Changed world conditions have prompted a new foreign policy and new approaches to the other areas of international economic policy. They require a fresh look at our trade policy as well.

The central issue is, simply, whether the U.S. should continue to pursue a liberal trade policy. Leadership for freer trade has been a cornerstone of our foreign policy through six administrations and nineteen Congresses. For thirty-seven years we have considered a liberal trade policy to be in the U.S. national interest. But events in 1970, particularly the failure of the Congress to enact the modest but liberal trade bill proposed by the administration and the near passage of protectionist trade legislation instead, demonstrated graphically she challenge to this traditional course.

Whether we continue a liberal trade policy in the l970s or not will have a profound impact at home and abroad. This administration is committed to the principles of free trade. We recognize that our preponderant size in the world economy gives us an international responsibility to continue on this path just as we have an international responsibility to manage our domestic economy well. I am convinced that liberal trade is in both our domestic economic interest and our foreign policy interest.

Trade benefits our economy in numerous ways. Imports broaden the range of products which is available to our consumers. They help maintain the competitive incentive for our own industries to achieve maximum efficiency and productivity. This plays an important role in our effort to restore price stability as we move toward full employ- ment.

In addition, export earnings are crucial to many sectors of the U.S. economy, particularly our agricultural community, which sells one- fourth of its harvested acreage abroad and many of our highly productive industries. Our firms, workers and farmers can maximize their prosperity only in a world in which their products can be sold as freely in other nations as they can within our own borders. We would hobble their efforts to do so if we were to impose import restrictions, because these would surely spark counterrestrictions on our own exports as well as impair the overall competitiveness of the U.S. economy.

The domestic benefits of liberal trade are reinforced by the pervasive impact of our trade policy overseas.

Because of the world's commercial interdependence, restrictions in one nation adversely affect the economic and social welfare of many others. Political repercussions within those countries inevitably fol- low, and the resulting cycle of recrimination and retaliation poisons political as well as economic relations:

Liberal trade policies are fundamental to our relations with the industrialized countries of Europe, Japan and Canada, our major trading partners. We rely on one another's markets for billions of dollars of sales annually. Our economic relations with these countries are inseparable from our political and military relations; they are a crucial element in our partnership.

Trade policy deeply affects our relations with the lower income countries. Assured access for their exports in the markets of the industrialized nations is crucial for their successful development. Indeed, healthy trade is one of the prime goals of our assistance programs.

It has important implications for our relations with Communist countries. Only they would benefit from a breakdown of economic cooperation in the non-Communist world and the resulting fissures in other fields.

A continued liberal trade policy, in short, is indispensable to our domestic economic health and to a successful U.S. foreign policy. A retreat from our historic policies would greatly harm those broad international interests which we can further only with others' cooperation.

But there are strong voices in this country which maintain that liberal trade policies no longer serve our national interest. They raise serious questions, though the challenge to liberal trade policies which hey pose has been greatly strengthened in recent years by the abnormal increase in imports caused by our domestic inflation and the policies and practices of some of our major trading partners.

To answer these questions within the framework of a liberal trade policy, to mesh our trade policy with the world of the l970s, we have moved on two fronts. First, the new Council on International Economic Policy will take up trade policy as one of the first priority items on its agenda. Secondly, the Commission on International Trade and Investment, chaired by Mr. Albert Williams, which I appointed last year to study the major issues of trade and investment policy, will shortly report its recommendations to me. From these two groups should emerge any new approaches which are needed.

One conclusion is already clear: Our trade policy problem is not ours alone. It is truly international in scope. We and other countries hall all move toward freer trade together or we shall all retreat to protectionism together. Restrictionist policies in one country reinforce restrictionist pleas in another and weaken the case of those who defend freedom of trade.

The U.S., of course, maintains its own range of trade restrictions, a fact which is often conveniently forgotten by those who focus on the barriers maintained by others. And, to be sure, we must be mindful of the need to mitigate the disruptive effects on particular U.S. industries which can sometimes be caused by sharp increases in imports.

But we cannot remove our barriers unless other countries are willing to eliminate theirs on a truly reciprocal basis. For those who question our traditional trade policies can often point to the practices of some of our major trading partners. Too often some of these policies have been set without regard to the interests of other countries, including the United States. Some of them have not responded adequately to requests for change from other countries, including the U.S.

This past year's events have not been encouraging for those who support a liberal trade policy. In my report a year ago, I noted three main tasks for trade policy in the immediate future:

Only the last was achieved in 1970. The failure of the administra- tion's trade bill and the near success of protectionist legislation in the Congress were closely related to the slow pace of the international negotiations on trade barriers. These developments make clear that other countries can no longer proceed on the facile assumption that no matter what policies they pursue, liberal trade policies in the U.S. can be taken for granted.

Thus, international cooperation is absolutely essential if we are to maintain a liberal trade policy in the United States. Our full support for the European Community continues, but its policies -including those related to the expansion of its membership, which we also support- must take full account of our legitimate economic interests. We look to the community, as the world's largest trading entity, to assume an ever greater responsibility for the maintenance of a liberal world trading order by pursuing liberal policies itself, and by playing a more active leadership role in seeking ways to further reduce the femaining barriers to trade. Similarly, Japan should continue its rapid reduction of the trade and investment restrictions which have long been inappropriate for the second largest national economy in the non-Communist world. It is essential that all other industrialized countries cooperate in this effort as well.

In 1970 we took a number of concrete steps on our own to further w'ur trade policy objectives. Barriers against our exports continued to fall, as tariff reductions previously agreed were placed in effect and as we continued to press for the elimination, or at least reduction, of nontariff obstacles to trade. To keep open markets for our agricultural exports, we vigorously urged the European Community to reduce its grain prices and to avoid taking any measures which might threaten our sales of soybeans, tobacco and citrus. We sought modifications in the agricultural policy changes proposed by the United Kingdom. We invoked our rights in the GATT (General Agreement on Tariffs and Trade) against the preferential trading arrangements and changes in citrus and tobacco import policies recently initiated by the European Community. We will maintain and intensify these efforts in the year ahead.

Meanwhile we moved to cushion the adverse domestic impact of grade competition without resorting to legislated import restrictions. We tightened our administration of the antidumping laws to protect our industries against unfair pricing by their foreign competitors. We patiently sought a solution to our textile import problem through negotiations with the Japanese and other Far Eastern suppliers, although in this unique case we also came to support quota legislation in view of the disappointing progress in the negotiations; we maintained the voluntary restraint programs on meat and steel exports to the U.S., and we negotiated new tariff quotas on imports of stainless steel flatware from Japan.

Pressures for legislated import restrictions have been fueled in past years by the failure to use two more positive alternatives available to US: the escape clause which provides for temporary relief from import competition for entire industries in cases where injury can be clearly demonstrated; and the adjustment assistance provisions of our trade legislation, which provide financial and technical assistance to individual firms and workers injured by imports.

In 1970, we used these alternatives. I accepted the Tariff Commission's findings in all three cases in which it found injury to U.S. industries from imports. I extended tariff relief in three escape-clause cases. I ordered adjustment assistance for three industries and for a number of specific firms and groups of workers. And the trade bill which I submitted in late 1969, and supported through 1970, would have made these statutory alternatives more readily available in cases of real need without opening them so wide as to provide an avenue for unjustifiable pleas for protection.

We have therefore demonstrated that there are several viable alternatives to legislated import restrictions, and that we can and will use them effectively. We will defend U.S. trade interests vigorously. And we have therefore demonstrated that a continuation of our historic policy of liberal trade is both possible and profoundly in our national interest. But, in addition to our own actions, we must look to our major trading partners -especially the European Community, which when expanded in membership will account for almost one-half of all world trade- to take actions, and perhaps even new initiatives, which would enable us all to move decisively in this direction together.