determine whether greater application of antitrust laws to regulated areas might be warranted. The recommendations of these two groups deserve consideration by the Congress.

WIDENING THE OPPORTUNITIES FOR SMALL BUSINESS

An intensive and continuing study of the problems confronting small business is being made by the Cabinet Committee on Small Business, which was appointed by the President on May 31, 1956. The Committee is charged with the task of formulating recommendations for administrative and legislative actions to expand the opportunities of small firms to grow and prosper. While policies that strengthen competitive forces and foster stable economic growth are the surest means for improving the opportunities of small business in a free economy, specific measures are needed to deal with problems of special importance to this sector of the economy.

The first Progress Report of the Committee, which was submitted on August 7, 1956, made 14 recommendations for action. The substance of two of the Committee's recommendations, directed to the preservation and strengthening of competitive markets, was dealt with in the preceding section of this Report; others concern financing and technical assistance, taxation, procurement, and paperwork.

Small businesses, particularly those that are new and growing, frequently encounter difficulty in obtaining the amount and type of financing they need. Several Government programs help meet this problem. First, the Small Business Administration makes loans to qualifying small businesses unable to obtain funds on reasonable terms from private sources. It has performed this function as far as possible with the participation of private financial institutions. In 1955, the continuation for two more years of the Small Business Administration was approved, and its lending authority was strengthened. At this time the Congress is requested to extend the Small Business Act.

Second, the access of small and medium-sized businesses to the capital markets is facilitated by the provision of a simplified notification procedure for issues of securities that do not exceed $300,000, and by the examination and processing of applications for such small issues by the Securities and Exchange Commission in its field offices. In view of the increased needs for capital which confront small business in a growing economy, the Cabinet Committee recommended that the Congress authorize the extension of these simplified procedures to issue of securities that do not exceed $500,000. To avoid any lessening of protection to investors, the procedures should be allowed only to seasoned businesses and withheld from so-called "penny stocks." The Congress is urged to take favorable action on this Cabinet Committee proposal.

Small businesses have benefited materially from recent tax law changesthe expiration of the excess profits tax, the 1954 reduction of the personal

income tax, and the extensive revision of the Internal Revenue Code. However, the reliance of small concerns on self-financing is such that they are especially sensitive to the burden of taxation. Certain adjustments in the tax laws would ease their financing problems and help maintain their independent status. The Cabinet Committee on Small Business made a careful study of tax changes that would benefit small business concerns, and presented a number of recommendations for such changes. The Congress should give early consideration to those Cabinet Committee recommendations for tax relief that would involve only a minimum loss of revenue. Consideration of further changes should be deferred until such time as a general tax reduction is possible.

Efforts to widen the participation of small business in Government procurement must continue. Under Defense Department programs, small business suppliers are actively sought out and given an opportunity to compete for contracts on fair terms with larger companies. The Department has cooperated with the Small Business Administration in a joint setaside program under which procurement contracts are screened for award to small business. In the past year this program was extended to various civilian executive agencies, following a successful pilot program conducted by the General Services Administration in 1955 in cooperation with the Small Business Administration. Also, the Defense Department, mindful of the limited opportunities for prime contracting open to such businesses as defense weapons become more complex, has initiated a program to stimulate subcontracting with small businesses.

Three additional recommendations on procurement programs, which were made by the Cabinet Committee on Small Business, have already been given effect by administrative action. First, a comprehensive review of procurement policies, procedures, and legislation, covering all departments and agencies, is being conducted by the General Services Administration. Second, regulations have been issued by those departments and agencies responsible for substantial amounts of procurement to assure prompt availability of progress payments and to make certain that the need for advance or progress payments will not handicap a qualified potential contractor in competing for procurement. Third, through amendment of its regulations, the Renegotiation Board has made it clear that subcontracting, especially with small concerns, is given favorable consideration in the determination of allowable profits, although the allowable profit to a prime contractor on subcontracted work may not be as large as on the work that he does himself. The Federal Government can save small businesses time and money by reducing the paperwork required by its programs. In this connection, the Congress is requested to authorize the consolidation of wage reporting by employers for income tax withholding and old age and survivors insurance purposes. As recommended by the Cabinet Committee on Small Business, the Bureau of the Budget is reviewing the reports and statistics which small businesses must now maintain for, or supply to, Government,

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in order to simplify them. This desirable objective must be weighed, however, against the need for better information on the economic position of small businesses.

The facilities of a commercial or industrial type that are owned and operated by the Federal Government compete in many cases with private enterprise, and particularly with small businesses. Each Government agency has been instructed to examine its activities of this type and to discontinue or curtail them wherever feasible and consistent with the public interest.

STRENGTHENING ECONOMIC TIES WITH OTHER COUNTRIES

A major objective of United States foreign economic policy continues to be to facilitate and increase the international flow of goods and capital on a nondiscriminatory basis. Since the volume of our imports and the amount of private funds available for investment abroad depend mainly on domestic prosperity, a stable and growing economy at home is an essential foundation for a sound structure of world trade. But positive measures are needed to help other nations participate in the growth and prosperity of the free world. Considerable progress has been made in this direction in the last four years, but important opportunities remain.

By multilateral reductions of trade barriers, the United States has promoted the nondiscriminatory flow of goods, while reserving the right to prevent serious injury to domestic industries. The authority initially granted by the Reciprocal Trade Agreements Act of 1934 was extended until June 30, 1958, with some modifications, by the Trade Agreements Extension Act of 1955. The 1955 legislation provided the President with certain new authority. Specifically, it permitted the reduction of tariffs on a reciprocal basis by as much as 5 percent a year for three years, and made possible the reduction, in annual stages, of rates in excess of 50 percent ad valorem to the 50 percent level. In accordance with this legislation, reciprocal tariff concessions involving approximately $1 billion of United States exports and imports were negotiated with 21 foreign countries in 1956 under the General Agreement on Tariffs and Trade (GATT). In 1955, prior to the passage of the Trade Agreements Extension Act, the United States and 16 other countries concluded substantial tariff negotiations with Japan under the GATT, thereby bringing that country economically closer to the rest of the free world. The "escape clause" and "peril point" provisions of the Trade Agreements Act, which are designed to protect domestic industries against serious injury from tariff concessions, continue to serve as safeguards for domestic enterprise in a manner broadly consistent with trade liberalization.

Multilateral negotiations under the GATT have been more effective than bilateral negotiations in reducing trade barriers and discriminatory restrictions against our exports. To make the GATT an even more effective

instrument for removing discrimination against our exports, an administrative agency-the Organization for Trade Cooperation-is required. In order to enhance the advantages that the GATT now provides, Congress is requested to enact legislation authorizing United States membership in the Organization for Trade Cooperation.

The United States has provided large sums to assist the economic development of other countries through Government grants and loans and private investment. The last three Economic Reports have emphasized the desirability of encouraging private investment in countries seeking to expedite their development. Private investment is generally accompanied by technical and managerial services that are as necessary as capital funds but are often more difficult to obtain. At present, foreign tax inducements to attract capital are in some situations nullified by not allowing credit in determining United States tax liability for income taxes waived by the country in which the investment is made. The investment of private funds abroad would be facilitated by tax treaties which, subject to appropriate safeguards, recognize the laws of other countries designed to attract new investment.

The economic development of the free world has been materially aided by grants and loans extended by our Government. For the current fiscal year, $1.8 billion was appropriated for nonmilitary assistance under the Mutual Security Program, including defense support, development assistance, technical cooperation, and other programs. Recommendations will be presented to the Congress to continue this assistance and to provide the flexibility needed to help meet the challenge of rapidly changing international conditions.

The Export-Import Bank has loaned substantial amounts to finance our exports and to assist economic development abroad. Private capital has been associated with many of these loans, thus augmenting the effectiveness of the Bank's operations. The authority of the Export-Import Bank to approve credits, which expires June 30, 1958, should be extended.

The International Bank for Reconstruction and Development and the International Monetary Fund, which rely in large part on the capital subscriptions and guarantees of the United States Government, increased their dollar transactions markedly in 1956. The lending activities of the Bank aid in the sound economic development of its member countries. The International Monetary Fund helps member countries meet temporary maladjustments in their balance of payments positions and promotes sound international financial policies and freer foreign exchange transactions. Recently, it provided funds to strengthen the reserve position of the United Kingdom.

United States customs procedures were simplified and inequities removed by legislation enacted in 1953 and 1956. In accordance with the 1953 law, a series of administrative actions has liberalized import invoice requirements.

The Customs Simplification Act of 1956 is intended to reduce burdensome delays and uncertainties by modifying the methods employed in the customs valuation of imported merchandise. On the basis of other legislation, the Tariff Commission is investigating ways to improve the present system of commodity classification and the customs rate structure.

Two promising moves now under study would further the economic integration of Western Europe. One is the establishment of a common market, without internal trade barriers, among the six continental nations comprising the European Coal and Steel Community. The second is the association of the United Kingdom with these countries and other continental nations in a free trade area. These moves, if brought to a constructive conclusion, should add much to the growing economic strength and political unification of the area, with substantial benefits to the United States and the entire free world.

The continued industrialization of Western Europe and of much of the rest of the world requires the expansion of economical sources of energy. Members of the European Steel and Coal Community are planning cooperative efforts in the field of atomic energy. Action should be taken by the Congress to authorize full participation by the United States in the work of the International Atomic Energy Agency of the United Nations, in order to extend our program of helping free-world nations share in the benefits of peaceful use of the atom.

ENLARGING PUBLIC ASSETs and Developing Natural ResourceS

Notable improvements have been made in the last four years in developing our natural resources and bringing the Nation's stock of public assets more nearly into line with the expanded private economy and the requirements of improved levels of living. The amount spent on public construction, including State and local but excluding military and industrial-type projects, increased steadily from $7.8 billion in 1952 to $11.6 billion in 1956. In percentage terms, this increase outstripped the growth in national output as a whole and exceeded the rise in private construction expenditures.

Three major public works programs, involving substantial Federal outlays, were initiated. First, work was started in 1954 on the St. Lawrence Seaway, which will extend ocean transport into the heart of the Nation. Construction of the United States sector of the Seaway proper is being financed through revenue bonds issued to the United States Treasury, while associated storage dams and power installations will be financed by nonFederal agencies. The construction costs of these associated projects will substantially exceed the outlays of the Federal Government. Second, the Upper Colorado River Basin project was authorized in 1956. By providing flood control, hydroelectric power, and water for irrigation and other uses, this project will eventually transform an undeveloped area, comprising parts of several States, into a major national productive asset. Third, few devel