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Mr. JAVITS. Does the Treasury favor the ITO because it believes it will improve the financial condition of the United States Treasury? Mr. FOLEY. Indirectly, I think the answer to your question is "Yes." We do believe that the ITO would tend to relieve us of some of the direct burden which we now carry in connection with our foreign-aid programs.

Mr. JAVITS. Thank you, Mr. Chairman.

Chairman KEE. Mr. Burleson, have you any questions?
Mr. BURLESON. No, Mr. Chairman, thank you.

Chairman KEE. Dr. Eaton, have you further questions?
Mr. EATON. I have nothing further, Mr. Chairman.
Chairman KEE. Mr. Gordon-

Mr. GORDON. No further questions, Mr. Chairman.

Chairman KEE. Mr. Vorys, you may proceed with your examina

tion.

Mr. VORYS. Mr. Foley, there have been two or three questions here that deal directly with whether the ITO is of any advantage to us or of any effect at all and we have been unable to obtain any answers. Would there be some other department of Government that might have the answers to the questions I have asked and Mr. Javits has asked?

Mr. FOLEY. I really do not know the answer to that. You have had the State Department before the committee yesterday and the day before. I think it will be possible for the State Department or the Treasury to supply the committee with the information that the committee is anxious to have.

Mr. VORYS. Frankly, I do not see how the Treasury Department or the State Department could arrive at a conclusion as to whether the ITO is a good thing or not without having had those answers themselves. I am perfectly amazed that these answers were not already on tap. I do not see how anybody could have arrived at an intelligent conclusion on this without having attempted to work out those answers. Mr. FOLEY. I am not entirely clear, Congressman Vorys, as to the exact purport of your questioning. You asked Mr. Willis a question in regard to the dollar gap, as I understood it, and what effect the ITO charter would have in closing that dollar gap. Is that the question to which you would like me to address myself? If it is, I can say that I think the ITO charter is a long-range means of increasing world trade, which should result in the long run in a substantial contribution toward the dollar-gap problem. In this period of economic stringency as a result of the war, I do not think that within the next couple of years to which you referred a great deal can be hoped for insofar as measurable accomplishments of the charter are concerned. For the immediate future, we shall have to put our main balance on other means of foreign assistance, to cope with the dollar-gap problems. It would be our hope, if this legislation were adopted and the charter accepted by the other countries which participated in the Havana Conference, that in the long run we would be substantially better off.

Mr. VORYS. This charter is over 2 years old, now. Its inception is over 4 years old. I asked about how much of world trade would be affected by the provisions of the charter 2 years from now. That is 6 years after it was thought up and 4 years after it was signed up. How much would still be restricted and so forth under the exceptions 2 years from now? You do not know?

Mr. FOLEY. I am perfectly frank to tell you I do not know and I do not think it would be possible to make any kind of a reliable prediction as to its effect 2 years from now. We do not even know how long it is going to take for this country or for other countries to complete necessary legislative action to adopt the charter. It may be a few

months, or it may be 2 years or longer, before the charter comes into force. We do not know what world conditions will be 2 years ahead. I think it would be impossible, Congressman Vorys, for us to make any kind of a definite forecast of the character which you are suggesting.

(The following information has been supplied in answer to Mr. Vorys' question:)

Hon. JOHN KEE,

THE UNDER SECRETARY OF THE TREASURY,
Washington, April 25, 1950.

Chairman, Committee on Foreign Affairs,

House of Representatives, Washington, D. C.

MY DEAR MR. CHAIRMAN : During the course of my appearance before the Committee on Foreign Affairs on April 21 in support of United States membership in the International Trade Organization, Congressman Vorys requested me to supplement my statement for the record. Congressman Vorys, I think, desired for the committee additional information, preferably statistical, on the proportion of world trade which is likely, by March 1952, still to be conducted under the balance of payments exceptions contained in the International Trade Organization charter. The committee will recall that it was stated as our belief that it is impossible to arrive at a meaningful statistical estimate on a problem of this character. After giving further careful thought to this problem, our judgment on this score remains unaltered.

Progress toward wiping out existing restrictions, discriminatory and nondiscriminatory alike, will depend upon the outcome of a complex variety of interacting forces under conditions during the next 2 years which promise to be unusually difficult to forecast. If, for example, the cold war should become intensified, we might have one result; a significant easing of tension would obviously give us a different one. Again, if economic and financial conditions in foreign countries should take a turn for the worse, it is likely that countries would tend to resort increasingly to the balance of payments exceptions; if, on the other hand, our current hopes of continued world improvement are realized, the proportion of trade under the exceptions can be expected to be significantly smaller. Other illustrations of this type could be given, but these are sufficient, I believe, to make clear that, depending upon unpredictable circumstances, the results might range from very favorable to very poor.

While statistical estimates are not feasible, it is entirely reasonable to expect that the ITO would in the long run have a favorable influence along these lines. The charter looks forward to the eventual elimination of all extraordinary restrictions on trade and limits their present use to cases of demonstrable necessity, under the charter standards. The charter would be unrealistic if it failed to recognize that exceptions had to be provided to deal with the abnormal conditions under which the world is laboring today, but these exceptions are strictly defined and narrowly limited. Moreover, the charter provides specifically, in article 21, paragraph 3 (b), that members applying restrictions to safeguard their balances of payments must progressively relax and ultimately eliminate such restrictions as their external financial conditions improve.

In the interest of a healthy economic world it is to be hoped that financial conditions will improve sufficiently by March 1952 to make possible a substantial retrenchment in the use of such restrictions. Indeed, the United States Government, in struggling actively with this problem, is doing everything within its power to bring those conditions to pass. It is significant, we think that after 2 years of the European recovery program, the western European countries are reducing restrictions on intra-European trade substantially, and the major emphasis on planning for the immediate future is on further improvements in this direction. It is hoped that this desirable trend will continue. There would appear to be little doubt that the extraordinary measures now employed by many countries as a result of abnormal world conditions would be intensified and extended, rather than diminished if failure attended the effort to secure general international acceptance of the code of commercial principles contained in the ITO charter. It is obviously to be expected that each country would be inclined with more confidence to reduce its own restrictions, if it could have the assurances which the charter provides that other countries would do likewise.

Very truly yours,

EDWARD H. FOLEY, Jr., Under Secretary of the Treasury.

Mr. VORYS. Now I have one other question. As I understand you, you said to my colleague, Mr. Javits, "The higher our export trade, the less drain on our economy." Did I understand you correctly?

Mr. FOLEY. I did not think I said it quite that way. I think Congressman Javits asked me whether, if our export and import trade were appreciably reduced, we would be better able to meet our international responsibilities. I think I answered I was of the opinion it would be less real drain on our resources to maintain a high level of two-way foreign trade.

Mr. VORYS. I understood you to say the higher our export trade the less the drain on our economy for foreign aid. Of course, our export trade was largest in 1947 and 1948. The trouble was we were paying for our own export trade. I just wondered whether you felt increasing our export trade would lower the drain on our economy or whether you thought we would have to be compensated for it in some way in order to lower the drain on our economy.

Mr. FOLEY. Other factors besides the gross outflow of goods are involved in estimating a real gain. I certainly think we ought normally to be compensated for our exports.

Mr. VORYS. Thank you very much.

Chairman KEE. Mr. Richards, do you have any further questions? Mr. RICHARDS. No questions.

Chairman KEE. Mr. Carnahan?

Mr. CARNAHAN. No questions, Mr. Chairman.
Chairman KEE. Dr. Judd?

Mr. JUDD. No questions.

Chairman KEE. Does anyone else have any further questions?

Mr. JAVITS. I just want to be sure Mr. Foley was not left in a state of confusion due to the combination of questions between Mr. Vorys and myself. He and I try to get at these inquiries in much the same way. I am sure we agree now, but I want to be sure you understand I was not trying to anticipate your answer. In short, I was asking you if you could tell us from the Treasury studies what is the impact as you see it on the economic position of the United States—not in its technical sense, but in the sense of our capability to carry our heavy programs for security and peace-of what you expect the effect of ITO will be.

Mr. FOLEY. I understood the question, Congressman Javits, and, in general terms, I said I thought it would be helpful for the future to maintain a high level of foreign trade. Insofar as any more particular formulation of our reply can be prepared, I said we would be glad to submit it to the chairman for the committee's consideration.

Mr. JAVITS. Thank you very much.

Chairman KEE. Is that all, gentlemen?

Mr. Foley, I think in your statement you pointed out very clearly and realistically the perils that now exist to world trade and conditions which were what you might call destructive elements, and you also pointed out, I think very clearly, that the charter of the ITO was so conceived, written, and designed to cure or correct the conditions now obstructing world trade.

I can very readily see where you cannot determine at this time whether or not the charter will be effective or the organization will be effective in accomplishing all that you hope and believe it will accomplish. Is that not correct?

Mr. FOLEY. That is correct, Mr. Chairman. It is difficult to foresee what the future holds for us in this field. However, we do believe that, in the long run our economic position will be enhanced by the adoption and implementation on the part of the other countries, and by the United States, of the ITO charter.

Chairman KEE. I think your statement made that clear.

I would just like to ask you about the bill dealing with customs, mentioned in your testimony. You stated it had been prepared and was now ready to be presented to Congress for the regulation of customs. What is that bill designed, in a general way, to accomplish!

Mr. FOLEY. The bill, in a general way, Mr. Chairman, deals with some of the improvements in our customs procedures that have been developed as a result of a study of our customs administration undertaken by McKinsey & Co., a private management engineering firm at the suggestion of the Appropriations Committees of the Congress a few years ago. As I said, we have undertaken that study quite independently of the provisions of the suggested ITO charter. However, if the customs procedures bill, as presented to the Congress, is adopted and enacted into law, I do not believe it will be necessary, in the event the charter is adopted by the Congress, to make any further changes in our customs laws as a result of such adoption.

Chairman KEE. In other words, you believe that the provisions of this bill will remove any conflicts that now exist between present law and the provisions of the charter?

Mr. FOLEY. I would like to put it this way, Mr. Chairman: In the event the customs procedures bill is enacted into law, I think that it will be adequate to provide legislative sanction for whatever commitments we might incur through the adoption of the ITO charter. Chairman KEE. Thank you very much. We appreciate your presence here and the testimony you have given us.

Mr. FOLEY. Thank you very much, Mr. Chairman.

Chairman KEE. Gentlemen, that will complete the hearings for today and on Monday we are going to consider two bills proposing to amend the Philippine Rehabilitation Act.

Mr. JUDD. Further hearings, or executive session?

Chairman KEE. It will be a further and open hearing on the Philippine rehabilitation measure heretofore enacted by the Congress. Mr. JUDD. You do not expect it to come to a vote in the committee on Monday?

Chairman KEE. No, but I promised the sponsors a hearing on the matter so that we can afterward at some time consider the legislation and mark it up if we so determine.

We will adjourn until Monday morning at 10 o'clock.

(Whereupon, at 11:33 a. m., the committee adjourned to reconvene Tuesday, April 25, 1950.)

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