As these regulations are being reviewed by the respective agencies, I would like to suggest another approach which I think will help to solve the problem without putting US firms at a competitive disadvantage.

Local laws and regulations of foreign countries purchasing US defense articles vary. Some prohibit the use of agents, other allow it, some regulate their activities strictly, others do not.

Essentially, it is a judgment for the foreign government to make as to how they wish their own procurement practices to work. US firms, and our international competitors, all operate in the same environment.

I propose that US companies using foreign sales agents be required to certify to the appropriate US government entity approving or monitoring the particular sale that, with respect to arrangements with foreign sales agents, the company has fully complied with all applicable laws and regulations of the foreign government. That is, US firms would certify that they are familiar with and have complied with all of the local laws and regulations which apply to the use of foreign agents and the payment of fees or commissions to such agents. This approach will help insure the integrity of US business practices in each country in which they do business. Foreign governments would then have an additional assurance that US companies are operating within local laws.

The result would be that the competitive position of US firms will be preserved. Foreign sales agents are used by many companies for perfectly legitimate purposes. In many countries, it is virtually impossible to do business without using such agents. Our purpose should be to weed out companies who use foreign sales agents for illegitimate purposes, while at the same time permitting responsible US companies to use them for appropriate business purposes.

Mr. Chairman, I appreciate the opportunity to respond to your request. I will be pleased to try to answer any questions you may have or provide any additional information you need.

Note: The exports include both domestic and foreign merchandise. The imports are general imports, not just imports for consumption. The value basis for the imports is Customs.

Source: Department of Commerce.

Note. The exports include both domestic and foreign merchandise. The imports are general imports, not just imports for consumption. The value basis for the imports is Customs.

Source: Department of Commerce.

TABLE 5.-U.S. IMPORTS OF OIL AND PETROLEUM PRODUCTS FROM IRAN AND SAUDI ARABIA

TABLE 6.-U.S. OIL AND PETROLEUM PRODUCTS, IMPORTS FROM THE MIDDLE EAST

APPENDIX 20

STATEMENT OF TIMOTHY W. STANLEY, PRESIDENT, INTER-
NATIONAL ECONOMIC POLICY ASSOCIATION, JULY 30, 1975

INTERNATIONAL BUSINESS ETHICS

Mr. Chairman:

This statement of personal views is submitted in response to your request of July 7, despite my hesitation in submitting views on matters on which I have had little firsthand experience or opportunity for research.

Nevertheless, the subject of the "payment

of gratuities to foreign officials by American companies" and the broader issue of international business ethics has a significant potential for affecting international commerce. In view of the extensive publicity--some of it erroneous or misleading--which the subject has received, I felt that we should be responsive to your Subcommittee's efforts to put this question in perspective.

Since its founding nearly 20 years ago, IEPA has described its mission as advocating "policies and practices by business concerns and governments that will keep American trade and investments abroad in a state of good health and repute. We regard the

"repute" not only as important in its own right but as an integral part of the "health." Therefore, if I were asked for an opinion by a company, my advice would be that it is better to have a companywide policy that "kickbacks" or any form of inappropriate payments to foreign officials are absolutely ruled out, in spite of any alleged short-term benefits, local pressure, or foreign competition. The knowledge that this is company policy, it seems to me, would reduce pressures on the company abroad. This may not, of course,

deal with cases where high officials of a foreign government
are, in effect, using their power for extortionary purposes.
In such cases (which hopefully will be increasingly rare), the
company may find that it needs the intervention or mediation,
on a quiet diplomatic basis, of its home government.

I believe that this is, in fact, the policy of many of the leaders in the U.S. business community, or at least those whom I know, and that they have found that this policy has served to discourage pressures, although I am not in any position to be an official spokesman for them. Most U.S. firms operating abroad, with which I am familiar, have as their philosophy, sometimes issued formally as a corporate policy statement, that they recognize an obligation of good citizenship on a worldwide basis and that their affiliates are expected to fully respect the sovereignty of host countries and obey all local government regulations, in keeping with their status as good citizens of the communities concerned.

This philosophy is a central feature of most of the "codes" developed by business organizations. For example, the "Elements

of Global Business Conduct" developed by a task force of the U.S. Chamber of Commerce specifies that corporate commitments should

include:

To obey the laws and regulations of all countries in
which the Corporation has international operations
To refrain from any involvement in partisan political
activity. The affiliate may, however, communicate its
public positions through appropriate channels on issues
relating to its business operations.1

1 "Elements of Global Business Conduct for Possible Inclusion in Individual Company Statements, January 1975, working document of specialized task force of the U.S. Chamber's Multinational Corporations Panel.