Mr. CLAYTON. No; the ITO will have no right of decision regarding what the tariffs should be of any member whatsoever. Mr. GEARHART. Does not the charter of the ITO, which is suggested by the State Department, provide that a country can file a complaint against the country whose tariff laws they think are discriminatory? Mr. CLAYTON. Well, discriminatory, yes. They can file a complaint but it does not give the ITO the right to dictate to us or any other country as to what the tariffs shall be. Mr. GEARHART. However, the ITO can pass on that complaint and can issue a directive to the offending country to correct that which has been complained against? Mr. CLAYTON. It cannot. Mr. GEARHART. Are you sure? Mr. CLAYTON. Yes. Mr. GEARHART. Are you sure it does not provide that? Mr. CLAYTON. It does not. Mr. GEARHART. Then, cannot the ITO issue a suggestion to the offending nation that it correct it? Mr. CLAYTON. Surely. That is different. Mr. GEARHART. And then, if the offending nation does not correct it, it will be excommunicated from ITO and from all of the benefits that have accrued? Mr. CLAYTON. No. The ITO charter does not provide that a nation may be expelled from membership in ITO if it does not follow the suggestions of the ITO about the reduction of its tariffs. Mr. GEARHART. Does the ITO acquire any right to determine what goods shall come in and what goods shall go from any member nation? Mr. CLAYTON. Positively not. Mr. GEARHART. Then, what do you mean when you talk about and set forth under your ITO charter that no nation shall be permitted to export unemployment? Mr. CLAYTON. It does not state it shall not be permitted to export unemployment. Mr. GEARHART. What does it say about exporting unemployment? Mr. CLAYTON. Well, it has something to say about it, but it does not say it shall not. Mr. GEARHART. Will you explain what you mean by the phrase "exporting unemployment?" Mr. CLAYTON. I expect you know about as much what it means as I do. I have an idea that it means that if a country excessively subsidizes its exports, the Government pays a part of the cost of productin or gives an export subsidy of some kind for the purpose of putting its goods in other countries, in competition with other countriesthat that is a type of exportation of unemployment. Mr. GEARHART. That is one type, and probably that can be corrected by force of public opinion, if nothing else. But suppose the American automobile industry, by sheer efficiency should manufacture a cheap automobile and send it to England in such quantities that the English automobile factories should be closed. What could England do under the I. T. O. to correct that situation? Mr. CLAYTON. They do not need the I. T. O. to correct that. 99616-47-pt. 1-16 Mr. CLAYTON. No, they just would not give the fellow in England that wanted to buy those cars the dollars with which to pay for it. That is simple. Mr. GEARHART. Suppose the Englishman has his money in his pocket. Mr. CLAYTON. If he has any dollars in his pocket, he has to turn them over to the Government. The Government has control of the handling of them. He might have his pockets full of pounds sterling, and that does not buy the car. He has to get dollars to pay for the car, and they will not give the dollars to him. Mr. GEARHART. That is just the point. In every other country, when the domestic industry suffers because of excessive importations from abroad, their government immediately flies to the aid of that industry. Mr. CLAYTON. No; that is not true. Mr. GEARHART. But in America that policy does not seem to appertain, because we have stood idly by and watched the destruction of the jeweled-watch industry, and they have pleaded for assistance to this Government, and the Government has offered them none. Because of unwise tariff policies which this country has refused to correct, others have gone to the wall. Mr. CLAYTON. The jeweled-watch industry is doing a large business and making money, so far as I understand, in this country. Mr. GEARHART. Mr. Clayton, there were 22 great jeweled-watch industries in the country a few years ago. I have in my pocket one of the watches made by one of those companies, the Howard Watch Co., the finest watch that ever came from any watch-making factory. That company is today out of existence. There are only 3 other great American jeweled watch companies left, and there used to be 22. You know the names-Hamilton, Waltham, and Elgin. All of the rest are gone. They are holding on by the skin of their teeth, and if you listen to your radio, you will listen to Bulova and Elgin. They are Swiss watches and German watches and everything but American watches. Do they get any relief from the State Department or from Congress? Mr. CLAYTON. You go back far enough and you will find a great many American industries in which the number of units of operation and production have greatly decreased in the last few years. Mr. GEARHART. Well, I must stop from sheer exhaustion. But I want to thank you, Mr. Clayton. I think that we have made a good record. Mr. CLAYTON. I am satisfied with it. JUGGLING FIGURES AND CONTORTING FACTS TO JUSTIFY TRADEAGREEMENTS PROGRAM Mr. GEARHART. Mr. Chairman, when the Assistant Secretary of State, Mr. Clayton, made use in his testimony before this committee of the rather threadbare and thoroughly untenable assertion that our exports to trade-agreement countries had, during the administration of the trade-agreements program, increased much more rapidly than had our exports to nonagreement countries during the same period, I recall that I once asked my friend, Dr. John Lee Coulter, who is, incidentally one of the greatest living experts on foreign trade, to make a careful study and analysis of the facts and figures upon which such assertions are based in order that the truth might be revealed. Because the report which Dr. Coulter released in response to my request demonstrates quite conclusively some startling facts and conclusions which should be brought to the attention of the committee and country, I ask that the results of this study, a document which this eminent scientist has entitled "Unfortunate Use of Statistics by the Government in Connection With the Trade-Agreements Program" may be spread upon the pages of these hearings. And in tendering this most interesting manuscript for inclusion in the record of these hearings, I cannot help but wonder who it could have been that so ingeniously juggled the figures and contorted the facts and then palmed them off upon the then Chief Executive who, trustingly, incorporated them in his message to the Congress of March 26, 1945. But all this notwithstanding, Mr. Chairman, the report of Dr. Coulter to which I have just referred speaks for itself. It is the following: MAY 1, 1945. UNFORTUNATE USE OF STATISTICS BY THE GOVERNMENT IN CONNECTION WITH THE TRADE-AGREEMENTS PROGRAM In order to make it appear that the Trade Agreements Act has served a useful purpose and, among other things, that it has resulted in a measurable increase in volume of mutually profitable foreign trade, Government agencies have resorted to the use of combinations of figures which call for objective examination. The most recent illustration of such use of statistics in this manner is the statement put out over the name of the President in the form of a special report to Congress about a month ago, on March 26, 1945. In this special report the then President is quoted as saying: "The record of how trade agreements expand two-way trade is set forth in the 1943 report of the Committee on Ways and Means. This record shows that between 1934-35 and 1938-39 our exports to trade-agreement countries increased by 63 percent, while our shipments to nonagreement countries increased by only 32 percent; between these same periods our imports from agreement countries increased by 22 percent as compared with only 12 percent from nonagreement countries. The disruptions and dislocations resulting from the war make later comparisons impossible. The record, published in 1943, is nevertheless as valid today as it was then. We know, without any doubt, that trade agreements build trade and that they will do so after the war as they did before. All sections of our population labor, farmers, businessmen-have shared and will share in the benefits which increased trade brings." This quotation, or the same figures, have now been used during testimony before the Ways and Means Committee by several witnesses and on several occasions. The table to which reference is made appears on page 7 of the report of the Ways and Means Committee above referred to, and reads as follows: These figures do not include Ecuador, Turkey, Venezuela and the United Kingdom, Newfoundland, and nonself-governing British colonies with which agreements have been concluded but where the period during which the agreements have been in effect is too short to justify inclusion for purposes of comparison. The apparent discrepancy shown by these figures in comparison with the other totals is due to the noninclusion of trade with Ecuador and the United Kingdom and its Crown colonies. Attention is particularly called to the exclusion of Ecuador, Turkey, Venezuela, and the United Kingdom and Crown colonies, because of the short time the trade agreements were in effect. The trade experience of this group of countries, excluded from the table was as follows: The first observation is that the trade experience of the group excluded by Government spokesmen was even worse than the experience of all of the nontrade-agreement countries combined (excluding countries at war). Little wonder that they were excluded from the table. The second observation is that during 1938-39 several countries were already in a state of war or interior revolution and yet these were all thrown in with the non-trade-agreement countries. These included Germany, Italy, Spain, Japan, and China (including Kwantung). Actually exports to that group fell off $20.524,000, and imports from them fell off $14,714,000 between 1934-35 and 1938–39. If it was proper to exclude one group of nations to make a good showing for the trade-agreements group, would it not be equally proper to exclude countries engaged in war or revolution in order to get a fair comparison? For the record, it must be remembered that Japan seized Manchuria during 1931-32 and the invasion of China began in 1937. It must also be remembered that Italy attacked Ethiopia in December 1934, and the invasion of Albania began in April 1939. In the case of Spain, while the Republic was established in 1931, the revolution began in April 1936 and was not completed until March 1939. German occupation of Austria was during 1938 and the seizure of the Sudetenland area of Czechoslovakia took place during the first 10 days of October 1938. The general invasion of Czechoslovakia began in March 1939. The invasion of Poland began September 1, 1939. Separating these two groups, we have made a comparison of our exports to and imports from by groups of nations, which will be bound in the table. From the table it appears that when contrast is made between (1) the completed trade-agreement countries in effect during all of 1938-39 and (2) the non-tradeagreement countries carrying on normal trade, the increase in value of exports to the trade-agreement countries was 62.8 percent while the increase in exports to the non-trade-agreement countries was 57.3 percent, or differed only slightly. From this there is no indication that exports were stimulated as a result of trade agreements. When we turn to an examination of general imports (without again listing the countries omitted from the trade-agreements group or those included in the nontrade-agreements group) we find that (1) imports from trade-agreement countries increased 21.6 percent while (2) imports from the other non-trade-agreement countries increased 24 percent. These were naturally_substantially the same, since concessions to one were extended to all-except Germany. The only other point of significance is that exports increased almost three times as fast as imports. This is entirely accounted for by the tremendous volume of exports of automotive equipment, electrical and industrial machinery, agricultural implements, office appliances, etc. These items were largely exported by important domestic industries who believed that the world market was getting into position to absorb very large quantities. Actually, exports of these items increased between 1934 and 1937 about 120 percent. Here again, the point of greatest significance is that when the countries in a state of war or revolution are excluded the exports were larger in amount and increased at a more rapid rate to the non-trade-agreement countries than to trade-agreement countries, as follows: Increase to trade-agreement countries, $144,322,366, or 117.9 per cent. Increase to non-trade-agreement countries, $216,267,277, or 126.4 percent. In addition to the reason just stated for more rapid expansion of exports over imports, it is important to remember that during 1937-3839 important agricultural products were exported with benefit of export subsidies. Furthermore, many foreign countries were already beginning to build stock piles in anticipation of a possible outbreak of new international conflicts. It was during this period that the United States exported unusual amounts of iron and steel scrap, high-octane gasoline, and many other materials particularly needed in connection with military operations. All of these factors tended to stimulate exports entirely apart from any possible influence of foreign concessions in reciprocal trade agreements. For detailed comparisons of exports to and imports from tradeagreement and other groups of countries, see following table: United States exports and imports for the period 1934-35 contrasted with those for 1938-39 Ecuador, Turkey, Venezuela, United Kingdom, and the Crown colonies. 3 Germany, Italy, Spain, Japan, China, and Kwantung. Mr. REED. If it is convenient to Secretary Clayton, I would like to adjourn now, for your benefit and for the benefit of the others here, until 10 o'clock in the morning. Would that be satisfactory to you, sir? Mr. CLAYTON. Yes, sir. Mr. REED. I would like to insert in the record, if I may, at this point, a statement of Mr. Knutson. (The statement is as follows:) STATEMENT OF THE HONORABLE HAROLD KNUTSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA Mr. KNUTSON. In our opening session on Wednesday, the witness. went into great detail about the amount of previous testimony taken on the subject of trade agreements. Out of fairness to my colleagues, to the witnesses, and to the American public, I should like to note now that these hearings differ from earlier ones in that they are being |