In addition, there are problems of achieving general reciprocity, since there is unevenness in the offers of the United States as compared with those of some of our major trading partners.

The answers basically lie with the EEC. The Ministers are to meet again early in February. It is our firm hope that they will agree to clear mandates for their representatives so that conclusions may be negotiated in the weeks to come. Time is short. If we see renewed flexibility and adaptability on all sides our hopes for the future of liberalized trade in the free world will be confirmed. The opportunity must not be lost.

TRADE PREFERENCES FOR DEVELOPING COUNTRIES

Regardless of the outcome of the Kennedy Round, the developing countries are very likely to press even more vigorously than before for international answers to their trade problems. The developing countries are urging the developed countries to adopt a one-way, generalized system of trade preferences by all industrialized countries applicable to importation of processed and manufactured goods from all developing countries.

The United States has expressed serious misgivings about such a system and has questioned whether the advantages would really outweigh the disadvantages. Nevertheless, the United States is willing to explore all alternatives respecting this issue and together with senior trade policy officials of the United Kingdom, France, and the Federal Republic of Germany is engaged in a study of trade problems between developed and developing countries.

The aim of this study, which is being sponsored by the Organization for Economic Cooperation and Development, is to formulate constructive and concerted policies for encouraging increased export earnings by the developing countries. Thus far, the group has concentrated its attention on the preference issue and has been examining ways of dealing with the practical problems which would inevitably arise if new preferences were to be extended to the developing countries. The results of these discussions will have an important bearing on the outcome of the United Nations Conference on Trade and Development to be held next year.

EAST-WEST TRADE

A third trade problem urgently requiring our attention is EastWest trade.

Two-way trade between the free world and Eastern Europe, including the U.S.S.R., has increased substantially during recent years to about $12.5 billion in 1965. Over half-$7.7 billion-of this trade has

been with Western Europe and the United Kingdom. However, I am encouraged by our 1966 trade which I believe will exceed $350 million-one of the highest levels attained in almost two decades. Under favorable circumstances, I can foresee substantial increases in our trade with Eastern Europe in goods and technology for peaceful uses.

Major increases in our trade will not be possible, however, until we remove the political and commercial obstacles involved in our continued denial of most-favored-nation tariff treatment of imports from most Eastern European countries. For its part, Eastern Europe must improve substantially its export products and its ability to market them in the United States.

The administration sought authority to extent most-favored-nation treatment as part of broad bilateral commercial agreements to be negotiated with these countries under the proposed East-West Trade Relations Act which Secretary Rusk submitted to the Congress last May. President Johnson has clearly indicated that he will seek similar authority from the present Congress. I fully support the need for such authority and believe the resulting commercial agreements would in many ways facilitate improved commercial relations with these countries and lead to worthwhile increases in peaceful trade. Mr. Chairman, this completes my statement. Let me thank the committee again for the opportunity to appear before you.

Thank you.

(The tables and charts referred to follow :)

TABLE 1.—A 3-year performance of selected major economic measures

1 Quarterly changes at annual rates; based on seasonally adjusted data. Source: U.S. Department of Commerce and U.S. Department of Labor.