Senator CHAFEE. Thank you very much.

Mr. STRAUSS. Let me respond a little bit further to Senator Long and be certain that he fully understands that I said that there is absolutely no problem with the value-added tax.

I said there are some questions about economists differing; they think that maybe the exchange rates might wash out some of the benefits that we would receive. But as the Senator knows, strictly as a trade item, there is no question in my mind that the valveadded tax is a positive. It would be a positive thing.

Senator LONG. An advantage?

Mr. STRAUSS. That is correct.

Senator LONG. There may not be much advantage if you were just adding it on on top of the other taxes they paid anyhow. It might not serve much purpose.

But on the other hand, if you were substituting it for some of the taxes that we already levy, especially some of those that have to be passed on in the price of the product for the consumer, then it would be an advantage.

Mr. STRAUSS. If it has a justified domestic tax reason, then it ought to be passed.

Senator LONG. You think it should be judged purely on the basis of whether it is a good domestic tax?

Mr. STRAUSS. I personally tilt in favor of it being a good trade tool. I am just saying to you there are others who would testify to the contrary. If there is not that much difference, it should not have a negative impact on the bill.

Senator LONG. I understand that. Please understand, I am not worrying about what other people are going to testify to. We will meet that when the time comes.

Thank you very much.

Mr. STRAUSS. Thank you very much.

Senator RIBICOFF. Ambassador Strauss, I would guess, and you would probably hope, that this is your last appearance before this committee on STR. I do want to compliment you for the Senate and the people of the United States for the outstanding job that you have done for this country as STR representative.

You set an example that any public servant could aspire to. Not only have you been a great Ambassador, but you pulled together a great team, and I know how hard they have worked and how supportive they have been, both at home and abroad.

Ambassador McDonald, Ambassador Wolff, and your general counsel, Dick Rivers, you have pulled together a small team of able, dedicated men who day-in, day-out, have slogged through one of the most difficult periods or negotiations in the history of our country and all of you should be proud of what you have achieved for the Nation.

Alan Wolff has resigned, so I would say soon that we would not have Alan Wolff with us. Ambassador McDonald and yourself and, I am sure, Dick Rivers, will be through with us until this measure reaches the floor and final action is taken, but on behalf of the entire committee and the American people, my congratulations and thanks to you and your entire staff.

Mr. STRAUSS. Thank you.

Senator NELSON. Mr. Chairman, I should like to endorse what Senator Ribicoff and others have said and, in particular, thank Ambassador Strauss, as well as Ambassadors Wolff, McDonald, and Mr. Starkey, because I would guess that you would agree that I and my staff have imposed upon your time and your staff at greater length than anybody else on the committee in examining the dairy aspects of this agreement, because it was a matter of great concern to us. We met with Ambassadors Wolff and McDonald, and we met several times with Mr. Starkey. We submitted several series of questions. We have always received answers.

We have gotten a good deal of clarification concerning the problems that we thought existed, beginning with Ambassador McDonald's meeting at the House Agricultural Committee several months ago with representatives of the dairy industry. So I just wish to say that you and your staff have been enormously cooperative. There are those who are not satisfied with the total agreement, but I think you have done as well as could be done and, in terms of your responses to our request for information and answers, your staff has been superb, and I appreciate it.

Mr. STRAUSS. Thank you, sir.

Senator LONG. Let me just agree with what has been said about you by Senator Ribicoff and Senator Nelson and brag for a moment. When we passed the 1974 Trade Act, I made quite a fight to say that the job of STR would have to be a Cabinet-level job. That really created a lot of consternation and gnashing of teeth-I thought it was just about to sink the White House. By the time they got through, it looked like they were going to go insane down there, that we would disturb the whole table of organization, and get all confused who sits where at the dinner table and every kind of other thing.

I persevered on the matter, and I was supported by Senator Ribicoff and Senator Nelson and others, so we managed to make this a Cabinet-level job and that also upgraded one notch your able assistants. I think that my position on that matter was vindicated by the fact that it helped us to get ourselves a man whom I believe is the most talented man President Carter has brought with him, Ambassador Strauss, and your service has proved that nt. I think the record will demonstrate we could not have gotten a first-class man like Bob Strauss to take that job if I had not done what I did-upgrade the job and give it the recognition it deserved.

I feel that in doing the fine job you did, you proved me right on the matter, I did want to thank you for that.

Mr. STRAUSS. Thank you, Senator Long. I appreciate what you and the other members have said very much. I must say with respect to that Cabinet status, I hope a lot of folks will agree you were right. I am not sure that my other colleagues in the Cabinet would agree with you

Senator RIBCIOFF. Thank you very much.

Mr. STRAUSS. Thank you very much.

[The prepared statement of Mr. Strauss follows:]

PREPARED STATEMENT OF AMBASSADOR ROBERT S. STRAUSS, SPECIAL
REPRESENTATIVE FOR TRADE NEGOTIATIONS

Mr. Chairman, members of the subcommittee, I appreciate this opportunity to discuss with you the results of the Tokyo round of the Multilateral Trade Negotiations. I welcome this opportunity not only because I strongly believe that these agreements merit your support, but also because of the essential role you and other concerned members of Congress have played throughout the negotiation of these agreements.

Simply stated, I believe these agreements successfully conclude the most ambitious, most comprehensive attempt to revise the rules of world trade since the initial GATT agreement over 30 years ago. They reflect American and international recognition that world commerce has changed during the last few decades. They reflect a commitment to inject new competitiveness into our international trading position. But even more improtant, they reflect a commitment to a climate of fair opportunity and efficient production in international trade-a climate from which all sectors of our economy, and all regions of our country, will benefit.

I attribute much of our success in these negotiations to the prominent role played by members of this Committee, members of the House Ways and Means Committee, concerned members of Congress in both the Republican and Democratic parties, and the private sector. The Trade Act of 1974 has proved to be a remarkably effective mechanism for insuring the full participation of the designated Members of Congress and private sector advisers in the negotiating process.

The breadth of support for the agreements reflects the range of advice we received during the negotiating process. Today I am pleased to announce to this Subcommittee that in a letter sent yesterday to Congressional leaders, 14 of our nation's foremost economists have expressed their strong support for these agreements. This is a truly bipartisan group. Its members have served under five presidents and across three decades and possess intimate knowledge of our nation and its

trade position. The group includes the two immediate past chairmen of the Federal Reserve Board, seven former chairmen of the Council of Economic Advisers, three other past members of the Council, a former Secretary of the Treasury, and a Nobel laureate. I would like to ask that their letter be included in the record of these hearings.

In the negotiation of a major international trade agreement, we have never had a more open flow of information and advice within our country. This exchange, involving all concerned parties, provided the expertise and support for us to negotiate the best possible deal for our country. Such open consultation is a classic example of the Executive and Legislative branches working together, with full discussion of all issues, to achieve truly constructive results.

Those results mark our most effective response to new world economic conditions. The world economy is bigger than ever before and more important to us than ever before.

International trade has increased tenfold in recent decades, to the point where it is a $1.3 trillion business.

Our stake in world trade has grown enormously. In 1969, our export totalled $37.3 billion. In 1978, our exports totalled $143.7 billion—an increase of nearly 400 percent in only nine years.

But not all that has happended in international trade is good news.

We are painfully award of how decisions OPEC makes in Geneva affect the prices of gas, heating oil, and electricity for homes and cars more than 4,000 miles away in Hartford, Dallas, and Los Angeles, and every other city, town and village in America.

We are painfully aware of the effects of subsidized industries and economic nationalism on our ability to compete fairly and successfully in foreign markets.

We need to compete in foreign markets and we are willing to compete. But right now this nation exports 8 percent of our GNP-a small figure compared to the 14 percent of GNP that Japan exports, or the 27 percent of GNP that West Germany exports.

We are not competing as successfully as we could because we have not been allowed to compete fairly. As tariffs become lower and lower, nations have erected more subtle barriers to trade which prevent American products from penetrating foreign markets.

These agreements give us the tools to knock down those barriers. Through these agreements, we can meet our need to export more, and we all know how vital that

is.

In these negotiations, we continued the tariff-lowering process begun in earlier negotiations. We lowered tariffs by about a third, on the average. These selective reductions will be phased in over the next eight years. We obtained important concessions from Japan and the European Community on specialty products so important to us, such as poultry, citrus, beef, and computer and communications equipment.

But the most significant achievements of the Tokyo round, I believe, are the agreements governing non-tariff barriers to trade. Those agreements, popularly known as codes of conduct, attack for the first time the distortions and problems caused by non-tariff barriers. The codes produce much-needed reform of the international trading system by providing, for the first time, a single language, and a single set of rules of govern world trade.

One of our key achievements is an agreement on Government Procurement based on the principle of reciprocity. As this Committee is aware, under the Buy America Act, firms in other nations have had extensive opportunities to bid for our government purchases at only a slight disadvantage. Our firms have not had similar opportunities abroad-in fact in most places we were just plain shut out. Under the Government Procurment Code, for the first time, American firms will have equal opportunities to bid on purchases made by foreign signatory governments. Those countries that creater no new opportunities will get no new opportunities. The Government Procurement Code opens a market now estimated at up to $20 billion for American businesses.

Another major achievement is our agreement on product standards. Our American product standards protect our consumers' health and safety and our environment, but many foreign product standards serve only to protect markets from American goods. This Code prevents much of this discrimination against American producers.

The Subsidies Code will allow us, for the first time, to take quick, meaningful action against the effects of subsidized products on our domestic and export markets.

The Customs Valuation Code prohibits arbitary customs practices which prevent our products from entering foreign markets at fair prices.

Over the long-term, these agreements will help fight inflation by lowering the trade barriers which drive costs up in this country and around the world. Even more important, the agreements offer a major opportunity to restore the international competitiveness of American industry by significantly expanding export opportunities.

The studies made of these agreements have reached a range of conclusions on their impact-but each has been positive overall despite widely varying assumptions. They have concluded that the agreements will increase export income for American agricultural producers by up to half-a-billion dollars annually.

The most recent studies I have seen, based on data straight from the negotiating table, conclude that there will be significant gains in jobs from the tariff cuts and the Government Procurement Code alone. And those studies do not even include potential job gains or economic benefits from the other codes of conduct.

In short, with effective implementation and monitoring, the agreements will mean an ever-expanding role in world markets for American agriculture and business.

They can mean more jobs, better jobs, and better pay for all American workers and more goods at a better price for consumers.

For every extra $1 billion we sell in export markets, we will gain 50,000 jobs, $22 billion in GNP, and $400 million in government tax revenues.

For us to take advantage of these agreements, we will need a sustained effort like the one that brought us this far-we must, and we will have it.

As we finalized these agreements, we devoted a good deal of time and attention to the question of reorganizing our government's trade structure. As you know, this is an important element of the trade picture that has President Carter's personsal attention and commitment.

Recommendations have already been submitted to the President for his approval. With his trip to the Economic Summit and the subsequent attention he has been devoting to energy and economic problems, he has not yet been able to give this issue the thoughtful consideration it deserves. He has indicated to me that we will soon be reviewing the options with him so that his proposal might be forwarded to the Congress.

While I obviously cannot discuss the specific details, I can offer some general observations. First, I expect that the changes proposed will be of some magnitude and will go far toward achieving our common goal of a more unified and effective trade structure. Second, I expect the proposals to emphasize the necessary improvement in policy coordination on trade, more diligent pursuit of our international rights to fair trade, and better follow-through to obtain the benefits of the Tokyo round agreements. These are each goals that I know are of utmost concern to members of this subcommittee.

The Tokyo round will, as I have outlined, benefit all sectors of our economy. But I want to conclude on a word of caution. This is an impressive achievement, but it represents only the first few chapters in a book that we are just beginning to write a book on a new American approach to international trade.

Writing the next chapters will require a strong and persistent commitment from each of us—executive branch and Congress, public and private sectors.

Senator RIBICOFF. We have a long list of witnesses and I think that our plans will be to go until 1 o'clock and then we will adjourn over until tomorrow at 2:30 in Room 2221 of this building, so that those of you, you can figure out, and each witness will be given five minutes, and those witnesses who are down on the list could feel comfortable about leaving now, if you so desire, and return tomorrow at 2:30.

Your statements will be placed in the record as if read.
[A brief recess was taken.]
Senator ROTH. Please proceed.

STATEMENT OF PAUL DeLANEY, ATTORNEY, ON BEHALF OF THE CHAMBER OF COMMERCE OF THE UNITED STATES

Mr. DELANEY. Mr. Chairman and members of the subcommittee, we first wish to thank you for providing us this opportunity to testify today and stress how important we think it is that the