which are common to many countries, including the
United States, and which are not used as a device to

penetrate markets to which access could not otherwise

be gained should not be penalized under the Antidumping Act.
The problem is not nearly so simple as Mr. Stewart
implies in his statement and his proposed amendment of
the Antidumping Act. For example, under varying accounting
practices, all of which may be internationally acceptable,
certain types of sales may, or may not, be below cost.
Which practice is to be followed under such circumstances?
What if U.S. accounting practices differ from those
generally accepted in the exporter's home market? If the
Treasury Department is to be placed under a legal
obligation to examine in every, or almost every, instance
whether sales are below cost, it cannot possibly meet
the time limits set forth in Section 310 of the Bill.
The Administration is carefully studying these

problems and hopes to be in a position to recommend to the
Committee an amendment dealing with the sales below cost
issue which will not create the serious administrative
problems alluded to.

Meanwhile, it opposes as unfair

and administratively impractical the amendment proposed by Mr. Stewart.

In this chapter the Administration bill makes procedural and
substantive changes in the countervailing duty statute which, with one
exception, are desirable and appropriate. The exception consists of
subparagraph (d) of Section 303 of the Tariff Act of 1930, as amended
by Section 330 as set forth on page 59 of the bill.

It would give the Secretary of the Treasury the discretion
not to impose countervailing duties notwithstanding his determination that
an imported article is subject to the payment of a bounty or grant on
production or export within the meaning of the countervailing duty statute.

The theory of this requested grant of discretionary power
appears to be that the Secretary of the Treasury ought to have the freedom,
when he decides that the imposition of countervailing duties would provoke
some type of economic retaliation against the United States, not to put
the duties in effect in order to avoid triggering a "detriment to the
economic interests of the United States."

If this provision of the bill were to be enacted, it can be

GOVERNMENT

Mr. Stewart also was critical of several of the amend

ments to the countervailing: duty law contained in the Trade
Reform Bill. In particular, he opposed the proposed new
subsection (d) of section 303 of the Tariff Act of 1930
(19 U.S.C. 1303) which would grant to the Secretary the
authority to refrain from imposing countervailing duties in
certain limited situations. Mr. Stewart argued that the
authority proposed in subsection (d) (1), if enacted, would
result in the imposition of countervailing duties in few,
if any, cases. He assumes that the Treasury Department would
employ this provision to emasculate or distort the purpose
of the countervailing duty law.

The discretion would, of course, he used responsibly
and would apply, as provided in the draft bill, to those
situations where the imposition of a countervailing duty
"would result or be likely to result in significant detriment
to the economic interests of the U.S." To determine when
such a situation existed the Secretary would have to

30(B)

MR. STEWART

predicted that in few cases, if any, would the Secretary impose counter

vailing duties, notwithstanding proof of the bounty or grant being paid
by the foreign government or other foreign interest with respect to the
production or exportation of goods to the United States.

The difficulty with the administration of the foreign trade
laws of the United States has been precisely the reluctance of the
officials of the Executive Branch of the Government who from time to
time occupy the positions of responsibility in question to defend and
protect American commerce by applying the remedies which Congress has
provided.

It must be acknowledged that at the present time and in
recent years the Secretary exercises what is tantamount to this type
of discretion by simply allowing countervailing duty complaints to gather
dust without action in those cases where for any of a variety of reasons,
including the fear of retaliation, or the "muddying of the waters of
diplomacy," the Administration prefers not to act.

GOVERNMENT

consider a number of factors, particularly those indicating
that imposition of countervailing would have significant
adverse effects on the domestic economy. For example, he
would consider such elements as whether countervailing would
have a major, broad and serious negative impact on our
trading relationships with foreign countries or have

a significant inflationary

effect in the United States without a corresponding
benefit to the United States.

Mr. Stewart also criticized proposed subsection
(d) (2) of section 303, arguing that significant injury
can be done to domestic industry by bounty-fed merchandise,
the importation of which is limited by quota. The
Administration agrees that the mere existence of quotas
does not negate the possibility that quota-controlled,
subsidized merchandise may injure U.S. industry. For
that reason the proposed amendment does not exempt
automatically such restricted merchandise from the

30(C)

MR. STEWART

The Congress ought not to ratify such dilatory tactics, nor

should it add to the overweening tendency of members of the Executive
Branch to refrain from exercising the powers given to them to counteract
unfair methods of competition affecting American commerce.

The cited section of the Administration bill would also give
the Secretary the discretion not to impose countervailing duties when
they are otherwise called for under the statute if the article in question
is subject to a quantitative limitation imposed by the United States.

It is interesting that the Administration should propose such
discretionary authority as it would appear, from the manner in which the
antidumping proceedings involving worsted fabric and impression fabric
from Japan were recently disposed of by the Tariff Commission, that there
is an unwritten ground rule fostered by the Administration that articles
such as textiles which are subject to a form of quantitative limitation
in the bilateral agreement with Japan would not be made subject to the
remedies which the Congress has specified for use to correct unfair methods

GOVERNMENT

application of the countervailing duty law, but allows
the Secretary to refrain from imposing countervailing
duties only if he determines that the quantitative
limitation is an adequate substitute for the imposition
of countervailing duties which would otherwise be mandated.
The Administration does believe, and your Committee agreed
in an essentially similar provision which was contained
in the Trade Bill of 1970, that in certain situations the
imposition of countervailing duties in addition to
quota restrictions could amount to overkill and would
not serve to defend U.S. industry in any significant
way from unfair trade practices. Accordingly, the
Administration strongly urges the retention of proposed
subsection (d) of section 303.

Mr. Stewart also has noted that the injury standard
proposed in section 330 (a) of the bill, which would
extend the scope of the countervailing duty law to duty-
free merchandise but require an affirmative injury

30(D)

MR. STEWART

of competition in the sale of such products.

In this proposal the Administration seems to have missed the
essential point that quota arrangements, on the one hand, are intended
merely to establish limits on the volume of goods that can be digested by
the United States market without disrupting those markets or injuring the
interests of the domestic industry or its workers; whereas, the counter-
vailing duty and antidumping laws, on the other hand, are directed towards
preventing the use of unfair methods of competition in the sale of whatever
volume of goods are in fact imported from a foreign country.

While the observance of the limits in a bilateral or multi-
lateral agreement for orderly trade can accomplish its general objective
of avoiding market disruption, the use by the foreign producers operating
within the limitations of such agreement of unfair methods of competition
such as low prices financed by bounties or grants or other forms of
subsidy paid by the foreign government to the producers, or the sale

GOVERNMENT

determination by the Tariff Commission before the imposi-
tion of additional duties on such merchandise, does not
conform precisely with the injury standard contained in
Article VI of the General Agreement on Tariffs and Trade.
He felt that the injury test proposed in the bill is more
severe than that contained in the GATT and proposed that
the bill be amended to incorporate the GATT standard.
There was no intent to propose a standard more severe
than that contained in Article VI, and the Administration
would, therefore, have no objection to the amendment
Mr. Stewart proposed.

Mr. Stewart concluded his discussion of the proposed
amendments to the countervailing duty law by suggesting
that the law be amended to specify that the term "bounty
or grant" expressly include rebates or remissions of any
internal tax in the country of production or exportation
of imported merchandise and the amount of any difference
in price of raw materials sold for use in the production