Kennedy's Tariff Battle

...Kennedy, indeed, put it more strongly than most of his supporters, warning that U.S...

...negotiators had difficulty matching this offer, since the President cannot lower U.S...

...By getting the domestic firm into new lines of work, out of the way of oncoming imports, it intensifies specialization and captures the gains from trade...

...the Common Market will be threat, promise, menace and opportunity, in alternating sentences...

...has been making a record for the other side...

...A U.S...

...They have tried to catch the opposition off-guard by conceding that tariff reduction could be painful, but urging the sacrifice as necessary if the United States is to maintain its leadership within the Western world...

...The President will have to use all of his skill and influence to win the tariff fight...

...If the United States were to join the Common Market, or even to enter into a limited partnership, it would dangerously divert Europe's attention from European problems...

...exports...

...For some months, the United States haggled with the Common Market countries over a European offer to reduce tariffs on industrial goods by 20 per cent in exchange for "equivalent" U.S...

...It may have trouble mobilizing support from those segments of the electorate that have favored liberal policies before...

...a subcommittee of the Joint Economic Committee has held two weeks of hearings to parade a host of witnesses friendly to the Administration...

...If unemployment continues to shrink, Congress may be very much more willing to risk a liberal trade policy...

...In the end, much will depend on the way in which two statistical series evolve during the next few months—the unemployment and gold statistics...

...Senator Barry Goldwater (R.-Ariz...

...The White House, however, may have regained some support in the farm belt by delaying acceptance of a tariff bargain already negotiated with the Common Market because that agreement did not do enough for the U.S...

...n enthusiastic advocate of private enterprise and free competition, draws the line at the seashore...

...Under present legislation, a firm may appeal to have tariffs raised whenever imports increase more rapidly than its own production—even when there has been no absolute decline in output, employment or profits...

...Administration spokesmen also argue that tariff reduction would slow the outflow of capital from the U.S...

...Administration allies correctly note, too, that the new tariff policy may not suffice to tear down the nontariff barriers obstructing agricultural trade, but that, lacking the power to bargain on tariffs, the U.S...

...Under the chairmanship of Representative Hale Boggs (D.-La...

...companies, not merely the earnings that come home as dividends...

...The Administration and many economists believe that the migration of American capital may be hurting the balance of payments, and may also be damaging employment and income in this country...

...They have thereby given credence to fears that the Administration will formally adhere to the Treaty of Rome, the constitution of the Common Market, and thus subscribe to the principle that labor should move as freely as goods...

...The concern with export promotion, traditional to the Trade Agreements Program, enjoys special prominence at the White House because the balance of payments has once again worsened...

...farm products, that it will be impotent to liberalize European agricultural policies...

...Ironically, the "cheap foreign labor" arguments used for so long by management to answer union wage demands are now taking hold in the labor movement...

...The individual worker, moreover, cannot be expected to accept the economists' austere answers to the "pauper labor" argument...

...The President is determined to win, and the Administration will run the gamut from reasoned appeal to dire prediction...

...One can only hope that he will, for the stakes are high and the President's proposals could inaugurate a new and fruitful era in American tariff history...

...By restricting imports because they injure a domestic producer the country foregoes such gains...

...This result would be especially damaging to Latin America, for it is already disadvantaged by the preferential treatment Europe gives to the countries of tropical Africa...

...will not be able to exert a liberal influence on Western Europe...

...wheat and cotton...

...Testifying before the Joint Economic Committee, Will Clayton, Dean Acheson and Christian Heiter all spoke of a partnership with Europe in terms so glowing and compelling that friends and critics alike may be excused for believing that they do envisage full or partial American accession to the Treaty of Rome...

...Even in his speech before the NAM, the President renewed this request, insisting that the present tax treatment of foreign-source income constitutes an undue stimulus to foreign investment and thus adds to the balance of payments problem...

...The unions, in addition, are increasingly worried about wage rates abroad...

...Still worse, Atlantic free trade would proclaim a formal separation of the rich lands from the poor and, in dangerous measure, the white from the non-white...

...It may also appeal when one of its products is adversely affected—even though it could use its plant and labor profitably to produce other products...

...Washington has always favored economic integration as a way station on the road to full European confederation...

...concessions...

...But there are advocates of formal union in the Administration's camp, and some of the other advocates of lower tariffs have been careless in their discussions of this most sensitive point...

...In his speech before the NAM the President employed these arguments, urging that trade policies should give consumers the widest choice of goods "at competitive prices...

...Now, an injured industry may ask for higher tariffs or other import restrictions...

...The farmers, too, are rather worried...

...The White House will probably ask that injury be defined to mean an absolute decline in employment or output, an outright idling of resources...

...A man in danger of losing his job is understandably suspicious of reassurances that glibly invoke average wage rates and productivity, or that talk about the balance of trade...

...But some labor leaders are now very concerned that the trade adjustment program will be inadequate...

...These same companies, however, are angry with the Administration because it has asked the Congress to tighten the tax treatment of foreign investment—to assert Treasury jurisdiction over the very firms that regard themselves as citizens of the world...

...The Administration, however, has also stressed other arguments for tariff reform...

...They are concerned that the new trade policy will not enlarge foreign markets for U.S...

...The White House faces stiff opposition in Congress, where protectionist sentiment has been growing apace with foreign competition...

...The European Common Market plays a very important part in the Administration's case...

...Peter B. Kenen, Associate Professor of Economics at Columbia University, wrote Giant Among Nations...

...A continuing outflow at recent levels might hurt the Administration...

...This fosters communal action and the growth of European political institutions...

...farmer...

...exports could "shrivel" if foreign trade barriers were not brought down...

...Tariff reductions would, of course, increase imports...

...businesses competing with imported products...

...membership or partnership would also complicate Western relations with the less-developed countries...

...To begin with, it would weaken the impetus to political union in Western Europe...

...The White House will also have difficulty with labor...

...seek "association" with the European Common Market...

...Economists familiar with tariff problems have been urging similar reforms for many years...

...He has not yet said what the new law should contain, but he has outlined his objectives and most observers predict he will ask for four major changes: 1. White House power to make large tariff cuts across the board, and even to remove certain duties...

...The AFL-CIO will support the Administration, but key constituent unions may abstain when it comes time to nail down votes in the House and Senate...

...That Committee, in fact, could give the President his biggest victories or worst defeats in the coming Congressional session...

...Exploiting the President's unique prestige in matters of foreign policy, the supporters of a new trade policy contend that trade liberalization is required to attain the essential objectives of American diplomacy...

...The President has explicitly disavowed any plan to unite the United States and Western Europe in a preferential trading community...

...European tariffs are not prohibitively high, but together with cost and tax differences they may be encouraging American business to build plants in Europe...

...Indeed, both sides are going to use every argument that can earn support and Capitol Hill will be host to the largest collection of bogeymen ever mustered to do battle on the tariff question...

...duties by more than 20 per cent and cannot go that far on many products...

...Finally, the White House will face determined opposition from the radical right...

...But the President has made his point...

...When, at last, agreement was reached, the White House expressed dissatisfaction with the bargain, reportedly because it did not open European markets to U.S...

...2. Elimination of the "perilpoint" provision that bars tariff cuts injurious to domestic industry...

...Such a policy would not increase unemployment over the long run, but could cause temporary idleness during the transition to freer trade...

...One can easily understand the plight of the labor leaders...

...These four basic changes are long overdue...

...At this writing, the provisional agreement seems slated for approval...

...The gold figures could cut either way...

...The new legislation would grant different kinds of relief: loans to diversify output, special tax treatment, aids to market research and for the retraining of workers, and an extension of unemployment compensation benefits...

...The big battle, however, will take place in the House Ways and Means Committee...

...First, it is said, the United States must preserve its share in Europe's growing market...

...As Adam Smith put it 185 years ago: "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage...

...3. A new "escape clause," containing a more meaningful definition of injury...

...A large part of the business community has come to espouse freer trade...

...The present Trade Agreements Act expires June 30, 1962...

...The trade adjustment program which is central to its proposal was first urged by David MacDonald, president of the United Steelworkers, when he was a member of the Commission on Foreign Economic Policy appointed by President Eisenhower...

...Many have affiliates uniquely devoted to foreign business...

...He has called for a thorough, revision of American tariff, policy, the first since passage of the Trade Agreements Act in 1934...

...The Europeans, incidentally, are a long way from unrestricted labor migration...

...Kennedy's Tariff Battle By Peter ?. Kenen In speeches before the National Association of Manufacturers and the American Federation of Labor-Congress of Industrial Organizations, President Kennedy has announced his intention to do battle on the toughest Congressional terrain...

...U.S...

...tariff cuts that would ease access to the huge American market...

...Trade is beneficial because it impels specialization in the tasks a nation can do most efficiently...

...Finally, it is said, Europe and the United States must jointly give growing markets to the lessdeveloped countries...

...If the United States, Canada and Western Europe were to eliminate trade barriers within the Atlantic community, while leaving or raising such barriers against imports from the outside, the less-developed countries would be at a serious commercial disadvantage in their most important export markets...

...While liberal trade policies would probably strengthen the balance of payments, as the White House maintains, Congress is skeptical...

...they will have difficulty finding new jobs and will lose seniority and other valued rights even when they can find alternative employment...

...What is more, the Administration may have played directly into the hands of the new know-nothings...

...One thing is clear, even at this stage...

...Many of the workers who would be most directly affected are middle-aged...

...It will have to deal with tax policy, including the President's proposal for the tougher treatment of American business abroad, even as it struggles with the tariff problem...

...While this is probably the best tactic, it may not work...

...The United States, they say, must have the power to bargain down European trade barriers and thereby promote U.S...

...The low-paid foreign worker will be displayed to counter the runaway textile firm...

...the most casual suggestion or implication along these lines flutters the red flag before the true-blue legions...

...Second, it is argued, the European market is the only one large enough to offer reciprocity for the U.S...

...In his 1961 tax message, the President asked Congress to tax the foreign earnings of U.S...

...foreign competition is somehow different from domestic competition...

...The President wants to be able to negotiate reductions even when they hurt U.S...

...At present, the President may make only small reductions in individual tariffs...

...4. A change in the method of coping with injury...

...Instead of requesting extension, the President will ask Congress to write new legislation...

...Corporations with extensive operations overseas have become increasingly cosmopolitan...

...The U.S...

...Unemployment is high and wages are low in a number of the industries that can expect additional competition if tariffs come down...

...But this does not matter...

...By eliminating barriers to trade within Europe and surrounding the Continent with uniform external tariff barriers, it is argued, the Common Market fosters recognition of Europe's common interest and problems...

...Another subcommittee, under the chairmanship of Representative John Dent (D.-Pa...

...The United States, he has indicated, will bargain hard to liberalize trade in farm products...

...But the advocates of trade liberalization argue that U.S...

...Putting the emphasis on exports rather than imports, Administration spokesmen and allies have warned that the emerging external tariff of the European Common Market nations — West Germany, France, Italy, Belgium, Luxembourg and the Netherlands—may curb U.S...

...The gains from trade, they point out, derive from obtaining certain goods more cheaply than they can be made at home...

...dozens have detailed their struggles with import competition...

...The skirmishing has already begun on Capitol Hill...

...exports would increase more, improving the balance of payments...

...It may not want to gamble on an increase of exports larger than the corresponding increase of imports...

...exports...

...Too many Administration supporters have been urging that the U.S...

...partnership with the Common Market would be folly, even if feasible...