Mr. CLAYTON. My figures show the average rate on dutiable goods imported into the United States in 1932 under the Smoot-Hawley tariff bill was over 50 percent.

Mr. GEARHART. Not according to these figures. The SmootHawley Tariff Act was a 40-percent act.

Mr. CLAYTON. Well, that is according to the figures in the State Department.

Mr. GEARHART. But if we harken back to the Dingley tariff law, it will be noted that the dutiable rate under that act was 46.1 percent. Did the world rise up against us then? If not, why not?

Mr. CLAYTON. I do not remember. I was not familiar with that, but I am only telling you what actually happened.

Mr. GEARHART. Yes; and I am merely trying to demonstrate to you that you have embraced and taken unto your heart something as fact which is not true. You should not take such things to heart, Mr. Clayton.

Mr. CLAYTON. Evidently, these countries thought they had a right to protest and retaliate because that is what they did.

Mr. GEARHART. Now, you have told us so much about retaliation. I want to apply and to insert into the record another little test. In determining if we have such a terribly high tariff that it has offended all of the outside world, it might be well for us to take a look at the custom receipts of ours and other nations in the world. Ours and their customs receipts ought to reveal whether we are gouging the outside world with an exorbitantly high tariff?

If I am able to show a customs receipt per capita of a whole lot less than any other country, would not that help a little in deciding this question? My figures are for 1929. What does Australia take from customs receipts?-$22.55 per capita.

Canada takes $20.83 per capita.

Great Britain, $15.90 per capita.

Chile, $11.73 per capita.

Switzerland, $11.63 per capita.

Sweden, $7.05 per capita.

Union of South Africa, $6.19 per capita.

The United States takes only $4.80 per capita, all this as of 1929.

I will ask at this time that this tabulation, Mr. Chairman, be included in the record of these hearings at this point.

The CHAIRMAN. It will be so ordered.

(The table is as follows:)

Customs collected per capita in United States and leading countries, 1929

Mr. CLAYTON. Mr. Gearhart, I would like to say this about the figures you have just read. It could easily happen if you were to cut a tariff rate half in two, cut the tariff rates half in two in the United States, you might double the customs revenue collected.

Mr. GEARHART. Now, with your permission, I want to pursue the subject of retaliation a little further.

You have testified several places that the depression was largely caused by the Smoot-Hawley Tariff Act and, as I suppose, the preceding McCumber Act is completely exonerated. You say the whole world was aroused against us and in retaliation closed the markets to us, further that the British devised their imperial preference system in order to get even with us.

Not only have you made those statements, but they have been made by others who have preceded you as witnesses before this committee. And they have been repeated upon public rostrums by those who have spoken in favor of the program.

In fact, the argument has been dinned into our American ears so many times that most people have assumed it must be true. The State Department has advanced that idea as an argument time and again when the Trade Agreements Act has been up for extension. How about the other departments of our Government? Do they all agree with what the State Department has so long asserted?

Mr. CLAYTON. I do not know that all of them do. Some of them certainly do because they are represented on the Trade Agreements Committee which passes upon questions of reduction in import duties in trade agreements.

May I just correct one thing you have just said, or two things you have said.

One was that I have made the statement that the depression was largely caused by the Smoot-Hawley tariff bill. I do not think I have ever said that, Mr. Gearhart. What I have said has been that the depression was widened and deepened and prolonged by the SmootHawley tariff bill.

You also said that the British adopted the imperial preference system to get even with us. I, frankly, think they adopted it for their self-protection because they lost their markets in the United States largely because of that.

Mr. GEARHART. Why, of course. Every country imposes tariffs to protect its own standard of living, the wages of its people, and every country that imposes restrictions on our trade is not to be condemned. They are simply looking after their own, and the thing which makes me feel badly, and which makes those of us who understand this picture feel a little aggrieved, is that no one seems to be very deeply interested in protecting the standard of living of the American people or the business opportunities of the citizens of this country.

Mr. CLAYTON. But that is not true, Mr. Gearhart.
Mr. GEARHART. Do you wish to comment, Mr. Clayton?

Mr. CLAYTON. I would like to discuss with you at any time here or anywhere else your thesis that the high protective tariff has anything to do with helping maintain a high standard of living, or has anything to do except really to lower the standard of living. I would be glad to discuss that with you at any time.

Mr. GEARHART. Well, I do not want to get away from this.

Now, you have said that there was retaliation and that the British imperial preference system was the result of our high tariffs in the United States. I just wondered if I could call as a witness here, another gentleman in the employ of the Government of the United States, who is regarded as a pretty good authority by some of us. That is Dr. Thomas R. Wilson, Chief, British Empire Unit, Bureau of Foreign and Domestic Commerce.

He has written an article on the British imperial preference system, and he tells of its history, when it started, and why, demonstrating that it was well on its way long before the Smoot-Hawley Tariff bill was ever thought of.

Mr. CLAYTON. That is right, there was some.

Mr. GEARHART. Now, let me read to you what Dr. Wilson has to say in this official publication of the Department of Commerce, dated June 3, 1944, under the title "British Imperial Preference System": Under the colonial policy, the guiding principle in tariff matters was that duties on British imports into the colonies should be wholly for revenue purposes, while the duties on foreign imports into the colonies should be both for revenue and for the protection of British trade and industry. In keeping with this principle, the colonies were permitted to levy uniform duties on British and foreign goods, and, in addition, the imperial authorities levied duties on foreign products imported into the colonies, thus creating a system of preferences in favor of British goods. And that begins in the seventeenth century.

Mr. CLAYTON. But it was done in a very small way, up to the time of the Ottawa Conference.

Mr. GEARHART. Yes; that is the straw to which you must grasp and upon which you must hang your argument.

I continue to read:

The preferential system grew, and, by 1840, the articles on the preferential list totaled 82 items. In 1842, preferences were provided on 375 items.

Following this first break in the then traditional Empire policy, more conferences were held and more colonies granted preferential tariff rates. The years of the adoption of the first preferential rates in various parts of the Empire were as follows: Australia, 1906.

What were they retaliating against?

New Zealand, 1903; Union of South Africa, 1903; Newfoundland, 1900; British India, 1927;

Canada was 1898.

Now, some of the preferences were set up long before the SmootHawley bill was enacted in 1932. Others afterward. Some of them were set up when the Underwood Tariff Act, for revenue only, was on the statute books.

Mr. CLAYTON. That is right.

Mr. GEARHART. Preferences were set up when duties were so low in the United States that our tariff levies were offensive to no one, regarded as merely revenue measures.

So, I think it is stretching things too far to say that the Empire preference system was set up as a retaliation when the preference system was in the process of development ever since the seventeenth century, when, as the record discloses, they enlarged it. They merely put the finishing touches on it in 1932. You say it was all done as a protest against the American tariff policy.

Mr. CLAYTON. I do not think I said it was done as a protest. I think I said it was done as a protective measure to the British Empire because of the difficulty which they faced in their foreign trade, due to the tariff policy of the United States.

Mr. GEARHART. Well, other witnesses besides yourself have not been so restrictive in their definition. Others who have appeared here on behalf of the State Department asking for extension of this act, have insisted that the British preference system was a direct consequence of the Smoot-Hawley tariff law, a retaliation, purely and simply.

Now, I have read so much of this kind of stuff that I am growing sick at heart. The misinformation that is put out by the State Department is appalling at times.

As an awful example take this statement which you put out under the title "California and Foreign Trade." Its craftily devised falsehoods are most discouraging to anyone who reveres truth. When I say "you," I, of course, am talking about all of those who are employed in the State Department; of no one in particular. I do not mean to be personal at all.

Mr. CLAYTON. Certainly.

Mr. GEARHART. You set up the old gags, as I would call them, and they go out to the world and they are read by the people who do not have the time to analyze such things as the truth.

For instance, as you have repeated here, and I believe you thought your statement was true, because it has been repeated so many times. You asserted our business with the trade agreement countries had increased very rapidly and business with nontrade agreement countries had increased slowly.

Mr. CLAYTON. Excuse me. I said business with trade-agreement countries had increased more than with nontrade agreement countries. Mr. GEARHART. And I think you gave the percentages; did you not? Mr. CLAYTON. If I remember correctly, the exports to trade agreement countries, after the enactment of the Trade Agreements Act, up to the beginning of the war, increased about 64 percent, whereas to the nontrade agreement countries, it was around thirty some odd percent.

Imports, likewise, from the trade agreement countries, increase more than imports from other countries.

Mr. GEARHART. Let me get this exactly right. The figures are 62.8 percent and 31.7 percent. Those are State Department figures and, I think, the figures you were endeavoring to quote. You came very close.

Well, how do you get at those figures? In the first place, you had to exclude a lot of trade agreement countries that had bad figures, in order to bring up the average to 62.8 percent. You had to exclude Ecuador, Turkey, Venezuela, and the United Kingdom, Newfoundland, and other self-governing British colonies, with which agreements have been concluded.

Do you think it is fair to tell the American people that you have made this percentage gain with trade agreement countries when you deliberately exclude from consideration the nations that I have just listed, every one of which was, at the time you gave those figures out, a trade agreement country?

Mr. CLAYTON. Excuse me a moment, Mr. Gearhart.

Mr. GEARHART. And do you know what the result would have been if you had included them?

Mr. CLAYTON. Excuse me a moment, please.

That could only have been done, Mr. Gearhart, because of the dates on which the agreements had been concluded. I do not have before me the documents to which you are referring, and I do not know why these countries were excluded, as you have mentioned, but I think I can assure you that the State Department would not put out any false or misleading information.

Mr. GEARHART. Well, they were trade-agreement countries, and they were excluded, and the result would have been, if they had been

included, that the business would have been increased with the tradeagreement countries, not 62.8 percent but 39.1 percent.

Mr. CLAYTON. May I ask you if that document does not give the reason for the exclusion?

Mr. GEARHART. Yes; it is explained down at the bottom of the page in very small type.

Mr. CLAYTON. What is the explanation, please?

Mr. GEARHART. I read most of it a moment ago. This is all of it:

These figures do not include Ecuador, Turkey, Venezuela, and the United Kingdom, Newfoundland, and self-governing British colonies with which agreements have been concluded, but where the period during which the agreements had been in effect is too short to justify inclusions for the purposes of this comparison.

Mr. CLAYTON. I think that is a valid reason.

Mr. GEARHART. That is a reason but not a valid one if you put them in, you get 39.1 percent. If you think that is a valid reason, how about the purposeful inclusion of a lot of other countries with the non-trade-agreement countries all of which were involved in wars and revolutions and things of that kind; wars and revolutions which prevented them from participating in world trade at all.

If it is fair for you to exclude in order to raise the percentages and to make them look good, is it fair to include other nations that were out of world trade to make the figures look bad for the non-tradeagreement countries?

Mr. CLAYTON. Mr. Gearhart, we would not exclude the countries which were excluded with which we had trade agreements to make the figures look good. We would only exclude them due to the very short period within which the trade agreement was operable at the time the figures were made. To have included them would not have given a true picture. They were excluded because the effect would not be correctly shown on the trade agreement countries for the period that we covered.

Mr. GEARHART. All right. By the same token, do you present a true picture when you include in the nonagreement countries, China, for instance, which was at war in Manchukuo and Hong Kong and Shantung, and out of world trade? Do you think it was fair to include Italy, which was at war with Ethiopia and Albania? And Spain, torn apart in revolution? Or Germany, which had already moved into Austria, and Czechoslovakia?

Mr. CLAYTON. Italy might have neeeed to do more foreign trading because of the existence of the Ethiopian War. I do not know. The trade we had with China was not appreciable. In any event, in most years. In some years, it was very big.

Mr. GEARHART. That is just the point. That illustrates it absolutely. You pick out the countries you want to make your trade agreements with, and you have the choice of those countries. You pick the best with the biggest trade, and you list only those that look good, and when you find some that look bad and bring down the percentage, you toss them aside and do not count them and figure the percentage without them. In order to make the percentage with the trade agreement countries look big and beautiful and a great achievement, you dump into the nonagreement countries a lot of nations, that we do not have any business with of consequence at all, nations which were involved in war, and were out of world trade entirely.

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