are delighted to have this opportunity to appear before this committee. We have had the chance in the past to discuss this question in some detail with members of the committee individually. As you know, from previous correspondence, we have long felt that a meeting such as this would be very useful, because we would like to lay out as carefully as we can what the code is and how it relates to the law.

I would like to introduce Mr. John Rehm, our General Counsel and Mr. Fred Smith, General Counsel of the Treasury. This is very much a matter for lawyers and I feel like an innocent in the middle. So they will, with me, answer questions after my statement.

I would also, Mr. Chairman, like, if it were possible, to be able to reply to the public testimony at least by filing a brief after the discussion is over.1

The CHAIRMAN. I think that is very fine, Mr. Roth, and I would suggest that in fairness, the opposition should be entitled to rebuttal as well. The committee will accord them the same opportunity.2 Mr. ROTH. Thank you.

Mr. Chairman and members of the committee, I appreciate this opportunity to testify with respect to the International Antidumping Code, which was negotiated and signed in Geneva as part of the Kennedy round last June. In particular, I should like to discuss briefly three aspects of the code the benefits to be derived from the code, its consistency with the Antidumping Act, and the importance of the code to the long-range effort of trade liberalization.

During the Kennedy round, we were mindful of any existing trade device maintained by other countries which, through little used to date, could have an adverse impact upon our trade in the future. We were especially concerned that the reduction of tariffs would lead other countries to a more prevalent-and protectionist-use of their antidumping laws.

Since 1948, article VI of the GATT has provided for the imposition of dumping duties on a product which is sold at a price in the United States, for example, lower than its home market price, and which, as a result, causes or threatens material injury to a domestic industry. However, there were several problems with this article, which was in fact modeled upon our own Antidumping Act. In the first place, it

1 The executive department rebuttal statements appear on pp. 189-211. 2 Other witnesses waived their privilege of surrebutal; see pp. 211-212.

uses largely undefined criteria and lacks procedural safeguards in the handlingof dumping complaints. Moreover, certain countries have been able to rely on the "grandfather" clause of the GATT in applying their antidumping laws which would otherwise be inconsistent with article VI.

The CHAIRMAN. Mr. Ambassador, before we go any further, would you mind just giving us for the record, classic example of dumping so we can have it to illustrate the problem we are talking about?

Mr. ROTH. I will be glad to. I would like to call Mr. Matthew Marks of the Treausry Department, who actually deals with all our dumping cases on a day-to-day basis.

The CHAIRMAN. Mr. Marks, what would appear to you to be a classic example of dumping which is clearly contrary to rules of fair competition in international trade.

Mr. MARKS. In order to have dumping, Mr. Chairman, you have to have two things. You have to have "sales at less than fair value"-I will explain what that means-and then, you also have to have injury.

The Treasury Department is responsible for determining whether there are sales at less than fair value and the Tariff Commission is responsible for determining injury.

If both these factors are present, then the Treasury Department is required to assess antidumping duties.

Take, for example, a product which is being sold by a foreign company in its home market for $1. It is discovered upon investigation that the same product is being sold by the same foreign company in the United States for 90 cents. In this case there is a margin of dumping of 10 cents. It is a very simple example that I gave you. The Treasury Department would find sales at less than fair value in this example and would then refer the case to the Tariff Commission. If the Tariff Commission found injury to U.S. industry in this particular case, it would be referred back to the Treasury and we would then assess a dumping duty of 10 cents on top of all normal duties.

The CHAIRMAN. In other words, a company is selling its product for a $1 a barrel, let us say, in its own country, It finds it has a big surplus on hand but if it cuts its price in the domestic market the competitors in that country also are going to cut prices with the result that they are all going to lose money. So, to dispose of his surplus he simply ships to another country at whatever price it can bring, maybe 50 cents a barrel. He dumps it on the other country. That is the kind of thing we have in mind in dumping. When he does that, in most instances he is injuring the industry in the second country which is producing the same product. So he is disposing of his headache by dumping it on somebody else which in turn, creates a very severe problem over there. Mr. MARKS. The example you just gave, Mr. Chairman, would be a classical example of dumping.

The CHAIRMAN. Thank you. I can think of other illustrations but that is the kind of thing I had in mind.

Thank you very much.

Mr. ROTH. Canada, for example, has long had a dumping law which operates fairly automatically if a good is entered at a price lower than its home market price-regardless of the impact of such dumping upon the domestic industry in Canada. This has cost the United States

literally millions of dollars worth of trade. Aluminum is an example. We might sell at a lower price than Canada from time to time, but without injury to their industry. Nevertheless, under Canada's law, they could have in effect retaliated against us.

The CHAIRMAN. In other words, if the discrimination exists as far as Canada is concerned, that is dumping; is that right?

Mr. ROTH. That is right.

The CHAIRMAN. If Canada has a domestic industry producing the same commodity, and you put your commodity in there at a discriminatory price-selling beneath your own market price in this country— then as far as Canada is concerned you are dumping.

Mr. ROTH. That is right.

The CHAIRMAN. And, it does not require that there be a showing that a Canadian industry has been injured?

Mr. ROTH. That is right. And this is the law they will now change. With these problems-both actual and potential-in mind, we had three basic objectives during the negotiating of the code. The first was to insure that all the major trading countries accepted the fundamental proposition-embodied in our own law-that dumping duties are legitimate only when dumping causes injury to a domestic industry. The second was to try to define and flesh out some of the key concepts used in antidumping actions. Our third objective was to reach agreement on a set of open and fair procedures--of the kind that we have to protect exporters against whom a complaint of dumping is brought.

The code was negotiated pursuant to the President's constitutional authority to conduct foreign relations and not under the Trade Expansion Act of 1962 or any other piece of legislation. In particular, the President expressly authorized the Special Representative for Trade Negotiations to conduct the negotiations for the United States. From the outset, we took the position that the code could not go beyond our Antidumping Act. Accordingly, Senate Consurrent Resolution 100-which was never taken up by the House—was not applicable to the code. I should add that while we were not required by law to do so, our Trade Information Committee held public hearings in September of 1966 concerning the issues involved in an international agreement on dumping. Moreover, as the negotiations progressed we kept our congressional delegates regularly informed. Finally, both before and after the conclusion of the negotiations, we expressed our willingness to discuss the code with this committee in whatever detail it might wish.

What was finally negotiated in the Kennedy round is, I believe, to the advantage of both our exporters and our domestic industries. Our exporters will have the assurance of being able to defend themselves against dumping complaints and the confidence that the proper criteria are being applied in each case. Any domestic industry should be able to have its dumping complaint investigated and decided in a considerably shorter period of time. This has been a matter of concern to a number of complainants in the past. A domestic industry will also be in a better position to know what it must demonstrate in order to qualify for relief, and on the basis of criteria which are reasonable and consistent with the act. I would add that, when these criteria in the code are properly read, they are no more demanding than those which

have been used in the past. In short, it will not be any harder for a domestic industry in the future to obtain relief under the act than it has been up to now.

I should like to make clear that during the negotiations, we consulted with the members of the Tariff Commission and kept them informed of the progress of these negotiations. I myself participated in a lengthy session with the Tariff Commissioners in February of 1967, when we were very close to a final draft in Geneva. Moreover, a member of the staff of the Tariff Commission was present during virtually all of the negotiating sessions in Geneva, thereby permitting the Tariff Commission to remain continuously up to date. It is quite true that the members of the Tariff Commission-with the exception of the then Chairman-did not give their formal clearance to the final version of the code. At no time, however, was there a suggestion by any of the Commissioners that the code was in conflict with the Antidumping Act, although that issue was raised with them. As a result, we were under the distinct impression that the Commissioners did not have any reservations about the consistency of the code with the act. In short, we did our best to obtain the views of the Tariff Commission in formulating our negotiating positions and indeed, believed we had done so.

Let me now turn to the question of the consistency between the code and the act. Since I am not a lawyer, I can claim no special expertise and, indeed, I will leave it to the lawyers to answer any specific questions you may have in this regard. But, I would like to take up briefly the two basic assertions that have been made in an attempt to demonstrate that the code is in conflict with the act.

The CHAIRMAN. Mr. Secretary, you say the Tariff Commission did not notify you that they felt you were violating the act. That's certainly not true of this committee. We passed a resolution-we sent word to you that in our judgment you were going beyond your authority. We warned that if you went beyond your authority we expected to call your hand, and although we did not say it expressly in the resolution that we passed, the committee report did make reference to the Antidumping Act. I quoted it in my opening statement. I'll read it again. On page 3 we said:

Another area may involve the treatment of dumped goods by the country in which the dumping occurs. This problem concerns unfair trade practices in a domestic economy and it is difficult for us to understand why Congress should be bypassed at the crucial policy-making stages and permitted to participate only after policy has been frozen in an international agreement.

Now, that is what we were talking about at that time.

Mr. ROTH. Mr. Chairman, I am very well aware of Senate Concurrent Resolution 100. We felt it did not apply because what you were concerned about was any modification of the act by the code and, as we would like to explain in considerable detail later in the questioning, there was no such modification of the act by the code. The CHAIRMAN. Well, the Tariff Commission says you did and industry thinks you did. And, after we hear both sides, we will conclude whether we think you did.

Mr. ROTH. Fine. I merely want to say again, Senator, that we have discussed this with individual Senators and we have been anxious since early last summer to have a meeting like this because I think you should be satisfied.