International Trade Files, Lot 57 D 284, Box 164, “Magnuson Amendment”
Unsigned Department of State Letter to Senator Walter F. George, Chairman of the Senate Committee on Finance
My Dear Senator George: Reference is again made1 to your letter of March 19, 1951 transmitting for the comment of the Department of State an amendment proposed by Senator Magnuson to the bill H.R. 1612, “To extend the authority of the President to enter into trade agreement under Section 350 of the Tariff Act of 1930, as amended, and for other purposes”.
[Page 1470]Section 22 of the Agricultural Adjustment Act, as amended, provides that the President shall impose import fees or quotas if he finds, on the basis of investigations made by the Tariff Commission, that imports threaten the impairment of farm programs undertaken for price support and other purposes. Subsection (f) of Section 22 provides that no restriction may be enforced under that Section which conflicts with obligations under existing or future trade agreements. It provides further, however, that no international agreement or amendment to an existing agreement shall in the future be entered into which would limit action under Section 22 of a type now permitted by the General Agreement on Tariffs and Trade.
The amendment proposed by Senator Magnuson would continue the basic authority to apply fees and quotas under Section 22 of the Agricultural Adjustment Act, as amended, but would modify the present provisions of Section 22 in a number of respects. Under this amendment the Department of Agriculture would replace the Tariff Commission as the agency which would investigate the facts and make recommendations to the President as to the need for import fees or quotas to protect farm programs which may have been undertaken. More important, however, the amendment would eliminate the present limitation in Section 22 prohibiting any action under it conflicting with existing or future trade agreements, and provide instead that “No international agreement hereafter shall be entered into by the United States, or renewed, extended, or allowed to extend beyond its permissible termination date in contravention of this section”.
While the language of this proposed change relating to international agreements may be somewhat ambiguous, it seems clear that it is intended to ensure that no trade agreement shall interfere with action that might be taken under Section 22. While it is possible to take action under Section 22 which would safeguard our farm programs and at the same time be consistent with obligations under our trade agreements, it would also be possible, if it were not for the present limitation in Section 22 preventing action inconsistent with our international commitments, to take action under that Section which would conflict with our international obligations. In fact, it was precisely the possibility that action in conflict with our international commitments could have been taken under an earlier version of Section 22 that led the Congress to enact the present limitation in Section 22 prohibiting such action.
What the amendment proposes is that this emphasis be reversed. Instead of ensuring that no action is taken under Section 22 which would conflict with our international obligations, the amendment would make certain that no international agreement will interfere with action that might be authorized under Section 22. While the words “in contravention of” in the amendment may be somewhat unclear, the [Page 1471] conclusion seems inescapable that any international agreement which might prevent action otherwise authorized under Section 22 would be “in contravention of” that Section. Hence, if the amendment were adopted, no new trade agreement which might prevent the taking of such action could “be entered into by the United States”, and no existing agreement which might prevent such action could be “renewed, extended, or allowed to extend beyond its permissible termination date”.
Our existing reciprocal trade agreements do place some limits on action that might otherwise be taken under Section 22 if there were no limitation in that Section, as at present, prohibiting action in conflict with such agreements. In fact, it is difficult to see how it would be possible to conclude any useful reciprocal trade agreement which would not limit the broad action otherwise permissible under Section 22. For the purpose of reciprocal trade agreements is to reach agreement with the other country that neither party will impose duties on the import of specified commodities above certain rates. The rates on agricultural commodities are, of course, very important parts of these agreements, both for us and the other country. Section 22, however, unless it contained a safeguard such as the present one prohibiting action in conflict with international commitments, would authorize the imposition of fees even on scheduled commodities included in trade agreements, thus having the effect of raising the agreed duties.
Similarly, our trade agreements, while permitting quotas in certain circumstances, set limitations on their use. Section 22, however, would be broad enough to authorize quotas which would exceed these limitations, unless the present safeguard protecting our international commitments is retained. In short, it is difficult to see how it would be possible to continue any existing trade agreement so as not to be “in contravention of” Section 22 in the sense apparently intended by the amendment, namely in the sense of preventing action that might otherwise be possible under that Section.
Nor does it seem probable that any useful new trade agreement could be concluded with any country under the amendment, particularly a country that had significant agricultural exports. For what we would be seeking under such an agreement would be limitations on the duties on particular commodities and, to protect these tariff concessions, limitations on the other country’s use of quotas. These they could not reasonably be expected to give us, if we reserved the right, at our sole option (as we would have to do under the amendment) to impose quotas or raise rates on agricultural imports.
If the amendment were adopted, therefore, it would deal a severe blow to our trade agreements program, under which after years of painstaking effort we have secured bilateral agreements with 14 countries and negotiated the multilateral General Agreement on Tariffs [Page 1472] and Trade, to which 31 countries are presently party and to which six more are expected to accede shortly.
And the great tragedy is that it would be completely and thoroughly unnecessary. Our present trade agreements afford ample leeway to take action to protect our farm programs as contemplated under Section 22. Our trade agreements do not, of course, restrict in any way our freedom to impose import fees on commodities not included in such trade agreements. While additional import fees on scheduled commodities in agreements would be precluded, import quotas on such commodities, as well as on commodities not covered in the agreement, would be permitted, subject to certain limitations. These limitations are broad enough to afford reasonable protection to our agricultural programs.
The General Agreement on Tariffs and Trade strikingly illustrates this fact. Under that Agreement we could apply quotas in connection with agricultural products when domestic production or marketing is also restricted. Under the Agreement we could apply quotas on agricultural products in connection with the removal of temporary surpluses where such surpluses are made available, as under our school lunch programs, to certain domestic consumers free of charge or at prices below the current market level. The General Agreement also has provisions which would permit the application of quotas to meet various problems arising out of the exigencies of the last war, such as the accumulation of government-owned or controlled stocks for whose orderly liquidation quotas may be necessary or the acquisition or distribution of products in short supply for which purpose quotas may be essential.
In addition, the General Agreement contains a general escape clause under which quotas and, for that matter, even additional import fees on scheduled commodities could be applied if as a result of unforeseen developments and of the effect of the obligations incurred under the Agreement, a product is being imported in such increased quantities as to cause or threaten serious injury to domestic industry.
These are fair and equitable principles. They allow the legitimate use of quotas under Section 22, but show to other nations that we are prepared to use reasonable self-restraint in the process. The Department of Agriculture has indicated that it has ample authority under the General Agreement to use Section 22 in a manner appropriately to protect United States agriculture. This Agreement prevents other countries from resorting without limitation to the use of quotas to restrict imports of agricultural products from the United States. To toss over these principles, whose acceptance was achieved only after long and arduous negotiations with over a score of countries, would represent a serious setback to the commercial policy which this Government [Page 1473] has been pursuing and endeavoring to persuade other nations to follow.
The amendment, it should be clearly understood, attacks a central element in our trade policy, namely the limitation of the use of quotas. The quota is the most restrictive and undesirable of all types of barriers. It is the type of restriction used most frequently by foreign countries. It has been widely used to limit imports of agricultural products from the United States. The consistent aim of the United States negotiators has been to obtain elimination or limitation of the use of the quota by other countries. Obviously, however, we cannot expect other countries to limit their use of protective quotas if we are not prepared to follow suit, and our exports, agricultural and otherwise, are bound to suffer.
We must not ignore the fact that American agriculture has two great interests—the domestic market and the export market. Both are vital. Our farm policy and our foreign policy should be designed and administered to give the maximum opportunity for our farmers in both markets. If we close the door to imports, we close the door to our exports also. If we refuse to accept any limitation, however reasonable, on our use of Section 22—even limitations which have been carefully designed to safeguard our domestic interests—other nations will not do so either, and our markets abroad for agricultural as well as other goods will suffer.
The United States occupies a central position as a leader in the development of world trade policy. It is the strongest single motive force behind the world-wide efforts for the reduction of trade barriers. Approval of the amendment in question would be interpreted by the countries of the world as a retrogression in American efforts to reduce trade barriers and as an indication of a return to more restrictive policies. We would impair our ability to persuade these countries to reduce their trade barriers at a time when we appear to be increasing our own, and our own national interests are bound to suffer.
For all these reasons the Department wishes to register its strongly held objections to the proposed amendment and recommends that it not be enacted.
- Reference uncertain.↩