Special Message to the Congress on United States Trade Policy.

To the Congress of the United States:

For the past 35 years, the United States has steadfastly pursued a policy of freer world trade. As a nation, we have recognized that competition cannot stop at the ocean's edge. We have determined that American trade policies must advance the national interest--which means they must respond to the whole of our interests, and not be a device to favor the narrow interest.

This Administration has reviewed that policy and we find that its continuation is in our national interest. At the same time, however, it is clear that the trade problems of the 1970s will differ significantly from those of the past. New developments in the rapidly evolving world economy will require new responses and new initiatives.

As we look at the changing patterns of world trade, three factors stand out that require us to continue modernizing our own trade policies:

First, world economic interdependence has become a [act. Reductions in tariffs and in transportation costs have internationalized the world economy just as satellites and global television have internationalized the world communications network. The growth of multi-national corporations provides a dramatic example of this development.

Second, we must recognize that a number of foreign countries now compete fully with the United States in world markets.

We have always welcomed such competition. It promotes the economic development of the entire world to the mutual benefit of all, including our own consumers. It provides an additional stimulus to our own industry, agriculture and labor force. At the same time, however, it requires us to insist on fair competition among all countries.

Third, the traditional surplus in the U.S. balance of trade has disappeared. This is largely due to our own internal inflation and is one more reason why we must bring that inflation under control.

The disappearance of the surplus has suggested to some that we should abandon our traditional approach toward freer trade. I reject this argument not only because I believe in the principle of freer trade, but also for a very simple and pragmatic reason: any reduction in our imports produced by U.S. restrictions not accepted by our trading partners would invite foreign reaction against our own exports-all quite legally. Reduced imports would thus be offset by reduced exports, and both sides would lose. In the longer term, such a policy of trade restriction would add to domestic inflation and jeopardize our competitiveness in world markets at the very time when tougher competition throughout the world requires us to improve our competitive capabilities in every way possible.

In fact, the need to restore our trade surplus heightens the need for further movement toward freer trade. It requires us to persuade other nations to lower barriers which deny us fair access to their markets. An environment of freer trade will permit the widest possible scope for the genius of American industry and agriculture to respond to the competitive challenge of the 1970s.

Fourth, the less developed countries need improved access to the markets of the industrialized countries if their economic development is to proceed satisfactorily. Public aid will never be sufficient to meet their needs, nor should it be. I recently announced that, as one step toward improving their market access, the United States would press in world trade forums for a liberal system of tariff preferences for all developing countries. International discussions are now in progress on the matter and I will not deal with it in the trade bill I am submitting today. At the appropriate time, I will submit legislation to the Congress to seek authorization for the United States to extend preferences and to take any other steps toward improving the market access of the less developed countries which might appear desirable and which would require legislation.

THE TRADE ACT OF 1969

The trade bill which I am submitting today addresses these new problems of the 1970s. It is modest in scope, but significant in its impact. It continues the general drive toward freer world trade. It also explicitly recognizes that, while seeking to advance world interests, U.S. trade policies must also respect legitimate U.S. interests, and that to be fair to our trading partners does not require us to be unfair to our own people. Specifically:

--It restores the authority needed by the President to make limited tariff reductions.

--It takes concrete steps toward the increasingly urgent goal of lowering non-tariff barriers to trade.

--It recognizes the very real plight of particular industries, companies and workers faced with import competition, and provides for readier relief in these special cases.

--It strengthens GATT--the General Agreement on Tariffs and Trade-by regularizing the funding of United States participation.

While asking enactment of these proposals now, the trade program I will outline in this message also includes setting preparations underway for the more ambitious initiatives that will later be needed for the long-term future.

TARIFF REDUCTION

I recommend that the President be given authority to make modest reductions in U.S. tariffs.

The President has been without such authority for over two years. This authority is not designed to be used for major tariff negotiations, but rather to make possible minor adjustments that individual circumstances from time to time require--as, for example, when it becomes necessary to raise the duty on an article as the result of an "escape clause" action or when a statutory change is made in tariff classification. Our trading partners are then entitled to reasonable compensation, just as we would be entitled to receive it from them in reverse circumstances. Lack of this authority exposes our exports to foreign retaliation. Therefore, the Bill would provide to the President, through June 30, 1973, the authority to reduce tariffs by limited amounts.

NON-TARIFF BARRIERS

The time has come for a serious and sustained effort to reduce non-tariff barriers to trade. These non-tariff barriers have become increasingly important with the decline in tariff protection and the growing interdependence of the world economy. Their elimination is vital to our efforts to increase U.S. exports.

As a first step in this direction, I propose today that the United States eliminate the American Selling Price system of customs valuation.

Although this system applies only to a very few American products--mainly benzenoid chemicals--it is viewed by our principal trading partners as a major symbol of American protectionism. Its removal will bring reciprocal reductions in foreign tariffs on U.S. chemical exports, and a reduction in important foreign nontariff barriers including European road taxes, which discriminate against our larger automobiles, and the preferential treatment on tobacco extended by the United Kingdom to the countries of the Commonwealth. Beyond this, its removal will unlock the door to new negotiations on the entire range of non-tariff barriers. Because of the symbolic importance our trading partners attach to it, the American Selling Price system has itself become a major barrier to the removal of other barriers.

Essentially, the American Selling Price system is a device by which the value of imports for tariff purposes is set by the price of competitive American products instead of the actual price of the foreign product, which is the basis of tariff valuation for all other imports. The extraordinary protection it provides to these few products has outlived its original purposes. The special advantage it gives particular producers can no longer justify its heavy cost in terms of the obstacles it places in the way of opening foreign markets to American exports.

Reducing or eliminating other nontariff barriers to world trade will require a great deal of detailed negotiating and hard bargaining.

Unlike tariffs, approaches to the reduction of non-tariff barriers are often difficult to embody in prior delegation of authority. Many--both here and abroad--have their roots in purely domestic concerns that are only indirectly related to foreign trade, and many arise from domestic laws.

Many would require specific legislative actions to accomplish their removal--but the nature of this action would not finally be clear until negotiation had shown what was possible.

This presents a special opportunity for Congress to be helpful in achieving international agreements in this vital area.

I would welcome a clear statement of Congressional intent with regard to nontariff barriers to assist in our efforts to obtain reciprocal lowering of such barriers.

It is not my intention to use such a declaration as a "blank check." On the contrary, I pledge to maintain close consultation with the Congress during the course of any such negotiations, to keep the Congress fully informed on problems and progress, and to submit for Congressional consideration any agreements which would require new legislation. The purpose of seeking such an advance declaration is not to bypass Congress, but to strengthen our negotiating position.

In fact, it is precisely because ours is a system in which the Executive cannot commit the Legislative Branch that a general declaration of legislative intent would be important to those with whom we must negotiate.

At the same time, I urge private interests to work closely with the government in seeking the removal of these barriers. Close cooperation by the private sector is essential, because many non-tariff barriers are subtle, complex and difficult to appraise.

AID FOR AFFECTED INDUSTRIES

Freer trade brings benefits to the entire community, but it can also cause hardship for parts of the community. The price of a trade policy from which we all receive benefits must not fall unfairly on the few--whether on particular industries, on individual firms or on groups of workers. As we have long recognized, there should be prompt and effective means of he]ping those faced with adversity because of increased imports.

The Trade Act of 1969 provides significant improvements in the means by which U.S. industry, firms, and workers can receive assistance from their government to meet injury truly caused by imports.

This relief falls into two broad categories: 1) the escape clause, which is industry-wide; and 2) adjustment assistance, which provides specific aid to particular firms or groups of workers.

These improvements are needed because the assistance programs provided in the Trade Expansion Act of 1962 have simply not worked.

Escape Clause

The escape clause provisions of the 1962 Act have proved so stringent, so rigid, and so technical that in not a single case has the Tariff Commission been able to justify a recommendation for relief. This must be remedied. We must be able to provide, on a case-by-case basis, careful and expedited consideration of petitions for relief, and such relief must be available on a fair and reasonable basis.

I recommend a liberalization of the escape clause to provide, for industries adversely affected by import competition, a test that will be simple and clear: relief should be available whenever increased imports are the primary cause of actual or potential serious injury. The increase in imports should not--as it now is--have to be related to a prior tariff reduction.

While making these escape clause adjustments more readily obtainable, however, we must ensure that they remain what they are intended to be: temporary relief measures, not permanent features of the tariff landscape. An industry provided with temporary escape-clause relief must assume responsibility for improving its competitive position. The bill provides for regular reports on these efforts, to be taken into account in determining whether relief should be continued.

Adjustment Assistance

With regard to adjustment assistance for individual firms and groups of workers, the provisions of the Trade Expansion Act of 1962 again have not worked adequately.

The Act provides for loans, technical assistance and tax relief for firms, and readjustment allowances, relocation and training for workers. This direct aid to those individually injured should be more readily available than tariff relief for entire industries. It can be more closely targeted; it matches the relief to the damage; and it has no harmful side effects on overall trade policy.

I recommend that firms and workers be considered eligible for adjustment assistance when increased imports are found to be a substantial cause of actual or potential serious injury.

Again, the increase in imports would not have to be related to a prior tariff reduction. The "substantial cause" criterion for adjustment assistance would be less stringent than the "primary cause" criterion for tariff relief.

I also recommend two further changes in existing adjustment provisions:

--That the Tariff Commission continue to gather and supply the needed factual information, but that determinations of eligibility to apply for assistance be made by the President.

--That adjustment assistance be made available to separate units of multiplant companies and to groups of workers in them, when the injury is substantial to the unit but not to the entire parent firm.

With these modifications, plus improved administrative procedures, our program of assistance to import-injured firms and workers can and will be made to work. Taken together, they will remedy what has too long been a serious shortcoming in our trade programs.

These changes in our escape clause and adjustment assistance programs will provide an adequate basis for government help in cases where such help is justified in the overall national interest. They will thus help us move away from protectionist proposals, which would reverse the trend toward interdependence, and toward a constructive attack on the existing trade barriers of others.

The textile import problem, of course, is a special circumstance that requires special measures. We are now trying to persuade other countries to limit their textile shipments to the United States. In doing so, however, we are trying to work out with our trading partners a reasonable solution which will allow both domestic and foreign producers to share equitably in the development of the U.S. market.

Such measures should not be misconstrued, nor should they be allowed to turn us away from the basic direction of our progress toward freer exchange.

FAIR TREATMENT OF U.S. EXPORTS

By nature and by definition, trade is a two-way street. We must make every effort to ensure that American products are allowed to compete in world markets on equitable terms. These efforts will be more successful if we have the means to take effective action when confronted with illegal or unjust restrictions on American exports.

Section 252 of the Trade Expansion Act of 1962 authorizes the President to impose duties or other import restrictions on the products of any nation that places unjustifiable restrictions on U.S. agricultural products. I recommend that this authority be expanded in two ways:

--By extending the existing authority to cover unfair actions against all U.S. products, rather than only against U.S. agricultural products.

--By providing new authority to take appropriate action against nations that practice what amounts to subsidized competition in third-country markets, when that subsidized competition unfairly affects U.S. exports. Any weapon is most effective if its presence makes its use unnecessary. With these new weapons in our negotiating arsenal, we should be better able to negotiate relief from the unfair restrictions to which American exports still are subject.

STRENGTHENING GATT

Ever since its beginning in 1947, U.S. participation in GATT---the General Agreement on Tariffs and Trade--has been financed through general contingency funds rather than through a specific appropriation.

GATT has proved its worth. It is the international organization we depend on for the enforcement of our trading rights, and toward which we look as a forum for the important new negotiations on nontariff barriers which must now be undertaken.

I recommend specific authorization for the funding of our participation in GATT, thus both demonstrating our support and regularizing our procedures.

FOR THE LONG-TERM FUTURE

The trade bill I have submitted today is a necessary beginning. It corrects deficiencies in present policies; it enables us to begin the 1970s with a program geared to the start of that decade.

As we look further into the Seventies, it is clear that we must reexamine the entire range of our policies and objectives.

We must take into account the far-reaching changes which have occurred in investment abroad and in patterns of world trade. I have already outlined some of the problems which we will face in the 1970s. Many more will develop--and also new opportunities will emerge.

Intense international competition, new and growing markets, changes in cost levels, technological developments in both agriculture and industry, and large-scale exports of capital are having profound and continuing effects on international production and trade patterns. We can no longer afford to think of our trade policies in the old, simple terms of liberalism vs. protectionism. Rather, we must learn to treat investment, production, employment and trade as interrelated and interdependent.

We need a deeper understanding of the ways in which the major sectors of our economy are actually affected by international trade.

We have arrived at a point at which a careful review should also be made of our tariff structure itself--including such traditional aspects as its reliance upon specific duties, the relationships among tariff rates on various products, and adapting our system to conform more closely with that of the rest of the world.

To help prepare for these many future needs, I will appoint a Commission on World Trade to examine the entire range of our trade and related policies, to analyze the problems we are likely to face in the 1970s, and to prepare recommendations on what we should do about them. It will be empowered to call upon the Tariff Commission and the agencies of the Executive Branch for advice, support and assistance, but its recommendations will be its own.

By expanding world markets, our trade policies have speeded the pace of our own economic progress and aided the development of others. As we look to the future, we must seek a continued expansion of world trade, even as we also seek the dismantling of those other barriers-political, social and ideological---that have stood in the way of a freer exchange of people and ideas, as well as of goods and technology.

Our goal is an open world. Trade is one of the doors to that open world. Its continued expansion requires that others move with us, and that we achieve reciprocity in fact as well as in spirit.

Armed with the recommendations and analyses of the new Commission on World Trade, we will work toward broad new policies for the 1970s that will encourage that reciprocity, and that will lead us, in growing and shared prosperity, toward a world both open and just.

RICHARD NIXON

The White House

November 18, 1969