TRADE AGREEMENTS AND HOW THEY ARE MADE 



by 



Arthur M. Sandberg 1/ 



The General Agreement on Tariffs and Trade, otherwise known as GATT, composed 

 of membership from governments of 37 countries of the world, is an international forum 

 for the operation and administration of trade agreements. Meetings are held semiannually 

 to seek and recommend solutions to international trade problems. It is pertinent to 

 point out the relationship of this organization with the trade agreements program. The 

 Tariff Act of 1930 established the basic rates of duty and the rules to be applied to the 

 importation of products entering the United States. In the early 1930' s, it was found 

 desirable, as the first step toward stimulating foreign trade and its benefits to our 

 economy, to break down the barriers which kept goods from moving in international trade 

 and the discriminatory practices which forced reduced amounts of trade into uneconomic 

 channels. 



In 19 3h, Congress passed the Trade 

 Agreements Act, authorizing the President 

 to conclude trade agreements with other 

 countries. In return for reductions by 

 other countries in their barriers against 

 American goods, the President was given 

 authority to modify United States tariffs. 

 This Act has been renewed 10 times by the 

 Congress, each time granting some additional 

 leeway to reduce duties and conclude trade 

 agreements. 



The latest renewal of the President' s 

 authority in this field was passed by the 

 Congress in 1958. This provided that the 

 President may reduce United States duties 

 in stages, by any one of the following 

 methods: (l) reducing the rate existing 

 on July 1, 1958, by not more than 20 per- 

 cent, with no more than half that reduction 

 in any one year; (2) reducing the rate by 

 not more than 2 percentage points ad valorem 

 (or its equivalent in case of a specific 

 duty - cents per pound) . 



The President's authority- to increase 

 duties was also changed to provide that he 

 may raise duties as much as 50 percent 

 over the rates which existed on July 1, 193U 

 (before any trade agreements had reduced 



^ ^— — — 



1/ Assistant Chief, Branch of Special 



Reports, Bureau of Commercial Fisheries, 



Washington, D. C. 



rates.) He may also convert a specific 

 duty to the ad valorem equivalent of the 

 193JU rate. The authority to increase 

 rate-s, of principal significance in es- 

 cape clause cases, was amended to minimize 

 the need to resort to quotas. In addition, 

 the President was given authority to im- 

 pose a duty of up to 50 percent ad valorem 

 on a duty free item which has been "bound" 

 in a trade agreement. It is under this 

 authority granted by the Congress that the 

 United States Government participates in 

 the international negotiation of trade and 

 tariff agreements. 



Before a tariff concession is offered 

 to a foreign country, reasonable notice is 

 given to interested parties who are invited 

 to present their views on the effects upon 

 domestic industry of reductions in duties 

 for items appearing on a public list. The 

 President seeks the advice of interested 

 agencies of the government and also obtains 

 "peril point" findings from the United 

 States Tariff Commission (these are rates 

 below which the Tariff * Commission finds 

 that duties may not be reduced without 

 serious injury to domestic industry) . 

 These and other considerations are explored 

 before a concession in duty is offered or 

 made. 



The President has established three 

 interdepartmental committees to make 



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