INTERNATIONAL TRADE ORGANIZATION THURSDAY, MARCH 27, 1947 UNITED STATES SENATE, The committee met at 10:30 a. m., pursuant to adjournment, in the Foreign Relations Committee room, the Capitol, Hon. Eugene D. Millikin (chairman) presiding. Present: Senator Eugene D. Millikin (chairman). The CHAIRMAN. The committee will come to order. STATEMENT OF CLAIR WILCOX, DIRECTOR, OFFICE OF INTERNATIONAL TRADE POLICY, DEPARTMENT OF STATE, WASHINGTON, D. C. (Resumed); AND GEORGE BRONZ, SPECIAL ASSISTANT TO THE GENERAL COUNSEL, TREASURY DEPARTMENT, WASHINGTON, D. C. (Resumed) The CHAIRMAN. Mr. Bronz, did you wish to make further comment on any of the subjects we were discussing yesterday? Mr. BRONZ. Yes, sir. At the end of the meeting yesterday afternoon, you asked a question with reference to article 26, section 3 (a). Section 3 (a) provides that when a member is contemplating the imposition of quantitative restrictions, it is required to consult with the organization and the Fund as to the nature of its balance-of-payments difficulties, the measures which may be available for correcting them, and the possible effect of such measures on other members. Section 3 (b) has a similar provision with reference to restrictions already in effect. You asked what some of the measures might be that might be suggested by the Monetary Fund. I am afraid that in testifying on the possible remedies for this situation of economic ill health, I mentioned some of the drastic possibilities in the nature of surgery, but neglected the "aspirin and a good rest" kind of remedies. The CHAIRMAN. Let us take the aspirin. Mr. BRONZ. The most obvious situation would arise when a country gets excited about a temporary imbalance in its international-payments situation, but after a consultation with the Fund, is convinced that the situation is not so bad, that it can stand a deficit for a while longer, and that it has enough in reserves to carry itself for some time, and perhaps it ought to wait for some time before it went to the drastic measuring of imposing import restrictions. Secondly, if the country is a member of the Monetary Fund it would have the right under the Fund agreement to draw foreign exchange from the Fund and thus get out of temporary difficulties which are not too severe. There is, of course, a third situation which is extremely important in this connection, The CHAIRMAN. There is a definite limitation under the Fund as to the amount of foreign currencies that can be drawn, is there not? Mr. BRONZ. Yes, but there is a fairly substantial drawing power. The CHAIRMAN. You are directing your remarks to a small difficulty? Mr. BRONZ. Yes, sir. The suggestions I made yesterday would be appropriate for the major difficulties. The CHAIRMAN. Yes; yesterday, I believe you mentioned that if the difficulty were induced, or if it were contributed to by an overvaluation of a particular currency, it could be reduced in value under the mechanisms provided in the Fund? Mr. BRONZ. Yes, sir. The CHAIRMAN. As I recall it, it can be reduced 10 percent after consultation with the Fund, but it could be reduced to any figure with the concurrence of the Fund? Mr. BRONZ. Yes, sir. The CHAIRMAN. Proceed. Mr. BRONZ. In addition, there might be a situation where a country is really not in difficulties, but wants to impose import restrictions for other reasons, such as the protection of domestic industry from competition from abroad, and it might claim, financial difficulties as an excuse for the import quotas. That, of course, is a situation which both the Trade Organization and the Fund would be in a position to detect and to point out that the country would not be following the requirements of the International Trade Organization Charter. The CHAIRMAN. Give me an illustration where a nation would impose import restrictions for a purpose disassociated with its own self-protection. Mr. BRONZ. Well, suppose a new automobile factory were being established in a country, costs were rather high, and it seemed unlikely that the company could succeed in its early years to sell its automobiles in competition with imported automobiles. Conceivably, the country might claim a financial stringency, set up an import licensing system, and then license everything but automobiles freely. The CHAIRMAN. Your point there is that it might be justified in imposing a restriction against automobiles, but would not be warranted in using automobiles as a general excuse for across-the-board restrictions? Mr. BRONZ. The quantitative restriction should not be used solely for protection. There may be countries that would attempt to protect a domestic industry by setting up the mechanism of import controls. The CHAIRMAN. It would be very easy to detect, would it not? We are talking from the standpoint of exchange imbalances. Mr. BRONZ. Yes, sir. The CHAIRMAN. That sort of imbalance would be easy to detect, would it not? Mr. BRONZ. Well, there are arguable questions about how you treat items that enter into the calculation of an imbalance. The CHAIRMAN. Pass that. You even have accountants arguing as to how to treat items in the balance sheet. Let us pass that. The next thing would be to determine the state of balance of a nation by those skilled in that business, I imagine? Mr. BRONZ. I imagine so. I am not skilled in that kind of computation. The CHAIRMAN. Are either you or Dr. Wilcox prepared to put into the record, the state of the trade balances of the 18 nations that will be in on these negotiations at Geneva? Mr. BRONZ. I do not know. I would have to see whether the material is available. The CHAIRMAN. Dr. Wilcox, do you have that material? Mr. WILCOX. I do not have it here. The CHAIRMAN. Will you supply it for us? Mr. WILCOX. I doubt if it is available for all the countries involved, but we can see what is available and provide it. Mr. BRONZ. A number of countries do not publish statistics as freely as we do. I believe the British have been publishing statistics on their balance of trade, but I am sure that many of the countries do not. The CHAIRMAN. It strikes me as rather odd that the doctor would prescribe without knowing the symptoms of the patent. Mr. BRONZ. The doctor would get the information. Nations are required under the Fund agreement, and would be required under the International Trade Organization agreement to supply that sort of statisical information. The CHAIRMAN. I hope the doctor finds out the symptons before he prescribes the remedy and the patient has taken it. I would like to have for entry into this record, the statistics on balance of trade of the 18 countries entering this agreement. Mr. BRONZ. We would supply whatever is public of that character, but there are governments, I am sure, that do not publish that information. The CHAIRMAN. Will that information not come before the conference? Mr. BRONZ. I do not believe it would come before the Geneva Conference; it would come before the International Trade Organization when and if the subject came up. The CHAIRMAN. I find it difficult to believe, not in the sense of doubting what you are saying, that we do not know the balance of trade difficulties, or the balance of trade strengths of the nations that we are inviting to accept this medicine. Do I make myself clear on that? Mr. BRONZ. Yes, sir. There is a difference between the precise statistics and knowing in a general sort of way. The CHAIRMAN. I not talking about the last penny. What is this country's present balance of trade? Mr. BRONZ. I believe in 1946 we exported some 10 billion dollars worth of goods, and imported in the vicinity of 5 billion. The CHAIRMAN. Now, do we not have the same statistics on the other 17 countries? Mr. BRONZ. I do not believe we have them on all of those countries. The CHAIRMAN. Well, will you try to get it in timely fashion? Source: Monthly Bulletin of Statistics, League of Nations and United Nations. The CHAIRMAN. Now, while we are on the subject of the Fund, give us some illustrations of the actions which the Fund has taken since its establishment to correct the evils that it was set up to correct. Mr. BRONZ. Well, the Fund has called upon the members to communicate to it the parities of their currencies in accordance with the Fund agreement. Most of the members have done so, the parities have been announced, and the time for initial review of these parities has passed. The Fund has been ready, I believe, since early this month, to do business. The CHAIRMAN. Has the Fund taken any affirmative action to relieve disequilibriums in the exchange of any of its members? Mr. BRONZ. The Fund's resouces have been available since early this month. The CHAIRMAN. I say, has the Fund taken any action? Mr. BRONZ. As far as I know, I do not believe that any transactions have been consummated. The CHAIRMAN. What, then, is the net accomplishment of the Fund to date? Mr. BRONZ. Well, the Fund has established itself, is ready for business, and is available to meet difficulties that its members may en counter. The CHAIRMAN. And when was it authorized by law? Mr. BRONZ. The Fund was established by the signatures of sufficient countries in the last few days of 1945. (The articles of the Fund appear as exhibit VIII-C.) |