Senator CLARK. That is all I ever attempt to state.

Senator JOHNSON. It is not the opinion of the Senator from Colorado.

Senator CLARK. I would not attempt to state the opinion of the Senator from Colorado.

Senator LODGE. I agree with the Senator from Missouri that the question is whether or not we approve of this policy, but the alternative if we reject this policy, the only alternative is not a return to excessive protectionism. That is what the automobile man said here yesterday, that it was either this policy or a policy of excessive protectionism, and it seems to me that is a most unwarranted assumption. Senator JOHNSON. Certainly there is no pending legislation that in any way has anything whatever to do with the 22 existing trade treaties that have been entered into.

Senator LODGE. You mean those stand and go on afterwards?
Senator JOHNSON. Just as they are, without change.

Senator LODGE. That is true.·

Mr. BESSE. May I make an observation, Mr. Chairman?

The CHAIRMAN. I suppose that will be argued on the floor. Do you want to make an observation?

Mr. BESSE. I was merely going to say that there is no existing rate which we have acquired as the result of any treaty which could not be left in the tariff act as the result of the flexible provision if it were possible to make out a case for that particular rate. There is no rate that has been lowered more than 50 percent, and it is quite possible to lower any rate 50 percent under the flexible provisions of the tariff if the board can make out a case for such a reduction. So the present rates are, if they are perfect, they can be easily maintained.

The CHAIRMAN. You would rather take your chances in the Congress than before this committee?

Mr. BESSE. I would not say that. I would rather take my chances with Congress than I would with a foreign negotiator.

The CHAIRMAN. You think they are pretty good people--the experts on this committee that negotiate these trade agreements?

Mr. BESSE. Splendid. But their recommendations have not always been followed. It is inevitable that they cannot be followed. A study is made of a particular industry but, although the study has been made with great care and with the best possible intention, after the study is made it has to be put into the hands of someone who then negotiates with a foreign country which is after some particular concession on this side of the water. I would much rather have our tariff set by a commission in this country who looked at our own problems rather than at the problems of the foreign nation. This is my primary objection, that we now set our rates by barter, not as a result of careful study.

The CHAIRMAN. They say they look after our interests.

Mr. BESSE. Of course, they do, Senator, but they start on the assumption that they must increase our imports in order to increase exports, which is what they are after, and they have to find some industry who is making a product, the importation of which can be increased.

Senator LODGE. You are not afraid they will raise them?
Mr. BESSE. There has been no evidence of it, Mr. Lodge.

The CHAIRMAN. Did your organization originally champion in 1922 putting a tariff on rags and waste?

Mr. BESSE. I think not. At the present time there are some interests in the industry that are concerned with the importation of rags, that belong to the association. If I remember correctly, in 1922 they were not; it was a separate association.

The CHAIRMAN. Did the National Wool Growers' Association advocate it?

Mr. BESSE. No; they were against it.

The CHAIRMAN. They were against it?
Mr. BESSE. Exactly.

The CHAIRMAN. You have generally agreed with them, though, haven't you?

Mr. BESSE. We have had a great many points of difference. The CHAIRMAN. You have gotten together though? You have been pretty successful in getting together in the end, haven't you?

Mr. BESSE. I think rather the reverse. Mr. Marshall is here today, and I think will bear witness to the fact that we have a good many divergent points of view.

The CHAIRMAN. They have not been expressed before this committee this time.

Mr. BESSE. We try to keep them out of Congress as far as we can. The CHAIRMAN. I thought so.

Senator CLARK. The export of wool rags from the United States during the first 10 months of 1939 exceeded the imports of wool rags by 800,000 pounds, so it does not look like those people have much of a squawk.

Mr. BESSE. In general, we export our poorer rags and import the better ones.

Senator CLARK. The exports did exceed the imports by nearly a million pounds during the first 10 months?

Mr. BESSE. That is correct.

The CHAIRMAN. You do not favor increasing the tariff on raw wool, do you?

Mr. BESSE. No; I would not.

The CHAIRMAN. Are there any other questions?

(No response.)

The CHAIRMAN. Thank you very much.

Mr. BESSE. Thank you, Senator Harrison.

The CHAIRMAN. I desire to insert in the record at this point a correction appearing in the Congressional Record of June 7, 1939, concerning which there has been some testimony by this witness. today.

(The same is as follows:)

Mr. HARRISON. Mr. President, on May 26, 1939, there was inserted in the appendix of the Record, by unanimous consent, a communication addressed by the Secretary of State, Hon. Cordell Hull, to Mr. Millard D. Brown, president, Continental Mills, Inc., Philadelphia, Pa., concerning the reciprocal trade-agreements program.

The figures $875,000,000 appearing in the last paragraph on the left side of page 8804 of the Record are in error. The figures should be $326,000,000. I ask unanimous consent that the permanent Record be corrected in this respect. The VICE PRESIDENT. The correction will be made as requested.

The CHAIRMAN. The next witness is Mr. Conover.

STATEMENT OF JULIAN D. CONOVER, SECRETARY, AMERICAN MINING CONGRESS, WASHINGTON, D. C.

Mr. CONOVER. My name is Julian D. Conover. I am secretary of the American Mining Congress, a national organization representing the mining industry of the United States in all its branches.

The mining industry approves all suitable measures for increasing our foreign trade, provided damage is not done to the public interest by cripping or destroying established domestic industries or employment, or lowering American standards of living. Our position on the resolution now before you was set forth briefly in a declaration adopted at our forty-second annual meeting on January 18, of this year, as follows:

We do not favor the extension of the Reciprocal Trade Agreements Act unless it is amended to eliminate certain defects which experience has developed:

(1) The policy of gratuitous extension of concessions to nearly all countries does not result in benefits to the United States equivalent to its sacrifices and should be abandoned.

(2) The trade agreements committee has not given each commodity the careful, complete and expert consideration it deserves, and has inflicted unduly severe burdens on established domestic industries.

(3) Administrators of the act have not applied the treaty provisions permitting modification where exchange rates are seriously altered.

(4) They have not utilized clauses in the treaties providing for withdrawal of specific commodities when countries outside a given pact reap the principal benefits at the expense of our domestic industries.

(5) The practical application of the act has not demonstrated a feasible method to provide tariff increases when necessitated by changed domestic conditions. (6) Reciprocal trade agreements are in fact treaties and should be ratified by the Senate.

For a full statement of the facts supporting these views, we respectfully refer you to our statement before the Ways and Means Committee, which appears on pages 1569 to 1584 of the record. We should like at this time to emphasize briefly three aspects of the problem and to offer three specific suggestions for needed amendments to the existing trade-agreements program.

First. We believe the law should contain a definite requirement limiting our concessions on any commodity to that country which constitutes the principal source of imports: This would merely carry out the oft-reiterated policy of the State Department, which unfortunately has not been followed in many instances. Such a policy was explained to both the House and Senate committees by the Honorable Francis B. Sayre, then Assistant Secretary of State, when this act was first under consideration in 1934. On this point Mr. Sayre made the following statement to the Finance Committee (found in the hearings before the Committee on Finance on H. R. 8687, April 27, 1934, p. 114):

The whole purpose of the program of trade bargaining is this: To restrict the commodities covered in the agreement with any specific country to commodities of which that country furnishes the chief source of supply of importation into the United States. Then, under our most-favored-nation agreement, to generalize those rates to other countries.

Mr. Sayre at the same time adduced a list of 29 countries, showing numerous articles or classes of articles for which each country was the leading source of supply; and the inference was plain that concessions would be granted to any country only upon such articles.

Under such procedure it was felt that the cost to us of generalizing our concessions to all nations would be minimized; and that, at the

worst, the welfare of a domestic industry dependent upon its tariff protection would not be traded away except to that country from which we would be able to demand substantial benefits in return. Thus the agreements negotiated under the act would be as nearly of a true reciprocal character as is possible under the most-favored-nation policy.

The actual conduct of the trade-agreements program has failed notably to adhere to this procedure, and the mining industry has been a major victim of these transgressions. Thus, our protection on zinc and cadmium, two essential mineral commodities, was reduced in the second agreement with Canada, a country which is not the principal or even an important source of imports. In the first 12 months under this agreement Canada supplied only 12 percent of our total zinc imports, while 59 percent came from Mexico, with whom we had no agreement, and from whom we received no compensating benefit, and the balance from Peru, Belgium, and other countries. In the same period only 8 percent of the benefit from the cadmium concession went to Canada, while Belgium secured 71 percent and the Netherlands, Italy, and other countries secured the remainder. Concessions on our products were thus granted to a minor source of imports, and the major benefits therefrom-entailing of course the major damage to domestic producers were extended as a free gift to other nations, with no direct compensating return to our country.

To remedy this serious defect in the program and to carry out the original intent under the act, we urge an amendment to require that concessions on any commodity be made only to that country which constitutes the principal source of imports. Consistent with this recommendation, we also suggest the insertion in the act of a further provision, as follows:

When for a period of 6 months total imports of any article the growth, produce or manufacture of any foreign country on which the rate of duty has been reduced in any trade agreement negotiated hereunder from countries other than the signatory country shall exceed those from the signatory country, the President shall take the necessary steps to withdraw the concession made to such signatory country on such article.

Second. We urge that definite provisions be incorporated in the act to make effective the "escape clauses" found in the various treaties: Our experience utterly fails to bear out the repeated assertions of the State Department, before your committee and in public statements, that a domestic industry which has been injured by a trade agreement can and will receive relief under these clauses.

The zinc industry again affords a conspicuous example. Producing a basic commodity whose price is governed by the world market, our producers immediately and automatically suffered the full cut of $7 per ton which was made in the Canadian agreement; and this penalty will persist throughout the life of that treaty, except for such temporary and uncertain relief as may be afforded by the war's dislocations. Senator CLARKE. It is a fact that our domestic production of zine increased considerably more than the total importations in 1939, is it not?

Mr. CONOVER. That is true, Senator.

Senator CLARK. And the price of zinc in 1939 was appreciably higher than the price for 1938?

Mr. CONOVER. That is true only as to the period since the war began in Europe. Up to the time of the beginning of the war in

Europe, our price was very seriously depressed. We were meeting the foreign competition, which was the only way that we could stay in business and keep our mines and smelters running, and our men employed.

Senator CLARK. As a matter of fact, the great bulk of the imports came in the same period after the war was declared, did it not?

Mr. CONOVER. The imports were increasing steadily throughout the

year.

Senator CLARK. The price jumped up to $6.50 in this country, and the importations became heavy?

Mr. CONOVER. There was a substantial increase in imports throughout the year.

Senator CLARK. The bulk of the increase according to the Department of Commerce, was a month after the declaration of the war? Mr. CONOVER. The imports throughout the year were substantially heavier as the result of the tariff reduction.

Senator CLARK. But the imports for the whole year were very much less than the increase in the domestic production?

Mr. CONOVER. That is true, but that domestic production was produced until the outbreak of the war at a ruinously low rate of return. Senator CLARKE. They did not step up production at a loss, did they? Do you mean that they increased their production over the previous year at a loss?

Mr. CONOVER. They had to meet the price which was governed by the world market.

Senator CLARK. But they did not have to increase the production, did they, if it was at a loss?

Mr. CONOVER. Of course with heavy overhead costs an increased rate of production is one way of keeping the loss down. However, I might point out that the production of the previous year had been at an extremely low level, and the production within the first 8 months of 1939 was only about 10 percent higher.

Damage has resulted not only from greatly increased imports, but from the depression of domestic price levels, and from the loss of that confidence in the future so essential to a natural resource industry which requires years of preparation before actual production takes place.

I might point out that the normal amount of exploration and development of new ore bodies is not going forward. In many districts, it is practically at a standstill because of the fact that our protection has been cut and there is no assurance of adequate protection for the years after the war, hence there is no incentive to spend large sums of money in the search for new ore bodies or to undertake expensive development work to prepare for future production. The continuance of this outlook is bound to have serious consequences upon our future supplies of a critical war material.

The zinc industry's case fulfills completely the conditions of the escape clause in the Canadian treaty. Under this clause our country has the right to withdraw or modify the concession on any article,quoting from the treaty-"if, as the result of the extension of such concession to other foreign countries, such countries obtain the major benefit of the concession, and if in consequence imports of the article concerned increase to such an extent as to threaten serious injury to domestic producers."