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Mr. KATZ. Thank you, Mr. Chairman.

I appreciate the opportunity to appear before the subcommittee today to testify on H.R. 1560, a bill to repeal section 5(b) of the Trading With the Enemy Act.

The Department of State's witness before the House Judiciary Committee's Subcommittee on Administrative Law and Governmental Operations testified on April 9, 1975, that the Department believed repeal of section 5(b) without enactment of adequate successor legislation to be imprudent. We continue to hold that view.

We recognize that section 5(b) was explicitly exempted from the scope of the National Emergencies Act enacted during the last Congress to permit thorough consideration of the continuing need and justification for such legislation. We hope that our testimony today will help to make clear that there is such a continuing need.


Section 5(b) has played historically and is playing now an important role in meeting U.S. foreign policy objectives. It grants specific authorities to the President for use during time of war or emergency. These authorities have proved to be an important tool in the conduct of our foreign relations.

The statute has not been invoked frequently during the 60 years it has been on the books. But there have been a few situations where its availability for immediate and continuing use has been of great assistance in reducing the adverse effects of crisis on our national interests. Operating under the authority of section 5(b), successive administrations have devised rapid responses to particular emergency situations. For instance, on a few occasions there was a need to block foreign assets in the United States without delay. The assets involved could have been withdrawn out of the country in the time required for even the most expeditious congressional action.

We believe that Presidents over the years have been circumspect in their invocation of the authority of section 5 (b). Indeed, Congress has on several instances subsequently passed legislation which explicitly authorized action in nonemergency situations of the type orginally taken pursuant to section 5(b). We recognize that some measures taken under section 5(b) have remained in effect longer than was originally contemplated. Nevertheless, as our relations with particular countries have evolved, the executive branch has terminated or modified many of these measures. Those controls currently being exercised are reviewed on a continuing basis in the context of our developing relationships with the targeted countries.

Mr. Chairman, I believe that the best way to proceed in our statement is to consider the five pertinent questions contained in your February 15 letter to us.

As we see it, the first question:

In what specific respects should section 5(b) be repealed as obsolete?

is partially related to the fifth question:

In what specific respects, if any, should section 5(b) be retained as part of the Trading With the Enemy Act and available only in time of declared war in conformity with the rest of the Act?

We believe that experience during World Wars I and II supports retention of the totality of the authorities conferred on the President by section 5(b) for use in time of war.

We also believe that these authorities continue to be necessary for peacetime emergency situations. Indeed, they are now being used as the basis for current activities. We cannot predict what form of emergency may confront us in the future or what types of emergency action may be required. Therefore, we believe that there are no significant respects in which section 5 (b) should be repealed as obsolete.


The second question was:

What specific activities are currently and potentially conducted by the Department under the authority of section 5 (b)?

The Treasury and Commerce Departments, rather than the Department of State, administer the controls currently exercised under the authority of section 5(b). However, the State Department plays a leading role in determining the scope of these controls, because of their significance in our foreign relations.

Treasury Department regulations pursuant to section 5(b) now control imports and financial transactions involving North Korea, Vietnam, Cambodia, and Cuba as well as assets of these countries, of the People's Republic of China, and of various Baltic and Eastern European countries pending resolution of substantial claims of American citizens. Treasury also controls exports from U.S. subsidiaries. abroad to Communist destinations. The 1950 to 1971 extensive controls affecting the People's Republic of China were based on section 5(b). In the future it may be in our national interest to take similar action in other areas.

Another current use of section 5(b) is as interim authority for Department of Commerce export controls. It was also used for this purpose on a few other occasions in the past, between periods of validity of the Export Administration Act.


The third question was:

In what specific respects should the authority for such activities be recast as standard, nonemergency legislation? Should such authority be written into other laws or as separate legislation? What specific language is recommended? Some of the situations in which section 5 (b) has been invoked could be met through nonemergency legislation. Resort to 5 (b) for interim continuation of export controls during lapses of the Export Administration Act would clearly not be necessary if that act were made permanent.

In the absence of section 5(b), I am sure that the Congress would agree that some other means would have to be found to authorize continuation of these controls between periods of validity of the Export Administration Act. Short term extensions of the act might suffice; but making the act permanent legislation would, in our view, be a more appropriate solution.

The controls on exports from U.S. subsidiaries abroad now exercised by the Treasury Department pursuant to section 5 (b) could be recast

as an amendment to the Export Administration Act authorizing prohibition or curtailment of exports not only from the United States as is now the case, but also from other countries where such transactions are effectively under the control of persons within the United States. However, we question both the desirability and practicality of recasting in nonemergency legislation the authority for other measures presently undertaken pursuant to section 5(b), namely Treasury controls on imports, financial transactions and foreign assets. Present arrangements generally work satisfactorily. The courts have developed a substantial body of case law upholding them. Furthermore, there is a substantial legal question as to whether action not related to declared national emergencies or to some other equivalent evidence of overriding national interest would find the same measure of support in the courts. Accordingly, we believe it would be unwise to recast the authority for these activities in standard, nonemergency form.


This leads logically to the fourth question:

In what specific respects, if any, should the authority for such activities be retained as emergency legislation, but amended to meet present circumstances, and to conform to the provisions of the National Emergencies Act? What specific emergency powers should be retained? Under what specific conditions and for what specific purposes should the President be authorized to declare a national emergency for the purpose of activating such powers? Should such authority be retained in the Trading With the Enemy Act, or written into other existing or new legislation?

For the reasons given in responding to the first, second and third questions, we believe that the authorities for activities now contained in section 5(b) should be retained as emergency legislation. The National Emergencies Act includes no substantive powers or authorities to be exercised in the event of a national emergency. Therefore, section 5(b) or a substitute with essentially the same authorities would continue to be needed even if the National Emergencies Act were made applicable to the governing declarations of national emergency.

With respect to conforming to the National Emergencies Act, we would not oppose application of the following sections of that act to emergencies which serve as the basis for the exercise of authorities now contained in section 5(b):

Section 201(a), which authorizes the President to declare national emergencies and states that such proclamation shall immediately be transmitted to the Congress and published in the Federal Register;

Section 201 (b) (1), which specifies that provisions of law conferring powers and authorities to be exercised during a national emergency shall be effective and remain in effect only when the President specifically declares a national emergency;

Section 202(a) (2), which provides for the termination of a national emergency by Presidential proclamation;

That portion of section 202 (a) which provides that any powers or authorities exercised by reason of an emergency shall cease to be exercised after the date of termination of an emergency specified in a Presidential proclamation except that such termination shall not affect pending actions or proceedings, actions or proceedings based on any

act committed prior to the termination date, or rights or duties that matured or penalties that were incurred prior to such date;

Section 202 (d), which provides for termination of any national emergency on its anniversary unless the President publishes in the Federal Register and transmits to the Congress, within the 90-day period prior to each anniversary date, a notice stating that such emergency is to continue in effect;

Section 301, which directs the President to specify the provisions of law under which action is to be taken; and

Section 401, which provides for maintenance of a file and index of Executive orders, proclamations, rules, and regulations issued pursuant to declarations of national emergency or war; transmittal of significant orders of the President and rules and regulations to the Congress; and transmittal of expenditure reports to the Congress. Our comments on conforming to the remaining sections of the National Emergencies Act are as follows:

Section 101-we believe that the section 5 (b) powers and authorities from the existence of declarations of national emergencies now in effect should not be terminated unless or until a satisfactory replacement is in effect.

Section 201 (b) (2)-we believe that section 5 (b) should not be effective only in accordance with the National Emergencies Act until all of the issues in conforming section 5 (b) to this act have been satisfactorily resolved.

Section 202 (a) (1), (b), and (c)-we note the September 14, 1976, statement of President Ford upon signing the National Emergencies Act that the provisions for congressional termination of an emergency by concurrent resolution are unconstitutional.

In summary, the Department of State opposes repeal of section 5 (b) of the Trading With the Enemy Act in the absence of replacement legislation containing substantially the same authorities for use in time of war or during any other period of national emergency declared by the President but would not oppose conforming this activity to those portions of the National Emergencies Act dealing with executive procedures.


The chairman's letter of March 23 to the Department of State also asks for views on H.R. 2382, the Economic War Powers Act. The need for new legislation on embargoes is reduced by the Export Administration Act, which already governs export controls, and emergency legislation such as section 5(b) of the Trading With the Enemy Act, which already governs import controls. The proposal in H.R. 2382 that embargoes could be terminated by concurrent resolution raises a constitutional problem similar to the one I mentioned previously concerning termination of national emergencies by concurrent resolution.


The chairman's March 23 letter also asks whether it would be appropriate for the President to use his asset control powers to regulate banking transactions in furtherance of foreign policy goals of the United States, such as human rights and nonproliferation.

We believe that it would be inadvisable for situations concerning such matters as human rights and nuclear nonproliferation to be regarded as emergencies triggering controls on private banking transactions unless they are part of broader crises directly affecting our primary national interests. Such controls would adversely affect the competitive position of U.S. banks and interfere in their market function, which is important for financing U.S. trade and for the smooth operation of the international financial system. We also believe that it would not be a useful way to implement our policies on human rights and nuclear proliferation.

On the other hand, there is clearly a need for emergency authority to intervene in banking transactions when a given situation does seriously affect the security of the United States. As long as section 5 (b) is retained or a substitute is enacted with essentially the same authorities, no further legislation would be required to protect U.S. interests in emergencies.

Thank you, Mr. Chairman.

Mr. BINGHAM. Mr. Bergsten.


C. Fred Bergsten, 36, of Annandale, Va., signed the oath of office as Assistant Secretary for International Affairs on March 31, 1977, following confirmation March 29 by the Senate. He was nominated by President Carter on February 7. Dr. Bergsten graduated magna cum laude in 1961 from Central Methodist College in Missouri. He received M.A., M.A.L.D., and Ph.D. degrees from the Fletcher School of Law and Diplomacy, where he majored in international economics and international relations.

Dr. Bergsten served President Carter as an advisor on international economics during the Presidential campaign, and was in charge of all aspects of international economic policy during the transition period. Shortly after President Carter's inauguration, Dr. Bergsten accompanied Vice President Mondale on his mission to the major European capitals and Tokyo.

As Assistant Secretary for International Affairs, Dr. Bergsten has major responsibilities in the formulation and execution of a wide range of U.S. international economic and financial policies. He has particular responsibility for U.S. participation in the international development lending institutions, including the World Bank. In fulfilling these responsibilities, Dr. Bergsten has recently headed the U.S. delegations to the negotiations for replenishing the resources of the International Development Association, the soft-loan affiliate of the World Bank, and to a meeting of the Group of Ten major industrial nations on international monetary problems.

Dr. Bergsten was a Senior Fellow at the Brookings Institution from 1972 until joining the Carter/Mondale transition team and then the Department of the Treasury. He was a Visiting Fellow at the Council on Foreign Relations during 1971-1972 and 1967-1969; Assistant for International Economic Affairs to the Assistant to the President for National Security Affairs, Dr. Henry A. Kissinger, in 1969-1971; and an International Economist at the Department of State during 1963-1967.

An energetic and prolific writer, Dr. Bergsten is the author or co-author of eight books and more than sixty articles on a wide range of international economic and monetary subjects. His latest volume is "The Dilemmas of the Dollar: The Economics and Politics of U.S. International Monetary Policy," which was published by the Council on Foreign Relations in early 1976. His "American Multinationals and American Interests" will shortly be published by the Brookings Institution. Dr. Bergsten was also the chief author of "The Reform of International Institutions, a study for the Trilateral Commission, an organization

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