I urge my colleagues on the committee to support this legislation which has, in my opinion, been thoroughly aired in the drafting stage. Chairman ZABLOCKI. Are there any further questions of the sponsors of the bill, H.R. 7738?

[No response.]

Chairman ZABLOCKI. If not, we will hear from Mr. Bergsten.

STATEMENT OF HON. C. FRED BERGSTEN, ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS, DEPARTMENT OF THE TREASURY

Mr. BERGSTEN. Thank you very much, Mr. Chairman. Let me say at the outset, it has really been a great pleasure for us in the administration and for me personally to have worked very closely with the subcommittee, especially Chairman Bingham, Mr. Whalen, and others, in trying to develop this legislation. We do have a couple of differences remaining that I will indicate in my testimony, but as to basic framework, fundamental approaches, we have worked very closely and cooperatively. And I think come to similar judgments about the best course of this legislation.

HISTORY OF TRADING WITH THE ENEMY ACT

As you well know, this bill had its genesis with the introduction of H.R. 1560 earlier in the congressional session, a bill which would have repealed completely section 5(b) of the Trading With the Enemy Act. The hearings that were held on that bill and the subsequent markup in Mr. Bingham's subcommittee gave both the Congress and the new administration a most welcome opportunity to evaluate the powers and procedures which had been provided under section 5(b). We greatly welcomed that opportunity for review and supported the need for change in that legislation.

In a real sense, of course, the bill before us today had its genesis in the enactment of the Trading With the Enemy Act in 1917 and in the subsequent, occasionally hurried, amendments to that act. In the midst of the 1933 banking crisis, and again in the hectic days preceding the Second World War, Congress added to the President's economic authorities to be exercised in wartime or during other periods of national emergency.

In contrast with those crisis situations in which Congress has previously amended the act, the current proposal and any new legislation will have the benefit of careful and deliberate consideration by all parties concerned, and we certainly commend the committee for taking the initiative in that direction.

NATIONAL EMERGENCIES ACT

Now, in the National Emergencies Act adopted late last year, Congress provided for procedural constraints it believed were required in the use of national emergency authorities in order to avoid unending states of national emergency.

However, Congress also recognized that the national emergency powers conferred under section 5(b) were complex and affected sensitive foreign affairs areas.

Accordingly, section 5 b) was excepted from the new procedures embodied in the National Emergencies Act to afford the appropriate congressional committees an opportunity to study that section to determine what changes would be appropriate.

The bill before us today reflects the development of a congressional response to the requirement of the National Emergencies Act, and we are pleased to have worked closely with the subcommittee in that effort.

ADMINISTRATION RECOMMENDATIONS

Back on April 26 in testimony before Mr. Bingham's subcommittee, Assistant Secretary of State Katz and I personally stated the belief of this administration that procedural reforms were very definitely needed in the way of which section 5(b) powers are exercised.

Accordingly, we recommended that in the future, the President be required to proclaim a new national emergency for any new application of section 5(b) powers. This would avoid reliance on outdated emergency declarations, such as the use of the 1950 emergency relating to the threat of Communist aggression to implement balanceof-payments controls in 1968, a linkage which is not too clear as one looks at it in retrospect.

We also testified that annual review and renewal of future national emergencies would be desirable. And in accordance with the accountability and reporting requirements contained in the National Emergencies Act, we supported keeping Congress and the public fully informed on the uses of section 5(b).

I am very pleased, and the administration is very pleased, to note the bill before us today does incorporate all of these suggestions. Let me turn for a moment to the specific provisions contained in H.R. 7738.

The administration supports the basic approach of the bill which is to separate the wartime from the national emergency powers by leaving the wartime powers in section 5(b) and placing the emergency powers in a separate statute. We also believe that the subcommittee has adopted a sound procedure for continuing the existing uses of section 5(b), to which Mr. Bingham has just referred. The procedure contained in section 101(b) of the bill enables the President after September 1978 to extend for a 1-year period section 5(b) authorities being exercised as of the present time if he determines that such extension is in the national interest of the United States.

The administration also supports the requirement of section 202 which states that a national emergency for purposes of this International Emergency Economic Powers Act must be based on an unusual and extraordinary threat to the national security, foreign policy, or economy of the United States. We believe that this approach emphasizes that such powers should be available only in true emergencies, a view which we most certainly share.

FOREIGN INTERESTS

The qualification contained in section 202 that the threat be from a source in whole or substantial part outside the United States will preclude, or at least may preclude, certain uses of this act which were heretofore authorized by section 5(b).

Similarly, the bill in its section relating to the President's power to act with respect to transfers of credit and payments between banking institutions limits those powers to transfers or payments which involve the interest of any foreign country or nation thereof.

This foreign interest qualification does represent a deletion of power which is now conferred under section 5(b). However, powers to regulate domestic transactions may be available pursuant to other statutes. The administration is reviewing these qualifications to determine their impact on the powers and authorities available to the President.

UNCOMPENSATED TRANSFERS

The language of section 203(b) (3) which precludes the regulation or prohibition under the act of uncompensated transfers of anything of value is troublesome to us. We are sympathetic to the purpose of this provision, but we believe its wording would prevent the President from regulating or prohibiting activities which, if permitted, could damage the national interest.

We should emphasize and fully support that this bill carefully limits the circumstances in which national emergency powers may be invoked in the first place. Accordingly, when those circumstances are present, we believe that the President should be able to exercise very tight controls to meet what are, by statutory definition, extraordinary and unusual threats.

We, therefore, recommend that the committee might wish to adopt the language contained in section 38 of the Trading With the Enemy Act which permits only the donation of food, clothing, and medicines intended to be used to relieve human suffering to escape the normal kinds of control network.

CONGRESSIONAL VETO OF REGULATIONS

Our source of greatest concern in the bill does relate to section 206, as Congressman Bingham has already indicated, which provides for additional congressional review of regulations in the bill. We fully agree that Congress should oversee closely the exercise of these national emergency powers. The bill, with our full support, contains numerous procedural restraints on the use of emergency authorities through its consultation provisions, its reporting and accountability requirements, notably the requirement for annual renewal of any emergency, in addition to all of these requirements contained in the National Emergencies Act itself.

Furthermore, Congress may, of course, always modify or revoke the President's emergency powers through legislation. Thus, we believe there is no need for additional review as provided in section 206 through the so-called congressional override provision via a concurrent resolution.

Furthermore, as you know, it is the administration's position that congressional disapproval by concurrent resolution of regulations issued pursuant to law in the administration of ongoing programs does violate the constitutional principle of the separation of powers. A similar concurrent resolution mechanism has been included in this bill for purposes of terminating declared national emergencies through the adoption of that provision now contained in the National Emergencies Act.

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We strongly oppose both of these provisions. As Congressman Bingham indicated, we, I guess, agree to disagree on that fundamental constitutional point. But we would submit in addition, Mr. Chairman, that there are so many safeguards built into this particular bill, all of which we support, that we find it hard to see there is a need for an additional safeguard through the provision of concurrent congressional resolution override in this particular case.

In essence, my point is that without trying in this case to resolve the constitutional issue on which there are differences of view, it might be possible to avoid this particular item simply by looking at the wide array of controls and congressional oversight authorities which we fully support, which are already in the bill without controversy.

Finally, therefore, let me say again that it has been a great pleasure to have worked with the committee and subcommittee and its staff in drafting a bill which meets our joint concerns in providing both adequate national emergency powers and adequate restraints on the use of such powers, We think the bill before the committee today makes very significant strides in that direction, and we fully hope that a formulation satisfactory to both the Congress and the administration can be worked out. Thank you.

Chairman ZABLOCKI. Thank you, Mr. Bergsten.

I gather from your statement you are representing the entire executive branch in your testimony, not just the Department of Treasury?

Mr. BERGSTEN. That is correct, sir.

CONSULTATION WITH CONGRESS

Chairman ZABLOCKI. Section 204A would require the President to consult with the Congress before exercising any of the authorities granted by the act. How do you perceive this requirement of consultation? Must the President consult before he declares a national emergency or after he has made such a declaration but before he has actually exercised authorities? Also, what type of consultation. would take place?

Mr. BERGSTEN. Mr. Chairman, we fully support this provision of the bill which would require the President to consult with the Congress before exercising the authorities in every possible instance. Given the nature of the issues arising under this legislation, national emergencies that constitute extraordinary threats to the foreign policy or national security of the country, I think it is difficult to envisage the precise procedures that would be carried out for that consultation process. We would certainly make every effort to talk to the leadership of the key committees, the leadership of the Congress as a whole before any action were taken. If time permitted, fuller consultations than that might occur. We do, though, have to indicate that emergencies might arise so quickly and perhaps at times when the Congress was not in session or where there were simply difficulties in communicating where one would simply have to do the best he could in trying to find key Members of Congress to carry out that consultation.

I think it is because of that unusual circumstance which is peculiar to this kind of legislation that the clause "in every possible instance" was put in and agreed to by the subcommittee.

Chairman ZABLOCKI. Would you agree with the interpretation of Congressman Bingham as to the savings provision that consultation is also required to unfreezing blocked assets?

Mr. BERGSTEN. I would, and I think in that case probably the opportunity to consult would be clearly more available than on the other side of the equation.

Chairman ZABLOCKI. The requirements of section 204 regarding consultation and reporting to the Congress are supplemental to those contained in title IV of the National Emergencies Act. In what way are they supplemental? What else is required by the National Emergencies Act?

Mr. BERGSTEN. Under the National Emergencies Act, all that is required is for the President to make periodic reports to the Congress on activities undertaken under the authority of that act. This section would go much further in requiring both the advanced consultations that we just discussed and requiring a specific set of reports to be issued and submitted by the President detailing, as it says in the bill, the underlying circumstances, the action he has taken and how it relates to the underlying circumstance and what he believes are the measures necessary to carry out his responsibilities having declared that emergency.

CURRENT APPLICATION OF TRADING WITH THE ENEMY ACT

Chairman ZABLOCKI. Mr. Bergsten, under what circumstances, to what countries, and in what ways, is the Trading With the Enemy Act currently being applied?

Mr. BERGSTEN. Mr. Chairman, there are now four different sets of uses of the Trading With the Enemy Act, section 5(b) thereof, which I detailed in my testimony to the subcommittee in late April. We have a foreign assets control regulation which prohibits persons under U.S. jurisdiction from engaging in unlicensed commercial or financial transactions with three countries, North Korea, Vietnam, or Cambodia. In addition, current commercial or financial transactions with the People's Republic of China are authorized as long as strategic goods are not involved.

Chinese assets are blocked for possible use of an asset settlement. So there are three comprehensive embargoes-North Korea, Vietnam, Cambodia; one part way, the China situation.

A second set of controls now used under that authority of the Cuban asset regulations, which are parallel to Korea, Vietnam, and Cambodia with the exception that U.S. foreign subsidiaries may engage in certain types of Cuban trade under license.

The third set are the transaction control regulations which essentially are back up to the export controls administered by the Commerce Department under the Export Administration Act and applied to a variety of countries in that context.

Finally, we have the foreign funds control regulations which continue to block property of Czechoslovakia, East Germany, and Lithuania,