Special Message to the Congress on United States Membership in the Proposed Organization for Trade Cooperation.

To the Congress of the United States:

The United States continuously seeks to strengthen the spiritual, political, military, and economic bonds of the free nations. By cementing these ties, we help preserve our way of life, improve the living standards of free peoples, and make possible the higher levels of production required for the security of the free world. With this objective in view, I recommended to the Congress in my message of January 10, 1955, the enactment of legislation designed to promote a healthy trade expansion and an increased flow of private capital for economic development abroad.

Consistent with that broad purpose, the United States over the past seven years has participated in the multilateral trade agreement known as the General Agreement on Tariffs and Trade. This key element in the nation's foreign economic policy has been carried on under the authority vested in the President by the Congress in the trade agreements legislation. After several months of intensive review of the trade rules in the General Agreement, the United States and 33 other participating countries last month agreed upon certain revisions of those rules. A new instrument was also drafted which would set up a simple international organization, to be known as the Organization for Trade Cooperation, whose purpose is the administration of the General Agreement.

I should like to recall the circumstances that gave rise to the General Agreement and this country's participation in it. I should also like to stress some of its benefits to us which justify the continued existence of the General Agreement and United States membership in the Organization for Trade Cooperation.

The economic and political dislocations produced by World War II jeopardized, in the postwar years, the re-establishment of healthy, expanding international trade. Many countries had little to export and lacked the means to buy the products of other countries. Widespread resort to restrictions on imports and to discriminatory bilateral trade arrangements threatened a return to economic isolationism and narrow channels of government-directed trade. There was a great need for cooperative efforts to reduce unjustifiable trade restrictions and to establish a set of principles, mutually beneficial to the free nations of the world, for the reconstruction of world trade.

In this state of world affairs, the United States and a group of friendly nations negotiated a series of tariff agreements among themselves. They also negotiated a set of trade principles or rules to protect the tariff concessions. These tariff agreements and trade rules were incorporated in a multilateral trade agreement, the General Agreement on Tariffs and Trade.

The trade rules consist basically of provisions which this nation, since 1934, has incorporated in bilateral trade agreements to protect our interest in the tariff concessions granted to us in such agreements. They provide, for example, that tariff concessions should not be nullified by the imposition of other restrictions; that quantitative restrictions should not be imposed on imports; that trade restrictions, when used, should be nondiscriminatory as between countries; and that concessions granted to one country should be extended to like products of other countries in accordance with the unconditional most-favored-nation principle.

To provide the degree of flexibility required to meet the varying needs of participating countries, the General Agreement provides for specific exceptions to the basic rules. Under certain circumstances waivers may be granted to countries to depart from these basic rules. The United States has obtained such a waiver to restrict imports of agricultural products on which we have government programs.

The General Agreement through the trade rules and the tariff negotiations sponsored under it, has served well the purpose for which it was designed: the orderly expansion of international trade. Thirty-four countries, whose trade accounts for nearly four-fifths of the world's total trade, are now participating in this cooperative effort. World trade has expanded at a rapid rate, and for many countries foreign trade now represents a higher ratio to total output of goods than in the prewar years.

An important benefit to this country results from participation in multilateral trade negotiations under the General Agreement. Doing so makes it possible for us to obtain more tariff concessions on our exports than would be forthcoming from bilateral negotiation. This country, as a party to the multilateral agreement, obtains benefits from concessions which other countries would be unwilling to negotiate except in a multilateral undertaking.

Some measure of the value of these multilateral trade agreement negotiations to the United States is indicated by the fact that we have been able to obtain concessions covering about 50 percent in value of our exports.

Another advantage to this country through our participation in the General Agreement has been manifest during the past two years. Restrictions on the part of other countries against dollar imports are permitted under the trade rules for genuine balance of payments reasons, and as the balance of payments position of other countries has improved, we have been able to persuade them to relax such restrictions. Between 1953 and the beginning of 1955 ten Western European countries had removed quantitative restrictions on dollar imports amounting to about 60 percent of such imports. Since the beginning of this year additional restrictions have been removed. In the absence of the General Agreement it would be more difficult to persuade these countries to relax such controls. We are thus moving toward full realization of the tariff concessions that have been granted our exports since 1948. It is the policy of this Government to utilize the consultative procedures of the General Agreement to press for the discharge of these commitments for the benefit of our foreign trade.

In addition to the general relaxation of restrictions on dollar imports that has been accomplished, we have been successful in persuading other countries to remove discriminatory restrictions against imports of particular dollar goods. This Government has protested the inconsistency between the discriminatory action in those cases and the principles of the General Agreement. Certain discriminatory restrictions have thus been removed on imports from this country of such items as coal, apples, cigarettes, lumber, potatoes, textiles, automobiles, tobacco, petroleum, wool, and motion pictures.

A further important contribution of the General Agreement to the extension of trade is the assurance against wholesale increases in tariff rates in export markets. Our exporters, therefore, can proceed with their plans for sales in markets abroad with a greater degree of certainty as to tariff rates. Participating countries may, of course, consistently with the trade rules, raise tariff rates in individual cases where serious injury to domestic industry is threatened.

The revised General Agreement has been thoroughly reviewed within the Executive Branch of the Government. I believe it has been improved and strengthened. It protects the legitimate interests of this country and provides a firm basis for orderly trade expansion among the free nations of the world. The necessity for the United States to restrict imports of agricultural products with regard to which we have government programs is fully recognized. The right of this country to protect the legitimate interests of its industries and labor is clearly provided for. The rules of trade regarding the imposition of discriminatory import controls have been tightened and should assist in the efforts to remove and to prevent discriminatory restrictions against United States exports. The spirit with which the participating countries cooperated in the task of review and revision of the General Agreement was heartening and augurs well for its future vitality.

The United States and the other participating countries concluded on the basis of seven years' experience that the organizational provisions of the General Agreement should be changed to provide a continuous mechanism for the administration of the trade rules and the discussion of mutual trade problems. Under present arrangements these activities are confined largely to the annual sessions of the parties to the Agreement. The participating countries therefore have proposed to set up an Organization for Trade Cooperation for more effective administration of the trade rules and related activities.

The Organization for Trade Cooperation would be established by a separate agreement among the participating countries. In addition to administering the General Agreement, it would provide a mechanism through which arrangements for trade negotiations could be facilitated. It would also serve as a forum for the discussion of trade matters and for the amicable adjustment of problems involving the trade rules. The Organization would have no supra-national powers. It would conduct no trade negotiations; this would be done by the countries who choose to participate in the negotiations and to whatever extent they choose.

The United States delegation which took part in the revision of the General Agreement was specifically instructed to reject all efforts to expand the functions of the new organization into fields other than trade. One measure of the success of the negotiations from the standpoint of the United States is the fact that the proposed Organization for Trade Cooperation is thus limited in its functions. Its effectiveness, in my judgment, will be enhanced by the fact that it has such specific and limited responsibilities.

I believe the reasons for United States membership in the proposed Organization are overwhelming. We would thus demonstrate to the free world our active interest in the promotion of trade among the free nations. We would demonstrate our desire to deal with matters of trade in the same cooperative way we do with military matters in such regional pacts as the North Atlantic Treaty Organization, and with financial matters in the International Monetary Fund and in the International Bank for Reconstruction and Development. We would thus cooperate further with the free world, in the struggle against Communist domination, to the greater security and the greater prosperity of all.

Such action would serve the enlightened self-interest of the United States. As a member of this Organization we could work more effectively for the removal of discriminatory restrictions against our exports. We could help establish conditions favorable to convertibility of currencies. We could further the expansion of markets abroad for the products of our mines, our farms and our factories. We could assist in the development of conditions conducive to the international flow of investment capital so urgently needed to expand production throughout the free world, especially in its underdeveloped areas.

Failure to assume membership in the Organization for Trade Cooperation would be interpreted throughout the free world as a lack of genuine interest on the part of this country in the efforts to expand trade. It would constitute a serious setback to the momentum which has been generated toward that objective. It would strike a severe blow at the development of cooperative arrangements in defense of the free world. It could lead to the imposition of new trade restrictions on the part of other countries, which would result in a contraction of world trade and constitute a sharp setback to United States exports. It could result in regional re-alignments of nations. Such developments, needless to say, would play directly into the hands of the Communists.

I believe the national interest requires that we join with other countries of the free world in dealing with our trade problems on a cooperative basis.

I herewith transmit copies of the agreement providing for an Organization for Trade Cooperation, and I recommend that the Congress enact legislation authorizing United States membership in that organization.

DWIGHT D. EISENHOWER