Franklin Roosevelt was in the White House and the U.S. was deep in the Depression when, in 1934, Congress passed the reciprocal Trade Agreements Act. Aimed at increasing U.S. exports, the bill authorized the President to enter into bi lateral tariff-cutting compacts with foreign nations. Since then, Congress has repeatedly extended the life of the act, and in 1958 it gave the President the power to chop tariffs, under certain conditions, by as much as 20%.
Last week, acting under the 1958 authority, the U.S. reached tentative agreement with the six-nation European Economic Community on a series of joint tariff reductions. The Common Market pledged itself to tariff concessions on U.S. agricultural exports (including cotton, soybeans, skins and hides), which last year had a value of $600 million to $700 million. On several industrial products, the cuts would be the full 20% permissible under U.S. law. On automobiles, the Europeans would lower their average common tariff from 29% to 22%, while the U.S. would decrease its auto duties from 8.5% to 6.5%. For the U.S. consumer, this could eventually cut the cost of a foreign car by $20 to $50.
Chief Aim. But to President Kennedy, the existing reciprocal trade law, which this year comes up again for extension by Congress, does not nearly meet the challenges of international economic life in 1962 and the years ahead. Far from seeking merely to extend the law, he has made its sweeping revision the chief aim of his second year as President.
Many of the specific details of the President's program are still being worked out or held secret. But in its broad out lines, the plan envisions presidential power to negotiate the complete elimination of tariffs on a long list of major industrial products traded between the U.S. and the Common Market nations. These would almost certainly include electrical machinery, rubber goods, automobiles and iron and steel products. On most of these items the U.S. tariff now is lower than the European; for example, the U.S. duty on iron and steel products is 8%, while the Europeans charge an average 10%. President Kennedy will also seek authority to cut tariffs by 50% on products not included on the select list.
Drastic Changes. To support his proposed new tariff-cutting powers, the President will urgently ask Congress to make drastic changes in the so-called "peril point" and "escape clause" provisions of the present U.S. trade law.
The peril point clause requires the President to submit to the Tariff Commission a confidential list of all items on which he proposes to cut tariffs. The commission* then suggests the lowest tariffs it considers possible on each item without imperiling domestic industries. The President is not bound by the commission's recommendations, but if he disregards them he must make lengthy explanations to Congress. In practice, the process is so complex that only on rare occasions have the peril point findings of the Tariff Commission been overruled.