I ask only one as an illustration of the kind of question he raises and then ask if you would submit for the record the answers to the rest of them. There are not very many; I think there are about seven or eight. Secretary RUSK. I would be very glad to, sir. EXTENT OF U.S. VOICE IN SETTING POLICIES OF A COMMON MARKET The CHAIRMAN. For example, in fairness to him I would like to ask one or two. He asked if the United States is to help pay for the establishment of a common market in Latin America, should we have a voice in setting its policies. Secretary RUSK. Well, I think, sir, that we can, that we will be in consultation with our Latin American friends throughout the process. The situation is somewhat like the process that developed in Europe after the war. The policy determinations were basically theirs to make, and these are very far reaching decisions for our Latin American friends to make, but then, on the basis of the decisions they made, we, in the case of Europe, did come up with, I think, $350 million for assisting in the establishment of a European Payments Union. Some of those funds still remain in that fund. Here we would be very closely in touch and, of course, we would be interested in the effect of common market arrangements on us and on our trade with Latin America, on general policy in the Hemisphere. But I would think the basic policy decisions would be for them to make because as I indicated earlier, this is undoubtedly the most important decision they will be facing since they became independent nations. MARSHALL PLAN PROCEDURE The CHAIRMAN. Mr. Secretary, since you mention it, I said in my statement yesterday that I thought the precedent followed in the Marshall Plan in Europe was a very good one, and in that case the Congress was not requested to make a prior commitment to the program but followed, I think, a very orderly and effective procedure, which didn't take too long but resulted in a successful, if not the only really successful, foreign aid program that we have ever undertaken. I would like very much to follow that same procedure in this case. We were not faced with a resolution of this kind prior to the proposal. If you will recall, General Marshall made his speech at Harvard in June of 1947. Congress had committees to study it as did the executive. Finally we came up with a very workable and the most successful program we have had. I am very willing and anxious to follow that procedure here. I simply don't like to be confronted with the specifics and be told, "Well, you are already committed." It takes away any incentive to study it or do anything about it because you are already committed. This is the part I don't like. It seems to me to eliminate the real function of the Senate, the role it is supposed to play in connection with the Congress. Senator Aiken? CLARIFICATION OF "SUPPORT" OF CONGRESS Senator AIKEN. Reading from the 10 o'clock version of this resolution, I find it says: "Congress is prepared to support the allocation of significant additional resuorces over a period of five years for these objectives." Now, we certainly can't bind future Congresses. Of course, some bold prognosticators predict radical changes in the next Congress-I don't know whether they are right about it or not-but predictions are in evidence. I am just wondering about the words "support the allocation of significant additional resources over a period of 5 years", whether this Congress could do more than authorize. What does the word "support" mean? That this Congress supports the next Congress and the Congress which follows that one in making the money available? What is the meaning of it? Secretary RUSK. In supporting the Act of Bogotá, the Congress authorized in a period of what-15 or 17 days-the half billion dollars requested there, a total of $600 million, including a contribution of a hundred million for Chile. And a new Congress then proceeded to give effect to that at the request of President Kennedy. Senator AIKEN. Yes. But that Congress in September 1960 not only authorized $600 million, as I recall it, $500 million for the Act of Bogotá and $100 million for Chilean earthquake victims, didn't they appropriate the money, too? Secretary RUSK. No, sir; I think the appropriations came Senator AIKEN. It was not provided that year; it was simply authorized? Secretary RUSK. It was authorized and appropriations were requested by President Kennedy on the basis of a program which he put before the Congress. Senator AIKEN. I just wonder about the meaning of the words “support *** allocation" by future Congresses; what meaning that has. Secretary RUSK. I would think that you would be saying that, if the Latin American countries go ahead with economic integration, and if they go ahead with the mobilization of additional internal effort for the Alliance for Progress, it would be our disposition, when the authorization and appropriations stage comes along, to support that effort on the order of magnitude that is being presented to you in the course of these hearings. Senator AIKEN. We would support it according to this, as far as it lies within our power to support it. Secretary RUSK. I would think so. Senator AIKEN. Over a five-year period. Senator AIKEN. You couldn't bind future Congresses to actually make the money available? Secretary RUSK. I think the central constitutional issue is not really engaged here because a future Congress would have to use its judg ment in the light of all the circumstances. But included in the circumstances would be an expression by the Government of the United States, the President and the Congress combined, in the year 1967 that, if certain things happened, the Government of the United States would expect that we would do certain things. That would be one of the circumstances that the Congress would take into account when it came to making the final decisions on these matters. DIFFERENCE BETWEEN "RECOMMENDS" AND "SUPPORTS" The CHAIRMAN. What is the difference between "recommends" and "supports"? These changes have been made, but I don't understand the difference. What substantive difference do you find between "recommends" and "supports"? Secretary RUSK. Ambassador Linowitz was present for most of the discussions and I wonder if he might comment on that point? I indicated earlier the principal reason I thought the change was made. The CHAIRMAN. Yes, what is the difference between the words you now have "supports" rather than "recommends"? Mr. LINOWITZ. Mr. Chairman, the primary reason for the change was not a matter of substance. It was really a matter of correct procedure for Congress in this kind of a situation, and, as the Secretary indicated, originally the plan was to have Congress recommend. That raised questions as to whether it was appropriate for Congress to be recommending as was pointed out in answer to Senator Symington's question and, therefore, this alternative wording which is consistent with prior resolutions by the Congress. As the Secretary said, for example, in the Act of Bogotá it says that Congress supports the development of relationships, supports the strengthening of certain unions and the improved management-labor relations, supports the consolidation of public institutions, et cetera. And we, therefore, adopted that language. The CHAIRMAN. Wasn't that a regular authorization bill? Wasn't it? It was not a resolution like this. Mr. LINOWITZ. It was a resolution-it was an authorization bill. The CHAIRMAN. It was an authorization bill? Mr. LINOWITZ. Yes, it was. Secretary RUSK. Yes. The CHAIRMAN. I will give you the rest of the questions of Senator Gore and I would like to have your answers. I don't wish to take any more time. I will yield to the Senator from Oregon. (The questions and answers referred to follow :) ANSWERS TO SENATOR GORE'S QUESTIONS 1. Question: There are many approaches to economic cooperation and market integration among independent states. A free trade area might be the goal. More limited goals in a few sectors might be preferable. The Administration has apparently decided to push for a full common market arrangement in Latin America. Has the Administration studied this matter sufficiently to arrive at a firm conclusion that the common market approach is best for Latin America and for the United States? Answer: The goal of establishing a Latin American common market was propounded some years ago by Latin Americans for Latin America. These proposals finally led to the Treaty of Montevideo signed February 18, 1960, that established the Latin American Free Trade Area, and which incorporated the determination of the participants "to establish, gradually and progressively, a Latin American common market. . . ." On December 13, 1960, the treaty establishing the Central American Common Market was signed in Managua. The Charter of Punta del Este, signed on August 17, 1961, by representatives of all of the members of the Organization of American States, also stated that one of the objectives of the Alliance for Progress was "to strengthen existing agreements on economic integration, with a view to the ultimate fulfillment of aspirations for a Latin American common market that will expand and diversify trade among the Latin American countries and thus contribute to the economic growth of the region." In fact, President Frei of Chile has said that "the objective of the Alliance is a Latin American common market...." The Economic and Social Act of Rio de Janeiro, which representatives of all the members of the OAS signed on November 30, 1965, called for action by the existing economic integration organizations to coordinate their activities with a view to the earliest achievement of a Latin American common market. The Protocol of Amendment to the Charter of the Organization of American States, signed at Buenos Aires on February 27, 1967, has now incorporated this intent, in Article 40, into the constitutional document of the inter-American system. Finally, it should be noted that the basis of all the preparations for the Meeting of Presidents is a document prepared by nine leading Latin American economists, chosen by the Latin American members of the OAS. These experts recommended that the Presidents of the Latin American Republics reaffirm their decision to establish a Latin American common market and suggested guidelines and outlined a schedule for the steps to be taken in creating the common market. Thus there can be no question of the Administration's "pushing" for a common market arrangement in Latin America. In fact, for some time there has been an impression among many in Latin America that the United States was opposed to the economic integration of the area, an impression we have sought to correct, for the Administration has tried to make clear that the United States supports Latin America's intent and efforts to achieve economic integration. We are confident that the achievement of a Latin American common market would make possible a more rapid rate of economic growth and would thereby contribute to the social and political stability of the Hemisphere. At the same time, as the formation of a common market contributes to higher incomes in Latin America, we are convinced that the area will become a better trading partner of the United States. We, therefore, believe that the achievement of a Latin American common market is not only in the best interests of Latin America but of the United States, as well. 2. Question: Do you have in mind at this time just what concrete steps the United States should take to facilitate this move through the various progressive steps which may be necessary? Is there an approximate timetable? Answer: The United States role is primarily that of encouraging the Latin Americans to continue toward their established objective of a Latin American common market and allowing them to proceed more boldly by offering to contribute to standby resources to cushion certain transitional problems. The United States is also prepared to contribute to physical integration through providing additional funds to the IDB and agreeing to the earmarking of IDB resources for multinational projects. The timetable for integration will have to be further discussed and agreed among the Latin Americans themselves. They agreed at the Eleventh Meeting of Consultation of Ministers of Foreign Affairs in Buenos Aires to put into effect in 1970 a system of automatic across-the-board cuts in tariffs and other restrictions on intra-regional trade. United States contributions to an integration adjustment assistance fund will be made available only as needed in accordance with the final agreed schedule for elimination of intra-regional trade barriers. The timing of United States multinational project assistance is dependent upon the decision to earmark sufficient Inter-American Development Bank resources to demonstrate the Latin American commitment to physical integration of the continent. 3. Question: Is it now United States policy to encourage regional trading blocs throughout the developing areas of the world, or are we to make an exception to our system of world-wide freer trade based on Cordell Hull's concepts and work, and to our older general concept of most-favored-nation, only in the case of Latin America? Answer: The Administration believes that the formation of regional economic groups holds much promise for other developing areas, as well as for Latin America. There are over 90 developing countries in the world with populations of under 15 million, and more than 60 with less than 5 million. The rate at which these countries will be able to move towards tolerable living standards may depend to a considerable extent on their ability to form larger and more viable economic units. We do not look upon such movements to more viable economic units as movements away from world-wide freer trade. The promotion of trade on a regional basis by means of lowering barriers to form a free trade area or customs union has long been recognized as a justified exception to the most-favored-nation rule. Thus Article XXIV of the General Agreement on Tariffs and Trade (GATT) recognizes that such arrangements promote rather than restrict world trade. 4. Question: The President, in referring to funds required to assist Latin America in moving toward a common market, stated in his message of March 13, "I will ask Congress to authorize these funds only when the first essential steps toward a common market are taken." Have any of these "first essential steps" already been taken? What others must be taken? Answer: The first essential steps will be the coming into force of a schedule for automatic reduction of tariffs and other barriers to intra-regional trade. The funds that Congress will be asked to authorize would be intended for use only to help cover temporary balance of payment deficits resulting from actual liberalization under the new schedule and to help specific industries and labor affected by this liberalization in adjusting to new production activities. 5. Question: Is it contemplated that the United States will give trade preferences to the Latin American Common Market countries? Will the United States, as the largest and most successful common market in the world, have a special relationship to this nascent common market similar, perhaps, to the relationship which now exists between the European common market and the former French African colonial territories? Do you consider the spread of these special relationships desirable? Answer: The Administration does not contemplate giving exclusive trade preferences to the Latin American common market countries. The Administration does not intend to seek nor does it expect to receive a preferred position for U.S. exports to the area. The proposed Latin American common market would be an undertaking by the Latin American countries themselves, with U.S. support and encouragement; it would not involve a special trade arrangement between the United States and Latin America. The Administration is opposed to the spread of special trading arrangements in other parts of the world which discriminate among developing countries and convey special trade privileges for certain industrialized countries in particular developing countries. 6. Question: If the United States is to help pay for the establishment of a common market in Latin America, should we have a voice in setting its policies? Will there be any machinery, formal or informal, for this? Answer: The Latin American common market is a Latin American undertaking, and the Latin Americans have to set its policies. The United States standby resources that have been proposed would represent a modest contribution relative to the major steps the Latin American countries will have to take if they are to reach their goal of a common market. Nevertheless, the United States will only support a common market that is commercially outward looking and receptive to foreign investment on reasonable terms. Furthermore, the United States will have opportunities to make known its views in various inter-American meetings between now and the establishment of an integration adjustment fund. Moreover, the common market's policies will be reviewed as an important part of the negotiations incident to any United States contribution to such a fund. 7. Question: Are we to accept any level of protection the Latin American common market may choose to see? Will we attempt to lower their outside tariffs if we consider them too high? Can we do this other than by ordinary bilateral negotiation? Answer: Latin America's economic development will in large part depend on its ability to export a diversified range of products competitively to world markets. This will be possible only if the common market is not built up behind an unreasonably high protective wall and is not based on cartels or national monopolies. The Guidelines agreed at the 11th Meeting of Foreign Ministers makes it clear that a common external tariff (CXT) in Latin America should be at “levels that will promote efficiency and productivity." Forthcoming inter-American meetings will give us many opportunities to encourage the Latin American governments to decide in favor of a reasonable CXT as consistent with these guidelines and in the area's own long-term best interests. We will also have an opportunity, together with most other trading nations of the world, to scrutinize the CXT |