GENERAL INTRODUCTION TO MATERIAL PREPARED IN RESPONSE TO SENATE RESOLUTION NO. 325 On January 28, 1933, the United States Senate adopted a resolution (No. 325) directing the United States Tariff Commission, with such cooperation as it might request of the Departments of State, Commerce, Agriculture, and Labor, to provide the Senate with certain information and statistics relative to the trade of the United States with other countries and as to conditions and methods of tariff bargaining. The resolution consists of a preamble and 11 paragraphs indicating the nature and scope of the information desired. The preamble is given in full below, followed by a brief summary of each of the 11 paragraphs. The full text of each paragraph precedes that section of the report prepared in response to it. Resolved, That the United States Tariff Commission (as provided under section 334 of the tariff act of 1930, and so far as deemed advisable by said Tariff Commission, with the cooperation of the Departments of State, Commerce, Agriculture, Labor, and other departments or independent establishments of the Government, as and when requested by the United States Tariff Commission to cooperate) is hereby directed under section 332 (g) of the tariff act of 1930, and for the purposes of that section, to investigate, particularly by resort to available files and records, and to report thereon to the Senate assembled data (including tariff rates, foreign-trade statistics, production statistics, and other pertinent facts) successively on or before February 1, 1933, February 15. 1933, and, finally, March 1, 1933, on the following subjects: (1) Any and all tariff classifications * * imports have which have ceased * with respect to substantially lessened or ** (2) Any and all dutiable articles of which imports represented less than 5 per cent of the domestic production * and * have (3) Any and all articles on which the tariff rates exceed 50 per cent ad valorem * separate lists showing for agricultural products * * carrying tariff rates exceeding 50 per cent the equivalent ad valorem of present rates based on average prices from 1920 to 1929 * * * (4) Dutiable articles the imports of which have increased in quantity or value since 1929 * * (5) Statistics * of all articles important in export trade, the exports of which have decreased * * * together with information on the extent of resulting unemployment * * (6) The extent of exports of capital from the United States to build or buy factories and employ labor in countries, together with the number of employees (7) The range and variety of costs. investigated by the Tariff Commission since 1920 (8) articles foreign * for each industry * * * which are produced in the United States with advantages, including trade and market conditions, which were factors in causing such articles ** substantial quantities to be exported in (9) * Imports of more or less noncompetitive dutiable articles * * * in which foreign countries possess advantages in production * (10) The extent to which existing clauses in commercial treaties with foreign countries, * most-favored-nation may affect tariff bargaining (11) Generally to advise such ways and means for tariff bargaining as may appear relevant for most advantageously promoting expanded trade between the United States and foreign countries, (The material in this volume deals only with the last two paragraphs above.) 1 The Commission's report in response to Senate Resolution 325, is, for convenience, printed in four parts. Part I includes the material prepared in response to paragraphs 1, 2, 3, 4, and 9 calling for information on imports into the United States. Part II includes the material called for in paragraphs 5, 6, and 8, all of them relating to exports. Part III presents data on the range and variety of costs as called for in paragraph 7. Part IV (herewith) gives, mainly in textual form, the information with respect to tariff bargaining called for in paragraphs 10 and 11. All the material for Parts I and III was prepared by the Tariff Commission. In preparing the material for Part II the Tariff Commission had the cooperation of the Departments of Commerce and Agriculture; and in preparing that for Part IV the cooperation of the Department of State. Published under the title, "Tariff Bargaining Under Most-Favored-Nation Treaties." (S.Doc. No. 7, 73d Cong., 1st sess.) Other parts published as Senate Document No. 180, Seventy-second Congress, second Bession, Economic Analysis of Foreign Trade of the United States in Relation to the Tariff. " TARIFF BARGAINING UNDER MOST-FAVORED-NATION TREATIES INTRODUCTION Paragraph 10 of S.Res. 325 calls upon the Tariff Commission for information concerning The extent to which existing conditional and unconditional most-favored-nation clauses in commercial treaties, listed for convenient reference, may affect tariff bargaining with foreign countries, having in view early and reciprocal reductions in tariff rates in the United States and foreign countries and increased trade and commerce between the United States and foreign countries. Paragraph 11 calls upon the Tariff Commission Generally to advise such ways and means for tariff bargaining as may appear relevant for most advantageously promoting expanded trade between the United States and foreign countries, with the purpose of increasing employment in the United States and markets abroad for products of farms and factories of the United States. The report under these paragraphs of the Senate resolution is divided into three sections: Section I, dealing with the position of the United States with respect to tariff bargaining under conditional and unconditional most-favored-nation treaties; Section II, containing a list of the commercial treaties and agreements of the United States now in force; and Section III, containing a list of the most-favorednation treaties of all foreign countries. SECTION I TARIFF BARGAINING UNDER CONDITIONAL AND UNCONDITIONAL MOST-FAVORED-NATION TREATIES The subjects in section I are treated in the following order: Lists of countries entitled by treaty or agreement to conditional or unconditional most-favored-nation treatment from the United States. Definition of conditional and unconditional most-favored-nation obligations, with illustrations. Use of conditional and unconditional forms by the United States. Use of conditional and unconditional forms by foreign countries. Respective advantages of the two forms. Methods of bargaining under conditional most-favored-nation treaties compared with methods under the unconditional form. The padding of tariff rates in preparation for bargaining. Summary of reciprocity experiences of the United States. RELEVANT WAYS AND MEANS OF TARIFF BARGAINING The Senate resolution did not request the opinion of the Tariff Commission concerning the advantage or propriety of adopting a policy of entering into tariff bargaining. But the Commission was asked to "advise such ways and means for tariff bargaining as may appear relevant for most advantageously promoting expanded trade between the United States and foreign countries." Accordingly, if Congress adopts a bargaining policy, the Tariff Commission directs attention to the following points: 1. On grounds set forth by the Tariff Commission in its report on Reciprocity and Commercial Treaties in 1919 in favor of a policy of equality of tariff treatment for foreign countries, the bargaining should be as far as practicable on the basis of unconditional mostfavored-nation treatment. (The discussion below describes this treatment.) 2. In bilateral bargaining with any country, the concessions granted by the United States should be confined generally to articles of which that country is a principal supplier of the United States. 3. The Congress should by law extend the concessions so made, immediately and unconditionally, not only to all countries which have unconditional most-favored-nation treaties or agreements with the United States, but likewise to all other countries which the President shall find do not maintain unreasonable burdens on the commerce of the United States. 4. The Congress, in framing the tariff bargaining law, might define a minimum tariff for the United States and prescribe that any change in rate or classification should become effective only as proclaimed from time to time, in whole or in part, by the President, each proclamation being to the effect that he had found the concessions made by a foreign country to be reciprocal and equivalent to concessions made by the United States. Alternatively the Congress might frame a law for bilateral tariff bargaining which would authorize the President, when he had arranged a tariff bargain with a certain foreign country (the concessions by the foreign country being a reasonable return for the concessions by the United States) to issue a proclamation stating those facts and naming the reduced rates of duty on specified articles imported into the United States. 5. If the Congress enacts a minimum tariff, or if alternatively in a more general tariff bargaining law it desires to limit the extent of the reductions in rates which may be proclaimed by the President, this may be done in either of two ways: (1) By a uniform percentage limitation applicable alike to all articles (for example, that no rate should be reduced by more than 50 per cent); or (2) by specifying two or more different percentage limitations applicable under different circumstances. For example, under the latter plan the largest reductions in rates might be permitted in the case of (a) articles of which there is little or no domestic production, (b) articles of which the imports are very small in comparison with domestic production, and (c) articles now bearing exceptionally high rates of duty. Since it can not be presumed that bilateral bargaining will result in a uniform reduction of all duties, if a single uniform percentage of permissible reductions be specified by law, either this percentage if large will confer upon the President a wide discretionary power most of which he will presumably not use, or else this percentage if small will greatly restrict his bargaining power. Foreign countries will attach value to concessions only in proportion to the increase in trade reasonably to be expected therefrom. By specifying two or more definite percentage limitations, if these are properly established, the Congress might limit the President's discretion without greatly curtailing his bargaining power. 6. The preceding paragraphs relate to methods of bilateral tariff bargaining. In addition the Congress may desire the United States to participate in a multilateral agreement with some or all foreign countries for a general and simultaneous reduction of tariffs. If so, it must be remembered that tariffs are so complicated that multilateral bargaining on individual articles must be regarded as impossible; no multilateral bargaining can be envisaged unless the nations can agree on some simple uniform formula applicable to all tariffs. For multilateral bargaining, if that be desired, the law should authorize the President to proclaim a general reduction in all tariff rates within certain limits (e. g., a uniform 10 per cent limit) if he finds a sufficient number of other countries willing to do the same. A multilateral agreement raises the question of the extension of rates so reduced to imports from countries not parties to the agreement but parties to bilateral most-favored-nation treaties. The answer to the question might depend on a general acceptance of a new exception to, or a new interpretation of, the most-favored-nation obligation. 7. The Congress should formulate restrictions designed to prevent the inclusion in reciprocity agreements of illusory concessions; that is, the removal of trade barriers or the reduction of tariff rates when such barriers and rates had been raised in anticipation of tariff bargaining, the amount of the concessions being smaller than or not greater than the previous increases of barriers and rates. Specifically, it is suggested that the Congress prescribe that all concessions included in reciprocity agreements, on both sides, be made from the rates and relating to the barriers in effect at a date which shall be fixed by the Congress. 8. The tariff agreements should specify that rates or other changes fixed in any arrangement shall continue throughout the term of the agreement and should not specify merely percentages of reduction from base rates themselves subject to change. LISTS OF COUNTRIES ENTITLED BY TREATY OR AGREEMENT TO CONDITIONAL OR UNCONDITIONAL MOST-FAVORED-NATION TREATMENT FROM THE UNITED STATES The United States has given conditional or unconditional mostfavored-nation pledges, now in effect, to the following countries: |