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exports — and particukrly upon the ability of our
farmers and businessmen to sell to the Common
Market. There is arising across the Atlantic a
single economic community which may soon have
a population half again as big as our own, working
and competing togetlier with no more barriers to
commerce and investment than exist among our
50 States — in an economy which has been growing
roughly twice as fast as ours — representing a pur-
chasing power which will someday equal our own
and a living standard growing faster than our
own. As its consumer incomes grow, its consumer
demands are also growing, particularly for the
type of goods that we produce best, which are only
now beginning to be widely sold or known in the



markets of Europe or in the homes of its middle-
income families.

Some 30 percent of our exports — more than $4
billion in industrial goods and materials and
nearly $2 billion in agricultural products —
already goes to the members and prospective mem-
bers of the ECC. European manufacturers, how-
ever, have increased their share of this rapidly
expanding market at a far greater rate than
American manufacturers. Unless our industry
can maintain and increase its share of this attrac-
tive market, there will be further temptation to
locate additional American-financed plants in
Europe in order to get behind the external tariff
wall of the EEC. This would enable the Ameri-
can manufacturer to contend for tliat vast con-
sumer potential on more competitive terms with
his European counterparts; but it will also mean a
failure on our part to take advantage of this grow-
ing market to increase jobs and investment in this
country.

A more liberal trade policy will in general
benefit our most efficient and expanding indus-
tries — industries which have demonstrated their
advantage over other world producers by export-
ing on the average twice as much of their products
as we import — industries which have done this
while paying the highest wages in our coimtry. In-
creasing investment and employment in these
growth industries will make for a more healthy,
efficient, and expanding economy and a still higher
American standard of living. Indeed, freer move-
ment of trade between America and the Common
Market would bolster the economy of the entire
free world, stimulating each nation to do most
what it does best and helping to achieve the OECD
target of a 50 percent combined Atlantic com-
munity increase in gross national product by
1970.»

Our efforts to prevent inflation will be rein-
forced by expanded trade. Once given a fair and
equal opportmiity to compete in overseas markets,
and once subject to healthy competition from over-
seas manufacturers for our own markets, Amer-
ican management and labor will have additional
reason to maintain competitive costs and prices,
modernize their plants, and increase their pro-
ductivity. The discipline of the world market-
place is an excellent measure of efficiency and a
force to stability. To try to shield American in-



For text, see Bulletin of Jan. 29, 1962, p. 159.



232



* For background, see ihid., Dec. 18, 1961, p. 1014.

Department of State Bulletin



dusti-y from the discipline of foreign competition
would isolate our domestic price level from world
prices, encourage domestic inflation, reduce our
exports still further, and invite less desirable gov-
ernmental solutions.

Our eflorts to collect our adverse balance of
payments have in recent years roughly paralleled
our ability to increase our export surplus. It is
necessary if we are to maintain our security pro-
grams abroad — our own military forces overseas
plus our contribution to the security and growth
of other free countries — to make substantial dollar
outlays abroad. These outlays are being held to
the minimum necessary, and we are seeking in-
cre-ased shai'ing from our allies. But they will
continue at substantial rates — and this requires us
to enlarge the $5 billion export surplus which we
presently enjoy from our favorable balance of
trade. If that surplus can be enlarged, as exports
under our new program rise faster than imports,
we can achieve the equilibrium in our balance of
payments which is essential to our economic sta-
bility and flexibility. If, on the other hand, our
siu'plus should fail to grow, if our exports should
be denied ready access to the EEC and other
markets — our overseas position would be endan-
gered. Moreover, if we can lower the external
tariff wall of the Common Market through nego-
tiation our manufacturers will be under less pres-
sure to locate their plants behind that wall in
order to sell in the European market, thus re-
ducing the export of capital fimds to Europe.

Our efforts to promote the strength and unity
of the West are thus directly related to the
strength and unity of Atlantic trade policies. An
expanded export program is necessary to give this
nation both the balance-of-payments equilibrium
and the economic growth we need to sustain our
share of "Western military security and economic
advance. Equally important, a freer flow of trade
across the Atlantic will enable the two giant mar-
kets on either side of the ocean to impart strength
and vigor to each other, and to combine their
resources and momentum to undertake the many
enterprises which the security of free peoples
demands. For the first time, as the world's great-
est trading nation, we can welcome a single part-
ner whose trade is even larger than our own — a
partner no longer divided and dependent, but
strong enough to share with us the responsibilities
and initiatives of the free world.



The Commimist bloc, largely self-contained
and isolated, represents an economic power al-
ready by some standards larger than that of
Western Europe and hoping someday to overtake
the United States. But the combined output and
purchasing power of the United States and West-
ern Europe — nearly a trillion dollars a year — is
more than twice as great as that of the entire
Sino-Soviet world. Though we have only half
the population, and far less than half the terri-
tory, we can pool our resources and resourceful-
ness in an open trade partnership strong enough
to outstrip any challenge, and strong enough to
imdertake all the many enterprises around the
world which the maintenance and progress of
freedom require. If we can take this step, Marx-
ist predictions of "capitalist" empires warring
over markets and stifling competition would be
shattered for all time — Commmiist hopes for a
trade war between these two great economic giants
would be frustrated — and Communist efforts to
split the West would be doomed to failure.

As members of the Atlantic community we have
concerted our military objectives through the
North Atlantic Treaty Organization. We are
concerting our monetaiy and economic policies
through the Organization for Economic Coopera-
tion and Development. It is time now to write
a new chapter in the evolution of the Atlantic
connnunity. The success of our foreign policy
depends in large measure upon the success of our
foreign trade, and our maintenance of Western
political unity depends in equally large measure
upon the degree of Western economic unity. An
integrated Western Europe, joined in trading
partnership with the United States, will further
shift the world balance of power to the side of
freedom.

Our efforts to piove the superioiity of free
choice will thus be advanced immeasurably. We
will prove to the world that we believe in peace-
fully "tearing down walls" mstead of arbitrarily
building them. We will be opening new vistas of
choice and opportunity to the producers and con-
sumers of the free world. In answer to those who
say to the world's poorer countries that economic
progress and freedom are no longer compatible,
we — who have long boasted about the virtues of
the marketplace and of free competitive enterprise,
about our ability to compete and sell in any
market, and about our willingness to keep abreast



Fefaruory 72, J 962



233



of the times — will have our greatest opportunity
since the Marshall plan to demonstrate the vitality
of free choice.

Communist bloc nations have negotiated more
than 200 trade agreements in recent years. In-
evitably the recipient nation finds its economy in-
creasingly dependent upon Soviet goods, services,
and technicians. But many of these nations have
also observed that the economics of free choice
provide far greater benefits than the economics
of coercion — and the wider we can make the area
of economic freedom, the easier we make it for all
free peoples to receive the benefits of our innova-
tions and put them into practice.

Our efforts to aid the developing nations of the
world and other friends, however, depend upon
more than a demonstration of freedom's vitality
and benefits. If their economies are to expand,
if their new industries are to be successful, if they
are to acquire the foreign exchange funds they
will need to replace our aid efforts, these nations
must find new outlets for their raw materials and
new manufactures. We must make certain that
any arrrangements which we make with the
European Economic Community are worked out
in such a fashion as to insure nondiscriminatory
application to all third countries. Even more im-
portant, however, the United States and Europe
together have a joint responsibility to all of the
less developed countries of the world — and in this
sense we must work together to insure that their
legitimate aspirations and requirements are ful-
filled. The "open partnership" which this biU
proposes will enable all free nations to share to-
gether the rewards of a wider economic choice
for all.

Our efforts to maintain the leadership of the
free world thus rest, in the final analysis, on our
success in this undertaking. Economic isolation
and political leadership are wholly incompatible.
In the next few years, the nations of Western
Europe will be fixing basic economic and trading
patterns vitally affecting the future of our econ-
omy and the hopes of our less developed friends.
Basic political and military decisions of vital
interest to our security will be made. Unlass we
have this authority to negotiate and have it this
year — if wo are separated from the Common
Market by high tariff barriers on either side of the
Atlantic — then we cannot hope to play an effective
part in those basic decisions.



If we are to retain our leadership, the initiative
is up to us. The revolutionary changes which are
occurring will not wait for us to make up our
minds. The United States has encouraged sweep-
ing changes in free-world economic patterns in
order to strengthen the forces of freedom. But
we cannot ourselves stand still. If we are to lead,
we must act. We must adapt our own economy to
the imperatives of a changing world, and one©
more assert our leadership.

The American husinessTnan, once the authority
granted by this bill is exercised, will have a
unique opportunity to compete on a more equal
basis in a rich and rapidly expanding market
abroad which possesses potentially a purchasing
power as large and as varied as our own. He
knows that, once artificial restraints are removed,
a vast array of American goods, produced by
American know-how with American efficiency,
can compete with any goods in any spot in the
world. And almost all members of the business
community, in every State, now participate or
could participate in the production, processing,
transporting, or distribution of either exports or
imports.

Already we sell to Western Europe alone more
machinery, transportation equipment, chemicals,
and coal than our total imports of these commodi-
ties from all regions of the world combined.
Western Europe is our best customer today — and
should be an even better one tomorrow. But as
the new external tariff surrounding the Common
Market replaces the internal tariff structure, a
German producer — who once competed in the mar-
kets of France on the same terms with our own
producers — will achieve free access to French mar-
kets while our own producers face a tariff. In
short, in the absence of authority to bargain down
that external tariff, as the economy of the Com-
mon Market expands, our exports will not expand
with it. They may even decline.

The American fanner has a tremendous stake
in expanded trade. One out of every seven farm
workers produces for export. The average farmer
depends on foreign markets to sell the crops grown
on one out of every six acres he plants. Sixty per-
cent of our rice, 49 percent of our cotton, 45 per-
cent of our wheat, and 42 percent of our soybean
production are exported. Agriculture is one of
our best sources of foreign exchange.

Our farmers are particularly dependent upon



234



Department of State Bulletin



the markets of Western Europe. Our agricultural
trade with that area is four-to-one in our favor.
The agreements recently reached at Brussels*
both exhausted our existing authority to obtain
further European concessions, and laid the
groimdwork for future negotiations on American
farm exports to be conducted once new authority
is granted. But new and flexible authority is
required if we are to keep the door of the Com-
mon Market open to American agriculture, and
open it wider still. If the output of our astound-
ing productivity is not to pile up increasingly in
our warehouses, our negotiators will need both the
special EEC authority and the general 50 percent
authority requested in the bill described later in
this message.

The American worker will benefit from the ex-
pansion of our exports. One out of every three
workers engaged in manufacturing is employed in
establishments that export. Several hundred times
as many workers owe their jobs directly or indi-
rectly to exports as are in the small group — esti-
mated to be less than one-half of 1 percent of all
workers — who might be adversely affected by a
sharp increase in imports. As tlie nimiber of job
seekers in our labor force expands in the years
ahead, increasing our job opportunities will re-
quire expanding our markets and economy, and
making certain that new United States plants built
to serve Common Market consumers are built here,
to employ American workers, and not there.

The American consum,er benefits most of all
from an increase in foreign trade. Imports give
him a wider choice of products at competitive
prices. They introduce new ideas and new tastes,
which often lead to new demands for American
production.

Increased imports stimulate our own efforts to
increase efficiency, and supplement antitrust and
other efforts to assure competition. Many in-
dustries of importance to the American consimier
and economy are dependent upon imports for raw
materials and other supplies. Thus American-
made goods can also be made much less expensively
for the American consumers if we lower the tariff
on the materials that are necessary to their produc-
tion.



'Agreements were reached at Brussels in January be-
tween the United States and the European Economic
Community which will be made part of the results of the
1960-61 GATT tariff conference that began on Sept. 1,
1960, at Geneva.



American imports, in short, have generally
strengthened rather than weakened our economy.
Their competitive benefits have already been men-
tioned. But about 60 percent of the goods we im-
port do not compete with the goods we produce —
either because they are not produced in this
country, or are not produced in any significant
quantity. They provide us with products we need
but cannot efficiently make or grow (such as
bananas or coffee), supplement our own steadily
depleting natural resources with items not avail-
able here in quantity (such as manganese or
chrome ore, 90 percent or more of which must be
imported if our steel mills are to operate), and
contribute to our industrial efficiency, our economic
growth, and our high level of consumption. Those
imports that do compete are equal to only 1 or 11^
percent of our total national production ; and even
these imports create jobs directly for those engaged
in their processing, distribution, or transportation,
and indirectly for those employed in both export
industries and in those industries dependent upon
reasonably priced imported supplies for their own
ability to compete.

Moreover, we must reduce our own tariffs if we
hope to reduce tariffs abroad and thereby increase
our exports and export surplus. There are many
more American jobs dependent upon exports than
could possibly be adversely affected by increased
imports. And those export industries are our
strongest, most efficient, highest paying growth
industries.

It is obvious, therefore, that the warnings
against increased imports based upon the lower
level of wages paid in other countries are not tell-
ing the whole story. For this fear is refuted by
the fact that American industry in general — and
America's highest paid industries in particular —
export more goods to other markets than any other
nation; sell far more abroad to other countries
than they sell to us; and command the vast pre-
ponderance of our own market here in the United
States. There are three reasons for this :

(a) The skill and efficiency of American work-
ers, with the help of our machinery and teclmol-
ogy, can produce more units per man-hour than
any other workers in the world — thus making the
competitive cost of our labor for many products
far less than it is in countries with lower wage
rates. For example, while a United States coal
miner is paid 8 times as much per hour as the
Japanese miner, he produces 14 times as much



februory 72, 7962



235



coal — our real cost per ton of coal is thus far
smaller — and we sell the Japanese tens of millions
of dollars worth of coal each year.

(b) Our best industries also possess other ad-
vantages — the adequacy of low-cost raw materials
or electrical power, for example. Neither wages
nor total labor costs is an adequate standard of
comparison if used alone.

(c) American products can frequently com-
pete successfully even where foreign prices are
somewhat lower— by virtue of their superior qual-
ity, style, packaging, servicing, or assurance of
delivery.

Given this strength, accompanied by increasing
productivity and wages in the rest of the world,
there is less need to be concerned over the level of
wages in the low-wage countries. These levels,
moreover, are already on the rise, and, we would
hope, will continue to narrow the current wage
gap, encouraged by appropriate consultations on
an international basis.

This philosophy of the free market — the wider
economic choice for men and nations — is as old
as freedom itself. It is not a partisan philosophy.
For many years our trade legislation has enjoyed
bipartisan backing from those members of both
parties who recognized how essential trade is to our
basic security abroad and our economic health at
home. This is even more true today. The Trade
Expansion Act of 1962 is designed as the expres-
sion of a nation, not of any single faction, not of
any single faction or section. It is in that spirit
that I recommend it to the Congress for prompt
and favorable action.

II. Provisions of the Bill

New Negotiating Authority. To achieve all of
the goals and gains set forth above — to empower
our negotiators with sufficient autliority to induce
the EEC to grant wider access to our goods and
crops and fair treatment to those of Latin Amer-
ica, Japan, and other countries — and to be ready
to talk trade with the Common Market in prac-
tical terms — it is essential that our bargaining au-
thority be increased in both flexibility and extent.
I am therefore requesting two basic kinds of au-
thoi-ity to be exercised over the next 5 years :

First, a general authority to reduce existing
tariffs by 50 percent in reciprocal negotiations. It
would be our intention to employ a variety of



teclmiques in exercising this authority, including
negotiations on broad categories or subcategories
of products.

Secondly, a special authority, to be used in ne-
gotiating with the EEC, to reduce or eliminate all
tarifl's on those groups of products where the
United States and the EEC together accoimt for
80 percent or more of world trade in a represent-
ative period. The fact that these groups of prod-
ucts fall within this special or "dominant sup-
plier" authority is proof that they can be pro-
duced here or in Europe more efficiently than
anywhere else in the world. They include most
of the products which the members of the Com-
mon Market are especially interested in trading
with us, and most of the products for which we
want freer access to the Common Market ; and to
a considerable extent they are items in wliich our
own ability to compete is demonstrated by the fact
that our exports of these items are substantially
greater than our imports. They account for
nearly $2 billion of our total industrial exports
to present and prospective Common Market
members in 1960, and for about $1.4 billion
of our imports from these countries. In short,
this special authority w-ill enable us to negotiate
for a dramatic agreement with the Common Mar-
ket that will pool our economic strength for the
advancement of freedom.

To be effective in achieving a breakthrough
agreement with the EEC so that our farmers,
manufacturers, and other fi-ee-world trading part-
ners can participate, we will need to use both the
dominant-supplier authority and the general au-
thority in combination. Reductions would be put
into effect gradually in stages over 5 years or more.
But the traditional teclmique of trading one brick
at a time off our respective tariff walls will not
suffice to aasure American farm and factory ex-
ports the kind of access to the European market
which they must have if trade between the two
Atlantic markets is to expand. We must talk in-
stead in terms of trading whole layere at a time in
exchange for other layers, as the Europeans have
been doing in reducing their internal tariffs, per-
mitting the forces of competition to set now trade
patterns. Trading in such an enlarged basis is not
possible, the EEC has found, if traditional item-
by-item economic histories are to dominate. But
let me emphasize that we mean to see to it that all
reductions and concessions are reciprocal — and



236



Department of State Bulletin



that the access we gain is not limited by the use of
quotas or other restrictive devices.

Safeguarding Interests of Other Trading Part-
ners. In our negotiations with tlie Common
Mai'ket, we will preserve our traditional most-
favored-nation principle under which any tariff
concessions negotiated will be generalized to our
other trading partners. Obviously, in special au-
thority agreements where the United States and
the EEC are the dominant suppliers, the partici-
pation of other nations often would not be sig-
nificant. On other items, where justified,
compensating concessions from other interested
countries should be obtained as part of the negotia-
tions. But in essence we must strive for a nondis-
criminatory trade partnersliip with the EEC. If
it succeeds only in splintering the free world, or
increasing the disparity between rich and poor na-
tions, it will have failed to acliieve one of its major
purposes. The negotiating authority under this
bill will thus be used to strengthen the ties of both
"Common Markets" with, and expand our own
trade in, the Latin American Republics, Canada,
Japan, and other non-European nations — as well
as helping them maximize their opportunities to
trade with the Common Market.

The bill also requests special authority to re-
duce or eliminate all duties and other restrictions
on the importation of tropical agricultural and
forestry products supplied by friendly less de-
veloped countries and not produced here in any
significant quantity, if our action is taken in con-
cert with similar action by the Conunon Alarket.
These tropical products are the staple exports of
many less developed countries. Their efforts for
economic development and diversification must be
advanced out of earnings from these products. By
assuring them as large a market as possible, we are
bringing closer the day when they will be able to
finance their own development needs on a self-
sustaining basis.

Safeguards to American Industry. If the au-
thority requested in this act is used, imports as



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 46, Jan- Mar 1962) → online text (page 48 of 101)