Foreign Trade: Bold New Instrument

The Kennedy Administration had long since made it clear that its major legislative ambition for 1962 would be to achieve a new program on trade and tariffs, designed to give U.S. industry freer access to the burgeoning six-nation European Common Market. In his State of the Union message, the President said he would request a "bold new instrument" to reshape U.S. trade policy and meet the demands of a changing international economy. Last week he did just that, sending up to Capitol Hill a fat, 52-page proposed Trade Expansion Act of 1962 designed "to promote the general welfare, foreign policy and security of the United States through international trade agreements and through adjustment assistance to domestic industry, agriculture and labor."

With the bill itself went a long-awaited special message explaining the President's specific proposals. Kennedy asked:

>"General authority to reduce existing tariffs by 50% in reciprocal negotiations."

> "Special authority, to be used in negotiating with the European Economic Community [the Common Market], to reduce or eliminate all tariffs on those groups of products where the United States and the EEC together account for 80% or more of world trade . . ."

> A series of safeguards to protect workers, farmers and businessmen whose competitive position in the world market might be endangered by lessened tariff protection.

Worrying Accent. The bill, said the President, would "benefit substantially every state of the union, every segment of the American economy." What made it necessary was that existing U.S. trade laws fail to "assure ready access for ourselves ... to a market nearly as large as our own"; in the five years of its existence, the Common Market has created a new economic community in many ways as vast and promising as the U.S. itself. Further, the plan would stimulate economic growth throughout the free world, and it would shore up the U.S. international financial position, weakened by years of defense and foreign-aid spending overseas which have added to the drain on gold reserves.

There was one accent in the Kennedy program that worried many otherwise sympathetic businessmen. "If we can lower the external tariff wall of the Common Market through negotiation." said Kennedy, "our manufacturers will be under less pressure to locate their plants behind that wall in order to sell in the European market"—and the net result would be a cut in the export of capital funds to Europe, thereby easing the balance of payments problem. There are a good many U.S. manufacturers who would welcome a lowering of U.S. and European tariff walls but still want to invest abroad when that seems advantageous. And in the long run, such investment generates earnings that may become a plus in the U.S. exchange position. Administration spokesmen say that the point is not to discourage foreign investment as such, but only to eliminate such artificial incentives to it as tariff barriers and tax havens abroad.