REVISION OF TRADING WITH THE ENEMY ACT THURSDAY, JUNE 16, 1977 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERNATIONAL RELATIONS, Washington, D.C. The committee met in open markup session at 10:48 a.m. in room 2172, Rayburn House Office Building, Hon. Clement J. Zablocki (chairman of the committee) presiding. Chairman ZABLOCKI. The committee will please come to order. We are meeting today to consider H.R. 7738, a bill to revise the Trading With the Enemy Act. The National Emergencies Act passed by Congress in 1976 terminates all national emergencies as of September 14, 1978, except for eight laws. The committees with jurisdiction over those laws were directed to study and report to the House and Senate within 275 days any recommendations and proposed revisions. One of those laws, the Trading With the Enemy Act, is in the jurisdiction of the Committee on International Relations. The Subcommittee on Economic Policy has held hearings on the Trading With the Enemy Act and has reported to the full committee its recommendations in the form of H.R. 7738. The bill and a section-by-section was sent to the members on Tuesday, and I am sure all members have had ample opportunity to review recommendations and the section-by-section of the bill. We will begin the meeting with a statement from Congressman Bingham, chairman of the subcommittee, explaining the subcommittee's action and the bill. The ranking minority member of the committee, Mr. Whalen, may also wish to make a brief statement, We will then hear the administration's position on the bill from Hon. C. Fred Bergsten, Assistant Secretary of the Treasury. Mr. Bergsten's testimony will be followed by a question and answer period. We will then commence markup, if there is sufficient time remaining in this morning's session, and, if necessary, continue markup at 10 a.m. tomorrow morning. Mr. Bingham, would you begin, please. STATEMENT OF HON. JONATHAN B. BINGHAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. BINGHAM. Thank you, Mr. Chairman. Mr. Chairman, the members have on their desks a rather comprehensive statement prepared for me by the subcommittee staff which goes into the background of the Trading With the Enemy Act in some detail. It is a comprehensive statement. It indicates what we have proposed and reasons for it. Members also have in front of them a volume which was compiled last year by my subcommittee staff dealing with this same subject. And just leafing through the volume, the members will get an idea of the enormous extent of the background of this act. What I would like to do is to ask that my statement be incorporated in full following my oral summary. Chairman ZABLOCKI. Without objection, so ordered... HISTORY OF TRADING WITH THE ENEMY ACT Mr. BINGHAM. Thank you, Mr. Chairman. I would like to sum. marize the situation briefly. The Trading With the Enemy Act has had a varied history. It has been used by a number of Presidents to accomplish things that those Presidents wanted to accomplish at the time. Its powers are very broad and it has been subject to, if not abuse, at least stretching to the breaking point. It was this act, for example, that was used by President Roosevelt in his demonetization of gold in 1933. It is this act which today is used by the administration to carry on the Export Administration Act functions including the previous provisions dealing with the Arab boycott and to do so, believe it or not, under an emergency declaration in 1950 at the outset of the Korean war. Similarly, it is the authority in the law today under which the embargo against Cuba is maintained, the embargo against Vietnam and North Korea, the freezing of assets of other Communist countries such as China, Czechoslovakia, and so on. What we have done in our proposed bill, while it may look somewhat formidable in H.R. 7738 that you have before you, is really not all that complicated. We have left the Trading With the Enemy Act substantially unchanged but have limited its application to the case of a declared war. GRANDFATHERING OF EMBARGOES OF CUBA AND VIETNAM We have also in title I grandfathered in essentially those actions. taken under the Trading With the Enemy Act which it would be extremely difficult, if not impossible, to persuade the Congress to reverse at this time. I refer to the embargo against Cuba, the embargo against Vietnam and so on. It is our hope, and we feel, that the bill in the form we have presented it is not very controversial. What we are focusing on is a procedural arrangement, and we are avoiding substantive issues of controversy. I think for us to attempt to deal with those controversial substantive issues would be a mistake even though I personally favor lifting the embargo against Cuba and Vietnam. But I think if we attempted to do that now, we would get this bill all messed up, and we would probably not succeed. I think in time those embargoes will be lifted, but I think that will probably not occur until the President has made up his mind that that should be done and then persuades the Congress to concur in that judgment. So we have grandfathered in those actions currently being taken under the Trading With the Enemy Act. That appears on page 2 of the bill. The only qualification on that is the following: We do provide that at the time of the termination of emergencies under the National Emergencies Act, which is September 1978, the President would, if he chooses to extend these uses of authorities, have to explain his actto state that it was necessary in the national interest to extend these powers for a 1-year period. He would be required to make such a statement annually thereafter so long as he considered that it was necessary in the national interest to continue any of these powers. Notice that we are not requiring the President to declare that there is an emergency, nor are we requiring that he continue the phony emergency of 1950. We are simply saying that the President must in effect review the decision annually, report to Congress and provide an explanation for his actions. There are certain other relatively minor changes in the original Trading With the Enemy Act, and then there is an increase in the criminal penalties which the administration asked for and which is in line with the criminal penalties provided in the Export Administration Act which the Congress has now passed. INTERNATIONAL ECONOMIC EMERGENCY POWERS Title II provides for emergency powers to be exercised in other types of situations to deal with what the bill calls any "unusual and extraordinary threat which has its source in whole or in substantial part outside the United States to the national security, foreign policy, or economy of the United States," and provide that in such a case the President can declare a national emergency with respect to that threat. The bill then grants the President authority to take a variety of actions under that emergency. These powers are substantially the same as those granted in the Trading With the Enemy Act with the following exceptions: The President would not have the power, as he does under the Trading With the Enemy Act, to seize property or to seize records, and he would not have the power to deal with bullion and gold, as is provided in the Trading With the Enemy Act. The powers granted are spelled out in section 203 under the term "Grant of Authorities" on page 4. And as I say, they are, with the exceptions I have mentioned, substantially the same as those provided under the Trading With the Enemy Act. I want to call attention to a limitation Mr. SOLARZ. Would the gentleman yield? DIFFERENT POWERS UNDER WAR AND UNDER OTHER EMERGENCY SITUATIONS Mr. SOLARZ. I appreciate the gentleman's explanation. I wonder if you could elucidate one point here on which I am not quite clear. Could you precisely describe the authority this legislation would convey on the President in a state of national emergency other than one resulting from a formal declaration of war and the precise powers the bill would convey on the President in a national emergency which had been legitimatized, as it were, by a declaration of war by the Congress? In other words, what can you do under one emergency but not under the other? Mr. BINGHAM. What he can do under the emergency under title II is spelled out in section 203. For example, to investigate, regulate, or prohibit any transactions in foreign exchange, transfers or credits or payments between banking institutions to the extent they involve any foreign interest. The importing or exporting of currency or securities, and then under B, "to investigate, regulate, direct and compel" and so on-"any acquisition holding, withholding"-and so on "with respect to transactions involving any property in which a foreign country or a national thereof has any interest." What this adds up to is, as I have said before, in effect, the same powers that have existed under the Trading With the Enemy Act with the exception of the power to seize property, the power to seize records and I should add, the power to take action with respect to purely domestic transactions. The kind of power that was exercised, for example, with respect to the demonetization of gold would not come within the authority of the more limited powers of title II. Mr. SOLARZ. What would be an example of a national emergency the President could declare unrelated to war under this bill which would give him these authorities? Mr. BINGHAM. A very obvious example would be a case where the United States was engaged in hostilities where there was no declaration of war, such as the war in Korea, or the war in Vietnam. I think that it would be logical to conclude that the President could declare an emergency and take certain action if there were a sudden drain on the resources of the United States through such a serious imbalance of trade as to require emergency action. Mr. SOLARZ. For argument sake, let us say there was another oil embargo. Would that constitute potentially the kind of nonwar national emergency? Mr. BINGHAM. I think quite clearly it would. Mr. SOLARZ. If it would, and the President declared a national emergency pursuant to such an embargo, could you explain in lay language what precisely he would be able to do under his powers? When it talks about regulating the controlling foreign assets, does that mean he could freeze the assets of the boycott of the country that established the embargo? Mr. BINGHAM. Correct, freeze but not seize. There is a difference. Mr. SOLARZ. So if he had money he could tie it up and say in effect when you lift the embargo, we will lift the freeze? Mr. BINGHAM. That is correct. He can also regulate exports in a manner not regulated by the Export Administration Act. Mr. SOLARZ. Which means he could in effect establish an embargo on exports to that country? Mr. BINGHAM. Correct. Mr. SOLARZ. For any reason once he had declared the national emergency? Mr. BINGHAM. That is correct. Mr. SOLARZ. He declares the national emergency pursuant to this bill, the Congress has the right to repudiate that declaration through a concurrent resolution? Mr. BINGHAM. That is correct. Mr. SOLARZ. If we feel it is unjustified. One final question. In the event that there is a declaration of war, the President's authority under this bill is expanded above and beyond the authority he would have in a national emergency unrelated to a declaration of war by giving him specifically the power, which in the first instance he would not have had, to take title to foreign property or to seize their property, records, and that sort of thing, right? Mr. BINGHAM. I do not think there is any expansion of powers here. Notice what we have done in section 101. The very key to this structure is that we have limited the Trading With the Enemy Act coverage to a condition of declared war. The original Trading With the Enemy Act includes the phrase which appears in section 101 "or during any other period of national emergency declared by the President." That was why the Trading With the Enemy Act was so broad that the President could do virtually what he wanted under it under any kind of an emergency and it did not have to involve war or hostility or anything else. Its powers were enormously broad so the President could do virtually what he wanted. This was really a dangerous situation in that it virtually conferred on the President what could have been dictatorial powers that he could have used without any restraint by the Congress. Mr. SOLARZ. I think the bill makes a very useful distinction between two different kinds of national emergencies; one, pursuant to a declaration of war and, another, pursuant to a Presidential declaration in a situation which does not involve a declaration of war. My point simply was, if I understand this correctly, under the former, he can do more than he can do under the latter. Mr. BINGHAM. That is correct. Mr. GOODLING. Mr. Chairman. Chairman ZABLOCKI. Would the gentleman yield to Mr. Goodling? ADMINISTRATION POSITION ON H.R. 7738 Mr. GOODLING. Have you had any feedback from the administration with respect to your proposal? Chairman ZABLOCKI. We will hear the executive branch's position. Mr. BINGHAM. During meetings of the subcommittee, we had administration representatives there at all times. They have given us a great many comments, and we have modified the bill in substantial ways to meet their objections to the original draft. I have not yet read Mr. Bergsten's testimony, but I hope in a general way the administration will not quarrel too much with the form in which the bill is now. We will get to that as soon as I finish, and I am almost finished. Let me point out one or two other things that I think might involve some controversy. TITLE II OF H.R. 7738 On page 6, and bear in mind we are now dealing with title II, which covers emergencies short of a declared war, we do spell out certain limitations on the power of the President which we felt it would be desirable to spell out in the interest of preserving certain basic freedoms under the Constitution. The President would not have the authority to regulate or prohibit personal postal or telegraphic com 93-149-77- -2 |