Senator LODGE. I may say, Mr. Chairman, that I have several amendments that I want to submit to the appropriation bills which are coming up, so I hope that there will be a chance to do that.

The CHAIRMAN. I am sure that the committee does not want to interfere with the free activities of any Senator who wants to be on the floor if some important matter is up. I had understood you to say, Senator Barkley, that you did not think the session would go along for more than 2 hours today?

Senator BARKLEY. I thought so. That is problematical, however. I would not want the committee hearing to interfere with the sessions of the Senate, especially on that bill.

The CHAIRMAN. Of course, we will have to watch developments on that.

We have invited the Secretary of State down this morning as the first witness, and I have arranged for the Secretary of Agriculture, Mr. Wallace, to appear before the committee tomorrow. The Secretary of State is here, so you may proceed in your own way, Mr. Secretary.

STATEMENT OF HON. CORDELL HULL, SECRETARY OF STATE

Secretary HULL. Mr. Chairman, on the assumption that the committee may allow me to spend the day with them, I am inclined to accept the invitation of the chairman to proceed sitting rather than standing, unless there is some objection.

Senator BAILEY. I wish to make an apology to you, Secretary Hull. I am here for just a moment or two, because there is a meeting of the Commerce Committee, and I will have to leave quite soon. I am getting back, however, to spend most of the day with you. Secretary HULL. It is my misfortune that you have to leave. Mr. Chairman, members of the Finance Committee, the hearings which begin today before your committee relate to a piece of legislation which is of extraordinary importance to our Nation at this time. It has a direct and vital bearing on our domestic economic prosperity and on world peace.

When I appeared before the Committee on Ways and Means, I presented a formal statement dealing comprehensively with all important phases of the problem, and I shall not now take your time. going over the ground thus already covered. However, I should like to make some additional remarks, especially with reference to some points which were raised in recent discussions.

I am glad to note that there is now scarcely any inclination anywhere to question the proposition that adequate foreign trade is indispensable to full and stable prosperity for our Nation, which requires the fullest possible development of both the domestic and the foreign markets. There is overwhelming evidence to show that, when our exports shrink seriously, the country's production, trade, prices, values, employment, incomes, and therefore, purchasing power are adversely affected. This is true of agriculture, manufacturing industry, transportation, mining, and all other phases of our economic life. There is also overwhelming evidence to show that all these determining factors of our national prosperity are favorably affected by an expansion of exports. We are living in a period in which our vast home market must be supplemented by foreign mar

kets for our ever-increasing surpluses. Satisfactory disposition of such surplus production has become an indispensable factor in our permanent progress and our sound and balanced prosperity. Of equal significance is the growing realization in our country of the close connection between trade and peace.

Let me recall briefly the background against which the tradeagreements program was enacted by the Congress 6 years ago. Trade between countries, involving the bread and butter of millions and affecting the political stability and contentment of millions, declined enormously. The peoples of the world had traded with each other in 1929 to the amount of $69,000,000,000. By 1932 this trade had fallen to 27 billions. This meant that millions of workmen were out of work and their families were in desperate need; millions of farmers and producers of other raw materials were unable to sell the results of their labor except at a miserable price. Governments were compelled to make enormous relief expenditures. They resorted to any type of measure which promised to relieve this unemployment and distress irrespective of its effects on the rest of the world. In other words, the background of circumstances leading to the enactment of the trade-agreements program was a most disturbing and rapid falling apart of the commercial and financial structure of the world, caused in large measure by the ever-rising barriers to trade raised by all countries, in which course our own Nation was, unfortunately, an outstanding leader.

All countries were sticken and few more seriously than the United States. Within 3 years, our exports declined from 5.2 billion dollars to 1.6 billions. This loss of more than 3.5 billion dollars worth of export business spelled havoc and tragedy throughout the land. Of itself, it would have been enough to throw out of gear the whole machinery of our national economic life. Combined with other factors, it brought this country face to face with the gravest economic emergency in our national history.

Between 1929 and 1932, inclusive, national income fell from $80,800,000,000 to $39,500,000,000; cash farm income, from $11,200,000,000 to $4,700,000,000; nonagricultural employment alone from 36,200,000 to 27,800,000; wages and salaries in manufacturing industries from $15,800,000,000 to $7,400,000,000; wholesale prices from a level of 95.3 to a level of 64.8. Agriculture was bankrupt; industry was bankrupt; and even the banks were bankrupt, hundreds of them having failed.

That emergency could not be met fully and successfully, unless, at the same time that we were putting into effect far-reaching and necessary domestic measures, effective means were also found to restore our foreign trade. This could only be done through reciprocal reduction, on the basis of equal treatment, by us and by other countries. of the unreasonable and excessive trade barriers which were strangling commerce. Since other governments possessed the means of prompt action in dealing with trade matters, it was essential that our Government devise for itself an instrument of similar action.

This was done through the enactment of the trade-agreements program, which has enabled the executive branch of the Government to engage, within the limits of policy strictly prescribed by the Congress, in vigorous action for the restoration of our foreign trade. that vital task, working against great difficulties, we have achieved a

In

gratifying measure of success. During the period of operation of the trade-agreements program, our exports expanded markedly, in sharp contrast with their steady decline during the period of operation of the embargo policy of the Hawley-Smoot Act. This revival of export business has been an important factor in bringing about the recovery which has occurred in agriculture, in industry, in employment, in prices, in values, in the national income, and all the other elements of our national prosperity.

Between 1932 and 1939, national income rose from $39,500,000,000 to about $70,000,000,000.

Senator BARKLEY. May I interrupt you, Mr. Secretary?

Secretary HULL. Certainly.

Senator BARKLEY. The Alexander Hamilton Institute last week announced that the national income for 1939 was $71,800,000,000. What makes up the difference in your estimate and that of the Department of Commerce of between $68,500,000,000 and the $71,800,000,000 fixed by the Alexander Hamilton Institute?

Secretary HULL. I think it was fixed at $70,000,000,000 by the Department of Commerce, and probably I tried to be a little too conservative in shading that figure.

Senator VANDENBERG. Does that figure, Mr. Secretary, include the resources poured into the national income by Federal benefit payments and relief appropriations, and so forth?

Secretary HULL. It is computed according to the usual methods, and frankly, it is a matter of such infinite detail and involves the expert accountants and the statistical experts all combined, and then some additional help, so that I would not undertake at the moment without reference to the details of the record to go into that, Senator, much as I should be glad to advise you.

Senator BARKLEY. Both figures are a net national income and do not necessarily represent gross expenditures?

Secretary HULL. Well, as I say, there are well-defined rules and methods of calculating the national income and they comprise an immense amount of details which appeal to the expert accountants or the fiscal authorities rather than to a layman like myself.

Senator VANDENBERG. I think it is true, since the Senator from Kentucky has made his observation, I think it is true that both figures include relief payments, farm benefit payments, and all contributions to the national income out of the Federal Treasury.

Secretary HULL. Between 1932 and 1939 national income rose from $39,500,000,000 to about $70,000,000,000; cash farm income from $4,700,000,000 to $7,625,000,000; nonagricultural employment from 27,800,000 to 33,700,000; wages and salaries in manufacturing industries from $7,400,000,000 to $12,600,000,000; wholesale prices from a level of 64.8 to a level of 77.1.

In enacting the trade-agreements program, the Congress was not making a definitive determination of a long-range and permanent tariff and commercial policy for this country. What was created in 1934 was a temporary agency, designed to meet the imperative needs of an abnormal situation and calculated to aid in bringing about conditions in which a permanent policy would become feasible.

Grave emergency conditions, resulting from the tragic errors of the past, existed in many phases of life, here and abroad. The trade and other economic policies of the period following the World War were,

in effect, instruments of intense and destructive economic warfare. Largely under their influence there occurred a growing weakening of social stability within nations and an ominous deterioration of international morality and of political relations among nations. There was no hope of arresting these fatal trends unless friendly and mutually beneficial trade relations were to supplant the existing system of economic warfare.

The trade-agreements program enabled us not only to promote directly our domestic recovery through an expansion of our foreign commerce, but also to take a position of leadership in efforts to check the spread of suicidal economic nationalism and to build a firm foundation for the kind of international trade relations which are indispensable to the maintenance of enduring peace, without which there can be no sustained prosperity for our Nation or any nation.

Senator LODGE. Mr. Secretary, would you mind having questions during your statement, or would you rather wait until you have

concluded it?

Secretary HULL. It would be preferable, at least my experience has suggested, that it is ordinarily preferable all around to conclude a preliminary statement. However, I am always agreeable to whatever the purpose or the desire of the committee or any member of the committee is.

Senator LODGE. I have a question on this point, but I will withhold it until you finish.

The CHAIRMAN. If there is no objection, the Secretary may proceed and finish, and then questions may be asked him.

Secretary HULL. It was not to be anticipated that the immense task involved could be accomplished overnight. The destructive forces released by the disastrous policies of the past were too powerful to be overcome easily or swiftly. Substantial progress in this direction was made since 1934. That progress has been interrupted by the outbreak of new widespread wars. Whether what has already been accomplished will be completely wiped out or whether it will, after the termination of hositilities, serve as a foundation and a powerful impetus for further progress will depend, in a decisive measure, upon what our country does now.

Most of those who oppose the extension of the Trade Agreements Act propose no substitute for it, except a return-open or disguisedto the Hawley-Smoot regime. That would be where we would find ourselves if the act were permitted to lapse or if its effectiveness were to be destroyed by the adoption of crippling amendments.

It requires no imagination, but only recollection of what happened under the Hawley-Smoot Act in 1930-32, to visualize what would be the result of a return to a policy of virtual embargoes and attempted self-containment at any cost. Our people are not likely to forget how, 10 years ago, the proponents of ever higher tariffs made solemn promises to the farmers, to the workmen, to the businessmen, to the nation as a whole, that increasing prosperity would follow the prohibitive tariff schedules which they were placing on our statute booksnor how those promises were fulfilled in bankruptcy for the farmer, in staggering unemployment for labor, in a collapse of prices and values for the businessman, in distress and despair for the entire Nation. Our people are not likely to forget the contribution which the enactment of the 1930 tariff made to the intensification of economic warfare

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among nations, to the growth of trade barriers, to vicious spirals of resentment, ill will and retaliation.

Other opponents of the trade-agreements program are putting forward proposals which, in the guise of an allegedly "more realistic" approach to the whole problem of foreign trade, would go beyond the extremes of the Hawley-Smoot policy and would commit this country to the use of exchange controls, quotas, and all the other devices which in recent years have disrupted and retarded international trade. To abandon the trade-agreements program and to substitute for it a system of this kind would be to destroy the only policy which in recent years has offered effective resistance to a spread of these destructive practices. It would be equivalent to committing our Nation to a course of far-reaching economic regimentation, since the experience of other nations shows clearly that, in an effort to make extreme trade controls function effectively, regimentation has to be constantly extended to other phases of business activity and of economic life in general. It would be a starkly realistic approach, not to an effective promotion of our foreign trade, but to governmental control over business activity on a scale never before attempted in this country, and to a policy of plunging this country into destructive economic warfare, from which no nation ever emerges the gainer.

The trade-agreements program has enabled us to expand our foreign trade without subjecting it to the strait jacket of extreme government control. Under it, our trade has increased far more markedly than that of any other of the commercially important nations.

The program has been devised and carried out as a means of creating conditions in which free enterprise can function most effectively. Reversion to a policy of extreme protectionism or substitution for the trade-agreements program of a policy under which we would adopt all the instruments of economic warfare that have been so disastrously prevalent in the recent past, would not only wipe out our recent trade gains, but would impose upon our people a further national loss of staggering proportions. Our Government would be compelled to . adopt most costly and difficult measures of relief and adjustment and to regiment the country's economic activity. And the most astonishing thing is that courses of action which must inevitably lead to these results are proposed and advocated by the very people who like to regard themselves as the real proponents of free enterprise and nonintervention of government in economic life.

This is the crux of the whole issue. The question of the survival or disappearance of free enterprise in our country and in the world is bound up with the continuation or abandonment of the tradeagreements program.

The record of what has been accomplished under the trade-agreements program toward opening and enlarging trade opportunity for all groups of our producers in both the foreign and the domestic markets. is an open book. So much has already been said on this subject that I shall refrain at this stage from going into details on that score. My associates and I will be glad to furnish you with the fullest data. But I should like to raise this question: Who would be helped and who would be hurt by the abandonment of the trade-agreements program or by the adoption of the proposals which have been made to limit its scope and impair its effectiveness?

Would our agriculture be helped or hurt by abandonment or impairment of the trade-agreements program?