administration of the act should prove that. If, however, there is any doubt in anyone's mind regarding the use of the act to seriously injure American industry, this doubt should be completely dispelled by the letter of May 25 from President Truman to the Honorable Sam Rayburn. The short letter reads as follows: "MY DEAR MR. SPEAKER: Supplementing our conversation yesterday, I wish to repeat that I regard the pending measure for the renewal and strengthening of the Trade Agreements Act as of the first order of importance for the success of my administration. I assume there is no doubt that the act will be renewed. The real question is whether the renewal is to be in such form as to make the act effective. For that purpose, the enlargement of authority provided by section 2 of the pending bill is essential. I have had drawn to my attention statements to the effect that this increased authority might be used in such a way as to endanger or trade out segments of the American industry, American agriculture, or American labor. No such action was taken under President Roosevelt and Cordell Hull, and no such action will take place under my Presidency.

"Sincerely yours,

"HARRY S. TRUMAN."

That I cite also as an additional confirmation of what appears to be, so far as the statements are concerned, the Presidential policy of no injury to American producers.

Do

you agree with that?

Mr. THORP. Yes, I do.

Senator MILLIKIN. And is that the policy of your Department?
Mr. THORP. That is the policy.

Senator MILLIKIN. Are you aware of Mr. Clayton's testimony of last year that they take risks in making these agreements, figuring on the escape clause to escape the risk?

Mr. THORP. I am aware of that testimony; yes.

Senator MILLIKIN. Then will you carve out the State Department's exceptions, so that we may understand them clearly, to the rule of no injury to domestic producers?

Mr. THORP. I can't state any exceptions to that rule.
Senator MILLIKIN. There are no exceptions?

Mr. THORP. There is a basic principle, on which the whole program operates.

Senator MILLIKIN. You state there is no risk-taking?

Mr. THORP. I think I would have to state it this way: There is risktaking by everyone operating in the economic world. What actually happens in this situation is that one has to examine the details of a particular situation and make a judgment as to where the point is which might be regarded as one which threatens; and, on the basis of that judgment, not go beyond that point.

Now, to the extent to which human judgment may be fallible, to the extent to which conditions may change, one may find that the judgment was in error; and in that situation the escape clause is the protection.

Senator MILLIKIN. I am driving to the point: Do you take calculated risks in the negotiation of your agreements?

Mr. THORP. We make a calculated judgment; and every judgment involves some risk.

Senator MILLIKIN. Well, if you take a calculated risk, when you are confronted with a single question of safeguarding domestic industry, how can you say that you are safeguarding domestic industry?

Mr. THORP. One makes a judgment as of the point at which the industry is safeguarded, and then defends that position by the escape clause. The calculated risk is the risk that is involved in making any judgment.

Senator MILLIKIN. But that is not what I am taking about. I realize thoroughly that in any judgment you make you can resolve all of the presumptions in favor of the domestic industry; and yet you might be wrong.

Mr. THORP. Yes.

Senator MILLIKIN. You might come up with something that would destroy the industry. And the result might have followed from the best of good faith and the most intelligent prior procedure. That is not what I am talking about.

Do you, in making these agreements, in their initial aspect, take a look at the whole situation and sometimes say, "This is risky, but we will do it and depend on the escape clause to get out"?

Mr. THORP. I would say that from the Department of State's point of view this is a relative problem. I would put it in other terms: that we do not act under this law in any direction in a way which we believe is likely to injure or threaten.

Senator MILLIKIN. Directing your attention to the hearings which were held before this committee last year, on June 1, 2, 3, 4, and 5, page 52: The chairman was interrogating Mr. Clayton. Down toward the bottom of the page, Mr. Clayton says:

We don't profess to have any sure way of finding it, Mr. Chairman. We don't attempt to find it with absolute certainty, because we know we can't. But what we do say is that if there are those cases where we take some calculated risks in order to achieve an over-all desideratum, and we find we are wrong, we have a protection here in the escape clause, so the mistake, if it occurs, can be corrected.

Would you say now that you do not take calculated risks?

Mr. THORP. I have not said, Mr. Senator, that there are not calculated risks; because this is all an area of uncertainty. But what I have said is that we do not take such action where we believe that there is a threatened injury to a domestic industry. This is a matter of judgment, on a scale of probabilities.

Senator MILLIKIN. But is the safeguard test the test? Or do you subject that test to other considerations?

Mr. THORP. The safeguard test is a very important element in the decision.

Senator MILLIKIN. But not the single test.

Mr. THORP. No, there are many tests that are involved before one decides on a total negotiation.

Senator MILLIKIN. I invite your attention to the fact that there are no exceptions carved out of any of those communications from either President Truman or President Roosevelt.

Mr. THORP. That is correct. I do not think I have been inconsistent. I have said that was not the only test. There are other tests as well.

Senator MILLIKIN. There are other tests, and I think you have made them clear in your statement here. Now we shall proceed to see what you carved out in the way of exceptions to the safeguard rule.

On page 2 of your statement, toward the bottom of the page, you say: The determinations by the Commission are to be made without regard to any national or international considerations

Now let us pause right there.

86697-49-pt. 1- -2

* * *

If the question were up as to a peril point, would you go below that peril point to serve national or international considerations?

Mr. THORP. Senator, I think perhaps it would help if I described briefly the difficulty which I have with the concept of peril points. Senator MILLIKIN. Let us waive the expression "peril points." I do not want to get off into a lot of semantics here. I am trying to drive at something in substance.

Let us say you reached a point in your consideration of a problem where if you went below a certain duty it might injure domestic industry. Now, would you go below that point for national or international considerations?

Mr. THORP. No, we would not go below that point.

We will drop the peril-point definition, but I think the concept is important in this connection; namely, that in making a judgment on any particular situation there are levels which might be regarded as absolutely "no peril" or "no threat," as a "slight threat," a "greater threat," a "probable threat," and a "complete threat." This is a running scale. And the problem is not one of having some point on that where it suddenly turns from black to white, but it is problem of determining where, on this scale, one will decide that there is a real threat to domestic industry. Now when that point is reached, that does become a determining factor.

Senator MILLIKIN. I am not interested in this mental strip-tease that you are going through on how you reach a decision. What I want to know is: If you reached the conclusion that to go below a certain point would bring injury to a domestic industry, would you go below that point in the interests of national or international considerations? Mr. THORP. I can't think of any cases where we would.

Senator MILLIKIN. Then all that you have said here is senseless. What you have said is: "The determinations by the Commission are to be made without regard to any national or international considerations." In other words, you say that the test we put on the Tariff Commission is too narrow; that the injury test, the peril test, is too narrow. So you are criticizing it by saying:

The determinations by Commission are to be made without regard to any national or international considerations.

It follows from what you have said that you favor considering international and national considerations in connection with whether injury is done, does it not?

You go on to say

such as benefits to be obtained from other countries.

If the benefits from other countries were substantial enough, would you injure a domestic industry?

Mr. THORP. No, I would not take such a position where there was any substantial expectation of injury to a domestic industry. But I am saying that in determining where we are on this scale, and how far we might go to the point where there is an assurance of threat, these other elements enter into one's judgment.

Senator MILLIKIN. In other words, you modify the peril-point theory with your own judgment as to whether, by exceeding the peril point, national or international considerations will be served. Right?

Mr. THORP. What I am saying is that there is some point where one is sufficiently assured of a threat of injury that that does establish a limit, yes.

Senator MILLIKIN. Now, then, I ask you again if the benefits to be obtained from other countries, let us say some very substantial exporting benefit to us, were sufficient, do you claim that it is within your privilege to injure a domestic industry to reach that point?

Mr. THORP. No; what I have said is that these do enter into your determination of how far one does go in terms of the scale of peril or risk.

Senator MILLIKIN. I do not see any magic in this scale talk of yours, Mr. Thorp. The point is: Are you doing something which will injure a domestic industry? Now I am trying to find out the exceptions which you carve out to that protection. And under your statement here it appears that if a national or international consideration was sufficiently weighty, you would injure domestic industry. It appears from your statement that if benefits obtained from other countries were sufficient. you would injure domestic industry. Then you have

long-term needs of our economy for expanding markets.

What does that have to do with the simple question of whether a dometic industry will be injured by lowering a tariff, let us say, below a peril point? What weight do you give that in your decision?

Mr. THORP. I am sorry that I have not been able to make my position clear, Senator. My position is that there is no point at which you turn from black to white, which represents an exact point where suddenly one can feel sure that this is likely to injure domestic industry.

Senator MILLIKIN. Yes, you have a question of judgment.

Mr. THORP. There is a question of judgment. And the problem of how far one can go along that scale, short always of the point of assurance of injury, is determined by these other items.

Senator MILLIKIN. So that your judgment in determining where there should be in injury from a proposed rate is affected by

national or international considerations, such as benefits to be obtained from other countries, long-term needs of our economy for expanding markets, the necessity of obtaining the best possible use of domestic resources, including consideration of conservation, possible strategic considerations, and the possible repercussions of our actions upon policies of other countries toward us.

Your criticism of the "no injury" rule boils down to that. You say the "no injury" rule is too narrow; that it is too narrow because it does not take these things ito consideration. Is that not correct? Mr. THORP. I don't think I have said that.

Senator MILLIKIN. What is the purpose, then, of what you have said here?

Mr. THORP. I can only repeat the last answer that I gave, and that is that these factors which I have mentioned here are factors which are important in considering where one will come to rest on the scale of threatened injury, short of the point of probable or assured injury. Senator MILLIKIN. You have said, here:

The third major objection to the 1948 act is that the peril-point reports of the 1948 act are necessarily unduly restrictive.

Now will you tell us how they are unduly restrictive?

Mr. THORP. There is another reason why I feel that they are unduly restrictive, apart from the subject matter which we have been discussing, and that is this: The Tariff Commission is instructed to fix points, exact points, at which it feels that there is a threat of injury to a domestic industry.

Having that responsibility-and it is a serious responsibility—it would seem to me that they would necessarily exercise the most extreme form of caution in fixing those points. And the reason is this: If they agree to a lowering of a tariff, we will say, by a certain amount, there never will be any way in which one can check as to whether it might have been lowered more than that amount or not without doing injury. If, on the other hand, there is injury which develops, quite possibly for the other reasons than just the tariff reduction, the Tariff Commission will be regarded as not having exercised its judgment wisely. Therefore, this responsibility is heavily loaded with respect to the position of the Tariff Commission from the point of view of their taking an extreme position. And that is the reason why it seems to me that this procedure restricts the possibility for negotiation which the President would have.

Senator MILLIKIN. And the other agencies of the Government making up this interdepartmental committee do not operate under the same pressures, or whatever you want to call them? They are not affected by considerations of that kind?

Mr. THORP. I would say the other agencies and the group with the Tariff Commission, working as a group, have tried to find the right points, rather than being put in a position where some future public censure may be voiced with respect to them, and, because of a responsibility given to them by Congress, tend to go to what I would regard as an extreme position.

Senator MILLIKIN. Why should anyone be sensitive about performing an official function, because of possible future criticism if they are wrong?

Mr. THORP. I am afraid this is a matter of human nature. One is asked to make a determination here, if a particular point, which as I see it, does not exist as a particular point. There is a scale of shifting circumstances here, and somewhere on that scale a particular point must be chosen. And because of the character of the situation it would seem to me--and I am talking of it in terms of the way I think I would function if I were a member of the Tariff Commission-that I would be extraordinarily cautious and extreme in determining that point in this range of possibilities.

Senator MILLIKIN. I would suggest if you were a member of the Tariff Commission that you would reach a point, following along that scale that you are talking about, beyond which there would be peril; and I suggest that that would also be good practice for the rest of the agencies in the interdepartmental committee to follow.

Mr. THORP. I should certainly try to do that, as a member of the Tariff Commission. I am talking about the effect of the circumstances. Senator MILLIKIN. Mr. Thorp, the end point comes down to this: You have said that the peril-point business is unduly restrictive. When we analyze what you have said to find out why it is unduly restrictive, you complain because the peril point may not take national and international considerations into view, that it may not take benefits from other countries into view, that it may not take long-term