at the same time that the United States Government generalizes concessions all other countries with which it has most-favored-nation treaties extend to the United States concessions made to other countries. A statistical analysis of existing trade agreements shows that many reductions in the tariff rates of foreign countries have benefited our commerce through the automatic operation of the most-favorednation principle.

When negotiations begin under the principles of the trade agreements program our negotiators consider not merely the effect of concessions made to the particular foreign country with which negotiations are being carried on but also the effect of any concession upon our entire commerce. In other words, negotiations under the trade agreements program are in effect negotiations of multilateral arrangements and concessions are made and received, having in mind their total effect after their generalization upon our domestic economy on the one hand, and on the other upon our expanding foreign trade.

THE OVER-ALL PROBLEM OF OUR DOMESTIC ECONOMY

The council favors the trade agreements program because it offers a scientific and flexible method, free from undue local political pressure, for appraising the over-all problem of our domestic economy, as well as the effect of concessions upon local and group interests.

Our great exporting interests, industrial, agricultural, and mercantile, are finding in the trade agreements program protection against discrimination and other restrictions by foreign governments as well as a means of stabilizing reasonable tariffs. Resulting enlargement of foreign markets tends to create prosperity in enterprises engaged in export trade which in turn expands the home market in the United States for the products of our stockman and farmer, as well as for the goods of our manufacturers.

The flow of our people's savings abroad, particularly into productive enterprises, is closely related to the growth of trade. An integral part of any policy which looks toward trade expansion is the full support of the rights of American investments in foreign countries. We believe therefore that our Government in negotiating trade agreements with other countries might well place greater emphasis on the fair treatment of American investments as an important consideration in granting tariff concessions.

These agreements, in a much higher degree than customary in international negotiations, involve specific and practical commercial considerations of vital importance to large sections of our industry and agriculture. Because mistakes may be irreparable, we urge an active cooperation with all interests involved in any given case and that there be increased consideration of facts and arguments before conclusions are reached. Our people are entitled to expect that in determining concessions which are to be made the United States Government will base its decisions upon careful analyses of competitive factors and effects on markets, and so conserve and foster enterprise to the benefit of the broadest interests of our economy.

The CHAIRMAN. It has been requested that an article appearing in the publication "American Exporter," of February 1940, written by Mr. Franklin Johnston, the publisher of that publication-discussing the trade agreements program-be inserted in the records. Without objection, that article will be placed in the record. (The same is as follows:)

THE SCANDAL IN THE TRADE AGREEMENTS PROGRAM 1 Some straight from the shoulder facts of importance to American industry (By Franklin Johnston, Publisher, American Exporter)

Before beginning the discussion of this highly controversial subject, let me introduce myself. For my interest in exposing the truth about the Hull reciprocal tariff policy is not merely academic.

I admit I have an axe to grind. Frankly, my interest in the tariff is primarily to foster the prosperity of the manufacturer. The more money American manufacturers make, the better I like it.

I am no lobbyist. The some 800 American manufacturers who as advertisers employed my paper last year to help increase their sales, did so for our influence with buyers abroad, not with Congress.

This article appears only in those copies of the American Exporter, February 1940 issue, circulating within the United States.

These manufacturers vary all the way from small manufacturers feeling their way in export to great corporations with huge export organizations, such as Chrysler, Firestone, General Electric, International Harvester and Westinghouse. Mostly they are makers of finished manufactures.

These constituents of mine, if I may call them so, normally average 16% export to total sales. That's two months' proc'uction each year. It is often the difference between red ink and black.

From 1932 to 1937 these manufacturers increased their exports on an average of 288%.

One manufacturer of household appliances, exporting for 59 years, wrote me that exports represented one-third of their total business and were up 735% over 1932.

A manufacturer of agricultural machinery reported that their exports were 25% of total sales and showed a gain of 1,062% over 1932.

A manufacturer of machinery, exporting for 16 years, with export 20% of total business, reported a gain of 60% over 1932.

An automotive manufacturer, with export 40% of total business reported a gain of 720% over 1932.

A hardware manufacturer, exporting for 39 years, reported a gain of 400% over 1932.

Let me add that when an American manufacturer sells 16% of his product abroad, that means not only that his plant. is working two months a year on export, or that his workers gain two months work a year from export, but it also means that 16% of all the raw materials he uses are just as much export as though they were shipped to London, Capetown, Bombay, or Buenos Aires, instead of to Detroit, Chicago, New Haven, or St. Louis, as they may appear on your records. And that means that 16% of the employment in the mines, cotton fields, wool farms, etc., necessary for those exports is just as much due to export as the 16% in the exporting manufacturing plant itself. And that 16% of the groceries sold to workers in those plants is due to export.

And so on ad infinitum.

THE PURPOSE HERE

In view of the controversy raging in Washington over the renewal of the President's authority to enter into reciprocal trade agreements, and the statements being issued by both sides, including Secretary of State Hull, I decided to compile for the benefit of manufacturers, the facts, independently and objectively. Here they are. I hope you will read them. For the subject is vital to your future prosperity. And you will have to read clear through to find the scandal. These figures are not derived from any association or from the Department of State, or any body or bureau which is trying to prove something. In view of some of the current statements being made about reciprocity, I think you will find some of these figures as amazing as Mae West's.

The first thing I wanted to verify was to what an extent our exports have really increased from the low point of 1932 to the period when the trade agreement program may be said to have been working under a nearly full head of steam. Below are the figures for some specific industries.

These are huge gains. Tremendous gains. Though I have been watching exports for years, these increases, when I delve into history and put them down in black and white, astonish even me.

1939 FIGURES RESEMBLE 1938

Think what those increases mean also in employment of factory workers. Full figures for 1939 are not entirely apropos, because of the effect of the European war in the later months. But those for the first nine months of 1939 show no striking changes from the 1938 figures.

In the first nine months of 1939 our total exports of finished manufactures were 5% greater than in the same period of 1938.

Since September 1, exports have increased still more, because of war conditions, but this increase is not to be credited to reciprocity.

Nothing could be plainer than the fact that American manufacturers and American factory workers are far better off now than they were under the HawleySmoot tariff, unmodified by the Hull trade agreements, so far as their exports are concerned.

But what about their domestic business. After all that's 84% of my con-
stituents' business and it would be folly to sacrifice that 84% in order to stimulate
the 16%; to make tariff concessions which would make them lose five steps
backward for every one forward.

Has American industry and American factory labor paid too high a price for
these export gains?

Here is what has happened to American manufacturing in general since 1932:

U. S. index of industrial production: Manufactures

Note that as the reciprocal agreements went into effect, instead of our industrial
production falling off, it actually increased.

WHAT CAUSED 1938 SLUMP?

To what an extent the slump in 1938 was due to the Hull agreements and to
what an extent it was due to the C. I. O. drive could be a matter of debate.
Personally, I think it was John L. Lewis' round.

Expecially as the agreements coming into effect in 1938 were those with Ecuador and Czechoslovakia, only one of which affected industrial imports. A 55% increase of manufacturing production does not, in itself, indicate that foreign manufactured goods have been flooding this country under the Hull tariff policy.

As a matter of fact, they haven't.

In 1938 imports of finished manufactures had increased over 1932 by only $77,000,000.

But in the same time exports of finished manufactures had increased by $899,000,000.

Thus for every dollar industry lost in the home market, it gained $11.67 in the export market. Assuming that all these imports were competitive, which, of course, is not the truth.

40% of our imports of finished manufactures come in duty free, indicating, politics being what they are, that they do not compete with American goods.

From 1934 to 1938 inclusive, exports of finished manufactures aggregated three billion dollars more than they would have done if we had continued at the 19321933 level.

That was three cool billion dollars of added business.

Back in the golden days of 1929, when everything was hunkydory, for every dollar of finished goods imported, we exported $2.54 worth.

But in the bleak days of 1932, with the Hawley-Smoot tariff in full force and effect, the ratio had fallen to only $1.83 worth of such exports for each dollar of imports.

SIX YEARS LATER

In 1938, with the Hull tariff policy going strong the ratio had risen to $3.65 of exports for each dollar of imports, the highest on record up to 1939, when it rose still higher, to $3.84.

Note how tremendously industry's balance of trade has increased during the period that the reciprocal-trade-agreements policy has been in effect.

As a matter of fact, believe it or not, imports of finished manufactures were much larger under the Harding, Coolidge, and Hoover administrations than they have been during the Hull program.

In 1923 imports of finished manufactures were valued at $771,300,000 and from 1926 to 1929 they averaged $913,726,000 a year.

But the highest figure under the Hull program has been $551,250,000 in 1937. By the way, note that while U. S. manufacturing has increased 55% since 1932, U. S. exports of finished manufactures have increased 144%. The export gain is more than double the total.

But what about semimanufactured goods?

Exports and imports of semimanufactured goods compare as follows:

By the way, from 68% to 70% of our imports of semimanufactured goods come in duty free, indicating that they are, in general, noncompetitive.

JUST SUPPOSE

Just suppose, for the sake of illustration, that Mr. Hull wanted to appeal to the voters in industry, both manufacturers and workers, as a protectionist. Think of his talking points.

He could point with pride to the fact that under his policy imports of finished goods are less than half what they were under the Republicans in 1929.

That we have sold 3 billion dollars more of American finished goods and allowed the foreigners to sell us only half a billion dollars' worth more.

That exports of finished manufactures have increased since 1932 by 144%, but imports of them have increased only 22%.

That the ratio of exports to imports of semi-manufactured foods has risen from $1.33 to $1 in 1932 to $1.82 to $1 in 1938.

That manufacturing production has increased as high as 73% over 1932.

MANUFACTURING PROFITS

Over and over again the critics of the Hull reciprocal tariff policy assert that it isn't the quantity of imports that causes the damage to our industries but their effect on price levels, and, therefore, of course, on profits.

Yet few of us who face a pay roll every week would swap today's profits for those of 1932. In fact, profit was almost a lost word in those days.

Here is how manufacturing profits compare up to 1937, the latest figures the census has published thereon.

That is a matter in which I am keenly sensitive. For when profits fall off manufacturers have a quaint habit of reducing their advertising expenditures. Here is how the profits of all manufacturing corporations in the U. S. compare:

Note that in 1936 manufacturing profits were the largest since 1929. In the same year imports, until then, were the largest since 1930.

And this in spite of the truly shocking increase of federal and state taxes. The rate of taxes paid went up from 160% of the net in 1929 to 33 0% in 1937-and getting worse.

In the years 1931 and 1932, when the Hawley-Smoot tariff was operating unmodified by the Hull agreements, you will note that the combined "profits" of all American manufacturers comprised a sea of red ink amounting to $2,740,000,000. And I need not ask exporting American manufacturers what the loss of their 16% export to total sales would mean to their profit and loss statement.

Not all the manufacturers with whom I am doing business as a publisher make their financial statements public. But some do.

I looked over the other day the latest financial statements of a group of these manufacturing companies, with whom I am doing business, picked at random in that they were all made public in recent weeks.

I found that of 28 important exporting manufacturers only eight showed any profit in 1932.

Combined "profits" for the 28 in 1932 was a loss of $26,201,143.

Figures for 1939, mostly to September 30th only, show that 24 out of the 28 made a profit and the combined profits of the entire group were $84,655,491, indicating that their profits for the entire year would exceed $100,000,000.

One company whose business is approximately 25% export lost $250,000 in 1932, earned $1,000,000 in nine months in 1939.

If we have been overcharged for the tariff concessions we wrung from foreign countries, it is evidently not the American manufacturer who paid the bill. It must have been a couple of other fellows.