DEPOSITED BY THE

UNITED STATES OF AMERICA

How a Trade Agreement Is Made

by Honoré M. Catudal

THE TRADE AGREEMENTS LEGISLATION

The Trade Agreements Act, initially enacted in 1934 and since renewed 10 times by Congress, gives the President limited authority to enter into trade agreements with foreign countries. In such agreements the United States reduces or agrees not to increase tariff rates applying to specified imports from abroad in exchange for similar concessions by other countries on products exported by the United States. Trade agreements also include mutual general obligations such as granting most-favored-nation treatment with regard to tariff matters.

The President's authority is limited both as to the time in which agreements may be concluded and as to the extent of reductions or increases in rates. Moreover, the law prescribes three things which must be done before a trade agreement is concluded: (1) reasonable notice must be given of intention to negotiate an agreement in order that interested persons (e. g., domestic producers, exporters, importers, the general public, etc.) may have an opportunity to present their views; (2) the President must seek information and advice from the Departments of State, Agriculture, Commerce, and Defense and from other appropriate sources; and (3), since 1951, the President must seek "peril point" recommendations from the U.S. Tariff Commission with respect to the products which are to be considered for the granting of tariff concessions by the United States in the proposed negotiations. (The "peril points" are the

• Mr. Catudal, author of the above article, is an adviser in the Trade Agreements and Treaties Division.

rates below which the Tariff Commission finds that U.S. duties may not be reduced without causing or threatening serious injury to the domestic industry producing like or competitive products.)

The trade-agreements authority having been granted by Congress specifically to the President, he is responsible for final decisions at each stage of the negotiations. Thus, it is the President who makes the decisions (1) as to whether to enter into trade agreement negotiations with a particular country or countries; (2) as to the items included in the list of imported commodities with regard to which peril-point recommendations are requested from the Tariff Commission and public views sought; and (3) as to the products on which concessions are to be offered and sought during negotiations. He also approves the content of the agreements before proclaiming them.

INTERDEPARTMENTAL ORGANIZATION

In carrying out his responsibilities under the Trade Agreements Act, the President is assisted by an extensive network of interdepartmental committees, so organized as to make available to him information and advice from all departments and agencies of the Government concerned with foreign trade from the technical level up to the Cabinet-and from the general public.

The President has established, by Executive orders, three principal interdepartmental committees to assist him in the administration of the trade agreements program. These are the Interdepartmental Committee on Trade Agreements, the Committee for Reciprocity Information, and the Cabinet-level Trade Policy Committee.

The Interdepartmental Committee on Trade Agreements, originally established in 1934, is re

sponsible for developing detailed information and recommendations concerning the administration of the trade agreements program. Although agency representation on this Committee has changed from time to time, at the present the Committee consists of representatives of the following agencies: Agriculture, Commerce, Defense, Interior, International Cooperation Administration (nonvoting), Labor, State, Tariff Commission, and Treasury. The representative of the Department of State serves as chairman. As special problems arise or as new trade agreement negotiations are contemplated, the Trade Agreements Committee sets up interdepartmental subcommittees to consider the particular problems or possible negotiations and to submit data and recommendations to the Trade Agreements Com

mittee.

The Committee for Reciprocity Information has at the present time the same membership as the Interdepartmental Committee on Trade Agreements, but the Tariff Commission member serves as its chairman. This Committee was established to receive the views of the public in connection with prospective trade agreement negotiations as well as with the administration of agreements already concluded.

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The Trade Policy Committee, chaired by the Secretary of Commerce, was established in November 1957 by Executive order as a Cabinetlevel committee to advise and assist the President in the administration of the trade agreements program. This Committee consists, in addition to the Secretary of Commerce as its chairman, of the Secretaries of State, Treasury, Defense, Interior, Agriculture, and Labor, or of alternates designated by them. Such alternates must be officials who are required to be appointed by the President with the advice and consent of the Senate.

Under the provisions of the Executive order creating it, the Trade Policy Committee has several functions in connection with the trade agreements program. The particular function of the Trade Policy Committee in the making of new trade agreements is to receive and review all recommendations made by the Trade Agreements Committee to the President and to transmit them

'For text, see BULLETIN of Dec. 16, 1957, p. 957.

to the President together with any comments of its own resulting from that review. This Trade Policy Committee review takes place at each of the stages of Trade Agreements Committee action described below.

PREPARATORY PROCEDURE AND NEGOTIA

TIONS

There are four principal stages in a trade agreement negotiation: (1) the decision to negotiate with a particular country or countries; (2) the preparation of the U.S. offers; (3) the preparation of our requests; and (4) the actual bargaining around the conference table.

Decision To Negotiate

Trade agreement negotiations are undertaken only after the President has made a decision that it would be desirable to do so. Any recommendations that may be made by the Trade Agreements Committee for the initiation of negotiations are transmitted to the Trade Policy Committee for consideration and forwarding to the President.

Preparation of U.S. Offers

Once the President has approved the recommendation that trade agreement negotiations should be undertaken with a particular country (which we will call country X), the Trade Agreements Committee proceeds to the task, lengthy and laborious, of formulating a list of import items to be considered for possible tariff concessions by the United States in the forthcoming negotiations. Obtaining Information on Trade With Country X

The first step is for the Trade Agreements Committee to establish an interdepartmental subcommittee of experts on our trade with country X. These subcommittees are usually referred to as "country committees." The task of the X country committee at this stage is to make a comprehensive survey of our trade with country X, studying the trade statistics for both our imports and our exports to that country with a view to drawing up preliminary lists of the items which should be considered in the negotiations.

The chief criterion guiding the work of country committees at this stage is that of the principal