CONGRESSIONAL RECORD -- SENATE

October 22, 1969

Page 31004

Mr. MUSKIE. Mr. President, will the Senator yield?

Mr. MONDALE. I yield the floor.

Mr. MUSKIE. Mr. President, as chairman of the Subcommittee on International Finance which reported the bill and which originally considered the pending legislation, I am happy to support S. 2696, of which I am a cosponsor, which has been explained in detail by the distinguished Senator from Minnesota (Mr. MONDALE).

At this time, I pay tribute to the distinguished Senator for his outstanding initiative and leadership in the development of the pending legislation.

Well over 2 years ago the distinguished Senator from Minnesota arranged, with the permission of the subcommittee and the chairman of the full committee, the Senator from Alabama (Mr. SPARKMAN), an extensive tour through Europe during the senatorial recess to explore the question of trade with the Eastern European countries.

In the process of that tour and as a result of his studies since that time and the hearings which he has conducted on the pending legislation in the subcommittee, the Senator has developed considerable background, and from my point of view he has become an expert in this field.

I am grateful to the Senator from Minnesota for his help and cooperation and for his willingness to take the leadership in this field.

Mr. MONDALE. Mr. President, I thank the Senator for his very kind comments. However, were it not for the interest and the concern shown by the chairman of the International Finance Subcommittee, the Senator from Maine (Mr. MUSKIE), the pending legislation would not be before us in its present form.

The Senator from Maine presided over and participated in most of the hearings. At all times the Senator has shown a special interest in trying to modernize and create an act to protect the national security interests of this country, but, where our national security interests were not involved, the Senator made certain that the American businessmen could freely and fully compete in nonstrategic items in Eastern Europe. I am proud of this measure, and I think a good deal of credit must be given to the distinguished chairman of the subcommittee.

Mr. MUSKIE. I thank the able Senator. I have already said that he has explained the bill in detail. I would like to put it in the broad context in which I understand it, the broad perspective in which I think it has significance, for the benefit of my colleagues and for the purpose of establishing the reasons for my support.

Well over a year ago, at my request, Senator MONDALE conducted extensive hearings on East-West trade. The hearings brought out the deep interest many American businessmen have in expanding peaceful trading opportunities with Eastern Europe and the Soviet Union. The hearings highlighted the difficulties and redtape they encountered in dealing with present export control procedures. The information developed in Senator MONDALE's hearings convinced him and other members of the subcommittee, including Senators BROOKE, WILLIAMS, PERCY, and myself, and Senator PACKWOOD of the full committee of the importance of revising and updating the Export Control Act of 1949.

Mr. President, in considering the legislation before us today it is necessary for us to recall the international climate which prevailed in 1949, when the Export Control Act was enacted. The United States was engaged in a deepening cold war with the Soviet Union. The economies of Western and Eastern European nations, including Russia, were still staggering under the effects of a devastating world war. Among all the major trading nations of the world, the United States alone had an economy strong enough and sophisticated enough effectively to deny items of trade which could have proved advantageous to the military or economic potential of those nations with which we were at odds.

The Export Control Act was passed to implement a policy of denying strategic items to the Soviet Union. As other nations of Eastern Europe entered the Soviet bloc, the restrictive trade policies were applied to them. At the same time, the United States was undertaking a massive program of economic assistance to Western Europe under the Marshall plan.

The success of our efforts in helping Britain, France, Germany, Italy, and other Western European nations to recover from the ravages of World War II needs no documentation here.

What does need emphasis is the fact that the Soviet Union and its Eastern bloc allies also demonstrated a remarkable economic recovery from the war. During the last 25 years the industrial capabilities of the Soviet Union have far surpassed their pre-World War II level. The Soviet Union now has a gross national product which is roughly one-half that of the United States, and its military capabilities rival our own. Furthermore, its economy is less dependent on imports than any other major nation in the world.

The world situation in 1969 has changed substantially since the early days of the cold war.

Confronted by the hard realities of a nuclear age, both the United States and the Soviet Union have taken a number of steps to avoid military confrontaiton. The nations of Eastern Europe, once apparently bound to the Soviet Union by monolithic ties, have demonstrated increasing signs of new independence and a desire to seek new avenues of communication with the West.

The economies of our allies in Western Europe and Japan have expanded to the point where they are now engaged in significant trade with Russia and Eastern Europe. Concurrently, the U.S. balance-of-payments situation has undergone a drastic, unfavorable change.

Existing export control policies do not reflect these changes. The hearings before the Subcommittee on International Finance last year and this year provided ample, often startling, evidence of instances where American businesses have lost millions of dollars of sales because of excessive delays in export licensing procedures. Businessmen gave evidence that in many cases these lost sales opportunities have gone to our allies in Western Europe and Japan, which do not have the same cumbersome red tape or lengthy licensing regulations as the United States.

In addition the United States unilaterally controls some 1,300 export items, 1,100 of which are freely available elsewhere to the Soviet Union and Eastern Europe.

Mr. President, such an export control policy is close to self-defeating. It has not prevented Russia and her allies from developing strong, sophisticated economies, and it has not helped the U.S. position in world trade. A recent New York Times survey estimates that the total U.S. share of world trade actually decreased by 5 percent between 1962 and 1967. In fact, as the economies of our allies in Western Europe and Japan have recovered and expanded during the past two decades, they have become increasingly strong and aggressive competitors for international markets, which once were thought to be the exclusive property of U.S. business.

Mr. President, I think the time has come for the Congress to reexamine our national policy with respect to East-West trade and to bring it into line with the present-day realities of world politics and international trade. The President has stated that he is seeking new opportunities to improve our relations with the nations of Eastern Europe. Leaders of the Democratic Party have expressed similar views. It seems to me that the chance for expanded trade in nonmilitary, noncontroversial areas is a vital first step toward implementing this goal.

This is what the proposed export expansion and regulation act seeks to do. It would declare a new national policy "to encourage the expansion of trade with all countries with which we have diplomatic or trade relations, except those countries with which such trade has been determined by the President to be against the national interest." At the present time, this would specifically exclude trade with Mainland China, Cuba, North Korea, North Vietnam, Southern Rhodesia, or any other nation specifically named by the President.

The bill would also "restrict the export of goods and technology which would make a significant contribution to the military potential of any other nation or nations which would prove detrimental to the national security of the United States."

These two provisions, Mr. President, give the President ample flexibility to control exports for reasons of national security. At the same time they reflect our desire to expand trade in peaceful goods and technology.

Two other provisions of S. 2696 which merit special attention are the elimination of the "economic potential" test as a measure of whether goods may be exported and the establishment of an "availability elsewhere" test in considering export control license applications. Practically any item which is not designed for personal consumption contributes to the "economic potential" of an Eastern bloc nation or the Soviet Union. Furthermore, our ability to influence economic growth in the Soviet bloc is limited to the degree that export items are not readily available from other nations. The provisions in the bill before us reflect those facts, answer specific and well-justified criticisms of present export control policy, and attempt to make this policy more rational and consistent with present-day situations.

Opponents of this bill argue against it for several reasons:

First, that the policy of the bill is uncertain;

Second, that few export control licenses have been denied over the years;

Third, that the trade potential of EastWest trade is small, anyway;

Fourth, that factors which made the Export Control Act necessary in 1949 have not changed substantially since then; and

Fifth, that the present act is a better approach to export control policy.

Mr. President, I contend that world conditions have changed since 1949 and that the export control policy contained in that act is an outmoded approach in 1969. I contend that the record of hearings on East-West trade has amply demonstrated that an overwhelming segment of American business opposes present-day export control policies, not because they want to materially aid the enemy, but because the Export Control Act has stalled and frustrated their legitimate attempts to engage in peaceful, nonmilitary trade.

These same businessmen overwhelmingly support the approach taken in the Export Expansion and Regulation Act of 1969. In addition, several former Government officials have expressed strong support for S. 2696, including such distinguished Americans as Averell Harriman, a former Secretary of Commerce and Ambassador to the Soviet Union, Nicholas deB. Katzenbach, former Attorney General and Undersecretary of State, John T. Connor, former Secretary of Commerce, and Theodore C. Sorensen, former counsel to Presidents Kennedy and Johnson. It was the considered judgment of these gentlemen, who have had first-hand experience with the administration of the Export Control Act, that the time has come for a change in that policy.

None of us who support S. 2696 argue that its enactment will automatically increase East-West trade or that the potential markets in Eastern Europe and the Soviet Union will ever amount to a large proportion of the total U.S. export market.

What we do argue, most emphatically, is that the time has come for us to take a positive approach to East-West trade. We believe that the thrust of our present policies is negative and that the administration of them will not change substantially without a new mandate from the Congress. It is not our intention to open the doors for trade which will in any way harm the national security of the United States. We believe, however, that the proposed Export Expansion and Regulation Act will be a positive declaration of this Nation's willingness to engage in peaceful, nonmilitary trade at the same time that it will continue to give the President all the authority he presently has to control exports which could prove harmful to the national security.

Our declaration of policy is clear; the authority it confers is precise.

Mr. President, President Nixon has suggested that we move from an era of confrontation to one of negotiation. In the legislation before us we are arguing that expanded trade contacts can encourage negotiations in a relatively noncontroversial area, and that as we succeed in this area, we can improve the prospect for negotiations in more controversial areas.

The Export Expansion and Regulation Act of 1969 is one chance of doing this. I urge my colleagues to support this bill.

Mr. FULBRIGHT. Mr. President, will the Senator yield?

Mr. MUSKIE. I am happy to yield.

Mr. FULBRIGHT. My understanding is that this bill was not reported unanimously. There is dissent about the bill. Is that correct?

Mr. MUSKIE. There is dissent.

Mr. FULBRIGHT. What was the vote in the committee on this bill?

Mr. MUSKIE. There was not a rollcall vote. To the best of my recollection, two members actively opposed the bill. Perhaps the Senator from Utah can correct me on that. I think that is accurate.

I understand that Senators BROOKE, PERCY, PACKWOOD, and GOODELL supported this bill in the committee, and, I understand, will do so on the floor.

Mr. FULBRIGHT. Is it clear what the basis for this objection is? Do they wish no bill at all?

Mr. MUSKIE. The Senator from Utah, of course, will express his views himself. The administration told us, in effect, that its objective would be to facilitate trade between the United States and Eastern bloc countries, that it would attempt to facilitate the operation of the procedures which make that trade open to American businessmen, but that it was not prepared to endorse this bill.

So the objective of the administration and the sponsors of this bill appears to be similar, but we got bogged down, apparently, on details.

Mr. FULBRIGHT. Is there anything in this bill that affects the most-favored-nation treatment of the countries of Eastern Europe?

Mr. MUSKIE. Mr. President, this bill would do nothing with respect to favored-nations treatment. That is a responsibility of the Committee on Commerce. This bill simply deals with the control of export items. Right after World War II there was concern that we not export to the Soviet Union or its allies strategic items, which at that time included not only military items but. I gather, items that might be useful to the economic development of the Soviet Union.

Mr. BENNETT. Mr. President, will the Senator yield?

Mr. MUSKIE. I yield.

Mr. BENNETT. This bill calls for equal treatment for all countries, as a matter of definite policy. To that extent it affects the most-favored-nation proposition.

Mr. MUSKIE. It is not my impression that this bill legislatively has the effect of modifying our most-favored-nation policies which are governed by other and broader trade policies and legislation. These are export controls and do not affect imports. The bill states the policy cannot be fully implemented by this legislation, but it is the effort of the committee to implement, so far as we could reach an agreement in committee, with respect to export items.

Mr. FULBRIGHT. It is only in exports that we would be given equal treatment and not in imports. Is that right?

Mr. MUSKIE. The Senator is correct.

Mr. FULBRIGHT. Does this bill have anything to do with the requirement of shipping exports in U.S. bottoms?

Mr. MUSKIE. This bill does not. That policy was established under Executive order, the Senator will recall, in connection with wheat sales to the Soviet Union.

Mr. FULBRIGHT. The Senator is correct. Is that still in effect?

Mr. MUSKIE. It is in effect. An effort was made in this bill to modify that policy. After full consideration and another day of hearings the committee decided that, rather than try to amend the bill, it would include in the committee report an expression to the executive urging reconsideration of that policy and a modification of it. But we were not able to agree on an amendment in this bill to cover that policy.

Mr. FULBRIGHT. Does that not effectively prevent any sales to Eastern European countries, or Russia, or China?

Mr. MUSKIE. It deals only with wheat.

Mr. FULBRIGHT. Only wheat.

Mr. MUSKIE. I agree with the Senator completely. I think the effect of this is to take us out of the international market on wheat.

The distinguished Senator from Minnesota (Mr. MONDALE) I think, has a special interest on this point.

Mr. FULBRIGHT. I saw in the newspapers the other day that the Canadians have negotiated sales of wheat in the amount of $150 million, I think, with China.

Mr. MUSKIE. The Canadians have been doing that regularly.

Mr. MONDALE. Mr. President, will the Senator yield?

Mr. MUSKIE. I yield.

Mr. MONDALE. The committee report sets forth the self-defeating nature of the 50-percent bottom requirement on commercial sales of grain to Russia. The figures show that during fiscal years 1965 through 1968, when the restriction existed, the United States shipped just under 2.5 million bushels of wheat to Russia and East European countries. In the meantime, Canada shipped 551 million bushels, Australia shipped 53 million bushels, Argentina shipped 86 million bushels, and France shipped 102 million bushels.

However, wheat shipments to Poland and Yugoslavia are not affected by the shipping restriction.

During fiscal years 1965 through 1968 the United States shipped a total of 138 million bushels of wheat to Poland and Yugoslavia, compared with less than 2.5 million bushels shipped to the countries affected by the restriction.

Mr. FULBRIGHT. I wonder if the committee did not feel it is time for us to open up our trade a little more in view of the imbalance in our international payments.

Mr. MUSKIE. This is one of the considerations that bore heavily on our decision to report this bill.

Mr. FULBRIGHT. Is the Senator informed of the estimates for this year's deficit in our international payments? Is it not quite large?

Mr. MUSKIE. I think there was an improvement in the last quarter for which we had figures. I shall put the figures in the RECORD as soon as I can get them.

Mr. FULBRIGHT. I think it would be interesting to see how that is affected. My impression is that there were few items in this bill that are not provided in the market by England, France, Italy, and others. We are not really depriving the Russians of anything.

Mr. MUSKIE. This is a very sore point with our businessmen. There are 1,300 items on our control list. Of those, 1,100 items are freely available from our Western European allies or the Japanese to Eastern bloc countries.

Mr. FULBRIGHT. Even with respect to the 200 items not on the list, those 200 items are restricted only to Russia and these countries but they are not restricted for us to sell those items to purchasers in Germany, France, or England, are they?

Mr. MUSKIE. No.

Mr. FULBRIGHT. Therefore, all they need to do is buy them through a third country. Is that right?

Mr. MUSKIE. The Senator is correct.

Mr. FULBRIGHT. Unless there is a high degree of cooperation in the third country. In the early stages of the cold war these countries did cooperate in enforcement of the regulation.

Mr. MUSKIE. They still do on items that are strategic.

Mr. FULBRIGHT. The Senator is talking about commerce now?

Mr. MUSKIE. The original concept appears to have been that we were concerned about exports to Eastern European countries, those which affect the economic potential of those countries, as well. With this policy we have not been able to control the economic growth of the Soviet Union and the Eastern European countries, so it has been a self-defeating policy and it did not work.

Western European countries have been much more realistic about this matter, and so they opened up trade with Eastern bloc countries, realizing it holds benefits for them and it does not hurt them.

Mr. FULBRIGHT. Does the Senator have the testimony on how much trade West Germany has with Russia?

Mr. MUSKIE. Yes.

Mr. FULBRIGHT. Is it substantial?

Mr. MUSKIE. Yes.

Mr. FULBRIGHT. It seems to me it would be interesting to highlight what the West Germans and Japanese do. Do the Japanese trade with Russia?

Mr. MUSKIE. Yes, and they trade with the mainland Chinese and Cuba, as well. I shall get the figures for the RECORD.

Mr. FULBRIGHT. I think it is interesting to show the contrast between West Germany and the Japanese, those countries being great industrial nations, and have trade with Russians.

Mr. MUSKIE. While we are looking for the other figures, I will give the latest figures on U.S. trade with Eastern European countries in 1963. Our exports to Eastern Europe were $166.8 million.

Mr. FULBRIGHT. Does that include Yugoslavia?

Mr. MUSKIE. Yes. The next year was the year for the wheat sales. It climbed to $339 million. In 1965 it fell back to $140 million. In 1966 it climbed up to $197 million. In 1967, the last year for which we have figures, it was $195 million.

The interesting thing is that in the first quarter of this year, 1969, our exports to the Soviet Union and other countries of Eastern Europe, were $39 million. This was a decrease of $62 million from the previous quarter and $55 million in the first quarter of 1968.

So notwithstanding an announced policy of the administration to facilitate the export of goods to Eastern European countries, we have dropped in our export sales to those countries.

I wish to ask the Senator from Minnesota if he has the figures on trade between West Germany and other Western European countries.

Mr. MONDALE. I do not have the figure here. I think West Germany is the big trading partner in Eastern Europe today. Those figures are in the RECORD. I will check them now.

Mr. FULBRIGHT. I do not want to delay the Senator's speech, but I thought it would be interesting to show the difference. When we look at our condition today as to interest rates, our balance of payments, and the severe economic strain we are going through, it does seem shortsighted that we turn this kind of trade in large amounts over to countries like Germany and Japan, or to any of the other friends of ours and say, "You take this trade, we just default." It seems to me to be unjust to our own businessmen. We have an Export-Import Bank trying to foster exports to other countries, and we pay a subsidy to give them a low interest; but not to Eastern European countries. Unless there is some overriding security matter, it seems to me to be a foolish policy for us to follow. If it is a security matter, I should like to know what it is. Has there been any testimony on it before the committee?

Mr. MUSKIE. To the best of my knowledge, and I have listened to the testimony, and have read the testimony, the argument against this bill and its objectives is not any specific security risk. It is not argued that it would open the door to the sale of items that have a clear military value. It is argued that to open up trade with Eastern European countries would add to their economic strength, and therefore we should not do that. That seems to me to be the basis of the argument.

Mr. FULBRIGHT. It seems like a case of the "Mad Hatter" all over again. Even in the military, we were told by spokesmen for the administration not too long ago, or more specifically, the Pentagon, that the Russians have a weapon such as the SS-9. I do not believe it, but at least they said it is one which threatens to be much more effective than the one we have. If it is as good as we were told it is, during the debate on the ABM, I do not know why we are so careful about shipping them anything we have, because if we believe what the spokesmen in the Pentagon have said, that weapon is extremely efficient and sophisticated. That is why they ask for so much money from us.

Mr. MUSKIE. It is clearly the intention of the Russians to develop self-sufficiency.

Mr. FULBRIGHT. I do not think what they say is true. I thought it was hogwash, but anyway, that is what they said. How they reconcile that with the arguments they made against the bill is strange to me.

Mr. MUSKIE. It is clear from the picture of the Russian economy I have that Russia does not depend upon imports to build its economic strength. It depends upon imports to a lesser extent than any other major trading nation in the world today. It has built its economy by internal development, not by trade.

Mr. FULBRIGHT. They have been forced to do that by just such acts as this. Being as large as it is, with its total resources, it is true what has developed, but I am not at all sure it has been to our interests. I am inclined to think that it has been against our interests. Russia just wants to become as self-sufficient as possible. If we had traded with her, I believe there would have been less disposition to enter into pacts with other countries and to continue the cold war.

Mr. MONDALE. Mr. President, if the Senator will yield, we have found the figures -- we shall have some later ones which we are now trying to uncover -- which show commercial trade between West Germany and eastern Europe in the years 1964, 1965, and 1966.

In 1964, $839 million for eastern Europe.

In 1965, $889 million.

In 1966, $1,102 million.

I think they are substantially higher than that now.

In 1966, we had $197 million.

The standard American share of world trade is about 16 percent.

In Eastern Europe, we are less than 2 percent.

Based on the first quarter, we are one-half of 1 percent, largely because of the self-defeating restrictions on commerce in our strategic trade which does not deny Eastern Europe anything but gives preference to France, Germany, Italy, Great Britain, and Japan.

Mr. FULBRIGHT. It would be interesting to have the Japanese figures, too. We do everything we can to help them. We have armed forces in there to protect them. I do not know how many billions of dollars we spend in protecting Japan, and Germany as well, with our military

men. We have thousands of military men in Japan and yet we pass a bill like this, and Japan is one of our largest traders.

Mr. MONDALE. In that same period, 1966, that we had $197 million with all of Eastern Europe, Japan had $273 million.

Mr. MURPHY. Mr. President, will the Senator from Maine yield?

Mr. MUSKIE. I yield.

Mr. MURPHY. Is there any question of price differential? Is this broken down so that we can tell whether this is because of inability to compete, because of prices?

Mr. MONDALE. These are strictly dollar volume figures. They do not reflect in the tables themselves the question of a price differential. All the testimony the subcommittee took with different problems, it all boiled down to seeking or gaining trade, which of course goes into a great deal of detail, but these figures by themselves do not reflect that.

Mr. MURPHY. We see instances of great problems now because of their ability in the labor market to produce quality based on what they have learned from us, at sometimes as low as half the price.

Mr. MUSKIE. What is involved here is not that question at all.

Mr. MURPHY. Yes.

Mr. MUSKIE. These four volumes of hearings cover 2 years in the field with stories and complaints of American businessmen, all of whom could sell more goods in these countries but for our policies and restrictions. They can compete. They want to compete. They are denied the markets, however. That is the problem.

Thus, these figures do not indicate any inhibitions. On the contrary, if we were able to relax our policies in accordance with the judgment of American businessmen, who tell us they can increase sales, it will not be an astronomical program, but they would be able to compete in the items they discussed with us.

Mr. MURPHY. I thank the Senator. That answers my question.

Mr. MUSKIE. Mr. President, I am going to close my formal remarks with perhaps 3 or 4 more minutes of observations so that we may proceed with debate.

The committee was motivated by the conviction -- that is a majority of the committee -- that in light of the changes which have taken place on both sides of the Iron Curtain since the original Export Control Act was enacted in 1949, the time has come for Congress to reexamine national policy with respect to East-West trade and bring it into line with present-day realities, world politics, and international trade.

The President has said that he is seeking new opportunities to improve our relations with the nations of Eastern Europe and to enter into an age of negotiations.

Leaders of the Democratic Party have expressed similar views. It seems to me that the chance for expanded trade in nonmilitary, noncontroversial areas is a vital first step toward implementing this goal. This is the modest nature of what the bill before the Senate undertakes to do.

It does not open wide any doors that should be closed. It merely undertakes, in a very modest way, which still leaves full control to the President in a way that I shall describe, the opportunities for peaceful trade with Eastern bloc countries. This trade is urgently desired by American businessmen, as they have testified in testimony covered in the four volumes which we have here in the Chamber at the present moment.

Now let me indicate to the Senate the control that the bill before us would give to the President.

It would declare a new national policy "to encourage the expansion of trade with all countries with which we have diplomatic or trade relations, except those countries with which such trade has been determined by the President to be against the national interest."

At the present time this would specifically exclude trade with mainland China, Cuba, North Korea, North Vietnam, Southern Rhodesia or any other nation specifically named by the President.

In addition, the bill would "restrict the export of goods and technology which would make a significant contribution to the military potential of any other nation or nations which would prove detrimental to the national security of the United States."

These two provisions, Mr. President, give the President ample flexibility to control exports for reasons of national security, and at the same time they would reflect our desire to expand trade in peaceful goods and technology.

Mr. President, if what we like to describe as the world's most powerful nation could not operate, within the limits of this modest kind of policy, to protect its own security while it expanded trade, then there is something wrong with the patriotism, ingenuity, and commonsense of the American businessman who would be implementing this policy.

I think we are playing a game of blind man's buff in the business of world trade or our own trade with Eastern Europe. All our allies, all our friends, all our Western trading partners are doing business with these European countries, and all that our own American businessmen are asking is an opportunity to do business with the same people on the same basis.

Are we so fearful of our ability to do so and protect our security that we must deprive ourselves -- this great commercial country -- of an opportunity which is so freely seized by countries less powerful, more closely located to the Eastern European countries?

Mr. FULBRIGHT. Mr. President, will the Senator yield for a question?

Mr. MUSKIE. I yield.

Mr. FULBRIGHT. Does this act affect a subsidiary of an American company that is operating in Germany, for example? Opel belongs to General Motors, as I understand it. Does this act affect Opel in Germany in selling anywhere? Does the Senator know whether it would?

Mr. MUSKIE. I understand the Treasury Department has some control over this kind of relation, by controlling part of the assets of the American corporation.

Mr. FULBRIGHT. If it did, it would run afoul of the German Government.

Mr. MUSKIE. It is a difficulty, and we do run into difficulties.

Mr. FULBRIGHT. I would think it would create a bad feeling between countries that think they are independent if we, through subsidiaries, tried to control sales, because they were sales of a subsidiary of a U.S. company. This is a German company. The greatest benefit occurs to the Germans, because they employ German workingmen and they pay German taxes. If the United States thinks it can, in this fashion, control the trade of a country like Germany or Japan, I think it is going to run into serious troubles.

Mr. MUSKIE. There is no trouble with them as a result of our policies with respect to trade with Eastern Europe. These countries laugh at us.

Mr. FULBRIGHT. That is with respect to our own companies. They like the idea of a German company trading with Eastern Europe because it brings in substantial funds to them. What they laugh at and what they like is for us not to trade directly with those countries.

Mr. MONDALE. Mr. President, will the Senator yield?

Mr. MUSKIE. I yield.

Mr. MONDALE. We estimated that there are about 1,100 major items freely available to them from Western countries, not controlled by COCOM, which we unilaterally prevent our own businessmen from selling to them. I have seen pages of specific items which came out in testimony by businessman after businessman. They had been bargaining for contracts of nonstrategic, nonmilitary items, and the export license office would not give them a license. The deal fell through, and the British, or the Germans, or the French got it. The balance of payments went to them. We lost the contract. We did not gain a thing. It is a self-defeating, Joe Stalin hangover.

Mr. FULBRIGHT. It strikes me that way.

Mr. MUSKIE. May I quote the testimony of Secretary Ball on the very point the Senator has raised. I think the Senator might be interested in his testimony, which relates to the problem of extraterritoriality. He said:

A more significant problem is that of extraterritoriality, which I hope will be addressed by the Congress. This is a problem that most often arises under the Trading With the Enemy Act, where the United states attempts to impose on the subsidiary of any American company doing business in a foreign country a policy which is not accepted by the government of the country in which the subsidiary is doing business.

Now we had a number of examples of this and they have been extremely abrasive. One or more have concerned our relations with Canada, where our government's actions have been deeply resented by the Canadians. I recall a case of some wheat loading machinery that was in possession of a company or two in Canada -- I think all of the companies that happened to have this particular kind of wheat loading machinery were subsidiaries of American companies. And we said, "You can't use this machinery to load the wheat to go to China." It was a machine put on the ship and I think it went along and unloaded it at the other end.

The Canadians were quite naturally upset. They said:

"You are telling a Canadian company doing business in Canada it can't use a particular piece of equipment for handling the wheat in connection with a sale which the Canadian Government has made."

Now, this is only an illustration of the point. We have had some other situations in France.

Sometimes the subsidiary company is not even wholly owned by the American parent, but there is a substantial minority interest and this aggravates it, because the minority interest, living in the foreign country, says, "What does the U.S. Government have to do with us? Why can't we run our business, as long as we comply with the laws of the country where we are situated? Why can't we run our business as we wish to?"

The Senator is quite right. Secretary Ball went on to discuss other instances.

Mr. FULBRIGHT. The Canadians rejected the protest, did they not? They did not abide by it?

Mr. MUSKIE. They found a way around it.

Mr. FULBRIGHT. For the self-respect of the country, I would think they would. What does this bill do about it? Does the bill remove the 1,100 items from the requirement of having to have an export license?

Mr. MUSKIE. No.

Mr. FULBRIGHT. Why does it not?

Mr. MUSKIE. Because we have the best bill we could get through the committee. It is a very modest bill. The Senator from Minnesota, who authored the bill, and who has pushed it this far, will correct me if I am wrong. My impression is that the bill in the present form does nothing more than indicate that it is the desire of Congress that the President, by the exercise of his discretion and by the use of the executive machinery -- to which we have made additions -- will undertake to break down these barriers and to eliminate the red tape and loosen up the licensing procedures so American businessmen will be encouraged to come in and ask permission to sell.

Mr. FULBRIGHT. In what way does the bill improve the existing law? Is it not just an extension of the law?

Mr. MONDALE. Mr. President, if the Senator will permit me, one principle we had to accept – and I would have preferred not to have it -- was that it was strongly felt by a minority in the committee that we could not do anything to deny the President the power to restrict an item if he decided to have it restricted. I would have preferred, as in my original draft, that the President would not have been able to deny the export of an item if it were available elsewhere. It is patent that it does not achieve anything except to provide a foreign competitor the ability to get our business.

In any event, we felt we had to accept. that principle, and we were willing to go along.

In the first place, the present law says that wherever there is an economic or military significance in an item to be exported to Eastern Europe, it must be prohibited. Any conservative administrator could conclude that almost any item has economic significance, or the country would not have desired to purchase it. We knocked the word "economic" out and applied only "military," which liberalizes the standard.

Second -- and I think this is very important -- we have a complicated, although not decisive, rule that, when the item is available elsewhere, is not exclusively available from us today, and is not a military item, no license should be required unless the President affirmatively states that he wants it licensed nevertheless, and sends us a report giving us the reasons why.

Furthermore, and this is very important: One of the big problems with the Export Control Act is that the businessmen who deal with it are left completely in the dark, once they apply; they do not know whether they are being turned down, or why their applications are delayed, and we have several safeguards, not to restrict the President's power but to permit the American businessman to have his side of the case heard, and to insure that the applicant be told the reason for whatever action is taken.

In other words, we have tried to create an adversary proceeding, so that the whole story may be told. This is not a perfect answer, but we think it goes a long way toward creating a balanced approach to the problem.

Today the Export Control Office, in my opinion, acts very much like the security officers in Joe McCarthy's day. In other words, the easiest thing for them to do is turn everything down, because then they will never be personally criticized by anyone. It tends to make them extremely conservative in their judgments. This bill tries, as best it can, to leave the President with all the power he needs to do anything he wants, but at the same time to eliminate the inherent excessive conservatism and fear of the administrator.

Mr. FULBRIGHT. Who will actually administer this act? Who is likely to make the decision, what officer?

Mr. MONDALE. It will continue to be the Export Control Office in the Department of Commerce.

Mr. FULBRIGHT. Who is the head of that office now?

Mr. MONDALE. It is under Assistant Secretary Davis. The actual Administrator is Rauer Meyer.

Mr. FULBRIGHT. I thank the Senator.

Mr. MUSKIE. Mr. President, the colloquy between the distinguished Senator from Arkansas and the distinguished Senator from Minnesota emphasizes, I think, the essential modesty and conservatism of this bill as a change in our export control policy. I do not think that, by anything further I might say, I can add to the picture, and I am happy to yield the floor so that the other side may present its case.