I am convinced that our own enlightened self-interest lies on the side of our taking a part as a member of the community of nations, on the economic side as well as on the political side. I do not believe our participation in political affairs on a world basis will be of any avail unless at the same time we take a proper and enlightened position of self-interest on the economic side, and unless we adopt policies supported widely by the people of this country, who understand why it is to their interest to look upon the world as our market and look on the world as a place from which to buy for the benefit and the welfare of our people.

I want to qualify that immediately by saying that we must protect our industries by proper tariffs. We must protect above all our agriculture. But that does not mean that we must protect every man who wants to produce everything and sell it to the American people at several times what that particular item might cost abroad. If there is no military requirement, no over-all need for it, that is. We must view these things on balance. In many cases foreign countries have succeeded in bringing the price of domestic prices down. Competition is the way we have developed in this country. That is our basic philosophy. I can only speak of it in broadest terms.

According to this program we study every single item, the effect of any tariff change on every single item. The Agriculture Department, Commerce, Labor, United States Tariff Commission, War and Navy Departments, if it relates to military matters, the Treasury Department, all have men who study each individual item.

I am not qualified to discuss individual items. It is only then that suggestions are made to the President for recommendations of tariff concessions in return for a quid pro quo on the other side. Then I do want to reimpress and repeat again the fact that it provides for another hearing, if after trade concessions are made and industry feels that it is threatened with serious damage. It can go to the United States Tariff Commission and have public hearings and the Tariff Commission must then recommend to the President suitable action based on the facts as they are developed.

Forgive me for being so long, but it is difficult to answer these questions in a sentence or two.

Mr. EBERHARTER. Mr. Secretary, can we say generally that it is a matter of economic principle, when a nation is in a so-called debtor class, it is more necessary for its exports to be greater in value than it is for a creditor nation?

Secretary HARRIMAN. Basically what you say is correct. You become a creditor nation by exporting more than you import. Up to the earlier war we were borrowing from abroad and had to import a good deal more than we do now. Of course, the accelerated exports during the war helping our allies in one way or another, gave us the sudden change. That is why it is so difficult for us, or has been difficult for us to adjust our policies accordingly.

I do believe that a creditor nation such as we are should not look to imports alone to balance our export. We should adopt policies which should encourage the continuous export of capital. But we must have a flow of imports to allow the servicing of those loans and have a reasonable balance. We cannot continue to export or invest abroad, or the balances would become entirely unmanageable.

Mr. EBERHARTER. Just one more question, Mr. Secretary: Mention was made of Russia.

Secretary HARRIMAN. May I just say one more thing: The American public has to be considered in this, the demands of the housewife. It is very well to say that we have to protect every man who wants to be in business to manufacture something, or everyone who wants to produce something, there has to be a big tariff. You can raise your tariff so that very important items can never reach the homes of America. I think too little is said in all of this discussion about the interests of the consuming public. It is all spoken of in terms of some producer.

I think if you study these items where they are considering reduction in tariffs, you would find that nobody is going to be seriously hurt, and the good old American consuming public is going to be benefited by them to a very material extent.

Mr. EBERHARTER. Mention was made of Russia, and you brought out the fact that all foreign trade there is to be controlled by the State. Is it not the aim of United States representatives to the conference on the International Trade Organization to insert provisions to require that any purchases or sales made by a State-controlled trade organization will be made on the basis of commercial considerations as much as can be, so that they will not be made on a basis of purely political considerations? Is that not one of the aims?

Secretary HARRIMAN. That is one of the aims and is one reason why we were so anxious to have the Soviet Government come into these discussions, but they have so far not agreed to it.

We believe that trading can take place between countries which have State trading systems and countries such as ours which have free enterprise systems.

Mr. EBERHARTER. Thank you very much, Mr. Secretary.

The CHAIRMAN. Mr. Martin will inquire.

Mr. MARTIN. Mr. Secretary, you made one statement this morning that interested me very much. You said we could not hope to compete with the foreign producers of toys, for instance.

Secretary HARRIMAN. No, sir; I did not.

Mr. MARTIN. Did I misunderstand you?

Secretary HARRIMAN. Yes; I said there are a certain quality of cheap toys that we cannot make in this country. But we have a very fine toy-manufacturing industry in this country.

Mr. MARTIN. What do you mean there are certain qualities we cannot compete with?

Secretary HARRIMAN. I think we would have to go to a toy shop to do that. There are certain hand-made items of special price and special quality-in terms of quality of the toys. We have a very fine toy-manufacturing industry in this country which should be protected against foreign governments, but we should not exclude the ability of children in this country to have toys from abroad, by too high tariffs.

Mr. MARTIN. What would keep us from being able to compete? Secretary HARRIMAN. The hand-made, we have not the willingness of people to make hand-made toys. Our labor rates are much higher and should be higher.

Mr. MARTIN. To pay for the labor or wage rate?
Secretary HARRIMAN. Certainly.

Mr. MARTIN. The competition of foreign labor or wage is a factor I have run into in a number of items. Would you agree with me that it is logical for us to take some steps to protect our workmen against competition of excessively low wage rates abroad?

Secretary HARRISON. Certainly, if that results in very low prices. That is the policy of this country. It has been historically, and I am certainly in favor of it.

Mr. MARTIN. Going over to the field of agriculture, if you found a product of agriculture which was coming in here from excessively low wage paying countries, that were competing with the crop in this country that was in surplus production, would you go along with me that we should protect our American production against that type of competition?

Secretary HARRIMAN. Did you say it was in surplus production? Mr. MARTIN. Yes, sir.

Secretary HARRIMAN. It has been our policy to protect our American agriculture. I do not want to make sweeping statements.

Mr. MARTIN. In what way have you protected American agriculture since the reciprocal trade agreements have come in. Name me one item on which you have increased the protection.

Secretary HARRIMAN. I can show you that you have to talk about every single item before you can come to a conclusion on what our policy should be with regard to that item, with regard to the quality of the grades of the various items that we make in this country, or imported from abroad, what the market is in this country. I do not want to keep reiterating it, but we can grow almost anything in this country we want to, if we want to pay the price. Just because somebody wants to produce something, I don't say "Yes." That is not protecting American labor; that is because somebody wants to make money.

I think the consuming public is entitled to some consideration if there are things that can be made abroad much cheaper because of time or because of any other conditions. And the statements I made to you should not be interpreted to mean that I am in favor of protecting everything that could be produced in this country. I cannot discuss it except to say I am in favor of protecting American industry and in favor of protecting American agriculture.

Mr. MARTIN. My county wants to produce corn, and they intend to keep on producing corn. And yet since your reciprocal trade programs have come in a very serious competitor to corn and potatoes in starch production has come into the field; namely, tapioca from the Dutch East Indies; a half a billion pounds of it last year, enough to take out of production a half a million acres of corn. We had a glut of the potato market. Would you go along with me in saying that there might develop some situation wherein you would help or support the placing of some protection against that sort of inroad? Secretary HARRIMAN. That is what our tariff policy is for.

(The following statement was submitted for the record by Secretary Harriman :)

Competition between cornstarch and tapioca starch

Tapioca starch and cornstarch seem to be competitive to a certain degree. For certain special cases, including adhesive uses on postage stamps and envelope flaps, in the plywood and furniture industries, for high speed, mechanical,

packaging operations, and for other similar cases the tapioca product is superior, and in many cases essential, and for these uses it is not competitive with corn products. In prewar years imports of tapioca and its products ran up to something over 400 million pounds a year, of which a maximum of perhaps 100 million pounds, representing from one-fourth to one-third of the total, was utilized in these noncompetitive items.

In a year of large imports, assuming that the imported product was already mostly in the form of starch, the 300 million pounds of competitive product would be roughly equivalent to 8.6 million bushels of corn. On the basis of 1946 production of 3,288 million bushels, this would be equal to approximately one-quarter of 1 percent of the total United States corn production. While translating such figures as yields of starch into acres of corn harvested must be regarded as the roughest kind of approximation, such a computation may be of some use in evaluating the situation. On the basis of a yield of 60 bushels to the acre (the estimated average yield for the State of Iowa in 1946), 300 million pounds of tapioca flour would be equivalent to the yield of corn from 143,000 acres, or about three-tenths of 1 percent of the total corn acreage for 1946 of the eight Corn Belt States.

There has been a decrease in corn acreage over the past several years; but as this has been accompanied by an increase in total production, it is generally held that widespread use of hybrid corn has released part of the former corn acreage for other uses.

Mr. MARTIN. Yes; name me one instance, in agriculture though, in which that direction has been followed since you have come through with a reciprocal trade program in agriculture.

Secretary HARRIMAN. There is the new provision in all our tariff agreements now which is this clause by which we can change tariffs on any item when the domestic industry is threatened, provided the United States Tariff Commission has found that such protection is justified under all the circumstances.

Mr. MARTIN. If we show such a condition exists, you would not be adverse to lifting or putting on some protection against that type of competition from abroad?

Secretary HARRIMAN. That is the purpose of it.

Mr. MARTIN. I am glad to have your statement on that, because there has been nothing done on it yet that I know of. It is a serious competition when you put an Iowa farmer up against Dutch East Indies labor, where they get 12 to 15 cents for a 12-hour day.

Secretary HARRIMAN. I do not know anything about the particular case that you mention. I do not know what the factors are in relation to it. One of the basic reasons I am for this program is that I think it is absolutely essential in the protection of our agricultural production in this country. I do not know the detail that you are speaking about, and I am not directing my remarks to that particular case. am ignorant of it. But the Department of Agriculture is very much alive to all of these matters and they are involved in every aspect of these agreements.

Mr. MARTIN. The farmers are going to be very aware of the fact as to whether you are cognizant of their problems when such a problem as that arises.

Secretary HARRIMAN. I think this administration has been pretty alive to the interests of the farmers.

Mr. MARTIN. Now, this matter of foreign labor wage rates comes in in several places. I have listened to the discussions here in the past several days regarding the manufacture of shoes in Czechoslovakia and other countries. In order to control the imports of shoes so the for

eign countries did not take more than 50 or 75 percent of our domestic market, would you assess quotas?

Secretary HARRIMAN. No; I do not believe in quotas. What we are talking about in the shoe business is 2 or 3 percent.

Mr. MARTIN. How would you limit the amount of our domestic trade that we would surrender to them?

Secretary HARRIMAN. By tariff policy.

Mr. MARTIN. Raise the tariff to equalize that wage cost?

Secretary HARRIMAN. Not wage cost, but to give protection to our people.

Mr. MARTIN. I am glad to have that. In your prepared statement you said, "No concessions will be made without a quid pro quo." What quid pro quo would you suggest we offer to Switzerland?

Secretary HARRIMAN. I am not here prepared to discuss the details of any trade agreements with any one country. Those are being conducted at Geneva. That is where the discussions are going on. I cannot discuss the details of any negotiations that are now going on in Geneva.

Mr. MARTIN. Unfortunately, I am going to have to start judging this program pretty soon on some details. Generalities are not going to satisfy me for all time.

Secretary HARRIMAN. I just want to explain that I cannot discuss details of negotiations that are being conducted in Geneva between our Government and the foreign governments.

The CHAIRMAN. Do you have any idea how long Mr. Clayton will be over in Geneva?

Secretary HARRIMAN. I do not think he will stay too long. He has a lot to do here. When he comes back he will be prepared to give you whatever information he feels is appropriate.

The CHAIRMAN. We can call him when he does return. We thank you very much.

We are glad to have had you before us, Mr. Secretary. Come again. Secretary HARRIMAN. Thank you. I shall come whenever you

want me.

(Memorandum prepared in the Areas Branch, Office of International Trade, in response to request of Hon. Roy O. Woodruff, Committee on Ways and Means, House of Representatives, for an analysis of the statistics inserted in the Congressional Record of February 27, 1947, by Congressman Bertrand W. Gearhart, on value of total imports for specified foreign countries and the proportion coming from United States and their significance in relation to the trade agreements program:)

DEPARTMENT OF COMMERCE OFFICE OF INTERNATIONAL TRADE

Congressman Gearhart cites trade figures for seven countries with which trade agreements were effective before the end of 1938 (France, Canada, Netherlands, Belgium, Sweden, Switzerland, and Brazil) and for six countries with which trade agreements were not in effect during the period under consideration (United Kingdom,' Italy, Denmark, Argentina, Germany, and Japan) to show that "in nearly all of the countries of the world, our share in those markets has dwindled,

Trade agreement with United Kingdom became effective January 1, 1939. 2 Trade agreement with Argentina became effective November 15, 1941.