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States seeks an internationally acceptable code, consistent as far as possible with its own regulatory tradition, that will promote efficient and competitive shipping services on a nondiscriminatory basis. Negotiations on the code will continue over the next year or so.

The United States is also in the forefront of international efforts to facilitate the use of technologically advanced types of ships, such as container- and bargecarrying vessels, which in turn permit the development of intermodal transport. Several of these efforts culminated in the U.N./Intergovernmental Maritime Consultative Organization (U.N./IMCO) Conference on International Container Traffic at Geneva in November. The United States will continue to seek international solutions to the problems encountered by the intermodal movement of world trade.

Another major issue is the expanding cargo reservation and other protectionist measures being adopted on behalf of national merchant marines. The developing countries especially have continued to expand their cargo preference practices. With growing conflicts of national interests, the Department is directing efforts toward the development and acceptance of international guidelines on the whole question of shares of trade in international shipping.

In concluding a maritime agreement with the Soviet Union in October 1972, we obtained provisions assuring that a substantial share of the traffic between the two countries would be carried on U.S. flag vessels. This was a unique situation due to the state-trading character of the Soviet economy; its capability to control the routing of cargoes in its foreign trade necessitated this provision to protect our merchant marine.

FM BROADCASTING AGREEMENT

On November 9, 1972, the United States and Mexico signed a bilateral agreement concerning frequency modulation broadcasting and concluded a related arrangement on FM broadcasting stations. The agreement concerns the allocation of FM broadcasting stations, both commercial and noncommercial, for a distance of 200 miles on each side of the U.S.-Mexican border. Through the application of common technical standards, it will serve to minimize harmful interference to the FM broadcasting operations of the two countries.

DEVELOPMENTS IN THE UTILIZATION OF SATELITE FACILITIES

In 1972 the United States and Canada formally recognized that it would be in the interest of both countries to permit domestic satellite telecommunications systems to provide assistance to one another. Provision of mutual support and assistance would be of particular importance in the case of catastrophic failure of either system.

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Hon. PAUL N. MCCLOSKEY,
Hon. PHILIP E. RUPPE,

DEPARTMENT OF STATE, Washington, D.C., September 12, 1975.

Merchant Marine Subcommittee, House of Representatives, Washington, D.C. DEAR MESSRS. MCCLOSKEY AND RUPPE: This is in response to the fourth, serenth, and last five questions of your letter of June 23, 1975. For the sake of clarity, I am repeating the questions from your letter.

4. Would you submit a list containing a description of each of the alternatives considered by the Interagency Task Force on Tanker Problems? Would you also provide legal opinion indicating which alternatives could be taken under existing law and which would require additional legislation?

As I noted during my testimony on June 19, an interagency committee on the U.S. tanker situation had been formed within the Executive Branch and chaired by then Secretary of Commerce Frederick B. Dent.

A number of alternatives were circulated by Secretary Dent to various interested agencies during February and March of 1975. The following is a list of certain options so circulated:

1. A temporary partial exemption from oil import license fees for importers using U.S. flag tankers constructed in the U.S.

2. Limited oil cargo preference which would require oil importers to use U.S. flag vessels provided such vessels were available.

3. Use of American vessels first, combined with a temporary remission of im. port license fees for oil carried on U.S. tankers.

4. Rate subsidy for U.S. flag tankers in the foreign trade.

5. Cost subsidy for U.S. flag tankers in the foreign trade.

6. Increased percentages for United States Government cargo preference.

7. Increased military use of civilian personnel on Military Sealift Command tankers, and increased military use of commercial tankers.

8. Use of idle tankers for emergency oil storage.

9. Government purchase of idle tankers for the National Defense Reserve Fleet.

The full implications of many of these alternatives are unknown and the legality of some of them was questioned by members of the Executive Branch. As noted above, Secretary Dent chaired this Committee and the Commerce Department collected and distributed all the alternatives and comments. Accordingly, we believe the Department of Commerce would be in the best position to supply detailed documentation of the deliberations within the Executive Branch on this problem.

7. On page 2 of your testimony, you state "An equally important objective is the continuation of efficient and competitive shipping services in the foreign trade of the United States." In your opinion, are shipping services really competitive under current situations? Do you see the trend in world shipping as being toward freer competition, or more toward restrictive bilateral or multilateral shipping agreements? Would you provide the Committee with a list of all known pooling agreements or bilateral trade agreements for shipping services presently in existence? Would you also comment on the cargo sharing provisions contained in the Code of Conduct for Liner Conferences Treaty? Though this treaty has not been ratified by any significant number of countries, in your view is this because of the cargo-sharing provisions, or is it because of other reasons? If it is other, what are they?

Although, as in most economic fields, there are many government-inspired economic distortions, the provision of world shipping services continues to be a very competitive business. There does, however, appear to be a trend for some of the developing countries to promote their own flag fleets through discriminatory and restrictive cargo sharing agreements.

We believe that it is important for the United States to oppose such agreements, and to set forth our belief that competition in ocean transport will be beneficial to world trade and the economy of the United States and that of all nations. We believe, therefore, that if the United States and other major maritime nations continue to oppose restrictive shipping practices, we will be successful in preventing world trade from falling victim to the uneconomic and noncompetitive results that bilateralism would promote.

You have asked for a list of all known pooling agreements or bilateral trade agreements for shipping services presently in existence. The US/USSR Maritime Agreement of 1972, our only bilateral cargo sharing agreement, includes provisions for U.S. and Soviet vessels to each carry at least one-third of the trade between our two nations. This cargo sharing agreement, as you know, is unique in U.S. shipping and was negotiated in response to the particular problems peculiar to US/USSR bilateral maritime relations.

It was felt necessary to enter into such a cargo sharing agreement with the Soviet Union because of the nature of a state-controlled economy, where the government directly controls its exports, and imports and therefore can determine the choice of vessels carrying its trade.

A further consideration was the inability of U.S. bulk carriers to compete in the Soviet grain trade without U.S. Government subsidies, and the necessity of Soviet agreement to pay higher charter rates than the market rates so that, with the subsidies, U.S. vessel operators would receive compensatory freight rates.

For information on non-governmental commercial pooling agreements, I suggest that the Federal Maritime Commission would be the best source of such detailed information.

Concerning the Convention on a Code of Conduct for Liner Conferences, the cargo reservation provisions of the Code of Conduct provide for a standard 40/40/20 sharing formula, i.e. 40 percent each for the flag lines of the two trading partners and the remaining 20 percent for third country shipping lines of a conference. At the same time, the Code allows, in certain instances, for other formulae reached by mutual agreement between conference members. Some coun

tries, however, have taken the position that the standard formula of 40/40/20 would not be applicable where two governments have established joint operations to transport their bilateral trade.

The cargo sharing provisions may be one reason some countries have not ratified the Code. Other factors could be the rigid provisions on, inter alia. freight rates, cargoes to be included in pools, and conciliation procedures. Moreover, a number of countries voted for the adoption of the Code for political reasons. A closer review of the final text and all its implications and ambiguities, no doubt, has caused some rethinking regarding haste in ratifying the Convention. For others, the explanation may be that their national procedures to complete ratification are complex and require a lengthy period of time.

11. On page 6 of your testimony, you say: "We cannot encourage these discriminatory trends abroad by agreeing to close trades to independent carriers or arbitrarily limit shares of trade which our vessels may carry." Do you have any evidence to indicate that discriminatory trends abroad have lessened in recent years as a result of the United States' failure to enact cargo preference laws of its own?

While we have no evidence to indicate that discriminatory trends abroad have lessened in recent years as a result of U.S. failure to enact cargo preference laws, we believe that were we to enact such legislation other nations, which heretofore have not enacted such laws, would likely do so, if for no other reason than to protect themselves from our laws. Many countries which have enacted cargo preference over the last several years have justified such action, in part through reference to procedents set by the United States, i.e. P.R. 17, P.L. 480, and P.L. 664.

12. On page 5 of your testimony, you state: "Nevertheless, operators to whom we granted such privileges should not be permitted to act in a predatory fashion by charging less than it costs to operate, thereby undercutting traditional rates and undermining the stability of existing trades." Would you provide a list of specific instances where this predatory action has occurred? What action is needed to remedy the situation? Is additional statutory authority required to deal with the problem? If so, what should the proposed statute provide?

I believe your request for a list of specific instances where predatory practices have occurred should be directed to the Federal Maritime Commission, which would be the best source of this information.

While some amendments to present U.S. law might be necessary, we believe that the laws under which the Federal Maritime Commission operates could be adequate to combat most of the predatory practices which exist. Perhaps expedited employment of these provisions would be sufficient to deal with these predatory practices. Nevertheless, we are engaged in consultations with proponents of legislation in this area to determine whether additional legislation is necessary, and to assist in developing appropriate language.

13. Would you provide a list of world shipping conferences and indicate to what extent each is open or closed?

Again, I suggest that this reqeust be directed to the Federal Maritime Commission, the U.S. Government agency most able to provide these data.

14. Would you provide a list of instances in the past five years where the United States has not maintained "consistent and credible shipping policies"? We believe that in the apst five years, the U.S. Government has maintained consistent and credible shipping policies, but that during this time, certain segments of the U.S. Government and the U.S. maritime industry have stated suggested policies which are contrary to existing U.S. Government policy and which might be misinterpreted by other nations who do not always understand our democratic system and its political institutions and processes. In particular, the very strong support by many members of Congress and segments of the U.S. maritime industry for commercial cargo preference, a policy which we believe to be contrary to the best interests of the United States, received wide interest abroad and most likely encouraged other maritime nations to more seriously consider commercial cargo preference for their merchant fleets.

15. What are your suggestions for better coordinating shipping policies among the Departments of State, Treasury, and Commerce and the Federal Maritime Commission?

We believe that the Departments of State, Treasury, and Commerce and the Federal Maritime Commission are already coordinating very well on U.S. ship

ping policy, especially considering that each Department and agency, by necessity and in some cases by statute, looks on U.S. maritime policy from a different viewpoint. Nevertheless, interagency meetings under permanent committees, such as the Shipping Coordinating Committee, have been expanded to include as many policy areas as possible so that solutions to these problems may be obtained through joint efforts.

I expect to provide answers to the remainder of the questions in your June 23 letter shortly.

Sincerely,

RAYMOND J. WALDMANN,
Deputy Assistant Secretary,
Bureau of Economic and Business Affairs.

DEPARTMENT OF STATE, Washington, D.C., September 19, 1975.

Hon. PAUL N. MCCLOSKEY,

Hon. PHILIP E. RUPPE,

Merchant Marine Subcommittee

House of Representatives

Washington, D.C.

DEAR MESSRS. MCCLOSKEY AND RUPPE: This is in response to the third question of your letter of June 23 in which you asked, "Why does the State Deportment object to having a commercial attache from the Department of Commerce in U.S. Embassies?"

In answer to the question, the State Department does not object to having a commercial attache from the Department of Commerce in U.S. Embassies. On the contrary, in keeping with the current exchange agreement between State and Commerce for the assignment of officers from each department to the other, of the 27 commercial attache level positions (including directors of U.S. Trade Centers at selected overseas posts) 16 are filled by Department of Commerce employees including 7 commercial attaches, 1 commercial counsellor and 8 Trade Center directors.

Thank you very much for the opportunity to supplement my testimony of June 19.

Sincerely,

RAYMOND J. WALDMANN,
Deputy Assistant Secretary,
Bureau of Economic and Business Affairs.

DEPARTMENT OF STATE, Washington, D.C., September 30, 1975.

Hon. PAUL N. MCCLOSKEY,

Hon. PHILIP E. RUPPE,

Merchant Marine Subcommittee,

House of Representatives,

Washington, D.C.

DEAR MESSRS. MCCLOSKEY AND RUPPE: This is in reply to the second question of your letter of June 23, 1975, in which you asked, "What specific steps has the State Department taken in the last two years to increase the foreign trade of the United States?"

The Department of State, primarily through the Foreign Service, plays a key role in the interagency effort to promote U.S. exports. The Department's activities involve three primary functions: (1) developing and maintaining a political and economic climate in which foreign trade can prosper; (2) encouraging domestic firms to enter the export market and providing information and assistance to U.S. exporters; and (3) cooperating with U.S. Government agencies like the Export-Import Bank which provide export financing. I will explain these functions in some detail.

Foreign Trade Climate.-Our actions in the field of trade policy affect the basic conditions for increasing U.S. exports. The Department consistently has held the view that an open, liberal world trading system offers the best prospects for advancing over-all U.S. export potential. For this reason, and in conjunction with the Office of the Special Representative for Trade Negotiations (STR), the State

Department contributed major sections of the Administration's proposals for new trade legislation which were submitted to the House in April, 1973, and which, among other provisions, authorized U.S. participation in a new round of multilateral trade negotiations, this time not only to reduce tariffs further, but to mount a major attack on the vast number of nontariff barriers which constitute the real obstacles to our foreign trade.

During debate on the Trade Bill in Congress, the Department sought to ensure that our negotiating leverage would be maximized. We therefore pushed for the inclusion of substantial U.S. tariff cutting authority, together with explicit provisions authorizing us to conclude non-tariff barrier agreements. To a large degree, these efforts were successful, and the Trade Act of 1974 as signed into law provides us with substantial authority to achieve reductions in the key trade barriers we currently face.

The Department also worked actively to bring into existence the new trade negotiations which were called for in the Smithsonian Agreements of 1971. These efforts culminated in the declaration of the September, 1973, Tokyo Ministerial Conference which brought the Multilateral Trade Negotiations (MTN) into existence under auspices of the GATT. These negotiations presently are in progress with U.S. participation under the management and supervision of the STR in accordance with relevant provisions of the Trade Act. Through established interagency mechanisms, the Department is directly involved in and contributes regularly to the formulation of U.S. negotiating objectives and strategy for all aspects of the MTN.

One of our major objectives of direct benefit to U.S. exporters is the significant reduction of tariffs world-wide, particularly the relatively higher ones of certain of our major trading partners, such as Canada and Japan. Also, and of at least equal importance. we are seeking to wage a major assault on the key non-tariff barrier problem. Our approach will be to formulate international codes of conduct for a number of the more serious non-tariff barriers we face. Here we will be concentrating heavily on codes governing export subsidies and product standards. areas of significant concern to our exporters. Furthermore, we are working actively to ensure that the MTN will result in significant improvement in our access to key and emerging markets for our agricultural products.

Unfortunately, the MTN takes place at a time of uncertain world-wide economic conditions. Faced with balance of payments difficulties, continuing inflation and persistent unemployment, many of the industrialized countries have been tempted to take unilateral trade restrictive and artificial export promotion measures. In an effort to prevent them from doing so, the Department participated in formulating a U.S. policy calling for a one year pledge of the OECD nations not to engage in trade distorting or "beggar thy neighbor" policies. The OECD “Trade Pledge" was adopted at our initiative in June, 1974, and renewed for one further year at the May, 1975, OECD Ministerial meeting.

Encouragement of and assistance to U.S. exporters.—Specific steps which have been taken in the last two years to encourage and assist U.S. exporters, both those new to market and experienced international traders, include the development and implementation of Country Commercial Programs for 38 countries where markets are deemed sufficiently developed to offer major opportunities for U.S. exporters. These programs, prepared jointly by the State and Commerce departments, are attempts to manage our overseas commercial programs in a more rational way to achieve maximum benefit from our identifiable commercial resources. The Country Commercial Programs are subject to annual reviews to further refine and improve them.

A second specific step taken was the formation of joint bilateral trade and economic cooperation commissions with a number of countries, including, but not limited to, major oil-producing states. From the activities of these commissions should flow sizeable trade and investment opportunities for U.S. exporters and investors utilizing funds from oil-producing countries to increase sales and job opportunities for the U.S. foreign trade community.

While the encouragement of domestic firms to enter export markets is primarily the function of the Commerce Department, the State Department has played a principal supporting role by mounting a series of State Departmentsponsored seminars involving senior level executives from the private foreign trade sector and U.S. Government officials charged with formulating trade and investment policy. A primary purpose of these seminars is to increase the U.S. businessman's awareness of overseas trade opportunities and U.S. Government policies designed to foster and exploit these opportunities.

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