TABLE 4.-Swiss watch and other timepiece movements, cased and uncased: United States imports for consumption 1945, and by months 1946, and first quarter of 1947 1

3 Figures do not include 5,900 units for 1946 and 6,400 units for January-March 1947 imported from France and of French origin.

Source: Compiled from official statistics of the U. S. Department of Commerce.

TABLE 5.-Clocks and clock movements: Swiss exports to United States, 1945, 1946, and first quarter of 1947

1 Not reported by number. Values in Swiss francs converted at 1 franc equals $0.2336. Source: Official Swiss statistics.

TABLE 6.-Clocks and clock movements: United States imports for consumption, 1945, 1946, and first quarter of 19471

Source: Compiled from official statistics of the U. S. Department of Commerce.

Senator MILLIKIN. Now, Mr. Brown, what is the life of the Swiss trade agreement?

Mr. BROWN. It may now be denounced at 6 months' notice. The original 3-year period has expired.

Senator MILLIKIN. So that either party could denounce it on 6 months' notice?

Mr. BROWN. Yes, sir.

Senator MILLIKIN. If the agreement is considered desirable in its over-all aspects, that affords you good leverage for a deal, does it not?

Mr. BROWN. If we consider it desirable from our point of view, Senator, I do not think that it would.

Senator MILLIKIN. Well, assuming the facts are as reported here, do you feel that the favorable trade balance that we have with Switzerland is sufficient to warrant the continuance of that agreement despite the facts which Senator Lucas has developed?

Mr. BROWN. I think it would be desirable to continue the agreement. I think it would always be desirable to have an escape clause in it.

Senator MILLIKIN. As between our choice of continuing the agreement and continuing this situation, would you choose to denounce or would you choose to stand by the agreement?

Mr. BROWN. I prefer not to answer that question, sir, for reasons which I think are quite obvious: that I do not have a definite position on it, and in the second place, if I did have it, I do not think it would be a good thing to have the Swiss know.

Senator MILLIKIN. I mention again that you have quite a little trading point there. As these watches came into this country through this circuitous route, did the State Department know the quantity of those imports, what they usually were?

Mr. BROWN. I do not think that there was usually a considerable amount of third-country imports.

Senator MILLIKIN. Was that factor in mind when the deal was made?

Mr. BROWN. Yes.

Senator MILLIKIN. Still, no proper caution was made against that until it was too late?

Mr. BROWN. We have no power to impose a quota by Executive action.

Senator MILLIKIN. You had the power to deal with Switzerland. Mr. BROWN. Only to the extent that they would agree.

Senator MILLIKIN. Did you attempt to make allowance for the possible destruction of the agreement by circuitous exports?

Mr. BROWN. They refuse to make any undertaking that they would limit the indirect imports, because they did not think that they could live up to that undertaking as a practical matter, but they did take the measures that were open to them and did effect a very substantial reduction of those indirect exports.

Senator MILLIKIN. As a practical matter, you make a deal with. them to achieve a net income of 7,000,000 plus, and that is upset by the circuitous imports.

What affirmative steps did you take not to limit the circuitous imports, but to limit the 7,000,000 if circuitous imports developed?

Mr. BROWN. There were no steps that we could take, we had a defininte agreement on that point, and that was as far as they would go.

Senator MILLIKIN. You believe that would be outside of the realm of a fair negotiation?

Mr. BROWN. I do not understand that question, sir.

Senator MILLIKIN. I think any businessman trying to secure a net effect of 7,000,000 imports would take those protective provisions to bring that result, and with the information before you that the results would be upset by circuitous imports which you could not prevent, you could put elasticity in your 7,000,000.

Mr. BROWN. Sir, I think that I have not made clear what the objective was that we were endeavoring to achieve by the agreement. The objective we were trying to achieve by the agreement was to secure a limitation on the imports of Swiss watches to a figure which would permit the domestic jeweled watch industry during the period ending in March of 1947 to sell all of the watches that it could produce, and that we did achieve by this agreement, because they sold every watch that they could produce, and in the agreement the Swiss undertook to limit their direct imports to 7,700,000 and as far as the direct imports were concerned, that was the agreement that we made. We knew there would be some indirect ones, and we did not know how much they would be.

Senator MILLIKIN. I am merely suggesting that you did not protect your main base sufficiently against these indirect imports. Now, Switzerland has a completely controlled economy on the watch business, has it not?

Mr. BROWN. There is a considerable degree of Government control. Senator MILLIKIN. You were here when we read the report from the legation at Bern, and they have control over exports and so the Swiss Government as such can keep that matter in complete control? Mr. BROWN. Yes.

Senator MILLIKIN. Which I suggest also gives you further bargaining power, and that leads me to the question: Are you attempting to cure this situation with any kind of negotiations at the present time?

Mr. BROWN. I would prefer to state we are taking every step that we can, and will continue to do so to get the escape clause in every trade agreement which we do not have.

Senator MILLIKIN. I am not talking about the escape clause. I am talking about making a further agreement with Switzerland to bring their exports under some sort of an allocation.

Mr. BROWN. No, sir. We are not.

Senator MILLIKIN. Have you any intention of doing so?

Mr. BROWN. Not at the present time.

Senator MILLIKIN. I have received information which I do not vouch for at all, that this Swiss allocation was to be 3,000,000, and that it was pretty well agreed all of the way along the line, including the United States officials, that was mysteriously upset by some intervening influences here.

Just to clear the atmosphere on that, will you make a statement of fact?

Mr. BROWN. The original proposal asked for by the domestic watch industry was a quota of 3.000,000 for the reasons which I gave you (and they estimated that that would be what the market would be). That proposal was made to the Swiss Government and it was incontinently rejected by them, flatly, and absolutely, and they would not even consider it. That was the mysterious influence, sir.

Senator MILLIKIN. And that answers completely what I heard. I heard that Switzerland was inclined to be favorable, but that the deal was almost negotiated when it was upset by some extraneous influence or intervention here.

Mr. BROWN. I am delighted that you asked the question, because that is absolutely not the case.

Senator MILLIKIN. I am glad to hear that. Thank you.

The CHAIRMAN. Mr. Reporter, here is a letter from the Secretary of the Treasury which bears on this bill before the committee, and which you will please enter in the record.

(The letter is as follows:)

Hon. WALTER F. GEORGE,

Chairman, Committee on Finance,

TREASURY DEPARTMENT, Washington, February 23, 1949.

United States Senate.

MY DEAR MR. CHAIRMAN: Further reference is made to your request for the views of this Department on H. R. 1211, to extend the authority of the President under section 350 of the Tariff Act of 1930, as amended, and for other purposes. The bill would extend the Reciprocal Trade Agreements Act to June 12, 1951, and would restore the provisions for the negotiation of reciprocal trade agreements which were effective prior to the amendments introduced by the Trade Agreements Extension Act of 1948 passed by the Eightieth Congress and reluctantly approved by the President. The bill has been passed by the House of Representatives and its action was in response to the President's message of January 8, 1949, repeating his recommendation of March 1, 1948, that the reciprocal trade agreements program be continued as it operated prior to the 1948 legislation.

On June 2, 1948, while the Senate had under consideration H. R. 6556 (80th Cong.) which later became, with amendments, the Reciprocal Trade Agreements Extension Act of 1948, I set forth the views of the Treasury Department on the bill in a letter to the then chairman of the Committee on Finance of the Senate. At that time I wrote:

"The bill purports to extend the reciprocal trade agreements authority in the Executive for an additional period of approximately 1 year, but in the judgment of this Department its provisions are such as to disrupt the present smoothly operating interdepartmental machinery and to render the reciprocal trade agreements program unworkable."

A detailed report on the difficulties encountered in administering the reciprocal trade agreements program in accordance with the procedural requirements set forth in the 1948 act has been put before the House Committee on Ways and Means by the Department of State and will be presented by that Department to your committee. The Treasury Department shares responsibility for the administration of the program and is in full agreement with the statement of the Department of State.

However, there is one aspect of the question which I particularly wish to bring to the attention of your committee. Under the provisions of the Bretton Woods Agreements Act, I serve as Chairman of the National Advisory Council on International Monetary and Financial Problems, the interdepartmental body which has responsibility for coordinating the policies and operations of this Government in the foreign financial, exchange, and monetary fields. Currently, the Council is giving its primary attention to a series of far-reaching programs involving financial assistance for other countries of the world. In carrying out these functions, the Council has constantly borne in mind the policies enumerated by the Congress in this connection, calling for the progressive reduction of trade barriers, the elimination of unfair trade practices, the expansion and balanced

growth of international trade, and the establishment of stable international economic relationships (Bretton Woods Agreements Act, sec. 14; Economic Cooperation Act of 1948, sec. 102 (a)).

The achievement of these aims and the restoration of a healthy international economy cannot be accomplished merely by looking backward toward a restoration of prewar conditions. Far-reaching developments in world economic relationships require that we plan for a changed basis for international economic stability, if our friendly partners in the world community are generally to achieve economic self-sufficiency. The careful and selective study and progressive elimination of trade barriers must go hand in hand with the programs of financial assistance we are administering. For this reason I consider the reciprocal trade agreements program to play a vital role in supporting our foreign financial policies.

For the foregoing reasons, I strongly urge that your committee give favorable consideration to H. R. 1211.

This Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee.

Very truly yours,

JOHN W. SNYDER, Secretary of the Treasury.

Senator MILLIKIN. The material that you are going to supply me, Mr. Brown, and which you supplied to Mrs. Springer, was sent over to the printer to be put into the record, and the material is very important for my further examination of yourself, and so I would like to have copies of that material sent to my home tonight so that we do not have a lot of delay in waiting to get that back from the printers. Mr. BROWN. I will do my best. We sat up pretty late late night getting that original copy for you.

Senator MILLIKIN. Do you not have a copy of that?

Mr. BROWN. I think that we may have a copy.

Senator MILLIKIN. The material is important in my examination, and by a misadventure for which I am not responsible and for which I blame no one, the material went to the printer's office, and is unavailable to me.

Mr. BROWN. Senator, if you would not mind an extremely rough and perhaps a little bit messy copy, I will be glad to give you the one was prepared for me.

Senator MILLIKIN. As long as the facts are the same, it is entirely agreeable to me.

The CHAIRMAN. Do you have that here?

Mr. BROWN. Yes; I have it here because I thought Senator Millikin was going to ask me about it.

The CHAIRMAN. I have a number of documents which have been received by the committee, and I will insert these documents in the record at this point.

We have received a statement from Harry B. Hilts, secretary, Empire State Petroleum Association, Inc., and a statement from Senator Francis J. Myers of Pennsylvania.

We have received a statement submitted on behalf of the American Association of University Women.

There is also a statement of C. T. Murchinson, President of the Cotton Textile Institute, Inc.

There is a further statement of Marion R. Garstang, counsel of the National Cooperative Milk Producers Federation, which will be inserted.