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Mr. ZABLOCKI (presiding). If there are no further questions, we are grateful to you, Mr. Batt, for appearing here today.

Mr. BATT. I thank the committee for this privilege and for the courtesy extended me.

Mr. ZABLOCKI. Mr. James Schramm.

STATEMENT OF JAMES S. SCHRAMM, VICE PRESIDENT OF THE J. S. SCHRAMM CO., OF BURLINGTON, IOWA

Mr. SCHRAMM. Mr. Chairman and members of the committee, I am grateful for the opportunity to present my testimony at this time. The prepared testimony is relatively brief and I will proceed directly with its presentation.

My name is James S. Schramm. I am executive vice president of the J. S. Schramm Co., of Burlington, Iowa, which is one of the oldest department stores in the United States, it having been founded by my grandfather 105 years ago. I am a veteran of World War II. I am also chairman of the State finance committee of the Republican Party of Iowa.

I have asked for the privilege of testifying in support of the International Trade Organization despite the fact that I have had to make a special trip from Iowa to do so and must return on an afternoon plane. Though I do not pretend to be an international lawyer who has analyzed every clause and subparagraph of the Habana charter, I have followed the growth of the ITO idea since it was first suggested by the United States in 1945, and I do understand the relation of this document to our domestic and international affairs. I have carefully reviewed the analyses of some organizations that have been able to give the charter more thorough and expert study than an individual businessman could hope to make. I would like to mention particularly in this respect the report of the Committee for Economic Development and the paper prepared by the subcommittee of the section on international and comparative law of the American Bar Association. I also have examined most of the material published by organizations which oppose the charter. The thing that has impressed me most about all of the criticisms is that they are made by the groups that are supposed to stand for continuance of private competitive enterprise. And yet the position they take on the charter or rather their total lack of practical alternatives-would quickly spell the end of private enterprise in international trade.

I favor the ITO, because I firmly believe that the only sure road to peace is through expansion of the channels for effective economic cooperation, particularly among the democratic countries. But I am also interested in the charter because of its relation to the future of private enterprise. As a businessman, I want to see our private enterprise system strengthened wherever possible. As an American, and I might add a midwestern American, I firmly believe that the survival of our democratic way of life depends on it. I thoroughly agree with the statement of the American Farm Bureau Federation, thatThe United States, as the leading exponent of free enterprise, should assume leadership in ratifying the charter.

The critics who have to date opposed the charter, without suggesting any realistic alternative, say they too are for private trade. I frankly

do not know what they mean. If they mean they are for the status quo, they are not very well informed as to the difficulties private traders have in conducting their business throughout the world today. According to a report just published by the Guaranty Trust Co. of New York, only 10 countries do not have government-managed currency restrictions: Cuba, Guatemala, Haiti, Liberia, Mexico, Panama, Salvador, Saudi Arabia, Switzerland, and Tangier. With two exceptions, these countries are relatively minor factors in United States trade. This means that private traders in the United States must deal through the governments of almost all countries in the world. If these governments decide arbitrarily to place restrictions on imports or change rates of valuation-this happens every day; it recently happened with almost disastrous results in the Philippines-private traders in this country must appeal to the United States Government to bring effective pressure on the particular countries or to give the United States businessman whatever assistance possible. This situation is getting worse. If the critics, therefore, are advocating the continuance of the status quo in international trade they are in fact advocating an inevitable expansion of government control and management over trade. And, they are advocating, therefore, the steady diminution of the area in which private trade can effectively, safely, profitably operate.

If they mean, as the views of some of the opponents of the Habana Charter seem to indicate, a return to some imagined period in the past when international trade was relatively free of government regulations and gold served automatically to balance the payments between countries, they are being wholly unrealistic. Those days are gone— if not forever, at least for a long time to come. The damage of two world wars cannot be eliminated by wishing for it. If we expect to maintain our leadership and the strength of our economy, and to securely establish our democratic idea throughout the world, we must find practical realistic measures for dealing with the problems as they exist today. It is my firm conviction after careful study of the international economic picture that the Habana Charter provides the only detailed program for effectively dealing with the many complex problems that beset all countries today in their efforts to expand trade and at the same time maintain strong, balanced internal economics. It is also my conviction after analyzing the views of the opponents of the charter that nothing has yet been suggested that would as successfully restore conditions in which private competitive trade can again operate.

I do believe in the free-enterprise system and want to see it expanded in international trade not only because I think it is the most efficient economic system but also because I consider it the essential foundation for maintaining the cherished liberties of our democracy. The important thing about the Habana Charter is that it will commit governments to agree to limit and reduce the controls and trade barriers which they themselves have created and which today are distorting the world's trade. Any individual country can put up trade barriers and extend government controls, but only a large group of nations-such as would be grouped in the ITO-can possibly reduce such barriers. By pledging governments to reduce government-imposed controls, the Habana Charter is a decided victory for the principles of private,

competitive enterprise. Russia and its satellites, who hate and fear private enterprise, have given the ITO a wide berth. They are obviously not at all interested in any document which commits governments to reduce controls over trade, or an international organization designed specifically to work toward the objectives outlined in article 1 of the charter; that is, toward conditions conducive to private trading. They also are not interested in an organization that will deal with problems through democratic discussions or that will require members to submit all the information necessary to solve commercial conflicts by negotiation.

Some persons feel that the commitments in the charter have been too watered down by exceptions to be of value. I cannot agree with this conclusion. It seems to me that the exceptions are principally a recognition of the difficult balance-of-payments situation which exists everywhere except in the United States, Switzerland, and a few smaller countries. You cannot frame a charter for world trade at least you cannot frame a realistic charter that is intended to be an operating instrument and not just an interesting historical document-that does not take into consideration the economic and political realities under which other countries must operate. What you can do-and what the charter does-is get an agreement that these controls will not be extended, that they will be reduced immediately in cases where that is possible, that they will be limited in time and scope where it is not possible, and that they will be constantly subject to pressure for reduction and elimination as the world economic picture improves. This is a very practical and large step forward.

Another aspect of the charter that interests me is its relation to the recovery effort in which we have invested so heavily in Europe. By the terms of the Foreign Assistance Act our aid will be terminated by June of 1952. But will the job be completed by that date? Will the countries in western Europe be in a position to pay their own way? Recent events indicate that they won't, unless they can find a way to eliminate the network of barriers that interlace Europe and until they can substitute multilateral trade for the bilateral deals that today rigidly limit the volume of intra-European commerce.

The countries in western Europe still are our best customers, and they will continue to need a large volume of American goods. Even with their excellent recovery to date, it is quite unlikely that they will be able to pay for all of the United States goods they need by means of a direct balancing of trade. Without restoration of multilateral trade, therefore, they will have to reduce their imports from the United States to the equivalent of what they can sell to us, plus their income from American tourists. In many cases this would mean a sharp and even dangerous drop in the exports of many large-scale American industries.

Drastic reductions of imports from the United States would, in my belief, be self-defeating for America, as well as dangerous for the countries in western Europe. The remarkable gains in production and fiscal stability in the ERP countries would be lost, and Communist pressure would surely mount to take advantage of the economic and social troubles that would result.

The fact is that it would be as dangerous to reduce our exports to Europe substantially as it would be foolish to continue to give them away indefinitely. As a businessman, it seems to me that we have to

do everything possible to allow Europe to purchase our goods by selling us its products in return. This is not possible on a purely bilateral basis. Even before the war countries like England and France never sold to us directly as much as we sold to them. They balanced their accounts by multilateral or triangular trade. France, for example, sold fashion goods to South America, which in turn sold raw materials to the United States, which then paid for these raw materials by shipping automobiles and other machinery products to France. But since the war multilateral trade has become so snarled up by controls and trade barriers that the whole flow of goods has been distorted, and European countries are dependent on United States for goods that they cannot hope to pay for on a bilateral basis.

I am very glad to see that some of the bitterest opponents of the charter share this view and accept the logical conclusion that the United States must continue to increase its imports if it hopes to expand the area in which private trade can operate. There seems to be a growing awareness, even among the most conservative business groups, that the American method of competition and enterprise cannot be restored to international trade without greatly increasing the United States imports of goods and services from other countries. It has also become evident to business and Government leaders that liberal trade as it has been practiced throughout the history of this country cannot be retained except through the multilateral flow of goods with the least possible restrictions from private and Government controls. At the recent annual Congress of American Industry of the National Association of Manufacturers (December 6, 1949), Mr. Curtis Calder, who is chairman of the Electric Share & Bond Co., and also serves as chairman of NAM's international relations committee, stated that unless the United States is able and willing to increase its imports it stands to lose most of the economic achievements of its foreign-aid program and also to suffer a drastic reduction in United States exports. Such a reduction of exports, he pointed out, could have serious repercussions on American output and employment and therefore on the whole domestic economy.

This point was supported with considerable detail in a publication of the NAM published in July, The Foreign Trade Gap, No. 14, in the NAM Policy Division Series, which also stated the case for multilateral trade as clearly, as simply and honestly as I have seen it stated anywhere:

Our efforts today should be directed toward the expansion of international trade, and particularly toward the restoration of multilateral trade in the world. This would do more than anything else to solve the problems arising in connection with the relationship between our own economy and the economies of other nations. The restoration of the multilateral trading system would permit private firms to trade directly with each other, and to use the earnings from such transactions in any country in the world. Under this system trade would rest on economic principles alone, making available to the world the products and skills of each individual nation as they have been developed by geography and tradition. There would be a minimum of Government intervention with a view to dictating the channels or terms of such trade. In such a world, the environinent would be highly favorable to our private enterprise system. In such a world the cessation of the Marshall plan aid would have the least effect upon the American economy and the problem of the foreign-trade gap could be most easily solved. The question which Mr. Calder and the NAM did not answer, but which obviously must be answered if adequate policies are to be de

veloped in support of their position: How can we hope to restore effective multilateral trade without the Habana charter and the ITO?

European and other countries can only hope to pay for the goods they need and that we want to sell them if multilateral trade is restored. This means an all-out campaign to limit and reduce the controls and barriers now hampering trade. And, this takes us back once more to the ITO. The ITO offers a practical, immediate means of attacking these barriers, and therefore restoring the triangular pattern of trade. The ITO offers practical hope that our huge insupportable export gap can be eliminated in a way that will benefit the taxpayer and the country.

In conclusion, I feel that the ITO should be approved by this Congress because it would help private enterprise and because it would provide a means to end foreign aid without draining the taxpayer and without endangering American security. It would be in the interests of both American principles and the taxpayer's pocketbook. The Charter is the best possible agreement that can be negotiated by trading nations large and small. It provides: Accepted procedures for an organized attack upon private and Government restrictions to private and profitable international trade; and an organization which can effectively carry out the procedures and also serve as a center of information, consultation and negotiation.

The principles of the charter are based upon the American concept of competitive nondiscriminatory multilateral trade; the organization and the procedures are based upon the American method of free discussion and compromise.

Mr. ZABLOCKI (presiding). Have you any questions, Dr. Judd? Mr. JUDD. Mr. Schramm, it is very nice to see you again after the very pleasant personal associations we have had in a good many years past, beginning in 1925, if I recall correctly.

You heard the discussion I had with Mr. Batt on the question, and you have referred to it indirectly, of how can we sell to the American people, the manufacturers and to the workers, this story. How get over to them the realization that if we expand international trade and allow more imports in order to carry on more exports, we inevitably hurt certain industries which cannot meet competition from abroad? If we do not do that, we put even more people out of work through the loss of exports. So it is not a question of people losing jobs or not losing jobs; it is a question of which group is to lose jobs and how many. Whatever you do, there will be people put out of work, either through decrease in exports or increase in imports.

The problem is first, how to achieve the goals with the minimum of shock, and second, how to explain it so people are willing to find means of dealing successfully with the difficulty, rather than just seeking to escape it. I think the whole thing boils down to that and I wonder if you have any suggestion to make.

Mr. SCHRAMM. I think I have nothing to contribute that has not already been said by Mr. Batt and will be contributed by others. I do believe that the vast majority of the employed people of the country, if a poll could be taken, would favor ratification of the ITO charter.

I am sure certain groups of workers are fearful of serious impact on their jobs. Those who have that fear, quite properly should oppose it in their own personal, immediate self-interest.

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