Of course, the principal factor, that permitted the tremendous expansion of our exports in 1946 was the gifts and credits that the United States made to foreign countries after World War II. For the period July 1, 1945, through December 31, 1946, this country made loans, credits, advances, relief expenditures, and other commitments (excluding the British loans) to foreign countries amounting to over 12 billion dollars (see Congressional Record, April 7, 1947, p. 3249 unbound). Now let us consider the second thesis stated above. The thought of this thesis is that if the United States lets down its trade barrier moderately (without harm to any domestic industry) it can so increase imports as to balance the rate of exports of the last few years. The total United States imports in 1946 were about 5 billion dollars-5 billion short of balancing exports. Now if dutiable imports were increased by 50 percent, an increase of about 1 billion dollars would be achieved (dutiable imports were about 2 billion dollars in 1946). But this is hardly conceivable. Up to 1939 duties had been reduced under trade agreements on only 550 million dollars worth of imports, increasing imports possibly 125 million dollars. The Tariff Commission estimated that if all 1939 duties were decreased by 50 percent and the per capita income increased by 75 percent, then such duty reduction would increase imports by 767 million dollars.1 But such an all-around duty reduction would put many United States industries out of business. Most of the industries whose imports would be substantially increased by duty reductions are the small industries that use an unusually large amount of hand labor. The bulk of their markets is not great, but they are very vulnerable to foreign competition. It is not the announced public policy to supplant these domestic industries by imports. It is therefore inconceivable that any reasonable decrease in United States import duties on the present price level could increase imports more than half a billion dollars. This is obviously far from enough to balance the export excess of 5 billion dollars. The constantly repeated implication that duty reductions will permit the present scale of exports is nothing less than deception. Of course, the best way to increase imports is to advance American prosperity and thereby the importation of free raw materials. Imports of goods free of duty increased from 1.4 billion dollars in 1939 to 2.9 billion dollars in 1946. One of the arguments for heavy exports and imports is that a large volume of foreign trade conserves our raw materials. How can this be so when our characteristic exports, such as metal products, use up our irreplaceable mineral resources? Is it wise to stimulate the exportation of such limited reserves by the closing down of our ceramic industries whose domestic raw materials are practically unlimited? To understand our export problem we must have a clear idea of the nature of export trade. The exporter does not exchange his goods for foreign goods. What he receives from foreign countries in return for his sales is purchasing power to obtain domestic goods. In the end, it is his own countrymen that reimburse him for his foreign sales. Therefore, any scheme by which the exporters can expand their foreign sales and collect from their own countrymen is advantageous to the exporters. Consequently, there is tremendous pressure to expand foreign sales. The exporter does not lose. He is amply reimbursed by the people as a whole. All the foreign loans and gifts are in fact payments by the people as a whole to the exporters. One of the strongest of American pressure blocs is that of the exporters. Of course foreign influence and our own international political programs use every possible means to abet the program of the exporters. We must learn that there is no advantage to the American people in pouring goods into foreign countries beyond what is necessary to obtain in exchange the foreign goods we need. Our exports can be expanded indefinitely, but what good does it do us if the foreign countries do not have something that we need for exchange for them? Even if their shipments to us destroy many of our smaller industries, they still cannot furnish us enough goods to balance our present exports. We simply have to learn that the present rate of exports is impossible. Why not rather adjust our economy so that our mass industries more adequately supply the needs of our own poor people? We have plenty of market at home for a long time if we forget our crazy mercantilistic ideas about the alleged virtues of exports. Mr. KNUTSON. We will have made a part of the record the statement by Senator Hugh Butler, dated February 9, 1947. 1 U. S. Tariff Commission, Postwar Imports and Production of Major Commodities, Washington, 1945, p. 16. (The information is as follows:) STATEMENT OF SENATOR Hugh Butler, (RepuBLICAN, NEBRASKA), FOR RELEASE TO SUNDAY Morning PapeRS, FEBRUARY 9, 1947 Senator Hugh Butler, (Republican Nebraska), announced today that the United States Tariff Commission had informed him more than half of the briefs and statements filed with the Committee for Reciprocity Information were opposed to reductions in duties on the products in which they were interested. Senator Butler said he had requested the information because of a report which had previously appeared in the press stating that the Department of State had reported that 80 percent of the briefs filed " were not opposed to the reciprocal trade program." Data supplied by the Tariff Commission, according to the Senator, were as follows: Mr. KNUTSON. The statement by William W. Stephenson, submitted by Mr. Eberharter, will also be made part of the record. (The information is as follows:) WILLIAM W. STEPHENSON'S APPEARANCE BEFORE THE COMMITTEE FOR RECIPROCITY INFORMATION ON JANUARY 16, 1947 My name is William W. Stephenson, National Shoe Manufacturers Association. At the outset I would like to point out to the committee that I have not come down here today to adopt a dogmatic position of opposing reciprocal trade agreements. We hope that we as an industry are taking into account the problems of the Government and the breadth of the whole program that will be dealt with, and we are not averse to making whatever contributions we can to that program. I would like to read a very short memorandum which I sent to our members last week, and while this originally was my thinking, it might be of interest to you to know that yesterday this attitude and philosophy was validated by our board of directors. [Reading:] "Recent public statements by officials of the State Department have indicated that while every effort will be made to give consideration to the individual problems of American industry, there is a definite desire to work out concessions which will permit increased world trade. In our dealings with the committee, it probably would be unwise for us to take a position of general opposition to tariff concessions, and to oppose trade agreements as such. The United States has certain over-all needs and objectives with respect to exports and imports, and these objectives can be accomplished only by a program of give and take. This endeavor is looked upon as an economic community chest to which all industries will be expected to contribute. It will be our job to find the most painless method of contribution.” "The American shoe industry wants access to world markets on raw materials and it also wants an opportunity to carry on a certain amount of export business. At the same time it wants the assurance that it will not be subjected to destructive competition from abroad. The exportation of shoes to other markets will be possible only if total imports and exports of all commodities are kept in reasonable balance. In November of 1946, the United States exported one billion dollars worth of goods and imported only one-half billion dollars worth. In order to maintain a balance, it is necessary for our Government to work out a program which will permit imports to approximately equal exports. "The importation of shoes into the United States from many countries, notably South America and Mexico, has increased since before the war. Furthermore, the increase in the price of shoes, particularly welts, has had a tendency to reduce the tariff percentages in cases where minimum per-pair tariffs were established." Now, I read that merely to establish our attitude and our philosophy about this whole problem, and in the hope that I can approach my discussion of it from the standpoint of a cooperative position; and I repeat that the philosophy as outlined there was validated yesterday in our board meeting. Mr. KNUTSON. The committee will stand adjourned until 10 o'clock tomorrow morning. (Thereupon, at 4:15 p. m., the committee adjourned until 10 a. m. the following day.) RECIPROCAL TRADE AGREEMENTS PROGRAM THURSDAY, APRIL 24, 1947 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D. C. The committee met at 10 a. m., pursuant to adjournment, in the hearing room of the Committee on Ways and Means, New House Office Building, Hon. Harold Knutson (chairman) presiding. The CHAIRMAN. The committee will come to order. Is Mr. Robert Martin in the room? STATEMENT OF ROBERT F. MARTIN, EXECUTIVE SECRETARY, VITRIFIED CHINA ASSOCIATION, WASHINGTON, D. C. The CHAIRMAN. Will you give your name and the capacity in which you appear? Mr. MARTIN. Mr. Chairman and members of the Ways and Means Committee, I am Robert F. Martin, executive secretary of the Vitrified China Association, 1010 Shoreham Building, Washington 5, D. C. The association members account for over 95 percent of the vitrified china, that is, china dishes, made in the United States. Realizing the limited time at hand, Mr. Chairman, I should like to introduce the statements of Messrs. James K. Love and E. L. Torbert, of the association's foreign trade committee. The CHAIRMAN. You may have that privilege, Doctor. Mr. MARTIN. I will only take 15 minutes to present my formal testimony, including an excerpt from one of the statements which are to be reproduced in full. The CHAIRMAN. Have you distributed copies of your remarks? I would like to start my discussion with an allegory. Once upon a time, after years of patient toil, a man succeeded in building an intricate new machine. It was a type of machine which would give employment in many communities and provide attractive goods to consumers everywhere. He loaded it on a truck to deliver it to the factory where it would be used. On the way the truck stalled right on a railroad crossing. Just then he heard the train, the Orient Express, around the curve whistle for the crossing. He jumped out and tried to push the truck, meanwhile calling for help. A farmer sitting on the rail fence nearby watched all this with interest. When the man shouted desperately to him for help, the farmer carefully removed his corncob pipe, expectorated deliberately into the goldenrod, leaned forward and hollered back: "What are ye worried about? Y'aint been hurt yet." it I suppose it was this same philosophy that lay behind the expansion of our foreign trade through the shipment of boatload after boatload of scrap iron to Japan in the not too distant past. I suppose it was true then that we hadn't been hurt yet. I also suppose was true that this contributed to that expanding world trade which we are told, over and over, inevitably leads to world peace and prosperity. In the light of subsequent developments in this case, however, it does make one a little wary of these idealistic_generalizations. Particularly so, if you happen to be living at Pearl Harbor or your employment is in an industry that could be restricted or destroyed by unfair competition arising from some one of the various types of expanding world trade. This brings us directly to what is going on at Geneva at present. The vitrified china industry in this country is fearful that injurious concessions will be made in the trade-agreement negotiations, or that foreign pottery industries in countries which actively support their welfare will acquire power in the ETO which will outvote American representatives even if the latter were to show equally active concern for the domestic American industry. Why are we fearful that injurious concessions will be made in the trade-agreement negotiations? The State Department has promised that no domestic industry will be seriously injured. We hope that this is so, but past experience and the current situation are not reassuring. For example, at the present moment the State Department is including china in the items on which it is negotiating tariff reductions, contrary to a public pledge made by Secretary of State Cordell Hull. In the original Ways and Means Committee hearings on the original Trade Agreements Act on March 8, 1934, in response to questions by Congressman Treadway, Mr. Hull replied as follows: I quote: Mr. HULL. As I said at the outset, every government pursuing this [mostfavored-nation] policy is very particular to ascertain in advance which nation is the chief supplier of a given commodity, and which two or three or a dozen produce, and that enables it to take care of the very thing you are talking about. Mr. TREADWAY. Wherever was the principal source of importation, you would negotiate in that country, and any negotiations concluded with that country on that particular article would apply to the other countries? Mr. HULL. Yes; that is correct. ** * * Mr. TREADWAY. Would the rates be the same with every country? For instance, let us assume you can manufacture china cheaper in Japan that you can in Great Britain, and we import china in large quantities from both countries. Mr. HULL. We import more from Great Britain. Mr. TREADWAY. I think you can go down to Woolworth's and buy large varieties made in Japan. But, however that may be, using it as an illustration, and never mind the quantities, if it was determined it was more expensive to make a certain article in Great Britain than in Japan, and if you found Great Britain was the principal source and you considered a reciprocal agreement with Great Britain, with certain rates you are asking to be lowered, would that same lowered rate apply to the importations from Japan, because we have a favorednation agreement with both countries? That is the point I want to get thoroughly explained. Mr. HULL. I wanted to say we would not negotiate a treaty under such circumstances. All of the 17 foreign countries included in the current negotiations combined, account normally for only 5 percent by volume and 17 per |