PAGENO="0001" FOREIGN TRADE AND, TARIFF PROPOSALS ~ ~ ~t7O\~~/U HEARINGS BEFORE THE COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES NINETIETH CONGRESS SECOND SESSION ON TARIFF AND TRADE PROPOSALS JUNE 4, 5, 10, 11, 12, 13, 14, 17, 18, 19, 21, 24, 25, 26, 27, 28; JULY 1 AND 2, 1968 PART 5 Contains June 18, 1968 Printed for the use of the Committee on Ways and Means 0 U.S. GOVERNMENT PRINTING OFFICE 95-159 0 WASHINGTON : 1968 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 - Price $1.75 PAGENO="0002" OOMMI'II'EE ON WAYS AND MEANS WILBUR D. MILLS, Arkansas, Chairman CECIL R. KING, California HALE BOGGS, Louisiana FRANK M. KARSTEN, Missouri A. S. HERLONG, JR., Florida JOHN C. WATTS, Kentucky AL ULLMAN, Oregon JAMES A. BURKE, Massachusetts MARTHA W. GRIFFITHS, Michigan GEORGE M. RHODES, Pennsylvania DAN ROSTENKOWSKI, Illinois PHIL M. LANDRUM, Georgia CHARLES A. VANIK, Ohio RICHARD H. FULTON, Tennessee JACOB H. GILBERT, New York JOHN W. BYRNES, Wisconsin THOMAS B. CURTIS, Missouri JAMES B. UTT, California JACKSON E. BETTS, Ohio HERMAN T. SCHNEEBELI, Pennsylvania HAROLD H. COLLIER, Illinois JOEL T. BROYHILL, Virginia JAMES F. BATTIN, Montana BARBER B. CONABLE, JR., New York GEORGE BUSH, Texas \VILLIA1~I H. QUEALY, Jlinority Counsel (II) Jonx M. MARTIN, Jr., Chief Counsel J. P. BAKER, Assistant Chief Counsel PAGENO="0003" CONTENTS Part 1 1968: Page Tuesday, June 4 1 Part 2 Wednesday, June 5 439 Monday, June 10 649 Part 3 Tuesday, June 11 741 Wednesday, June 12 877 Thursday, June 13 1081 Part 4 Friday, June 14 1313 Monday, June 17 1475 Part 5 Tuesday, June 18 1829 Part 6 Wednesday, June 19 2349 Part 7 Friday, June 21 2749 Monday, June 24 3173 Part 8 Tuesday, June 25 Part 9 Wednesday, June 26 3865 Thursday, June 27 4201 Part 10 Friday, June28 4483 Monday, July 1 4669 Tuesday, July 2 4909 Part 11 Summaries 5601 PAGENO="0004" IV SUBJECT HEADINGS Aircraft Aluminum Athletic goods Barber and beauty shop equipment Bicycle parts and accessories Ceramic tile, glass, pottery, etc Chemicals Coal Dairy products Distilling industry Electronics and cameras Fish Fruits and vegetables Fur General Governmentwitnesses. Honey Industrial rubber products Iron and steel Lead and zinc Leather goods Machine tools Meat Miscellaneous Oil and gas Optics Paper and publishing Pins, fasterners, etc Plastics, buttons, etc Rubber footwear Stainless steel Textiles Umbrellas Watches Window shades Wood and wood products Date June 21. June 24. June 21. June 21. June 24. June 25. June 28 & July 1. July 1. July 2. June 21. June 25. June 24. July 2. June 26. June 11, 12, 13, 14, 17. June 4, 5, 10. June 24. June 26. June 18. June 18. June 26. June 21. June 24. July 2. June 27. June 21. June 27. June 21. June 21. June 25. June 21. June 19. June 21. June 25. June 25. June 27. Press release dated Thursday, May 9, 1968, announcing public hearings on tariff and trade proposals Proposed "Trade Expansion Act of 1968," committee print Message of the President Draft bill (HR. 17551, introduced by Chairman Mills on May 28, 1968, at the request of the administration) Section-by-section analysis WRITTEN COMMUNICATION SUBMITTED BY GOVERNMENT OFFICIAL Fowler, Hon. Henry H., Secretary of the Treasury, letter dated June 6, 1968, to Chairman Mills 666 ORAL STATEMENTS BY GOVERNMENT OFFICIALS Agriculture, Department of: Freeman, Hon. Orville L., Secretary 649, 654 Ioanes, Raymond A., Administrator, Foreign Agriculture Service__ 439, 649 Labor, Department of: Wirtz, Hon. W. Willard, Secretary 28, 37 Blackman, Herbert N., Administrator, Bu~eau of International Labor Affairs 439 Page 2 0 8 13 19 PAGENO="0005" V Commerce, Department of: Page Smith, Hon. Cyrus R., Secretary 28 Garland, Allen H., Director, Trade and Commercial Policy Division~. 439 McQuade, Hon. Lawrence C., Assistant Secretary 28, 439 Consumer Affairs, Special Assistant to the President for, Miss Betty Furness 649, 662 Interior, Department of, Hon. Stewart L. Udall, Secretary 28, 33 State, Department of: Rusk, Hon. Dean, Secretary 649 Solomon, Hon. Anthony M., Assistant Secretary for Economic Affairs, Bureau of Inter-American Affairs_ 649 Trade Negotiations, Office of Special Representative for: Roth, Ambassador William M., special representative for trade negotiations 28, 42, 439, 446, 649 Gates, Theodore R., assistant special representative 439 Malmgren, Harald B., assistant special representative 28, 439 Rehm,John B., general counsel 28, 439 Treasury, Department of: V Petty, Hon. John, Deputy Assistant Secretary, Office of International Affairs__~ Smith, Fred B., general counsel 28 STATEMENTS OF PUBLIC WITNESSES Abbitt, Hon. W. M., a Representative in Congress from the State of Virginia 4819 Abel, I. W., president, United Steelworkers of America 1845, 1895 Abernethy, Hon. Thomas G., a Representative in Congress from the State of Mississippi 3173 Ackert, James D., Domestic Producers Association of New England 3386 Ad Hoc Committee of Galvanized Electrical Transmission Tower Fabri- cators: Gannaway, Charles B., chairman 2211 Searls, David T., counsel.. 2211 Adair, Hon. E. Ross, a Representative in Congress from the State of V Indiana 894 Adams, Charles F., chairman of the board, Raytheon Co 3640 Adams, John Quincy, chairman, coordinating committee, Food Industries of NewYork, Inc 3297 Adams, Dr. Walter, professor of economics, and director of program on industrial structures in the Atlantic, community, Michigan State Uni- versity 1430 Aerospace Industries Association of America, Karl G. Harr, Jr., president- 1391 AFL-CIO: Biemiller, Andrew J., director, department of legislation 1091 Goldfinger, Nathaniel, director, department of research 1Q91 Alcan Aluminum Corp., Eric A. Trigg,president 3370 Aluminum Association, John M. Mitchell 3345 American Aniline Products, Inc.: Marshall, James J., president, and in behalf of Ad Hoc Committee of U.S. Dvestuff Products 4724 Stewart, Eugene L., counsel 4724 American Apparel Manufacturers Association, Lawrence S. Phillips 2538 American Association of Oilwell Drilling Contractors, Robert A. Busch- man, president 4314 American Association of Port Authorities, Roger H. Gilman, first vice president. 861 American Association of University Women, Dr. Lois Torrence 869 American Association of Woolen Importers, Inc.: Bissinger, Fred, president 2553 Daniels, Michael P., counsel 2553 Smith, David 2553 American Beekeepin.g Federation, Glenn Gibson, executive secretary 3453 American Cyanamid Co., John M. Fasoli, director of public relations_ - - - 4651 PAGENO="0006" VI American Farm Bureau Federation: Page Harris, Herbert E., II, legislative counsel 1215 Lynn, John C., legislative director 1215 American Fur Merchants Associations, Inc., Eugene Dreisin, president~ 4039 American Importers Association: O'Brien, Gerald, executive vice president 829 Floor covering group: Herzstein, Robert E., counsel 2599 Imported footwear group: Hemmendinger, Noel, counsel 4109, 4155 Lipkowitz, Edward, chairman 4155, 4174 Non-rubber-footwear group: Donohue, Joseph F, and Noel Hemmendinger, counsel, imported footwear group 4109 Organic chemicals group: Graubard, Seymour, counsel 4673 Haines, Walter W 4673,4706 Hochschwender, Karl 4673, 4704 Stobaugh, Robert B., Jr 4673, 4675 Textile and apparel group: Daniels, Michael P., counsel 2415, 2417 Hohenberg, Bernard L., chairman 2415 American Iron & Steel Institute, Thomas F. Patton 1845 American Institute for Imported Steel, Inc., Kurt Orban, president 2088 American Loudspeaker Manufacturers Association, Eugene L. Stewart, counsel 3518 American National Cattlemen's Association: Carrothers, R. B 3196 House, Bill, president 3196 American Petroleum Refiners Association, Walter Famariss, Jr., president_ 4308 American Producers of Italian-TypeCheeses Association, and Stella cheese division, Universal Foods Corp., Stephen F. Owen, Jr., counsel 4866 American Retail Federation: Savona, Vincent 1404, 1409 Selonick, Edward H 1404 American Soybean Association: Lodwick, Seeley G., vice president 950 Ranoolph, Chet, executive vice president 950 American Textile Manufacturers Institute: Dent, Frederick B., president 2360 Jackson, Robert C., executive vice president . 2360 American Watch Association, Bertram Lowe, chairman, customs com- mittee 3705 Anti-Friction-Bearing Manufacturers Association, Bernard J. Shallow, chairman 2974 Ashbrook, Hon. John M., a Representative in Congress from the State of Ohio 4829 Ashley, James M., chairman of the board, Trade Relations Council of the United States, Inc 1109 Ashton, Prof. David J., director, International Center of New Englanth - 1572, 1573 Association on Japanese Textile Imports, Inc., Mike M. Masaoka, Washing- ton representative 2490 Athletic Goods Manufacturers Association, William P. Holmes 3071 Atlanta Artificial Kidney Center, John H. Sadler, M.D., director~ 1324, 1333 Baird Chemical Industries, Joseph M. Baird, chairman of the board - - - - 4764 Balgooyen, H. W'., New York Chamber of Commerce 1271 Barbaree, George, international secretary-treasurer, and Robert. Lord, vice president, International Brotherhood of Operative Potters - 3756, 3801 Barnard, Robert C., counsel, Synthetic Organic Chemical Manufacturers Association, and Dry Colors i\Ianufacturers Association 4483, 4512 Bates, Hon. William H., a Representative in Congress from the State of Massachusetts 3378, 3865 Beard, Charles H., chairman of the board, National Committee on Inter- national Trade Documentation 1015 Beckman, Luke F., president, Minster Canning Co 5036 Beckmann, R. J., Domestic Wood Louvered Products Industry 4437 PAGENO="0007" VII Belcher, Hon. Page, a Representative in Congress from the State of Page Oklahoma 3178 Belgian-American Chamber of Commerce~in the United States, Inc., Robert M. Gottschalk, counsel 1597 Bender, Mark G., Ph. D., assistant professor of economics, Holy Cross College, Worcester, Mass 1659 Bendix International, W. Michael Blumenthal, president 1238 Berry, Hon. E. Y., a Representative in Congress from the State of South Dakota 1085, 3996 Bevill, Hon. Tom, a Representative in Congress from the State of Alabama. 1839 Bicycle Manufacturers Association, William M. Hannon, chairman, Wash- ington affairs committee 4902 Biemiller, Andrew J., di~rector, department of legislation, AFL-CIO 1091 Bissinger, Fred, president, American Association of Woolen Importers, Inc - 2553 Blackburn, Hon. Benjamin B., a Representative in Congress from the State of Georgia 1324 Blackie, William, chairman, Caterpillar Tractor Co 1348 Blumenthal, W. Michael, president, Bendix International 1238 B'nai B'rith, Herman Edelsberg, director, International Council 1026 Boeing Aircraft, T. A. Wilson, president 1343, 1347 Boland, Hon. Edward P., a Representative in Congress from the State of Massachusetts 895 Bonomo, Ralph, Italy-American Chamber of Commerce 1619, 1622 Boot & Shoemak~rs Union, John E. Mara, president, and George 0. Fecteau, general president, United Shoeworkers of America, AFL-CIO~ - 4102 Bradford District, Pennsylvania Oil Producers Association, Pennsylvania Grade Crude Oil Association, and New York State Oil Producers As- sociation, J. Paul Jones 4212, 4251 Bradley, Mrs. David G., foreign policy chairman, League of Women Voters of the United States 982 British-American Chamber of Commerce of New York, Earl W. Kintner. 1579 Broun, E. Fontaine, president, Manmade Fiber Producers Association 2464 Broyhill, Hon. James T., a Representative in Congress from the State of North Carolina 1475 Buchanan, Hon. John, a Representative in Congress from the State of Alabama 1319 Burch, Robert, Rocky Mountain Oil & Gas Association 4346 Burleson, Hon. Omar, a Representative in Congress from the State of Texas 4205 Burrows, Fred W., executive vice president, International Apple Associa- tion 5007 Burton, Hon. Laurence J., a Representative in Congress from the State of Utah 1478 Buschman, Robert A., president, American Association of Oilwell Drilling Contractors 4314 Business Builders International, Inc., J. Theodore Wolfson, president 857 Cal-Compack Foods, Gentry Corp., Santa Maria Chili, Inc., and Universal Foods Corp., W. Ed Crane, in behalf of 5001 California Council for International Trade, Gerald B. Levine, director and member, U.S. trade policy committee 1280 California Independent Producers & Royalty Owners Association, Joseph C. Shell, executive director 4212, 4270 California Olive Growers & Canners Industry Committee, G. K. Patterson_ 4991 California Strawberry Advisory Board, Northwest Canners & Freezers Association, and Oregon Strawberry Council, Robert E. Ward 3743 Camero, Sergio, administrator, Puerto Rico Economic Development Administration 4348 Campbell, William C., secretary, industrial rubber products division, Rubber Manufacturers Association 4190 Carmody, Edward T., vice chairman and director, Timex, the U.S. Time Corp 3720 Carrothers, R. B., American National Cattlemen's Association 3196 Cast Iron Soil Pipe Institute: Hunt, Frederick D., foreign trade consultant 2234 Perry, J. Wiley, Jr., chairman, import study committee 2234 Caterpillar Tractor Co.: Blackie, William, chairman 1343, 1348 Eckley, Robert S., assistant to the~ president 1035 PAGENO="0008" VIII Page Cement Industry Antidumping Committee, John C. Mundt, vice chairman 1369 Cerf, Jay H., manager, international group, Chamber of Commerce of the United States 1710 Chamber of Commerce of the United States, Jay H. Cerf, manager, inter- national group 1710 Cheese Importers Association of America, Martin A. Fromer, counsel 4873 Chester, Howard P., executive secretary, Stone, Glass, and Clay Coordi- nating Committee 3756 Chesterton, A. Devereaux, director, International Center of New Eng- land 1572, 1576 Christopher, William F., chairman, tariff committee, Society of the Plastics Industry, Inc 3098 Clay, Henry J., Netherlands Chamber of Commerce in the United States, Inc 1589 Cleveland Greenhouse Growers Cooperative Association, Jerry Nowinski, chairman 5027 Clothespin & Veneer Products Association, and Slide Fastener Association, Richard A. Tilden 2752 Coerper, Milo G., German-American Chamber of Commerce~ 1594 Colmer, Hon. William ?vl., a Representative in Congress from the State of Mississippi 4819 Committee for a National Trade Policy, Carl J. Gilbert, chairman 741 Committee for Economic Development, Howard C. Petersen, vice chair- man, international economic studies, research, and policy committee - - - 1225 Committee of Producers of Ferroalloys & Related Products, Ronald L. Cunningham 2170 Conneaut Port Authority, Mayor Edward J. Griswold, of Conneaut, Ohio~ 1424 Control Data Corp., Hugh P. Donaghue, assistant to the president 1416 Cooper, Mitchell J., counsel, footwear division, - Rubber Manufacturers Association 4148 Cooperating Oil & Gas Association, Clinton Engstrand, vice chairman, liaison committee, & president and chairman, Kansas Independent Oil & Gas Association 4212, 4238 Cornett, Hollan, executive board member, United Stone & Allied Products Workers of America 3756, 3792 Council, Buford W., chairman, tomato committee, Florida Fruit & Vege- table Association 4951, 4964 Cowherd, Edwin R., vice president, dyestuff and chemical division, GAF Corp 4640 Cox, J. Abney, past president and chairman, competition and marketing agreements committee, Florida Fruit & Vegetable Association 4951 Crane, W. Ed, in behalf of Cal-Compack Foods, Gentry Corp., Santa Maria Chili, Inc.,and Universal Foods Corp 5001 Culbertson, J. Steele, director, National Fish Meal & Oil Association 3429 Cunningham, Ronald L., Committee of Producers of Ferroalloys & Related Products 2170 Daniels, Michael P.: American Association of Woolen Importers, Inc., counsel 2553 American Importers Association, textile and apparel group, counsel 2415, 2417 Danish-American Trade Council, Inc.: Hessel, B. H 1626 Wedell, Gustav, chairman, business practices committee 1626 Darman, ~\1orton H., chairman of the board, National Association of Wool Manufacturers and in behalf of National Wool Growers Association - - - 2376 Davidson, Paul H., president, International Importers, Inc., H. William Tanaka, attorney, in behalf of 3634 Davies, Richard, consultant, Synthetic Organic Chemical i\'Ianufacturers Association 4483, 4590 Davis, Roy B., president, National Cotton Council of America 2562 Dawson, David H., vice president, E. I. DuPont de Nemours & Co 4596 DeBlois, Robert, New England Fuel Institute 4302 Dellenback, Hon. John, a Representative in Congress from the State of Oregon 4006 Denney, Hon. Robert V., a Representative in Congress from the State of Nebraska 3191, 4007, 4843 PAGENO="0009" Ix Page Dent, Frederick B., president, American Textile Manufacturers Institute_ 2360 Dent, Hon. John, a Representative in Congress from the State of Penn- sylvania 3873 Derwinski, Hon. Edward J., a Representative in Congress from the State of Illinois 1836 Dc Santis, Arthur A., executive secretary, Italy-American Chamber of Commerce 1619 Dirlam, Dr. Joel B., professor of economics, University of Rhode Island~ - 1430 Dlouhy, John, executive vice president, Emil J. Paidar Co 3136 Donaghue, Hugh P., assistant to the president, Control Data Corp 1416 Donehower, William L., Jr., Rolled Zinc Manufacturers Association 2306 Donohue, Hon. Harold D., a Representative in Congress from the State of Massachusetts 1083 Donohue, Joseph F., Nonrubber Footwear Group, and Noel Hemmend- inger, Imported Footwear Group, American Importers Association 4109 Domestic bicycle tire and tube industry, C. J. Warrell 3450 Domestic Producers Association of New England, James D. Ackert 3386 Domestic Wood Louvered Products Industry: Beckmann, R. J 4437 Golden, David A., counsel 4437 Dorn, Hon. William Jennings Bryan, a Representative in Congress from the State of South Carolina 2407 Douglas, Donald W., Jr., vice president, McDonnell Douglas Corp 2783 Dreisin, Eugene, president, American Fur Merchants Association, Inc - - - 4039 Dry Colors Manufacturers Association, Robert C. Barnard, counsel 4483 DuPont, E. I., de Nemours & Co., David H. Dawson, vice president 4596 Dymsza, Dr. William A., research director, International Business Institute, Graduate School of Business Administration, Rutgers University 1637 Eastern Meat Packers Association, Inc., and Meat Trade Institute of New York, George Kern 3287 Eberlein, John G., chairman, drawback committee, National Customs Brokers & Forwarders Association of America, Inc 1021 Eckhardt, Hon. Bob, a Representative in Congress from the State of Texas 1480 Eckley, Robert S., assistant to the president, Caterpillar Tractor Co_ - - - 1035 Edelsberg, Herman, director, International Council, B'nai B'rith 1026 Electronic Industries Association: Consumer products division: Fezell, George H. vice president 3479 Hoffman, Charles N., chairman 3479 International trade matters division: McCauley, Alfred R., special counsel 3479 Parts and distributor products diyisions: Stewart, Eugene L., counsel 3518 EMBA Mink Breeders Association, Richard Wcstwood, president 4012 Emergency Committee for American ~1rade: Blackie, William, chairman, Caterpillar Tractor Co 1343, 1348 Purcell, Robert, finance committee chairman, International Basic Economic Corp 1343, 1350 Watson, Arthur K., chairman 1343 Wilson, T. A., president, Boeing Aircraft 1343, 1347 Engstrand, Clinton, vice chairman, liaison committee, Cooperating Oil & Gas Association, and president and chairman, Kansas Independent Oil& Gas Association 4212, 4238 Epstein, Lawrence D., vice president, Perry Products, Co 2243 Eshleman, Hon. Edwin D., a Representative in Congress from the State of Pennsylvania 2751 Everett, Hon. Robert A., a Representative in Congress from the State of Tennessee 3196 Fairchild Camera & Instrument Corp., Richard Hodgson, vice chairman, board of directors 3644 Fallon, Hon. George H., a Representative in Congress from the State of Maryland 1832 Famariss, Walter, Jr., president, American Petroleum Refiners Associa- tion 4308 Fasoli, John M., director of public relations, American Cyanamid Co~ - - - 4651 PAGENO="0010" x Fecteau, George 0., general president, United Shoeworkers of America, Page AFL-CIO, and John E. Mara, president, Boot & Shoemakers Union - 4102 Fezell, George H., vice president, Consumer Products Division, Electronic Industries Association 3479 Finkel, Leonard E., president, Umbrella Frame Association of America~. 3140 Fisher, Hon. 0. C., a Representative in Congress from the State of Texas 877 Flavor Pict Cooperative, Louis F. Rauth 5023 Fletcher, Aubrey, executive vice president, C. Tennant Sons & Co 2311 Florida Citrus Mutual, Robert W. Rutledge, executive vice president - - 4981 FloridaFruit & Vegetable Association: Council, Buford W., chairman, tomato committee 4951, 4964 Cox, J. Abney, past president and chairman, competition and market- ing agreements committee 4951 Peters, John S., manager, membership and industry relations division 4951, 4966 Food Industries of New York, Inc., John Quincy Adams, chairman, coordinating committee 3297 Fox, Stark, executive vice president, Independent Oil & Gas Producers of California 4212, 4266 French, Charles W., vice president, Pfister Chemical, Inc 4648 Fromer, Martin A., counsel, Cheese Importers Association of America___ 4873 Fuller, Robert P., chairman, government affairs committee, National Shoeboard Conference, Inc 4124 GAF Corp., Edwin R. Cowherd, vice president, dyestuff and chemical division 4640 Galifianakis, Hon. Nick, a Representative in Congress from the State of North Carolina 4008 Gallagher, Daniel R., director, Green Olive Trade Association 4991 Galvanized Electrical Transmission Tower Fabricators, ad hoc Committee of (See Ad Hoc Committee, etc.) Gannaway, Charles B., chairman, ad hoc Committee of Galvanized Electrical Transmission Tower Fabricators 2211 Geier, Philip 0., Jr., National Machine Tool Builders' Association 2845 Geller, Norman, director, Independent Wire Drawers Association. - - 2194, 2196 Gentry Corp., Cal-Compack Foods, Santa Maria Chili, Inc., and Universal Foods Corp., E. Ed Crane, in behalf of 5001 German American Chamber of Commerce, Milo G. Coerper 1594 Gerstack er, Carl, chairman of the board, Manufacturing Chemists Association 4483, 4484 Gibson, Glenn, executive secretary, American Beekeeping Federation - - - 3453 Gilbert, Carl J., chairman, Committee for a National Trade Policy 741 Gilbert, Robert A., vice president, Investors League, Inc 1031 Gillis, John, vice president, and member, board of directors, Monsanto Co~ 4618 Gilman, Roger H., first vice president, American Association of Port Authorities 861 Glass, Irving R., executive vice president, Tanners' Council of America, Inc 4064,4082 Golden, David A.: Domestic Wood Louvered Products Industry, counsel 4437 United States Potters Association, customs and tariff counsel 3803 Goldfinger, Nathaniel, director, Department of Research, AFL-CIO - - - 1091 Goldstein, Alan, chairman, national affairs committee, National Footwear Manufacturers Association 4064 Golson, Charles E., International Engineering & Construction Industries Council 805 Gottschalk, Robert M., counsel, Belgian-American Chamber of Commerce in the United States, Inc 1597 Graham, Harry L., legislative representative, National Grange 756 Graubard, Seymour, counsel, organic chemicals group, American Im- porters Association 4673 Greater Detroit Board of Commerce, Frederick C. Nash, world affairs committee 1260 Greater Minneapolis Chamber of Commerce, J. Patrick Kittler, chairman, world trade committee 1290 Green Olive Trade Association, Daniel R. Gallagher, director 4991 Griswold, Mayor Edward J., city of Conneaut, Ohio, behalf of Conneaut Port Authority 1424 PAGENO="0011" XI Guenther, Dr. Harry P., dean, School of~ Business Administration, George- Page town University 1662 Hagan, Hon. G. Elliott, a Representative in Congress from the State of Georgia 3179 Haines, Walter W., organic chemicals group, American Importers Asso- ciation 4673, 4706 Hall, 1-Ion. Durward G., a Representative in Congress from the State of Missouri 1081 Hamilton, Hon. Lee H., a Representative in Congress from the State of Indiana 4006 Harmon, William M., chairman, Washington affairs committee, Bicycle Manufacturers Association 4902 Hansen, Hon. Clifford P., a U.S. Senator from the State of Wyoming. - - - 3192 Hardboard Manufacturers, James R. Sharp, attorney 4447 Harr, Karl G., Jr., president, ~ Association of America_ 1391 Harris, Herbert E., II, legislative counsel, American Farm Bureau Federa- tion .- 1215 Harrison, Hon. William H., a Representative in Congress from the State of Wyoming 4933 Harsha, Hon. William H., a Representative in Congress from the State of Ohio - 1838, 4831 Hartke, Hon. Vance, a U.S. Senator from the State of Indiana 1931 Harvey, Hon. James, a Representative in Congress from the State of Michigan 4833 Hemingway, Stuart C., Jr., Stainless Steel Flatware Manufacturing Asso- ciation - 3091 Hemmendinger, Noel, counsel: Imported footwear group, American Importers Association 4109, 4155 Imported footwear group, and Joseph F. Donohue, nonrubber footwear group, American Importers Association 4109 Henderson, Hon. David N., a Representative in Congress from the State of North Carolina 3384 Henderson, David W., executive secretary, National Board of Fur Farm Organizations 4012, 4019 Herkner, George W., executive vice president, Warner & Swasey Co_ 2845, 2971 Herzstein, Robert E., counsel, floor covering group, American Import Association, and Wilton and Velvet Carpet & Rug Importers 2599 Hessel, B. H., Danish-American Trade Council, Inc 1637 Hicks, W. B., Jr., executive secretary, Liberty Lobby 1256 Hiliman, Jimmye S., head, Department of Agricultural Economics, Uni- versity of Arizona 1039 Hobbs, Claude E., chairman, foreign trade committee, National Electrical Manufacturers Association 3507 Hochschwender, Karl, organic chemicals group, American Importers Asso- ciation 4673, 4704 Hodgson, Richard, vice chairman, board of directors, Fairchild Camera & Instrument Corp 3644 Hoffman, Charles N., chairman, Consumer Products Division, Electronic Industries Association 3479 Hohenberg, Bernard L., chairman, textile and apparel group, American Importers Association 2415 Holmes, William P., Athletic Goods Manufacturers Association 3071 Home, Dr. M. K., Jr., chief economist, National Cotton Council of America 2562 Horton, Hon. Frank, a Representative in Congress from the State of New York 4835 House, Bill, president, American National Cattlemen's Association 3196 Hull Rear Adm. Harry executive director, International Center of New England 1572 Hunt, Frederick D., foreign trade consultant, Cast Iron Soil Pipe Institute_ 2234 Imported Hardwood Products Association, Myron Solter, counsel 4428 / Independent Oil & Gas Producers of California, Stark Fox, executive vice president 4212,4266 Independent Petroleum Association of America, Harold M. McClure, Jr., president 4212, 4266, 4293 PAGENO="0012" XII Independent Wire Drawers Association: Page Geller, Norman, director 2194, 2196 Muntwyler, F. C., president 2194 Intemann, Herman K., vice president, Union Carbide Corp 4322 International Apple Association, Fred W. Burrows, executive vice presi- dent 5007 International Basic Economic Corp., Robert Purcell, finance committee chairman 1343, 1350 International Brotherhood of Operative Potters, George Barbaree, interna- tional secretary-treasurer, and Robert Lord, vice president 3756, 3801 International Center of New England: Ashton, Prof. DavidJ., director 1572, 1573 Chesterton, A. Devereaux, director 1572, 1576 Hull, Rear Adm. Harm-, executive director 1572 International Engineering & Construction Industries Council, Charles E. Golson 805 International Importers, Inc., H. William Tanaka, attorney in behalf of Paul H. Davidson, president 3634 International Leather Goods, Plastics & Novelty Workers Union, AFL- CIO, Norman Zukowsky, international president 4130 International Longshoremen's & Warehousemen's Union, Albert Lannon, Jr., Washington representative 864 International Trade Development Board: Parker, Joseph 0., chairman 960 Pringle, Vie 960 Investors League, Inc., Robert A. Gilbert, vice president 1031 Italy-American Chamber of Commerce: Bonomo, Ralph 1619, 1622 Dc Santis, Arthur A., executive secretary 1619 Jackson, Robert C., executive vice president, American Textile Manu- facturers Institute 2360 Javits, Hon. Jacob K., a U.S. Senator from the State of New York 3986 Johnson, Lindsay, F., Lead-Zinc Producers Committee 2279 Johnson, Reuben L., director, legislative services, National Farmers Union_ 786 Jones, J. Paul, Pennsylvania Grade Crude Oil Association, Bradford district, Pennsylvania Oil Producers Association, and New York State Oil Producers Association 4212, 4251 Kansas Independent Oil & Gas Association, Clinton Engstrand, president and chairman, and vice chairman, liaison committee, Cooperating Oil & Gas Association 4212, 4238 Kaplan, Richard, counsel, Division of Imports, Rubber Manufacturers As- sociation 4190 Kastenmeier, Hon. Robert W., a Representative in Congress from the State of Wisconsin 4001 Keith, Hon. Hastings, a Representative in Congress from the State of Massachusetts 3385 Kentucky, Commonwealth of, Hon. Louie B. Nunn, Governor, statement read into the record by Hon. M. Gene Snyder, a Representative in Congress from the State of Kentucky 4930 Kern, George, Meat Trade Institute of New York, and Eastern Meat Packers Association, Inc 3287 Kindleberger, Charles P., professor of economics, Massachusetts Institute of Technology 1652 Kintner, Earl W., British-American Chamber of Commerce of New York_ - 1579 Kittler, J. Patrick, chairman, world trade committee, Greater ~`Iinneapolis Chamber of Commerce 1290 Kieppe, Hon. Thomas S., a Representative in Congress from the State of North Dakota 3195, 4009 Kohnstamm, H., & Co., Inc., Yale Meltzer, manager, commercial develop- ment and market research, patents, and trademarks 4628 Korzenik, Sidney S., executive director and counsel, National Knitted Outerwear Association 2577 Kyros, Hon. Peter N., a Representative ~in Congress from the State of Maine 3995 Laird, Hon. Melvin R., a Representative in Congress from the State of Wisconsin 886 Lakeway Chemicals, Inc., Normand Phaneuf, president 4642 PAGENO="0013" XIII Page Langdon, Jim C., chairman, Railroad Commission of Texas 4285 Langen, Hon. Odin, a Representative in Congress from the State of Min- nesota 4943 Lannon, Albert, Jr., Washington representative, International Longshore- men's & Warehousemen's Union 864 Latta, Hon. Delbert L., a Representative in Congress from the State of Ohio 3999 Lead-Zinc Producers Committee, Lindsay F. Johnson 2279 League of Women Voters of the United States, Mrs. David G. Bradley, foreign policy chairman 982 LeBlond, R. K., Machine Tool Co., Daniel W. LeBlond, president_~. 2845, 2969 Levine, Gerald B., director and member, U.S. trade policy committee, California Council f~r International Trade 1280 Liberty Lobby, W. B., Hicks, Jr., executive secretary 1256 Lipkowitz, Edward, chairman, imported footwear group, American Im- porters Association - 4155, 4174 Lloyd, Hon. Sherman P., a Representative in Congress from the State of Utah 902 Lobred, Leonard K., director, International Trade Division, National Canners Association 1009 Lodwick, Seeley G., vice president, American Soybean Association 950 Long, Hon. Clarence D., a Representative in Congress from the State of Maryland 4927 Long, Hon. Speedy 0., a Representative in Congress from the State of Louisiana - 3189 Lord, Robert, vice president, and George Barbaree, international secretary- treasurer, International Brotherhood of Operative Potters 3756, 3801 Lovre, Harold 0., in behalf of domestic mink ranchers 4012 Lowe, Bertram, chairman, customs committee, American Watch Associa- tion 3705 Lundquist, James H., counsel, Meat Importers' Council, Inc 3212 Lynn, John C., legislative director, American Farm Bureau Federation___ 1215 McCauley, Alfred R., special counsel, Division on International Trade Matters, Electronic Industries Association 3479 McClure, Harold M., Jr., president, Independent Petroleum Association of America 4212, 4266, 4293 McClure, Hon. James A., a Representative in Congress from the State of Idaho 1339 McDonnell Douglas Corp., Donald W. Douglas, Jr., vice president 2783 McEwen, Hon. Robert C., a Representative in Congress from the State of New York 3991 McVay, M.D., chairman, Government Relations Committee, National Soybean Processors Association 1234 Mack, James K., counsel, National Confectioners Association of the United States 3470 Magdanz, Don F., executive secretary, National Livestock Feeders Association 3266 Mahon Hon. George H. a Representative in Congress from the State of Texas 4279 Manmade Fiber Producers Association, E. Fontaine Broun, president~~ 2464 Manufacturing Chemists Association, Carl Gerstacker, chairman of the board 4483, 4484 Mara, John E., president, Boot & Shoemakers Union, and George 0. Fceteau, general president, United~ Shoeworkers of America, AFL-CIO - 4102 Marsh, Edwin E., executive secretary, National Wool Growers Association 3288 Marsh Hon. John 0. Jr. a Representative in Congress from the State of Virginia 881, 959 Marshall, James J., president, American Aniline Products, Inc., and in behalf of ad hoc committee of U.S. Dyestuff Producers 4724 Martin Hon. Dave a Representative in Congress from the State of Nebraska 3180, 4834 Masaoka Mike M., Washington representative, Association on Japanese Textile Imports Inc 2490 Massachusetts Committee for the Preservation of the Groundfish In- dustry, Howard W. Nickerson, chairman-coordinator 3420 PAGENO="0014" xIv Matsunaga, Hon. Spark M., a Representative in Congress from the State Page of Hawaii 2352, 3183, 4290 May, Otto B., Inc., Ernest M. May 4016 Meat Importers' Council, Inc., James H. Lundquist, counsel 3212 Meat Trade Institute of New York, and Eastern Meat Packers Associa- tion, Inc., George Kern 3287 Meltzer, Yale, manager, commercial development and market research, patents and trademarks, H. Kohnstamm & Co., Inc 4628 Meyer, A., Jr., president, Tanners' Council of America, Inc 4064, 4079 Miller, Henry E., National Retail Merchants Association 802 Minshall, Hon. William E., a Representative in Congress from the State of Ohio 1834 Minster Canning Co., Luke F. Beckman, president 5036 Mitchell, John M., Aluminum Association 3345 Monagan, Hon. John S., a Representative in Congress from the State of Connecticut 891 Monsanto Co., John Gillis, vice president, and member board of director&. - 4618 Montgomery, Hon. G. V. (Sonny), a Representative in Congress from the State of Mississippi 4844 Moody, Joseph E., president, National Coal Policy Conference, Inc 4810 Morris, Hon. Thomas G., a Representative in Congress from the State of New Mexico 899 Moss, Hon. Frank E., a Representative in Congress from the State of Utah 4000 Mundt, John C., vice chairman, Cement Industry Antidumping Com- mittee 1369 Muntwyler, F. C., president, Independent Wire Drawers Association - - - 2194 Muskie, Hon. Edmund S., a U.S. Senator from the State of Maine 3868 Nash, Frederick C., world affairs committee, Greater Detroit Board of Commerce 1260 Nation-Wide Committee on Import-Export Policy, 0. R. Strackbein, chairman 905 National Association of Wool Manufacturers, Morton H. Darman, chair- man of the board 2376 National Board of Fur Farm Organizations, David W. Henderson,. execu- tive secretary 4012,4019 National Canners Association, Leonard K. Lobred, director, international trade division 10Q~ National Coal Policy Conference, Inc., Joseph E. Moody, president 4810 National Committee on International Trade Documentation, Charles H. Beard, chairman of the board 1015 National Confectioners Association of the United States: Mack, James K., counsel 3470 Sifers, Burr, chairman, board of directors 3470 National Cotton Council of America: Davis, Roy B., president 2562 Home, Dr. M. K., Jr., chief economist 2562 Sayre, Dr. Charles R 2562 National Customs Brokers & Forwarders Association of America, Inc., John G. Eberlein, chairman, Drawback Committee 1021 National Electrical Manufacturers Association, Claude E. Hobbs, chair- man, Foreign Trade Committee 3507 National Farmers Union, Reuben L. Johnson, director, legislative services 786 National Fish Meal & Oil Association, J. Steele Culbertson, director 3429 National Footwear Manufacturers Association: Goldstein, Alan, chairman, National Affairs Committee 4064 Shannon, Thomas F., counsel 4064 National Foreign Trade Council, Inc., Robert M. Norris, president 1495 National Grange: Graham, Harry L., legislative representative 756 Newsom, Herschel D., master 756 National Knitted Outerwear Association, Sidney S. Korzenik, executive director and counsel 2577 National Livestock Feeders Association, Don F. Magdanz, executive secretary 3266 National Machine Tool Builders Association, Philip 0. Geier, Jr 2845 National Milk Producers Federation, Otie M. Reed 4845 PAGENO="0015" xv Page National Retail Merchants Association, Henry E. Miller 802 National Shoeboard Conference, Inc., Robert P. Fuller, chairman, Gov- ernment Affairs Committee 4124 National Soybean Processors Association, M. D. McVay, chairman, Gov- ernment Relations Committee 1234 National Wool Growers Association: Darman, Morton H 2376 Marsh, Edwin E., executive secretary 3288 Nelsen, Hon. Ancher, a Representative in Congress from the State of Minnesota 4003, 4823 Netherlands Chamber of Commerce in the United States Inc., Henry J. Clay 1589 Neu, Hugo, chairman, Scrap Industry Trade Policy Council 2202 New England Fuel Institute, Robert DeBlois 4302 New York Chamber of Commerce, H. W. Balgooyen 1271 New York State Oil Producers Association, Bradford district, Pennsyl- vania Oil Producers Association, and Pennsylvania Grade Crude Oil Association, J. Paul Jones 4212, 4251 Newsom, Herschel D., master, National Grange 756 Nickerson, Howard W., chairman-coordinator, Massachusetts Committee for the Preservation of the Groundfish Industry 3420 Norris, Robert M., president, National Foreign Trade Council, Inc 1495 Northern Textile Association, Fulton Rindge, Jr., chairman 2379 Northwest Canners & Freezers Association, Oregon Strawberry Council, and California Strawberry Advisory Board, Robert E. Ward 3743 Northwest Independent Steel Mills, Robert L. Phelps, in behalf of 2118 Nowinski, Jerry, chairman, Cleveland Greenhouse Growers Cooperative Association 5027 Nunn, Hon. Louie B., Governor of the Commonwealth of Kentucky, state- ment read into the record by Hon. M. Gene Snyder, a Representative in CongressfromtheStateofKentucky 4930 O'Brien, Gerald, executive vice president, American Importers Association_ 829 O'Hara, Clifford, director, port commerce, Port of New York Authority_ 873 Orban, Kurt, president, American Institute for Imported Steel, Inc 2088 Oregon Strawberry Council, Northwest Canners & Freezers Association, and California Strawberry Advisory Board, Robert E. Ward 3743 Owen, Stephen F., Jr., counsel, American Producers of Italian-Type Cheeses Association, and Stella cheese division, Universal Foods Corp- 4866 Paidar, Emil J., Co., John Diouhy, executive vice president 3136 Paimby, Clarence, executive vice president, U.S. Feed Grains Council____ 795 Palmer, John D., president, Tobacco Associates, Inc 1425 Panhandle Producers & Royalty Owners Association, Don Watson, president 4212, 4248 Parker, Joseph 0., chairman, International Trade Development Board~ 960 Patterson, G. K., California Olive Growers & Canners Industry Committee- 4991 Patton, ThOmas F., American Iron & Steel Institute 1845 Pelly, Hon. Thomas M., a Representative in Congress from the State of Washington 3381 Pennsylvania Grade Crude Oil Association, Bradford district, Pennsylva- nia Oil Producers Association, and New York State Oil Producers Association, J. Paul Jones 4212, 4251 Pennsylvania Oil Producers AssociatiOn, Bradford district, Pennsylvania Grade Crude Oil Association, and New York State Oil Producers Association J. Paul Jones 4212, 4251 Pepper, Hon. Claude, a Representative in Congress from the State of Florida 4822 Perry, J. Wiley, Jr., chairman, import study committee, Cast Iron Soil Pipe Institute 2234 Perry Products Co., Lawrence D. Epstein, vice president 2243 Peters John S., manager, membership and industry relations division, Florida Fruit &Vegetable Association 4951, 4966 Petersen, Howard C., vice chairman, international economic studies, research and policy committee, Committee for Economic Development 1225 Pettis, Hon. Jerry L., a Representative in Congress from the State of California 1840 PAGENO="0016" XVI Page Pfister Chemical, Inc., Charles W. French, vice president 4648 Phaneuf, Normand, president, Lakeway Chemicals, Inc 4642 Phelps, Robert L., in behalf of Northwest Independent Steel Mills 2118 Philbin, Hon. Philip J., a Representative in Congress from the State of Massachusetts 2349 Phillips, Lawrence S., American Apparel Manufacturers Association 2538 Pin, Clip & Fastener Association, Myron Solter, safety pin and straight pin division 2774 Pogeler, Glenn H., president, Soybean Council of America, Inc 1411 Polanco-Abreu, Hon. Santiago, Resident Commissioner, Puerto Rico 4941 Port of New York Authority, Clifford O'Hara, director, port commerce - - 873 Price, Hon. Bob, a Representative in Congress from the State of Texas - - 4202 Pringle, Vie, International Trade Development Board 960 Purcell, Hon. Graham, a Representative in Congress from the State of Texas 4201 Purcell, Robert, finance committee chairman, International Basic Eco- nomic Corp 1343, 1350 Puerto Rico, Hon. Santiago Polanco-Abreu, Resident Commissioner 4941 Puerto Rico Economic Development Administration, Sergio Camero, administrator 4348 Quie, Hon. Albert H., a Representative in Congress from the State of Minnesota 4822 Quillen, Hon. James H., a Representative in Congress from the State of Tennessee 1336 Quimby, John, past director, West Coast Metal Importers Association - - 2228 Railroad Commission of Texas, Jim C. Langdon, chairman 4285 Randolph, Chet, executive vice president, American Soybean Association_ 950 Rauth, Louis F., Flavor Pict Cooperative 5023 Raytheon Co., Charles F. Adams, chairman of the board 3640 Reed, Otie M., National Milk Producers Federation 4845 Reifel, Hon. Ben, a Representative in Congress from the State of South Dakota 4005 Reiser, Ralph, international president, United Glass & Ceramic Workers of North America 3756, 3767 Rhode Island Textile Association, Fulton Rindge, Jr 2379 Rhodes, Hon. John J., a Representative in Congress from the State of Arizona 4821 Richman, Gilbert C., button division, Society of the Plastics Industry, Inc 3131 Rindge, Fulton, Jr., chairman, Northern Textile Association, and in ~-`behalf of Rhode Island Textile Association 2379 Rivers, Hon. L. Mendel, a Representative in Congress from the State of South Carolina 4922 Robinson, Dana I., Sudbury, Mass 1297 Robison, Hon. Howard W., a Representative in Congress from the State of New York 4820 Rocky Mountain Oil & Gas Association, Robert Burch 4346 Rodino, Hon. Peter W., a Representative in Congress from the State of New Jersey 4669 Rogers, Hon. Paul G., a Representative in Congress from the State of Florida 4951 Rolled Zinc Manufacturers Association, William L. Donehower, Jr 2306 Rubber Manufacturers Association: Campbell, William C., secretary, industrial rubber products division 4190 Cooper, Mitchell J., footwear division 4148 Kaplan, Richard, counsel, division on imports 4190 Ruppe, Hon. Philip E., a Representative in Congress from the State of Michigan 1842, 4009 Rutledge, Robert WT., executive vice president, Florida Citrus MutuaL. - - 4981 St. Germain, Hon. Fernand J., a Representative in Congress from the State of Rhode Island 1087 St. Onge, Hon. William L., a Representative in Congress from the State of Connecticut 2353, 4842 Sadler, John H., i\1.D., director, Atlanta Artificial Kidney Center~~ 1324, 1333 Santa Maria Chili, Inc., Cal-Compack Foods, Gentry Corp., and Uni- - versal Foods Corp., W. Ed Crane, in behalf of ~001 PAGENO="0017" XVII Page Savona, Vincent, and Edward H. Selonick, American Retail Federation - 1404, 1409 Saylor, Hon. John P., a Representative in Congress from the State of Pennsylvania 883 Sayre, Dr. Charles R., National Cotton Council of America 2562 Scandinavian Fur Agency, Inc., James R. Sharp, counsel 4050 Schadeberg, Hon. Henry C., a Representative in Congress from~ the State of Wisconsin 1485 Scherle, Hon. William J., a Representative in Congress from the State of Iowa 1492 Schwenger, Robert B., Kensington, Mdi. 1678 Scrap ludustry Trade Policy Council, Hugo Neu, chairman 2202 Searls, David T., counsel, Ad Hoc Committee of Galvanized Electrical Transmission Tower Fabricators 2211 Selonick, Edward H., and Vincent Savona, American Retail Federation~ 1404 Shallow, Bernard J., chairman, Anti-Friction Bearing Manufacturers Association 2974 Shannon, Thomas F., counsel, National Footwear Manufacturers Associa- tion, and Tanners Council of America, Inc 4064 Sharp, James R., counsel: Hardboard Manufacturers 4447 Scandinavian Fur Agency, Inc 4050 Shell, Joseph C., executive director, California Independent Producers & Royalty Owners Association 4212, 4270 Shriver, Hon. Garner E., a Representative in Congress from the State of Kansas 4210 Sifers, Burr, chairman, board of directoi~s, National Confectioners Associa- tion of the United States 3470 Slide Fastener Association, and Clothespin & Veneer Products Association, Richard A. Tilden 2752 Smith, David, American Association of Woolen Importers, Inc 2553 Smith, Hon. James V., a Representative in Congress from the State of Oklahoma 1313 Snyder, Hon. M. Gene, a Representative in Congress from the State of Kentucky 4843, 4930 Society of the Plastics Industry, Inc.: Christopher, William F., chairman, tariff committee 3098 Riehman, Gilbert C., button division 3131 Solter, Myron, counsel: Imported Hardwood Products Association 4428 Pin, Clip & Fastener Association, safety pin and straight pin division~~ 2774 Soybean Council of America, Inc., Glenn H. Pogeler, president 1411 Stainless Steel Flatware Manufacturing Association, Stuart C. Hemingway, Jr 3091 Steed, Netum A., president, Texas Independent Producers & Royalty Owners Association 4212,4253 Steed, Hon. Tom, a Representative in Congress from the State of Oklahoma 3176 Steele, Hoyt P., chairman, commercial policy committee, U.S. Council of the International Chamber of Commerce 1002 Steiger, Hon. William A., a Representative in Congress from the State of Wisconsin 1486 Stewart, Eugene L., counsel: American Loudspeaker Manufacturers Association 3518 American Aniline Products, Inc_ 4724 Electronic Industries AssociatiOn, parts and distributor products divisions 3518 Trade Relations Council of the United States, Inc 1109 U.S. Producers of Flat Glass 1504 Stitt, Nelson A., director, United States-Japan Trade Council 2126 Stobaugh Robert B. Jr. organic chemicals group, American Importers Association 4673, 4675 Stone, Glass, and Clay Coordinating Committee, Howard P. Chester, executive secretary 3756 Strackbein, 0. R., chairman, Nation-Wide Committee on Import-Export Policy 905 95-i59 O-68-pt.5-2 PAGENO="0018" XVIII Stratton, Hon. Samuel S., a Representative in Congress from the State of Page New York 2405, 4004, 4825 Synthetic Organic Chemical Manufacturers Association: Barnard, Robert C., counsel 4483, 4512 Davies, Richard, counsultant 4483, 4590 Turchan, Thomas P., president 4483, 4504 Talcott, Hon. Burt L., a Representative in Congress from the State of California 3181 Tanaka, H. William, attorney, in behalf of Paul H. Davidson, president, International Importers, Inc 3634 Tanners' Council of America, Inc.: Glass, Irving R., executive vice president 4064, 4082 Meyer, A., Jr., president 4064, 4079 Shannon, Thomas F., counsel 4064 Taylor, Hon. Roy A., a Representative in Congress from the State of North Carolina 2350, 4826 Teague, Hon. Olin E., a Representative in Congress from the State of Texas 3174 Tennant, C., Sons & Co., Aubrey Fletcher, executive vice president 2311 Texas Independent Producers & Royalty Owners Association, Netum A. Steed, president 4212, 4253 Thomas, Victor, general vice president, United Cement, Lime & Gypsum Workers 3756, 3786 Thomson, Hon. Vernon, a Representative in Congress from the State of Wisconsin 4947 Thorn, Prof. Richard S., Department of Economics, University of Pitts- burgh 1691 Thorpe, A. E., vice president and secretary-treasurer, U.S. National Fruit Export Council 853 Tilden, Richard A., Clothespin & Veneer Products Association, and Slide Fastener Association 2752 Timex, the U.S. Time Corp., Edward T. Carmody, vice chairman and director 3720 Tobacco Associates, Inc., John D. Palmer, president 1425 Torrence, Dr. Lois, American Association of University Women 869 Tower, Hon. John G., a U.S. Senator from the State of Texas 4264 Trade Relations Council of the United States, Inc.: Ashley, James M., chairman of the board 1109 Stewart, Eugene L., counsel 1109 Tranoco, Inc., Charles F. Travis, president 4455 Travis, Charles F., president, Tranoco, Inc 4455 Trigg, Eric A., president, Alcan Aluminum Corp 3370 Turchan, Thomas P., president, Synthetic Organic Chemical Manufacturers Association 4483, 4504 Uecker, William F., Window Shade Manufacturers Association 3857 Umbrella Frame Association of America, Leonard E. Finkel, president - - 3140 Union Carbide Corp., Herman K. Intemann, vice president 4322 Universal Foods Corp., Cal-Compack Foods, Gentry Corp., and Santa Maria Chili, Inc., W. Ed Crane, in behalf of_ 5001 Universal Foods Corp., Stella cheese division, and American producers of Italian-Type Cheeses Association, Stephen F. Owen, Jr., counsel 4866 United Cement, Lime & Gypsum Workers, Victor Thomas, general vice president 3756, 3786 United Glass & Ceramic Workers of North America, Ralph Reiser, international president 3756, 3767 United Shoeworkers of America, AFL-CIO, George 0. Fecteau, general president, and John E. Mara, president, Boots & Shoemakers Union. - 4102 United States-Japan Trade Council, Nelson A. Stitt, director 2126 United States Potters Association, David A. Golden, customs and tariff counsel 3803 United Steelworkers of America, I. WT. Able, president 1845, 1895 United Stone & Allied Products Workers of America, Hollan Cornett, executive board member 3756, 3792 U.S. Council of the International Chamber of Commerce, Hoyt P. Steele, chairman, commercial policy committee 1002 U.S. Dyestuff Producers, ad hoc committee of, James J. Marshall, in behalf of, and president, American Aniline Products, Inc 4724 PAGENO="0019" XIX Page U.S. Feed Grains Council, Clarence Paimby, executive vice president - - - 795 U.S. National Fruit Export Council, A. E. Thorpe, vice president and secretary-treasurer 853 U.S. Producers of Flat Glass, Eugene L. Stewart, counsel 1504 U.S. Time Corp., Timex, Edward T. Carmody, vice chairman and director 3720 Walker, Hon. E. S. Johnny, a Representative in Congress from the State of New Mexico 1337 Ward, Robert E., Northwest Canners & Freezers Association, Oregon Strawberry Council, and California Strawberry Advisory Board 3743 Warner & Swasey Co., George W. Herkner, executive vice president 2845, 2971 Warrell, C. J., domestic bicycle tire and tube industry 3450 Watkins, Hon. G. Robert, a Representative in Congress from the State of Pennsylvania 1829 Watson, Arthur K., chairman, Emergency Committee for American Trade 1343 Watson, Don, president, Panhandle Producers & Royalty Owners Asso- ciation 4212, 4248 Wedell, Gustav, chairman, business praôtices committee, Danish-American Trade Council, Inc 1626 West Coast Metal Importers Association, John Quimby, past director - - 2228 Westwood, Richard, president, EMBA Mink Breeders Association. - - - 4012 Whalley, Hon. J. Irving, a Representative in Congress from the State of Pennsylvania 4827 White, Hon. Richard C., a Representative in Congress from the State of Texas 2749, 4211 Whitener, Hon. Basil L., a Representative in Congress from the State of North Carolina 1499 Willis, Hon. Edwin E., a Representative in Congress from the State of Louisiana 4206 Willson, R. B., Co., Inc., Robert B. Willson, president 3462 Wilson, T. A., president, Boeing Aircraft 1343, 1347 Wilton & Velvet Carpet and Rug Importers, Robert E. Herzstein, counseL 2599 Window Shade Manufacturers Association, William F. Uecker 3857 W olfson, J. Theodore, president, Business Builders International, Inc_ - - - 857 W yatt, Hon. Wendell, a Representative in Congress from the State of Oregon 1089 Wyman, Hon. Louis C., a Representative in Congress from the State of New Hampshire 2355 Zukowsky, Norman, international presicient, International Leather Goods, Plastics & Novelty Workers Union, AFL-CIO 4130 Zablocki, Hon. Clement J., a Representative in Congress from the State of Wisconsin 1335 MATERIAL SUBMITTED FOR THE RECORD GOVERNMENT OFFICIALS Clubb, Bruce E., Commissioner, Tariff Commission, statement before the Senate Finance Committee hearings on the International Antidumping Code, June 27, 1968 1942 Freeman, Hon. Orville L.; Secretary of Agriculture, Department of Agricul- ture inspection /of meat exports from foreign countries to the United States 696 Furness, Miss Betty, Special Assistant to the President for Consumer Affairs, letter dated June 10, 1968, to Chairman Mills 64 Roth, Ambassador William M., Special Representative for Trade Negotia- tions: Absolute increase in imports of principal commodities 1960-67 107 Agricultural concessions received by United States in Kennedy round 710 Comparison of watch prices 699 Dye exports financed by AID 574 Establishment of STR and TIC 560 European tax systems (including exhibits A through E) 53 Experience to date with the 1968 investments under the mandatory investments restraint program and relationship of this program to exports 386 International Grains Arrangement, 1967 394 PAGENO="0020" xx Roth, Ambassador Wffliam M.-Continued Justification for adjustment assistance program related to increased Page imports 559 Nonrubber footwear 701 Outline of trade policy study and supporting computer program 442 Preliminary inventories of nontariff barriers 122 Preliminary inventory of nontariff barriers affecting U.S. trade in agricultural products 123 Preliminary inventory of nontariff barriers affecting U.S. trade in industrial products 220 Inventory of alleged U.S. nontariff barriers 308 Nontariff barriers, by William B. Kelly, Jr 313 Production of ASP chemicals by one, two, or three firms 599 Progress in the elimination of foreign nontariff barriers 609 Recent changes in the use of nontariff barriers by other countries_ - - - 721 Retaliatory action by United States 645 Selected industries with tariff reduction greater than the overall aver- age reduction of 35 percent 580 Selectivity of the German added value tax 115 STR consideration of the representations of interested groups 566 Table 1-Chemicals and allied products 521 Table 2-Benezenoid chemicals 522 Table 3-Intermediates 523 Table 4-Dyes and azoics 524 Table 5-Pigments 525 Table 6-Medicinals 526 Table 7-Other benzenoid products 527 Table 8-Comparison of U.S. and EEC tariff rates for large-volume benzenoid intermediates 528 Table 9-U.S. chemical exports, imports, and trade balance by prin- cipal destination and source, 1961-67 529 Table 10-Benzenoid chemical rates of duty, ad valorem equivalents, and 1964 imports 531 Table 11-Chemicals and allied products; new capital expenditures by selected industries and industry groups, 1958-67 547 Table 12-Annual plant and equipment expenditures abroad by U.S. manufacturing companies: all manufacturing and chemicals and allied products 547 Table 13-Estimates of plant and equipment expenditures by foreign affiliates of U.S. companies, by area and industry, 1965-68 547 Table 14-Chemicals and allied products: sales by American-owned enterprises abroad and exports from the United States 548 Table 15-Research and development expenditures, by industry, 1958-66 548 Table 16-Selected employment data for chemicals and allied prod- ucts, industry, intermediate coal tar products industry, and all manu- facturing industries, 1958-68 549 Table 17-Selected economic indicators for the intermediate coal-tar products industry, 1958-66 550 Table 18-Index of industrial production (1957-59 equals 100) 550 Table 19-Selected economic data: comparisons of chemicals and allied products industry with all manufacturing industries, 1958-67 551 U.S. exports, excluding military grant aid, in current and constant dollars, 1960-67 587 U.S. exports financed under the Public Law 480 and AID programs, 1960-67 U.S. imports and exports by major industries 100 Rusk, Hon. Dean, Secretary of State: Analysis of U.S. exports to Europe, 1957-1967 725 Allied efforts in Europe 674 Letter dated June 13, 1968, from H. G. Torbert, Jr., Acting Assistant Secretary for Congressional Relations, to Chairman Mills re plac- ing before the Federal Maritime Commission the views of the United Kingdom Government 689 PAGENO="0021" XXI Smith, Hon. Cyrus R., Secretary, Department of Commerce: Page Annual value of U.S. exports, imports, and merchandise balance 83 Commerce export promotion activities-relation to private efforts and measurement of results 380 Major commodity increases in U.S. domestic exports from 1960 to 1967 98 Major commodity increases in U.S. imports from 1960 to 1967 97 Selected data on foreign transactions of the United States in the first quarter of 1968 available as of the middle of May 1968 88 Trends in U.S. foreign trade, 1960-67 and January-April 1968 95 U.S. balance of payments in the first quarter 1968 84 U.S. trade by end-use categories, 1960-67 93 Wirtr, Hon. W. Willard, Secretary, Department of Labor: Automotive Products Trade Act of 1965 (APTA) 554 International Labour Organisation (ILO) and working conditions~~ 377 PUBLIC A. & A. Trading Co., et al., H. William Tanaka, counsel, in behalf of certain importers of electronic products, statement 3654 Adams, Charles F., chairman of the board, Raytheon Co., telegram dated July 12, 1968, to Chairman Mills 3634 Addonizio, Mayor Hugh J., Newark, N.J., statement 1473 Ad Hoc Committee of Galvanized Electrical Transmission Tower Fabri- cators: Letter dated May 31, 1967, from David T. Searls, counsel, Charles B. Gannaway, Jr., chairman, re imposition of countervailing duties on imports of Italian galvanized electrical transmission towers 2220 Letter dated July 11, 1968, from David T. Searls, counsel, to Chairman Mills, re strengthening of countervailing duty statute 2226 Judicial interpretation as to what is a bounty under countervailing duty law 2216 Adler, Kurt S., Inc., Kurt S. Adler, president, letter dated May 29, 1968, to Chairman Mills 3170 AFL-CIO, Nathaniel Goldfinger, director, department of research, addi- tional views on ad~ustment assistance provisions of the Trade Expansion Act of 1968 1107 Aircraft Locknut Manufacturers Association, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 Air Transport Association of America, statement 4414 Akin, Paul B., president, Laclede Steel Co., statement 2255 Alabama Garment Manufacturers Association, James Utsey, president, letter dated June 18, 1968, to Chairman Mills, with resolution attached and with covering letter from Hon. Bill Nichols, a Representative in Congress from the State of Alabama 2626 Alabama, State of, Hon. Albert P. Brewer, Governor, telegram dated July 8, 1968, to Chairman Mills 4362 Alaska Fishermen's Union, George Johansen, secretary-treasurer, state- ment 3444 Allen, John R., vice president, eastern region, McDonnell Douglas Corp., letter dated July 16, 1968, to Chairman Mills 2798 Allerhand, Irving W., vice president, Consolidated International Trading Corp., statement 4186 Allied Chemical Corp., Chester M. Brown, chairman of the board, state- ment 4785 All-State Welding Alloys Co., Inc., Thomas D. Nast,. president, letter dated July 3 1968 to Chairman Mills 3374 Amalgamated Clothing Workers of America, AFL-CIO, Milton Fried, director of research, and International Ladies' Garment Workers' Union, AFL-CIO, Lazare Teper, director of research, letter dated June 14, 1968, to Chairman Mills 2641 Amalgamated Meat Cutters & Butcher Workmen of North America, AFL-CIO, Abe Feinglass, international vice president, director, fur and leather department, statement 4182 American Bankers Association, Charls E. Walker, executive vice president, letter dated June 17, 1968, to Chairman Mills 1809 PAGENO="0022" XXII American Hand-Made Glassware Industry, 3. Raymond Price, executive Page secretary of Glass Crafts of America, statement in behalf of 3819 American Hardboard Association, J. Mason Meyer, executive secretary, statement 4468 American Importers Association: O'Brien, Gerald, executive vice president, statement on U.S. foreign trade policy before Trade Information Committee of Office of President's Special Representative for Trade Negotiations, May 20, 1968 841 Floor covering group: Rostov, Charles I., statement 2603 Additional statement 2618 Textile and apparel group: Daniels, Michael P., counsel, report to the President on investigation No. 332-55 under section 332 of the Tariff Act of 1930 by U.S. Traiff Commission 2433 American Institute for Imported Steel, Inc.: Continuous casting; taking over 10 percent of semifinished steel pro- duction, article from 33/The Magazine of Metal Producing 2103 Deliveries of rolled steel products in countries of the European coal and steel community 2103 U.S. balance of trade-Steelmaking raw material, 1967 2102 American-International Charolais Association, J. Scott Henderson, execu- tive secretary, letter dated June 5, 1968, to Chairman Mills 3332 American Iron & Steel Institute, Thomas F. Patton: Discussions of steel imports with OEP-response to questions by Congressman Curtis 1917 Steel and the National Security, April 1968 1857 Steel import controls of other countries-response to question by Congressman Schneebeli 1910 "Uniqueness" of steel-response to question by Congressman Ullman 1908 American Koyo Corp., J. B. Gray, corporate services manager, letter dated July 9, 1968, to Chairman Mills 2268 American Loudspeaker Manufacturers Association, Eugene L. Stewart, counsel, letter dated July 3, 1968, to Hon. Jackson E. Betts, a Repre- sentative in Congress from the State of Ohio, re Far East comparative wages 3630 American Metal Importers Association, Inc., Aubrey L. Moss, president, letter dated July 1, 1968, to Committee on Ways and Means 3377 American Mining Congress, J. Allen Overton, Jr., executive vice president, letter dated May 29, 1968, to Chairman Mills, with attachments 1946 Declaration of Policy-1967-68 1947 Summary of issues discussed in AMC staff study 1948 Staff study and comparative analysis by the AMC of the International Antidumping Code 1949 American Mushroom Institute, Ronald B. Hunte, executive director, letter dated June 26, 1968, to Chairman Mills 5088 American National Cattlemen's Association, C. W. McMilan, executive vice president, letter dated July 9, 1968, to Chairman Mills, re explana- tion of the proposed amendments to the Meat Import Act of 1964 3211 American Newspaper Publishers Association, Stanford Smith, general manager, statement 4465 American Paper Institute, Inc., Edwin A. Locke, Jr., president, statement~ 4460 American Pipe Fittings Association, T. William C. Smith, president, letter datedJune20, 1968, to Chairman Mills 2259 American Scotch Highland Breeders' Association, Margaret Manke, secretary, letter dated June 29, 1968, to Chairman Mills 3331 American Sprocket Chain Manufacturers Association, J. E. Cooper, presi- dent, R. E. Lambert, chairman, Committee on Government Relations, andL. E. Stybr, executive director, statement 3039 American Textile Manufacturers Institute, Frederick B. Dent, president, letter dated July 9, 1968, to Hon. Thomas B. Curtis, a Representative in Congress from the State of Missouri, re statement of position on H.R.. 17551 2388 Amperex Electronic Corp., Frank L. Randall, Jr., president, statement 3505 Anderson, M. Allen, president, Premier Santa Gertrudis Association, resolution, dated May 26, 1968, with covering letter from Hon. Roman L. Hruska, a U.S. Senator from the State of Nebraska 3333 PAGENO="0023" xxi" Angevine, Erma, executive director, Consumer Federation of America, Page letterdatedJulyl2, 1968, toChairmanMills 1739 Arizona Cattle Feeders' Association, D. C. Entz, chairman, board of directors, statement 3306 Arizona Cattle Growers' Association, statement 3306 Armco Steel Corp., C. William Verity, Jr., president, statement 2253 Ashland Oil & Refining Co.: Atkins, Orin E., president, letter dated July 5, 1968, to Chairman Mills 4397 Whealy, Roland A., vice president, statement 4393 Atkins, Orin E., president, Ashland Oil & Refining Co., letter dated July 5, 1968, to Chairman Mills 4397 Australian Meat Board, W. W. Stenning, North American representative, statement, with forwarding letter from the State Department 3301 Australian Mining Industry Council, statement, with forwarding letter from Department of State 2322 Australian Wool Tops Exporters, statement, with forwarding letter from Department Qf State 2734 Automobile Manufacturers Association, statement 1759 Baldanzi, George, international president, United Textile Workers of America, AFL-CIO, statement 2628 Barsy, Solbert J., Chicago, Ill., letter dated July 8, 1968, to Chairman Mills 2274 Bartel, Andrew, president, Great Lakes Mink Association, statement_ - - - 4017 Bass, V. J., vice president, J. E. Barnard & Co., Inc., letter dated June 27, 1968, to Chairman Mills 1806 Battenfeld Grease & Oil Corp. of New York, G. W. Miller, chairman of the board, statement, with forwarding letter from Hon. Henry P. Smith III, a Representative in Congress from the State of New York 4422 Battin, Hon. James F., a Representative in Congress from the State of Montana: Economic "abyss" seen by Martin; Reserve chief asks rise in taxes and spending cut, article from June 12, 1968, New York Times 989 U.S. trade surplus goal unattainable, official says, article from June 6, 1968, Wall Street Journal 988 Bauer, Richard J., president, Independent Zinc Alloyers Association, statement 2304 Baughman, Harry W., Jr., national president, Window Glass Cutters League of America, statement 3824 Beeghly, Charles M., Jones & Laughlin Steel Corp., telegram dated June 20, 1968, to Chairman Mills 1926 Bell, David H., president, Ohio Oil & Gas Association, letter dated May 27, 1968, to Committee on Ways and Means 4392 Belridge Oil Co., R. W. Trueblood, president, statement 4269 Bendix Corp., Michael Blumenthal, president, Bendix International, telegram dated July 12, 1968, to Chairman Mills 3632 Bendix International, W. Michael Blumenthal, president, industry repre- sentations during Kennedy round 1251 Bennett, William E., president, Kentuckiana World Commerce Council, Inc., letter dated June 25, 1968, to Chairman Mills, with resolution attached 1775 Bernard, J. E., & Co., Inc., V. J. Bass, vice president, letter dated June 27, 1968, to Chairman Mills 1806 Beskind, Claire, president, League of Women Voters of the Princeton Com- munity (N.J.), letter dated June 20, 1968, to Chairman Mills 997 Bethlehem Steel Corp., Edmund F. Martin, chairman, letter dated June 17, 1968, to Chairman Mills 1926 Black & Decker Manufacturing Co., Alonzo G. Decker, Jr., chairman of the board and president, letter dated June 20, 1968, to Chairman Mills 2268 Blake, Grant, president, Idaho Beekeepers Association, Inc., statement - - 3469 Blincoe, Richard D., president, Idaho Cattle Feeders Association, Inc., statement 3316 Blood, Mrs. Lawrence, president, League of Women Voters of Reading (Mass.), letter dated June 25, 1968, to Chairman Mills 994 Blumenthal, Harry & Sons, Inc., Harry Blumenthal, president, letter dated July 8, 1968, to Chairman Mills 3378 Blumenthal, W. Michael, president, Bendix International: Industry representations during Kennedy round 1251 Telegram dated July 12, 1968, to Chairman Mills 3632 PAGENO="0024" XXIV Page~ B'nai B'rith, Dr. William A. Wexier, president, statement 1028 Bommarito, Peter, president, United Rubber, Cork, Linoleum, & Plastic Workers of America, AFL-CIO, statement 4180 Bourbon Institute, Vice Adm. William J. Marshall, USN (retired), president 2799 Branch, C. B., executive vice president, Dow Chemical Co., statement_ - - - 4793 Brewer, Hon. Albert P., Governor of the State of Alabama, telegram dated July 8, 1968, to Chairman Mills 4362 Bright Wire Goods Manufacturers Service Bureau, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 Brook, John G., chairman, Lear Siegler, Inc., telegram dated July 12, 1968, to Chairman Mills 3633 Brown, Chester M., chairman of the board, Allied Chemical Corp., state- ment 4785 Brown, Hon. Clarence J., Jr., a Representative in Congress from the State of Ohio, statement 3300, 4887 Brown, L. G., president, Precision Drawn Steel Co., letter dated June 4, 1968, to Chairman Mills, with attachement 2273 Buckner, Emil H., secretary-treasurer, United States Extrusions Corp., letter dated June 27, 1968, to Chairman ~vIi11s 3377 Bucy, J. Fred, group vice president, Texas Instruments Inc., telegram dated July 11, 1968, to Chairman Mills 3634 Bullen, George S., legislative director, National Federation of Independent Business, statement 1730 Burke, Hon. James A., a Representative in Congress from the State of Massachusetts: Importation of footwear from foreign countries, material relatiug to 727 Strawberries, statistical tables and comments 3749 Burns, Hon. John A., Governor of the State of Hawaii, statement 2353 Business Builders International, Inc., J. Theodore Wolfson, president, article from Wall Street Journal entitled "Steel Firms' Profits Are Expected To Spurt as Outlays Begin To Pay Off, Analysts Say" 859 Byrne, George P., Jr., secretary and legal counsel: Service Tools Institute, statement 3046 U.S. Cap Screw Service Bureau, U.S. Wood Screw Bureau, U.S. Machine Screw Service Bureau, Tapping Screw Service Bureau, Socket Screw Products Bureau, Tubular and Split Rivet Council, Aircraft Locknut Manufacturers Association, and Bright Wire Goods Manufacturers Service Bureau, statement - 3027 Caggiano, G. Robert, director, Bureau of International Trade, Department of Commerce and Development, Commonwealth of Massachusetts, statement 1065 California-Arizona Citrus Industry, statement 5041 California Cattlemen's Association, Will Gill, Jr., president, statement_ - 3308 California Dried Fig Advisory Board, Ron Klamm, manager, and managing director, California Fig Institute, statement 3308 California Fig Institute, Ron Klamm, managing director, and manager, California Dried Fig Advisory Board, statement -- 3308 Campbell, Dr. Persia, National Consumers League, statement 870 Campbell, R. A., chairman, liaison committee, Cooperating Oil and Gas Association, statement 4238 Candle Manufacturers Association, H. R. Parker, secretary, letter dated June 25, 1968, to Chairman Mills-- 3170 Canned Meat Importers Association, Ronald Wright, president, statement_ 3338 Carlip, i\'Irs. Alfred B., chairman, foreign policy committee League of Women Voters of Broome County (N. Y.), letter dated June 28, 1968, to Chairman Mills 998 Carnation Co., Jule N. Kvamme, corporate department, statement 4792 Carson, Mrs. Robert M., president, League of Women Voters of Winter Park-Orlando, Fla., letter dated June 26, 1968, to Chairman Mills 992 Cast Iron Soil Pipe Institute, Frederick D. Hunt, foreign trade consultant, letter dated July 22, 1968, to Representative Curtis, re authority in negotiating International Antidumping Code 2241 PAGENO="0025" xxv Cement Industry Antidumping Committee, John C. Mundt, vice chair- man: Memorandum on the legal authority of the executive branch to Page negotiate the International Antidumping Code 1388 Supplementary statement 1384 Certified Livestock Markets Association, C. T. "Tad" Sanders, general manager, letter dated July 3, 1968, to~Chairman Mills 3332 Chamber of Commerce of the New Orleans area, Murray C. Fincher, president, letter to Chairman Mills, with statement attached 1785 Chernoff, Mrs. Max, president, League of Women Voters of Great Neck, N.Y., letter dated June 21, 1968, to Chairman Mills 998 Citizens State Bank & Trust Co., Wayne R. Starr, president, letter dated June 20, 1968, to Chairman Mills 1824 Citronbaum, Jack, executive vice president, Luggage & Leather Goods Manufacturers of America, Inc., statement 4131 Clay, Henry J., Netherlands Chamber of Commerce in the United States, Inc., letter dated June 25, to Hon. John W. Byrnes, re quantitative restrictions 1594 Clothing Manufacturers' Federation of Great Britain, and the Shirt, Collar & Tie Manufacturers' Federation, statement, with forwarding letter from the Department of State 2736 Committee of Producers of Ferroalloys and Related Products, Ronald L. Cunningham, letter dated July 12, 1968, from Lloyd Symington, counsel, to Chairman Mills, re questions addressed by Congressman Curtis - - - 2191 Conneaut, Ohio, city of, Arvo E. Sundberg, statement 2248 Conner, Commissioner Doyle, Florida Department of Agriculture, state- ment 5069 Conrad, A. B., secretary-manager, West Mexico Vegetable Distributors Association, statement, with forwarding letter from Hon. Morris K. Udall, a Representative in Congress from the State of Arizona 5088 Consolidated International Trading Corp., Irving W. Allerhand, vice president, statement 4186 Consumer Federation of America, Erma Angevine, executive director, let- ter dated July 12, 1968, to Chairman Mills 1739 Continental Oil Co., statement 4398 Continental Baking Co., George R. Vail, vice president and director, and president, Morton Frozen Foods Division, statement 3342 Cooper, J. B., president, R. B. Lambert, chairman, Committee on Govern- ment relations, and L. E. Stybr, executive director, American Sprocket Chain Manufacturers Association, statement 3039 Cooperating Oil & Gas Association, R. A. Campbell, chairman liaison committee, statement 4238 Coors Porcelain Co., Clinton M. Hester, attorney, statement 3827 Copper & Brass Fabricators Council, Inc. ,Y. E. Veitfort, managing director, letter dated June 19, 1968, to Chairman Mills, with statement attached - 2325 Cordage Institute, Merle S. Robie, chairman, executive committee, state- ment 2372 Corn Refiners Association, Inc., Robert C. Liebenow, president, statement_ 5093 Courtright, C. A., president, Washington Cattle Feeders Association, letter dated June 5, 1968, to Chairman Mills 3329 Coyne, Robert W., president, Distilled Spirits Institute, Inc., statement. - 2811 Crawford, G. R., executive vice president, Smithfield Packing Co., Inc., letter dated June 10, 1968, to John M. Martin, Jr., chief counsel, Com- mittee on Ways and Means 3343 Crompton & Knowles, Corp., James W. L. Monkman, vice president, statement 4798 Culbertson, W. 0., Jr., president, New Mexico Cattle Growers' Association, statement 3322 Cunningham, Ronald L., Committee of~Producers of Ferro-alloys & Related Products, letter dated July 12, 1968, from Lloyd Symington, counsel, to Chairman Mills, re questions addressed by Congressman Curtis 2191 Curl, William W., president, Texas Citrus Mutual, statement 5083 Curtis, Thomas B., a Representative in Congress from the State of Mis- souri: Memorandum to the American Iron & Steel Institute and their reply-Indirect imports and exports 1921 Memorandum to the Emergency Committee for American Trade and their reply-Problems of measuring steel export-import trade 1364 PAGENO="0026" XXVI Daniel, Mrs. T. Emory, president, League of Women Voters of De Kaib Page County (Ga.), letter dated July 8, 1968, to Chairman Mills 992 Daniels, Michael P., counsel: American Importers Association, textile and apparel group, report to the President on investigation No. 332-55 under section 332 of the Tariff Act of 1930 by U.S. Tariff Commission 2433 Japan Chemical Fibers Association, statement with forwarding letter from Department of State 2728 Japanese Chamber of Commerce, woolens division, statement 2743 Swiss Union of Commerce and Industry, statement, with covering letter from State Department 4771 Danish American Trade Council, Inc., Finish American Chamber of Com- merce, Inc., Norwegian-American Chamber of Commerce, Inc., and Swedish Chamber of Commerce of the United States, Inc., statement. - - 1775 Davis, Warren B. director, planning and economics, Gulf Oil Corp., state- ment 4401 Davis Wire Corp., James L. Walker, president, letter dated July 9, 1968, to Chairman Mills, with attachments 2269 Decker, Alonzo G., Jr., chairman of the board and president, Black & Decker Manufacturing Co., letter dated June 20, 1968, to Chairman Mills 2268 Del Signore, M., president, et al., Local Union No. 14256, District 50, United Mine Workers of America, letter dated July 5, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means. 4808 Demeter, Mrs. James, Koib-Lena Cheese Co., letter dated May 23, 1968, to Chairman Mills 4901 Dent, Frederick B., president, American Textile Manufacturers Institute, letter dated July 9, 1968, to Hon. Thomas B. Curtis, a Representative in Congress from the State of Missouri, re statement of position on H.R. 17551 2388 Dent, Hon. John, a Representative in Congress from the State of Pennsyl- vania, nontariff trade barrier inventory by country 3878 Derby, Roland E., Jr., president, Nyanza, Inc., letter dated June 17, 1968, to Chairman Mills 4802 Dc Santis, Arthur A., executive secretary, Italy-American Chamber of Commerce, letter dated June 20, 1968, to Chairman Mills, re oil exports to Italy 1625 Detmers, Mrs. Bruce, president, League of Women Voters of Hamden (Conn.), letter dated June 24, 1968, to Chairman Mills 991 Deuschle, B. C., president, Shears, Scissors, and Manicure Implement Manufacturers Association, statement 3063 Distilled Spirits Institute, Inc., Robert W. Coyne, president, statement - 2811 Diversified Wire & Steel Corp., David P. Piering, president, telegram, dated June 14, 1968, to Chairman Mills 2202 Docking, Hon. Robert B., Governor, State of Kansas, statement 4363 Doherty, Mrs. George, president, League of Women Voters of Anderson (md.), letter dated July 12, 1968, to Chairman Mills 993 Dole, Hon. Bob, a Representative in Congress from the State of Kansas, statement 4365, 4888 Domestic Litharge Industry, statement 2301 Dorn, Hon. William Jennings Bryan, a Representative in Congress from the State of South Carolina: Additional statement 2412 Joint statement of over 100 Members of the House presented by Mr. Dorn, secretary, Informal House Textile Committee Group 2414 Dow Chemical Co., C. B. Branch, executive vice president, statement~__ 4793 Dray, Margaret B., economist, Chicago, Ill., letter dated May 19, 1968, to Ways and Means Committee 2275 Dryer, Edwin Jason, counsel, Independent Refiners Association of America, statement 4~3Th Duncan, Hon. John J., a Representative in Congress from the State of Tennessee, letter dated June 13, 1968, to Chairman Mills 4890 Dunn, Stephen F., president, National Coal Association, statemeut 4423 Eberlein, John G., chairman, drawback committee, National Customs Brokers & Forwarders Association of America, Inc., pamphlet entitled "What Is Customs Drawback?" 1024 PAGENO="0027" XXVII Edelman, L., vice president, Gafco, me., letter dated July 15, 1968, to Page Chairman Mills 4062 Edgerton, William B., Friends Committee on National Legislation, statement 1807 Electronic Industries Association: Jaumot, F. E., Jr., chairman, semi-conductor division, letter dated July 10, 1968, to Chairman Mills 3507 McCauley, Alfred R., special counsel to consumer products division, letter dated June 27, 1968, to John M. Martin, Esq., chief counsel, Committee on Ways and Means, forwarding memorandum of the * Magnavox Co. on color television pricture tubes 3496 Moore, William H., staff vice president, Government products division, letter dated July 12, 1968, to Chairman Mills 3507 Stewart, Eugene L. counsel, letter dated July 3, 1968, to Hon. Jackson E. Betts, a Representative in Congress from the State of Ohio, re Far East comparative wages 3630 Ellis, Don A., treasurer, Tektronix, Inc., statement 3704 EBMA Mink Breeders Association: Westwood, Richard E., president, statement 4014 Wittig, Harley, past president, statement 4013 Emergency Committee for American Trade: A critique of the Trade Relations Council's analysis of certain 1958/ 60-1964 declines in employment 1352 Memorandum from Representative Thomas B. Curtis of Missouri, and reply thereto-Problems of measuring steel export-import trade 1364 Entz, D. C., chairman, board of directors, Arizona Cattle Feeders' Asso- ciation, statement 3306 Erie Technical Products, Inc., George P. Fryling, president, telegram dated July 11, 1968, to Chairman Mills 3633 Evans, Hon. Daniel J., Governor of the State of Washington, letter dated June 7, 1968, to Chairman Mills, with position paper attached 1719 Evaporated Milk Association, Fred J. Greiner, executive vice president, statement - 4897 Expanded Shale, Clay & Slate Institute, the Lightweight Aggregate Pro- ducers Association, and the National Slag Association, statement 3813 Farrell Lines, Inc., statement - 1791 Feighan, Hon. Michael A., a Representative in Congress from the State of Ohio, statement 2087 Feinglass, Abe, international vice president, director, Fur and Leather Department, Amalgamated Meat Cutters & Butcher Workmen of North America, AFL-CIO, statement - 4182 Fezell, George H., president, Magnavox Consumer Electronics Co., tele- gram dated July 10, 1968, to Chairman Mills - 3633 Fineher, Murray C., president, Chamber of Commerce of the New Orleans Area, letter to Chairman Mills, with statement attached 1785 Fine & Specialty Wire Manufacturers' Association, J. A. Mogle, chairman, foreign trade committee, statement 2275 Finish American Chamber of Commerce, Inc., Danish American Trade Council, Inc., Norwegian-American Chamber of Commerce, Inc., and Swedish Chamber of Commerce of the United States, Inc., statement - 1775 Finney, Wray, president, Oklahoma Cattlemen's Association, letter dated May 28, 1968, to Chairman Mills 3327 First National City Bank, Walter B. Wriston, president, letter dated July 12, 1968, to Chairman Mills, with attachment 1810 First Washington Net Factory, Inc., Carl Koring, president, letter dated May 22, 1968, to John Martin, Jr., chief counsel, Committee on Ways and Means 2727 Fifth Cleveland Steels, Inc., Peter H. Garfunkel, executive vice president, letter dated May 23, 1968, to Chairman Mills 2272 Fishman, Morris, & Sons, Clinton M. Hester, attorney, statement 2747 Fitch, T. S., president, Washington Steel Corp., letter dated June 28, 1968, to Chairman Mills 1928 Fletcher, Aubrey, executive vice president, C. Tennant, Sons & Co., letter dated June 21, 1968, to Chairman Mills, re statistics on lead and zinc~ 2318 Florida Department of Agriculture, Commissioner Doyle Conner, state- ment 5069 PAGENO="0028" xxvm Florida Fruit and Vegetable Association, J. S. Peters, manager, member- ship and industry relations, letter dated July 29, 1968, to Congressman Page Thomas B. Curtis, re domestic market for fruits and vegetables 4978 Ford, Hon. Gerald R., a Representative in Congress from the State of Michigan, letter dated May 27, 1968, to Chairman Mills, with petition re mink industry attached 4061 Foerch, Mrs. Margaret, president, League of Women Voters of Michigan, letter dated June 28, 1968, to Chairman Mills 996 Forsythe, Russell, president, and James H. Warner, secretary, Ohio Cattle Feeders Association, letter dated June 17, 1968, to Chairman Mills, with attachment 3326 Forward America, Inc., Ed Wimmer, president, radio talk 1733 Foskett, John D., president, Homeshield Industries, letter dated July 3, 1968, to Chairman Mills 3369 Franko, Joseph J., treasurer, B. L. Lemke & Co., Inc., statement 4626 French Chamber of Commerce in the United States, Inc., Raymond J. Picard, president, statement 1773 Fried, Milton, director of research, Amalgamated Clothing Workers of America, AFL-CIO, and Lazare Teper, director of research, Interna- tional Ladies' Garment Workers' Union, AFL-CIO, letter dated June 14, 1968, to Chairman Mills 2641 Friedson, N., Meat-O-Mat, Inc., letter dated June 12, 1968, to John M. Martin, Jr., chief counsel, Ways and Means, Committee 3344 Friends Committee on National Legislation, William B. Edgerton, state- ment 1807 Frost, M. F., vice president, Texas Farm Bureau, statement 5081 Fryling, George P., president, Erie Technical Products, Inc., telegram dated July 11, 1968, to Chairman Mills 3633 Fuel Oil Council of Maryland, Jay D. Kline, president, and Independent Oil Heat Dealers Association of Maryland, John M. Myers, president, letter dated July 5, 1968, to Chairman Mills 4420 Gaf co, Inc., L. Edelman, vice president, letter dated July 15, 1968, to Chairman Mills 4062 Galvanized Electrical Transmission Tower Fabricators. (See Ad Hoc Cona- mittee of Galvanized, etc.) Galvin, Robert W., Motorola, Inc., telegram dated July 12, 1968, to Chairman Mills 3634 Gannaway, Charles B. (See Ad Hoc Committee of Galvanized Transmis- sion Tower Fabricators.) Garfunkel, Peter H., executive vice president, Firth Cleveland Steels, Inc., letter dated May 23, 1968, to Chairman Mills 2272 Gehl's Guernsey Farms, Inc., John P. Gehi, statement 4894 General Dynamics Corp., John J. Graham, group vice president, telegram dated July11, 1968, to Chairman Mills 3633 General Electric Co., statement 3657 Gerst, Leon W., president, Tenneco colors division, Tenneco Chemicals, Inc., statement 4780 Gill, Will, Jr., president, California Cattlemen's Association, statement - - 3308 Glass Crafts of America, J. Raymond Price, executive secretary, on behalf of the American Hand-Made Glassware Industry, statement 3819 Glass Workers' Protective Leagues of West Virginia, Pennsylvania, Ohio, and Indiana, Huberta M. Patterson, secretary, West Virginia League, statement 3826 Glenndenning, Howard A., president, Local Union No. 13896, District 50, United Mine Workers of America, letter dated July 3, 1968, to John Martin, Mr., chief counsel, Committee on Ways and Means 4809 Goldfinger, Nathaniel, director, department of research, AFL-CIO, addi- tional views on adjustment assistance provisions of the Trade Expansion Act of 1968 1107 Golson, Charles E. (See International Engineering & Construction In- dustries Council.) Gorton Corp., E. Robert Kinney, president, statement 3442 Graham, Harry L. (See National Grange.) Graham, John J., group vice president, General Dynamics Corp., telegram dated July 11, 1968, to Chairman Mifis 3633 Granite City Steel Co., Nicholas P. Veeder, chairman of the board and president, statement 2254 PAGENO="0029" xxix Page Gray, Charles M., manager, Insulation Board Institute, statement 4478 Gray, J. B., corporate services manager, American Koyo Corp., letter dated July 9, 1968, to Chairman Mills 2268 Great Lakes Mink Association, Andrew Bartel, president, statement 4017 Greater Fort Lauderdale (Fla.) Chamber of Commerce, Marshall M. Smith, letter dated July 3, 1968, to Committee on Ways and Means 1785 Green, Ronald W., commissioner, Department of Sea and Shore Fisheries, State of Maine, statement 3445 Greenaway, E., secretary, National Association of Glove Manufacturers, letter dated May 28, 1968, to Chairman Mills, with forwarding letter from the Department of State 2742 Greiner, Fred J., executive vice president, Evaporated Milk Association, statement 4897 Grube, Mrs. Alfred, president, League of Women Voters of Sheboygan (Wis.), letter dated June 27, 1968, to Chairman Mills 1001 Guam, Territory of, Hon. Antonio B. Won Pat, Representative in Wash- ington, statement 3740 Gulf Oil Corp., Warren B. Davis, director, planning and economies, statement 4401 Haber, Fred S., president, Ocean Freight Consultants, Inc., statement 1801 Hahn, Dorothy Parshley, chairman, foreign economic policy, League of Women Voters of Falmouth (Mass.), letter dated July 1, 1968, to Chair- man Mills Hall, Wilfred H., executive vice president, National Oil Jobbers Council, statement 4366 Hamilton Watch Co., Arthur B. Sinkler, chairman of the board, letter dated July 12, 1968, to Chairman Mills 3741 Hampton, Robert N., director of marketing and international trade, National Council of Farmer Cooperatives, letter dated July 12, 1968, to Chairman Mills 1735 Hansen, Hon. George V., a Representative in Congress from the State of Idaho 4060 Hansen, Mrs. Howard, president, League of Women Voters of Glen Ellyn (Ill.), letter dated June 19, 1968, to Chairman Mills 992 Hardwood Plywood Manufacturers Association, statement 4475 Harnischfeger, Walter, Milwaukee, Wis, statement 5098 Harshaw Chemical Co., R. A. Lueht, president, letter dated May 31, 1968, to Chairman Mills 4800 Hartke, Hon. Vance, a U.S. Senator from the State of Indiana, statement re International Antidumping Act 1939 Harvey, Dr. E. W., administrator, Otter Trawl Commission of Oregon, statement 3450 Hathaway, Hon. William D., a Representative in Congress from the State of Maine, statement 4010 Haughton, D. J., chairman of the board, Lockheed Aircraft Corp., telegram dated July 11, 1968, to Chairman Mills 3633 Hawaii Cattlemen's Council, Robert L.~ Hind, Jr., president, letters (with attachments) dated June 1, and June 14, 1968, to Hon. Patsy T. Mink, a Representative in Congress from the State of Hawaii, with covering letter 3308 Hawaii, State of, Hon. John A. Burns, GOvernor, statement 2353 Hawley Fuel Corp., Mark R. Joseph, vice president, letter dated June 11, 1968. to Chairman Mills 4427 Hays, George L., Mission Creek Angus Ranch, statement, and Mrs. George L. Hays, president, Idaho Cow Belles, letter dated May 22, 1968, to Hon. James A. McClure, a Representative in Congress from the State of Idaho, with covering letter 3335 Heinkel, Fred V., president, Midcontinent Farmers Association & Missouri Farmers Association, Inc., statement~ 1310 Henderson, J. Scott, executive secretary, American-International Charolais Association, letter dated June 5, 1968, to Chairman Mills 3332 Hester, Clinton M., attorney: Coors Porcelain Co., statement 3827 Fishman, Morris & Sons, statement 2747 Hilton-Davis Chemical Co., R. L. Marienthal, manager of chemical sales, letter dated June 21, 1968, to Committee on Ways and Means 4801 PAGENO="0030" xxx Hind, Robert L., Jr., president, Hawaii Cattlemen's Council, Inc., letters (with attachments) dated June 1, and June 14, 1968, to Hon. Patsy T. Mink, a Representative in Congress from the State of Hawaii, with Page covering letter 3308 Homeshield Industries, John D. Foskett, president, letter dated July 3, 1968, to Chairman Mills 3369 Howard, John A., vice president and general manager, Magruder Color Co., Inc., letter dated June 24, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means 4801 Hunt, Frederick D., foreign trade consultant, Cast Iron Soil Pipe Institute, letter dated July 22, 1968, to Representative Curtis, re authority in ne- gotiating International Anti-dumping Code 2241 Hunte, Ronald B., executive director, American Mushroom Institute, letter dated June 26, 1968, to Chairman Mills 5088 Huston, Charles Lukens, Jr., president, Lukens Steel Co., letter dated June 24, 1968, to Chairman Mills 2257 Idaho Beekeepers Association, Inc., Grant Blake, president, statement- - - 3469 Idaho Cattle Feeders Association, Inc., Richard D. Blincoe, president, statement~____- 3316 Idaho Cow Belles, Mrs. George L. Hays, president, letter dated May 22, 1968, to Hon. James A. McClure, a Representative in Congress from the State of Idaho, with covering letter 3335 Independent Oil Heat Dealers Association of Maryland, John M. Myers, president, and Fuel Oil Council of Maryland, Jay D. Kline, president, letter dated July 5, 1968, to Chairman Mills 4420 Independent Petroleum Association of America, Dan L. Jones, general counsel, letter dated July 3, 1968, to Chairman Mills, re selected data on oils' balance of payments 4276 Independent Refiners Association of America, Edwin Jason Dryer, counsel, statement Independent Zinc Alloyers Association, Richard J. Bauer, president, statement 2304 Insulation Board Institute, Charles M. Gray, manager, statement 4478 Inter-American Committee on the Alliance for Progress (ClAP), Carlos Sanz de Santamaria, chairman, statement, with covering letter from State Department to Chairman Mills 1713 International Chemical Workers Union, Walter L. Mitchell, president, statement 4804 International Economic Policy Association, statement - 1727 International Engineering & Construction Industries Council, Charles E. Golson: Article from September-October 1967 issue Worldwide P. & I. Plan- ning entitled "~Señor, qué es una `U.S. Firm' segiin la AID?" 822 Letter dated June 17, 1968, to Chairman Mills, re clarification of two points in the council's oral statement 828 Position paper entitled "The competitive position of United States engineering and construction firms in the international market"_~ 809 International House, E. M. Rowley, president, letter dated July 10, 1968, to Chairman Mills, with resolution attached 1786 International Ladies' Garment Workers' Union, AFL-CIO, Lazare Teper, director of research, and Amalgamated Clothing Workers of America, AFL-CIO, Milton Fried, director of research, letter dated June 14, 1968, to Chairman Mills 2641 International Trade Club of Chicago, statement 1787 International Union of Electrical, Radio & Machine Workers, AFL-CIO- CLC, Paul Jennings, president, statement 1740 Iowa Beef Producers Association, Orville Kalsem, president, statement_ - 3318 Italy-American Chamber of Commerce: Dc Santis, Arthur A., executive secretary, letter dated June 20, 1968, to Chairman Mills, re oil exports to Italy 1625 Laraja, Edward, chairman, Dairy Products Importers Group, statement 1621 Jackson, Mrs. Robert F., president, League of Women Voters of Greater Toledo (Ohio), letter dated June 27, 1968, to Chairman Mills 999 Japan Chemical Fibres Association, Michael P. Daniels, counsel, statement with forwarding letter from Department of State 2728 PAGENO="0031" XXXI Japanese Chamber of Commerce, Woolens Division, Michael P. Daniels, Page counsel, statement 2743 Jardox Fur Co., Arthur Rapaport, letter dated July 10, 1968, to Chairman Mills 4063 Jaumot, F. E., Jr., chairman, Semiconductor Division, Electronic Indus- tries Association, letter dated July 10, 1968, to Chairman Mills 3507 Jennings, Paul, president, International Union of Electrical, Radio, & Machine Workers, AFL-CIO-CLC, statement 1740 Johansen, George, secretary-treasurer, Alaska Fishermen's Union, state- ment Johnson, Howard, sales manager, Linen Thread Co., statement 2620 Johnson, Lindsay F. (See Lead-Zinc Producers Committee.) Johnson, Reuben L. (See National Farmers Union.) Jones, Mrs. Dewitt C., III, president, League of Women Voters of Fal- mouth (Mass.), letter dated July 1, 1968,, to Chairman Mills 994 Jones & Laughlin Steel Corp., Charles M. Bèeghly, telegram dated June 20, 1968, to Chairman Mills 1926 Jones, L. Dan, general counsel, Independent Petroleum Association of America, letter dated July 3, 1968, to Chairman Mills, re selected data on oils' balance of payments 4276 Joseph, Mark R., vice president, Hawley Fuel Corp., letter dated June 11, 1968, to Chairman Mills 4427 Kalsem, Orville, president, Iowa Beef Producers Association, statement__ 3318 Kaminski, Jerome, president, International Union of District 50, United Mine Workers of America, letter dated July 11, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means 4809 Kansas, State of, Hon. Robert B. Docking, Governor, statement - 4363 Katz, Lawrence R., Polan, Katz & Co., Inc., letter dated July 9, 1968, to Chairman Mills 3157 Kennedy, Edward E., research director, International Union of District 50, United Mine Workers of America, statement 1752 Kentuckiana World Commerce Council, Inc., William E. Bennett, presi- dent, letter dated June 25, 1968 to Chairman Mills, with resolution attached 1775 Kerr, Robert M., attorney, Specialty Crops Conference, statement 5049 Keystone Steel & Wire Company, Walton B. Sommer, president and chairman of the board, letter dated June 10, 1968, to Chairman Mills, with statement attached 1927 King, Hon. Cecil R., a Representative in Congress from the State of California, letter dated February 13, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means, re trade ties between the United States and Canada with replies of the various Federal Depart- ments 2785 Kinkead Industries Inc., E. R. Meyer, letter dated July 1, 1968, to Chair- man Mills 3376 Kinney, E. Robert, president, Gorton Corp., statement 3442 Klamm, Ron, managing director, California Fig Institute, and manager, California Dried Fig Advisory Board, statement 3308 Kline, Jay D., president, Fuel Oil Council of Maryland, and Independent Oil Heat Dealers Association of Maryland,: John M. Myers, president, letter dated July 5, 1968, to Chairman Mills 4420 Koring, Carl, president, First Washington Net Factory, Inc., letter dated May 22, 1968, to John Martin, Jr., chief counsel, Committee on Ways and Means 2727 Kolb-Lena Cheese Co., Mrs. James Demeter,~ letter dated May 23, 1968, to Chairman Mills 4901 Kummer, Mrs. Joseph, first vice president, League of Women Voters of Ann Arbor (Mich.), letter dated June 20, 1968, to Chairman Mills. - - - 995 Kurtin, Harold, president, National Association of Secondary Material Industries, Inc., letter dated July 10, 1968, to Chairman Mills 2627 Kvamme, Jule N., corporate department, Carnation Co., statement 4792 Laclede Steel Co., Paul B. Akin, president, statement 2255 Lambert, R. E., chairman, committee on GOvernment relations, J. E. Cooper, president, and L. E. Stybr, executive director, American Sprock- et Chain Manufacturers Association, statement 3039 Lang, Ernest U., chief engineer, National-Standard Co., statement - 1824 PAGENO="0032" XXXII Laraja, Edward, chairman, Dairy Products Importers Group, Italy- Page American Chamber of Commerce, Inc., statement 1621 Latella, John T., associate counsel, and Allan A. Rubin, vice president and counsel, U.S. Brewers Association, statement 2826 Lead-Zinc Producers Committee, Lindsay F. Johnson: Average E. & M. J. price per pound 2300 Factors preceding Presidential Proclamation No. 3257-September 22, 1958 2287 Leaf Tobacco Exporters Association, Inc., Malcolm B. Seawell, executive secretary and general counsel, statement 1429 League of Women Voters: Anderson (md.), Mrs. George Doherty, president, letter dated July 12, 1968, to Chairman Mills 993 Ann Arbor (Mich.), Mrs. Joseph Kummer, first vice president, letter dated June 20, 1968, to Chairman Mills 995 Beverly Hills (Calif.), Mrs. Bruce Rabin, president, letter dated June 18, 1968, to Chairman Mills 990 Broome County (N.Y.), Mrs. Alfred B. Carlip, chairman, foreign policy committee, letter dated June 28, 1968, to Chairman Mills~ 998 Cincinnati (Ohio), telegram dated June 1, 1968, to Chairman Mills~ 999 Columbia-Boone County (Mo.), Mrs. James W. Mackenzie, president, letter dated June 24, 1968, to Chairman Mills 997 De Kalb County (Ga.), Mrs. T. Emory Daniel, president, letter dated July 8, 1968, to Chairman Mills 992 Falmouth (Mass.), Dorothy Parshley Hahn, chairman, foreign eco- nomic policy, and Mrs. Dewitt C. Jones III, president, letter dated July 1, 1968, to Chairman Mills 994 Glen Ellyn (Ill.), Mrs. Howard Hansen, president, letter dated June 19, 1968, to Chairman Mills 992 Great Neck (N.Y.), Mrs. Max Chernoff, president, letter dated June 24, 1968, to Chairman Mills 998 Greater Lafayette (md.), Mrs. Ralph Webb, president, letter dated June 27, 1968, to Chairman Mills 994 Greater Toledo (Ohio), Mrs. Robert F. Jackson, president, letter dated June 27, 1968, to Chairman Mills 999 Hamden (Conn.), Mrs. Bruce Detmers, president, letter dated June 24, 1968, to Chairman Mills 991 Indiana, Mrs. Robert S. R.ichey, president, letter dated July 1, 1968, to Chairman Mills Long Beach (Calif.), Mrs. Marvin Tineher, president, letter dated June 24, 1968, to Chairman Mills 990 Los Gatos_Saratoga (Calif.), Mrs. Harold Martin, president, letter dated June 20, 1968, to Chairman Mills 991 Metropolitan Dade County (Fla.), Mrs. Robert T. Phillips, president, letter dated June 24, 1968, to Chairman Mills 991 Michigan, Mrs. Margaret Foerch, president, letter dated June 28, 1968, to Chairman Mills 996 Midland County (Tex.), Mrs. J. R. Sheeler, president, and Mrs. W. M. Raimer, foreign policy committee, letter dated June 26, 1968, to Chairman Mills 1000 New Berlin (Wis.), Mrs. Jack Prochnow, president, letter dated June 22, 1968, to Chairman Mills 1000 New Brighton (Minn.), Mrs. Paul A. Moore, Jr., president, letter dated June 20, 1968, to Chairmhn Mills 996 Oklahoma, Jean Thomas, State president, letter dated June 20, 1968, to Chairman Mills Princeton Community (N.J.), Claire Beskind, president, letter dated June 20, 1968, to Chairman Mills 997 Reading (Mass.), Mrs. Lawrence Blood, president, letter~ dated June 25, 1968, to Chairman Mills 994 Sheboygan (Wis.), Mrs. Alfred Grube, president, letter dated June 27, 1968, to Chairman Mills 1001 Williamstown (Mass.), Anne F. Skinner, foreign policy chairman, letter dated June 27, 1968, to Chairman i\Iills 995 Winter Park-Orlando (Fla.), Mrs. Robert M. Carson, president, letter dated June 26, 1968, to Chairman Mills 992 PAGENO="0033" XXXIII Lear Siegler, Inc., John G. Brook, chairman, telegram dated July 12, 1968, Page to Chairman Mills 3633 Leboeuf, Leonard E., treasurer and general counsel, Stevens Linen Asso- ciates, Inc., statement 2726 Lemke, B. L., & Co., Inc., Joseph J. Franko, treasurer, statement 4626 Levi, Archie B., president, et a!., Oil, Chemical & Atomic Workers Inter- national Union, letter dated June 27, 1968, to Chairman Mills 4764 Levy, M. Barry, counsel, Toy Manufacturers of America, Inc., statement. 3168 Lewis, Joseph H., president, local 12457, District 50, United Mine Workers of America, letter dated July 5, 1968, to J~ W. Martin, Jr., chief counsel, Committee on Ways and Means 4808 Lichtblau, John H., director of research, Petroleum Industry Research Foundation, Inc., letter dated July 2, 1968, to Ways and Means Committee, with attachment 4388 Liebenow, Robert C., president, Corn Refiners Association, Inc., state- ment 5093 Lightweight Aggregate Producers Association, the Expanded Shale, Clay & Slate Institute, and the National Slag Association, statement 3813 Lindholm, Richard W., professor of finance and dean of the Graduate School of Management and Business, University of Oregon 1706 Linen Thread Co., Howard Johnson, sales manager, statement 2620 Locke, Edwin A., Jr., president, American Paper Institute, Inc., statement 4460 Lockheed Aircraft Corp., D. J. Houghton, chairman of the board, telegram dated July 11, 1968, to Chairman Mills 3633 Long Island Association of Commerce & Industry, and World Trade Club of Long Island, Fred E. Merrell, secretary, letter dated June 26, 1968, to Committee on Ways and Means, with position paper attached 1789 Louisiana, State of, Hon. John J. McKeithen, Governor, statement 4207 Loxcreen Co., J. W. Parrish, president, telegram dated July 8, 1968, to Chairman Mills 3376 Lucht, R. A., president, Harshaw Chemical Co., letter dated May 31, 1968, to Chairman Mills 4800 Luggage & Leather Goods Manufacturers of America, Inc., Jack Citron- baum, executive vice president, statement 4131 Lukens Steel Co., Charles Lukens Huston, Jr., president, letter dated June 24, 1968, to Chairman Mills~~ 2257 McCauley, Alfred R., special counsel to consumer products division, Electronic Industries Association, letter dated June 27, 1968, to John M. Martin, Esq., chief counsel, Committee on Ways and Means, forwarding memorandum of the Magnavox Co. on color television picture tubes. - - 3496 McClory, Hon. Robert, a Representative in Congress from the State of Illinois, statement 4011 McClure, Hon. James A., a Representative:in Congress from the State of Idaho, letter dated June 3, 1968, to Chairman Mills, forwarding letter from Mrs. George L. Hays, president, Idaho Cow Belles, and statement from George L. Hays, Mission Creek Angus Ranch 3335 McColly, Don W., president, and Jefferson E. Peyser, general counsel, Wine Institute, statement 2803 McDonald, D. L., president, West Central Texas Oil & Gas Association, statement 4205 McDonnell Douglas Corp., John R. Allen, vice president, eastern region, letter dated July 16, 1968, to Chairman Mills 2798 McKeithen, Hon. John J., Governor, State of Louisiana, statement 4207 McMillan, C. W., executive vice president, American National Cattle- men's Association, letter dated July 9, 1968, to Chairman Mills, re explanation of the proposed amendments to the Meat Import Act of 1964 3211 Mackenzie, Mrs. James W., president, League of Women Voters of Co- lumbia-Boone County (Mo.), letter dated June 24, 1968, to Chairman Mills 997 MacRae, John S., & Co., John S. MacRae, letter dated June 6, 1968, to Chairman Mills 2728 M. & R. Refractory Metals, Inc., R. S. Wood, vice president, telegram dated July 11, 1968, to Hon. Florence P. Dwyer, a Representative in Congress from the State of New Jersey, with covering letter 2347 95-159 0 - 68 - pt. 5 - PAGENO="0034" XXXIV Magnavox Co., memorandum of the, on color television picture tubes, letter dated June 27, 1968, to John M. Martin, Esq., chief counsel, Committee on Ways and Means, from Alfred R. McCauley, special counsel to consumer products division, Electronic Industries Associa- Page tion, forwarding memorandum 3496 Magnavox Consumer Electronics Co., George H. Fezell, president, tele- gram dated July 10, 1968, to Chairman Mills 3633 Magruder Color Co., Inc., John A. Howard, vice president and general manager, letter dated June 24, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means 4801 Maine, State of, Department of Sea and Shore Fisheries, Ronald W. Green, commissioner, statement 3445 Manke, Margaret, secretary, American Scotch Highland Breeders' Asso- ciation, letter dated June 29, 1968, to Chairman Mills 3331 Mantle & Costume Manufacturers' Export Group of London, England, statement, with forwarding letter from Department of State 2739 Marienthal, R. L., manager of chemical sales, Hilton-Davis Chemical Co., letter dated June 21, 1968, to Committee on Ways and Means~~ 4801 Marks Specialties, Inc., Harry L. Marks, president, statement 3069 Marshall, Vice Adm. Wm. J., U.S. Navy (retired), president, Bourbon Institute, statement 2799 Martin, Edmund F., chairman, Bethlehem Steel Corp., letter dated June 17, 1968, to Chairman Mills 1926 Martin, Mrs. Harold, president, League of Women Voters of Los Gatos- Saratoga (Calif.), letter dated June 20, 1968, to Chairman Mills 991 Massachusetts, Commonwealth of: Caggiano, G. Robert, director, Bureau of International Trade, Department of Commerce and Development, statement 1065 Governor's Advisory Committee for the Shoe and Leather Industry, resolution 4063 Mathias, Hon. Charles McC., Jr., a Representative in Congress from the State of Maryland, letter dated June 20, 1968, to Chairman Mills 4889 May, Hon. R. J., secretary, Rubber and Plastics Footwear Manufacturers Association, Liverpool, England, with forwarding letter from the U.S. State Department 4174 Meat-O-Mat, Inc., N. Friedson, letter dated June 12, 1968, to John M. Martin, Jr., chief counsel, Ways and Means Committee 3344 Mendocino County (Calif.) Farm Bureau, Mayme Williams, secretary, letter dated June 19, 1968, to Chairman Mills 3334 Mercker, Albert E., executive secretary, Vegetable Growers Association of America, statement 5086 Merrell, Fred E., secretary, Long Island Association of Commerce & Industry, and World Trade Club of Long Island, letter dated June 26, 1968, to Committee on Ways and Means, with position paper attached 1789 Meyer, E. R., Kinkead Industries, Inc., letter dated July 1, 1968, to Chairman Mills 3376 Meyer, J. Mason, executive secretary, American Hardboard Association, statement 4468 Midcontinent Farmers Association and Missouri Farmers Association, Inc., Fred V. Heinkel, president, statement 1310 Miller, G. W., chairman of the board, Battenfeld Grease & Oil Corp. of New York, statement, with forwarding letter from Hon. Henry P. Smith III, a Representative in Congress from the State of New York 4422 Miller, Henry E., National Retail Merchants Association, letter dated July 12, 1968, to John M. Martin, Jr., from John C. Hazen, vice presi- dent-Government, re exports of textiles and textile products 805 Mink, Hon. Patsy T., a Representative in Congress from the State of Hawaii, letter dated June 20, 1968, to Chairman Mills forwarding material from the Hawaii Cattlemen's Council 3308 Miracle, Ralph, secretary, Montana Stockgrowers Association, Inc., letter dated June 5, 1968, to Chairman Mills 3320 Mission Creek Angus Ranch, George L. Hays, statement, with covering letter from Hon. James A. McClure, a Representative in Congress from the State of Idaho Missouri Farmers Association, Inc., and Midcontinent Farmers Association, Fred V. Heinkel, president 1310 PAGENO="0035" xxxv Page Mississippi Cattlemen's Association, statement 3318 Mitchell, 0. J., Jr., vice president, Union Steel Chest Corp., letter dated June 4, 1968, to Chairman Mills 2258 Mitchell, Walter L., president, International Chemical Workers Union, statement 4804 Modesto, Octavio A., general manager, Seafood Producers Association, letter dated May 31, 1968, to Chairman Mills 3443 Mogle, J. A., chairman, foreign trade committee, Fine and Specialty Wire Manufacturers' Association, statement 2275 Moiola Bros., Lawrence Moiola, partner, letter dated May 22, 1968, to Chairman Mills 3336 Monkman, James W. L., vice president, Crompton & Knowles Corp., statement 4798 Montana Stockgrowers Association, Inc., Ralph Miracle, secretary, letter dated June 5, 1968, to Chairman Mills 3320 Moore, Hon. Dan K., Governor of North Carolina, statement 2624 Moore, Mrs. Paul A., Jr., president, League of Women Voters of New Brighton (Minn.), letter dated June 20, 1968, to Chairman Mills - - - 996 Moore, Wm. H., staff vice president, Government products division, Elec- tronic Industries Association, letter dated July 12, 1968, to Chairman Mills 3507 Moran, C. C., president, Cupples Products Division, H. H. Robertson Co., telegram dated July 3, 1968, to Chairman Mills 3376 Moss, Aubrey L., president, American Metal Importers Association, Inc., letter dated July 1, 1968, to Committee on Ways and .Means 3377 Motorola, Inc., Robert W. Galvin, telegram dated July 12, 1968, to Chairman Mills 3634 Mundt, John C. (See Cement Industry Antidumping Committee.) Murphy Oil Corp., C. H. Murphy, Jr., president, statement 4405 Murray, John E., Jr., vice president, Nicholson & Co., Inc., letter dated June 24, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means 5095 Myers, A. Nelson, vice president, marketing, Texas Gulf Sulphur, Co., letter dated July 9, 1968, to Chairman Mills 2348 Myers, John M., president, Independent Oil Heat Dealers Association of Maryland, and Fuel Oil Council of Maryland, Jay D. Kline, president, letter dated July 5, 1968, to Chairman Mills 4420 Nast, Thomas D., president, All-State Welding Alloys Co., Inc., letter dated July 3, 1968, to Chairman Mills 3374 Nation-Wide Committee on Import-Export Policy, 0. R. Strackbein, chairman: Cost of becoming competitive in ocean shipping 933 Countervailing duty provision, information on 919 Letter dated June 18, 1968, to Hon. Herman T. Schneebeli re U.S. treatment of imports 926 Nontariff trade barriers 929 Price of becoming competitive in steel 947 Trends in prices on commodities subject to import quotas 918 National Association of Alcoholic Beverage Importers, Inc., John F. O'Connell, president, statement 2814 National Association of Glove Manufacturers, E. Greenaway, secretary, letter dated May 28, 1968, to Chairman Mills, with forwarding letter from the Department of State 2742 National Association of Manufacturers, statement 1723 National Association of Secondary Material Industries, Inc., Harold Kurtin, president, letter dated July 10, 1968, to Chairman Mills - - - 2627 National Coal Association, Stephen F. Dunn, president, statement 4423 National Consumers League, Dr. Persia Campbell, statement 870 National Council of Farmer Cooperatives, Robert N. Hampton, director of marketing and international trade, letter dated July 12, 1968, to Chairman Mills 1735 National Council of Jewish Women, Inc., statement - - 1826 National Customs Brokers & Forwarders Association of America, Inc., John G. Eberlein, chairman, drawback committee, pamphlet entitled "What Is Customs Drawback?" 1024 PAGENO="0036" xxxv' National Farmers Union, Reuben L. Johnson, director, legislative services: Statement of Farmers Union adopted by delegates at the convention Page in Minneapolis 790 Statement by Reuben L. Johnson to the conference on trade policy sponsored by the coordinating council of organizations on inter- national trade policy at the Sheraton Park Hotel, Washington, D.C~ 790 National Federation of Independent Business, George S. Bullen, legislative director, statement 1730 National Footwear Manufacturers Association: Nonrubber footwear: Tariff and trade regulations (U.S. Department of Commerce, Business and Defense Services Administration) - - - - 4093 Richardson, Mark E., president, telegram dated June 13, 1968, to Hon. Dean Rusk, Secretary of State 2624 National Grange: Graham, Harry L., legislative representative, excerpt from European Economic Commission report on the economiô situation of the milk and milk products sector in the Community 782 Newson, Herschel D., master, U.S. agricultural exports to the Euro- pean Economic Community: value by commodity 781 National Handbag Association, Steven J. Weiss, counsel, statement 4134 National Oil Jobbers Council, Wilfred H. Hall, executive vice president, statement 4366 National Piano Manufacturers Association, Perry S. Patterson, counsel, statement 3159 National Restaurant Association, Ira H. Nunn, counsel, statement 3337 National Retail Merchants Association, Henry E. Miller, letter dated July 12, 1968, to John M. Martin, Jr., from John C. Hazen, vice president, government, re exports of textiles and textile products 805 National Slag Association, the Expanded Shale, Clay & Slate Institute, and the Lightweight Aggregate Producers Association, statement 3813 National-Standard Co., Ernest U. Lang, chief engineer, statement 1824 Nebraska Stock Growers Association, E. H. Shoemaker, Jr., president, letter dated May 25, 1968, to Chairman Mills 3320 Netherlands Chamber of Commerce in the United States, Inc., Henry J. Clay, letter dated June 25, to Hon. John W. Byrnes, re quantitative restrictions_ 1594 Nevada State Cattle Association, Leslie J. Stewart, president, letter to Chairman Mifis 3321 New Mexico Cattle Growers' Association, W. 0. Culbertson, Jr., president, statement 3322 New Zealand Dairy Board, statement, with forwarding letter from the State Department 4890 New Zealand Meat Producers Board, statement, with forwarding letter fromtheStateDepartment 3304 Newark, N. J., Mayor Hugh J. Addonizio, statement 1473 Newsom, Herschel D. (See National Grange.) Nicholson & Co., Inc., John E. Murray, Jr., vice president, letter dated June 24, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means 5095 North Carolina, Governor of, Hon. Dan K. Moore, statement 2624 North Dakota Stockmen's Association, Raymond Schnell, president, statement 3325 Norwegian-American Chamber of Commerce, Inc., Danish American Trade Council, Inc., Finnish American Chamber of Commerce, Inc., and Swedish Chamber of Commerce of the United States, Inc., statement - - - 1775 Nunn, Ira H., counsel, National Restaurant Association, statement 3337 Nyanza, Inc., Roland E. Derby, Jr., president, letter dated June 17, 1968, to Chairman Mffls 4802 O'Brien, Gerald, executive vice president, American Importers Association, statement on U.S. foreign trade policy before Trade Information Com- mittee of Office of President's Special Representative for Trade Negotia- tions-May 20, 1968 841 Ocean Freight Consultants, Inc., Fred S. Haber, president, statement 1801 Ocoma Foods Co., Harold J. Wendt, vice president, production, letter dated May 31, 1968, to Chairman Mills 3344 O'Connell, John F., president, National Association of Alcoholic Beverage Importers, Inc., statement 2814 PAGENO="0037" XXXVII O'Connor, J. M., executive vice president, Peerless of America, Inc., letter Page dated July 1, 1968, to Chairman Mills 3376 Odian, Bedros, attorney, Buffalo, N.Y., letter dated May 15, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means 5098 Oesterle, Father John, Church of St. Teresa, Munhall, Pa., letter dated June 3, 1968, to Ways and Means Committee 5096 Ohio Cattle Feeders Association, Russell Forsythe, president, and James H. Warner, secretary, letter dated June 17, 1968, to Chairman Mills, with attachment 3326 Ohio Oil & Gas Association, David H. Bell, president, letter dated May 27, 1968, to Committee on Ways and Means 4392 Oil, Chemical & Atomic Workers International Union: Levi, Archie B., president, et al., letter dated June 27, 1968, to Chairman Mills 4764 Riker, Raymond, president, local 8-95, letter dated July 3, 1968, to John M. Martin, Jr., chief counsel 4807 Oklahoma Cattlemen's Association, Wray Finney, president, letter dated May 28, 1968, to Chairman Mills 3327 Optical Importers Association of the United States, Inc., Julius Simon, president, statement 3135 Orban, Kurt. (See American Institute for Imported Steel, Inc.) Oregon, Otter Trawl Commission of, Dr. E. W. Harvey, administrator, statement 3450 Ornitz, Martin N., president, Roblin Steel Co., letter dated June 24, 1968, to Chairman Mills, with covering letter from Hon. Henry P. Smith, a Representative in Congress from the, State of New York 2257 Orr, Robert M., president, and Ed Thompson, executive vice president, Permian Basin Petroleum Association, statement 4281 Otter Trawl Commission of Oregon, Dr. E. W. Harvey, administrator, statement 3450 Overton, J. Allen, Jr. (See American Mining Congress.) Pacific American Steamship Association, statement 1790 Parker, H. R., secretary, Candle Manufacturers Association, letter dated June 25, 1968, to Chairman Mills 3170 Parrish, J. W., president, Loxcreen Co., telegram dated July 8, 1968, to Chairman Mills .3376 Patterson, Huberta M., secretary, West Virginia League, in behalf of West Virginia, Pennsylvania, Ohio, and Indiana Glass Workers' Protective Leagues, statement 3826 Patterson, Perry S., counsel, National Piano Manufacturers Association, statement 3159 Patton, Thomas F. (See American Iron & Steel Institute.) Peerless of America, Inc., J. M. O'Connor, executive vice president, letter dated July 1, 1968, to Chairman Mills 3376 Perkel, George, director of research, Textile Workers Union of America, AFL-CIO, statement 2630 Perkins, Hon. Carl D., a Representative in Congress from the State of Kentucky, letter dated June 17, 1968, to Chairman Mills 4889 Permian Basin Petroleum Association, Robert M. Orr, president, and Ed Thompson, executive vice president, statement 4281 Peters, J. S., manager, membership & industry relations, Florida Fruit & Vegetable Association, letter dated July 29, 1968, to Congressman Thomas B. Curtis, re domestic market for fruits and vegetables 4978 Petroleum Industry Research Foundation, Inc., John H. Lichtblau, director of research, letter dated July 2, 1968, to Ways and Means Committee, with attachment 4388 Peyser, Jefferson E., general counsel, and Don W. McColly, president, Wine Institute, statement 2803 Phillips, Mrs. Robert T., president, League of Women Voters of Metro- politan Dade County (Fla.), letter~ dated June 24, 1968, to Chairman Mills 991 Picard, Raymond J., president, French Chamber of Commerce in the United States, Inc., statement 1773 Piering, David P., president, Diversified Wire & Steel Corp., telegram, -dated June 14, 1968, to Chairman Mills 2202 Polan, Katz & Co., Inc., Lawrence R. Katz, letter dated July 9, 1968, to Chairman Mills 3157 PAGENO="0038" xxxvm Precision Drawn Steel Co., L. G. Brown, president, letter dated June 4, Page 1968, to Chairman Mills, with attachment 2273 Premier Santa Gertrudis Association, M. Allen Anderson, president, reso- lution, dated May 26, 1968, with covering letter from Hon. Roman L. Hruska, a U.S. Senator from the State of Nebraska 3333 Price, J. Raymond, executive secretary of Glass Crafts of America, on behalf of the American Hand-Made Glassware Industry, statement - - 3819 Prochnow, Mrs. Jack, president, League of Women Voters of New Berlin (Wis.), letter dated June 22, 1968, to Chairman Mills 1000 Public Lands Council, Joseph H. Tudor, general counsel, letter dated May 27, 1968, to Chairman Mills 3333 Purcell, Robert, Emergency Committee for American Trade, a critique of the Trade Relations Council's analysis of certain 1958/1960-1964 declines in employment~ 1352 Rabin, Mrs. Bruce, president, League of Women Voters of Beverly Hills (Calif.), letter dated June 18, 1968, to Chairman Mills 990 Raimer, Mrs. W. M., foreign policy committee, League of Women Voters of Midland County, Tex., letter dated June 26, 1968, to Chairman Mills. 1000 Rampton, Hon. Calvin L., Governor of the State of Utah, statement - - - 4059 Randall, Frank L., Jr., president, Amperex Electronic Corp., statement - 3505 Rapaport, Arthur, Jardox Fur Co., letter dated July 10, 1968, to Chairman Mifis 4063 Raytheon Co., Charles F. Adams, chairman of the board, telegram dated July 12, 1968, to Chairman Mills 3634 Reuther, Walter P., president, United Automobile, Aerospace and Agri- cultural Implement Workers of America (UAW), statement 1755 Richardson, Mark E., president, National Footwear Manufacturers Assoc- iation, telegram dated June 13, 1968, to Hon. Dean Rusk, Secretary of State 2624 Richey, Mrs. Robert S., president, League of Women Voters of Indiana, letter dated July 1, 1968, to Chairman Mills 993 Riker, Raymond, president local 8-95, Oil, Chemical and Atomic Workers International Union, letter dated July 3, 1968, to John M. Martin, Jr., chief counsel 4807 Roach, T. L., Jr., president, Texas and Southwestern Cattle Raisers Association, letter dated May 28, 1968, to Chairman Mifis, with at- tachment 3327 Rogers, Hon. Paul G., a Representative in Congress from the State of Florida, statement 4980 Robertson, H. H., Co., C. C. Moran, president, Cupples Products Division, telegram dated July 3, 1968, to Chairman Mills 3376 Robie, Merle S., chairman, executive committee, Cordage Institute, statement 2372 Roblin Steel Co., Martin N. Ornitz, president, letter dated June 24, 1968, to Chairman Mills, with covering letter from Hon. Henry P. Smith, a Representative in Congress from the State of New York 2257 Rostov, Charles I., floor covering group, American Import Association, statement 2603, 2618 Rott, Dr. Ernst, executive secretary, United States Austrian Chamber of Commerce, Inc., letter dated May 29, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means, with memorandum attached 1771 Rowley, E. M., president, International House, letter dated July 10, 1968, to Chairman Mifis, with resolution attached 1786 Rubber & Plastics Footwear Manufacturers Association, Liverpool, England, R. J. May, Hon. secretary, with forwarding letter from the U.S. State Department 4174 Rubin, Allan A., vice president and counsel, and John T. Latella, asso- ciate counsel, United States Brewers Association, statement 2826 Rusmisell, Deane E., president, Work Glove Manufacturers Association, Inc., statement 2723 Sanders, C. T. "Tad," general manager, Certified Livestock Markets Association, letter dated July 3, 1968, to Chairman Mills 3332 Sanz de Santamaria, Carlos, chairman, Inter-American Committee on the Alliance for Progress (ClAP), statement, with covering letter from State Department to Chairman Mills 1713 PAGENO="0039" XXXIX Schmidt, Donald R., president, South Dakota Beekeepers Association, Page telegram dated June 22, 1968, to Chairman Mills 3470 Schnell, Raymond, president, North Dakota Stockmen's Association, statement 3325 Schwenger, Robert B., supplemental statement 1680 Scott, Hon. William Lloyd, a Representative in Congress from the State of Virginia, letter dated July 1, 1968, to Chairman Mills 4888 Seafood Producers Association, Octavio A. Modesto, general manager, letter dated May 31, 1968, to Chairman Mills 3443 Seawell, Malcolm B., executive secretary and general counsel, Leaf To- bacco Exporters Association, Inc., statement 1429 Sebastinas, A., president, International Union of District 50, United Mine Workers of America, Local 15143, letter dated June 14, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means - - 4807 Segall, Irving, New York, N.Y., letter dated July 11, 1968, to Chairman Mills 4062 Service Tools Institute, George P. Byrne, Jr., secretary and legal counsel, statement 3046 Sharp, W. Parker, Pittsburgh, Pa., letter dated June 18, 1968, to Chair- man Mills 2265 Shaw, Arnold H., counsel, Warehousemen's Association of the Port of New York, Inc., letter dated June 18, 1968, to Chairman Mills 1801 Shearer, Wendell B., president, Vinyl Maid, Inc., letter dated June 17, 1968, to Chairman Mills 5092 Sheeler, Mrs. J. R., president, League of Women Voters of Midland County (Tex.), letter dated June 26, 1968, to Chairman Mills 1000 Shears, Scissors & Manicure Implement Manufacturers Association, B. C. Deuschle, president, statement 3063 Sherwin-Williams Co., G. L. Tickner, eastern manager, pigment, color and chemical department, statement 4667 Shirt, Collar & Tie Manufacturers' Federation, and Clothing Manu- facturers' Federation of Great Britain, statement, with forwarding letter from the Department of State. 2736 Shoemaker, E. H., Jr., president, Nebraska Stock Growers Association, letter dated May 25, 1968, to Chairman Mills 3320 Simon, Julius, president, Optical Importers Association of the United States, Inc., statement 3135 Sinkler, Arthur B., chairman of the board, Hamilton Watch Co., letter dated July 12, 1968, to Chairman Mills 3741. Skinner, Anne F., foreign policy chairman, League of Women Voters of Williamstown (Mass.), letter dated June 27, 1968, to Chairman Mills_ 995 Slesinger, Reuben E., associate dean, professor of economics, division of the social sciences, University of Pittsburgh, letter dated June 25, 1968, to Chairman Mills, with article attached entitled "Steel Imports and Vertical Oligopoly Power: Comment" 2265 Smith, Marshall M., Greater Fort Lauderdale (Fla.) Chamber of Com- merce, letter dated July 3, 1968, to Committee on Ways and Means - - 1785 Smith, Stanford, general manager, American Newspaper Publishers Asso- ciation, statement 4465 Smith, T. William C., president, American Pipe Fittings Association, letter dated June 20, 1968, to Chairman Mills 2259 Smithfield Packing Co., Inc., G. R. Crawford, executive vice president, letter dated June 10, 1968, to John M. Martin, Jr., chief counsel, Com- mittee on Ways and Means 3343 Snow & Co., H. R. Snow, letter dated June 6, 1968, to Chairman Mi1ls~. - 3334 Socket Screw Products Bureau, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 Sommer, Walton B., president and chairman of the board, Keystone Steel & Wire Co., letter dated June 10, 1968, to Chairman Mills, with statement attached 1927 South Dakota Beekeepers Association, Donald R. Schmidt, president, telegram dated June 22, 1968, to Chairman Mills 3470 Southern California Edison Co., statement 4417 Specialty Crops Conference, Robert M. Kerr, attorney, statement 5049 Sporting Arms & Ammunition Manufadturers' Institute, Robert C. Zimmer, counsel, statement 3081 PAGENO="0040" XL Starr, Wayne R., president, Citizens State Bank & Trust Co., letter dated Page June 20, 1968, to Chairman Mills 1824 Standard Oil Company of California, statement 4408 Steelworkers of America, Local No. 3256, Arvo E. Sundberg, statement - 2248 Stenning, W. W., North American representative, Australian Meat Board, statement, with forwarding letter from the State Department 3301 Stephens, Hon. Robert G., Jr., a Representative in Congress from the State of Georgia 4886 Stevens Linen Associates, Inc., Leonard E. Leboeuf, treasurer and general counsel, statement 2726 Stewart, Eugene L., counsel, Parts and Distributor Products Divisions, Electronic Industries Association and American Loudspeaker Manu- facturers Association, letter dated July 3, 1968, to Hon. Jackson E. Betts, a Representative in Congress from the State of Ohio, re Far East comparative wages~ 3630 Stewart, Leslie J., president, Nevada State Cattle Association, letter to Chairman Mills 3321 Strackbein, 0. R. (See Nation-Wide Committee on Import-Export Policy.) Strate, Martin F., executive secretary, Virginia Beef Cattle Association, letter dated May 24, 1968, to Chairman Mills 3329 Stybr, L. E., executive director, J. E. Cooper, president, and R. E. Lam- bert, chairman, committee on Government relations, American Sprocket Chair Manufacturers Association, statement 3039 Sundberg, Arvo E., representing the city of Conneaut, Ohio and Local No. 3256, AFL-CIO, Steelworkers of America, statement 2248 Swedish Chamber of Commerce of the United States, Inc., Danish Ameri- can Trade Council Inc., Finnish American Chamber of Commerce, Inc., and Norwegian-American Chamber of Commerce, Inc., statement 1775 Swiss Union of Commerce and Industry, Michael P. Daniels, counsel, statement, with covering letter from State Department 4771 Synthetic Organic Chemical Manufacturers Association (SOCMA), memorandum concerning testimony given in support of the "separate" package agreement 4760 Tanaka, H. William, counsel, on behalf of certain importers of electronic products, A. & A. Trading Co., et al., statement 3654 Tapping Screw Service Bureau, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 Tatem Manufacturing Co., Inc., Stewart M. Tatem, statement 4481 Teague, Randal Cornell, director of regional and State activities, Young Americans for Freedom, Inc., statement 4909 Tektronix, Inc., Don A. Ellis, treasurer, statement 3704 Tennant, C., Sons & Co., Aubrey Fletcher, executive vice president, letter dated June 21, 1968, to Chairman Mills, re statistics on lead and zinc~. 2318 Tenneco Chemicals, Inc., Leon W. Gerst, president, Tenneco colors divi- sion, statement 4780 Teper, Lazare, director of research, International Ladies' Garment Work- ers' Union, AFL-CIO, and Milton Fried, director of research, Amalga- mated Clothing Workers of America, AFL-CIO, letter dated June 14, 1968, to Chairman Mifis 2641 Texaco Inc., statement 4409 Texas Citrus Mutual, William W. Curl, president, statement 5083 Texas Farm Bureau, M. F. Frost, vice president, statement 5081 Texas Gulf Sulphur Co., A. Nelson Myers, vice president, marketing, letter dated July 9, 1968, to Chairman Mifis 2348 Texas Instruments Inc., J. Fred Bucy, group vice president, telegram dated July 11, 1968, to Chairman Mills 3634 Texas and Southwestern Cattle Raisers Association, T. L. Roach, Jr., president, letter dated May 28, 1968, to Chairman Mills, with attach- ment 3327 Textile Workers Union of America, AFL-CIO, George Perkel, director of research, statement 2630 Thomas, Jean, State president, League of Women Voters of Oklahoma, letter dated June 20, 1968, to Chairman Mills 999 Thompson, Ed., executive vice president, and Robert M. Orr, president, Permian Basin Petroleum Association, statement 4281 PAGENO="0041" XLI Tickner, G. L., eastern manager, pigment, color and chemical department, Page Sherwin-Williams Co., statement 4667 Tincher, Mrs. Marvin, president, League of Women Voters of Long Beach (Calif.), letter dated June 24, 1968, to Chairman Mills.~~ 990 Tool and Stainless Steel Industry Committee, statement 1929 Toy Manufacturers of America, Inc., M. Barry Levy, counsel, statement - 3168 Trueblood, R. W., president, Belridge Oil Co., statement 4269 Trugman-Nash, Inc., Bernard A. Trugman, statement 4894 Tubular and Split Rivet Council, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 Tudor, Joseph H., general counsel, Public Lands Council, letter dated May 27, 1968, to Chairman Mills 3333 United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW), Walter P. Reuther, president, statement 1755 Union Steel Chest Corp., 0. J. Mitchell, Jr., vice president, letter dated June 4, 1968, to Chairman Mills 2258 United Mine Workers of America, District 50. (See Glenndenning, Howard A.; Kaminski, Jerome; Kennedy, Edward E.; Lewis, Joseph H.; Se- bastinas, A.; and Del Signore, M.) United Rubber, Cork, Linoleum, and Plastic Workers of America, AFL- ClO, Peter Bommarito, president, statement 4180 United Textile Workers of America, AFL-CIO, George Baldanzi, inter- national president, statement 2628 U.S. Austrian Chamber of Commerce, Inc., Dr. Ernst Rott, executive secretary, letter dated May 29, 1968, to John M. Martin, Jr., chief counsel, Committee on Ways and Means, with memorandum attached - 1771 U.S. Brewers Association, Allan A. Rubin, vice president and counsel, and John T. Latella, associate counsel, statement 2826 U.S. Cap Screw Service Bureau, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 U.S. Dry Pea and Lentil Industry, statement 5087 U.S. Extrusions Corp., Emil H. Buckner, secretary-treasurer, letter dated June 27, 1968, to Chairman Mills 3377 U.S. Machine Screw Service Bureau, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 U.S. Wood Screw Service Bureau, et al., George P. Byrne, Jr., secretary and legal counsel, statement 3027 Utah, State of, Hon. Calvin L. Rampton, Governor, statement 4059 Utsey, James, president, Alabama Garment Manufacturers Association, letter dated June 18, 1968, to Chairman Mills, with resolution attached and with covering letter from Hon. Bill Nichols, a Representative in Congress from the State of Alabama 2626 Vail, George R., vice president and director, Continental Baking Co., and president, Morton Frozen Foods Division, statement 3342 Vander Ende, Gerrit P., San Francisco, Calif., letter dated May 22, 1968, to Chairman Mills 5096 Veeder, Nicholas P., chairman of the board and president, Granite City Steel Co., statement 2254 Vegetable Growers Association of America, Albert E. Mercker, executive secretary, statement 5086 Veitfort, T. E., managing director, Copper & Brass Fabricators Council, Inc., letter dated June 19, 1968, to Chairman Mills, with statement attached 2325 Verity, C. William, Jr., president, Armcô Steel Corp., statement 2253 Vinyl Maid, Inc., Wendell B. Shearer, president, letter dated June 17, 1968, to Chairman Mills 5092 Virginia Beef Cattle Association, Martin F. Strate, executive secretary, let- ter dated May 24, 1968, to Chairman Mills 3329 Walker, Charls E., executive vice president, American Bankers Associa- tion, letter dated June 17, 1968, to Chairman Mills 1809 Walker, James L., president, Davis Wire Corp., letter dated July 9, 1968, to Chairman Mills, with attachments 2269 Warehousemeii's Association of the Port of New York, Inc., Arnold H. Shaw, counsel, letter dated June 18, 1968, to Chairman Mills 1801 PAGENO="0042" XLII Warner, James H., secretary, and Russell Forsythe, president, Ohio Cattle Feeders Association, letter dated June 17, 1968, to Chairman Mills, Page with attachment 3326 Washington, State of, Hon. Daniel J. Evans, Governor, letter dated June 7, 1968, to Chairman Mills, with position paper attached 1719 Washington Cattle Feeders Association, C. A. Courtright, president, letter dated June 5, 1968, to Chairman Mills 3329 Washington Cattlemen's Association, Inc., John Woodard, president, letter dated June 14, 1968, to Ways and Means Committee 3330 Washington Steel Corp., T. S. Fitch, president, letter dated June 28, 1968, to Chairman Mills 1928 Webb, Mrs. Ralph, president, League of Women Voters of Greater Lafay- ette (md.), letter dated June 27, 1968, to Chairman Mills 994 Weiss, Steven J., counsel, National Handbag Association, statement 4134 Wendt, Harold J., vice president, production, Ocoma Foods Co., letter dated May 31, 1968, to Chairman Mills 3344 West Central Texas Oil & Gas Association, D. L. McDonald, president, statement 4205 West Mexico Vegetable Distributors Association, A. B. Conrad, secretary- manager, statement, with forwarding letter from Hon. Morris K. Udall, a Representative in Congress from the State of Arizona 5088 Western Dairy Products, Inc., statement 4892 Westwood, Richard E., president, EMBA Mink Breeders, Association, statement 4014 Wexler, Dr. William A., president, B'nai B'rith, statement 1028 Whealy, Roland A., vice president, Ashland Oil & Reaning Co., statement~ 4393 Williams, Mayme, secretary, Mendocino County (Calif.) Farm Bureau, letter dated June 19, 1968, to Chairman Mills 3334 Williams, Oliver, New York, N.Y., statement 5096 Wimmer, Ed, president, Forward America, Inc., radio talk 1733 Window Glass Cutters League of America, Harry W. Baughman, Jr., national president, statement 3824 Wine Institute, Don W. MeColly, president, and Jefferson E. Peyser, general counsel, statement 2803 Winn, Hon. Larry, Jr., a Representative in Congress from the State of Kansas, letter dated July 12, 1968, to Chairman Mifis 3168 Wittig, Harley, past president, EMBA Mink Breeders Association, statement 4013 Wolfson, J. Theodore, president, Business Builders International, Inc., article from Wall Street Journal entitled "Steel firms' profits are ex- pected to spurt as outlays begin to pay off, analysts say" 859 Won Pat, Hon. Antonio B., Territory of Guam, Representative in Wash- ington, statement 3740 Wood, R. S., vice president, M. & R. Refractory Metals, Inc., telegram dated July 11, 1968, to Hon. Florence P. Dwyer, a Representative in Congress from the State of New Jersey, with covering letter 2347 Woodard, John, president, Washington Cattlemen's Association, Inc., letter dated June 14, 1968, to Ways and Means Committee 3330 World Trade Club of Long Island, and Long Island Association of Com- merce & Industry, Fred E. Merrell, secretary, letter dated June 26, 1968, to Committee on Ways and Means, with position paper attached 1789 Work Glove Manufacturers Association, Inc., Deane B. Rusmisell, president, statement 2723 Wright, Ronald, president, Canned Meat Importers Association, state- ment 3338 Wriston, Walter B., president, First National City Bank, letter dated July 12, 1968, to Chairman Mills, with attachment 1810 Young Americans for Freedom, Inc., Randal Cornell Teague, director of regional and State activities, statement 4909 Zimmer, Robert C., Sporting Arms & Ammunition Manufacturers' Institute, statement 3081 Zwach, Hon. John M., a Representative in Congress from the State of Minnesota, statement 1494 PAGENO="0043" FOREIGN TRADE AND TARIFF PROPOSALS TUESDAY, JUNE 18, 1968 HOUSE OF REPRESENTATIVES, CoMMIrrn~ ON WAYS AND MEANS, Wa$hington, D.C. The committee met at 10 a.m., pursuant to notice, in the committee room, Longworth House Office Building, Hon. Wilbur D. Mills (chair- man of the committee) presiding. The CHAIRMAN. The committee will please be in order. Our first scheduled witness this morning is the Honorable Vance Hartke, our colleague from the Senate. Senator HARTKE. Mr. Chairman, I would like to yield my time at this moment and testify after the presentation by the industry and by the union. The CHAIRMAN. Our colleague from Pennsylvania, the Honorable G. Robert Watkins. STATEMENT OP HON. G. ROBERT WATKINS, A REPRESENTATIVE IN CONGRESS PROM THE STATE `OP PE~TN~SYLVAEIA Mr. WATKINS. As a representative of the steel-producing Common- wealth of Pennsylvania, I share with many of our citizens a growing concern in regard to foreign steel imports. The fact that last year 1 out of every 8 tons of all steel mill products used in this country came from a foreign source, gives me sufficient reason for concern. The imports of finished steel products into the United States in 1967 rose to 11.5 million tons and represented in ex- cess of 12 percent of the apparent consumption of these products. And,'look at what has been taking place thus far in 1968. The De- partment of Commerce reports that during the first quarter steel mill product imports amounted to 3.4 million tons-already up 1 million tons over the similar period in 1967. `There is much evidence of the drastic effect steel imports have on our Nation's balance of trade deficit. There also is increasing concern for the serious threat to national security that foreign steel imports could have should they continue to take an ever growing proportion of domestic consumption. It is apparent that in such a case the domes- tic steel industry may not be able to supply requirements in this coun- try in a time of war. Yet another aspect of this problem deserves your consideration. I would like to discuss briefly the impact on the economy of the country and of Pennsylvania resulting from domestic production lost to for- eign steel imports, using 1967 as an example. (1829) PAGENO="0044" 1830 The American steel industry last year lost almost $2 billion in sales to foreign producers of steel mill products. That is the approximate amount that would have been paid to domestic steel producers had the 11.5 million tons of finished steel products imported into this country been producedT here. Assuming that Pennsylvania's steel producers would have earned the same proportionate share of that production as they do of U.S. domestic production, this would have meant $412 mil- lion more in Pennsylvania sales. It is at this point that the impact spreads with a rippling effect felt beyond the confines of the steel industry itself. For instance, lost sales on the magnitude of $2 billion in the steel industry translate into lost sales of $781 million for the suppliers of materials and services. Some- thing on the order of $183 million were lost to these suppliers as a re- sult of the tonnages taken from Pennsylvania steel mills by imports. The impact of the steel industry's sales losses due to imports was felt in government circles too quite substantially, I might add. It is estimated that 1967 steel imports cost Government more than $122 million in corporate and personal income taxes, of which $29 million were the result of the effect of imports on steel sales in Pennsylvania alone. These are ta.xes that were not paid by the steel industry and the employees of that industry which would have been clue had 11.5 mil- lion more tons of steel mill products been ordered from American steel mills, thus providing additional job opportumties for steel work- ers. The figures are most conservative, for they do iiot take into account taxes that would have been paid by suppliers of goods and services, dividend recipients and others who would have derived income as the dollars multiplied through the economy. It appears proper at this point to discuss in more detail the jobs that were not available to American steel workers because of the in- roads being made by foreign steel producers into domestic markets. The human aspects of this problem are obvious but the economics involved are of some interest, too. The employment opportunities lost to foreign steel imports in 1967 would have provided wages and salaries well in excess of $607 million to American workers. That total is exclusive of any moneys paid for benefits, such as vacations, pensions, insurance, et cetera. Now we need only turn to reports of the Department of Commerce and the Bureau of Labor Statistics to see how widespread can be repercussions from steel imports. For instance, had $607 million been paid to steel workers last year, we can estimate that they would have put more than $37 million into savings institutions. The butcher, baker, milkman, grocer and whoever else supplies these families with food would have shared $110 million. Another $163 million would have been spent with businesses in- volveci in housing and $52 million would have gone to the various sup- pliers of clothing. Transportation is a big item in most family budgets, too. The $607 million in wages and salaries would have resulted in an additional expenditure of $68 million for transportation services. It PAGENO="0045" 1831 would also have meant additional spending of $69 million for personal items, recreation and other miscellaneous uses. Our share of those local business losses in Pennsylvania were sizable. First, it has been calculated that the direct wages and salaries lost to steel workers due to imports amounted to approximately $142 million in our State. Because that $142 million was not available, this is what was lost to the various business categories: -Savings institutions, almost $9 million; -Food suppliers, $26 million; -Housing, $38 million; -Transportation services, $16 million; -Clothing suppliers, $12 million; and -Personal supplies, recreation and miscellaneous, $16 million. These are illustrative economic effects of rising imports of steel mill products using the year 1967 as an example. Should such imports take an ever-increasing share of the domestic market, as their continu- ing rate of rise would indicate, they will have a still greater impact upon the economy of our Nation and that of our Commonwealth of Pennsylvania. I contend, gentlemen, that we are 1iot dealing with a steel industry problem. It is a problem that has far-reaching impact on our total economy; one that touches the lives of thousands, perhaps millions, of people who are not directly involved in the making or selling of steel. Foreign steel imports have become a national problem. One, however, for which there is a just solution. It is found in legislation already drafted and before this committee for consideration. The CHAIRMAN. The material appended to your statement will ap- pear at this point in the record. (The material referred to follows:) CALCULATED LOSSES DUE TO 1967 STEEL IMPORTS [Dollar amounts in millionsi Unite,d States Pennsylvania Raw steel (million tons) 16.4 3.85 Finished steel (million tons) 11.5 2.69 Steel employment lost to imports (workers) 73,600 17,200 Total direct wages and salaries 1 $607.6 $142.0 Less personal incometaxes -$80.0 -$18.5 lncomeaftertaies $527.6 $123.5 Less savings -$37.5 -$8.8 Total personaloutlays $490.1 $114.7 Transportation $68.0 $15.9 Apparel $52.1 $12.2 Personal, recreation, and miscellaneous $69.3 $16.2 Food $109.9 $25.7 Medical $27.9 $6.5 Housing $162.9 $38.1 Steel industry sales $1,759.5 $411.9 Steel industry protits (before taxes) $129.0 $30.2 Steel industry profits (after taxes) $86. 4 $20. 2 Federal incometaxes $42.6 $10.0 1 Excludes other employment cost as vacations, pensions, insurance, etcetera. PAGENO="0046" 1832 FACT SHEET, Item Amount Source U.S. raw steel production tons__ 126,920,069 AISI. Pennsylvania raw steel production do~. - - 29,882,000 Do. Total U.S. imports million tons - 11.5 Department of Commerce. Pennsylvania percent of imports 23.5 Lukens. Pennsylvania share of imports, raw steel.~.~million tons__ 3.85 Do. Pennsylvania share of imports, finished steel tons_ 2,691,808 Do. U.S. steel industry employees 555,000 P1St. Pennsylvania steel industry employees 218, 000 Do. U.S. raw steel per worker tons.... 228.7 Lukens. pennnsylvania raw steel per worker do_ - 137. 1 Do. Pennsylvania steelworkers displaced 17,200 Do. Pennsylvania annual salary and wages $8, 256. 88 PISI and Lukens. Steel industry composite price ton_ - $153 Steel magazine. Personal income tax rate percent_ 13 Department of Commerce. Savings rate do_ -- - 7. 1 Do. Personal outlays breakdown Bureau of Labor Statistics, Consumer Price Index. Steel industry profits, percent of sales (AT) 4.91 Steel magazine. Steel industry profits, percent of sales (BT) 7.33 Do. Materials, supplies, freight, and other services (1966) 44.4 PlSl. percent of sales. The CHAIRMAN. Thank you, Congressman Watkins, for the benefit of your fine words. The committee will certainly take them into consideration. Are there any questions? If not, then thanks again. Mr. WATKINS. Thank you, Mr. Chairman; it has been a pleasure to appear before this committee. The CHAIRMAN. Our next witness is from Maryland, the Honorable George H. Fallon. We appreciate your being with us this morning and you are recognized, sir. STATEMENT OP HON. GEORGE H. PALLON, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP MARYLAND Mr. FALLON. Mr. Chairman and distinguished members of the com- mittee, I appreciate this opportunity to appear before you today to express my concern over the growing imports of steel into our country, and in support of legislation that would limit the quota. Steel imports this year are again running at new records. Between 15 and 17 million tons are expected to be shipped into the United States. This level of imported steel would represent about 15 percent of the U.S. production. If the estimate of 15 million tons proves correct, this will be an increase of more than 30 percent from 1967, and if 17 million tons are imported, this will be a 48-percent increase from last year. Also, during 1967, the steel import balance-imports minus ex- ports-reached 9.8 million tons, the largest to date and the ninth straight year of an unfavorable trade balance in steel. These are just a few sobering statistics that indicate that Congress must start giving some relief to the steel industry which has suffered long enough from excessive import competition. We must begin by enacting legislation to limit the amount of steel imports to the United States. I have introduced H.R*. 17265 to provide for orderly tradein iron and steel products and to prevent harm to our domestic economy from such imports. It is essential to pass legislation like this for a healthy economy and strong national security. PAGENO="0047" 1833 Additional facts underscore the immediate need for legislation to protect our steel industry from excessive imports. In the short time since the end Of World War II the U.S. share of world steel production has plunged from 61 percent to 26 percent, while Japan's has increased tenfold, Italy's has tripled and the Soviet Union's has doubled. This drastiô shift in world steel production is partly due to two basic positions of U.S. foreign policy. First, shortly after World War II the United States began to pour money and "know-how" into the shattered war nations and this enabled many of them to build modern steel plants. Today those plants-operated by workers who only earn a small percentage of the wages paid to American steelworkers-are rapidly taking over the U.S. market. Sec- ondly, the U.S. foreign trade policy has operated on the naive assump- tion of fair competition among all nations. In reality, we have any- thing but fair competition today. Most foreign steel producers receive assistance from their governments in numerous ways to compete against U.S. steel producers. For example, in most important steel producing countries of Western Europe, the domestic tax system pro- vides incentives for exporting steel at low prices and offers stiff pen- alties for American steel imports. The greatest threat of these excessive imports is to our own working people. It is well to remember that as we import steel we may also be importing unemployment and sacrificing jobs at home. One of the most serious results of cheap steel imports is the shrink- ing employment opportunity in the steel industry. About 6,400 people are now employed in our steel plants for every million tons of finished products shipped in a year. An additional 1,300 persons are involved in coal and ore mining and transportation. Therefore, 7,700 American men and women are employed for every million tons of domestic steel mill products shipped. In simple language, the 11.5 million tons of steel imports sold in this country in 1967 represents the export of over 84,000 jobs that have gone abroad. The employment situation may become even more critical when peace comes to Vietnam and the boys in uniform come home and begin to look for jobs. The steel companies may not be able to help absorb the returning servicemen unless action is taken to stem this high tide of steel imports. This possibility is even more shocking when you con- sider that most of those imports which are hurting U.S. companies are produced in countries that have done absolutely nothing to help us in the Vietnam war. On the other side of the coin, this import deluge threatens the wage standards of thousands of steelworkers. U.S. wages in steel in 1967 averaged about $3.50 per hour more than in Japan and $2.75 above West Germany. This wage gap is larger than it was in 1952. The labor costs per ton of steel are about $59. This compares very unfavorably to that of Western Europe, $29 per ton; and Japan, $18 per ton. It is easy to see why foreign steel prices beat American prices by as much as $40 per ton or 25 percent. Partly because of these cheap pro- duction costs abroad, American steel companies and labor are forced into a wage-price confrontation spiral. Steel officials state they can- not match the low price of cheap imports and still pay the high wage levels our steelworkers currently enjoy. During this difficult situation, imports this year are increasing sharply because steel users are: stockpiling metal against the pos- sibility of a steel strike this summer. Thus, while our workers and PAGENO="0048" 1834 businessmen engage in the cherished right of collective bargaining, foreign producers take advantage of us. Despite much bravado everyone knows the dofla.r is in trouble. The U.S. balance-of-payments problem is getting worse. It is necessary to simply point out that the entire deficit in our balance of payments, amounting to about $1.4 billion, represents little more than the amount of the trade deficit with respect to steel, which in 1966 was almost $1 billion. Finally, it is important to recall that we are all aware of the advan- tages that will accrue from the final achievement of free world trade. But it is unwise to ignore free-trade barriers. Almost all nations rec- ognize the importance of steel production to their economies and na- tional security, and every country has import problems. Congress must now grapple with a steel import policy, keeping in mind our own na- tional interest. Our current policy is a failure. Congress must act now to insure a viable and expanding steel industry for our nation until other governments of the major steel producing countries are willing to discuss common interests for all nations engaged in steel production. The CHAIRMAN. Thank you, Mr. Fallon. Any questions? The next witness is our colleague from Ohio, the Honorable William E. Minshall. Mr. Minshall, we appreciate having you with us and you are recognized. STATEMENT OP HON. WILLIAM E. MINSHALL, A REPRESENTATIVE IN CO~RESS PROM THE STATE OP OHIO Mr. MINSHALL. Mr. Chairman, distinguished members of the com- mittee, I join in strong support of a limitation on the import of iron ore, pig iron, and steel mill products. As cosponsor of H.R.. 14120, which would provide for orderly trade in these products, I already have registered my grave and growing con- cern about the impact of imports on our domestic steel economy. My great state of Ohio ranks second among the Nation's steel producers and second among steel consumers. Our Ohio steel industry produces more tonnage than France and nearly as much as Great Britain. Some 90,000 Ohioans are employed in the industry, with many thousands more involved in the economic well-being of the industry. The damage being wreaked by increased steel imports is more than a matter of State concern, of course, since it threatens the entire economy of our Nation. You have heard ample testimony from the experts as to the increasingly large share of the United States market being taken over by foreign steel imports. I would like to make part of the printed record of these hearings excerpts from the many hun- dreds of letters I am receiving from concerned individuals in the 23d District of Ohio, which I represent. They come from men and women in all walks of life-from management to labor, stockholder to con- cerned taxpayer. They speak eloquently of the many reasons for this committee to promptly and positively report effective quota legisla- tion to the House floor. "The importing of steel into Ohio at the present rate is a frighten- ing and threatening thrust at our future. For this country to endorse `free trade' at a risk to our economy and without regard for our in- dustry is deplorable." PAGENO="0049" 1835 "If you do not take action to stem the tide of steel imports, there will be a growing reliance on foreign sources of steel which will harm our national security and further contribute to the deterioration of this country's balance of payments~" "It is my understanding that President Johnson has asked Congress for $350 million to subsidize the extra cost of training the first 100,000 hard core unemployed. He also announced that some 60 executives in manufacturing, banking and other fields have agreed to try to find permanent work for jobless in big city ghettos by 1971. It seems some- what paradoxical that in the face of this tremendous effort to find jobs and the expenditures of huge sums of money that we are abdicat- ing employment possibilities to workers in foreign countries. I am referring to the jobs that are being lost in this country as the result of the tremendous influx of foreign steel * * *" "Is it necessary for foreign producers to take 15 percent of our do- mestic market? `I am sure the many thousands of persons employed at good American wages by the steel industry want to keep it a com- petitive industry-as all American industry should be." * ~* * "It is fantastic to learn that $1,300,000 worth of steel was imported into the United States in 1967 and that the steel trade deficit in 1967 amounted to the staggering sum of $1,100,000,000. And further, these steel imports in 1967 reached the all time high of 12.3 percent of the domestic market for steel mill products. Steel imports in the past 6 years have skyrocketed from 3.5 million tons to 11.5 million tons. No industry and the companies it represents can possibly cope with in- creases of this magnitude. Action must be taken before it is too late- before the backbone of the health of the steel industry is very seriously damaged to the extent that it never can recover." "Owning steel stock which has been on t.he decline in value for some time I am concerned about the unfair situation the steel companies are in due to imports. I hope you will support a bill favorable to these companies." * * "It is very discouraging to see foreign steel being unloaded in the Cleveland Port when so many tons of steel are produced here in Cleveland." "I hope you will support the proposed Iron and Steel Orderly Trade Act of 1967. I am sure that you appreciate the importance of such legislation. This measure is not only humane in that it provides health- ful living conditions for the steelworkers of the country, but it is also good business because it will monetarily assist the steelworkers and the country as a whole, as well as the manufacturers and sup- pliers. But perhaps the greatest benefit of all will be the security that will be assured the steel workers. I am 57 years old and would find it impossible to find other employment." * * * 95-159 0-68-pt. 5-4 PAGENO="0050" 1836 "Steel is my livelihood and I am concerned with the rising steel im- ports as actually evidenced by me through visual observation of the Port of Cleveland. Today, the Norwegian freighter, Roiwi is unload- ing 21,000 tons of coil steel which would cover 2 months booking for all of our PT. & L. cold rolled sheet customers in this area * ~. Our office is experiencing every day the loss of stee' orders at lower prices due to labor cost advantages and tax rebates and subsidies." "The main business of our company is supplying the steel industry with iron ore and coal and the vessel transportation thereof as well as certain facilities widely used in the pouring of steel ingots. Obvi- ously our company goes up and down with the steel industry and it is becoming critically important that this industry shares in the growth of the economy." "As a taxpayer I am concerned about the continued increase in the tonnage of steel imported into the United States to the detriment of our domestic industry. American steelworkers are deprived of jobs (and taxable income) and U.S. steel companies' tax contributions are lowered by the substantial unbalance existing in favor of steel imports." "Many of us who work in the steel business have been concerned with the threat to our industry and to our individual job security posed by these ever-increasing steel imports." The CHAIRMAN. Thank you, Mr. Minshall, for bringing to us your thoughts. Are there any questions? Our colleague from Illinois, Mr. Derwinski, is our next witness. We appreciate having you with us this morning, and you are recognized. STATEMENT OP HON. EDWARD 3~. DERWINSKI, A REPRESENTATIVE fl~ CONGRESS PROM THE STATE OP ILLINOIS Mr. DERWINSKI. Mr. Chairman, it is my strong opinion that the results of the Kennedy round negotiations were detrimental to our balance of trade and to American exporters and their employees. May I also emphasize that the present situation creates obvious problems for the domestic steel industry, which very properly deserves the attention of this committee. I include as part of my testimony a statement I inserted in the Con- gressional Record on June 24, on the subject of steel imports. We must develop an effective national policy, properly administered by the executive branch, which would work to remove artificial bar- riers against U.S. exports as well as providing for the competitive com- plications facing U.S. industry from foreign competitors who receive support or subsidies from their governments. (The statement referred to follows:) PAGENO="0051" 1837 IMPORTS AND OUR STEEL INDUSTRY BY HON. EDWARD J. DERWINSKI OF ILLINOIS, IN TIlE HOUSE OF REPRESENTATIVES, MONDAY, JUNE 24, 1968 Mr. DERwIN5KI. Mr. Speaker, the U.S. Government negotiators did not ad- equately serve the United States in the years of negotiations which have pro- duced tariff adjustments. As a result, there are clearly visible adverse impacts on the American economy. One major industry which faces complications from foreign sources and which was unfortunately ignored by our governmental tariff negotiators is the steel industry. In the fifties, steel imports from foreign nations ranged in the 1- to 2-million- ton level annually. The trend changed in 1959 and the steady increase started. Students of international trade were shocked in 1965 when, for the first time in our history, imports for a single year exceeded 10 million tons. But, as events subsequently proved, even this high figure was not to be the ceiling. In 1966, imports increased again, this time to nearly 11 million tons. In 1967, they rose to 111/2 million tons. Where are they now? Figures that once we thought of only as an annual volume are now used to describe monthly inflow. An all-time monthly record of 11/3 million tons of foreign steel came into this country last November. December, January, February, and March each had more than 1 million tons of steel im- ports. These are the cold weather months when the Great Lakes freeze over; the St. Lawrence Seaway shuts down, and imports are supposed to fall. But now the pipelines of steel from abroad are so swollen that they continued to flood our shores in the winter months. The latest blow may be found in Commerce's April figures-a new, all-time record of 1,480,000 tons. Do we realize how much steel this is? In the decade prior to 1959 when the current trend started, the imports for only three full years exceeded the total that came into this country in April alone. In the first 4 months of this year, nearly 5 million tons of foreign steel has come into the United States. This is a new record. It represents an increase of 50 percent over imports for the similar period of last year. Trade sources estimate that foreign steel will continue to come in at this rate, at least, through the balance of this year. Consequently, imports for the full year of 1968 should total at least 15 million tons, also a record. There are those who argue that our Government should not interfere in this ti'ade because any steps to impede the flow of foreign steel into our land is "pro- tectionist" and would only cause retaliation amount foreign countries. I say look at the rules of international trade. Examine the reasons why this foreign steel can so easily compete in our land with our product. Examine the help that foreign steel companies get from their own governments. Examine the openness of foreign markets to our products. Examine the policies of foreign nations in their relationship to acquiring dollars and what they must do to get them. If the import groups that argue in our land for free trade would first establish free entry into their own lands, if their companies would operate as independ- ently of government help as ours do, if their steel companies would abide by the same minimum wage standards for interstate commerce that our companies do, then we could complete with them. However, the way the game is now rigged, our international balance of trade in steel costs us a deficit of more than a billion dollars last year. It may cost us a billion and a half this year. This country has too many responsibilities through- out the world as well as at home to tolerate deficits of this nature indefinitely. They threaten our economy; they threaten our national defense; and they threaten the future of many of our citizens. Mr. Speaker, in lieu of the points I have emphasized, it is obvious that Con- gress, and more specifically, the Ways and Means Committee, must give priority to the problems affecting the steel industry and other areas. It is obvious that the administrators will do nothing. I recognize that this session of Congress is entering its final 5 weeks and if Congress is to provide the necessary le~dslation, we must move without delay. "Free trade" is a wonderful theory to which I prescribe to in principle. However, we as a Nation should not place our major industries in a. position where artificial factors give foreign competition visible advantages. American industrial capacity is a cornerstone of our national greatness. American wage earners, consumers, investors and, in fact, all citizens have a vital stake in maintaining an economic situation within which our major industries such as steel can honestly compete. PAGENO="0052" 1838 The CrrAIru~rAN. Thank you, Mr. Derwinski. Any questions? Mr. DERwINSKI. Thank you, Mr. Chairman. The CHAIRMAN. Our next witness is the Honorable William H. Har- sha, of Ohio. Please come forward, sir, and you are recognized. STATEMENT OP HON. WILLIAM H. HARSHA, A REPRESENTATIVE IN CONG~RLSS PROM THE STATE OP OHIO Mr. HARSHA. On October 26, 1967, I introduced H.R. 13715, c~rfhe Iron and Steel Orderly Trade Act of 1967," and on November 21, 1967, cosponsored H.R. 14120, which was introduced by Congressmen Charles Vanik and Jackson Betts, of Ohio. Both bills have the same general thrust-the preservation of our American steel industry, which is in imminent danger from an ever-increasing flood of low-priced foreign steel imports. Indicative of the depth of concern felt by both industry and labor is the appearance before this committee of Mr. Tom Patton, chairman of the board of Republic Steel Corp., and Mr. I. W. Abel, president of the United Steelworkers-on the same side of the table. Presently these and similar bills are being considered by the Ways and Means Committee; and certain recent events have led me to urge the committee to report this legislation promptly and favorably. Last year foreign steel imports set a new record-11,500,000 tons with a value of $1.3 billion; that was bad enough, but in the first 5 months of this year, imports have reached a new peak and for that period are 56 percent higher than last year's record. Total steel im- ports for 1968 are expected to be in the neighborhood of 17 million tons. Not only is this flood endangering the livelihoods of many thousands of steelworkers as well as the financial health of the industry itself, but its harmful impact on our balance of trade and balance of pay- ments can no longer be ignored. In May the Department of Commerce reports that our imports set a new record for the second month in a row and that we had in fact a negative balance of trade for that month. For the first 5 months of 1968, a paper-thin favorable balance of trade in the order of $972,000 is shown. A major factor in this disturbing trend is the outflow of dollars for foreign steel which through the first 5 months of 1968 has amounted to $735,563,000. It should also be noted for the record that one of our principal trading partners-France-faced with somewhat the same problems insofar as their balance-of-payments problems are concerned as we are immediately imposed import quotas on a number of items including steel and likewise instituted a new series of export subsidies. France's action is just most recent evidence that no other nation in the world will permit the strength and viability of its steel industry to be impaired. Can and will we stand icily by and watch this basic and vital industry of ours condemned to a not-so-lingering death? Again, I urge the committee with all the force and sincerity at my command to report out promptly and favorably the Iron and Steel Orderly Trade Act of 1967. The CI-IAIRMAN. Any questions? If not, then, thank you, Mr. Harsha, for sharing your views with us. PAGENO="0053" 1839 Mr. HARSHA. Thank you, Mr. Chairman. The CHAIRMAN. Our colleague from Alabama, Mr. Bevill, is our next witness. We appreciate having you with us this morning, and you are recognized. STATEMENT OP HON. TOM BEVILL, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP ALABAMA Mr. BEVILL. Mr. Chairman, distinguished members of the Ways and Means Committee, I want to thank you for giving me the opportunity of appearing before you today to express my concern over the growing imports of foreign steel into this country. This trend of importing more and more foreign steel into the United States each year disturbs me greatly. It disturbs me particularly be- cause of the effects excessive imports are already having on our major southern steel-producing areas of Birmingham and Gadsden, Ala. I refer to our Southeastern area, but the same effect can be observed in other steel-producing areas of our Nation. My home State of Alabama will be severely hit if foreign steel im- ports overpower our steel industry with cheap steel. Alabama is the South's biggest steelmaking State. In 1908, imports are expected to amount to 15 million tons. This is a total import increase of one-third over last year. It is obvious that this rapidly rising importation of foreign steel is taking jobs away from American steelworkers. It is obvious that a domestic crisis looms as a distinct reality unless something is done in the very near future. I feel, Mr. Chairman, that we must approach this problem with a sense of urgency. We must stop analyzing the problem; we must stop talking of the dangers involved and get on with some proper action. Legislation is needed to limit the amount of steel which can be imported into the United States. It is estimated that if the steel that is now being imported from for- eign countries were produced in this country, at least 70,000 additional jobs would be available for American steelworkers. As you well know, we are confronted by cheap foreign labor costs, the increased technology of foreign producers, export incentives and subsidies by most foreign governments and, lastly, by the sheer total of overproduction. All in all, it seems that overseas production goals apparently are based on visions of unlimited sales to the United States. Much of the intensive competition due to surplus output has prompted foreign mills to sell to us at "bargain basement prices." Mr. Chairman, I stand for fair competition. Our steel industry con- sists entirely of private enterprise. But administration policies are affecting the industry adversely. This industry is basic to our national security in war and peace. We must control the excessive imports that are undercutting our steel industry. I respectfully urge and request that immediate, favorable action be taken on legislation which will establish controls on steel imported into this country. The CHAIRMAN. Are there any questions? If not, then thank you Mr. Bevill. Our next witness is from California, our colleague, Mr. Pettis. Proceed, please. PAGENO="0054" 1840 STATEMENT OP HON. IERRY L. PETTIS, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP CALIFORNIA Mr. PETTIS. Please permit me to make the following comments which are directed to the serious problem of foreign steel imports. A prominent integrated steel producer employing 8,500 people is located in my congressional district. I am receiving many communications from these steelworkers and this letter reflects their concern over the continuing increase of steel imports which they feel is becoming a threat to job security. A fair solution to the steel import problem facing the Nation should comprehend regional quotas based on consumption patterns. I believe this would provide an equitable balance throughout the country. Coastal regions in 1967; namely, the Atlantic (15 percent imports), South Central (18 percent imports), and the west coast (22 percent imports), received disproportionate steel imports in relation to their share of total steel consumption and would very likely continue to be penalized under existing proposed legislation. These figures com- pare with a national import figure of 12 percent in 1967. Western steel producers have been plagued with approximately twice the percentage of imports to consumption as compared with the Nation as a whole since steel imports began their phenomenal rise in the late 1950s. In the first quarter of 1968, imports through Western ports accounted for an estimated 28 percent of total steel shipped into the seven Western States from all sources. With a national import figure in excess of 12 percent during calendar year 1967 deemed detri- mental, I suggest there is little doubt that the present 28 percent in the West is injurious and presents a national security problem. Without the safeguard of regional quotas, it is difficult to see any relief for coastal regions of the United States. I believe it is in the national interest to maintain a healthy steel industry in each of the four major producing regions of the United States. Passage of the pending legislation would not correct this regional imbalance. For this reason and for appropriate consideration I am herewith submitting an amendment calling for regional quotas. A second attachment is a statement concerning the pending iron and steel orderly trade bills and the probable impact of a high rate of im- ports in the Western region of the United States as compared to the more equitable regional consumption formula provided by the attached amendment. May I add the above statement and the proposed amendment have been endorsed by a number of steel producers in the Western region of the United States, including Judson Steel Co., Emeryville, Calif.; Allison Steel Manufacturing Co., Phoenix, Ariz.; Oregon Steel Mills, Portland, Oreg.; Pacific States Steel, Niles, Calif.; Kaiser Steel Corp., Fontana, Calif.; and Northwest Steel Rolling Mills, Seattle, Wash. (The attachments referred to follow:) PAGENO="0055" 1841 PROPOSED AMENDMENTS TO THE "IRON AND STEEL ORDERLY TRADE ACT OF 1967" I. Paragraph (5) is added to Section 3 to read as follows: The term "region" means any one of the four regions comprised of the states or territories as shown below: (a) Pacific Coast and Mountains consisting of: Montana, Idaho, `Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada, Washington, Oregon, Cali- fornia, Alaska, and Hawaii (b) South Central consisting of: Kentucky, Tennessee, Alabama, Missis- sippi, Arkansas, Louisiana, Oklahoma, Texas (c) North Central consisting of:, Ohio, Indiana, Illinois, Michigan, Wis- consin, Minnesota, Iowa, Missouri, N. Dakota, S. Dakota, Nebraska, and Kansas. (d) Atlantic consisting of: Maine, New Hampshire, Vermont, Massachu- setts, Rhode Island, Connecticut, `New York, New Jersey, Pennsylvania, Delaware, Maryland, District of Columbia, Virginia, West Virginia, N. Carolina, S. Carolina, Georgia, Florida, and the Commonwealth of Puerto Rico. II. Paragraph (1) and (2) of SectiOn 4 are deleted. Paragraph (3) is re- numbered (2). III. Paragraph (1) of Section 4 shall read as follows: (1) Total imports of any category into any region for each year shall not exceed an amount determined by applying to the average annual consump- tion of that category into that region during the first three years of the four years immediately preceding the year in which the limitation is to be effective a percentage equal to the percentage of United States average annual consumption of that category represented by ~imports during the years 1964 through 1966 inclusive. IV. Section 5, Lines 1 and 2 of Page 5 is deleted and changed to read: "annual consumption during the first three of the four years immediately preceding the year in which the restriction is to apply." V. Section 5, Line 19, is deleted and changed to read: "(1) of Section 4, by proclamation restrict annual imports." VI. Paragraph (2) of Section 9 is deleted and Paragraph (3) is renumbered as Paragraph (2). The "Iron and Steel Orderly Trade Act of 1967" has been introduced by a number of Members of the House in the 90th Congress. As these bills now read, we believe the Western Region would continue to re- ceive twenty-five percent or more of its steel consumption from imports. This would compare to the Great Lakes Basin region, the country's largest consum- ing area, which would receive approximately five percent of their consumption in the form of imports. The basic reason that the Western Region would receive a disproportionate share of imports is that Japan will receive 43% of the allow- able import tonnage and the Pacific Coast is their most economic outlet. An ex- ample of how we believe this will work is shown in the following set of figures: Total allowable imports in 1967 as a fixed percentage equal to the ratio of total imports to average consumption during the base period (1964-1966). 95,840,000 net tonsX9.6%, 9,192,000 net tons. Japan's allowable imports would be 43% based on. their share of imports in the base period. 9,192,000 net tons X43%, 3,947,000 net tons. In the year 1966 Japan exported through West Coast ports 1,4340,000 net tons of steel products. We firmly believe that this amount of tonnage and possibly even more of their allowable allocation would continue to come in. If our as- sumption is correct, from Japan alone, the West Coast would receive approxi- mately 18% of the nation's imports, while consumption is approximately 9% of the nation's total. The attached table will indicate for selected products our estimate of the consequences of the Act as now proposed vs. the more equitable regional consumption version. PAGENO="0056" 1842 COMPARISON OF NATIONAL AND REGIONAL IMPORT QUOTAS FOR SELECTED PRODUCTS 1964-66 BASE PERIOD, 1966 MODEL YEAR Product Current bill Proposed am ended bill National quota Estimated minimum western region imports Imports, percent of western consumption National quota Western region quota Plate Reinforcing bar Carbon bars Hot-rolled sheet Cold-rolled sheet Galvanized sheet All other products 729,000 550, 900 906, 300 1,441,400 927, 900 364,100 4,272,200 201,000 67,700 87, 100 276,800 223, 000 146,100 962,000 17.5 11. 8 17. 3 33.3 42. 8 26.6 21.1 729,000 550, 900 906, 300 1,441,400 927,900 364,100 4,272,200 81,900 80, 000 56,900 92,400 26, 000 27,900 446,000 Total products 9,191,800 1,963,700 22.6 9,191,800 811,000 Note: The difference in the western region estimated imports under a national import quota and a regional import buota based on consuming patterns is: 1,963,700 net tons against 811,000 net tons. The CHAIRMAN. Thank you, Mr. Pettis. Any questions? Mr. PETTIS. Thank you for your kind attention, Mr. Chairman. The CHA~MAN. Our colleague from Michigan, the Honorable Phillip K Ruppe, is our next witness. We appreciate having you with us this morning, and you are recognized. STATEMENT OF HON. PRILLIP E. RUPPE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN Mr. RUPPE. Mr. Chairman, it is with great concern that I have noted the fact that imports of steel mill products in 1967 again reached a new record level. The 11,455,000 tons which were imported last year represented an increase of 6.5 percent over last year and amounted to 12.2 percent of steel consumption in our Nation. One of my principal concerns is for the security of the Nation. In a period of world danger are we well advised to permit any substantial part of our steel supply to be produced abroad? Our domestic steel industry contends that it has adequate capacity to meet the Nation's maximum needs, but can the industry continue to maintain a reserve of unused steel capacity for long? If not, where will this Nation obtain the steel it needs for its military and civilian requirements if any substantial part of the flow from overseas should be halted? The congressional district I represent is an excellent example of why we must deal with these growing iron ore and steel imports. The mining of iron ore has been a major industry in this district- probably the largest, in fact-for over 100 years. Michigan's Upper Peninsula has constituted a substantial part of the raw materials for steel plants in and around the Great Lakes area, the largest steel- producing district of our Nation. For a number of years after World War II the demand for Michigan ore declined. High grade natural ore from this area became scarce and steel firms increasingly looked to other areas for the tonnages they formerly obtained in Michigan. But in recent years this situation has turned around. New mining methods and new technological developments in the upgrading of lean ore, has given the iron mining industry of my State a new lease PAGENO="0057" 1843 on life. Furthermore, the new technology for upgrading ore, together with the large tonnages of lean iron-bearing materials which lie be- neath the surface of our land, can assure prosperity for the Michigan Upper Peninsula for many years. No, the question is not: Do we have ore in Michigan of competitive quality and of competitive cost? The question we now must answer is: Will our steel industry, including that segment based in the Great Lakes basin, continue to thrive and consume this ore? A few years ago, any doubts on this score would have been regarded as fantasy. Today, they are disturbingly real. Let me cite an example why this condition must be regarded with concern. Ten years ago, foreign-made steel entering the United States amounted to 1,707,000 tons. Last year, that much steel and more entered the United States through just one customs district-the district of Detroit! The total foreign-made steel that entered the United States through Great Lakes ports, through a few other inland ports, and across the Canadian border, last year was approximately equal to our Nation's steel imports only 6 years ago. The opening of the St. Lawrence Seaway in the spring of 1959 made the huge steel markets of the Midwest available to the steel producers abroad for the first time and, as you can see, they have taken full ad- vantage of that fact. Thus, we must note with alarm, that whereas steel imports for the Nation as a whole have increased nearly tenfold in the past decade, imports into the Great Lakes area have increased over sixtyfold in that same period. The marked resurgence of iron mining in upper Michigan is periled by this situation. If less steel is to be made in the Great Lakes basin, less ore will be needed. Instead of an expanding economy in northern Michigan, ours will again be one of steady contraction. The solution to this problem, in the short run at least, is the imposi- tion of quotas on steel imports. Recognizing that some foreign nations have geared their economies to steel production for export to the United States, reasonable quota legislation would permit the importa- tion of steel in quantities around the levels of the past several years. The bill I have introduced into Congress recognizes that condition. Furthermore, as American steel consumption grows, the tonnage per- mitted to enter the United States under this bill would grow with it, thus permitting foreign steel producers to share in our growth, but not at the jeopardy of our domestic steel producers and our domestic iron mining industry. Finally, it would call for a review after 5 years to evaluate the effect on our national security, on employment oppor- tunities and on our balance of payments to determine whether such legislation should be modified, continued, or perhaps repealed. To me, this is eminently fair legislation which could scarcely invite retaliation by our industrial friends in other lands. Thus, this bill takes into account the need of some of these foreign countries to export to live, and fully recognizes that only in America are there markets for steel tonnages of such size. It permits us to pro- tect the investment~s of American stockholders and the jobs of tens of thousands of steelworkers and iron ore miners, without seriously dis- turbing existing trade relationships. We must be mindful of the rate at which this problem is growing. Each month that we delay coming to grips with this issue, the more PAGENO="0058" 1844 serious it becomes to our domestic economy. At the same time, each month we delay in establishing sensible quotas, the more serious the impact on the economies of other steel-producing countries will be when we come to the establishment of some restraints, as we inevitably must. There are some who believe that the superior technological know- how of this country can overcome the cost disadvantages under which our domstic steel industry operates due to the high standard of living of our Nation. This is wishful thinking. Most foreign steel plants are as modern as our own and the productivity of their steel workers, which for years has lagged behind ours, is catching up. They have im- proved the availability of low-cost raw materials so that advantages once enjoyed by the domestic steel industry on that score are now of lit- tle consequence. Furthermore, steel teclmology, like most technology, is international in scope. Improved methods which may yield advantages for one country are soon recognized and adopted by others. These are hard facts to face, but we cannot afford to ignore them. Some economists have castigated proposed restrictions on imports on the basis of the so-called principle of comparative advantage. This principle holds that a nation which has the most favorable combina- tion of conditions, materials, and labor to produce any given product should be permitted to do so without restraint by artificial factors such as tariffs or quotas. The bright new world in which this principle can be universally embraced is not yet with us. We cannot, in these days, jeopardize our supplies of essential materials such as steel to experi- ment with the practical application of theoretical principles. Edmund F. Martin, chairman of American Iron & Steel Institute phrased it very well when he said: In a permanently peaceful world where all markets are equally open to all comers and sources of supply are never threatened, this might not matter. In today's dangerous and confused world, it matters a great deal. With this viewpoint I heartily concur and I urge your favorable consideration of the legislation which I have introduced in full sup- port of this position. The CHAIRMAN. Are theie any questions? If not, then thank you Mr. Ruppe, for sharing your views with us. Mr. RUPPE. Thank you, Mr. Chairman, for listening to me. The CHAIRMAN. Our next witnesses will be Mr. Patton and Mr. Abel. Will you please come forward? Mr. Patton is with the American Iron & Steel Institute and Mr. I. W. Abel is president of United Steelworkers of America. Permit the Chair to take occasion to call attention to the high de- gree of cooperation that the committee has received from representa- tives of the steel industry, both employees and management, in the coordination of the testimony that they will present to the committee. This is an example that I hope other industry groups will be willing to follow. It is a real pleasure to have you gentlemen with us this morning and we are pleased to note that there are many things, at least which come to the attention of the Ways and Means Committee, about which you gentlemen are in complete accord. You are recognized, Mr. Patton. PAGENO="0059" 1845 STATEMENT OP THOMAS P. PATTON, AMERICAN IRON & STEEL INSTITUTE; ACCOMPANIED BY LAURENCE PENNINGER, JR., A~D WILLIAM G. STEWART; COORDINATING WITH I. W. ABEL, PRESI- DENT, UNITED STEELWORKERS OP AMERICA; ACCOMPANIED BY JACK SHEEHAN, LE(~ISLATIVE~ REPRESENTATIVE Mr. PATTON. Mr. Chairman and gentlemen of the committee, my name is Thomas F. Patton. I am chairman of Republic Steel Corp. I am accompanied by Mr. William G. Stewart, president of Cyclops Corp., a producer of specialty steels, one of the smaller companies in the steel industry, and by Mr. Laurence Fenninger, Jr., assistant vice president of Bethlehem Steel Corp. We are appearing today as repre- sentatives of the American Iron & Steel Institute, a nonprofit trade association having 67 member companies in the United States. Those companies, which include mine and those of my colleagues, account for about 95 percent of this country's raw steel production. Before I proceed with my statement, I should like to express my own and the institute's appreciation for the opportunity to be heard during your review of tariff and trade proposals. May I point out that we appear today together with Mr. I. W. Abel, president of United Steelworkers of America, and his colleagues from that union, which represents the vast majority of the employees of the institute's member companies. Whatever our differences may be as to other matters, we and the union are of one mind as to the seriousness of the problem of imports of pig iron and steel mill products into the United States. We and the union are in agreement that there is an immediate need for some reasonable limitation on the importation of those commodities to pre- vent the present negative balance in steel trade from growing rapidly worse. Recognizing the importance of conserving the committee's time and the extensive testimony you have already heard on general trade mat- ters, I shall confine my remarks to a summary of the problem of steel imports and the solution which the member companies of the institute endorse. Documentation for this statement is found in "The Steel Import Problem" published by the institute in October 1967, and recently up- dated to include those 1967 data currently available, a study of steel imports prepared by the staff of the Committee on Finance of the U.S. Senate, and a paper prepared by the institute on the national security aspects of steel imports. I ask that these documents be en- tered in the record of these hearings, although I suggest that only the national security paper need be niade part of the printed record. In this statement, I shall use data applying only to trade in steel mill products to avoid confusion. Those data are generally representa- tive of the trade in pig iron, although there are substantial differ- ences as to countries of origin of imports. All data on imports and exports will be expressed in net tons of 2,000 pounds. DIMENSIONS OF THE CURRENT IRON AND STEEL IMPORT PROBLEM The dimensions of the iron and steel import problem can be de- scribed quickly. Until 1959, the United States was a net exporter of PAGENO="0060" 1846 steel. In 1957, for example, we exported 5.3 million tons of steel mill products and imported a nominal 1.2 million tons. In 1967, by con- trast, we exported a mere 1.7 million tons, about half of which was financed by the United States under AID programs, and imported 11.5 million tons, 12.2 percent of the total steel supply in the United States. Thus, in one decade, we experienced an adverse swing in trade of about 14 million tons having a value of about $1i/2 billion. During the late months of 1967 and the early months of this year, the situa- tion has grown rapidly worse. In fact, steel imports in the first 4 months of 1968 were more than 50 percent above the corresponding period last year, the previous record for those months. (Chart 1.) CHART 1 U.S. DIRECT. INTERNATIONAL STEEL TRAOE 1968 Initially, steel imports were concentrated in product categories, such as common wire rods, concrete reinforcing bars, and wire products, the manufacture of which involves relatively simple technology and coin- paratively broad dimensional and physical tolerances. As time has gone on, however, there has been a marked shift toward the more sophisticated products, with the greatest gains occurring in flat-rolled items such as hot- and cold-rolled sheets and the specialty products-stainless steels, tool steels, and high alloy steels. In fact, imports of specialty steels now account for a higher proportion of the supply in the United States than do imports of common steel products. A similar shift has occurred in the distribution of imports by geo- graphical regions. Originally, as might be expected, imported steel was confined largely to coastal areas. With the opening of the St. (Million Net Tons) 1946 1950 1955 1960 1965 PAGENO="0061" 1847 Lawrence Seaway, however, all major steel-consuming sections of the United States became markets for steel produced abroad. Last year, for example, the port receiving the largest amounts of imported steel was Detroit, Mich. As to countries of origin, Western Europe, a traditional steel ex- porter, supplied about two-thirds of all U.S. steel imports at the beginning of the last decade. The rapid expansion of the Japanese steel industry has changed the picture radically. Presently, the coun- tries of the European Common Market account for about 42 percent of our total imports and Japan accounts for a similar proportion. CAUSES OF THE STEEL IMPORT PROBLEM The basic forces which have changed the United States from a net exporter of steel to the world's greatest importer are four: First, the availability of a large amount of excess steel-producing capacity outside the United States and the policies of certain foreign countries as to the use of this capacity; Second, production costs in other countries which are far less than those in the United States; Third, resulting low prices in world markets, some of which are below the home market prices of many foreign producers; and Fourth, measures taken by foreign governments to protect and strengthen their own steel industries and to encourage exports. For Some time after World War IT, steelmaking facilities abroad were largely occupied with filling their own domestic requirements. Supply and demand were in approximate balance and such steel as was available for export went largely to countries which traditionally had imported all or most of their steel fleeds. The demand for steel after World War IT was, of course very high. This, together with such factors as the formation of the European Common Market and the anticipated growth of under- developed countries, led the planners in Western Europe and other industrialized countries to overestimate the growth of steel consump- tion. The 1958 economic recession in Europe and Japan revealed for the first time a substantial excess of ëapacity over demand. It has never disappeared and, in fact, has grown to the point where steelmaking capacity outside the United States now exceeds production by about 55 million tons. (Chart 2.) The pressure which it exerts on world steel markets results from the determination of other countries to export in an effort to employ their steelmaking facilities as fully as possible. It has been aggravated by the establishment of new steel industries in the less developed coun- tries and the deliberate expansion of exports by Japan. Exports to the United States have been stimulated by the substan- tial cost advantages enjoyed by foreign producers. Evidence obtained by the institute and corroborated, by the Senate Finance Committee staff study indicates that direct production costs in Japan are about $40 per ton and those in Western Europe are about $25 per ton below those of the United States. With the opening of large coal and iron ore deposits around the world_-principafly through the activities of American producers and with American financing-the development of very large bulk cargo PAGENO="0062" 1848 10 0 CHART 2 ships, and the construction of steel plants on deep water, foreign pro- ducers have been able to reduce their raw materials costs to levels about equal to those of the United States. Costs of purchased services and supplies are below those in this country, largely because they reflect most lower wage levels. This is also true of construction costs, with the result that higher interest rates abroad have been offset by much lower initial costs. Japanese hourly employment costs, including all identifiable benefits, are about one-fourth of ours, while those in Europe are one-half to one-third those in this country. This is largely a reflection of differ- ences among national wage levels, since the relationship between steel wages and industrial wages generally is about the same in Europe and Japan as it is in the United States. Such differences obviously cannot be changed significantly by the actions of one industry or one labor union. By way of contrast, output per man-hour in the Japanese in- dustry as a whole is about three-quarters of ours and in the newer plants it appears to equal the current level in this country. Thus, unit labor cost in the Japanese steel industry is only one-third that in the United States. The difference is very large-$35 to $40 per ton of steel mill products. Unit labor costs in Western Europe, where productivity is lower than it is in Japa.n, are about $25 per ton below ours. Following World War II, the United States provided both money and know-how for the rebuilding of war-torn steel industries abroad. This, together with the rapid expansion of domestic markets in other countries, led to the adoption of superior technology around the world. That has continued and technological developments in steel are now quickly available to all who have the funds required for their adoption. 60 50 40 30 20 1955 56 57 58 59 60 61 62 63 64 65 66 70 75 PAGENO="0063" 1849 Thus, although the steel industry in the United States still leads the rest of the world in efficiency, its advantage is smaller now than it was 10 years ago. Furthermore, even maintaining, let alone expand- ing, that advantage is becoming more difficult as the steel industries of Western Europe and Japan approach that of the United States in size and continue to obtain, from domestic and other sources, the funds required for expansion and improvement of their plants. In any case, technology now available or in sight could not possibly increase output per man-hour to a level which would make our produc- tion costs competitive with those of the European and Japanese steel industries. Excess capacity and the determination to use it for export purposes have caused the decline of steel prices on the world market. Low export prices depress the prices charged in the domestic markets of the producers toward world levels. This is especially true of Western Europe and the United Kingdom and it has been the source of con- stant complaint by producers in those countries. Little is known about Japanese domestic prices since most of the steel used in that country is sold to affiliates of the steel producers or through associated trading companies. I might note that this system of distribution also acts as a powerful deterrent to imports. Indirect evidence derived from the financial reports of Japanese steel producers indicates that domestic prices are somewhat higher than export prices. Such information as we have been able to collect shows that world steel prices are little, if any, above the direct pro- duction costs of European producers and roughly equal to the total costs of the Japanese. Delivered prices of foreign steel in the United States average $30 to $40 per ton below the prices of steel produced in this country, while the average profit before taxes of American steel companies in 1967 was about $12.50 per ton. The key to current world market price levls is the cost structure of the Japanese steel industry. Japan is the largest single exporter and all other steel exporters are affected by Japanese prices, especially in the U.S. market. Foreign governments have generally taken the view that domestic steel industries capable of supplying all or most of the steel required by their economies are necessary for economic strength. They have also supported, with few exceptions, efforts by their steel industries to maintain high production levels and, therefore, high employment, regardless of market demand. In many cases, they have looked on steel exports as an important means of generating foreign exchange. These views have led other governments increasingly to involve themselves in the affairs of their steel industries and to encourage exports. This involvement has taken a variety of, forms, including outright owner- ship, as in the case of Great Britain; majority equity holdings, as in the case of Italy; low-interest bearing loans, as in the case of France; preferential capital allocation, as in the case of Japan; and the en- couragement of mergers and the formation of cartels in France and West Germany. All the steelproducing countries, save the United States, have a variety of effective restrictions on steel imports, some of which are matters of practice and custom rather than of formal laws and regula- tions. These include, from time to time and in varying combinations, border taxes, all-pervasive domestic preference buying, special ware- PAGENO="0064" 1850 housing charges, customs redtape, and other restrictions tantamount to outright embargoes. Exports are encouraged by protection of domestic markets and by a variety of special devices including tax incentives and rebates, direct and indirect subsidies, favorable credit terms for exports, and credit guarantees. PROBABLE FUTURE DEVELOPMENTS IN SUPPLY, DEMAND, AND COST FACTORS The current situation is extremely serious and the prospects for the future are worse. World steel trade has been expanding at an average rate of about 41/2 percent a year. The major foreign producers, how- ever, have been expanding their steelproducing facilities at much higher rates, each with the intention of increasing his exports. The most notable example is, again, Japan. Last year, Japan produced 68 million net tons of raw steel, more than any other country except the United States and the Soviet Union. That was double the amount produced as recently as 1963. Capital expenditure plans recently sub- mitted for Government approval call for a steelmaking capacity of 110 million net tons by 1971, 4 years earlier than had been anticipated. While domestic consumption has been growing very rapidly in Japan, it has not equaled that expansion rate over the years. The meaning is clear: vastly increased exports from Japan. Meanwhile, the European industry is continuing to expand faster than domestic consumption in spite of financial difficulties and a sub- stantial current excess of capacity. (Charts 3 and 4.) 120 100 40 CHART 3 Rate STFEL CAPACITY. PRODUCTION & CONSUMPTION IN JAPAN 80 60 20 PAGENO="0065" There is little prospect that steel export markets outside the United States will grow rapidly enough during the next 5 years or so to ab- sorb the excess supply. Thus, the principal target for rising exports from Japan and Europe is the U.S. market. As to costs, the Senate Finance Committee sta~ff study noted that if steel hourly employment costs here and abroad continued to rise at the rates of increase experienced from 1960 to 1964, it would take the French 21 years, the West Germans 25 years, and the Japanese 26 years to catch up with the United States. Since world supplies of iron ore and coal are expanding rapidly, foreign producers may enjoy even lower prices for these raw materials in the futürë. Thus, American producers are likely to continue to be at a serious cost disadvantage. This, together with the growing supply of steel available for export from other countries, makes the continued rapid growth of steel im- ports into the United States a certainty unless steps are taken by the Government to prevent it. IMPLICATIONS OF A CONTINtITED RAPID RISE IN IRON AND STEEL IMPORTS The growth of imports into the United States during the last 10 years has taken a substantial portion of the secular growth~ in steel consumption in this country during that period. The disparity in growth rates has been extremely large; imports have grOwn about 10 times as fast as consumption over the last decade. The implications are very serious. If these trends continue, they mean an inevitable decline in steel producing facilities in the United States in both relative and 1851 CHART 14 95-159 0-68-pt. 5-5 PAGENO="0066" 1852 absolute terms. The steel companies obviously cannot justify eco- nomically the continued expenditure of their owners' money for steel- making facilities under these conditions. During the course of our industrial history, many industries have waxed and waned in response to changes in demand and other market conditions. There are, however, two factors which make the prospec- tive decline in the domestic steel industry as a consequence of rising imports a real problem for the United States. The first is its effect on the security of the United States. The role of steel in national defense is twofold. It is an important component of the great variety of ma- terials and equipment used in military operations of every kind. At present, direct military requirements account for more than 41/2 million tons of steel mill products, many of them highly specialized. Even more important m terms of the volume required, steel is an es- sential ingredient in the facilities and equipment used in the manufac- ture and transportation of war materials, whether or not they are made of steel. The executive branch agencies concerned with national security have estimated that a conventional, non-nuclear war of 3 years' duration occurring in the early 1970's when gross national product had reached $1 trillion would result in direct military steel requirements more than double those of today and an increase in steel demand for both military and civilian purposes of about 20 percent, to a total of 140 million tons of steel mill products. The assumption is that sources of steel, other than Canada and Mexico, would not be available in case of such a war and that civilian requirements would not be curtailed. Normal requirements are expected to increase to 115 million tons of steel mill products by 1975. If imports rise at only half the rate ex- perienced during the last 10 years, they will amount to 30 million tons, or 26 percent of requirements, by that year. Tinder those conditions, the domestic industry may well be smaller then than it is now. If, at that time, a war emergency of the type envisioned by the executive branch occurred and steel imports largely disappeared, total domestic supply could not be expanded to 140 million tons of steel mill products. It takes three to 5 years to plan, construct and bring into operation a major steelmaking facility. The result, obviously, would be severe steel shortages. Plans now being made determine the facilities available in the early 1970's. As matters now stand, those plans must assume a static or declining market for domestic steel, unless action is taken promptly to prevent imports from taking all or most of the growth in the demand for steel. The second source of danger from a decline of the domestic steel in- dustry is the effect of such a decline on our balance of trade. As early as January, 1966, the chairman of the Council of Economic Advisers pointed out that the adverse swing in steel trade between the aver- age for 1955-57 and 1965 had reached the huge amount of $1.3 billion. It has grown since then as exports have continued their decline and im- ports have continued their rapid increase. In 1967, our steel trade deficit, excluding freight charges, was $877 million and, if the trends reflected in the first 4 months of this year are indicative of the rest of the year, our 1968 adverse balance will be on the order of $1.4 billion. Compared with the average surplus enjoyed in 1955-57, this will PAGENO="0067" 1853 mean a deterioration in our foreign trade of more than $2 billion a year on the steel account alone. If steel imports were to increase at only half the rate experienced during the last 10 years, the annual steel trade deficit would reach $3 billion by 1975 for a cumulative dollar drain over the 7-year period of more than $15 billion. INADEQ1JATE REMEDIES SUGGESTED BY OTHERS The suggestion has been made that steel imports could be dis- couraged by vigorous price competition. Let us see where that would lead the domestic producers. As I have noted earlier, the average dis- parity between domestic prices and the delivered prices of imported steel is on the order of $35 per ton, or approximately 20 percent. In 1967, the domestic steel companies earned just over seven percent, or $12.50 per ton, before Federal income tax on the sale of their products. It is obvious, therefore, that widespread price reductions sufficiently large to affect the volume of imports would put the domestic companies in serious financial difficulty. Critics of the industry have argued that price reductions could be selective, but they overlook the fact that imports have penetrated all major regional markets and all important product lines. They also ignore the point that many of steel's customers have operations in a number of regions and purchase a variety of steel products. The experience of the steel industries within the European Common Market is instructive in this regard. In recent years, there has been an increasing flow of steel from One member country to another at - prices approaching or equaling world export prices. Producers in one country, faced with exports from a neighbor at prices below those established for the domestic market, have tried to solve the problem by aligning on the low prices of imports. The result has been a decline in the general price level and financial distress among European steel producers. Alinement on import prices by steel producers in the United States would lead inevitably to the same unfortunate consequences. It has also been suggested that yigorous efforts to export at prices prevailing in the world market would discourage or help offset imports into this country. Selling abroad at prices below prevailing domestic prices would be extremely costly. Domestic customers could not be expected to subsidize exports at prevailing world prices and, in fact, could be expected to demand those prices themselves. This would be ruinous for the domestic steel companies. Moreover, if such actions succeeded in taking business away from foreign producers in their own or third country markets, that would simply make more foreign steel available for the U.S. market. Thus, this so-called remedy would aggravate the present situation, Another remedy prescribed for solving the import problem is the in- stallation of large steelmaking facilities by American producers in low-wage countries, even though there is already a worldwide excess of steel supply. This is, of course, impossible on any substantial scale under existing restrictions on capital investment abroad. Even if it were not, large-scale shipments of steel from such facilities to the United States would add to the amounts of steel imported into the United States and, therefore, to our balance of payments and national security problems. They would also create domestic political problems PAGENO="0068" 1854 as plants in the United States curtailed operations in favor of ship- ments from overseas plants. Furthermore, a modern, large-scale steel plant in a less-dev~loped country would be a considerable economic hostage. The most frequently heard suggestion for solving the steel import problem is that the industry in the United States should regain its former commanding lead in steel technology. This stems in part from the mistaken belief that the industry has been slow to adopt new tech- nological developments. That criticism is usually based on a superficial analysis of the development and adoption of the basic oxygen steel- making process which has had wide circulation. It has been thoroughly discredited by Prof. Alan K. McAdarns of Cornell University in an article entitled "Big Steel, Invention, and Innovation, Reconsidered." I shall not attempt to summarize this article but ask that it be in- cluded in the record of these hearings for later study by members of this committee. I would note, however, that more steel is produced by this process in the United States than anywhere else in the world and our basic oxygen furnaces are the most advanced. The fact is that the American steel industry is still the most tech- nically efficient in the world. Our technology, particularly as to up- grading of raw materials and the processing of steel beyond the crude ingot stage, is superior to that of any other country. Our research facilities and efforts far exceed those of any other nation and the fruits of our research are widely and quickly adopted by the industries of other nations. This is why foreign producers continue to buy Amer- ican-made equipment and seek licenses to use American-developed processes and make American-developed steel products. Furthermore, the steel companies in the United States are investing in improved steelmaking and processing facilities at a record rate and engaging in vigorous campaigns to expand the uses of steel products. The difficulties involved in increasing our technical superiority enough to overcome our cost disadvantages are twofold. First, steel technology is almost completely international. An in- novation by one company soon finds it way into the operations of others, both here and abroad. No one country has a monopoly on brains, curiosity, and imagination. And, as the domestic markets of major steel producers abroad have grown, their former prejudices against innovation have tended to disappear. The second difficulty arises from the cost of adopting innovations. One hears stories about the savings to be achieved through the adop- tion of new processes and techniques. The amounts of those alleged savings are frequently exaggerated. Comprehensive studies of the pro- duction costs which could be expected from wholly new plants embodying the latest in technology indicate that they would be sub- stantially above those in modern plants abroad if proper account is taken of capital costs. In short, nothing now available or in the process of development can be expected to lower domestic steel production costs to the extent of overcoming the production-cost advantages now enjoyed by foreign producers. Another suggested solution for the steel import problem is the re- moval by international agreement of existing non-tariff barriers to trade. There is no need to dwell here on the great difficulties involved in identifying those barriers, obtaining agreement on their removal, PAGENO="0069" 1855 and enforcing such an agreement in the face of nationalistic considera- tions. It is sufficient to point out that cost disparities between steel producers in the United States and those in other countries are so large that elimination of those barriers is not likely to change the competitive situation significantly. Moreover, the removal of those barriers would not reduce the opti- mistic expansion plans of foreign producers and, therefore, the excess steel supply in world markets. Finally, the process of removing those barriers would consume so much time that the domestic steel industry might have suffered irreparable injury long before they disappeared. All these suggestions for meeting the threat posed by growing im- ports presuppose the existence of èonditions essential to the operation of a free market. They also assume no need to maintain a strong, do- mestic steel industry for national security. These conditions do not exist today. Differentials in basic cost factors persist among steel- producing countries. Wide differences prevail among nations as to what constitute proper rules of international trade. Thus, remedies which depend on free market cOnditions cannot be effective in the real world of today. To sum up, the remedies suggested by many simply do not fit the case. OUR PROPOSED SOLUTION We believe that an equitable solution to the problem of rising im- ports into this country is a system of quotas based on recent market shares of the countries which export steel to the United States. Action to establish such a system must be taken to prevent serious damage to the domestic steel industry. This is the system embodied in the orderly trade bills now before this committee. The industry recognizes that, troublesome as steel imports have be- come, foreign producers rely on the U.S. market for an important part; of their sales. Any control device, therefore, which greatly reduced imports would have a seriously adverse effect on the economies of other countries. An embargo or sharply increased tariffs would have such an effect. Quotas based on recent import shares of the market would not. The bills before you not only embody such quotas but also provide review every 5 years to examine the system in light of then-existing conditions. We recognize also that the capital spending programs of steel industries in certain countries, notably Japan, are presently based in part on expectations of a continuing expansion of exports to the United States. Limiting those exports to fixed, absolute quantities might be disruptive to those industries. Flexible quotas expressed in terms of historical market shares would permit the volume of steel imports to grow as the U.S. market for steel expands. Thus, they would minimize the adverse effects on the steel industries of other countries and encourage their orderly development in the future. ANSWERS TO CRITICISMS OP QUOTAS The assertion is frequently made that the institution of quotas on steel imports would lead to instant retaliation by the countries affected against other commodities exported from the United States. This is by no means a foregone conclusion. Other nations purchase goods and PAGENO="0070" 1856 services from this country because they want and need them, not be- cause of altruistic feelings. Curtailment of those purchases would hurt not only the United States but also the country taking such action. Retaliation could be expected, therefore, only if the country involved believed that its own national interest would be served by that course. A flexible quota system which preserved recent shares of the U.S. markets and permitted imports to grow with those markets would not provide much to retaliate against. We are not advocating sharp reduc- tions in imports. In essence, we are talking about maintaining market shares as they exist under normal conditions. Under GATT, signatory nations are allowed to limit imports for national security reasons without fear of retaliation by other countries. As I have noted earlier, our national security is threatened by rising imports of steel mill products. No other important nation has net im- ports of such products much in excess of 5 percent of its total require- ments. Ours are now at nearly three times that level. Another criticism of flexible quotas is that they would destroy com- petition among steel companies in the United States. The assumption here is that the only form of competition faced by steel companies is that from foreign steel producers. This is far from the case. Every one of you has seen evidence of the competition we face from a host of other materials-in construction, packaging, and the manufacture of a wide variety of articles. Limiting the flow of imported steel to recent levels is not going to reduce that competition at all. Furthermore, I can assure you from my own long experience that domestic steel companies compete vigorously with each other. Gen- erally speaking, we do not sell a consumer product and our competi- tion is not, therefore, as evident as that of the makers of automobiles, appliances, cosmetics, or foods. But it is there, nevertheless. Finally, recent levels of imports represent a large piece of the U.S. market and one worth going after. Only two steel companies in this country pro- duce more than the amount which would be coming in from abroad under the proposed quota system. One other criticism of quotas should be mentioned. It is that their establishment would harm our friendly relationships with other na- tions. Our view is that far greater damage to those relationships will result from letting steel imports continue to rise to the point where even the most ardent advocates of free trade recognize that our na- tional security is in danger. A policy of drift would encourage other nations, particularly Japan, to continue to expand their steel indus- tries more rapidly than would be warranted by domestic and normal export requirements, only to tell them later that they must curtail sharply their sales to this country. The longer remedial action is put off, the more disruptive will be the effects on the economies of our own and other countries. CONCLUSION The American steel industry provides a material essential to the economy and the security of the United States. Our national well- being depends on having an assured supply of this material in all the many grades and forms needed by a complex, industrial society. Rapidly rising imports are eroding the ability of the domestic indus- try to perform this essential function and increasing dependence on PAGENO="0071" 1857 imports is endangering our national security. No one questions the need for steel in our economy and few doubt that there is a point beyond which it is unsafe to rely on supplies from abroad. We believe that point was passed in 1967 and that, in our national interest and the interests of the countries now exporting steel to the United States, the rate of growth of steel imports above recent historical levels should be limited to the rate of growth of steel requirements in our economy. Accordingly, we respectfully request your favorable action, during this session of Congress, on the bills before you which would limit steel imports in that fashion. Thank you. Mr. HERLONG (presiding). Thank you, Mr. Patton. The material you requested to be placed in the record will appear here. (The material referred to follows:) STEEL AND THE NATIONAL SECURITY, APRIL 1968 I. SUMMARY A. Steel and the industry which provides it are critically important to the security of the United States of America-both for the nation's military defense in time of war and for its economic strength as a world power. Almost every item of military equipment contains steel components for which no acceptable substitutes are known. The civilian economy's ability to equip and move military forces and to maintain a high level of civilian activities is equally dependent upon steel in myriad forms. What the President's Materials Policy Commission said in 1952 remains equally true today: "The Nation must maintain a strong and expanding economy with a large and diversified materials base that can be tapped for war production, with special attention to providing prime essentials such as steel, electricity, petroleum, and aluminum whose expansion takes considerable time and whose production sets the pace not only for economic growth, but also for production in wartime." B. Since 1957, imports of steel have been rising at an annual growth rate of 26 percent and have taken the lion's share of the growth of the domestic market. Over the past decade, imports of steel into the United States have increased to the point where, in 1967, they exceeded 12 percent of total consumption. A projec- tion at only half of the historical rate of increase puts imports at 17 million tons per year by 1970. On the same basis, by 1975 imports, if unimpeded, would reach 30 million tons per year, which-in view of reasonable expectations about steel consumption-implies that normal levels of steel shipments by domestic pro- ducers in 1975 would be lower than actual shipments in either 1965 or 1966. If these conditions should come to pass, the resulting stagnation of the domestic steel industry would have weakened its ability to serve the nation in times of crisis. The importance of a strong domestic steel industry to national security is recognized by all first-class military and economic powers throughout the world. Except for the United States, there is no major country or economic unit (in- cluding the USSR, Japan, the European Common Market, and the United King- dom) which today imports from other areas much more than 5 percent of its total steel supply. Through 1958, this statement was equally true for the United States. C. The Office of Emergency Planning has calculated that in event of a conven- tional non-nuclear war in the next decade, some 9 million tons of finished steel product annually would be required for direct defense. At the same time, we would lose the ability to import steel from countries other than Canada and Mexico-a loss which, as projected, might amount to 16 million net tons in 1970 and 29 million net tons in 1975. A normal level of steel consumption in a year around 1975 is expected to be 115 million product tons. During a general non-nuclear war, current Office of Emergency Planning studies indicate that direct and indirect military needs would raise steel requirements by at least 20 percent above a normal peace- time level. Thus, during an emergency period in the mid-1970's, domestic steel consumption would be about 140 million tons. This level of requirement would be roughly 30 million tons higher than the domestic industry's current all-out pro- PAGENO="0072" 1858 ductive capability of about 110 million tons. Even assuming that facilities pro- jects already committed and under way may add another 5-10 million tons by the early 1970's, a continued rapid rise in imports would pose the question of whether even that increase could be justified economically. Under the war conditions assumed by the Office of Emergency Planning, non- contiguous imports of about 30 million tons would not be available to the United States. Thus, if these conditions arose in the mid-1970's, there would be a short fall of some 20 million tons. In the early 1970's steel consumption during an emergency would be only 5-10 million tons lower than that expected in 1975. Thus, only a few years in the fu- ture, the demand for steel under conditions of an anticipated national emergency could exceed the domestic industry's capacity at that time, including expansion now under way, by some 10-15 million tons. The domestic steel industry cannot financially justify the investment of the billions of dollars necessary to build facilities for the replacement of imports in an emergency, over and above the re- quirements for direct defense, if these facilities are to stand idle except under emergency conditions. Therefore, unless the mounting invasion of steel imports is brought under control, it is quite likely that neither the domestic steel facilities nor the qualified personnel to operate them will be available in an emergency in the mid-1970's to make good the loss of the 30 million tons of domestic steel re- quirements that would, by then, be dependent upon imports. D. Since it takes from three to five years to plan, construct, and bring on- stream a major steelmaking facility, it is evident that the planning must begin immediately for the facilities that will be required in the crucial mid-1970's. To proceed with the planning, steel companies must have a reasonable expectation that at the time a plant is completed and ready to operate, there will be a market for its products under peacetime conditions?If the domestic steel companies can- not be sure that producing steel in this country w-ill be profitable in terms of the necessary investment, they will either have to invest in foreign plants or reduce future investment in steel facilities and seek alternate uses of their funds. Either alternative could reduce employment and production in the U.S., have a depress- ing effect on the balance of payments, and threaten our national security. E. The balance of payments in steel trade, excluding transportation costs, has moved from an annual surplus of $645 million in 1955-57 to a deficit of $877 million in 1967. The deterioration in the balance of payments attributable to steel trade over this period was $1.5 billion. Furthermore, if import trends continue as projected, the cumulative dollar outflow in direct steel trade from 1968 through 1975 w-ould total $15.5 billion. II. THE GROWTH OF STEEL IMPORTS-PAST, PRESENT, AND FUTURE The flow of imported steel mill products into the United States market is a phenomenon of relatively recent origins. In 1950, the United States produced 47 percent of the world's raw steel and, as the world's largest producer, was a substantial net exporter of steel. U.S. production increased by 31 percent between 1950 and 1967. However, foreign steel output rose so dramatically during that period that the U.S. share of world steel production dropped to 23 percent. By comparison, Japan's share of world steel output over the same 17 years grew from 21/2 percent to 13 percent. Since the late 1950's, the tonnage growth of imported steel mill products into this country has sharply increased. In 1957, approximately 1.2 million tons reached our shores; by 1963, the figure had risen to 5.4 million; and in the next three years, it doubled again to 10.8 million. In 1967, imports of steel mill prod- ucts rose to nearly 11.5 million tons. Between 1957 and 1967 imports have grown at a compound annual rate of 26 percent. Net tons Net tons (in nvilltons) (in millions) 1957 1. 15 1963 5. 45 1958 1. 71 1964 6. 44 1959 4. 40 1965 10. 38 1960 3. 36 1966 10. 75 1961 3. 16 1967 11. 45 1962 4.10 While the import penetration of the United States market varies by product and by region, there is no important product line or market area w-hich is now immune from imports. They enter through virtually every major port-Great PAGENO="0073" 1859 Lakes, Gulf Coast, Pacific Coast, and Atlantic Coast. Accordingly, imported steel is reaching all regional markets in substantial quantities, as Table A clearly indicates. While the growth of imports has affected all product groups, the impact has been far from uniform.~ When imports first began to enter, they were concen- trated in those products which had a high labor content, or which could be produced with comparatively old equipment and simple technology. Reinforcing bars and common grades of wire rod, wire products, and pipe were the first big invaders. During the 1960's, however, steel mill expansion abroad was concen- trated on facilities for the manufacture of products-such as sheets-which require large and complex processing equipment and advanced technology. As a result, the relative importance of these products among steel imports has grown rapidly. For example, in 1961, imports of sheet and strip came to only 171,000 tons but by 1967 were 4,281,000 tons; imports of shapes, plates, and piling were 330,000 tons in 1961 versus 2,089,000 tons in 1967. Much the same pattern has occurred with respect to imports of specialty steels (whose contribution to our national security is discussed later). Production of these steels, among the most sophisticated, was once the exclusive province of a few highly industrialized nations. In recent years, foreign-produced specialty steels have been entering our country at an even higher rate of growth than that of total steel mill product imports. Whereas in 1959, imported stainless steel rep- resented only 1 percent of our domestic consumption, by 1967 this figure reached 17.5 percent. Imported stainless cold rolled sheet increased its U.S. market pene- tration from 6 percent to 24 percent during the 1962-67 period alone. Table B summarizes the market penetration which has occurred in each major steel product group, from 1957 to 1967, expressing these inroads in tons and as a percentage of the total domestic market for each product. Both the extent of this penetration which ranges up to 50 percent of the domestic market for some products, and its rapidity-sometimes tripling in one year-are well illustrated by the table. The reasons for this recent heavy growth of imported steel products in the U.S. have been described in detail in The Steel Import Problem.1 In December, 1967, the Senate Committee on Finance published a Staff Study on the steel im- port situation which largely supports the conclusions of the AISI papers.2 A. World Surplus Capacity Tue steel Import Problem shows that in 1966 there were 55 million annual tons of unused steelmaking capacity in the free world outside the U.S. This surplus is a relatively new condition. As recently as 1960, production and capacity outside the United States were about the same. There are several reasons why the unbalanced condition has occurred. Indus- trial and state planners in major foreign steel-producing nations have consistent- ly overestimated their own domestic steel requirements, as well as the potential demand for exports, thus causing the creation of greatly over-expanded steel in- dustries. Moreover, in some developing nations, the ability to produce steel con- stitutes a symbol of industrial progress and has been fostered without close re- gard to economic need. Some such nations have themselves become exporters of steel. Thus, the development of steelmaking industries in these countries not only adds to total free world capacity, but also pre-empts some traditional export markets-thus increasing the competition while reducing the size of the total market for exports. These problems of capacity will not be mitigated by any foreseeable increase in world steel consumption. 1. Japan The "Economic-Social Development Program" announced by the Japanese Gov- ernment in March 1967, includes projections of increases in iron and steel produc- tion for the period 1965-71.~ These range from 9.1 percent to 9.9 percent per year. Japanese-planned additions to plant and equipment will increase that country's steelmaking capacity from 57 million net tons of raw steelmaking capacity in 1966 to 82 million net tons by 1970. Japanese consumption of steel has also been growing rapidly-at a rate of about 11 percent per year. That rate cannot con- 1 "The Steel Import Problem," American Iron & Steel Institute, New York, October 1967, Ch. III. ("The Steel Import Problem" is appended to this report.) 2 "Steel Imports-A Staff Stud~ of the Committee on Finance~ U.S. Senate," Russell B. Long, chairman, Washington, D.C., Dec. 19, 1967. (Hereinafter referred to as "Staff Study.") The Oriental Economist, May 1967, pp. 300-304. PAGENO="0074" 1860 tinue indefinitely-but even assuming it will, by 1970 home demand will take about 55 million net tons of raw steel equivalent.4 That could leave unused ca- pacity for 27 million tons of raw steel equivalent available for export in 1970, compared with 18 million tons in 1966. During the period 1957-66, Japan in- creased her total exports of iron and steel, to all countries combined, from about 1,165,000 to about 10,885,000 net product tons, a more than nine-fold increase. Even this phenomenal growth rate is but a fraction of the growth rate of Japan's exports to the U.S. In 1957, these exports were only 84,000 net product tons; in 1966, they totaled 5,166,000 net product tons-more than 60 times as much as in the earlier period. In four of the first ten months of 1967, the United States was the country of destination for 50 percent or more of Japanese exports of iron and steel. No other nation took as much as 10 percent of Japanese steel exports.5 Indications are that by 1970 Japan will have more than 5 million additional net product tons of steel available for export. Since we can expect little signif- icant growth in export markets in non-industrialized countries, much of the tonnage appears inevitably destined for the United States. The most recent previous increase of approximately 5 million net product tons of exports came in the short period of 1963-66, when nearly 70 percent of the increase went to the United States. It seems reasonable to expect that these trends will con- tinue in the future. No other country in the world has permitted as steady and rapid an increase of steel imports from Japan as has the United States. It is doubtful whether any other industrialized country in the world would tolerate steel imports in sufficient volume to justify Japan's indicated planned additions to capacity in excess of her domestic requirements. But the United States, which took only 7 percent of Japan's iron and steel exports in 1957, received 24 percent in 1961 and 47 percent in 1966; and only the United States has a market capable of absorbing the further planned additions of the Japanese steel industry. 2. Westerm Europe The most recent projection by the High Authority of the European Coal and Steel Community is for an ECSC capacity of 130 million net tons of raw steel by 1970.° This may prove to be a conservative estimate, since it assumes that some obsolete capacity will be shut down over the next few years. A more realistic estimate of capacity by 1970 may be nearer to 135 million tons, an increase of 15 million net tons over 1966 capacity. By 1970, the High Authority envisions raw steel requirements within the Com- munity of 93 to 96 million net tons. It seems very likely, however, that actual 1970 domestic requirements will reach only 90 million net tons of raw steel. This estimate is based on the actual growth of apparent consumption between 1960 and 1965-which the High Authority had consistently overestimated. Even if steel consumption in the European Community equals or exceeds the High Authority's projections, there would be ample capacity to raise exports above present levels without exceeding the rates of operation of about 90 per- cent which have been achieved in half of the past ten years-specifically, 1957, 1959, 1960, 1961, and 1964. Indeed, a desire for high utilization of capacity and full employment would strongly encourage efforts to increase exports up to the limits of the United States market acceptance for ECSC steel products. B. Forecast of future impart levels In short, at the present time the flow of imported steel into the United States from foreign sources is rapidly increasing, with no sign that the increase will be stabilized at any tolerable level. There is no short-range way for United States producers to respond to the overwhelming price advantage offered by foreign producers for steels of comparable quality and availability. The present price gap (averaging approximately $30 to $40 per ton) substantially exceeds the U.S. steel industry's total profit per ton of $17 in 1966 before taxes. If no steps are taken to prevent the rapidly increasing flow of imports, it is difficult to predict with any degree of confidence a limit to the increased amount of the domestic market they may capture. If the annual growth rate of 26 per- cent for the last ten years is projected, it indicates an import growth to more 4Yawata News, July 1967. Consumption data for 1971 in metric tons of shipments con- verted to equivalent net tons of raw steel and reduced by 11.4 percent, the estimated annual growth rate of domestic consumption. "Monthly Report of the Iron and Steel Statistics," the Japan Iron and Steel Federation, Tokyo, December 1967, vol. 10, No. 12, pp. 12, 13. 0 Objectifs Gén~raux Acier-1970, Bulletin No. 65, Tableau 22, p. 44, ECSC. PAGENO="0075" 1861 than 23 million net tons In 1970, and to more than 73 million tons by 1975. (This past year, imports managed to grow 6.5 percent over 1966 even though the domestic market dropped by more than 5.4 percent.) However, if it were assumed arbitrarily that the rate of growth would be a more conservative 13 percent-half the recent annual rate-then a projection to 1970 would indicate an import level of about 17 million tons-and about 30 million tons by 1975. A recent domestic steel market forecast predicted that a total of 115 million product tons would be required by American manufacturers in a normal year around 1975.~ Consumption of 115 million tons, including 30 million tons of imports, implies domestic shipments of 85 million tons to the home market. Thus, shipments by the domestic industry in 1975 would total 87 million tons (including an estimated 2 million tons of exports, which is about the current level). This 87-million-ton total is less than was actually shipped in either 1965 or 1966. Total 1975 con- sumption (shipments plus imports less exports) of 115 million tons would represent a growth of 17 million tons frorn the 1965-67 level. Imports would, therefore, be accounting for more than the total growth of the domestic market. As the preceding discussion of free ivorld Surplus Capacity has shown, im- ports of 30 million toris by the mid-seventies appear well within the export capabilities of foreign producers, if the recent rates of capacity additions abroad continue. Most public announcements of plans indicate that they will. III. THREAT OF STEEL IMPORTS TO THE NATIONAL SECIJBITY A. Defense requirements Military security depends heavily on a vigorous and expanding economy to prqduce the overwhelming quantities °~ equipment, machinery, and supplies necessary to support modern military strength. On the other hand, healthy economic growth depends importantly on military security to maintain that climate of confidence in the future in which private enterprise flourishes. Neither military nor economic strength can be raised to its highest potential without an abundant and varied flow of criticalmaterials. (President's Materials Policy Commission-Section I-i, June, 1952) The issue of war and peace looms today as the most important factor in the shaping of our national policy. The, world situation demands unprecedented efforts to insure our national security. Our continuing commitments in Vietnam and elsewhere exemplify the rapidly escalating demands that can tax industrial America, Supporting this view, President Johnson on April 8, 1967, proclaimed that "steel is the core of industrial America . . . and this vital product is basic to our economy and essential to our security." During the 1950's, with the advent of advanced nuclear weapons and inter- continental ballistic missiles, it was widely claimed that the ability of a country to wage modern warfare was dependent upon atomic missiles and electronic equipment. However, Vietnam has dispelled this image and has demonstrated that the ability to wage war today is still primarily dependent on the availability and mobility of men and material-guns, ammunition, trucks, airfields, and ships. Thus, in times of national emergency, steel is indispensable to national defense, and national defense rests on steel. The role of steel in national defense is two-fold. First, steel is an important component of materials and equipment used in military operations. A repre- sentative list of direct steel-using defense items is as follows: Armored combat vehicles Grenades Tactical vehicles Warheads Amphibious vehicles Mines Naval vessels Cartridge cases Assault boats Mortars Military aircraft engines and landing Small arnis gear Gun tubes Military trailers Bomb racks Bombs Missile motor cases Projectiles Missile ground handling equipment ~ "The Steel Import Problem," p. 9. PAGENO="0076" 1862 Tank fuel cells Lightweight armor for helicopter seats Revetments and tactical vehicles Landing mats Barracks Parachute hardware Base housing Helmets Prefabricated buildings Mess kits CONEX containers Canteens Fence posts Stainless steel inner soles for combat Concertina barbed wire boots Second, and more important in terms of the volume of steel necessary to satisfy defense requirements, steel is an essential in the facilities and equipment used in the manufacture and transportation of all vital war materials, including those not made of steel. These indirect defense requirements-without which effective defense of the nation would not be possible-include: Industrial Plant and Equipment: Interstate National Defense High- Metalworking Machinery way System Machine Tools Merchant Marine Vessels Textile Machinery Communications Equipment Electrical Generating Equipment Construction Equipment Domestic Transportation Systems: General Support Items: Trucks Filing Cabinets Railroad Equipment Desks 1. Direct defense steel requirenveats Current Department of Defense forecasts of direct steel requirements are for about 4.6 million tons in 1968, so that the defense share of estimated total domestic steel consumption will approximate 41/2 percent. However, these ag- gregate figures do not portray the full impact of the present defense requirements for some steel products. As Assistant Secretary of Commerce Ray stated in 1959: `Aside from the broader impact on our national health and safety, the defense requirements, although limited in volume, are precise, particular, complicated, and ever-changing and cannot be met by a stockpile of new or preselected items of steel. In other words, the need is not merely for a given amount of steel in being, but for a continuous flow of specially tailored items capable of meeting developing defense requirements. Only continued production of steel in all its phases can supply the real needs of defense." The aggregate requirement consists of many products, some of which are affected tremendously by military buildup, some hardly at all. The thrust of rapidly escalating defense steel demand can be appreciated by examining its effect on certain key products (Tables C, D, E, F). Between 1965 and 1966, ammunition steel requirements increased seven-fold-froni 150,000 tons to over one million tons-and then increased again by more than one-half million tons in 1967. About 2.4 million tons of steel will go into ammunition in 1968. As a consequence, direct defense demand in 1968 for such a category as semifinished products is expected to amount to 28 percent of total shipments of these products to all industries (Table G). Bar, semifinished, and tubular prod- ucts represent most of the ammunition requirements; and more than two million tons of these products were imported in 1967. In 1968, as a result of sharply increased demand for shells, industry facilities for some types of these steel products are even more heavily taxed. Between 1965 and 1966, military demands for regular and concertina barbed wire increased almost 100,000 tons, and reached 180,000 tons in 1967 as it suddenly became necessary to fortify the demilitarized zone (DMZ) betw-een North and South Vietnam. But it is in the general category of wire products that foreign imports have taken over the greatest share of the domestic market. In 1967, imported wire rods represented 46.1 percent of total domestic con- sumption, barbed w-ire 40.6 percent, and wire nails 39.8 percent. It is difficult to maintain a viable wire products industry with such levels of imports. The military helicopter and aircraft programs are vital to our effort in Viet- nam, and critical importance of alloy and stainless specialty steel products has required extensive production scheduling and expediting by the Department of Defense. Hence, while the absolute level of total defense steel consumption does not present supply difficulties at the current degree of involvement in Vietnam, requirements in some key product areas are already high (Table G) and would escalate rapidly in event of a broad-scale military action. PAGENO="0077" 1863 In order to identify potential shortages of critical resources, the Office of Emergency Planning has prepared a detailed forecast of steel product require- ments. Explicit in their projections are the following assumptions: (a) A conventional, non-nuclear war of three years' duration occurring in 1969 through 1971. (b) GNP growing to 1 trillion current dollars by 1971 and civilian steel requirements being met throughout the period. (c) Contiguous sources of steel imports (Canada and Mexico) continuing to be available, but non-contiguous sources cut off. (d) Growth in the labor force and employment sufficient to maintain forecast productivity levels and also to meet armed services manpower requirements. Under these assumptions, the OE'P estimates that total civilian and defense steel requirements would reach 127 million product tons in 1969 and 143 million product tons in 1971 (Table H). Included in these totals are direct defense steel requirements exceeding 9 million tons: per year during the period of the war (Table I). Redistributing these prOjections into product requirements (Table G) indicates 22 percent of all carbon semifinished sold would be required for direct defense alone, in the event of a future limited war. Similarly, 17 percent of all alloy products and almost 20 percent of all cold finished carbon bars would be consumed for direct defense uses. Certainly, steel product requirements of this magnitude make our dependence on imported steel products difficult to justify in terms of our national security. 2. Indirect defense steel requirements Indirect defense steel requirements far exceed direct requirements. Military prepardness in our nation cannot exist without the entire industrial complex required to produce the weapons and~ systems which utilize varying amounts of steel as ingredients. The industrial: complex cannot grow to satisfy defense requirements without steel. Nor can the necessary ingredients of defense pro- grams be assembled and moved to their ultimate destinations without a vast, efficient transportation system, which is equally dependent upon steel for its existence. The Department of Defense estimated the total steel requirement of the industrial complex which provides defense material at 57 million tons in 1964-65 percent of apparent consumption in that year. And OEP forecasts that this requirement will grow to 88 million tons in 1969 and 98 million tons in 1971, never less than two-thirds of the total national OEP steel consumption fore- cast. As can be seen from Table J, the indirect defense requirement in time of war represents about 90 percent of total defense steel tonnage. The strength of the whole industrial complex is necessary to military strength, and the steel required to maintain the entire economy is therefore the measure of its impor- tance to national security. Our mobilization base before World War II was totally inadequate to meet critical defense needs and essential civilian requirements. Our inability to pro- duce munitions as well as automobiles, trucks, and railroad cars, resulted in severe dislocations throughout the economy until finally rationing became the only effective means of allocating scarce resources. 3. Steel industry's research contributions to national defense (Steel industry) research continues to uncover new uses for this durable and versatile product to satisfy exacting military and civilian requirements. (President Johnson's Proclamation 3778-April 8, 1967) National defense has always acted as a stimulus to the creation of new and superior steel products. In World War II, welded tank armor, helmet steels, and steel spring technology all resulted from the privately-financed research of the U.S. Steel industry. In the last several years, a number: of new products have been introduced to meet the ever-increasing demands of the military. Maraging steels for high strength aircraft and missile requirements; dual hardness armors for helicopters, river patrol boats, and armored vehicles; high tensile strength plate for sub- marine hulls, and mortar-proof revetments for aircraft shelters are just a few of the examples of steel products designed to meet the specific requirements of the military market. National defense requirements have created the initial need, and now represent almost the entire market, for vacuum melted steels. Other specialty steels have particular importance to the security of the United States, because of their unique capabilities and qualities. Specialty steels, with their varied high alloy PAGENO="0078" 1864 content and unique properties, have myriad important applications. Some can remain stable at high temperatures; some have extraordinary toughness, par- ticularly at low temperatures. Such qualities have made specialty steels an integral part of the defense program of the United States. A list of strategic products dependent upon specialty steels includes: missile and rocket frames and parts, airplane structures, atomic reactors, jet engines, turbine blades, ball bearings, oil refining equipment, and cutting tools and dies. Not only is the Apollo spacecraft fashioned from stainless steel, but ~o is the anti-spike innersole in the combat boot now being worn in Vietnam. Both are the products of constant research and development, often extending over a period of years from first identification of need to final practical application. The markets for these specialty and tool steels have suffered severe inroads from foreign steel products. The importation of strategically important stain- less steels has increased approximately 15 times since 1959. Foreign countries without a vested interest in American national security must not be relied upon to support American military steel technology, especially in time of war; yet if the increase in imports continues, the American steel industry will have neither the incentive nor the ability to go on spending hundreds of millions in research and development, let alone increase these expenditures. The incentive to expand crucial defense research in the face of rising imports is furthermore affected by the fact that the domestic steel industry does not to- day enjoy any lasting technological advantage over foreign producers. The ad- vantage which domestic producers formerly possessed due to their large re- search and development programs has been reduced. This is not because domestic research and development has been lagging; indeed, the opposite is true. How- ever, advances in steelmaking technology, by their nature, are quickly adopted by all major world steel producers. As Mr. Yushihiro Inayama, President, Yawata Iron and Steel Co., Ltd., said in a presentation at the International Iron and St~l Institute in Brussels, November, 1907: "It is my firm conviction that, however, hard we may have tried, such phe- nomenal development as Japan's steel industry enjoys today could never have been achieved without the invaluable assistance and cooperation extended to us by the steel companies represented by many of you present at this meeting. In this sense we may say without exaggeration that you are the real magicians who accomplished our `economic miracle'." The American steel industry is uniquely capable of meeting increased military needs today, and this capability must not be impaired by any further denial of a share of market growth upon which future investment so heavily depends. 4. S'teelrnaking facilities requirements for national security Aside from periods of sharply increased defense steel requirements, the demand for steel in the United States is subject to a substantial degree of fluctuation. There are a number of reasons for these fluctuations. Among the most important of these are: fluctuations in the overall economy (especially in the level of capital spending), changes in the mix of the economy, consumers' building or liquidation of steel inventories, and seasonal factors. The domestic steel industry has provided in the past, and can be expected to provide in the future, productive flexibility sufficient to adjust to normal changes in the level of steel demand resulting from these factors. Government defense planning requires that the domestic steel industry be capable of providing steel in an emergency sufficient to meet direct defense requirements, substantially higher indirect defense steel needs, and all essential civilian needs, in the absence of imports of steel except thos~e from Canada or Mewico. The domestic steel industry was able to ship steel at an annual rate of 103 million tons during the peak demand period in the six months prior to the settle- ment of the 1965 labor negotiations, but part of this tonnage was available only through the reduction of mill stocks. The industry has added capacity since 1965; and in 1968, under similar strike threat conditions, domestic shipments during the six-month period ending in July could be at an annual rate of 108- 110 million product tons. Currently, as in 1965, part of the tonnage being shipped is available only through a liquidation of steel inventories held at the mills. It is probable that both in 1965 and presently the additional tonnage shipped out of mill stocks would offset any capacity not completely utilized during these periods because of lack of demand in particular products or areas. Therefore, the actual shipping levels are probably a good gauge of the domestic steel industry's ability to produce and ship for a sustained period. PAGENO="0079" 1865 As stated earlier, a normal level of steel consumption in a year around 1975 is expected to be 115 million product tons. During a general non-nuclear war, current Office of Emergency Planning studies indicate that direct and indirect military needs would raise steel requirements by at least 20 percent above a normal peacetime level. Thus, during an emergency period in the mid-1970's, domestic steel consumption would be àbQut 140 million tons. This level of re- quirement would be roughly 30 million tons higher than the domestic industry's current all-out productive capability of about 110 million tons. Even assuming that facilities projects already committed and under way may add another 5-10 million tons by the early 1970's, there is a question of how much further than that steel companies can proceed. The Office of Emergency Planning further assumes that, under these war con- ditions, non-contiguous imports of perhaps about 30 million tons would not be available to fill any short fall. Thus, under these conditions, a short fall of some 20 million tons seems likely by the mid-1970's, unless the industry can find valid reasons to continue its building program. In the early 1970's steel consumption during an emergency would be only 5-10 million tons lower than that expected in 1975. Thus, only a few years in the future, the demand for steel under conditions of an anticipated national emer- gency could exceed the domestic industry's capacity at that time by some 10-15 million tons. Since it takes at least 3 to 5 years to plan, construct, and bring onstream a major steelmaking facility, it is evident that steel companies must now be planning for the facilities that will be required in the crucial early and mid- 1970's. In 19G1, with imports already supplying 12 percent of the total domestic steel market, there has been some curtailment of operations of facilities which pro- duce products whose markets are now most heavily eroded by imports. Such cur- tailments usually result also in the loss of the skilled crews who operated these facilities. In a national emergency, with most imports shut off and the American steel industry's productive capacity having been atrophied from inactivity, there would not be time to create all the required facilities and hire and train em- ployees for rapidly expanding direct and indirect defense steel requirements. Thus, imports must be held at a reasonable share of the market if domestic steel companies are to have the incentive to continue to expand capacity so that we will be able to supply the entire steel needs of our country in times of emergency in the future. B. Economic strength and national security There is a close relationship between the nation's economic strength and the nation's security. This point was emphasized by Raymond J. Saulnier, Ohairman of the Council of Economic Advisors, in 1959: "In today's international context, the nation's safety depends heavily on the vigor and efficiency of the economy . "A sound and vigorous United States economy is essential not only to maintain the confidence of friendly and uncommitted nations; it is essential also to the deterrence of potential aggressors." Thus, a country with weakened basic industries or with reduced job oppor- tunities has uncertain national security; and so also does a nation whose cur- rency is undermined by a chronic. deficit in its balance of payments. The effects of steel imports will be evaluated, first, on the future welfare and growth of the domestic steel industry; and second, on the nation itself. 1. The steel industry The domestic steel industry faces the prospect of losing to foreign producers apart, all, or more than all of the growth in the domestic market for steel. This fact has two major implications for capital investments by the steel industry. First, investments of steel projects will become much less attractive if the growth of imports continues unchecked. Investments in steel facilities depend on reasonable assurance that the markets for products will grow in proportion to increases in productive capacity. Otherwise, capital would be tied up in idle facilities which add to costs but not to, revenues. If imports continue to increase their share of the domestic market at a rate equal to only half that of the last decade, the desirability of investments in steel facilities would be gravely threat- PAGENO="0080" 1866 ened. It would become extremely difficult to show the wisdom of continuing the high level of capital investment necessary to keep the domestic steel industry's capability abreast of even normal growth in civilian demand and defense requirements. The steel industry's capital investment program depends, of course, on avail- ability of capital. Availability of capital depends on the prospect of profitability. Capital investment in steel is not a matter of a single decision on which the die has been cast. The program consists of hundreds, if not thousands, of decisions involving a wide range of projects with varying investment requirements. Some of these decisions have been made, but many are still to come. Investment decision making is a continuous process based on the market and profit prospects of many alternative opportunities, including overseas steel- making facilities. While some past decisions cannot be reversed, a change in market and profit prospects can often bring about a change in the scope of a project, or even its complete abandonment. The investment program may be more drastically cur- tailed by the deferment or rejection of new investment opportunities because of adverse changes in market and profit prospects. In reaching a decision, market and profit prospects must be considered to- get/icr. Because of the high levels of fixed charges in steel, a given increase in volume results in a substantially greater increase in profit; conversely, a given reduction in volume results in a substantially greater reduction in profit, or possibly in a loss. As a result of this relationship, a rising level of imports pro- duces a substantially greater effect on the profit prospects of the domestic in dustry than on its shipments. A second major effect of imports may be on the nature of the steel industry's capital investments. Steel companies may well decide to devote large portions of their new investment to projects which do not involve steel. In many recent in- stances, steel producing companies have entered other fields. The determining factor, of course, is the prospective profitability of various investment opportuni- ties available. If opportunities are more attractive in other fields, the steel in~ dustry cannot be expected to confine itself to less attractive steel projects. The continuing erosion of the domestic industry's existing market and growth prospects, therefore, calls in question the likelihood of maintaining a healthy and viable steel industry, capable of serving the nation's needs in times of emergency. 2. Balance of paynveats The growing dollar deficit in the balance of trade in steel products has already had an adverse effect on the total balance of trade. It has contributed increasing- ly to the persistent deficit in our balance of payments. The Chairman of the President's Council of Economic Advisers put the prob- 1cm in historical context January 3, 1966: "Overall steel imports in the first 11 months of 1965 were up to 9.7 million tons, worth $1,096 million. The value of steel exports was down to $460 million, pro- ducing an 11-month steel deficit of $636 million, perhaps $700 million for the full year. In 1955-57 we had an average steel export surplus of $645 million. Thus, the deterioration of our balance of payments due to steel over the last decade is $1.3 billion, probably as large as our entire balance of payments deficit in 1965." The Chairman's statement, brought up to date, would read: "Overall steel imports in 1967 were up to 11.5 million tons, worth $1,292 mil- lion. The value of steel exports wa~s down to $415 million, producing a 1967 deficit of $877 million. In 1955-57, we had an average steel export surplus of $645 million. Thus, the deterioration of our balance of payments due to steel over this period is $1.5 billion, more than one third of our entire balance of payments deficit in 1967." If steel import levels continue to rise, without offsetting exports, the trade deficit may become truly alarming. Assuming that in 1970,17 million net tons of imports valued at an average of $113 per ton are purchased by American cus- tomers; and that steel exports continue at the current $400 million level; the steel trade deficit would then amount to $1.5 billion for that year. If, as is en- tirely possible, steel imports reach 30 million tons in 1975, the steel trade deficit that year-at today's prices-would reach a total of $3.0 billion. The cumulative loss from 1968 through 1975 would amount to a staggering $15.5 billion. None of these figures reflect the additional dollar outflow for shipping charges and in- surance but which are equally deleterious to our balance of payments problem. PAGENO="0081" 1867 Year lmportsl (millions of tons) Imports2 (billions) Exports3 (billions) Annual trade deficit (billions) 1968 1969 1970 13 15 $1.5 1.7 $0.4 .4 $1.1 1.3 1971 17 19 1.9 .4 1.5 1972 1973 21 2.1 2.4 .4 1.7 2.0 1974 27 2.7 2.3 1975 30 3.1 3.4 .4 2.7 3.0 Cumulative trade deficit to 1975: 15. 6 1 Annual increase in imports estimated conservatively at 3~l the annual growth rate for last 10 years. 2 Calculated at average of $113 per ton f.o.b. foreign port (approximate 1967 average value). 3 Estimated to continue at current levels. These grim predictions have sound factual basis. As has been demonstrated herein, foreign steel producers have the capacity to verify the predictions, and previous trade patterns offer further proof. When growth in demand slackens abroad, many foreign firms find themselves with excess capacity. To a far greater extent than American firms, the European and Japanese manufacturers turn to foreign markets to hold up output. IV. CONCLUSION The body of this statement has shown the impact which rising levels of steel imports will have on the domestic steel industry and on the nation. The na- tional security depends on the maintenance of a growing steel industry that will have the ability to supply a complete range of quality steel products for specific defense needs, and to guarantee the viability of other crucial industries which require steel. But unless relief in some form is forthcoming, it is clear that the nation will have to rely upon foreign steels to meet defense needs-foreign steels that sound defense planning must consider unavailable in the time of crisis. This con- clusion was expressed in the Senate Staff Study, in the following terms: "If the United States would rely more and more on importing steel, it would gamble with the national welfare and the national security by assuming that these imports would always be availbale in the future. We probably can afford to take this risk on Scotch whisky, French cognac, German beer, and Japanese motorcycles, but we cannot allow a basic industry like the steel industry to decay." 8 Unless steps are taken immediately which will stop enlargement of the present gap which impairs our national security, we "gamble with the national welfare and the national security." 8 Senate Staff Study, p. 246. 95-159 0-68--pt. 5-G PAGENO="0082" 1868 N. C)~ C~) (Q~ C)CO N. ~ CO 0 CD ~CD CO N. ~ N. C~4 0~ C~C~ N. ~ N.03 ~C) CO - ~ ~CO N. C?) CO N. CD - ~ CC~ C?) C?)C?4 ~i ~ .~ .:~ o - - OCOC?4C?4N. ~ >-0 ~ C~ - 0 ~ ~.j.~~.JC?4CNNJC%4 CO ::~CO 5 (0 C?) ~CC?)~?4 ~)CO C~ C~J~ C?) o~ U) ~C?).CC?)C~N.N. 0 - CO - ~ .~ S I. _ N.COO C?) C?) ON. ~ 0 I- CD CO ~ NJ CO ~ CD (0 .0 CD~COCDOC?)COCO~CO ~ E 0 .-Z~-.--~ :1::: PAGENO="0083" C CC COO c~2 ~ -~i~ Cl) C- I- C.) 0 C- >- C') C.) 0 0 C- 5 -J 1- C,, U- 0 C/) 0 C- S -J Co C/) 0 U- 0 C') Co C,) 0 1869 (C Cl) C')Co (CO Cl) Co (C C~(C -00 (CLt) ~ C~) Cl) ~ - - - C~J N. ~ m- (C(CO - CO Cl) (C (C ~ ~ (C ~ Cl)C'.J ~ NJ - (C ~ (.4 (C CO~ (C N. (0(l) Cl) CO C\J(C N. (C (C (C (C ~ (C (0 (C) (C CQ~ - (C (C ~ ~ (.4 (`4 Cl)O Co U) (C (CO ~ Cl)~ (C CO 000'4 ~ ~~CoCo 0 Ox: C- C.) C- S 0 I- C-) Co C. (`4 Co Cl) Cl) Ø (CN.N.~ C) (C C~4 00 N. (C (C ~ ~ (C C~J - Co (C Co ~ N. ~ N-CC) (`4-- (C(CN.OCl)N.C'4 Co Co Co Co Co CoIl) 0 CC) ~ Co ~ Co - Co (C (C (C - (C C') CI) CC) -Co r-~ (C (C ~ (C~ (CCo N. r~ CoCo Co Co (`4 Co (C Co - Cl) N. - (C ~ (.4 Co Co - ~ (C ~ Co CC) CoCo (C(C (C Co Cl) CoCoCo (C Cl) ~(Co (C ~ ~ C~ - (C ~ Co Co Co CC) N. C'JN. Co (C - E E E ~0 SC.) C,~ 0 C,) PAGENO="0084" 1870 :~!!~!!!~! ~C~4 C~ ~D COLt) ~ ° ~ C~J - ~O~t~(O~ :~. c'~ r~ ~ - - ~C~~C%Jt%J I c~) LI~ ~ C~ ~ - E I-E E E 00 C,, = :; 00 0 00 C- CO C) 0 0 00 0~ CO 0 C- CI, 0 C.) -J C,, - LL.E 0 - C,, U, CU U, LU 0 CU. 0 00 C- 0 C.~ LU -J CO 0 0 E 0 U, PAGENO="0085" 1871 L~mcor-~-~o NJ N- It) ~ C) N- N- ~ NJ N- N-~ COIC)C)(CN4N-C~ NJ - E S C-, E E U C/) ~ 2 cC It) ~ 2 cC C, 0 >- C, C-, C, 0 C, >- C, = 0 2 It, = 0 -J C,, 0 C,, cC C, C, 0 C,, = C, 0 = 2 C, cC C, cC Co 0 It) F- C, E C, C', PAGENO="0086" C) C~4 1872 C) (C Cl) (CC) C) Cl)LC) C~4 ,-~U) (C) C~J ~c~) ))) C) ~ (C) (C) C~) C') C') ~ C) C) CD C) - E S C) ~ w E E S C) ~ - C~ c'4~ cbC)C) ~ -~ ~ C'4 CD C~j ~F'- (C) C'4 ~ C) C) ~ (C r~ `C) 00 IC) )`)L() C'4.-o 00~CO C') £-.~ ~ C) ~ - m~4~C%JLC)C, C'4 (`4 r-C-.tt) C~) ~C') ~ `CO C'- C')C') ~ C)~ C) (0 (OC~J -- (0 (`4 S C) CO C) C) >- C) C-) C) 0 C) 0~ >- C) 0 2 Cl) 0 C-) ~ 0 Cl) 0 - C/, C-) C) 0 Cl) C) 0 2 C) C- C) C) C', C) E C) C,) PAGENO="0087" TABLE F-DEPARTMENT OF DEFENSE FORECAST OF STEEL CONSUMPTION BY PRODUCT, BY PROGRAM, 1968 `(PROJECTED) [In tons and percenti Ship- Tank, Military Construc- Miscella- Total Product Aircraft Missiles building automotive Weapons Ammunition Electronics building tion neous all distribution supplies programs (percent) Carbon: Ingots, billets 3,000 1,000 12,000 3,000 500 60,000 100 400 250 80,250 1.7 Billets, shells 50 895, 000 400 895, 450 19. 4 Bars, C.F 7, 000 2, 100 6, 000 35, 000 3,000 130, 000 1, 000 200 800 3, 000 188, 100 4. 1 Bars, H.R 1, 000 700 18, 500 60, 000 500 266, 000 500 54, 000 15, 000 25, 000 441, 200 9. 5 Bars, reinforced 200 22, 000 65, 500 7, 000 94, 700 2. 0 Bars, shells 20, 000 300 20, 300 . 4 Struc. shapes 900 900 82, 500 9, 700 400 8, 000 150 5,800 48, 400 5, 000 161, 750 3. 5 Piling 50 2, 000 2, 100 50 4, 200 . 1 Pipe and tubing 600 1,300 51,400 13,000 400 511,000 400 400 22,600 32,000 633,100 13.7 Plates 700 5,000 211,600 70,000 2,500 150,000 550 3,400 19,400 6,000 469,150 10.2 Sheet and strip 6, 000 5, 000 42, 400 240, 000 8, 000 218, 000 2, 700 275, 000 6, 600 27, 000 830, 700 18. 0 Sheet, galvanized.... 50 100 71, 100 2, 000 200 250 4, 000 4, 900 7, 000 89,600 1. 9 Tin, terne, and black 50 400 2, 000 8, 000 150 10, 600 . 2 Rails and accessories 25 6, 150 6, 000 12, 175 . 3 Wheels and axles 25 50 Wire products 2,000 250 34,400~ 5,000 15,000 2,400 45,000 -- 8,600 10,000 75 -- Total carbon 21,300 16, 650 532, 350 439,700 15, 300 2,281,200 8, 050 409, 800 200, 500 129, 150 4, 054, 000 87. 7 Alloy: Ingots, billets 45,000 5,000 4,000 13,000 75,000 25,000 50 300 167,350 3.7 Bars, C.F 500 1,000 4,000 20,000 4,000 13,000 100 50 350 2,000 45,000 1.0 Bars, H.R 18, 000 4, 000 5, 000 75, 000 3, 000 35, 000 100 200 600 2, 000 142,900 3. 1 Struc. shapes 200 150 4, 000 50 25 100 600 300 5,425 . 1 Pipe and tubing 3,000 350 1,500 3,000 1,000 7,000 50 900 600 17,400 .4 Plates 5,000 1,100 29,400 10,000 500 250 200 700 1,100 48,250 1.0 Sheet and strip 3, 000 3, 000 1, 500 2,200 50 11, 000 100 650 1, 050 22, 550 . 5 Plates, armor 500 50 18, 500 1, 000 50 3, 000 100 100 23, 300 . 5 Track accessories 100 100 Wheels and axles Wire products 200 200 1,000 600 50 50 150 150 2,400 Total alloy 75,400 14,850 67,900 125,350 83,600 94,850 475 700 3,950 7,600 474,675 10.3 Stainless: Nonnickel stainless 28,000 500 1,000 50 400 11,000 250 25 350 2,300 43,875 .9 Nickel stainless 28, 000 3, 000 8,900 1, 000 600 5, 000 500 25 800 1, 100 48, 925 1. 1 Total all products 152, 700 35, 000 610, 150 566, 100 99,900 2, 392, 050 9, 275 410, 550 205,600 140, 150 4, 621, 475 100. 0 `Revised, April 1968. Source: Department of Defense. PAGENO="0088" TABLE G.-DEPARTMENT OF DEFENSE AND OFFICE OF EMERGENCY PLANNING FORECAST OFSTEEL REQUIREMENTS BY STEEL PRODUCT AND CURR ENTSHARE OF ALL STEEL INDUSTRY SHIPMENT Def ense share of estimated tot al steel O.E.P.2 1960 `(tons) 1965 `(tons) 1966 `(tons) 1967 `(tons) 1968 ~* (tons) projection (tons) industry shipments 1965 1966 1967 1968* O.E.P. projec- tion Carbon: Semifinished 43,000 61,000 315,000 637,000 976,000 943,000 1.6 11.3 21.9 28.2 22.0 Bars, cold-finished 35,000 43,000 134,000 144,000 188,000 442,000 2.8 8.3 10.3 11.8 19.2 Bars hot-rolled 214, 000 237, 000 393, 000 526, 000 556, 000 1, 007, 000 2. 2 3. 5 5. 2 4. 8 6. 6 Shapes and piling 171, 000 162, 000 200, 000 236, 000 166, 000 420, 000 2. 4 3. 0 3. 9 2. 4 4. 6 Pipe and tubing 81, 000 94, 000 477, 000 657, 000 633, 000 1, 263, 000 1. 2 5. 6 7. 9 7. 1 10. 7 Plates 171, 000 205, 000 386, 000 550, 000 469, 000 1, 030, 000 2. 1 4. 2 6. 8 5. 0 8. 2 -~ Sheet and strip 170, 000 149, 000 783, 000 561, 000 831, 000 2, 101, 000 . 5 2. 6 2. 0 2. 6 4. 9 ~ Sheet, galvanized 29, 000 24, 000 57, 000 131, 000 89, 000 120, 000 . 5 1. 2 2.9 1. 7 1. 7 -~ Tin, tome and black plate 1, 000 2, 000 3, 000 5, 000 11, 000 13, 000 1 . 1 . 1 . 2 Wheels, axles, and track 24, 000 14, 000 19, 000 24, 000 12, 000 36, 000 . 9 1. 1 1. 7 . 8 1. 8 Wire rods and wire products 49, 000 52, 000 174, 000 185, 000 123, 000 376, 000 1. 1 3. 5 4. 0 2. 4 5. 4 Other 5,000 Carbon steel, total 993, 000 1, 043, 000 2,940, 000 3,656, 000 4, 054, 000 7,751, 000 1. 2 3. 6 4. 8 4. 6 6. 6 Alloy steel, total 174, 000 206, 000 278, 000 402, 000 474, 000 1, 331, 000 3. 9 5. 3 8. 8 8. 8 17. 1 Stainless steel, total 57, 000 40, 000 68, 000 89, 000 93, 000 140, 000 4.5 7.3 10.6 9. 5 10.4 Total all products, allgrades 1,224,000 1,289,000 3,286,000 4,147,000 4,621,000 9,222,000 1.4 3.7 4.9 4.9 7.3 *Revised: April 1968. `Source: Department of Defense. 25ource: Product mix estimated from Office of Emergency Planning's projection of total defense steel requirements during conventional nonnuclear war in 1969. PAGENO="0089" 1875 TABLE FL-CIVILIAN AND DEFENSE STEEL REQUIREMENTS, MILLIONS OF PRODUCT TONS, 1969-71 1969 1970 1971 Carbon 118 125.9 133.0 Alloy 8 8.6 9. 1 Stainless 1 1.1 1.1 Total, all grades 127 135. 6 143. 2 Source: Office of Emergency Planning. TABLE 1.-DIRECT DEFENSE STEEL REQUIREMENTS, MILLIONS OF PRODUCT TONS, 1969-71 1969 1970 1971 Carbon 8. 00 8. 00 8. 00 Alloy 1. 10 1. 30 1. 30 Stainless . 13 . 15 . 15 Total, all grades 9. 23 9. 45 9. 45 Source: Office of Emergency Planning. TABLE J.-DIRECT AND INDIRECT DEFENSE STEEL REQUIREMENTS [Millions of product tons, 1964 and 1969-71~ Direct, "A" Indirect, "B" Total defense Total national Defense percent products products of national 1964 1.4 55.6 57.0 87.9 64.8 1969 9.2 78.8 88.0 127.0 69. 3 1970 9. 4 83.7 93. 1 135.6 68. 7 1971 9.4 88.3 97.7 143.2 68.2 Source: Office of Emergency Planning. PAGENO="0090" 1876 BIG STEEL, II~VENTION, A~D I1~OVATION, RECONSIDERED Alan K. McAdarns Reprinted by permission of the publishers from Alan K. McAdams The Q~iarterly Journal of Economics Cambridge, Mass: Harvard University Press, Copy- right 1967 by the President and Fellows of Harvard College PAGENO="0091" 1877 BIG STEEL, INVENTION, AND INNOVATION, RECONSIDERED * ALAN K. MCADAMS I. The basic issue, 457.-Il. Status of the United States industry compared with the world industry as a whole, 458.-Ill. The United States and European industries compared, 461.- IV. Technological and economic complications in the decision process, 465. - V. The United States and Japanese industries compared, 470.- VI. The significance of 1962, 471.- VII. Conclusions, 473. In their article "Big Steel, Invention, and Innovation" in the May 1966 issue of this Journal Walter Adams and Joel Dirlam state their thesis clearly and forthrightly: For testing the "Schumpeterian" hypothesis (that large firms with substantial market power have both greater incentives and more ample resources for research and innovation) we have selected the oxygen steelmaking process - the circumstances surrounding its invention, its delayed adoption by the dominant firms in the United States steel industry, and the cost of this delay in terms of the industry's social performance.' Their conclusion was that the hypothesis was not supported by the data presented. In this article the same case and essentially the same sources have been examined, but quite different, and in some instances exactly opposite, conclusions have been reached. I. THE BAsIc IssuE The key to the analysis presented by Adams and Dirlam is the comparative delay of United States firms in introducing the LD process.2 To establish the fact of this delay they present a table of data (reproduced on page 460) and state, Reviewing the history of innovation with respect to oxygen steelmaking, the following conclusions are inescapable. First, as Table II indicates, United * ~ wish to express appreciation to M. G. Clark, M. G. De Chazeau, A. E. Kahn and P. B. Burleson for comments on drafts of this article; to The Ford Foundation, Cornell University, and IESE of the University of Navarra, Spain, for Research grants and administrative support; and P. J. Schwarz for research assistance. Errors which remain are my responsibility. 1. Walter Adams and Joel Dirlam "Big Steel, Invention, and Innova- tion," this Journal, LXXX (May 1966), 169; hereafter referred to as "Big Steel." 2. In this article the several oxygen converter processes are col- lectively designated "OC" processes while the Linz-Donawitz, one particular process, is referred to as "LD." PAGENO="0092" 1878 States steelmakers lagged behind the rest of the world in adopting the LD process. By September 1963 the United States had some 10,040,000 tons of LD capacity in place - compared with 46,210,000 tons for the world as a whole.8 They also suggest that the United States industry installed 40 million tons of "the wrong capacity during the 1950's"~ and then state: Until the steel industry restates its accounts to reflect the efficiencies that have been possible for at least the past fifteen years [i.e., since 1950] little credence should be given to its plaintive pleas for higher prices or profits.5 Their. own illustrative restatement of the possible profit picture of the steel industry of the Uni~ç~i States showed the impact of 87 million tons of oxygen converter capacity (and output) or 88 per cent of total United States output in 1960, being added "by 1961," i.e., by the end of 1960.6 II. STATUS OF THE UNITED STATES INDUSTRY COMPARED WITH THE WORLD INDUSTRY AS A WHOLE The data in Table I show world converter steel capacity (not output) with world production of steel. This comparison thus gives the most generous picture possible for the progress of oxygen steel- making.7 World output of crude steel increased by approximately 122,- 000,000 tons in the period 1953-60 while world capacity to produce 00 steel increased by roughly 15,000,000 tons. Over the full period 1950-60 world output increased by approximately 148,000,000 tons.8 Thus by 1960 about 10 per cent of the increment to world produc- tion after 1950, or 4 per cent of total world production èould have been produced in oxygen furnaces. World capacity for the new process was negligible until 1957. Though it has been rapidly recognized worldwide, the OC process has not been adopted whole- sale overnight. It has followed a cycle of development over an ex- tended period of time. 3. "Big Steel," p. 182. 4. Ibid., p. 185. 5. Ibid., p. 189. * 6. Ibid., p. 187. 7. Year to year changes in percentage result from changes in both factors, 00 capacity and actual output, however, and thus should be interpreted with care. Output of steel by the 00 process was, of necessity, less than capacity, since during this period growth was rapid and the capacity of a plant was included in the data for a given year no matter when during the year a plant may have been completed. 8. See Table II. PAGENO="0093" 1879 TABLE I COMPARISON OF WORLD OXYGEN CONVERTER CAPACITY WITH WoRLD CRUDE STEEL PRODUCTION FROM ITS INCEPTION THROUGH 1965 (FIGURES IN MILLIONS OF NET TONS AND PER CENT AT YEAR END) Year World Converter Steel Capacity World Crude Steel Production Converter Capacity as a % of World Production 1953 0.5 257.9 02 1954 1.0 246.2 0.4 1955 1.0 297.5 0.6 1956 2.0 311.5 0.6 1957 7.0 322.0 22 1958 10.0 298.9 3.4 1959 14.0 335.8 42 1960 15.5 379.7 4.1 1961 23.0 390.1 5.9 1962 31.9 394.1 8.1 1963 52.OE 422.7 12.3 1964 77.0 E 479.0 15.7 1965 110.0 501.4 21.9 Source: (a) American Iron and Steel Institute, Annual Statistical Re~port. (b) The Iron and Steel Engineer, "Developments in the Iron and Steel Industry during rthe previous yearl ," January of each year, prepared by I. E. Madsen (The Society of American Iron and Steel Engineers), Pittsburgh. E Estimate by author by interpolation. The record showing both crude steel production and OC capacity ° for the world, the United States, and the United States as compared with the world is presented in Table II. The United States proportion of world OC capacity has roughly kept pace with United States crude steel output as a proportion of world crude steel output. After 1958, United States crude steel production has roughly stabilized at about 26 per cent of the total, while United States OC steel capacity has (with the exception of 1958, a year in which the United States percentage was relatively high and 1961 when it was relatively low) fluctuated between 24 per cent and 29 per cent of world capacity. Adams and Dirlam's Table II is reproduced on page 460, but calculations of relative positions have been tabulated in columns 4 and 5 as well. Adams and Dirlam's Table II confirms that at least from 1958 on, rather than significantly lagging in oxygen steelmaking, the 9. The capacity figures are used for OC steel because reliable estimates of actual world production could not be found. PAGENO="0094" TABLE II SELECTED DATA ~oa UNITEr) STATES AND Wonu STEEL INDUSTRIES, 1951-1965 (Fxouitns IN MILLIONS OF NET TONS OR IN PER CENT AT YEAR END) `51 `52 `53 `54 `5.5 `56 `57 `58 `59 `60 `61 `62 `63 `64 `65 TOTAL CRUDE TEE' World Production 231.8 232.6 257.9 2462 297.5 311.5 322.0 298.9 335.8 379.7 390.1 394.1 422.2 279.0 501.4 U.S. Production 105.2 93.2 111.6 88.3 117.0 1152 112.7 85.3 93.4 99.3 98.0 983 109.3 127.1 131.5 U.S.as%of . . . World Production 45.6 40.0 43.2 35.9 39.4 37.1 352 28.8 27.9 26.1 25.1 25.0 25.9 26.5 262 Index of . U.S. Production 108.3 95.4 114.9 90.9 120.5 118.3 116.0 87.8 062 101.9 100.9 1012 112.5 130.5 135.3 (1957-59 = 100) ~. . OXYGEN-CONVERTER STEEL b . : . . World Capacity 1.0 1.9' 2.0~ 7.0 10.0 14.0 15.5 23.0 31.9' 52.0~ 77d 110 U.S. Capacity Began Dec. `54 .56 .56 2.0 4.0 42 4.7 4.7+ 7.5' 13.0 22 31.1 U.S.as%of . World Capacity 28 27 28 40 30 31 20 24 25 29 28 ACTUAL U.S. PRODUCTION * .3 .5 .6 1.3 1.9 3.4 4.0 5.5 8.5 15.4 22.9 (tons) a. American Iron and Steel Institute, Annual Statistical Report. b. The Iron and Steel Engineer, `Developments in the Iron and Steel Industry during (the previous Year]," January of each year, prepared by I. E. Madsen (The Society of American Iron and Steel Engineers), Pittsburgh. Capacity figurea as of December 31. c. LD only. d. Estimate by author as linear interpolation from figures reported at other than year end dates. e. Estimate as of mid-year for both figures. PAGENO="0095" 1881 ADAMS AND DIRLAM'S TABLE II EXTENDED ANNUAL LD STEELMAKING CAPACITY (MILLIONS OF TONS) Adams and Dirlam's Table II Relative Data for United States and World Year United States ~ World * U.S. Crude U.S. Steel Production LD capacity as % of as % of World World LD Crude Steel capacity b Production 1953 - 0.5 1954 - 0.9 1955 0.54 1.9 28 39 1956 0.54 2.0 27 37 1957 0.54 2.7 26 35 1958 1.35 52 26 29 1959 3.58 9.5 38 28 1960 4.16 11.5 36 26 1961 4.65 172 27 25 1962 7.50 24.7 30 25 Action No. 16,900, U.S. District a. Trial Brief for Plaintiffs, Kaiser v. McLouth Civil Court (ED. Mich.), p. 67. As shown in "Big Steel," p. 182. b. Calculation from columns 2 and 3. c. Table II, p. 460. United States has roughly kept pace with the world development of oxygen steelmaking capacity. The data for 1963 (quoted above) in the body of the Adams and Dirlam paper represents a low point in their tabulation of the relative position of the United States industry (22 per cent of world capacity), but between September and December of 1963, United States producers added 3,000,000 tons of 00 capacity, a 30 per cent increase in those months alone. (Though Adams and Dirlam's source 1 and my sources agree on this fact, the data presented in these tables should be interpreted as roughly indicative, rather than precise, since it is extremely difficult to find agreement in source materials either on the capacity of given furnaces, or of total ca- pacity in a given country or countries as of a given date. For some of the reasons see the footnotes on page 466 and page 471.) III. THE UNITED STATES AND EUROPEAN INDUSTRIES COMPARED Adams and Dirlam have frequently repeated the Business Week 1. Adams and Dirlam's source, the Kaiser Engineers L-D Process News- letter No. 21, September 1963, estimates the expected growth of U.S. capacity to 13 million tons in its first paragraph. It also states in the last sentence on p. 1 that "the U.S. portion of world output will climb from 25% to 32% in the next few years." PAGENO="0096" 1882 statement that during the 1950's the United States industry bought "40 million tons of the wrong kind of capacity" (the open hearth furnace). In an earlier article they noted that in contrast "the-"-- Europeans and Japanese were installing the cheaper and more progressive oxygen converters at a breakneck pace." They also stated: Despite these apparent advantages of the oxygen technique, and despite its widespread use in Europe more than ten years ago [i.e., about 1954], the U.S. steel industry was slow to adopt it.2 Especially as compared with Europe, the United States is stated to have been backward. At the end of 1954 there was.a total of four firms throughout the world using oxygen converters for steel production; one in Canada (two 40-ton converters), one in the United States (three 35-ton converters), and the two in Austria where the process was developed: Linz (three 30-ton converters) and Donowitz (two 30- ton converters). The first European plant outside Austria was set up in France (two 15-ton converters) in September of 1956.~ We have already seen from Table I that as of December 1954, world capacity for steel production by the 00 process was approximately 0.4 per cent of the 253 million tons that were produced. The data for the United States in comparison with the countries of the European Coal and Steel Community (ECSC) plus Austria and Russia after 1954 is presented in Table III. Adams and Dirlam implicitly recognize their earlier misstatement of the rapid rate of European introduction of OC steelmaking: The lag of the United States behind other major steel producers is all the more remarkable, because the LD process developed by the Austrians was immediately applicable to conversion of our low-phosphorus ores. Major European steelmakers by contrast, had to wait until 1957 before the LD process was modified sufficiently (by the addition of lime powders in the LD- AC, OLP, and LD-Pompey processes) to be suitable for processing high phosphorous ores constituting their primary supply. Once this adaptation was made, these countries moved to install the latest technology. So did Japan.4 However, this explanation cannot be applied for Russia, Great Britain, Italy, the Netherlands,- or Japan, all of which use low- phosphorous ores for the bulk of their production. Today even 2. Walter Adams and Joel B. Dirlam, "Steel Imports and Vertical Oligopoly Power," American Economic Review, LIV (Sept. 1964), 627, 647. Emphasis added. 3. J. K. Stone "Worldwide Distribution of Oxygen Steelmaking PL..nta," Iron and Steel Engineer, Nov. 1966, pp. 93-97. 4. "Big Steel", fn. p. 182. PAGENO="0097" 1883 TABLE III ANNUAL PRoDuCTIoN OF CRUDE STEEL BY OXYGEN PROCESS, UNITED STATES, ECSC, USSR AND AusmIA (THOUSANDS OF NET ~?ONS) Year United States * ECSC b USSR Austria 1955 307 - - 742 1956 506 - - 935 1957 612 - - 1,325 1958 1,323 684 1,300 1,282 1959 1,864 1,089 2,080 1,424 1960 3,346 1,757 2,745 1,955 1961 3,967 2,615 2,863 2,000 1962 5,553 3,840 2,920 2,020 1963 8,544 6,030 3,000 2,036 1964 15,442 11,470 3,580 2,160 1965 22,879 18,150 NA NA Note: The first LD converter in the United Kingdom went into production in 1960. See c below. a. Annual Stati8tical Report, 1960, 1965, American Iron and Steel Institute (New York). b. Iron and Steel: Statistical Yearbook, Statistical Office of the European Communities, 1961 - Brussels. c. Statistical Handbook 1984, British Iron and Steel Federation (London). France, Germany and Belgium are using low-phosphorous ores in new LD plants. The data presented thus far suggest that the United States was among the early experimenters with the oxygen process (Canada was also early). As of 1958, the United States was the largest producer of oxygen steel in the world.5 This position was achieved despite difficulties faced by United States producers during the 1950's. For example, from 1950 to 1953 the United States industry was faced with public pressure to expand its capacity immediately to meet the needs of the Korean war. It could not have been ex- pected to begin large-scale experimentation with OC steel - which had not yet been produced on a commercial scale - at that time. In the period following the wartime build up of capacity, 1953-60, United States output of steel decreased 12,300,000 tons.6 This is an indication of the decreased demand for steel in the United States market, since United States producers have been successful in ad- justing steel supply to demand. 5. It held the lead in 1958 and 1960. From 1961 until 1965 the lead was held by Japan, as we will see in a moment. 6. Slesinger pointed out that only 5.6 million tons of new open hearth capacity was constructed in the United States after 1953. R: E. Slesmger "Steel Imports and Vertical Oligopoly Power: Comment," American Economic Review, LVI (Mar. 1966), 152-55. 95-159 0 - 68 - pt. 5 - 7 PAGENO="0098" 1884 The ~erformance of the United States industry is even more significant in light of differences in the structure of the costs it faces. This was forcefully pointed out by Francis A. Muller, Economic Affairs Officer of the United Nations Economic Commission for Europe, in a letter to this author. He states: The economic structure of the steel industry in the United States and the rest of the world is significantly different: United Statee ECSC Employment costs 40 20 Energy, materials, supplies 45 75 Investment and interest 10 5 Miscellaneous 5 5 It is quite natural that in the Unit~1~ States the main innovation effort is made toward improving labor productivity, and in the rest of the world toward improving raw material and energy savings. A recent survey of labor productivity comparisons in the iron and steel industry (U.N. Report Steel! 304) has shown that labor productivity in the United States is more than twice a.s high as in European countries. This is explained mainly by innova- tion in operative efficiency of tin.' steel industry as a whole. A rough comparison of energy and labor input for one ton of cold rolled sheet at the various stages of production is shown in the following table: Energy Manpower Blast fiirnat.e 20 15 Steelmaking 45 20 Hot rolling 15 45 Cold rolling 20 20 It is quite natural from the economic point of view ihat more research and development effort is spent in the United States on the labor-intensive roll- ing stages, and more research effort is spent in other countries on the energy- intensive iron and steelmaking improvements. From the point of view of quality of the steel products, it is also well known, that it is in the rolling :tr a where the hulk of the problems arise and have to he tackled. (It is worthwliih pointing out that a great many technical terms (lescribing rolling practice'~ and steel quality defects exist only as English expressions and are used :is such in other languages, awaiting adequate translations.) It is especially in this area where big savings and profits can be made, provided the proper installations and the proper operative tech- niques have been developed. General conclusion: It is incorrect for the evaluation of the research and development effort of "Big Steel" to pick out one single process de- velopment and to analyze the comparative result& The steel industry is a complex industry with a very broad field for research and development.7 7. Letter dated January 16, 1~7, pp. 2 and 3. PAGENO="0099" 1885 IV. TECHNOLOGICAL AND ECONOMIC COMPLICATIONS IN THE DECISION PROCESS It appears that Adams and Dirlam have understated the complexity of the technology of oxygen steelmaking, and their presentation definitely oversimplifies the decision problem faced by United States steelmakers. The understatement of the tech- nological complexity of OC steelmaking is especially surprising in light of the exhaustive detail the authors have provided for the earliest stages of its development: the process was proved tech- nologically in 1948 at which time VOEST, the innovating Austrian firm, began considering its use; Robert Durrer began testing with a 2.5-ton converter in 1949; voEsT proved the process practically in 1950 with 15-ton converters; put a plant in operation in December of 1952 with 30-ton (equals 35 net ton) converters and reached a commercial output scale in 1953.8 At each stage during the five years between conception and commercial implementation difficult problems had to be overcome. The implication of the article is that because one firm was operating commercially under its given conditions in 1953, all technological problems had been solved for all scales of operation - except f or the problem of high-phosphorous ores, a problem not "solved" until 1957.~ Yet other problems with the use of converters remained.' For example: the quality range of their output, their maximum feasible scrap rate, their maximum batch size. Quality range. Unless the new process could produce a firm's full range of steel qualities consistently, introduction of the process could not be accompanied by the closing of old facilities (or it would require installation of two processes to operate together) ~2 8. They also note that the first LD license in the United States was taken out in 1953 by Kaiser Steel, but that the plant did not go into operation until 1958. When it did, it utilized 110-ton converters, not the 30-40 tonners of Linz and Donawitz. 9. Even today some steel qualities cannot be produced by the LDAC process and the investment and operating costs remain higher than for the LD process. 1. The discussion in this section is based on the annual articles by I. E. Madsen, "Developments in the Iron and Steel Industry during [the previous year] ," The Iron and Steel Engineer, January Editions, hereafter referred to as "Madsen." This was also one of Adams and Dirlam's major sources. 2. This was the strategy used by McLouth when it built its OC plant in 1953. It also ordered the largest~ electric furnaces then available in the world (Madsen, January 1954). The oxygen furnace was intended only to refine the metal partially, with the process completed in the electric furnaces. The Prospectus for McLouth common shares dated May 10, 1955, provides further perspective on p. 3. ". . . although certain operating problems re- main to be solved, the corporation believes that its costs of production in PAGENO="0100" 1886 Scraj~ Rate. Today the maximum scrap rate commercially possible with LD converters is about 30 per cent; general practice is to use no more than 25 per cent scrap in the converter charge. Initially very little scrap could be used.8 By comparison OH furnaces are usually charged with 50 per cent scrap in United States practice and 65 per cent scrap in European practice. The Thomas process, widely used with high-phosphorous iron for some lower quality steels in Europe, has a scrap rate of roughly 10 per cent. The United States is a surplus producer of low cost scrap while Europe, outside West Germany, has been a scrap deficit area. Smaller scrap using capacity implies a higher hot metal charge to the steel furnace (a situation faced if U.S. or European producers shift from the open hearth to the,,LD). For a balanced, integrated plant a rise in hot metal requirements implies a need for additional blast furnace capacity for the same final product output. A rela- tively larger scrap using capacity (Europeans shifting from Thomas steel to the LD) implies the ability to expand steel output without new blast furnace capacity - but, of course, requiring propor- tionately more steel rolling and finishing capacity. Maximum Batch Size. The LD converter has experienced a rapid scaling-up over its lifetime in the first five years (see page 465). The first Jones & Laughlin converters in 1957 represented a significant innovation and were the largest in the world in batch size and annual output.4 Kaiser's 110-ton converters took both honors when they were put into production in 1958. Though even the 35-ton converters had large annual capacity (both they and Thomas converters have tap-to-tap times of less than one hour), the batch size itself is a crucial factor in an inte- grated plant. Ladles, cranes, transportation and handling equip- ment, etc., all must be in harmony for such installations. It is very inefficient to place 30 tons of steel in a ladle designed for 175 tons and transport it by cranes capable of 200 tons, for example. Euro- using the process will be as low or lower than those of conventional steel making methods." Emphasis added. 3. The early LD's were not capable of utilizing even the amount of scrap generated within the plant, so called "home scrap." The Kaldo Process was (and is) capable of utilizing a higher proportion of scrap, but is a more complicated process. The economic analysis of its differences from other OC processes is important, difficult, and continues today. 4. The announced batch size for these converters was first 55 tons, then 65. When put in operation, they produced about 82 tons per heat. The re- rating from 55 to 65 tons proportionally raised the stated annual capacity of these converters; however, the increase in heat size from 65 to 80-plus tons involved no change in annual capacity; the larger heat merely took propor- tionally longer to blow; 55 vs. 39 minutes per heat. (Madsen, January 1959, p. 23.) PAGENO="0101" 1887 pean plants generally are char~cterized by 10- to 40-ton Thomas converters or relatively small open hearth furnaces. United States plants generally do not use Thomas converters and have tended toward larger and larger batch size open hearths (though their much longer tap-to-tap time has meant comparatively low annual capacity). Changeover to OC converters in the United States would often require complete plant revision while in many European firms converters alone can be added to, or substituted for, Thomas fur- naces.5 Batch size is also interrelated with ingot size. Flat rolled products can be produced more efficiently from large ingots which are most economically produced from large batches while long products do not require such large ingots. A greater proportion of United States production is in flat products than is true of other parts of the world. Adams and Dirlam oversimplify the investment decision on at least two counts: first, they focus on a single step in the inte- grated production chain, steel furnaces alone. In so doing they assume away many of the problems of technological interrelated- ness suggested above. Second, they fail to note that the manager may be faced with a series of mutually exclusive opportunities for improving his plant, all of which provide his firm with positive present value. The decision which Adams and Dirlam consider is that be- tween a new OH plant and a new OC plant at a single point in time and in vacuo. Even firms which are expanding their output can do so by modifying an existing plant or by building a completely new facility. Only in the latter case can the potential of a new process be utilized most fully through production line balancing. Actually managers in this industry face a matrix of decision possibilities when they introduce new technology. Each of them must be analyzed. Adams and Dirlam's analysis applies most closely to the simplest case, the I-E decision. While the comparison of the costs of the OC and OH plants in the I-E decision involves the comparison of an- nualized investment plus operating costs for both processes, the R-R 5. It is possible to find in Europe today plants originally constructed in the 1800's with Thomas and OC converters operating side by side, still utiliz- ing original auxiliary equipment. One example is that of Dillinger Hutten- werke, Dillingen, Germany which has one melt shop of Thomas and LDAC converters utilizing the same auxiliary equipment. It also continues to operate its 80-ton open hearth furnaces because of their great flexibility in charge and output range. Even when its new OC plant is built in the im- mediate future, the open hearths will be retained, in part to assure processing of home scrap. PAGENO="0102" 1888 TABLE IV V~iuôus CONDITIONS FOR THE INTRODUCTION or NEW TECHNOLOGY Replacement Expanthon Revision Building of Existing Plant Ncw Integrated Plant R - R I.- R R - E I - E decision requires the comparison of the total of investment plus operating costs of the 00 plant against operating costs alone for the OH plant. (Its investment costs are sunk.) Then, to the extent that further investment is required to balance the production line, or possible operating savings are lost through interference at other stages of production, the possibility of a desirable result is lessened. A positive result in the former case in no way guarantees such a result in the latter. The replacement of existing facilities by a new integrated plant, the I-R decision, could be folly if the only benefit was the savings at the converter stage. These cost savings would have to balance at present value the investment cost of a fully integrated plant (less any, presumably small, incidental savings from newer facilities at other stages). If, however, the whole existing plant were physically aged and thus in need of early replacement, the relevant incremental costs of the decision approximate those of the I-E alternative. (In each case the sunk costs and book values would be relevant only in their impact on the taxes the firm would have to pay.) A decision to replace existing steel melting capacity in an existing plant or to expand existing capacity by modifying an existing plant, may run into all the possible complications from the interrelatedness of the process with other stages in the chain. Thus it can be extremely complex and can involve wide ranges of relevant incremental investment and operating costs.6 We cannot dismiss out of hand (as Adams and Dirlam have done) the possibility that if a firm could increase its output of steel from its existing open hearths by the relatively negligible cost of 6. Obviously, this can work both ways. In the case of Dillingen, con- version was less costly than building a new 00 shop, but it might also be sound economics for a firm to achieve a small increment to capacity by adding a new open hearth to an existing OH shop rather than to scrap the whole shop in favor of an oxygen converter installation of desired total capacity, especially if investment funds are limited. In making these state- ments we disassociate ourselves from any implication that the sunk costs of an earlier investment themselves are relevant for decisionmaking except for their impact on the tax position of the firm. PAGENO="0103" 1889 oxygen lances without interrupting its revenue stream, without changing its auxiliary equipment, and without the use of an entirely new process, it may well be wise for it to do so, even though a new process does exist, and, in certain cases, even if the new process is proven economically superior for a new installation. Even if all four decision situations in the above matrix were to show a positive net present value for a given firm at a given date, conversion of the plant might not be the best alternative. A manager must also decide the best time to convert his plant. He must take into account the lead time for a new plant - another factor Adams and Dirlam seem almost to disregard. In deciding this he must weigh the benefits -~ expressed in reduced uncertainty about the new process and improved performance from it - against pressures from competitors and lost experience with, and savings from early implementation of the process. Steel plants are long- term investments. If firms were to jump precipitously, they might find that they acted before significant improvements were intro- duced. (Witness the technological evolution of computers and on a more personal level, commercial television, first black and white, then color.) This actually did happen to several steel firms as stressed in Mr. Muller's letter: In England, for instance, two Kaldo vessels have been installed, along with two LD vessels, in a steel works and operated during two years; under the given local conditions it turned out that the LD vessels did produce most kinds of steels more economically and the Kaldo process was therefore dis- continued. In Western Germany a steel works did install a full-scale Rotor installation, which also did not prove economical; in South Africa the Rotor process had also been adopted in a steel works but has since been replaced by what is called the tandem process. All these wrong investments have only been mistakes under the given circumstances, whereas for a company's ven- ture into larger size installations, as needed in the United States, they could eventually have meant ruin for the company. Had American firms been able to act as suggested by Adams and Dirlam and convert their plants to LD by 1961, today they would find themselves on the verge of technological obsolescence. Two or three of today's 330-ton converters are capable of the same output as 8, 10, or 12 smaller ones - with great savings in invest- ment costs, labor costs, and other operating costs. The economic life of early OC equipment, has proven to be relatively short,7 and this is a crucial element in present value 7. An investment with a short useful life and low initial outlay may still be higher in total cost of operation over its lifetime than another invest- ment with higher initial outlay and longer useful life. The choice, of course, PAGENO="0104" 1890 evaluations. A process which appears desirable when evaluated over an economic life assumed to be long may prove undesirable if its life turns out to be much shorter than expected. Let us now turn to the comparison of the United States with Japan which is enlightening on several counts. V. THE UNrr~ STATES AND JAPANESE INDUSTRIES COMPARED The comparison of U.S. oxygen converter steelmaking with that of Japan is shown in Table V. Although negligible until 1958, TABLE V ANNUAL PRODUCTION OF CRUDE STEEL BY OXYGEN PROCESS IN THE UNITED STATES ANIi'JAPAN PLUS TOTAL CRUDE STEEL PRODUCTION IN JAPAN, 1955-1965 (THOUSANDS OF Nnr TONS) Years United States OC Steel Japan OC Steel Total Crude Steel 1955 307 - 10,400 1956 506 - 12,200 1957 612 62 * 13,900 1958 1,123 870 13,400 1959 1,864 1,326 18,300 1960 3,346 2,890 24,300 1961 3,967 5,910 31,500 1962 5,553 * 9,290 30,400 1963 8,544 * 13,270 34,700 1964 15,442 19,350 43,800 1965 22,879 25,000 45.000 Sources.: Table III, (a), (h) (d) p1w the Japanese Iron & Steel Federation Stat?sticsof the iron & Steel industry of Japan for 1965. Japan's production of OC steel exceeded that of the United States in 1961 when Japan became the world's leading Producer of oxygen process steel. More significant is that, as of 1965, Japanese oxygen process steel represented approximately 55 per cent of its total crude steel output, while it was roughly 17 per cent of total output in the United States. Comparable figures for some European coun~ tries were: Germany, 19 per cent, France 13 per cent 8 and England 16 per cent.9 is greatly influenced by the opportunity costs of capital involved in the decision. 8. Iron and Steel Stattsttcal Year Book, 1965 and Monthly Edition, 1966, No. 3 Statistical Offices of the European Communities (Brussels). 9. United Nations, Economic Commission for Europe, Quarterly Bulk.. tin of Steel Stati8tics for Europe, 1957, 1960, 1964 and Nos. 1-3, 1965. PAGENO="0105" 1891 The explanation for the phenomenon of Japan is in large part its rapid rise in output, from 5 million tons in 1950 to 10 in 1955, 24 in 1960, and 45 in 1965; a ninefold increase in fifteen years. Japanese producers were able tb expand output by building new integrated plants embodying the new technology, the I-E decision. Of the 35 million tons of new capacity (and output) achieved be- tween 1955 and 1965, 25 million tons was oxygen steel. In contrast, we noted from Table II that the United States steel industry achieved peak production in 1955 and did not match this output again until 1964. Thus, steelmakers in the United States faced a much different decision, a strict R-R replacement decision. It must be noted in addition that Japan added 15 million tons of new OH capacity after 1950 and continued to increase, and to operate that capacity into 1964.' Only after 1960 did Japanese OC steel production outpace that in the United States (see Tables II and V). Despite t.he rapid expansion~ of total Japanese output (roughly five-fold from 1950 to 1960 and 2.5 times between 1955 and 1960), a total of only 2 million tons of OC steel was produced in all the 1950's in Japan. The Japanese performance has been facilitated by two other major developments - the rapid development of new sources of high quality, low cost ores and the precipitous decline in world bulk shipping costs. It appears that nowhere in the world (with the possible ex- ception of tiny Austria) have firms acted in accord with the pattern suggested for them by Adams and Dirlam - a pattern against which the United States industry has been measured and found wanting. Perhaps the fault lies in the measure. VI. THE SIGNIFICANCE OF 1962 The decade of the `50's appears to have been the infancy of the 1. Only after 1964 was there a significant reduction in OH capacity. The data as reported by the Japanese Iron~ and Steel Federation in its Statistics of the Iron & Steel Industry of Japan for 1965, published in 1966, show the following: (data are for the beginning of the year) Open Hearth Furnaces No. of Furnaces Thousands of Tons of Annual Capacity 1963 145 14,926 1964 146 17,447 1965 118 16,465 1966 82 11,318 These data reflect the difficulties of interpreting the meaning of capacity figures at a time when oxygen lances were being introduced into open hearths. For example, during 1963 capacity inèreased by 2.5 million tons with a net increase of one furnace. Similarly, during 1964 a net of 28 furnaces or 19 per cent was retired with a net decrease in capacity of only 5.6 per cent. PAGENO="0106" 1892 oc process: Then, in 1962, a series of apparently interrelated events occurred: 2 Steelmaking capacity outside the United States exceeded steel demand outside the United States for the first time since the war. Japanese production of oxygen steel greatly exceeded that of the United States (9.3 vs. 6.5 million tons, respectively). Apparently as a result of the pressure of imports of steel on the west coast of the United States, Kaiser Steel Company (one of the early United States oxygen steelmakers) cut the price of west coast steel by $12 a ton, removing the traditional west coast differential in steel price. "Workable" OH plants of 3 million tons capacity, including Bethlehem's San Francisco plant,., cyere shut down in the United States, the first such actions in the postwar period. Data on the operation of the 200-ton LD converters with which Jones & Laughlin had directly replaced 175-ton OH furnaces - the first such action by a United States producer - was just becoming available (the converters had began operation in Septem- ber 1961) 8 The federal government passed the amendment to the internal revenue code, "the investment credit" act designed to stimulate investment. The U.S. Steel Corporation announced plans for the construc- tion of its first basic oxygen steelmaking facility. The rate of introduction of oxygen capacity in the United States having been comparatively slow in the early 1960's, greatly accelerated. In 1962 it appeared that the costs to United States producers for not innovating were significantly raised by actual and threat- ened competition from both domestic and. foreign oxygen steel- makers. At the same time the cost of making the innovation had been significantly lowered by~the perfecting of the process and the scaling-up of feasible converter size, scrap-using capability, range of product output, and by new tax regulations. These data are consistent with the statement that United States steelmakers were influenced by foreign competition in their, de- cision to introduce new oxygen steel capacity. However, they are also consistent with rational economic decisionmaking on the part of United States producers. Mr. Muller's conclusions reinforce those above: 2. Madsden, Jan. 1963, pp. 138-42. 3. This action is consistent with our suggestions about the significance of batch size for the replacement decision. PAGENO="0107" 1893 * . . Both Big Steel and Small Steel contributed to the development of the oxygen steelmaking process, each one in its proper role; small works played the role as pilot plants whereas Big Steel contributed effectively to the improvement of the raw material supply . . .4 VII. CoNcLusIoNs The premise of United States technological backwardness on which Adams and Dirlam's analysis is based, is not supported by the statistical record of this industry. The analysis made by Adams and Dirlam does not take into account technological and economic complications faced by the industry's decisionmakers. Adams and Dirlam's calculatidn of profit opportunities "lost" by the United States industry is based on unrealistic assumptions. They would require: 88 per cent of United States output in oxygen steel at a time when the whole world had capacity to produce 4 per cent of its output by the process,; United States 00 output alone in 1960 at a level not reached by the whole world until 1965. In light of the information presented in this article, United States producers do not appear "ignorant" nor their actions "ironic." Whoever the innovator's were in the United States, they were of sufficient size and importance to allow the United States industry to keep pace with overall world performance in 00 steelmaking, de- spite some significant disadvantages which the industry faced. Even if the data had supported Adams and Dirlam's premise, there would be grave question about the conclusions they have drawn with respect to Schumpeter's hypothesis which Adams and Dirlam paraphrase as: Large firms with substantial market power have both greater incentives and more ample resources for research and innovation. We note that the requirements are "large" size and "substantial" market power. Also there is no requirement that the opportunity for innovation be accepted by all for Schumpeter's hypothesis to be consistent with the data. Adams and Dirlam appear to force their analysis. The basic innovator, VOEST, is dismissed as "tiny" in absolute terms; yet, it is a virtual monopolist in its home market and has state financial backing. United States firms which are large in absolute size are designated by their relative ranking in the United States market (innovating Jones & Laughlin with close to $1 billion sales in 1965, is "only fourth"). Investigation of McLouth, first United States 4. Letter, op. cit, p. 5. PAGENO="0108" 1894 00 producer, shows that its market and financial positions were excellent: General Motors, which is hard to dismiss either in absolute or relative terms, had given the firm its backing through long-term contracts for steel products and financial support, first through loans, then through stock ownership.5 Kaiser, as the first integrated steel plant on the west coast and as a member of the Kaiser Industries group possessed both power in its market and significant financial resources. (It was a sufficient force on the west coast to lead the $12 price decline there in 1962.) Had Schuinpeter stated the hypothesis: The three largest firms in an oligopoly industry will be the technological innovators in that industry, this hypothesis would have been refuted by Adams and Dirlam's presentation in the case of the United States. But this was not Schumpeter's statement. What has been illustrated in this single case is that in the oligopolistic steel industry of the United States - characterized by price stability (and even upward movement) despite slack demand -there appears to be sufficient incentive for firms with "sufficient" resources (several integrated producers appear to have reached this threshold) to innovate. Several firms with similar incentives appear to have awaited further development of 00 steelmaking before they have acted, a strategy which cannot be condemned out of hand. Once technological problems were overcome (sufficiently) the United States industry as a whole appears to have moved to imple- ment the OC process. For 1966 the Kaiser Engineers reported United States LD capacity to be 38,015,000 tons, or 28 per cent of the world's capacity of 136,755,000 tons at year end. During 1966 the increase in United States LD capacity was 47 per cent as compared with 34 per cent for the world as a whole. This year the United States industry re- gained its lead in installed LD capacity. A total of 24 per cent of ingots produced were of LD steel (this excludes the Kaldo output of Sharon steel) as compared with 17 per cent in 1965.6 CORNELL UNIvERsrrr 5. Prospectus, op. cit., p. 8. As of 1q55 General Motors owned 92.6 per cent of McLouth's cumulative participating (voting) preferred stock and, among other things had the option to purchase up to 92.6 per cent of Mc- Louth's cold rolled carbon sheet. 6. Stone, op. cit., p. 93. PAGENO="0109" 1895 Mr. HERLONG. Before I present Mr. Abel to the committee I just wanted to tell you that the chairman expressed his apologies for leav- ing when you were testifying. lie and Mr. Byrnes have to go to the Rules Committee at this time. Mr. PATTON. We understand, Mr. Herlong. Thank you very much. Mr. HERLONG. Mr. Abel. We are happy to have you before the com- mittee, Mr. Abel. We appreciate your coming. STATEMENT OP I. W. ABEL, PRESIDENT, UNITED STEELWORKERS OP AMERICA, ACC~OMPANLED BY J~ACK SHEEHAN, LEGISLATIVE REPRESENTATIVE Mr. ABEL. Mr. Chairman, my name is I. W. Abel. I am president of the United Steelworkers of America, a union which represents the workers in the basic iron and steel industry in the United States and Canada. We also represent iron ore miners in both countries. Accompanying me this morning on my right is Mr. Jack Sheehan, our legislative representative here in the city of Washington. I am sure that the joint appearance before this committee of the union and the industry, represented by Mr. Tom Patton of Republic Steel and me, will come as a surprise to many, since we are currently engaged in negotiating a labor agreement. Frankly, Mr. Chairman, we hope that our appearance will elicit more than surprise. We hope it will arouse a real concern for and a willingness to investigate the new problems which our domestic economic system faces as a result of our current national trade policy. EVALtTATION OF TRADE POLICY All of us, of course, are moved by the argument that if a specific policy works, it must be the right one. But the converse is also true. There can be no dogmatic truths in an evolving and changing eco- nomic climate. The best argument for pursuing our foreign trade policy, which was initiated over 34 years ago, has been the fact that we have developed and generally maintained a favorable trade balance. This was particularly true in the steel industry until 1959, at which time we began to rapidly plunge into a deficit position. Now the na- tional trade balance is also being jeopardized. The 1967 trade surplus was only $3.6 billion, and already this year we have experienced trade deficits. Our balance of payments have also succumbed to a long series of large international deficits, beginning in 1958. It is interesting to note that the last time this committee deliber- ated upon our trade policy we were very much in a surplus condition and our payment deficits were declining. The impact of those delibera- tions was not to be felt until this year, but the atmosphere in which you conducted them was certainly optimistic-between 1960 and 1965, our trade surplus averaged $5.2 billion and during the same period, our payment deficits dropped from minus $3.9 billion to minus $1.3 billion. PAGENO="0110" 1896 BALANCE OF PAYMENTS AND TRADE [In billionsi Balance of payments Balance of trade 1958 1959 -$3.4 9 +$3.3 -fi. 0 1960 1961 -3. 9 -2.4 +4. 8 +5.4 1962 1963 1964 1965 1966 1967 -2.2 -2.7 -2. 8 -1. ~ -1.4 -3.6 +4.4 +5.1 +6. 7 +4. 8 +3.7 +3.6 It is no wonder then that we accepted the fact that our national trade policy was correct. It was working. But, gentlemen, the same logic should prevail today and we should acknowledge it.. Our trade balances have dipped and not just because of temporary factors. Deep penetrations by foreign producers have been made into domestic in- dustries and apparently there is no leveling off in view. At any rate, the clarity of the logic is being felt in the steel industry and the Steelworkers' Union has responded to it because it may mean the livelihood and jobs of our members. My comments should be taken within the context of our union's support for an expansionary trade policy. We have traditionally fought for the concept of wider trade relations with other countries because of its political and economic advantages. The international political aspects of freer trade are readily recognized. We have equated our national political interest with the advancing of international cooperation. As Dean Rusk recently indicated: The trade policy the United States has pursued for more than three decades contributes to our broad political objectives. Moreover, we have felt that our foreign economic policy has en- hanced our national economic welfare. As a matter of fact, the most persuasive justification of our trade policy was the very evident con- tribution which it did make to our economic growth. We are, there- fore, convinced that an isolationist economic policy is outdated in a world of interdependence. It was probably one of the achievements of the New Deal era that the philosophical position of Fortress America-at least as far as trade is concerned-was demolished. How- ever, current evalution cannot rest upon past performance or past factual situations. International trade has now taken on different dimensions. I make these comments precisely because the problems of the past and their solutions are not necessarily the problems facing interna- tional trade today. Unfortunately, there are too many who would apply, in a doctrinaire manner, the public policy decisions of the past and criticize any contemporary evalution of present-day problems as an attempt to return to the days of the Smoot-Hawley Act. Our past trade policy grew out. of an economic atmosphere of scar- city. At that time, artificial trade barriers, which further restricted each country's limited productive facilities, had condemned the vari- ous individual national economies to total dependency upon each country's weaknesses. Within an economy of scarcity, there was little room for improvement. PAGENO="0111" 1897 However, just as today the development of our domestic public policy is being conditioned by the problems arising from an economy of affluence, so also our foreign trade policy must grapple with the same source of international economic concern. Although these com- plexities arise from an affluent economy, they are no less real or no less critical than those arising from a depressed economy. We are, therefore, appealing to you to view our trade problems within this context. What I am `saying is that we must have a balanced trade relationship within an expansionary trade policy. As far as the domestic steel industry is concerned, we are experienc- ing a rapid and accelerated percentage penetration of our market by foreign producers. Within the last 5 years, steel imports have risen from 3 percent of domestic demand to almost 15 percent, if current imports for 1968 are projected on an annual basis. Furthermore, we have been a deficit Nation in the value of direct steel trade since 1962. The current deficit amounts to about $900 mil- lion. But more than that, we are~ still a deficit Nation even when we take into consideration indirect steel trade-that is, trade in which steel is used in manufactured products. In 1966, our total steel trade balance was in a deficit position by almost $500 million. This, of course, causes a drain on our balance of payments. But it also refutes the con- tention that American steel which is exported in manufactured items outbalances and compensates for any deficit in direct steel trade. STEEL IMPORT STUDY-VALUE OF DIRECT AND INDiRECT (END.USE) STEEL IMPORTS AND EXPORTS AND THEIR EFFECT ON U.S. BALANCE OF PAYMENTS [In millions of dollars] Imports 1 Exports Trade balance, total - Steel End-use Total ~- Steel End-use Total products (direct imports) items 2 (indirect imports) (direct plus in- direct) products 3 (direct exports) items 4 (indirect exports) (direct plus in~ direct) exports less im- ports 1957 ° 235 109 344 977 510 1 487 +1, 143 1958 252 110 362 733 435 1,168 +806 1959 639 171 810 485 450 935 +125 1960 552 145 697 711 480 1,191 +494 1961 462 102 564 503 480 983 +419 1962 586 129 715 443 495 938 +223 1963 752 127 879 448 525 973 +94 1964 897 154 1,051 583 615 1,198 +147 1965 1,395 193 1,588 553 645 1,198 -390 1966 1,444 257 1,701 545 660 1,205 -496 1 Values increased by 10 percent to adjust from fob. to c.i.f. basis. 2 Values calculated by multiplying estimated net tons of indirect imports times the average c.i.f. landed value per net ton imported steel mill products plus 10 percent to adjust from fob, to C.i.f. basis. 3 Values represent steel product exports less AID-financed exports. Values calculated by multiplying estimated net tons by an average price of $150 for finished carbon steel in the do- mestic market, which during this period ranged from $149 to $158. 3 The value of "other steel products" component of the steel product direct imports and exports estimated. Note-For comments by AISI on this table see appendix. Source: AISI, Foreign Trade Trends Quarterly; AIS Imports 1; Exports 1; USDC, Overseas Busines Reports. We are convinced that the pressure behind these foreign imports is basically one of affluence-in other words, it results from excessive overcapacity. The Senate Finance Committee, last December, released a report indicating that surplus capacity had already reached a level of 50 million tons. Each year, `steel capacity grows at a rate of 33 PAGENO="0112" 1898 million tons. It is the continued investment in overcapacity facilities which must be moderated in order to bring about a balanced trade rela- tionship. STEEL AND ORE QUOTAS Our support of the Vanik bill is predicated, therefore, upon a two- fold objective. First, the bill will determine that, as a matter of public policy, a 10 percent penetration of our steel market is a balanced one. Maybe Congress will suggest another figure. But, set a level, it must, in our judgment. As far as iron ore is concerned, our miners have com- plained about job losses due to the continued high levels of importation of ore during periods of recession. Their job loss becomes more pro- nounced than basic steelworkers if there is not a proportionate reduc- tion of iron ore imports comparable to a downturn in steel production. Currently, ore imports are about 36 percent of domestic consumption. The second objective will be found in the fact that the bill will serve as a guideline for foreign steel industries to moderate their invest- ments in facilities producing steel well beyond their own domestic consumption and a reasonable share of our market. It would be disasterous for Japan, for instance, to be led to assume it has an unlimited access to the U.S. steel market. Then, at a later date, when its investments are already made and its manpower already com- mitted, if Japan is forced to curtail its access, severe political and eco- nomic consequence would undoubtedly ensue. Now is the time to de- clare whether there is a limit. And, this is a responsibility for Congress. This, then, is the sole purpose of our support of a flexible quota bill. We have arrived at this position at a time when our own industry is accelerating its investments in new plants and equipment to mod- ernize obsolete facilities. There has been severe criticism levied at the industry for allowing its facilities to become outdated. There may be some justification to the charge. But the industry is now correcting this problem. My concern, however, arises from the fact that if we do not retain a steady share of the increase in domestic demand for steel, there will be a job loss, since the new facilities will be able to produce more steel with less workers. Furthermore, if the increased domestic market is lost to our own producers, I am afraid that the necessary continued investment to modernize will be suspended. OVERCAPACITY I cannot over emphasize the coincidence of these two factors: for- eigii overcapacity and domestic accelerated investment. If the report of the Senate Finance Committee carries any real message, it is the documentation of overcapacity and the concomitant pressure that it puts on the world market. The price structures of the United King- dom and Europe are under heavy strain because of it. It is our firm contention that the world surplus of steelmaking capacity must be brought into balance with the world demand for steel. Otherwise, these industries, as instruments of their own government's full employment policy, will be compelled to export whatever the cost-or, should I say, loss. And that loss will be at our expense in steel production and steel- workers' jobs. PAGENO="0113" 1899 The compulsion to export is dramatically revealed by a news re- lease in the January 11, 196ft, issue of the "Japan Metal Bulletin," which I submit for the record with my statement. (The information referred to follows:) OBLIGATORY STEEL EXPORT SYSTEM BEING RECOMMENDED As the basic measure to improve the foreign exchange balance when tight money policy is being enforced domestic accompanying the pound's devaluation and import control policy in America originated in dollar protection, the iron and steel industry is planning to provide obligatory export quota to steel, the tonnage allocated to be 10% over the actual exports in the current fiscal year, with export target in the next fiscal year raised to over 12 million tons. Those companies that fail to export the allocated tonnage will get less coking coal than they want to get delivered, or will be penalized by ~10,000 ($28.00) per ton covering the balance unexported. In parallel with the enforcement of the foregoing proposition, the Japanese steel industry is to demand guaranty by Ministry of Finance and M.I.T.I. in con- nection with the restlessness centering around pounds and dollars. Mr. ABEL. The bulletin declares that- The iron and steel industry is planning to provide obligatory export quota to steel, the tonnage allocated to be 10 percent over the actual exports in the cur- rent fiscal year, with export target in the next fiscal year raised to over 12 million tons. Those companies that fail to export the allocated tonnage will get less coking coal than they want to get delivered; or~ will be penalized by $28 per ton cbvering the balance unexported. ACCELERATED INVESTMENT Furthermore, the U.S. steel industry, as indicated by Tom Patton, has embarked upon a program of rapid technological development. I note that our academic community has been critical of the past deci- sions of the industry. How justified those criticisms are I leave to your judgment. But those are past decisions that have no weight now. Actually, as a union president, I must begin to think about the rapidity of the investment which is at the rate of approximately $21/2 billion a year. (a) Employment impact The more recent acceleration of steel imports has come fortunately at a time of an extended boom in the American economy. Steel pro- duction in 1967 was 127 million tons. Despite this increase produc- tion, however, steel employment has substantially declined. In 1952, steel production stood at 93 million tons and employment at 545,000 workers. Employment in 1967 was only 424,000 workers, 121,- 000 less than in 1952, although production had increased by 34 mil- lion tons. Of course, this is the result of increased productivity and is an economic factor decreasing the need for manpower in the steel in- dustry regardless of the import situation. However-and this I stress-without the increased demand for steel accompanying our present economic growth, the impact of automation on steel employ- ment would have been intolerable. According to Professors Adams and Dirlam, longrun decreases in employment are due to increases in productivity and not to increases in imports. But this is true only because the foreign penetration of our growth in steel demand has begun to reach alarming proportions just recently. If, however, foreign producers had penetrated our markets 95-i5~J 0-68--pt. 5-s PAGENO="0114" 1900 earlier, the unemployment rates would have been totally unacceptable not only to our union, but, I am sure, to the Nation also. It is precisely because increase in productivity does indicate a downturn in employ- inent that we must retain an appropriate share of increased steel de- mand. If investments proceed at the present clip and imports expand at the current accelerated rate then we are in for employment trouble. The Wall Street Journal, May 23, 1968, recently noted: Consumption (1068) is much higher, but imports are siphoning off most, if not all, the growth. Moreover, if there is a dip in the economy and the present percentage penetration by foreign producers is retained, the reaction of unem- ployed steelworkers will be predictable and justifiable. (14 Uo'rtglome?~ation We have become increasingly uneasy over the new tendency for corporations to conglomerate. Its impact upon labor relations could be disastrous. During the recent strike with the copper industry, we were appalled over the contemplated merger between Kennecott Cop- per and Peabody Coal. Now the steel industry is engaged in this adven- ture. The list of companies so far include Crucible, Youngstown Sheet & Tube, Alleghany Ludlum, Bethlehem, United States Steel, Jones & Laughlin and Detroit Steel. Inland Steel has created a corporate de- velopment staff unit which will be responsible for seeking out and evaluating new diversification opportunities. I mention this new development here because the pressure to get a higher rate of return upon capital investment may begin to drive steel funds out of the industry into other lucrative endeavors. If the in- dustry is doubtful of its future share of the market, its stockholders will put the doubt to rest. We are all aware of the fact that the industry must and is investing heavily in new technology. But as the Senate Finance Committee reports: Aside from the fact that foreign producers are also modernizing their facilities, often with assistance from their governments, these investments are greatly in- creasing the fixed charges of the domestic industry. Unless the output of the U.S. steel industry increases by some 2 to 21/2 percent a year, such fixed charges can only mean higher rather than reduced costs per ton of output and, therefore, smaller rather than higher profits. This would result in less funds being avail- able from retained earnings and the capital market for investment in research and modeFn facilities. A rise in imports may, therefore, not only result in a displacement of workers but also by encouraging conglomeration may put the work- ers who remain in the industry in an extremely jeopardized position as far as their ability to collectively bargain. COLLECTIVE BARGAINING There is yet another major concern which we have over increased imports. It is the short-term adverse impact which these imports exert upon our membership's expectation of normally continuous employ- ment and our union's right to bargain. When the union's contract ap- proaches the termination date, there is a rush to build up inventories as a hedge against strike action. Despite various attempts to keep the purchasing domestic, many steel consumers increase their foreign or- PAGENO="0115" 1901 ders. After the immediate period of negotiations and/or strike is over, there are layoffs in the steel mills as inventories are worked off. Furthermore, long-range commitments are made by the domestic con- sumers to foreign producers which result in a long-term loss to domes- tic steel production. These commitments are being made because the foreign producer takes the advantage of a good opportunity and demands a long-term contract for shipping steel for a period of 2 to 5 years. In 1965, after the last inventory buildup, some 65,000 steelworkers were laid off, while steel imports were coming in at the rate of about 1 million tons a month. We very definitely do not think that our foreign trade policy should be taken advantage of to the detriment of the domestic workers who are exercising their prerogatives under the expressed public policy procedure in labor-management relations; namely, to bargain collec- tively. The right to bargain is a cherished one, but it is being eroded by the unfair intrusion of foreign trade. The February 8 issue of the Japan Metal Bulletin mentions that the Japanese Government, con- cerned about its own balance-of-payment deficits, has "asked steel companies for increased exports and decreased imports"-here, I espe- cially call your attention to the comment-"and with the threatened steel strike in America resulting in increased inquiries, the original export target of 10 million tons is likely to be attained." And I submit the support of that statement with our statement, Mr. Chairman. (The information referred to follows:) DEFICITS RECORDED IN FIRST 9 MONTH STEEL TRADE IN OURRENT FISCAL YEAR Japanese iron and steel trade in the first nine months of the current fiscal year, viz, from April to December, 1967, registered deficits amounting to $391 m. with direct exports of steel products earning $984 million, and imports draining by $1,375 million. Tabulated in comparison with the corresponding term of the last fiscal year: [In millions of dollars) Fiscal year Fiscal year 1967' 1966' Exports 984 1,004 Imports: Iron ore 552 477 Scrap Coal 252 2277 116 2211 Pig iron and finished steel 296 113 Balance 391 88 1 April to December. 2 Estimated. Due to brisk domestic demand, during the 1st half of the current fiscal year, steel companies cut exports in a way or other, their exports barely amounting to $984 million in the first 9 months, compared with the corresponding term of the 1966 fiscal year. And of imports, enlarged production scale naturally resulted in increased im- ports of iron ore (+$73 million), scrap (+$137 million) and pig iron (+$66 million-estcl.). PAGENO="0116" 1902 And at these grim figures, the Government asked steel companies for increased exports and decreased imports, to the compliance of the latter, and with threat- ened steel strike in America resulting in increased enquiries, the original export target of 10 million tons is likely to be attained. And of imports of raw materials, staid domestic demand is expected to exer- cise braking pressure, with improved foreign exchange pictures hopefully ex- pected. But as a matter of fact, many important-contracts had been concluded prior to the Government's recommendation to decrease imports, and the actual effects on a grand scale cannot be expected. Mr. ABEL. Gentlemen, we should be allowed to bargain a domestic agreement within the framework of a domestic situation. Frankly, Mr. Chairman, we are becoming very annoyed by the so- called advocates of the free trade market. The labor movement has never accepted the fact that the unhampered decisions of the market- place will redound to the benefit of the workingman or the consumer for that matter. It was for that reason that unions were organized to protect workers from the callousness and inhuman operations of the free market where labor was considered a commodity and social justice was a trade barrier. As a matter of fact, the trade union movement was considered to be an illegal conspiracy in restraint of trade. The great social laws of the 1930's denounced the notion that a union was an illegal conspiracy, although it does remain as a restraint of trade in the domestic marketplace when it exercises its obligation to prevent labor from being treated as a commodity. When, then, in the international trade market must labor again be treated as a commodity and a union's right to negotiate a wage benefit be a restraint of international trade? Well, Mr. Chairman, we reject that notion of a foreign trade policy. Our trade policy is not an end in itself in which its primary objective is merely to increase the free flow of goods. A free flow of goods did not automatically insure the interest of workers and consumers domestically, and it will not do so internationally. A trade policy, like an economic system, must also provide for the raising of the workers' standard of living. At that point, where the trade balance begins to restrain a union from negotiating wage in- creases consistent with the growth in the domestic economy, then that trade policy like the economic policy of the 1930's, is treating labor as a commodity. This observation is particularly true when imports, presumed to flow because of a competitive advantage, penetrate a market when there is a particular domestic problem unrelated to the cost competitiveness of the domestic industry. I speak about periods of negotiations and strike action. Recently, we witnessed the unwar- ranted strike-breaking acceleration of copper imports (and, I might say, they are still coining in despite the fact that copper miners are not being recalled to work) and today, we are deluged by steel im- ports for inventory buildup, despite the fact that the union and the industry has only recently begun formal negotiations. I mentioned earlier that there is always a search for scapegoats to explain a drop in trade. It seems too many are eager to point a finger at the labor movement and the unit labor cost. Yet, the U.S. Treasury Department in its release of January 1968 on Maintaining the Strength of the Dollar stated that: In the 1960's, U.S. unit labor costs in manufacturing declined slightly while those of our major European competitors rose significantly. If changes in rela- tive costs were the only determinant of export performances, then w-e should have noticeably increased our relative share of world markets. PAGENO="0117" 1903 It is this dimension of our trade~ policy which contravenes our pub- lic policy on collective bargaining that this committee should also give serious attention. However, let me reiterate that our problem in the steel industry exists whether we are engaged in negotiations or not. The negotiation period is only an occasion in which the increased levels of imports become more notiéeable in that they reach these levels more rapidly. It is certainly erroneous to leave the impression, as some earlier testimony did, that the upsurge in steel imports is a re- sult of strike or the negotiation of this union. Moreover, it is maintained that One of the reasons for a greater flow of trade is to restrain price increase. But, after reading some of the recent extreme statements by import trade associations, I wonder whether the real objective is to restrain legitimate wage increases. At what level of market penetration will this be a reality in the steel industry? And when it reaches that level, how many workers will be penalized by losing their jobs in order to control the pricing policy of the various corporations? Until such time as we can have international price competition in which labor is not a commodity and there are international fair labor standards, then I suggest that American workers not bear the full brunt of a national pricing policy. I submit, therefore, that we are not talking about extremes-a total free trade policy or the protectionism of Smoot-Hawley, as envisioned by the massive retaliation arguments. Our position as a union lies within the framework of an expansionary trade policy-but one which is balanced. Our concern is not over a freer trade relationship. We are committed to that. Nor is it one of being unduly aroused over fairer trade. Certainly, we seek equitable antidumping laws and the recip- rocal elimination of nontariff barriers. But for an industry that is primarily domestic, our attention is directed at a more orderly and balanced penetration of our market. Even GATT regulations rec- ognize the chaotic conditions arising from "market disruption." We are advocating, therefore, that these quota restrictions be en- acted and enforced until such time as world overcapacity is moderated. Once there is a more proper relationship between world demand and world capacity, then, injurious competition will be abated. We are not opposed to steel trade-even at competitive prices-but, we are con- vinced that the competition should arise from lower cost factors and not from the compulsion of excess facilities. Hence, we view the fact of overcapacity as the crucial malady in the world steel trade picture and not necessarily other competitive factors, like wage costs. I might also mention that the principle of trade adjustment assist- ance to a limited number of workers displaced by foreign trade is most necessary, but highly unsatisfactory as a solution to massive displace- ment. I am aware that there are a number of proposals before Con- gress which would liberalize that section of the Trade Expansion Act dealing with assistance to workers adversely affected by foreign trade. I hope that Congress will react favorably to these proposals. It is my understanding that, as of now, not one single case has been acted upon favorably by the Federal Tariff Commission. However, it is one thing to provide assistance for a small group of workers, who will be ad- versely affected, in the interest of a broader trade policy, which pro- vides greater demonstrable economic growth for the economy and PAGENO="0118" 1904 more job opportunities for American workers. However, such a relief program cannot be a substitute for a more basic solution to the prob- lems facing the steel industry. Within the framework of an expansionary trade policy, we must now grapple with the question of a balanced trade development. It is that task which Congress must face, and it is one which this union is completely convinced must be done now-this year, 1968. Thank you, Mr. Chairman. Mr. HERLONG. Thank you, Mr. Abel. Are there any other witnesses at the table who have statements? Are there questions? Mr. Burke will question. Mr. Btrnic~. I want to commend both of you gentlemen for your statements and I believe you hit the nub of the problem here. Most people opposing some of these bills that are before the Congress are attacking the Congress and charging them with being protectionists, and I was one of those. who voted for the trade bill back a few years ago, but I think that you gentlemen have pointed out that you are not asking for a shutdown on imports or a cutdown on imports. What you are asking for is an orderly marketing procedure on the part of these countries and not have them expect to glut the market with their products to the extent that we destroy our own basic Ameri- can industries. Is that true? Mr. PATTON. That is true, Mr. Congressman. As far as the industry is concerned we recognize that there is a share of the American market that should be open to foreign competition. We say that that share has now reached its highest level and that any growth now from there on should be up or down with the requirements of the economy just as the growth of the domestic steel industry is based on that requirement. We are not asking for any rollback whatsoever, beyond what is in the bill. Mr. Btriuu~. Thank you. That is all, Mr. Chairman. Mr. VANIK. Mr. Chairman. Mr. HERLONG. Yes, Mr. Vanik. Mr. VANIK. Mr. Chairman, I would like to ask, within that limita- tion of import quotas that you seek, whether or not there is a general classification. You don't seek any special identification within that 10-percent limitation? Mr. PATTON. We think that the historical pattern should be related both to the total tonnage imported and to the type of products im- ported and to the ports of entry, the areas that have been penetrated. All three factors should be considered in the legislation. Mr. VANIK. But there would be free competition within that 10 percent. Mr. PATTON. There certainly would. Mr. VANIK. In all lines and in all product lines. Mr. PATTON. There certainly would, Mr. Congressman. Mr. VANIK. I would like to point out one other thing, Mr. Chair- man: that American industry, steel and all the other industries, carry an overwrite expense in taxes in maintaining an army in both Japan and in Germany, a defense structure which is paid for out of the profits of American operations. This is an over-write expense and industries in those two nations as well as other nations in the free world. Most steel producing coun- PAGENO="0119" 1905 tries do not have the same burden to carry. In a sense, a part of our added costs in this country are reflected in the taxes that we pay to contribute to support defense for these areas of competition. I have one other question, Mr. Chairman. The build up of imports pending or during a management-labor dispute could have the effect of perhaps of disrupting or even destroying labor-management nego- tiations in collective bargaining. In addition-in addition to the establishment of tolerable quotas- would it be helpful to modify this trade bill to provide for the licens- ing of imports of any kind under circumstances wherein either the management or labor, or both, could appeal to the President that im- ports during a strike or negotiation are disruptive and taking undue advantage of the labor-management controversy in America? Now, if either of you gentlemen have a response to that I would like to have it. Mr. ABEL. Certainly we support that position. We urged that upon Congress, if you recall, a few months ago when we were engaged in the strike in the nonferrous industry, which was prolonged for some eight and a half months primarily because of fantastic imports of foreign copper and the increase of the price of copper from roughly 41 or 42 cents a pound to 65 and 67 cents a pound, and I think the experience encountered by our union in the nonferrous industry of last year and the early part of this year is certainly justification for consideration of this type of action. Mr. VANIK. So that I take it that you would support this kind of an amendment to the bill. Mr. ABEL. Very strongly. We have advocated this sort of action, Mr. Congressman. Mr. VANIK. Is there any comment by you, Mr. Patton? Mr. PATTON. Mr. Congressman, it is my belief that if the bill which is now pending is passed the situation outlined by you will be auto- matically taken care of and that such a situation couldn't arise be- cause there would be a historical amount of steel that they could bring in and they couldn't bring in any more, and I wouldn't think that the labor relations would be disrupted. If you passed the bill now before you I think you will have cured the situation which you outline. Mr. VANIK. In other words, by the 10 percent limitation you would remove the need for special situations. Mr. PATTON. Yes, sir. Mr. VANIK. Where there is a labor-management controversy. I want to thank the gentlemen, Mr. Chairman. Mr. HERLONG. Thank you. Mr. Betts. Mr. BErN. Gentlemen, I am pleased to have you here to give your views on a subject which I think is very important to this committee as far as decision and determination on the bill is concerned. I simply want to ask for a comment in connection with the testimony of a wit- ness, I think last week, in opposition to the import quota concept, and particularly with respect to steel. I asked him especially what views he had to meet this problem if he didn't go along with the quota cOncept and he took the position that the steel industry should be subsidized to a certain extent to help this problem and that the adjustment assistance provisions in the proposed PAGENO="0120" 1906 administration trade expansion bill took care of the steel industry so far as that is concerned. Do you see anything in the adjustment assistance provisions which would help the steel industry in this case? Mr. PATrON. No, sir; I do not. The steel industry is not askmg for subsidies. We are asking for a limitation on imports into the market and not for any help from the U.S. Treasury in that respect. Mr. BE'rrs. From the taxpayers, I might add. Mr. PATrON. I might say that I don't see, even if they wanted to have a subsidy, how it could be any answer to our problem. We are talking here about an entire industry that would involve billions of dollars and that is not the kind of help that they are talking about in any assistance that is in this new bill. It would take billions of dollars to do the job that is needed by way of assistance, and it is not practical and it is not contemplated at all. Mr. BETTS. I might say that I think your views coincide with mine, but I certainly wanted to have them for the record because I think my conversation with that witness ended just on the same note that you are striking here, namely, that if we were to try to find some remedy through adjustment assistance it would simply be completely impossible to do it with the tremendous cost involved. Mr. PATrON. We are talking about an entire industry that has an investment of billions and billions of dollars, and that is what you are talking about and this kind of assistance is not meant to meet that kind of situation. It just doesn't meet the case. Mr. BElTs. I certainly am glad to have your views. Do you agree with that, Mr. Abel? Mr. ABEL. We of course support assistance to workers who are dis- placed or displaced because of unfair competition and we feel there are certain things that can be done both for the industry as well as the workers in giving some assistance. We certainly don't advocate a subsidized industry. I would point out to you that a lot of our problems stem from situations where we have socialized as well as subsidized industries in other countries, and this, I think, Congress must take into consideration. If we want to get down to that level of competition, then we can compete, but I don't think this country wants to move in the direction of socializing the steel industry or providing competitive subsidies for the steel industry. Mr. B~rrs. I am certainly grateful to you for those answers, and I appreciate your comments. Thank you, Mr. Chairman. Mr. HERLONG. Mr. Ullman has a question. Mr. TJLLMAN. You gentlemen are certainly very able spokesmen for your industry. Tell me, in your judgment, if there is something unique about your industry so that it should be considered separately? If it is unique, and if you can make a convincing argument that it is a separate problem and should therefore be dealt with separately, I would like to know on what basis you base that conviction. Mr. PATTON. Mr. Congressman, I certainly do believe that the steel industry has a imique case to present because steel, unlike many other products, is a very basic material, basic to the welfare of the whole economy of the Nation, basic to the security of the Nation, and the country just can't get along without a healthy steel industry, not only this country, but any country in the world. PAGENO="0121" 1907 You will find, Mr. Congressman, that every country of any conse- quence has a steel industry, and it is doing everything in its power to keep that steel industry healthy and growing. It is also doing every- thing in its power to see that it is not being withered by a lot of im- ports into the country. I think the United States is the only Nation in the world that is not doing something to protect its steel industry from imports, be- cause every other nation realizes that steel is essential to the economy of that nation, essential to the security of that nation. Its future depends upon this basic material, steel, and it is doing everything it can to see that it has a steel industry. The very fact that every nation which is emerging, the first thing it asks for is a steel industry, indicates that that nation thinks that this is an important element. I repeat, steel is a basic material on which the economy of this Nation and the economy of every nation and on which the security of this Nation depends and it is unique and should receive, if necessary, special treatment apart from some less important products that might be involved. Mr. ULLMAN. Mr. Abel, did you have a comment? Mr. ABEL. I concur completely in everything Mr. Patton said. I could only emphasize what he said. Mr. ULLMAN This wouldn't apply, then, to copper? Mr. Arn~i~. No, no. It is a different situation entirely. I might say this, Mr. Congressman: In many cases contrary, because a lot of the foreign copper production is owned and controlled by some of the industry right here in this country. This is not true in the basic steel industry. Mr. ULLMAN. I presume that very little American capital is in- volved in foreign steel production. Mr. PATrON. A~ of the present moment, that is true. Mr. ULLMAN. Why do you qualify it? Do you see some change? Mr. PATTON. I don't mean to qualify it. I merely say that it mdi- cates the impracticability of having a large investment in steel abroad. It has been suggested that maybe American steel industries ought to go abroad and put plants in low-cost wage countries. What happens if we do that? Then you have a material which is coming into the United States destroying the investment of the steel industry in the United States, destroying the jobs of steelworkers in the United States, and giving another source of supply on which this country is going to depend from a foreign source, and if that source is cut off in a time of emer- gency, we have no steel available to take care of our own requirements. We in our own company very seriously look at the possibility of investments in other countries in basic steel facilities, and we have con- cluded that they are not economic and not practical and not in the best interests of our workers or our stockholders, either one. Mr. ULLMAN. I am a bit intrigued about the argument of the uniqueness of this industry. We are groping for an answer here, as members of this committee. We are besieged by industries that are being severely hurt by imports, and it is very difficult to establish a rationale that would allow us to proceed independently on a bill deal- ing with a separate industry. PAGENO="0122" 1908 If you can come up with some more cogent and concise arguments in this regard, I would be very interested in receiving them prior to the time that we take this matter up in executive session, because it cer- tainly is going to be one of the very difficult decisions we are going to have to make, as to whether we can proceed with one industry or whether we are going to be forced, if we do take action in this area, to deal in terms of general legislation covering a multitude of industries. Mr. PATTON. Mr. Congressman, we would be very happy, and I beg leave of you now for permission to file with you a statement on the very subject which you have just been talking about. Mr. tTLLMAN. Mr. Chairman, I would suggest that we hold the record open for such a statement. Mr. HERLONG. Without, objection, the record will be held open for that statement of Mr. Patton. Thank you. (The following information was received by the committee:) "UNIQUENEss" OF STEEL-RESPONSE TO QUEsTION BY CONGRESSMAN ULLMAN The situation of the steel industry in respect of import legislation can be differ- entiated from the situations of other industries in the following respects: 1. Steel, as a basic material in machinery, construction, transportation facili- ties and other essential commodities and services, is vital to the continued functioning of the economy. 2. Our military strength depends on the ready availability of steel products of many kinds as components of both military hardware and the industrial complex which produces and transports military equipment and supplies. The emergency planning of the Executive Departments contemplates that non-con- tiguous supplies of steel would be cut off in the event of a general, non-nuclear war. 3. The kinds of steel required for both military and civilian uses are con- stantly changing and can be met only by sustained research and development activities. These, in turn, can be supported only by a growing and profitable domestic industry. 4. The construction of steel producing facilities involves lead-times of up to three years, large amounts of capital and capital goods, and substantial forces of engineering, supervisory and construction workers. All these are in short supply at times of national emergency. Hence, deficiencies in productive capacity resulting from gearing steel plant capital expenditures to static or declining markets cannot be overcome quickly. 5. Imports of steel mill products into the United States are facilitated by the policies of foreign governments which recognize the unique importance of steel to a modern, industrial economy and stimulate the growth and development of their steel industries by encouraging them to export. 6. No other major industrial country (including Western Europe, Japan and the Soviet Union) has net imports of steel mill products much above 5% of its total supply. Ours are now running in the vicinity of 15% and the trend has been steadily upward. The foregoing points are developed in detail in the paper entitled "Steel and the National Security," which Mr. Patton introduced as an exhibit at the hear- ings on June 18, 1968. Mr. HERLONG. Mr. Schneebeli. Mr. SOHNEEBELI. Mr. Patton, the Office of Emergency Planning has been established to look out for the welfare of those industries whose future survival is considered to be in the interest of national security. I understand at the present time that only one basic industry is qualified for the quota system that has been established by the OEP. In the light of your testimony and your discussion of the national security aspects, has the steel industry made any exploratory approach PAGENO="0123" 1909 to OEP as to whether they could qualify for the quota system estab- lished by OEP? Mr. PATrON. I am sure that the steel industry has had conversations with OEP on this subject. Mr. SCHNEEBELI. This is the agency of the Government, as you are aware, which determines whether an industry qualifies for national security concern and quota treatment. You say most all of the other nations import less than 5 percent of their steel requirements and we are up in the 12 to 15 percent area. Now, has the steel industry made any approach to OEP to qualify? Mr. PATTON. We have had conversations with OEP and, you know, it takes a Presidential order, as I understand it, to get this kind of a clearance and no such order has been issued as I understand it. Mr. SCUNEEBELI. Has any request been made for an approach along this line? Mr. PATTON. I don't know that it has been made formally, sir, but I know we have had conversations with the agency and I know they are fully familiar with the situation. Mr. SCHNEEBELI. I am impressed with your argument as a security measure. I think it is very valid. Mr. PATrON. It is very valid. We honestly and sincerely say that we have to get relief from the Congress, sir, and not from the agencies. We have not been very successful in getting relief from the agencies. Mr. SCHNEEBELI. But the establishment of quotas is already legis- latively possible by qualification~ through OEP. I was wondering whether this course had been taken or even approached by your industry. Mr. PATTON. As I said, I know that we have had conversations with that source but we have gotten no results or no indication that we would get such a- Mr. SCHNEEBELI. There hasn't been any formal approach. Mr. PATTON. No; but they are fully familiar with it. Mr. SOHNEEBELI. Could you tell me whether any of the leading trad- ing nations with whom we do business have quotas established such as the bills that have been introduced~ in this Congress? Have any of the leading nations established quotas on basic com- modities such as steel? Mr. PATTON. Not on steel that I know of. They have on other commodities. Mr. SCHNEEBELI. But has this approach been used extensively by any other countries? Mr. PATTON. Approaches that are much more drastic than this have been used in other countries. Mr. SCHNEEBELI. Would you supply for the record the knowledge of what you and your industry have along that line of artificial barriers. Mr. PATTON. Yes. Some other countries have completely prevented the importation of steel. In others, as I said, you have to get a license to get any steel into the country. In other cases they make it very difficult in many ways to get in, not by quotas, but by other avenues that are more severe by far than the quota bill that we are asking Congress to enact here. PAGENO="0124" 1910 (The following information was received by the committee:) STEEL IMPORT CONTROLS or OTHER COUNTRIES-RESPONSE TO QUESTION BY CONGRESSMAN SOTINEEBELI Restrictions placed by other countries on steel imports are varied and many are not codified. A general discussion of barriers to trade appears as Appendix 1 to "The Steel Import Problem", which was introduced as an exhibit at the hearings on June 18, 1968. Additional information is found in Chapter III and Appendix C of "Steel Imports", a study by the Staff of the Senate Com- mittee on Finance, which was also introduced as an exhibit on that occasion. The variety of restrictions is remarkable and their identification is difficult because of the informal character of many. Officially, the Japanese have no restrictions other than tariffs on most steel imports. Yet, because of subtle, non-tariff barriers, even the most resourceful exporters are unable to sell steel in Japan at any price except to fill gaps in the domestic supply. One reason may be that about three-quarters of the steel sold in Japan is distributed through trading companies with which the steel producers are affiliated. The balance is sold to users in w-hich the steel companies have some degree of financial interest. Thus, there is no open market for steel in Japan which compares with ours. Trading companies are associated with stevedoring con- cerns, warehouses and domestic transportation companies. Thus, they can influence physical access to such Japanese markets as might otherwise be open to foreign steel, small as it is. Within the European Common Market, member nations are supposed to trade freely in steel, and, in fact, did so until the recent announcement by the French government of its intention to impose quotas on steel imports. Officially, only tariffs and border taxes restrict access to the market by non- members. Yet imports of steel from countries outside the Common Market account for only about 5% of total supply. Domestic preference buying for government use is one factor restricting imports and, because government enter- prises bulk larger in the economies of the Common Market nations than they do here, this factor is of substantial importance. But more subtle forces are clearly at work when the Japanese producers, who have lower production costs than the Europeans, are able to sell only a tiny fraction of their total exports in the European market. Ambassador Roth and others engaged in trade negotiations have noted repeatedly that identification of non-tariff barriers to trade is extremely diffi- cult. The foregoing examples indicate not only why that is so but also why they are so difficult to eliminate. Mr. SCHNEEBELI. Mr. Patton and Mr. Abel, the two largest steel companies of Japan which are now the fourth or fifth largest steel companies in the world have made application to the Federal Gov- ernment of Japan `for a merger. It is apparently part of their law that such application has to be made and approved. At the time that the application was made it was felt that the ap- proval would be given by the Japanese Government. If the merger were effected it would lnake this company the second largest steel company in the world, ahead of Bethlehem Steel. The reason given by the press for the proposed merger was to meet international competitive situations. I have several questions along this line. Do you know whether this merger has been approved? Mr. PATTON. I don't know that it has been approved but I know that it is pending and approval is expected certainly Mr. SOHNEBBELI. It was expected when it was applied for originally in April. Mr. PATTON. Yes; I am sure that the companies involved expect the merger to be approved. Mr. SCHNEEBELI. The same week this merger request was made I happened to be in Tokyo with 7 of my colleagues and we had a meet- PAGENO="0125" 1911 ing with 17 members of the Japanese Diet. One of the problems dis- cussed was the matter of tariffs and trade. I reminded the Japanese that it would be much better for our future relationships if they im- posed their own voluntary export quotas as far as steel was concerned in their exports to us, like they had done previously in textiles and other products. I impressed upon them that this approach-their self-imposed quotas-would be much better than if the Congress of the United States adopted a more drastic approach which a lot of these recently introduced bills indicated might happen. When I proposed this to my counterparts in the Japanese Diet, the reaction was, "We hope in the next 5 years we can get around to doing something about this." Would your comment be about as~ explosive as mine was to the bland reply by the Japanese representatives? Mr. PArEON. And in the next 5- Mr. SCHNE~EBELI. Would your comment be about as explosive as mine was? Mr. PATrON. In the next 5 years, the American steel industry will be very bad off. 1 Mr. SCHNEEBELI. Their attitude seemed to be, "You are nice fellows and you will not do this to us." I thought you would concur with my conclusion. Mr. HERLONG. Mr. Broyhill? 9 Mr. BROYHILL. I saw this morning in the Washington Post, in~ an article which appeared on the comic page, I don't place any date in the article, but the article said the steel industry was looking for relief from Congress because of ineptitude over a period of years. It said the foreign steel companies had done a much better job in research, and that you had not pu~t aside a portion of your profits for research. Did you see the article? Mr. PATrON. No; but I have heard this charge made, and we have filed as part of our presentation, reports by two authorities on this charge, and this charge has no basis in fact. The American steel indus- try has modernized just as fast as circumstances would permit and as finances would permit. The American steel industry today is the most efficient steel industry in the world. When you stop to consider that in America, it takes twelve and a half man hours to produce a ton of steel, and in Japan, which is looked upon as a very modern steel producing country, it takes over 17 man hours, you must realize we are efficient or we couldn't be pro- ducing on that kind of a basis. Mr. Bnoymt~~. I appreciate your answer, and I am mighty glad to hear it, but I think the article I referred to is the greatest boost you could have had, because the person who wrote the column is so irre- sponsible that whenever he says anything, I look for the opposite. [Laughter.] Mr. PATTON. If you read the material that we file with this commit- tee, you will find that the American steel industry throughout the years has been progressive and alert to the new techniques coming in and has spent billions and billions of dollars to install new equipment and the best and most modern techniques in the world, and we are PAGENO="0126" 1912 more efficient in every respect today, I think, than any steel industry in the world. Mr. BROYHIL1J. I have a great deal of faith, confidence and respect for American industry, and people like the person I am referring to are trying to knock it and run it down. Mr. HERLONG. May I say to the gentleman that this same article told us that the cause for the depression in the 1930's was Smoot-Hawley. I am interested to learn that. I was a young man at that time, but I didn't know that was the sole cause of the depression. Mr. Vanik? Mr. VANIK. Subsidies are enjoyed by our foreign steel competition. Do you have any information concerning subsidies that the steel in- dustries have, either Japan or Western Europe? Mr. PATrON. Yes, Mr. Congressman. They take various forms. As you realize, some steel industries of some nations are wholly owned by the Government. You take England, that owns the steel industry completely. In Italy, the majority of the ownership in every steel company is owned by the Government. In France, the Government is giving aid in the way of loans to industry at very low rates, and. is rebating taxes on material that is exported. The same is true in Germany, and the same is true in Japan, as I understand it. Mr. VANIK. Is the expansion of the Japanese steel industry some- thing that comes about through financial support made available through the Government in some way? Mr. PATTON. Well, certainly in the early days, the number of these steel industries were made possible by money made available through the U.S. Government through the Marshall plan. It was a good thing. It probably saved these countries from going Communistic, and it was a good thing. I can't say today that the Japanese Government is directly putting money into the Japanese steel industry, but we are certain that it is encouraging financial institutions in that country to make available to the Japanese industry-make money available to them. Mr. VANIK. Do any of the countries involved in steel marketing today have import controls which limit our export of steel to them. Could we, for example, sell steel to Japan, forgetting the issue of competition? Could we get it into Japan on any basis? Mr. PATTON. Japan will say you can, but the history of the situa- tion is that the imports of steel into Japan are very, very small, and it is difficult to sell steel in Japan that is not made in Japan. Mr. VANIK. Do they operate with quotas, or licenses or restrictions against our product? Mr. PATrON. They don't operate on a quota system or a license sys- tem, but they have their own informal ways of keeping steel out of their domestic market that is made abroad. Mr. HERLONG. Mr. Battin? Mr. BATrIN. Yesterday, Professor Richard Thorn, Professor of Economics at the University of Pittsburgh testified. He stated, and I will preface this so you will get the import of it-he talked about steel productivity, wages, prices, and output, and he submitted to us a chart showing that the steel industry in a period of 1957 to 1966- PAGENO="0127" 1913 this is on a percentage per annum-that the output per man hour in the steel industry was 2.8, and comparing it with all other manufactur- ing, was 3.6. All other manufacturing was 3.6. The compensation per man hour was 3.4 as compared to 3.8. Unit labor cost was 0.6 compared with 0.2. Prices were comparable, 0.7 to 0.7, and the output in steel was 3.4 versus 5.0 compared with all manufacturing. Then he went on to give us his idea of what the solution was to the steel problem. I would like to ask questions concerning the three points. One, increased expenditures of research and development on new products in order to step up the rate of cost reducing innovations. The steel industry spent only .60 cents for every $100 of sales in research and development, compared with $1.90 for all other manufacturing. Only the textile and wood produets industries spent less on research and development. Mr. PATrON. I will be glad to comment on that. If you will compare steel with any steel industry elsewhere in the world, you will find that we are far, far greater in research, expenditures than any other steel industry in other places in the world. That is number one. Number two, if you compare the research expenditures of the steel industry in the United States with the basic metals companies, I think you will find that we compare very favorably. True enough, our research budget does not compare with that of a drug company, for instance, or some sophisticated industry of that kind. But we are spending millions of dollars on research, and we are spending millions more than any other steel industry in the world, and the fact that we have made these discoveries in this country that other companies all over the world are desirous of licensing, indicates that we are well ahead in research in the world steel industry. Mr. BATTIN. As a matter of fact, many of the competitive countries who have, since World War II, actually gotten back into the steel pro- ducing business, aren't they using United States licenses in the manu- facture of their steel? Mr. PATTON. Yes; they are. You will recall that it was the policy of this Government at the end of World War II to ask the American steel industry to give their know-how and knowledge and ability to produce steel and make available to these foreign countries the equipment we had available in this country to make steel, so that the basis f'r the world steel industry today is American know-how and American equipment. Mr. BATTIN. That generosity is coming back to haunt us now; isn't it. Another point you made, which I thought was rather unique, is that to maintain the present high level of investment over the next decade, this requires greater use of outside financing. The steel industry itself financed 85 percent of its investment expenditures-almost 100 percent of working capital is included-compared to the 61-percent figure for all other manufacturing companies. In other words, the professor is suggesting, as I understand it, that, rather than use your own capital in financing expansion that you go into the market and borrow this money from whatever sources that might be available, as some of the other industries have done. PAGENO="0128" 1g14 I am just curious whether that wouldn't increase the cost of the product that is now not competitive in world trade because of price. Mr. PATTON. It would very well increase the cost of products, be- cause by pouring back into our new equipment our retained earnings, we are keeping the amount of interest that we have to pay and the amount of money that we have to pay back to people who would loan us the money, at a lower level, so that should tend to keep down our costs and not increase our costs. Mr. BATTIN. I would think the suggestion here would have two effects, and that is, No. 1, it would increase your cost, and the fact that the steel industry might go into the money market would also have a tendency to create more competition for the available dollars. Mr. PATTON. It would do that, and when you stop to consider that the steel industry is not the favorable industry of the financial com- munity because in a study that was made by the National City Bank of the earning ability of industries, steel stood 39th out of 41 industries surveyed. We made on our net worth 7.4 percent, whereas the average for all industry was about 121/2 percent. So that steel is one of the lowest earning industries in the country, and it is not as easy for it to borrow at favorable rates or to sell securities at good prices as it is for other industries. One of the things we wish to do is to get steel to a situation where it will be looked on by the investor as a good industry in which to put his money. Today, it is not. Mr. BATTIN. There is a third one I don't understand very well, that there should be an introduction of an aggressive and flexible price policy designed to expand the steel market position both at home and abroad. Our domestic steel prices have risen 51 percent since 1952, compared with 19 percent in Germany, and a 30-percent decline for Japan. In the long run, greater price stability depends on cost-reducing measures. And he goes on to talk about the competitive position of the industry. What has happened in Japan is that there has been a decline in steel prices. Is that because of Government subsidy, or because of some other reasons? Mr. PATTON. Japan had no steel industry in 1945, and as its volume grew, its costs came down, and it has all new equipment, and they get good productivity out of the workers, so the cost has come down. The American steel industry, if you will look back to, say, 1958, you will find that there has been very moderate increases in the price of steel since 1958. As a matter of fact, the index indicating the steel increase since that period is lower than the general wholesale index or the retail index, and the price of steel in recent years hasn't gone up very much at all. When you add to that the fact that the steel we are selling year by year is of a very superior quality, each year better than the year be- fore, our customer is getting a better product at the same price-in effect, he is getting a lower price, because he is getting a better steel. Mr. BATTIN. I was interested in both your statement and Mr. Abel's concerning the need to have a healthy steel industry in terms of the national security. PAGENO="0129" 1915 It would seem that because of this peculiar situation, it is going to be necessary through one avenue or another to make Sure that the steel industry stays as healthy as possible, to meet not only the domestic expansion needs, but also to remain in this necessary position of hav- ing an industry ready to react as far as our own national security is concerned. I tthimk this becomes a very vital question on what this committee and this `Congress does, because I don't think there is anybody that doesn't agree that it is ~aecessary to have a strong steel industry, in- cluding our trading partners. I have never heard the argument made by either Germany or Japan that they wo~uld like to see our industry here suffer as a result of the exports they are sending out and the in~ports we are getting. Have you ever had discussions? Mr. PATTON. I think everybody recognizes that there comes a point when imports are a danger, and everybody recognizes that steel is basic to our economy and to our national security. The problem arises as to, first, when that point of danger arrives, and we say it has already arrived, and, second, what is the remedy to handle this situation, and we say, Mr. Congressman, that the re~nedy as set forth in the bills which have been introduced to put in flexible quotas based on recent historical imports of steel, and confining the growth in the future to the growth of our own steel requirements in this country. I think that everybody recognizes the problem and where is the danger point and what do you do about it? We say it has been reached and this is the way to cure it by quota. Mr. BATTIN. I wish to thank you and Mr. Abel for what I consider two good statements. Mr. ABEL. Mr. Chairman I would like to add further with respect to what Mr. Patton said on the kind of job our industry is doing by calling your attention again to a statement in our statements, which, briefly, is this: That in 1952, steel production was 93 million tons. We had 545,000 steelworkers in the industry. But in 1967, the number of workers had dropped to 424,000, for a reduction of 121,000 workers, while produc- tion has increased by 34 million tons, roughly one-third increase in productivity. So certainly the industry hasn't been standing still. It is this sort of thing that disturbs us, especially when we `have this tremendous growth of imported steel, and while the witness yesterday, Mr. Thorn, may register some views in this regard the facts pretty well speak for themselves in this that the industry is modernizing at an expenditure rate of better than $2 billion a year which is sizeable even in our economy. I would remind you too that Mr. Thorn did start out his testimony yesterday by stating that he, too, felt that there should be some curbs on the importation of steel in this colUltry. Mr. BATTIN. One question. There is a position you took in your testimony that I would like to explore a little more, and it has to do with adjustment assistance. As I understand, as I remember the case, when the Trade Expansion Act of 1962 was passed, and this adjustment assistance section was in 05-159 O-68-~pt. 5-9 PAGENO="0130" 1916 the bifi, it was contemplated that only small industry might be affected. We saw this come about with the passage of the United States- Canadian Automotive Agreement, where it was contemplated that per- haps a small subcontractor or supplier of a part for a car, rather than the manufacturer of the automobile, would be displaced, and that as a result he should get this adjustment assistance to either try to retrain him or give him the ability to take the time and furnish the money to get back into a competitive job. If we look at adjustment assistance in looking at the steel industry we are going to face a big dollar problem. Another witness we had yesterday from MIT suggested that the United States, if it could not compete in steel, we ought to then get out of steel production and put our resources into something else, and he qualified this, of course, with the national security problem, but he said he did not represent the economists generally in the country. But what are you going to do? This becomes a real problem. We don't have enough money to take care of the people that would be dis- placed-and I am not talking about the workers in the industry alone-we are talking about the industry itself. Would the people in this country accept eliminating and then pay- ing for the elimination for all of the people engaged in the steel in- dustry as far as the workers are concerned, and then buying out, if you will, the investment that the companies have in the steel mills and their properties? It is a very frightening thing to me. I don't believe that the adjust- ment assistance system would be able to even come close to taking care of the needs of the people who could be hurt in the steel industry. Mr. ABEL. That is true. You can't take care of all the needs. Certain- ly there are areas in which Government can be helpful in this transi- tionary period, and this is the concern that we have. Certainly I point out to you again that even with this provision that nobody has ever received any benefit, and it is because it has been too restricted in its application. Certainly it is not so urgent at the present moment, our economy is in good shape, but there are periods when this sort of assistance not only is helpful, but very much needed, and I think we had a good ex- perience a few years ago when Studebaker went out of business in Indiana. Certainly the community as well as the workers had a great need, and the Government had a real and responsible bit to play in a situa- tion like that, in our opinion. Mr. IJERLONG. Mr. Curtis? Mr. Cun~ris. Mr. Chairman, I know Mr. Patton was testifying essen- tially on the steel and iron ore quota bill, but does your organization have a position of the administration bill? Mr. PATrON. No; we do not, sir. We do not believe that the admin- istration bill would solve the problem of import quotas. Mr. CunTIs. I understand that, but would you be opposed to the administration bill? It doesn't solve your problem, but would you support the administration bill as it is? . . Mr. PATTON. There are many parts of the administration bill which we do not think are good, but I want to say that I am only speaking for myself. I could not commit the organization one way or another on the administration bill. PAGENO="0131" 1917 Mr. Cur~TIs. Is your organization going to testify on the adminis- tration bill? Mr. PATrON. I cannot answer that at this moment. Mr. CURTIS. Mr. Abel, would you comment on that? Mr. ABEL. Frankly, Mr. Congressman, we support the position of the AFL-CIO on that measure, and Andy Biemiller has testified on certain provisions of it and objecting to certain other provisions. Mr. CURTIS. I see. Your testimony here has been confined to this position you have talked about. Mr. ABEL. That is right. Mr. CURTIS. To get all this in cOntext, what position does your in- dustry take, Mr. Patton, in respect to the Kennedy round? Has that in any way aggravated the problem of the steel industry, or do you feel you are largely unaffected? I don't think too much went on there in steel products, but I would like to get whatever position the steel industry has with respect to the impact of the Kennedy round. Mr. PATrON. My our position with respect to the Kennedy round is that it had not too much impact on our problems. Our problems were far and beyond the Kennedy round. The slight reduction in steel imports which were involved in the Kennedy round didn't change the problems of the steel industry in any material respect. They were there before and they are more there, in an emphatic way, than they were before. Mr. CURTIS. In other words, your problem with the Kennedy round was not what it did, but what it didn't do that might have helped? Mr. PATrON. I think that would be a fair observation. Mr. CURTIS. The same question to you, Mr. Abel: Has your union taken a position on evaluating the Kennedy round? Mr. ABEL. We supported the Kennedy round action, but our posi- tion has been and still is pretty much as Mr. Patton has said, on the basis that our industry is primarily a domestic industry and not too much concerned with the export market, and so the Kennedy round and the tariff arrangement doesn't have too much impact. Mr. Ctnrns. Mr. Patton, I am anxious to pursue, not necessarily here, but perhaps by memorandum, the line of questioning earlier on the use of the national security machinery, OEP. I don't know anyone who disagrees with your point that a viable and vital steel industry is essential to the security of this nation, or any nation. But I would appreciate a memorandum-perhaps that would be the best way-as to what the industry has done through the OEP, includ- ing whether or not you feel that the machinery there is inadequate to meet the national security aspect of the steel problem. Mr. PATTON. We will be glad to file such a memorandum with you, `Mr. Curtis. We are convinced, however, that any relief through ad- ministrative agencies is not realistic. (The following information was received by the committee:) DIScuSsIoNS OF STEEL IMPORTS WITH OEP-RESPONSE TO QuEsTIoNS BY CONGRESSMAN CURTIS As Mr. Patton indicated in his testimony on June 18, 1968, representatives of the steel industry have discussed the national security aspect of Steel imports with members of the staff of the Office of Emergency Planning. PAGENO="0132" 1918 The steel industry has not, however, made a formal application to the OEP for a finding, under Section 232 of the Trade Expansion Act, that steel imports threaten to impair the national security. There have been several reasons for this: 1. The OEP is not an independent, fact-finding agency but is an arm of the President's Executive Office. It has appeared to the steel industry that, absent a prior decision to act by the Administration as a whole, an application to OEP is unlikely to be successful. This view is reinforced by the fact that the only findings by the OEP of national security impairment have related to petroleum and, in those cases, the initiative came not from applications filed by the indus- try but from the President himself. 2. The powers of the OEP are limited under Section 232 to a finding that national security is endangered and a recommendation that the President take appropriate action. The President makes the final determination and decides what, if any, measures are necessary to alleviate the threat to national security. 3. Cases dealt with by the OEP indicate that its investigative procedures are time-consuming. The steel industry believes that the import problem requires prompt action and that this could not be expected from OEP. Rather than apply to the OEP for relief, the industry has chosen to appeal to the Executive and Legislative Branches as such. Representatives of the industry have engaged in numerous presentations of the steel import problem not only to the Congress, but also to officials in the Commerce, State and Treas- ury Departments, the Council of Economic Advisers and the Office of the Spe- cial Trade Representative. Mr. Cuirns. But OEP does provide for the quota approach, and it is tied to a. procedure that is established. OEP uses the very argu- ment you were using here, where it establishes the fact that our in- dustry is being affected deleteriously, which would impair our national defense. That is why I would like you to comment on not just what you have done through OEP, but. if you feel whether the Congress wrote the OEP laws adequately. Maybe there is something we need to do further. I am worried about. t.his business of writing new laws with- out first examining carefully whether administration of the present laws might not solve the problem. Some of it could be maladministration. Some of it could be that the laws themselves are inadequate and therefore tha.t other laws are needed. Now, your proposed legislation on quotas, would not be tied to national security guidelines, would it? Mr. PATTON. Not at all, no. Mr. Cun'ris. Not at all? Mr. PATTON. It would not be tied to national security as such. It would be a straight out quota bill, but it would have an impact on having steel available when national security requires it. Mr. Cmn'is. There is no question t.hen that this would render un- necessary, I guess, any proceeding through OEP. Mr. PATrON. Yes. I must speak perfectly frank, Mr. Curtis, in say- ing that our experience in seeking relief through administrative agen- cies or existing avenues has been very, very dismal. We haven't been successful at all, and we don't see that we will be in the future. We must get relief from Congress. Mr. CunTIs. Let me warn you that Congress is not the executive branch of t.he Government. All Congress can do is legislate. What- ever we legislate is going to have to be ca.rried out by the executive branch of the Government. PAGENO="0133" 1919 Even, for example, if we were to pass a quota bill, the Executive is the one that is going to have to implement it. And the Executive will make the decisions. Possibly we might have judicial review, and hopefully Congress would exercise oversight, but I don't think that you should count on the Congress getting into the Executive function. Whatever we do will be to write another law. If the OEP is not being administered properly, as you think or the laws we wrote for relief through the Tariff Commission are not administered well-do you see what I am driving at? Mr. PATTON. I do, Mr. Congressman, but I come back to the posi- tion that the bill which is pending before you, in it you have the guide- posts set up specifically so that the administrative end of the Govern- ment must follow these specific posts, and they are too nebulous in many other existing things, and they make their own determination of what is right and wrong. Mr. CURTIS. I wish I had the faith you have. [Laughter.] I have been in this business of trying to write guideposts in legislation only to see the Executive interpret them differently, or not even recognize that there were guideposts. But let me ask this: You do approach this, if I understood your testimony, as a temporary relief? Am I correct? Mr. PATrON. Yes. Mr. CURTIS. This is not what you are advocating for permanent methods of handling international~trade in this area. Mr. PATTON. We think the time has come when this Government should take a complete new look at its foreign trade policy. We don't think it is going to be able to do that in a very short time. Until that is done, until circumstances in the world change, we think that we ought to be protected in the interim, beginning now, and you take a look again at the end of 5 years and see where we are. Mr. CURTIS. These temporary things worry me, because they have a tendency to be permanent. Do you have in your proposed legislation guideposts for termination of the quota in, say, 5 years? Mr. PATrON. It would be up to the Secretary of Commerce to make a recommendation to the Congress as to whether the law should be re- pealed or whether it should be carried forward. Mr. CURTIS. In referring to the guideposts, I know you said that the overproduction of steel, or, I guess a better way to put it is that when world demand for steel equals world production, is that the point that you would then suggest that this temporary measure be elimi- nated? Mr. PATrON. Not necessarily. I think that when the time-I think the time would be that when the trading circumstances, the trading practices that exist in world markets are such that they are fair and equitable to all countries involved,: including the United States, when the tax elements are equal, when the labor elements are equal, when other elements are equal, then we would all have a fair shake at the thing, I think that is probably the time. Mr. CURTIS. Very good, because that is what I wanted to get to. Your main point in your discussion in regard to these unfair trade practices, and I certainly would regard them as such, and there are a whole variety, including subsidies, and others-as I understand your PAGENO="0134" 1920 argument, it takes time to get at those things, and this quota would be in effect until we really got at those problems. Is that correct? Mr. PATTON. That is one of the purposes of the bill. There are so many complications involved in world trade, including some of the things you have just mentioned, that it is going to take time to get this whole new posture of world trade properly set up as far as the United States is concerned, and in the interim we ought to have this protection. Mr. CtrRTIs. This makes a big difference as to whether we encourage these foreign nations to eliminate those practices, rather than for us, in turn, to emulate them. I wanted to be sure that we were in agreement on the thrust of what we should be doing in the ensuing years. Should we be trying to encourage these other nations to stop sub- sidizing- Mr. PAT'roN. Yes, sir. Mr. Cuirns. Or try to drop what we might consider our own un- fair trade practices. Mr. PATroN. I would l~ope ultimately we would have a situation evolve in world trade where we could say that we were all playing in the same ball park. In the interim, however, we don't want the American steel industry to go down the drain. We want protection now. Mr. Cuirns. I won't prolong this further. I thought that was your position, and I might State here that I certainly will listen to such a proposition, because as long as I see in which direction our thrust is, then I am a little bit wiser. You give us the picture as far as actual steel production, but not that which concerns all aspects of steel. For instance, we export a great deal of structural steel as well as heavy machinery and automobiles that are made from steel, and I do think it is important to have a complete picture before this committee. Mr. PATTON. Mr. Abel has that picture. He presented it in his statement. Mr. CuRTIS. Is that item in here, Mr. Abel? Mr. ABEL. Yes, sir. It shows roughly an adverse balance of about $500 million a year on steel products, equipment made of steel. That is contrary to the general belief. Mr. CuRTIs. Yes, it is contrary to what I had thought was the pic- ture as far as steel products are concerned. Mr. ABEL. As a matter of fact, what I say in the statement is simply this, that we have been a deficit nation in the value of direct steel trade since 1962. The current deficit amounts to about $900 million, but more than that, we are still a deficit Nation when we take into considera- tion indirect steel trade, that is, trade in which steel is used in manu- factured products. In 1966, our total steel trade balance was in a deficit position by almost $500 million. Mr. CuRTIs. What I need to do, then, is to supply to you the figures I have seen on this in order to have them reconciled with your figures, and I will do that through correspondence, and we can look at that. Mr. PATTON. Thank you, sir. We will be glad to get them. (The following material was received by the committee:) PAGENO="0135" 1921 MEMORANDUM FROM REPRESENTATIVE THOMAS B. CURTIS, OF MISSOURI, TO THE AMERICAN IRON AND STEEL INSTITUTE The table cited by Mr. Abel in his testimony to the Committee was drawn from the Senate Finance Committee's Steel Import Study, page 69, table 31. Table 31 attempts to more accurately measure total steel export-import trade by including the value of steel eaported and imported in the form of end-use items. The total trade balance presented by this table, which was compiled by the American Iron and Steel Institute, shows a deficit of $496 million in total direct and indirect steel trade. But I wondered if this table should be qualified by factors explained in the Steel Import Study itself. For example, in addition to inserting with his testi- mony table 31, Mr. Abel might have for completeness included reference to the chart shown on the following page of the Senate Finance Study which follows as Appendix 1. This chart, Chart 32 on page 70, reveals a $6 billion surplus (in 1966) in trade of end-use items containing steel. Thus, if the adverse balance of trade in direct steel products alone of $1 billion (this figure includes an addi- tional 10% added to the value of imports to represent cost, insurance, and freight and subtracts from exports the amount of AID-financed steel shipments) was combined with the $6 billion favorable balance resulting from trade in products containing steel, the result is a favorable balance of trade in 1966 for steel and products made from steel of $5 billion. I wonder also if the value of the direct steel imports might not have been overvalued by 10% to represent the c.i.f. costs (the standard measurement of value of U.S. imports is the "export value", which does not include these costs), and if by eliminating AID-financed exports the Table presented by Mr. Abel might be incomplete. The Senate Finance Committee Report itself qualified the information in the Table presented by Mr. Abel, noting the difficulty of estimating the steel content of end products made of steel. According to the Steel Import Study, page 68, "the data on foreign trade are not well adapted to the job of estimating steel content; there are vast categories of machinery and equipment items represented only by value data and with no corresponding unit figures. Even if unit data were avail- able, the average steel content is unknown without a bill of material for each type of machinery." Furthermore, shipping weights of such manufactured items are not necessarily representative of steel content. An automobile contains hundreds of pounds of other materials. Finally I feel it is very difficult to measure the value of the steel contained in, these exports. For example, one large exporter informs me that they pay con- siderably more than the average steel price used in the estimates presented in Mr3 Abel's Table. This is because their machinery exports contain many forgings and castings, special alloys and heat treated steel, as well as special sections, non- standard specifications, and special sizes. Thus the value assigned to the steel in Mr. Abel's table would seem to be too low at least for one major type of steel exporting industry. I wonder if it is not also appropriate to give special consideration here to the fact that end-use items made from steel-such as machinery, transport equipment, and many kinds of fabricated metal products-which make up the backbone of our exports of manufactured goods, contain a great deal of additional American labor in high wage industries. Some of these workers in fact are members of the United States Steel Workers of America.~ Finally, I wonder if the Table presented by Mr. Abel doesn't have problems in its attempt to calculate a balance of trade simply for the steel contained in end- use products. This is because no business is transacted in the steel contained in end-use items. Obviously, it is the end-use items themselves which flow in world trade. In selling these items, too, much more is sold than the steel contained in them. Perhaps more importantly, United States exporters of steel-containing end- use items sell value added by labor-high skill, high wage labor-engineering, research and development and very high amounts of human capital in the form of management and marketing skills. PAGENO="0136" 1922 Value o~ U. S. Foreign Trade in End-Usc Items Contahijn~ Stec~l, 1957-P)(,G 1957 58 59 60 6], 62 63 64 65 66 S0Ul~E: Basic data, Bureau of Census U.S. Department of Comxserce, Office of Busine~s. Economics CHART 32 PAGENO="0137" 1923 REPLY FROM AMEnIcAN IRON AND STEEL INSTITUTE-INDIRECT IMPORTS AND EXPORTS: QUESTIONS BY REPRESENTATIVE CURTIS 1. Question: Why is the value of imports adjusted from an f.o.b. to a c.i.f. basis on the indirect import and export table published by Dr. Weidenhammer's report, page 69? Why is the adjustment 10 percent? (Footnote 1) Answer: The reason for making an adjustment to the import value from f.o.b. (foreign port) to c.i.f. (port of entry) is to reflect more completely the total cost of U.S. imports to the economy. The dollar value shown in the U.S. import statistics is generally the market value in the foreign country and therefore excludes U.S. freight charges from the foreign country to the U.S., insurance, and other incidental costs. It is necessary to adjust the landed value of imports up- ward by some percentage to cover the charges from foreign port to U.S. domestic port. It was felt that the 10 percent adjustment would be appropriate, although the number is an approximation but in accordance with the Tariff Commission studies. The U.S. export statistics report all values f.o.b. seaport or border point, and all values are based on the selling price and include inland freight, insur- ance, and other charges to the port of exportation. Thus a more realistic com- parison can be made by comparing the adjusted import value with the actual export value. 2. Question: Why are steel product exports shown less AID-flanced exports? (Weidenhammer Report, Page 69, Footnote 3.) Answer: AID-financed exports were excluded since they do not represent any inflow of foreign exchange. In effect, they are no different than if the commodity itself were given, rather than the funds with which to purchase the commodity. In the second instance, however, it would be obvious that no foreign exchange was generated and the question of inclusion or exclusion of AID-financed pur- chases would never arise. 3. Questicm: Why was $150 per ton used as the average price in estimating the value of steel contained in indirect exp6rts? Answer: The range of sales realization per ton for carbon steel during the 1957-1966 period ranged from $148.76 to $159.64; the selected value falls within this range. Carbon grades represented from 90.2 percent to 93.8 percent of all steel shipments during the period. Obviously the bulk of all steel contained in indirect exports was of this grade. Admittedly, an all grades value could also have been used. Had this been done, the range would have been from $165.36 to $180.30 or from 11 to 13 per- cent higher. Whether these values would have been more realistic is, of course, unkonwn. Nevertheless, a new Table 31 is attached which uses the values for all grades to illustrate the effect on this basis. (This new Table 31 also incorporates the value of AID shipments in exports and deducts the 10 percent adjustment to imports.) A contrary argument, however, can be made for the value of steel contained in indirect imports. It has often been stated that steel imports to the U.S. are sold at less than country of origin domestié prices. If this is true, then certainly a higher value than the average value per net ton of imported steel mill products should have been used. If the value of steel contained in indirect imports were adjusted upward as seems appropriate, the steel trade balance would be less favorable than shown. SUMMARY: As noted in the last question, a revised Table 31 has been prepared. The revised table adjusts for the 10 percent f.o.b. to c.i.f. adjustment, exclusion of AID- financed exports, and the value of steel contained in indirect exports. These adjustments were made by reducing the value of steel product and end- use item imports by the 10 percent by which they had previously been increased. The AID-financed exports shown in Table 29 on Page 67 were simply added to the steel product direct exports (apparently indirect steel exports had not been previously adjusted to exclude AID-financed exports). The value of indirect exports has been recalculated by multiplying the estimated net tons by the aver- age sales realizatioon per net ton of steel products (all grades) for the respec- tive year, rather than the $150 used in the original table. Interestingly, the trade balance for 1966 is still negative, although to a lesser degree than shown in Table 31. Our point, however, is that the trade balance is continuing to deteriorate-not the level at which it presently stands. Further- more, there is no indication that the balance will improve in the near future. PAGENO="0138" 1924 VALUE OF DIRECT AND INDIRECT (END-USE) STEEL IMPORTS AND EXPORTS AND THEIR EFFECT ON U.S. BALANCE OF PAYMENTS [In millions of dollars) Imports' Exports Trade balance, total Steel End-use Total Steel End-use Total products (direct imports) items° (!ndirect imports) (direct plus indirect) products3 (direct exports) items4 (!ndirect exports) (direct plus indirect) exports less imports 1957° 214 99 313 1,010 546 1,556 +1,243 1958 229 100 329 753 501 1,254 +925 1959 581 155 736 498 533 1,031 +295 1960 502 132 634 727 554 1,281 +647 1961 420 93 513 547 553 1,100 +587 1962 533 117 650 565 567 1,132 +482 1963 684 115 799 627 594 1,221 +422 1964 815 140 955 780 697 1,477 +522 1965 1,268 175 1,443 721 752 1,473 +30 1966 1,313 234 1,547 635 793 1,428 -119 1 After deducting 10% allowance for FOB to CIF adjustment. 2 Values calculated by multiplying estimated net tons of indirect imports times the average CIF landed value per net ton of imported steel mill products after deducting 10% allowance for FOB to CIF adjustment. 3 Values represent steel product exports including AID-financed exports. 4 Values calculated by multiplying estimated net tons by the Average Sales Realization per Net Ton of Steel Products (all grades) for the Respective Year. (Computed from Census of Manufactures Data Published by the Bureau of Census). The value of "other steel products" component of the steel product direct imports and exports estimated. Source: Steel Imports-Staff Study of the Committee on Finance, United States Senate, December 19, 1967, page 69. Mr. CuwrIs. I know the use of countervailing duties is coming back into play. Do you feel that this is a possible way for us to continue to move forward to try to at least equalize some of these unfair trade practices? Mr. PATTON. There is no harm in moving forward on that area, but I must respectfully submit that we consider it to be wholly in- adequate to correct the situation as we see it. There is only, as I recall, one case that has been decided on counter- vailing duties involving some Italian radio power, and as I under- stand it, only half of that case has been decided and they have been waiting a year and a half for the other half to be decided. So it is a very slow process, and if we went at this thing case by case and sale by sale, Mr. Congressman, we wouldn't get any relief in any appreciable form in any kind of time. Mr. CURTIS. You are among those who think the administration has not been enforcing the law as it has been written on the books for sometime. It certainly hasn't seemed to have used the tools which it has available which would move in this direction. Now, whither this is so, we ought to find out whether this is a proper channel, to see if by developing the countervailing duty approach we can handle these problems. Believe me, I would much prefer to see this kind of tariff differential counter these unfair trade practices that create your problem. Anyone can read a tariff schedule, even the small- est businessman. No matter how much you like it or dislike it, quotas require the ac- tion of a. political bureaucracy. You can put in your guideposts, but, believe me, those are going to be interpreted by civil service employees and others in the executive branch of the Government. We run into the same problem of writing laws and then finding that they have not been administered the way some of us have thought they would be administered. PAGENO="0139" 1925 Mr. PATTON. Mr. Congressman, I fully appreciate your sincerity and your views on countervailing duties, but I must say that we in the steel industry don't think we are going to get relief of the kind we need within the time we need by a case by case by case buildup which takes a trial and an appeal and everything else, and it is just going to be interminable. Mr. CURTIS. Let me say this: I would be much more inclined to go along with what is requested in the name of being temporary, if I saw a real effort on the part of those who are asking for temporary relief to come in and help develop the movement toward eliminating these various unfair trade practices which, when eliminated, would be the basis for terminating the temporary quota. But when there isn't this kind of thrust, I begin to wonder how temporary is "temporary." The long-term cotton textile agreement was supposed to be temporary. We do have experience of the sugar quota that was put on, I think, back in 1938, and we can see the long-range effect of the quota and license approach in this field. So ~ye do have an example to go by on what might occur. You say that your guideposts are to, in effect, freeze the trade pat- terns. You use the word "historical trade patterns." This means that what kind of steel products would come from what country, into what ports, and at what times, and all other factors- all these decisions will be made by bureaucrats, people in the executive branch of the Government. Mr. PATTON. On the basis of guideposts that are set forth in the bill, you have the historical pattern of the country of origin, the ton- nage, the products, and the ports of entry. Mr. Crm~rs. That is why I use the word "freeze." You freeze the trade pattern. What happens to innovation and flexibility when you freeze patterns in this dynamic economy of ours? Mr. PATTON. I think there is plenty of room for innovation. In the first place, that is just a small percentage of the total steel require- ments of the country. We in the steel industry are fighting tooth and nail with each other, not only for the market, but for a recapture, if you please, of the steel that has been lost to foreign competition. We are fighting with aluminum, ivith plastics, with all kinds of com- petitive materials. I think there is plenty of room for innovation, and it will come. Mr. Cuirns. I agree that there is this kind of innovation. In fact, in many respects, I think a great deal of the problems in steel come from these other kinds of competition although I don't want to min- imize the problems that exist in this trade area, because I do happen to believe there has been a great deal of unfair trade practices going on in your industry. I think there is over-production, and I think a lot of this has come about through the Government's intervening in the market place. What I do urge this industry and others to recognize is that when you come to the Government for protection in this fashion, you are giving great powers to the Government to freeze the marketplace in certain ways, and it will also interpret the guide posts. We try to write guideposts, and if we do pass this legislation, I will do whatever I can to be sure that the guideposts are as clear as we PAGENO="0140" 1926 can make them, but I know from experience that no matter how well intentioned we may be and how much we try to write them clearly, they still will be interpreted by the Executive as it wishes. I hope that there is great emphasis laid on the fact thta this quota proposal is temporary, and that this temporariness is related to some specific things that must be done, and that when those things are done, then there is an end to the temporary measure. Otherwise, I can assure you that it will be permanent. Mr. PATTON. I am sure that we wouldn't want this to remain in effect perliialieiitl3T. I am sure that while it is in effect the industry will be cooperative to advance on every front with respect to every type of relief that might be thought of or that is in existence to make it better and more effective than it is today, and to close whatever loop holes exist either in the act itself or in the administration of the act. I am sure we would be doing that. Mr. CURUs. Thank you, and I thank you for your testimony. Let me emphasize that I have a very high regard not only for the steel industry, but for all American industry. I think that you and we, if I can use the word "we," can compete against anybody if the prac- tices are fair. - Mr. PATTON. Thank you for those kind words. Mr. HERLONG. Thank you, gentleman, for being here and for the contribution you have made to our committee. Mr. PATrON. Thank you, Mr. Chairman, and thank all of you for coming and sitting with us and listening to our problems. We urge again that you promptly enact the quota bill that is before you. Mr. HERLONG. Thank you. (The following letters and telegrams were received by the com- mittee:) BETHLEHEM STEEL CORP., Bethlehem, Pa., June 17, 1968. Hon. WnILBun D. MILLS, Chairman, Committee on Ways and ]Iean s. U.S. House of Representatives, Washington, D.C. DEAn MR. CHAIRMAN: Bethlehem Steel Corporation endorses the testimony of Mr. T. F. Patton before the Ways and Means Committee of the House of Repre- sentatives during its review of tariff and trade proposals. Mr. Patton's statement on the iron and steel import problem and the solution reflected in the orderly marketing bills now before the Committee have our full support. We urge the Committee, upon completion of its trade hearings, to take prompt and favorable action on those bills. Very truly yours, EDMUND F. MARTIN, Chairman. JONES & LAUGHLIN STEEL CORP., Pittsburgh, Pa., June 20, 1968. Hon. WILBUR D. MilLs, U.S. House of Represemtatives, Was hington~ D.C. Jones & Laughlin Steel Corporation appreciates the opportunity which the Ways and Means Committee accorded the steel industry and the United Steel Workers to present testimony before the committee on June 18. Mr. Patton's statement with respect to the problem and the recommended solution which is reflected in the various iron and steel orderly marketing bills now before the PAGENO="0141" 1927 committee have our full support. We urge you and the committee to take prompt action so that these bills may be reported favorably to the House for passage. CHARLEs M. BEEGHLY. KEYSTONE STEEL & WIRE Co., Peoria, Ill., June 10, 1968. Hon. WIRBuR D. MILLS, Chairman, Ways and Means Convnvittee, Hoitse Office Building, Washington, D.C. DEAR CHAIRMAN MILLs: With the domestic markets for some of our products being half filled by imports, we at Keystone are vitally interested in the current hearings. Since this subject has such a vital interest to us, we appreciate and are grate- ful for the opportunity your Committee is giving us to be heard. As one of the smaller steel producers, Keystone supports the statement being presented in behalf of the American Iron and Steel Institute members. We supplement that statement with one of our own stressing the impact that imports have had on this Company and its people. On behalf of the men and women of Keystone-the employees, the share- holders, the vendors and the neighbors who have a stake in our business-I re- spectfully and earnestly urge the adoption of the legislation proposed by the American Iron and Steel Institute. Sincerely, WALTON B. SOMMER, President and Chairman of the Board. STATEMENT OF WALTON B. SOMMER, CHAIRMAN OF BOARD AND PRESIDENT, KEYSTONE STEEL & WIRE Co. I am Walton B. Sommer, President and Chairman of the Board of Directors of the Keystone Steel & Wire Company, Peoria, Illinois. I submit this statement to solicit your favorable consideration of appropriate legislative action to help equalize certain trade factors, the imbalance of which presently permits foreign steel products to consume so great a share of our domestic market. The Keystone Steel & Wire Company was started by my grandfather and his father in Central Illinois in 1889. Today our Company has over 5,500 stock- holders and with our subsidiary companies employs 6,300 people. Back in 1889, we started this business by weaving galvanized steel wire into wire fencing for the farmer. The Company has progressed to today where we are capable of producing 700,000 tons of steel ingots in five open hearth furnaces at Bartonville, Illinois. This steel is rolled or cast into billets, some of which are then processed into rods in which form they are sold to subsidiaries and other manufacturers. Our finished products are various types of industrial wire, products for the farm market (under our Red Brand trademark for field fence and barbed wire), building and construction materials from nails to welded wire fabric for reinforcing concrete and plaster, etc. Our main plants are at Bartonville, Illinois, but with our subsidies, the National Lock Company in Rockford, Illinois, Mid-States Steel and Wire Company in Crawfordsville, and the Chicago Steel and Wire Company in Chicago and their various branch opera- tions, we have active producing and distribution outlets from New York State to Florida to California to Seattle. The most recent addition to our corporate family by acquisition is the plant and properties of Wickwire Bros., a wire products fabricator in Courtland, New York. While our production is centered in Peoria, Illinois, imports of steel and wire products through most of the customs districts have a sharp impact on our competitive climate. Those steel products which are our specialty such as wire rods, drawn wire, barbed wire, woven wire fence, nails and staples have had their domestic markets heavily infiltrated by: imported steel from Europe and Japan. This is reflected by the 1967 statistics of TJ.S. imports of selected steel and wire products which Keystone produces, shown as a percentage of the U.S. market: wire rods, 46.1%; drawn wire, 15.1%; wire nails, 39.8%; barbed wire, 40.6%; and wire fence, 32.9%. Important markets for Keystone's customers have also been diluted by imports. I refer to the fastener business where imports of bolts, nuts and rivets practically PAGENO="0142" 1928 doubled from 1903 to 1967. Our wire rope and wire strand customers offered a similar report. During the calendar year of 1958, 181,284 net tons of wire rods were imported into this country. At the same time, 432,185 net tons of wire and wire products were imported. Nine years later, for the calendar year of 1067, these comparative figures were 1,076,407 net tons of rods and 797,445 net tons of wire and wire products. During this same period of time, the earnings' record of Keystone Steel & Wire Company showed that the percentage of profit on net sales dropped from 11.01% in 1958 to 4.82% in 1967 and percent profit on investment plummeted from 16.31% in 1958 to 6.08% in 1967. We do not seek the abolition of free world commerce, only the opportunity for domestic steel companies including the Keystone Steel & Wire Company, Peoria, Illinois, to compete equitably with foreign steel producers in the United States domestic market. WASHINGTON STEEL CORP., Washington, Pa., June 28, 1968. Hon. Winun MIRLS, Chairman, Committee on Ways and Means, TJ.~ Honse of Representatives, Washington, D.C. DEAR CHAIRMAN MILLS: You have heard some of the critics of the proposed legislation to set a reasonable limit on imports of steel ~ay that "None of the steel companies seem to have been seriously hurt." This is certainly not true of the Washington Steel Corporation. Substantially all of the company's production is stainless steel and more than 70% of the stainless steel produced is nickel-bearing material; in fact, the average nickel content is 91/~%. Thus, to support our minimal requirements we need S to 7 million pounds of nickel per year which makes us one of the largest consumers of nickel in the country. There are two specific and very real areas in which our company has been demonstrably hurt. Although the market price for electrolytic nickel is 95~ per pound, plus or minus, (depending on which form you buy) we have been obliged to pay as much as $1.55 to $1.00 a pound for some of the units which we needed and one of our really helpful sources supplies high nickel ferro chrome to us at what constitutes a premium of 30% a pound nickel contained. One other way in which we can get some nickel is to quote marginal prices on government contracts so that we can get some rated orders for which the nickel is assured-it's another way of paying a premium. The other way in which we have been very seriously and demonstrably hurt is that on stainless steel sheets as much as 25% of domestic consumption has come into this country from Japan alone in many months-the average is running 18% to 22% now on stainless sheets. Thus, u-c have lost an important and profitable part of our production but the Jap's prices were as much as 30% below the book prices of the American producers and, little by little, the domestic prices deteriorated to the extend of 15% in an endeavor to hold on to some of the stainless steel sheet business; these reductions will probably never be re- gained and thus they came out of our former profits. Before concluding, we w-ould like to add that our own government has not made our plight any easier by allowing so much stainless steel scrap to be exported to Japan. No legislation is needed to control that; it's simply a matter of policing the export licenses. Well, Mr. Chairman, I do plead w-ith you to get us some action on these im- port limitation measures. Heaven forbid that our seven children and all the grandchildren who are now beginning to, appear from all directions should ever have to go on public relief-the load would be heavy. As a member of the American Iron and Steel Institute Public Affairs Develop- mont Committee, may I express to you my personal thanks for the fine treat- ment which was accorded our Committee by you and your associates. Please be assured that we wish to be helpful. Respectfully yours, T. S. FITCH, President. (The following statement of Tool & Stainless Steel Industry Com- mittee, was received for the record:) PAGENO="0143" 1929 STATEMENT OF TOOL AND STAINLESS STEEL INDUSTRY COMMITTEE This statement is submitted by the Tool and Stainless Steel Industry Com- mittee, an association of 17 producers of specialty steels. A list of our member- ship is attached as an Appendix heretO. We endorse the statement presented to this Committee today by the American Iron and Steel Institute. We submit the following additional amplifying comments because of our special concerns with the import problem. I. SPECIALTY STEEL IMPORTS Specialty steel producers make about one percent of the annual tonnage of the overall domestic steel industry, but account for about seven percent of its dollar sales. Ours is a specialty business. Our research, raw material, labor, and marketing costs are higher than those, of the basic carbon industry because of the expensive alloys and particular skills we need to make high-performance steel. Much of our production is custom tailored to a specific need, and our in- dustry tends toward job-shop production of small quantities of steel. We are truly an industry distinct, though not apart, from the basic carbop steel industry. I say "not apart" because we share many problems with basic carbon steel. The one before us now is the problem of import competition. The trend of im- port penetration into the tool and stainless steel markets in the Uni:ted States shows a curve which is similar to although steeper than that in the tonnage industry. In 1067 imports of stainless steel were 150,000 tons, up from 80,000 in 1964 and 8,000 in 1959. The share of apparent U.S. stainless steel consump- tion claimed by foreign products has jumped from 1 percent in 1959 to 16 percent in 1967. In tool steel the penetration has followed the same pattern, with im- ported high speed tool steel claiming 14 percent of the United States market in 1967. The same international economic factors which permit the penetration of basic carbon steel markets in the United States have brought about this market loss in the specialty areas. World over-capacity, foreign wage-rate advantages, for- eign government export incentives, and easy access to the United States market combine to injure the specialty industry just as they do the carbon producers. We feel strongly that quantitative limitations on imports of steel mill products are the only effective means of relief from this problem, and we join whole- heartedly in supporting the steel quota bill which the American Iron and Steel Institute has endorsed before this Committee. II. IDENTITY OF SPECIALTY STEEL INDUSTRY We feel equally strongly, however, that in recognizing our common problem and endorsing the analysis of causes and suggestions for solutions presented here by the American Iron and Steel Institute, we must not obscure the very specific differences existing between the basic carbon steel industry and the tool and stainless steel industry. At the outset our products are more sophisticated. They are made to be used under conditions of temperature, pressure, stress, and corrosion for which carbon steels are not designed. They contain expensive alloying elements and undergo expensive melting and treating procedures which enable them to perform under these conditions. Manhours per ton in the stainless steel industry average 6.5 times the basic carbon steel figure, and in tool steel may reach 10 to 20 times the carbon average. These labor costs are not susceptible of substantial reduc- tion by automation because of both the specialized nature of the product and the small quantities in which it is ordinarily made. III. SPECIALTY STEEL AND THE NATIONAL SECURITY Like basic carbon steel, specialty steel is essential to the national security and defense. A brief examination of some of its applications will amply demon- strate this fact. To begin with, the fundamental use for tool steel is in the cutting and shaping implements which in turn are used in the production of every manufactured ob- ject in our economy. The direct military applications of tool and stainless steel, however, are as varied as the range of modern weaponry. A single military aircraft engine, for example, will depend on bearings made of AI5I M-50 or AI5I 52100 tool steel. This steel must be made through a consum- able electrode vacuum melt process in order to attain the precise chemical anal- PAGENO="0144" 1930 ysis and high degree of cleanliness required. Specialty steel producers are the only companies with the equipment and metallurgical experience necessary to this production. This same engine may also contain torque rings or turbine or compressor discs made of high-temperature high-strength materials such as Waspalloy and moly ascoloy by small specialty companies which produce no carbon steel. Injury to their business cannot be offset by additional production in standard grades. This engine powers an aircraft containing structural members, linkage systems, gears, and actuating devices made of hot work tool steel of high cleanliness, strength, ductility and reliability. Its generator needs Vanadium permendur, a 49 percent cobalt, 2 percent vanadium alloy which requires close attention and skill in pro- duction because of extreme brittleness during its semifinished stages. The airplane may carry reconnaissance photographic equipment having stain- less steel parts. Its missile guidance systems contain servo-synchro motor trans- mitters made by a specialty steel company. Its radar system needs a klystron microwave tube with a vacuum envelope of iron so pure that it must be refined in a consumable electrode vacuum melt furnace at a specialty steel facility. Meanwhile the infantryman in the Vietnam jungle carries an M-16 rifif' with a stainless steel bolt. The rifle shoots bullets drawn from a special alloy-chi.d metal produced by a specialty steel maker. The soldier may be saved a dangerous wound by a stainless steel innersole in his combat boots. If injured he will be evacuated by a helicopter with a rotor shaft made of tool steel to a hospital where he will be sewed up by a needle of stainless steel wire. From the antispike innersole to the delicate missile guidance system, our modern arsenal depends on tool and stainless steel to perform a myriad of special functions under extreme conditions. iv. THE NEED FOR RELIEF OF THE SPECIALTY STEEL INDUSTRY The ability of the specialty steel industry to continue the basic research and development which makes these products possible is now being hampered by the continuous rise in imports. This research and development activity is financed by the profits earned on routine sales of staple specialty steel products. These activities are carried on with the expectation that new products mean new growth and new methods mean new economies. As imports cut away the growth potential of the United States market, our enthusiasm for continued expansion of this vital research and development function is also eroded. As part of the domestic steel industry, the tool and stainless steel producers ask this Committee to hear and heed the expressions of the American Iron and Steel Institute. As makers of distinct and specialized products, however, we urge you to have in mind our separate identity within the industry. APPENDIX Allegheny Ludlum Steel Corporation, 2000 Oliver Building, Pittsburgh, Penn- sylvania 15222. Armco Steel Corporation, Armco Division, Middletown, Ohio 45042. Bethlehem Steel Corporation, Bethlehem, Pennsylvania 18016. Braeburn Alloy Steel Division, Continental Copper & Steel Industries, Inc., Braeburn, Pennsylvania 15016. The Carpenter Steel Company, Post Office Box 662, Reading, Pennsylvania 19601. Crucible Steel Company, Four Gateway Center, Pittsburgh, Pennsylvania 15230. Eastern Stainless Steel Corporation, Post Office Box 1975, Baltimore, Mary- land 21203. Jessop Steel Company, Washington, Pennsylvania 15301. Jones & Laughlin Steel Corporation, Three Gateway Center, Pittsburgh, Penn- sylvania 15230. Joslyn Stainless Steels, 155 North Wacker Drive, Chicago, Illinois 60606. Latrobe Steel Company, Latrobe, Pennsylvania 15650. McLouth Steel Corporation, 300 5. Livernois Avenue, Detroit, Michigan 48217. Republic Steel Corporation, Massillon, Ohio. Simonds Steel Division, Wallace-Murray Corporation, Ohio Street, Lockport, New York 14094. The Universal-Cyclops Specialty Steel Division, Cyclops Building, 650 Wash- ington Road, Pittsburgh, Pennsylvania 15228. PAGENO="0145" 1931 VASCO-A Teledyne Company, Latrobe, Pennsylvania 15650. Washington Steel Corporation, Washington, Pennsylvania. Mr. HERLONG. I see our colleague, Senator Hartke, of the other body is here. We are happy to welcome you to the committee, Senator. STATEMENT OP HON. VANCE HARTKE, A U.S. SENATOR PROM THE STATE OP ~DIANA Senator HAmrKE. It is indeed an honor for me to appear before this committee. Today our Nation is suffering a bad case of economic pessimism. It is frequently said that our economic progress has reached its zenith; that we must retract and retreat; that we must tighten our belts; that we must cave in to the threats of European money changers; that the rapid improvement in our standard of living must slow down; that a decline in our prosperity is likely to be our lot for the next few years. I believe that this is a wildly mistaken interpretation of what is happening to us. We are not suffering from the rheumatics of old age. We seem to forget that we are rapidly approaching a trillion dollar gross national product. There is no doubt, however, as you gentlemen are painfully aware, that we are facing today a number of crucial economic issues, that we must find solutions to a number of problems if our prosperity is to continue. I submit that if we are to take our task seriously we must get beyond the sterile debate of protectionism versus free trade. We must focus not on utopia, but upon the hard realities of the present international economic situation. Today I want io focus on those realities relating to steel. But first permit me a word about American attitudes toward trade policies. Those attitudes are rapidly changing. The phrase "free trade" is almost a religion among economists, but today I see no other road by which we can achieve trade equilibrium. I am opposed to quotas. I believe free trade is one way to triumph over selfish nationalism. But I believe that quotas are necessary in the short term now, in order to force free and fair trade in the long term. If quotas are long delayed, under present circumstances, substantial unemployment must most certainly result. I prefer quotas to com- petitive international wage cutting as the road to international balance with the attendant social strife that wage cutting could bring. I firmly believe that unless we take limited steps now on behalf of some of our crucial industries, despite the screams about protectionism that we will hear from some critics we will be called upon by the American public in the next few years to take extreme steps on behalf of many of our industries. We will witness a conservatization of our trade policy to the extreme. Steps can be taken now to preserve and promote our prosperity and stave off such conservatization. But our failure to enact quotas as a defensive, not as an offensive, device for U.S. workers and the continued use of nontariff barriers by our trading partners will come to a result that will astound the free world; extreme isolationism and economic nationalism. Mr. Chairman, right now the administration is seeking some solution to our deteriorating balance of trade-let me repeat, that is our balance 95-159 O-G8-pt. 5~iO PAGENO="0146" 1932 of trade, not the balance of payments. In March of this year we im- ported more than we exported for the first monthly period since 1963. They are contained on page 3 of his statement presented on June 6, 1963. One, he says restoration of wage-price stability. Is he saying that he will institute wage and price controls? The second deals with the avoidance of work stoppages or threat of work stoppages. Is he asking for passage of legislation without right to strike? Then he wants a new consciousness and energy on the part of man- agement and labor to produce and sell for export. Certainly I think any manufacturer would want to do that today. The Commerce De- partment says they are doing all they can, in this record in separate testimony already, so there certainly cannot be much new expected in that. The two other proposals, the enactment of new export expansion proposals, are excellent ideas, but there is no indication that these policies are going to achieve anything near what they are talking about. Let me remind you that in a very short period of time we have come from a $700 million trade surplus to a $400 million trade surplus in the first quarter of this year. The Secretary made no statement whatsoever about relieving any of the American industry from the antitrust laws which prevent Amer- icans from competing against international cartels. The Secretary made no mention about innovations, about having international steel conferences of any nature whatsoever to eliminate the nontariff barriers to which we frequently refer. Under consideration in the administration is a proposal to impose a 5 percent surcharge on imports. The surcharge would apply to all imports now subject to tariff duties; it would exempt noncompetitive imports of raw materials and foodstuffs. Mr. Chairman, that proposal, if adopted, would be illegal under GATT-an indication of how far many parties are already willing to go. The import quota I recommend today, how-ever, is perfectly legal under that international agreement. Let me `now turn to the steel- quota proposal. On October 16, 1967, I introduced in the Senate a bill to provide for orderly trade in iron and steel mill products-S. 2537-on behalf of myself, Senator Dirksen, as the chief Republican cosponsor, and 37 fellow Senators. A large number of members of the House have introduced identical bills. When I introduced the Senate bill, I said that I believed it was a moderate and reasonable approach for meeting a clear and well- documented need. I will summarize it a little later. I do not take lightly the espousal of quota proposals. Consequently, I urged the administration and the Senate Finance Committee to make thorough investigat.ions of the steel situation. Last year the Senate Finance Committee authorized a staff study on steel imports, and that study, conducted under expert guidance, was released on December 19 and is available to the Congress. I request the committee to insert in the record of these hearings after my remarks, the portions of that study designated "Introduc- tion," "Summary of Conclusions" and "Summary of Factual Find- PAGENO="0147" 1933 ings." Also in 1967, the American Iron & Steel Institute prepared a study on "The Steel Import Problem" which was released 111 October and that too is available. The Senate committee staff study and the American Iron & Steel Institute study provide conclusive evidence that the imports of steel have been growing so rapidly in the past few years, with no indication that they will not continue to do so, that the United States is forced to examine the implications for our do- mestic economy, our balance of payments, and our national security. The figures now available for 1967 and the early months of 1968 make it even more imperative that we should take action to deal with the rapidly increasing problems of our domestic steel industry which affect our national interest. I am in favor of the ultimate achievement of free trade and I think we can all recognize the advantages that would accrue from it. I sup- ported the purposes of the Kennedy round, but as was indicated by the prior testimony, tariffs are by no means the only trade barriers to be considered. In the world as it is today, even if we abolished all tariffs, we would still not have free trade. There are so many non- tariff barriers in existence and so many economic and political factors that can be and are structured in~ such a way as to prevent free trade, that the conclusion of the Kennedy round negotiations is far from being the whole answer. The problem of steel imports into the United States provides a good example of the limited value of tariff reductions. The American steel industry is not being seriously hurt by the low tariffs which apply to steel imports, but by other conditions which are far more formidable and in the next few years could so dislocate the domestic industry that domestic steel shipments would even decline from their present levels and our national security and our balance-of-payments position would be eroded to the danger point and even beyond. One of the nontariff barriers used by members of the European Economic Community is the manipulation of transaction taxes, or turnover taxes, to favor exports and to limit imports. On exports from the European Economic Community to the United States the trans- action tax is rebated to the exporter but the transaction tax is applied to goods coming from the United States when they enter the European community. Since the United States has no such indirect taxes, we are not in a position at present to use this system to reduce imports, al- though it is currently permissible~ under the provisions of the General Agreement on Tariffs and Trade. Perhaps even more important is the fact that foreign governments take a very direct interest in their steel industries and regard them as essential to the national economy and national security so that measures are taken to assure that these national steel industries con- tinue to increase their production. This is achieved by providing for the low-cost financing for produc- tion facilities and by the use of licensing arrangements, warehousing requirements, redtape and buy-national policies to insure that im- ports will be held at a minimum. In fact, today the Common Market countries do not permit imports of steel products from outside the EEC to exceed 5 percent of the domestic market. Japan has imports of less than 1 percent. In the United States, in 1967 imports accounted for I 2.2 percent of apparent supply. PAGENO="0148" 1934 In addition to using their domestic tax systems and government in- tervention in support of their steel industries, other major producers of steel products take full advantage of the wage differentials which favor the foreign product over the American product. Differences in unit labor costs are now on the order of $25 per ton to the advantage of Western Europe and $40 per ton to the advantage of Japan. For all of these reasons steel produced in the European Economic Community and in Japan enjoys such substantial advantages over steel produced in the United States that there is frankly at present no way in which the price disparity can be met by our domestic industry. Let me review for you the trend of steel imports during the last. few years. In 1957 the United States imported 1.15 million net tons of steel products. In 1967 we imported 11.45 million net tons. Be- tween 1957 and 1967 imports grew at a compound annual rate of 26 percent and, while this import penetration of the U.S. market varies by product and region, it affects every important product line or market area. In recent years, foreign-produced specialty steels have been entering t.he United States at an even higher rate of growth than that of total steel mill product imports and of course these specialty steels are of paramount importance to our national security. The present price gap between foreign steel and domestically pro- duced steel averages $30 to $40 per ton, which substantially exceeds the U.S. steel industry's average total profit per ton of $17 in 1966 before taxes. If we should project the average annual growth rate in imports of 26 percent for the last 10 years, we could expect imports of more than 23 million net tons in 1970 and more than 73 million tons by 1975. Even assuming arbit.rarily that the rate of growth of imports is a more conservative 13 percent, or one-half the recent annual rate, then we could expect an import level of 17 million tons by 1970 and about 30 million tons by 1975. And there is no reason why such import levels could not be achieved, since both Japan and the European Economic Community are plan- ning expansion of their production facilities which can easily meet these levels. In fact., a. year ago, the excess steel-producing capacity outside the United States in the free world was estimated at 55 million tons and it has been increasing since then. Our own steelmaking capacity has also been expanding, but only at the average rate of about 2 percent a year over the last decade, and it is not certain whether this expansion can continue if imports are allowed to take up all of t.he growth in the domestic market as they have in recent periods. Investments in steel facilities depend upon reasonable assurance that the market for products will grow in pro- portion to increases in productive capacity. The steel industry's capital investment program depends on availability of capital and availability of capital depends upon the prospect of profitability. If the domestic * industry cannot hold onto its present share in the U.S. market and participate in the growth expected in that market, the likelihood of maintaining a healthy and viable steel industry, which President Johnson, on April 8, 1967, proclaimed to be the core of industrial America, a vital product basic to our economy and essential to our security, will be put in jeopardy. The Office of Emergency Planning has calculated that in the event of a conventional nonnuclear war in the next decade, and God forbid, PAGENO="0149" 1935 direct and indirect military needs would raise steel requirements by 20 percent above a normal peacetime level. A normal level of steel consumption in a year around 1975 is expected to be 115 million prod- uct tons. During an emergency in the middle 1970's domestic consump- tion would therefore be about 140 million tons. The OEP assumes that in the event of a conventional nonnuclear war, imported steel would only be available from Canada and Mexico, and under these conditions a shortfall of some 20 million tons seems likely by the mid- 1970's, taking into account facilities projects already committed and underway, unless the domestic steel industry can find valid reasons to continue its building program. Such reasons will not exist if the growth in consumption is wholly absorbed by imports. Tinder the provisions of the General Agreement on Tariffs and Trade, limitations on imports are permitted if necessary for reasons of national security and no reprisals would be authorized. But the effect of steadily rising imports is iot limited to the serious threat to our national security. These imports can also profoundly affect em- ployment in the United States and deepen significantly our balance- of -payments deficit. I call again to your attention the statement made by Mr. Abel, that our production employees in the United States have already signifi- cantly dropped, by over 120,000 employees. It is estimated that about 6,400 people are now employed in steel plants for every million tons of finished products shipped in a year. An additional 1,300 persons are involved in coal and ore mining~ and transportation. In total, 7,700 American working men and women are employed for every million tons of domestic steel mill products shipped. The Department of Commerce estimates that 14.5 million tops of steel imports will come into the country in 1968. In simple English, and certainly no one should misunderstand this, the imports of steel have taken the jobs of 100,650 Americans. This is a loss of wages for America in this period of over $1 billion, and a loss of total tax revenue on wages paid alone of nearly one-fourth billion dollars. So far as our balance-of-payments defict is concerned, steel imports already account for a significant amount of our difficulty. Overall steel imports in 1967 were up to 11.5 million tons, worth $1,292 million. The value of steel exported was dOwn to $415 million, producing a 1967 deficit of $877 million. If steel import levels continue to rise without offsetting exports, the trade deficit in steel products will be truly alarming. If we assume that by 1970 we will have 17 million net tons of im- ports, a conservative figure based on recent experience, and such steel imports are valued at an average of $113 per ton, the approximate 1967 average value, the steel trade deficit would then amount to $1.5 billion for that year of 1970. If we project steel imports on the same conservative basis to 1975, steel imports could then reach 30 million tons in that year, and the steel trade deficit, at today's prices would be $3 billion. It seems to me quite apparent that the United States cannot permit the deterioration of its domestic steel industry which is essential to our national interest and that measures must be taken to limit the per- centage of steel mill products we import from abroad. The bill I intro- duced, S. 2537, provides that the President may negotiate multilateral PAGENO="0150" 193~ or bilateral agreements limiting imports to 9.6 percent of the average amount of steel consumed in the United States during the 3-year peri- od preceding each quota year. Product and country of origin limita- tions would also apply based upon their percentage share of total imports during the 3-year base period. For countries which do not enter into agreements with the United States as provided in the bill, imports would be limited to a percentage of recent consumption equal to the percentage of consumption supplied by that nation during a longer base period, 1959-66. This method of limiting imports would permit countries now supplying part of our requirements to partici- pate in the growth of our market, but not to absorb all of the growth and even more. After 5 years the Secretary of Commerce would re- view the program and recommend to Congress the continuation, modi- fication, or termination of quota relief. Present conditions, including wage disparities and government policies, do not permit competition among the steel producers of the free world on a. comparatively equal basis. A means must be developed to arrest the growing penetration of the American market to prevent the domestic industry from being seriously weakened, our national security put in jeopardy, our balance of payments increased, and domestic employment substantially reduced. While I think 5. 2537 would achieve these results, and the method for limiting steel imports in the bill has the support of the steelworkers' union, I would also heartily support any effort our Government can make to establish voluntary restrictions on the exports of steel mill products from Japan and the European Economic Community to the United States. If it is possible for the U.S. Government to take the lead in per- suading the major steel producers to voluntarily limit their exports to this country to an amount which represents a fair share of the American market, in line with recent experience, then this would serve the purpose of preserving an adequate share of the domestic market for our own industry to permit it to continue to expand and to invest in research and development. This is what all of us want to see. We want to eliminate the danger to our national security, to our balance of payments, and to our domestic industry. I would caution, however, that foreign producers, like our own, are not in the habit of reducing their market opportunities simply out of sympathy for a competitor. Voluntary restrictions are only likely to come about, and remain in effect, so long as there is a credible threat that our Government will ace to prevent further increases of imports that are not in proportion to increases in our domestic market. I strongly urge that we move forward with 5. 2537, or the com- panion bills here in the House, and I want to thank the committee for giving me this honor in appearing before it. Mr. HERLONG. Thank you, Senator. Are there questions? Mr. Curtis? Mr. Cumuis. Yes. First, I want to compliment Senator Hartke not only for his statement, but the work he did in getting this study made by the Senate Finance Committee. There is one item, however. Your statement I agree with, but you interjected the fact of the loss to the economy of jobs and wages from imports. This is, in my judgment, hardly a compelling argument in a PAGENO="0151" 1937 period of relatively low unemployment, where we actually have more jobs going begging right now than there are unemployed. We get into a big problem-which is the only reason I raise this issue-because the thing that bothers me the most is allocation of our resources. Our society is getting this billion dollars from work being done in other industries. Senator HARTKE. I don't know many industries that have a com- parable scale of the steel industry. Mr. CURTIS. I suspect they have better jobs. I suspect that the work- ers who left the steel industry have been unskilled and semiskilled, rather than your more skilled people. This argument has to be faced. When we have a shortage of labor in our society, we are going to depend on production abroad in various areas to supplement our production. Senator HARTKE. Congressman, I do not agree. I do not think we have a shortage of labor, and I do not think anyone in America can justify that proposition, because we still have 4 percent unemployed. What we have is a shortage of skilled labor, but we do not have in the American marketplace today a shortage of available bodies, be- cause we have 1 out of 25 Americans, according to the Department of' Commerce statistics- Mr. Crams. We can analyze the reason for unemployment, but I said in context that there are more jobs going begging than there are unemployed. Granted that is a thesis, but it is about time you people quit assum- ing that the other is true without looking at what data we do have. I think what data we have clearly shows my theory to be a fact, but we need to discuss it, for steel as well as for other industries. I remember colloquy with one of my colleagues here about the fact that we had cut back on a space contract, and he said it meant that 20,000 people lost their jobs in his area. I said I didn't realize there was unemployment in that particular area. "Oh," he says, "They got jobs elsewhere." Well, they did. They did get jobs elsewhere. I am not trying to de- tract from the total thrust of your argument. I don't think the point I am making does detract from the thrust of what you are trying to get across, but I do think that your argument, which is heard frequently, is, I would argue, specious. Senator HARTKE. You can argue that, but I don't think you can prove it, and I don't think it is provable. Mr. Phelps-I think his testimony is going to be in this record- represents a type of steel industry in which they use a cold-steel process. They take the old steel automobiles, the junk cars, and they extract the nonmetal material, take the scrap steel, crush it and then reuse it. It is a wonderful thing. He will testify, if he hasn't already, that not alone are they not able to keep their employment up, but they are laying people off. If my argument is not true, why are they laying off people in this industry at this time? The reason is the simple fact that they cannot meet the import prices of steel. Mr. Crams. We are not talking about the same thing. I am not say- ing that people have not been laid off in the steel industry. I am saying PAGENO="0152" that when we look at the total society and the allocation of our re- sources, our greatest resource is, of course, our manpower. I am saying these people who have been laid off have gotten jobs. That is my point. Can we agree on that? Senator HARTKE. I can agree on that. Mr. CURTIS. The jobs going begging require skills, and those laid off tend to be unskilled and semiskilled people; and, therefore, we have to do a great deal more in the retraining area. Senator HARTKE. Yes. I would like for you to join with us in put- ting through a 71-percent tax credit to train these people on the job. Mr. CURTIS. As a matter of fact, it. is 10 percent, and I first intro- duced it in the House. [Laughter.] If you will examine that, it was done in my workshop, and I was happy that Senator Javits and others cosponsored it in the Senate. It is a supplement to the Manpower Training and Development Act, which originated over here, too, in 1962. The tax credit does get the private sector in; and here, again, we share this goal. Senator HARTKE. Let me congratulate you for your originality and innovation. The point I want to make is on these job shifts. One of the most se- vere was when Studebaker closed down in South Bend. We put seven programs in there, and it was an excellent program; but we took peo- ple at that time who were working then with 25 and 30 years' seniority, out of an automobile plant with the wages the automobile work gave them, and we trained them to go into jobs where they were barely able to earn the minimum pay. Ultimately what happens is a reduction of a standard of living. I don't want to reduce the American standard of living to the level of the rest of the world. I would like to see the rest of the world come up to our level. Mr. Cu~is. We agree on that, t~. Mr. SOHNEEBELI. You say, in your statement., that they wouldn't re- duce exports simply out of sympathy for competitors. I agree with that. I would like to remind you of one problem I found to exist in Japan. The first 20 years of this steel industry, 1945 to 1965, was devoted largely to filling their own consumer and capital needs, which were enormous as a result of World War II. Now that they have pretty well taken care of their own market, they are looking to foreign fields to take care of the huge production f a- c.ilities they have built up, so they have to be more competitive than ever; and I think our competition with the Common Market and Japan is going to be due to the fact that they have taken care of their own needs that were so great after the war, and as a result now there is a more competitive position than ever. I think in the next 20 years it will be greater than in the last 20 years because of this fact. Mr. \TANIK. I would like to ask the Senator one question. State- ments before the committee today by Mr. Patton, Mr. Abel and by you have been most impressive, and I think they set. the tone of reason- ableness, and they have been logical. What are the possibilities of favorable consideration of this kind of legislation in the Senate? Senator HARTKE. I think they are excellent. We are going into trade hearings in the Finance Committee. PAGENO="0153" 1~9' Frankly, I am of the opinion that probably this bill, especially this one and the one which passed, as you witnessed the passage of the tex- tile bill, could be tacked on to House bills. I disapprove of that procedure, but I might say- Mr. VANIK. It works. Senator HARTKE. If we cannot find the orderly processes of the origination in the House moving in a fashion which they should, we might try to do this in another manner. Frankly, I think the possibility of this type of success is very good. I think it is good because it is right, and I would hope that the adminis- tration would meet its words when they consider this measure. The President said steel is the core industry of the United States. The administration ought to join with us. Maybe the presidential candidates ought to express themselves before we vote for them this fall. Mr. HERLONG. Senator, I believe that you asked that a portion of the Senate staff study on the steel imports be included as part of the record. Senator HARTKE. Either directlyor by reference. Mr. HERLONG. If you want it included-well, we will include it by reference, then. Senator HARTKE. Thank you. I had requested permission to appear separately on the antidumping provisions, and I do have a statement here that deals with the Inter- national Antidumping Code. I would like to have it included in its entirety. Frankly, even the Tariff Commission agrees that the code and the law of the United States are in conflict; so I would hope that more than usual attention would be given to this statement. Mr. HERLONG. This statement will be included following your testimony. (The statement referred to follows:) STATEMENT OF SENATOR VANCE HARTKE, A U.S. SENATOR FROM THE STATE OF INDIANA The International Antidninping Act On July 1, 1068, the International Antidumping Code, signed at Geneva last summer, is scheduled to take effect. The United States Department of Treasury, in consequence, promulgated regulations to implement the Code in this country. Mr. Chairman, the Code and the Treasury regulations clearly conflict with the antidumping law of this nation. The Administration has acted beyond the bounds of its authority as granted by Congress or the Constitution. Only the Executive approved the agreement; the consent of the Senate was not asked. Only the Executive acted to conform American law to the agreement; implement- ing legislation from Congress was not sought. Yet the Code and the Treasury regulations would substantially amend the Antidumping Act of 1921. In short, the Executive has again usurped the authority of the Congress. I am here today to urge this committee to act favorably upon H. Con. Res. 447 and its companion in the Senate, S. Con. Res. 38, expressing the sense of the Congress that the Code is inconsistent with the American Antidumping Act, that the President ought to submit the Code to the Senate for its consent, and that legislation is required if the Code is to be implemented in the United States. At the outset we need to be quite clear about two things. First, the act of dump- ing is universally considered an unfair trade practice and is universally con- demned as such. Other nations seek to prevent dumping in their home markets; and the parties to the General Agreement on Tariffs and Trade denouiieed dumping. It is quite improper to label attempts to prevent dumping as protectionism. PAGENO="0154" 1940 Secondly, the Code, though negotiated during the Kennedy Round negotiations, was agreed to independent of any Kennedy Round Tariff concessions. To alter our commitment to this code would in no way alter our commitment to the tariff reductions, nor would it lose for us any reciprocal reductions from other nations. THE ADMINISTRATION LACKED AUTHORITY TO ENTER AGREEMENT Let me return to my main point: Members of the ~~ministratiofl-eSpecially the Office of the Special Representative for Trade Negotiations_ignored the prerogatives of Congress from beginning to end in this manner: in negotiating the agreement, in signing the agreement, and now in implementing the agreement. The failure of the Administration to recognize and respect the areas of policy determinations which are the province of Congress, can hardly be viewed as a mere oversight, attributable to inadequate familiarity with the well-established doctrine of the separation of powers. Almost two years ago the Senate over- whelmingly adopted Senate Concurrent Resolution 100, advising the Executive Branch generally and warning the Office of the Special Representative specifically against including in the Kennedy Round negotiations matters outside the scope of the Trade Expansion Act of 1962. Dumping was one of the matters which was specified. As summed up by the Senate Finance Committee in its report on Senate Concurrent Resolution 100: "This problem (dumping) concerns unfair trade practices in a domestic economy and it is difficult for us to understand why Congress should be bypassed at the crudal policymaking stages, and permitted to participate only after policy has been frozen in an international trade agreement." Notwithstanding this clear warning by the Senate, the Office of the Special Representative persisted in negotiating the Antidumping Cede which conflicts di- rectly with, and, if the Code becomes effective would amend the Antidumping Act of 1921 in many substantive respects. In point of fact the Code would emasculate the Antidumping Act of 1921 and for all practical purposes strike the Act from the statute books. THE INTERNATIONAL CODE CONFLICTS WITH DOMESTIC LAW While the Code would subject the Antidumping Act to a multitude of amend- ments, I limit myself here to an examination of three fundamental amendments of the Act. First, Article 3 of the Code specifies that a determination of injury may be made only if it is found that "dumped imports are demonstrably the principal cause of material injury or of threat of material injury to a domestic indus- try * * * ." Section 201(a) of the Antidumping Act vests the Tariff Commission with authority to determine whether "an industry in the United States is being or is likely to be injured * * * by reason of the importantion of (dumped) mer- chandise." The Act does not restrict the Tariff Commission to affirmative find- ings of injury or likelihood of injury only when satisfied that dumped imports are "demonstrably the principal cause of material injury." Thus, it is clear that the Tariff Commission's authority to make injury deter- minations, as conferred upon it by Section 201 of the Anti.dumping Act, would be materially altered and circumscribed by Article 3 of the Antidumping Code. Secondly, Article 4 of the Code defines the term "domestic industry" to include all of a country's producers of a product which is "like" the dumped imported product under consideration. Only in "exceptional circumstances" may a regional competitive market sell "all or almost all of their products in such market." Further, an additional restriction on the Tariff Commission's authority to find injury is imposed, since "all or almost all of the total production" in the regional market must be injured. Section 201 of the Antidumping Act does not restrict the Tariff Commission in its determination of what constitutes "an industry in the United States." In a considerable number of cases, the Commission has concluded that regional mar- kets and regional industries may be found without regard to whether the pro- ducers supplying a limited competitive market "sell all or almost all their prod- ucts" in such market, and without regard to whether "all or almost all: of the producers are injured. Thus, it is clear that Article 4 of the Code is providing substantial limitations in its definition of industry and in adding a further restriction on the authority PAGENO="0155" 1941 to make affirmative determinations of injury, would severely curtail the present powers of the Tariff Commission under Section 201 of the Antidumping Act. Thirdly, Article 5 of the Code provides that a dumping investigation shall be initiated only when supported by evidence of both dumped prices and of injury to the industry involved, and requires that evidence of dumping and of injury shall be "considered simultaneously." In addition, Article 10 forbids the institu- tion of any provisional measures, which specifically include the authority to order withholding of appraisement unless there is "sufficient evidence of injury" as well as of dumping. Section 201 (a) of the Antidumping Act was amended in 1954 and transferred from Treasury to the Tariff Commission sole responsibility for injury deter- minations. This subsection specifies that the `Commision shall make a determi- nation of injury only after being advised by Treasury that a dumping price has been found by that agency. The Senate Finance Committee Report on the 1954 amendment made this crystal clear: "This title would also transfer the injury determination under the dumping law to the Tariff Commission and provide that it be made within 3 months from the determination of the question of a dumping price by the Secretary." Furthermore, Section 201(b) of the, Act specifically requires that Treasury "shall authorize * * * the withholding, of appraisement" whenever Treasury, in the course of an investigation and before a formal finding of dumping prices, "has reason to believe or suspect" that sales have been made at a dumping price. The Act specifies Treasury then "shall forthwith publish notice of that fact * * * and shall authorize * * the withholding of appraisement reports." At that stage the Tariff Commission, not having been advised by Treasury of a determination of dumping, has no authority to institute an investigation, much less make a finding of injury or of the existence of "sufficient evidence of injury," whatever this phrase as used in the Code may meah. Thus, it is patently clear that by requiring simultaneous investigations of dumping and of injury, and by requiring decisions on dumping and on the existence of "sufficient' evidence of injury" as conditions precedent to the with- holding of appraisement, Articles 5 and 10 of the Code conflict directly with the provisions of subsections (a) and (b) of Section 201 of the Antidumping Act. U.S. TARIFF COMMISSION CONFIRMS CONFLICT BETWEEN CODE AND LAW The United States Tariff Commission, reporting to the Senate Finance Com- mittee on S. Con. Res. 38, concurred in the analysis I have just presented. In March of this year, the Finance Committee printed the report, and I would com- mend it to your attention. That report, by the independent agency which now has prime responsibilities in administering the Antidumping Act, provides a point by point review of the inconsistencies between the Code and the U.S. law. After pointing up these crucial inconsistences, the most important of which I have outlined above, the Commission Report concluded: "It is well settled that the Constitution does not vest in the President plenary power to alter domestic law. The Code, no matter what are the obligations under- taken by the United States thereunder internationally, cannot, standing alone without legislative implementation, alter the provisions of the Antidumping Act or of other United States statutes." Commissioner Clubb, in his additional comments in the report, explicitly states that it is the majority opinion that in the absence of Congressional approval of the Code, the Tariff Commission is "powerless" to apply it. In essence, the Code cannot be implemented in the United States without sup- porting action from Congress. To do otherwise would constitute a substantial amendment of United States law solely by the executive branch, emasculating the role of Congress in the lawmaking process. THE CODE WOULD PROVIDE NO RELIEF FROM DUMPING Under the present law, it is already very difficult to obtain relief from dump- ing. Under the Code and Treasury regulations it would become nearly impossible. For one, the standard of "injury" is so rigid and the definition of "industry" so encompassing that almost no American industry, in the face of proven dump- ing, could obtain relief until it was practically on its last legs. PAGENO="0156" 1942 In its report, the Tariff Commission noted that had it applied the Code standards in previous cases, the outcome of those cases may have been com- pletely different: "The conditions under which a regional industry concept may be employed in an injury determination under the Code are so narrowly defined that four out of five affirmative determinations by the Tariff Commission might not have been made had the Code been in effect when the determinations were made. Moreover, the four findings of dumping are currently in effect and, if continued beyond June 30, 1968, would appear to be inconsistent w-ith the Code." The results from using the standards embodied in the Code would almost cer- tainly be like those flowing from the adjustment assistance standards of the Trade Expansion Act of 1962, where no industry or labor group has yet been able to meet the rigid, complicated, and technical standards for obtaining relief despite the fact that any reasonable person can see that in accordance with Congressional intent assistance should have been forthcoming. Now, of course, we are being asked by the Preident to liberalize those stand- ards-and quite rightly, I believe. But let us take this as a lesson and not allow the Antidumping Code to establish impossible standards similar to the 1962 adjustment assistance standards. CANADA HAS YET TO ACCEPT THE INTERNATIONAL CODE Presumably the International Antidumping Code w-ill bring reciprocal con- cessions that make it palatable at least to some segments of American business and industry. Previously, the Administration has particularly emphasized the concessions to come from Canada. Under Canada's present law duties are im- posed as soon as a determination of dumping has been made. If and when Canada accepts and implements the Code, she w-ill have to make a finding of injury as a prerequisite to the imposition of duties. Canada, however, has not rushed headlong, as has the United States, to effectu- ate the Code. Like many other nations, she made it clear at the outset that her signature on the Code was not binding until Parliamentary approval had been obtained. At this juncture no legislation has yet been adopted by the Canadian Parlia- ment to implement this Code. In fact, it is my understanding, that no such legis- lation has even been introduced. Certainly there is considerable opposition from important Canadian industries to such legislative action. At any rate, Mr. Chairman, the new- Parliament is not expected to convene until after July 1-the agreed date for implementation of the International Code. Certainly this provides additional reason for Administration to postpone imple- mentation in this country. Such postponement could permit Congress to play its just role in this affair. (The following statement was received by the Conmiitt.ee for inclu- sion in the record at. the point when antidirniping matters were discussed.) STATEMENT OF BRUCE E. CLUBB, Co~IMIssIoNER, U.S. TARIFF CoMMISsION, BEFORE THE SENATE FINANCE COMMITTEE HEARINGS ON THE INTERNATIONAL ANTIDIJMP- ING CODE, JUNE 27, 1968 My name is Bruce E. Clubb. I am one of four members of the Tariff Commission currently in office. I am appearing here at the request of the Committee to testify on the question of whether the International Antidumping Code negotiated during the Kennedy Round and scheduled to become effective on July 1, 1968, is suffi- ciently consistent with the provisions of the Antidumping Act of 1921 that it can be implemented by the United States without enabling legislation. At present, the application of dumping duties in the United States governed solely by the provisions of the Antidumping Act of 1921. This Act, as amended, provides in effect that whenever the Secretary of the Treasury determines that imported merchandise is. being sold in the United States at a price lower than that charged in the home market, he is to inform the Tariff Commission which has the responsibility of determining whether an industry in the United States is being injured by such sales. If the Commission determines that an industry is being injured by the sales of such dumped merchandise, dumping duties are imposed in an amount equal to the difference between the price in the country of production and the price at which the goods are sold here. PAGENO="0157" 1943 During the Kennedy Round an International Antidumping Agreement (herein- after referred to as "the Code") was negotiated which describes the conditions under which the signatory countries, including the United States, agreed that dumping duties will be permitted. The Code was signed on June 30, 1967, and later that year Senate Concurrent Resolution 38 was introduced, stating that it is the sense of Congress that the provisions of the Code are inconsistent with the Act; that the President should submit the Code to the Senate for advice and con- sent in accordance with the treaty provisions of the Constitution; and that the provisions of the Code should become effective in the United States only at the time specified in enabling legislation. In due course the Resolution was referred to the Finance Committee and the Committee asked the Tariff Commission to report on it. On March 8, 1968, the Commission filed its report which contained three sepa- rate statements. The report of the majority, made up of Vice Chairman Sutton, Commissioner Culliton, and myself, indicated that there are, in our judgment, important differences between the Code and the Act. Moreover, the majority stated that in any event the Code could not alter domestic law. In this connection the report states that "It is well settled that the Constitution does not vest in the President plenary power to alter domestic law. The Code, no matter what are the obligations under- taken by the United States thereunder internationally, cannot, standing alone without legislative implementation, alter the provisions of the Antidumping Act or of other United States statutes. As matters presently stand, we believe that the jurisdiction and authority of the Commission to act with respect to dumping of imported articles is derived wholly from the Antidumping Act and 19 U.S.C. 1337." I filed additional comments setting out the legal basis for the majority's posi- tion on this issue, the effect of which was that without legislative implementa- tion of the Code the Commission was powerless to either apply the Code itself domestically, or to torture the construction of the Act so that it would be con- sistent with the Code. In a minority statement Chairman Metzger and Commissioner Thunberg stated in effect that, while there are differences in language between the Act and the Code, these differences do not appear obviously or patently to call for differing results in future cases coming before the Commission. The minority also differed with the majority on the question of what effect should be given by the Tariff Commission to the Code in the absence of any action by Congress. The minority Commissioners took the position that the Commission had a re- sponsibility to construe the Act in accordance with the Code. To do this it should apply the principles of American law to the task of interpretation of the Act as it affects the facts of the investigation, including those principles re- lating to interpreting the Act so as to avoid inconsistency between it and the international obligations of the United States." The minority further noted that if it was impossible to avoid an inconsistency between the Act and the Code, then the Act should prevail. Subsequently, these hearings were scheduled, and I was requested to appear and give testimony on the question of whether the Code is sufficiently consistent with the provisions of the Act that it can be implemented by the United States without enabling legislation. I will attempt to comply with this request by identifying for the Committee some of those differences between the Act and the Code which are mentioned in the majority report to the Committee on Senate Concurrent Resolution 38. These are differences which the majority felt were important, and which in my judgment could affect the outcome of cases before the Commission. Before identifying differences between the Act and the Code, however, I think it is only prudent to remind you that I do not speak for the Commission in this matter, nor do I speak for the majority. The Commission's report on Senate Concurrent Resolution 38, including both majority and minority views, is the official position of the Commission. I appear here as an individual Commissioner, and what I will give you is my own interpretation of portions of the report and what I believe to be the substance of the majority view. With that in mind, let me begin by noting that the Act and the Code are entirely different documents. Not only is the terminology different, but also concepts expressed in one or two words in the Act, are sometimes the subject of lengthy and often limiting definitions in the Code. Accordingly, if one were attempting to determine what the differences are he would have to say that in a PAGENO="0158" 1944 technical sense the documents are different in almost every respect. in the Com- mission's report on Senate Concurrent Resolution 38, however, we attempted to identify those differences which seemed most important, and which might call for a different result depending upon whether the Act or the Code were applied. The Commission report notes a number of such instances. I will highlight only a few of them here. A. T1~e injury test The Code states that before dumping duties can be imposed it must be found that the dumped merchandise is "de- monstrably the principal cause of mate- rial injury or threat of material injury to a domestic industry," (Article 3) and that the authorities must "weigh, on the one hand, the effect of the dumping and, on the other hand, all the other factors taken together which may be adversely affecting the industry." One difference here appears to be that the Code requires a weighing procedure while the Act does not, requiring the Commission to evaluate all factors adversely affecting the industry and determine whether other factors were more respon- sible for the injury to the industry than are the sales at less than fair value. Under the Act it is merely necessary to focus on one factor, dumped imports, and determine whether an industry is being injured by them. The Code requires that in evaluating the effect of the dumped imports on the industry the Commission must consider all factors having a bearing on the state of the industry, and such as "development and prospects with regard to turn- over, market share, profits, prices . . . export performance, employment, volume of dumped and other imports, utilization of capacity of domestic industry, and productivity; and restrictive trade practices." (Article 3) This appears to say that if the industry is otherwise healthy, then an injury finding cannot be made. The Commission majority noted, however, that- "The Act does not authorize the forgiveness of a material injury caused by less than fair value imports in those cases where consideration of `all [other] factors having a bearing on the state of the industry in question' shows that the industry is in a healthy condition despite the effect of the less than fair value imports." Moreover, if I may add a personal view which does not appear in the majority report, if the language of the Code relating to restrictive trade practices means that under it a dumping charge can be defended on the ground that the domestic industry is engaging in restrictive trade practices, then it is clearly differer~~ from the Act, which provides no such defense. B. The industry test The Code defines the domestic indus- try as producers of like products (Arti- cle 4(a)) and defines like products as those which are identical or have char- acteristics closely resembling those of the dumped product (Article 2(b)). Differences First, the Act permits the Commission to find injury to an industry other than that producing a like article. The Code would not. For example, if apples were being dumped and were being processed into applesauce, the Act would permit the application of dumping duties if the domestic applesauce producers were being injured. The Code apparently would permit the production of dumping duties only if there were injury to the apple producers, but not if there were injury to applesause producers. THE ACT THE CODE The Act requires that the Commission shall determine "whether an industry in the United States is being, or is likely to be, injured . . . by reason of the importation of such merchandise . . THE ACT THE CODE The Act states that dumping duties must be applied if "an industry in the United States is being or is likely to be injured . . . "by dumped merchandise. PAGENO="0159" ~945 "in exceptional circumstances a coun- try may, for the production in question, be divided into two or more competitive markets and the producers within each market regarded as a separate indus- try, if, because of transport costs, all the producers within such a market sell all or almost all of their production of the product in question in that market, and none, or almost none, of the prod- uct in question produced elsewhere in the country is sold in that market or if there exist special regional market- ing conditions (for example, traditional patterns of distribution or consumer tastes) which result in an equal degree of isolation of the producers in such a market from the rest of the industry, provided, however, that injury may be found in such circumstances only if there is no injury to all or almost all of the total production of the product in the market defined." The Act requires that injury to "an industry in the United States" must be found before dumping duties can be applied. The Commission has sometimes found that the producers in a particular area or those serving a particular market are "an industry" for this purpose. The Code would also permit a "Segmentation" of the industry for purposes of determining injury, but would so restrict it that it could not be employed as it has in the past. Thus, the Code would permit segmentation of the market only when all producers within a market (Paragraph 4(a)) sell all or almost all of their production of the product in that market. The Commission in the past has included in such a regional industry producers who were adjacent to the competitive market area. The Commission majority noted that the circumstances under which the Code would permit the employment of the regional industry concept are so narrowly defined that "four out of five affirmative determinations by the Tariff Commission might not have been made had the Code been in effect when the determinations were made." The Code also requires that in order tO find injury in a segmented market it must be found that "all or almost all" of the producers in the segmented market area are injured. The Act has no such requirement. In fact, under the Act the Commission can find that an injury to one of the producers is sufficient to sustain a determination of injury to the industry.~ Procedural matters THE ACT THE CODE The Act provides that the Secretary The Code requires that dumping com- of the Treasury is to make a determina- plaints be rejected by the Treasury De- tion of sales at less than fair value, and partment unless there is sufficient then the matter is to be sent to the evidence of injury to justify proceeding Tariff Commission for an injury deter- with the case (Article 5(c)). mination. Differences Under the Act the Treasury Department normally receives a complaint from a domestic producer and is then required to make the "arithmetical computation" necessary to determining whether sales at less than fair value are being made. If they are, then theoretically Treasury "automatically" refers the matter to the Tariff Commission for an injury determination. Under the Code, Treasury would not only have to make the LTFV determination, but would have to make a pre- liminary injury determination as well. THE ACT The Commission shall determine "whether an industry in the United States is being, or likely to be injured" by the dumped imports. THE CODE PAGENO="0160" 1946 The present division of responsibility between the Treasury and the Commis- sion was established by the 1954 Amendment which transferred the injury determination function to the Commission. The apparent reason for the transfer was that the Treasury Department was not staffed to handle it, and did not feel that it was competent to do so. The Code requires the Treasury Department again to make injury determinations by requiring it to receive evidence of injury in order `to determine whether to proceed with the investigation. This requires the Treasury Department to determine (a) w-hat constitutes evidence of injury, and (b) what is the minimum amount of injury and evidence required for an injury determthation. Not only might the thinking of the Treasury officials be different from that of the Tariff Commission on such matters, but also, as noted above, there are differences between the Code and the Act on what constitutes injury and, indeed, what constitutes evidence of injury. If the Treasury officials apply the provisions of the Code on the injury question, w-hile the Commission applies only the Act, there might well be cases which w-ould be dismissed by the Treasury Department on the grounds that no evidence of injury (which would satisfy the Code) had been received, in spite of the fact that, had the matter been referred to the Tariff Commission for an injury determination, a positive finding would have been made under the Act. Even if there were no other objection, however, it seems clear that by requiring a preliminary injury determination at Treasury, another obstacle not contemplated by the Act is placed in the path of a domestic producer seeking relief. It might be argued that in fact the Treasury Department makes such "de minimis" determinations on the injury question even now, and has done so for some time under the Act. If so, my answer w-ould be that this practice, too, is inconsistent with the Act. Conclusion I have attempted to point out some of the material differences between the Code and the Act which in specific cases could provide different results under the Code than would be reached under the Act. There are other instances whereby the Code can be made consistent with the Act only by the most tortured interpreta- tion of the Act. Some of these are noted in the Commission's majority report on S. Con Res. 38. I should say in conclusion' that in making the report on Senate Concurrent Resolution 38 and in presenting this testimony the Commission and I have no desire to embarrass the President or his representatives or further to confuse international trade negotiations. We were merely asked w-hether there are incon- sistencies between the Code and the Act, and our answer is yes. The majority of the Commission went further and said that, w-hether or not there are incon- sistencies between the Act and the Code, the Code is not the law in the United States, and until the Commission is otherwise instructed by a proper authority, we will not apply it as such. The Commission did not attempt `to pass judgment on the value of an international dumping agreement, or the desirability of this one. (The following letter, with attachments, was received, for the record, by the committee:) AMERICAN MINING CONGRESS, Washington, D.C., May 29, 1968. Representative WILBUR D. MILLs, Citairnian, Committee on Ways and Means, U.S. House of Representatives, Washington, D.C. DEAR MR. MILL5 With the International Anti-Dumping Code scheduled to come into effect on July 1, may I respectfully ask you and your Committee to give timely consideration to whatever action might be taken `to prevent, or at least postpone the implementation of the Code, until the Congress has had `an oppor- tunity to review the present shortcomings of the United States Antiduinping Act and the further weakening of the U.S. law, which would `be required by con- formity to the International Anti-Dumping Code. The American Mining Congress at its annual convention in Denver, Colorado on September 7, 19G7 gave its support to Senate Con. Res. 38. An identical resolu- tion, H. Con. Res. 447, has been introduced this session and is before your Com- mittee.. Enclosed is a copy of the anti-dumping portion of the AMC Declaration of Policy. PAGENO="0161" 1947 The Tariff Commission's recent report to the Senate Finance Committee on S. Con. Res. 38 points out significant areas of conflict between the International Anti-Dumping Code and the United States Antidumping Act. The report makes the very telling point that in four out of five cases in which dumping was found to be injurious to U.S. industry, no finding of injury would have been made had the standards of the International Codebeen followed. Of particular interest to `the Committee will be the revisions to the antidump- ing regulations which Treasury has said it will put into effect on July 1, to imple- ment the Code. Under these regulations, the Treasury Department would take back a portion of the injury determination in dumping cases, in spite of the fact that in 1954 the Congress specifically withdrew the injury function from Treas- ury and placed it with the Tariff Commission. Requiring a dumping complainant to document for Treasury a prima fade case of injury will make the Tariff Com- mission's functions a dead letter-many cases will never even reach the Tariff Commission for a determination of injury to United States industry. For your convenient reference in evaluating the many areas of disparity be- tween the United States Antidumping Act and the International Anti-Dumping Code, enclosed is a staff study prepared by the American Mining Congress and a one page summary of the significant basic policy questions raised by these con- flicts. I offer it to show both the full scope of the massive uncertainty which may be expected and that implementation of the International Code in July will seri- ously undermine the basic import price floor of United States trade policy pro- vided by the United States Antidumping Act. Noting that Canada will not have implemented the International Code by July 1, it may also be more appropriate for the United States to postpone hasty imple- mentation of the International Code, rather than go through the more painful processes of revoking United States implementation of the Code at a later date. With warmest personal regards, Sincerely, J. ALLEN OVERTON, Jr., E~vecntive Vice President. DECLARATION OF POLICY, 1967-68, AMERICAN MINING CONGREsS, ADOPTED AT DENVER, CoLo., SEPTEMBER 10, 1967 Antidurnping-Foreign manufacturers who sell their goods in the United States at discriminatory prices-below the prices prevailing in the countries of origin- are engaging in a practice which is clearly contrary to the principles embodied in our domestic fair-trade laws and the intent of Congress as expressed in the Antidumping Act of 1921. After 46 years, legislative amendment of this Act is now urgently needed; not as protection against fair international trade, but as a necessary counter- measure against the unfair trade practice of dumping. Experience has shown that Congressional guidelines are necessary to clarify basic concepts. There is an immediate need to eliminate loopholes revealed in administrative practices and to provide greater speed and certainty in the handling of dumping cases. Bills designed to accomplish those objectives were introduced in the 89th and 90th Congresses under broad legislative sponsorship and with significant and substantial support from both industry and labor. The recent negotiation of an International Antidumping Code (referred to below) has stimulated further interest in antidumping legislation. As a consequence, additional bills-similar to the foregoing ones-may be introduced in the near future for the purpose of dealing comprehensively with this important subject. We urge Congress to assign a high priority to such legislation. The International Antidumping Code, drawn up in Geneva during tariff negotiations under the Trade Expansion Act of 1962 and scheduled to become effective July 1, 1968, has been agreed to by the President and was made public on June 30, 1967. The code is inconsistent with the provisions of the Antidumping Act of 1021 and, we believe, could expose American industry to increased unfair competition from foreign manufacturers. Because implementation of the International Antidumping Code may produce this result, its acceptance is clearly a usurpation of the legislative functions of our government and is contrary to Senate Concurrent Resolution 100, adopted in 1066. Therefore, we consider it essential that the code negotiated in Geneva be submitted to Congress for study, hearings and action as proposed in Senate Concurrent Resolution 38, 00th Congress, before it is made effective. 95-159 0-68-pt. 5-11 PAGENO="0162" 1948 SUMMARY or IssuEs DIscussED IN AMC STAFF STUDY OF INTERNATIONAL ANTIDUMPIN~ CODE The U.S. Antidumping Act, 1921, as amended, as the law of the land, should prevail in areas of conflict with the International Antidumping Code, which is only in the nature of an executive international agreement. Yet, conformity with the Code of domestic law, regulations and administration is pledged by all signatory governments. Thus, endless arguments can be expected first, over whether conflicts exist, and second, over whether present U.S. law or the Code should prevail. Approximately 35 out of 60 major points of substance are man- datory. [see Appendix A.] It is difficult to believe that the remaining permissive criteria will not also be asserted as controlling in U.S. antidumping proceedings. Areas of conflict go to the heart of whether or not the U.S. will have an effec- tive deterrent to injurious dumping of foreign products. At stake are such issues as: (1) the amount and type of injurious activity which must be shown [see Article 3(a)1]. (2) the scope of the market area in which the impact of injury may be meas- ured [see Article 4(a)]. (3) whether injury determinations are to be undertaken without a knowl- edge of the margin of dumping involved and whether Treasury is, in effect, going to take portions of such determinations out of the Tariff Commission's hands contrary to the intent of Congress in the 1954 amendment [see Article 5(b)]. (4) whether the finality of dumping cases is going to be eroded by discretion- ary administration [see Article 8(a)]. (5) whether a "basic price" concept in certain exporter countries will circum- vent the margin of dumping concept [see Article 8(d)]. (6) whether importers may dump in one regional market, stop, and then dump in another, and thereby elude the reach of U.S. law [see Article 8(e)]. (7) whether by redesigning the time-limits and retroactive features of pro- visional measures the effectiveness of the U.S. Antidumping Act will be irrepara- bly diluted [see Articles 9, 10 and 11]. PAGENO="0163" STAFF STUDY AND COMPARATIVE ANALYSIS BY THE AMERICAN MINING CONGRESS of the INThRNAT1ONAL ANTIDuMPING CODE as it relates to ANTIDUMPING PROVISIONS, ARTICLE VI, GAiT U.S. ANTIDUMPING ACF, 1921, AS AMENDED U.S. TREASURY ANTID MPING REGULATIONS S. 1726 introduced by Senator Vance Hartke and others (90th Congress) Laurence P. Sherfy General Counsel J. Allen Overton, Jr. Stanley W. Schroeder Executive Vice President Assistant General Counsel American Mining Congress 1100 Ring Building, Washington, D. C. 20036 August 1967 * (1949) PAGENO="0164" 1950 NOTE: This section-by-- section comparative analysis and the basic materials from which the analysis was made are for convenient and continuing reference pur- poses; and as a working device to assist in developing American Mining Congress position. Staff commentary and explanation are intended to highlight some of the aspects which are likely to come up for discussion of the Code's scope and potential impact. J. Allen Overton, Jr. Executive Vice President PAGENO="0165" 1951 INTRODUCTION SOME GENERAL OBSERVATIONS REPRESENTATIONS THAT NO CONGRESSIONAL ACTION IS NEEDED (a) A Code in Legal Limbo Many pious statements have been made by members of the Office of Special Representative for Trade Negotiations that no Congressional approval of the Code would be required. They have claimed that this could all be done by mere changes of Treasury regulations. They seem to overlook the facts that: (1) While the President as Head of State has the power to conduct U. S. foreign policy and to conclude executive agree- ments which have international force and effect, the power over U.S. commerce has constitutionally and historically been in the hands of Congress and has only been parceled out piece- meal in the international trade field to the President by specific Acts of Congress in the reciprocal trade agreements program starting in 1934. (2) Congress did not, in the Trade Expansion Act of 1962, authorize the entry into an international agreement which would change the U.S. Antidumping Act, just as it did not authorize a change in American Selling Price. (3) The Senate has not approved the International Antidumping Code as if it were a treaty, nor has the Congress implemented it by legislation. The conclusion is inescapable that the U.S. accession on June 30, 1967 to the Code is without force and effect in relation to the U.S. Antidumping Law, unless implementing legislation is approved by the Congress. In the absence thereof, there is no change in the applicability of existing U.S. law. (b) The `Permissive' Argument One of the arguments which is likely to be raised in defense of the assertion that the Code will not require implementing legislation is that a good portion of the Code is permissive, i.e., the word "may" is used rather than the word "shall." A rough tabulation of approximately 60 major points of PAGENO="0166" 1952 substance contained in the Code tsee Appendix A] reveals that approximately only 25 will fall in this permissive category while 35 wIll fall in the mandatory category. Two major areas of the Tariff Commission's concern would become almost completely mandatory if the Code were to apply. Article 3, for example, which sets out detailed standards for measuring Injury and the threat of Injury is completely mandatory. In Article 4 (a) the term "domestic Industry" is required to be defined on a nationwide basis except where, under very limited conditions, the regional market can be Isolated and a narrow competitive product concept is superimposed on both the national and regional industry concepts. There is an incredibility factor in this "permissive" argument which raises these questions: Is the Congress to stand by and see the U.S. Antidumping Act emasculated on the basis of the excuse that approxi- mately 25 out of 60 of the substantive provisions of the Code are couched in terms not mandatory, but permissive? Would our negotiators have us and our trading partners believe that it was really the U.S. intent all along not to implement the approximately 42 percent of the InternatIonal Code whose provisions were couched in the permissive? This is difficult to believe Insofar as signatories to the Code pledge In Article 14 to conform their "laws, regulations and administrative procedures with the provisions of the Antidumping Code." (c) The "Treasury Regulations Can Provide Conformity" Argument It has also been asserted that a change in Treasury Regulations will be sufficient to effect any necessary changes to conform with the U.S. antidumping approach to the new Code. However, a number of mandatory provisions would apply to both the Treasury' s dumping and the Tariff Commission's Injury determinations. For example, the definition of "like product" in Article 2 (b) is central to the Commission's competitive product market concept contained in 3 (d) as well as the Treasury's determination of dumping in Article 2 (d). Clearly, a change in the Treasury Regulations could not accomplish the mandatory application of the like product concept in 2 (b) to the Tariff Commission's determination of the competitive product market in 3 (d)--if the Tariff Commission does not choose to do so itself. Similarly, In Article 6, containing 10 evldentiary provisions of which 6 are mandatory, four would apply equally to the Tariff Commission as well as to the Treasury Department. These would include the right to present evidence t6 (a)], and t o examine evidence [6 (b)], to the treatment of con- fidential informatIon [6 (c)], and the right to confrontation and rebuttal [6 (g)]. PAGENO="0167" 1953 (d) Simultaneous Dumping and Injury Investigat~Qp~ The requirement in Artidle 5 (b) that evidence of both dumping and injury must be considered simultaneously in the decision of whether or not to initiate an investigation, "and thereafter", affects both the responsibilities of Treasury and the Tariff Commission in the prosecution of their respective dumping and injury finding duties. Insofar as the Treasury, under U.S. law, initiates the antidumping investigation by attempting to determine if there is a margin of dumping, it is presumed that the intent of this paragraph is to move up the start of the injury determination by the Tariff Commission to not later than the earliest date from which provisional measures may be applied. By definition in Article 10 (a) this is after a preliminary decision has been taken that there is dumping and sufficient evidence of injury. It must be concluded, therefore, that the preliminary determination of whether sufficient evidence of injury exists must be made either by the Tariff Commission or by the Treasury Department. If the Tariff Commission would make such determination, it would be a violation of the U. S. law which requires that the Tariff Commission take up the injury question after the Treasury has made a finding that there are sales at less than fair value. If the Treasury would make such determination, such action would be contrary to the 1954 amendment of the U.S. Antidumping Act which took the determination of injury to industry away from Treasury and gave it to the Tariff Commission without any reservations to the Treasury Department for preliminary injury decisions. (See comments under Article 5 (c)]. Thus, the procedure outlined either cannot be accomplished under U. S * law or a change of U.S. law is required. (e) Many Principal Mandatory Code Provisions Will Conflict with U. S. Law A list of some of the more obvious conflicts would include these areas: - Principal cause of material injury (see Article 3(a)] - National markets (see Article 4(a)] - Simultaneous dumping and injury (see Article 5(b)] - Discretion of authorities (see Article 8(a)] - Basic price system [see Article 8(d)] - Dumping cessation in regional markets (see Article 8(e)] - Time limit on provisional measures (see Article 10(d)] CONSIDERATIONS RE IMPLEMENTING LEGISLATION Should the Congress consider the possibility of implementing legislation, it would seem appropriate to examine the relationship of the Code provisions to all aspects of existing U.S. law and regulations in order to understand the differences that exist and the consequences of any action which would superimpose the Code upon the existing law and regulations. Sufficient disparities exist between the Code and U.S. law to require many Congressional decisions as to which shall govern and nothing short of a massive overhaul of the U. S. Anti- dumping Law and implementing regulations would seem to be required, not to mention the effect such action would have in effectively forclosing the chances of unilateral U.S. legislative improvements of its antidumping law in the future (see discussion under Article 1]. PAGENO="0168" 1954 tCode, the Exclusive Remedy) International Antidumping Code: Article 1 The imposition of an antidumping duty is a measure to be taken ~j~y under the circumstances provided for in Article VI of the General Agreement. The following provisions govern the application of this Article, in so far as action is taken under antidumping legislation or regulations. Comment: To require U.S. antidumping actions to conform to the conditions set out in the Code is to limit use of the present U.S. Antidumping Act and regulations to those areas in which the U.S. law and regulations are in accordance with the international code. In those areas not in accordance, it will be necessary to either change U.S. law and regulations to conform to the international code or to cease to use U.S. law and regulations now on the books, a situation which it is doubtful that the Congress intended. Whereas the Code contains many permissive points which the authorities may" apply, and therefore which would not seem to require conformity by countries signatory to the international Code, the danger of these permissive provisions lies in the fact that they prescribe the outer limits of any national legislation in the future, on the points they cover, just as effectively as those provisions which are mandatory under the new Code--should the Congress at a later time be persuaded that any legislation contrary to the Code would embarrass the President as being contrary to our international obligations. If this were the case, while Congress could still pass any legislation it desired, it would, as a practical matter, be effectively foreclosed from legislatively achieving many of the needed reforms outlined in 5. 1726 and other industry proposals. PAGENO="0169" 1955 A. Determination of Dumping Article 2 tFair Value v. Normal Valuel International Antidumping Code: 2 (a) For the purpose of this Code a product is to be considered as being, i. e., introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country. Article VI, GATT: I. `The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products." Antidumping Act, 1921, As Amended: Antidumping Act, 1921, does not specifically define dumping, but rather is directed only at sales at "less than fair valu~," which is un- defined. Thus, Treasury is left free to define dumping in its regulations as it sees fit. U.S. Treasury Regulations: At present fair value, as defined in paragraph 14.7 of the Treasury Regulations (19CFR 14.7), may be found if purchase price or exporter's sales price (as defined in sections 203 and 204, respectively of the Antidumping Act, 1921, as amended) is not, or is not likely to be, less than the foreign market value (as defined in section 205) or constructed value (as defined in section 206) after adjustments as provided for in section 202 at which such or similar merchandise (as defined in section 212 (3)) is sold for con- sumption in the country of exportation. Footnote 15 of the Treasury Regulations makes it clear that the definition of fair value "does not in any way modify or affect definitions of foreign market value or constructed value, or their application as a basis for de~. termining whether or not to withhold appraisement under section 201 or impose the duty under section 202. S. 1726 (90th Congress): The term "at less than fair value" would be defined in the statute so as to preclude Treasury from changing its regulations or the interpretation of its regulations. Therefore, the bill provides for a comparison of provisions already defined in the present Act--purchase price or exporter's sales price and foreign market value or constructed value. Section: 1 (20l(f)(l)]. Comment: Raises question of whether U.S. "fair value" is equivalent to Code's "normal value." If U.S. Treasury regulations have to be changed to read "normal value" then U.S. law would also have to be changed to read "normal value" since Treasury Regulations are intended to reflect the U.S. Antidumping Law. PAGENO="0170" 1956 [Like Product) International Antidumping Code: 2 (b) Throughout this Code the term "like product" ("produit similaire") shall be interpreted to mean a product which is identical, i.e., alike in all respects to the product under consideration, orin the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration. Antidumping Act, 1921, As Amended: No comparable all-purpose concept under U. S. law. There is no such concept regarding injury but there is a concept somewhat similar for dumping; the section 2 12(3) definition of "such or similar merchandise" is used in determining foreign market value in sections 205, 202(b) and (c). Strict priorities are set out in section 212(3), however, for which there is no parallel in the International Antidumping Code. U.S. Treasury Regulations: Section 14.7(b)(3) of the Treasury Regulations requires that in any consideration of "similar merchandise" as described in subdivisions (C), (D), (E), or (F) of section 212(3), Antidumping Act, 1921, as amended, due allowance be made for differences in the merchandise, primarily the effect of such differences upon the market value. Consideration may also be given to differences in cost of manufacture if the amount of any price differential is wholly or partly due to such differences. Comment: The Code term "characteristics closely resembling those of the product under consideration" is thoroughly ambiguous. Are these to be physical characteristics, competitive equality, similarity of productive processes? What kind of variations would determine "closely resembling"? Like product is further clarified in the Code only with regard to qualifications for comparison under the injurytest--production process, the producers' realizations, profits. (See discussion in Article 3 (d)). Thus, U.S. Law and Treasury Regulations are much more specific than International Code. This raises the question of whether these provisions must be scrapped in favor of the more generalized Code provisions. PAGENO="0171" 1957 [Trans-Shipments] International Antidumping Code: 2 (c) In the case where products are not imported directly from the country of origin but are exported to the country of importation from an intermediate country, the price at which the products are sold from the country of export to the country of importation shall norm~y be compared with the comparable price In the country of export. However, comparison in~i be made with the price in the country of origin, if, for example, the products are merely trans-shipped through the country of export, or such products are not produced in the country of export, or there is no comparableprice for them in the country of export. Article VI. GATT: 1. ,For the purposes of this Article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another (a).. . less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or. . . Antidumping Act, 1921, As Amended~ Antidumping Act, 1921 has no such intermediate country concept. U.S. Treasury Regulations: Not covered by Treasury Regulations. Comment: Article 2 (c) is permissive, not mandatory, so that U.S. need not adopt such procedure. Thus, Treasury could continue to use country of export on trans-shipments, and go to 3rd country prices rather than to country of origin. If Treasury wanted to use country of origin, a change in Treasury Regulations would be ~equired and Sec. 205 (Foreign Market Value) of the U.S. law would have to be amended to bypass the parenthetical requirement in Sec. 205 to use 3rd country sales. PAGENO="0172" 1958 [Third Country Sales] International Antidumping Code: 2 (d) When there are no sales of the like product in the ordinary course of trade in the domestic market of the expprting country or when, because of the particular market situation, such sales do not permit a proper comparison, the margin of dumping shall be determined by com- parison with a comparable price of the like product when exported to any third country which may be the highest such export price but should be a representative price~ or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and any other costs and for profits. As a general rule, the addition for profit shall not exceed the profit normally realized on sales of products of the same general category in the domestic market of the country of origin. Article VI, GATT: 1 (b) "... in the absence of such domestic price, is less than either (i) the highest comparable price for the like product for export to any third country in the ordinary course of trade, or (ii) the cost of production of the product in the country of origin plus a reasonable addition for selling cost and Antidumping Act, 1921, As Amended: Antidumping Act has generally same purpose but many differences of details. No reference to highest export price. The format of priorities under U.S. law in sections 201 (b) and 205 are as follows: First, try to establish "foreign market value" in country of export (Sec. 205) Second, if either (1) inadequate quantities in country of export compared to sales for export to countries other than the U . S. or (2) no sales, or, in the absence of sales, offers for sales in the principal markets of the country from which exported, in the usual quantities and in the ordinary course of trade-- look to sales in third country by exporter (this is still "foreign value") Sec. 205. Third, if no foreign value possible--use a constructed value (Sec. 201(b)) (Sec. 206). PAGENO="0173" 1959 U.S. Treasury Regulations: Paragraph 14.7 follows priorities set out in U.S. law with exception that section 14. 7 (a)(2) of the Treasury Regulations focuses exclusively on inadequacy of quantities without mentioning other factors such as * absence of sales or offers for sales in.the principal markets .. in the usual wholesale quantities in the ordinary course of trade S 1726 (90th Congress) Third Country Sales The Btll would specify that the exporter s home market will be the basis for determining foreign market value so long as at least one vendor s sales of like merchandise in the home market account for 15% or more of his total sal~_, excluding sales to the U.S. This pro- vision would greatly reduce the number of instances in which third. country markets are used as the basis for determining foreign market value. Section: 4 [205 (a) (1)]. If no such vendor can be found resort is to sales in country which is the largest consumer of the vendors sales. Sec. 4 [205 (a) (2)]. In absence of proof of sales at a different price, foreign market value is presumed to be sellers list or published price Sec 4 [205 (a)] Comments: U S law has definite priorities for using sales in exporter s home market third countries and then constructed value while Article 2 (d) of International Antidumping Code would allow resort to either third country sales or constructed value once sales in exporters home market were found not to permit a proper comparison.. Thus, for the U. S. authorities to follow the GATT, a change in U.S. law would seem to be required. However, Treasury might try to get `around this by not going to constructed value before third country sales, or by claiming, that third country sales were insufficient or inadequate before using constructed value. The requirements of third country price to be the highest but representative price is permissive. (Also, U.S. has already subscribed to those portions of Article VI of GATT not in conflict with U.S. law.) The abilityto use sellers' list or published prices contained in S. 1726 was not covered in the Code. ` PAGENO="0174" 1960 [Unreliable Prices] International Antidumping Code: 2 (e) In cases where there is no export price or where It appears to the authorities concerned that the export price is unreliable because of asso- ciation or a compensatory arrangement between the exporter and the Importer or a third party, the export price j~y be constructed on the basis of the price at which the imported products are first resold to an independent ~ or if the prodicts are not resold to an independent buyer, or not resold In the condition as imported, on such reasonable basis as the authorities may determine. 2 (f) (last sentence) In the cases referred to in Article 2 (e) allowance for costs, including duties and taxes1 incurred between importation and resale1 and for profits accruing, should also be made. Antidumping Act, 1921, As Amended: Section 207 defines specific relationships that will require use of Section 204 Exporter's Sales Price which is the price at which imported merchandise is sold or agreed to be sold in the U~uited States, by or for the account of the exporter. U. S. law does not contain the flexibility to use a "reasonable basis as the authorities may determine" where no resale to an independent buyer or no resale at all in the condition as imported. Section 206 (b) and (c) dealing with constructed value allow valuations to be disregarded if transactions between related parties do not reflect market value. Resort is to best evidence available. Section 205 (last sentence) dealing with foreign market value authorizes use of prices at which such or similar merchandise is sold through a sales agency or other organization related to the seller to determine foreign market value. U. S. Treasury Regulations: One type of compensatory arrangement exists where foreign exporters off to reimburse U.S. importers for the payment of any dumping duties which may be incurred. This usually takes the form of a warranty of non-applicability of dumping duties. Under the Treasury Regulations such a warranty will reduce purchase price or exporter's sales price except to the extent that it covers merchandise which is (1) purchased or agreed to be purchased before publication of a withholding of appraisement notice, and (2) exported prior to a dumping determination by Treasury. 14.9 (f) PAGENO="0175" 1961 S. 1726 (90th Congress) There are a number of features of S. 1726 designed to deal with the problem of the unreliability of foreign price data. Remedies are proposed in the following areas: Reliance on List or Published Prices: In the absence of conclusive evidence that merchandise was actually sold at a different price the seller s list or published price will prevail Section 4 t205(a)(2)] "Usual Wholesale Quantity":, Certain classes of transactions which are not likely to reflect a fair price freely arrived at on the open market should not distort Treasury's determination of what constitutes the usual wholesale quantity The Bill would exclude a. Quantity discounts not freely available to all purchasers at the time sales in question were made. b. Transactions between "related" persons described in Section 207. c. Contracts pursuant to exclusive dealing arrangements, e * g., exclusive distributorships or exclusive requirements contracts. Section: 7 (1) Cost-lu stification of Quantity Discounts: Treasury's recently revised regulations on antidumping, in effect, acknowledged that the long-standing complaint by domestic industry had been valid. Treasury's practice had been to make allowance for differences in quantity discounts- -on sales to the U.S. compared with sales in the home market--if they were "reasonable" without explaining what standards it uses in ascertaining what is "reasonable." Treasury's revised regulations specify that an allowance ordinarily will be made for a quantity discount only if it is actually in effect for six months with respect to 20 percent bf the merchandise sold in the home market or in third country markets where applicable, or, in the alternative, unless it is cost-justified. The 1965 Bill would limit the allowance for quantity discounts to differences in the cost of manufacture,~j&., or delivery resulting from differences in wholesale quantities actually considered and taken into account by the vendor in establishing his price. Section: 2 [202 (b)(l) and (c)(l)J. PAGENO="0176" 1962 Dummy Exporter Loophole: Importers could avoid the Act simply by setting up a foreign subsidiary to the parent company as the exporter of the dumped merchandise, and by seeing to it that the bulk of the profits from the sale of such merchandise are made by the subsidiary itself in the country of export. The Bill, therefore, provides that such mark~p for expenses and profits by the exporting subsidiary shall be deducted in determining the exporter's U * S. sales price. In addition, if Treasury finds a margin of dumping both ways-- whether it recognizes or sees through the subsidiary--the Bill pro- vides that the dumping duty shall be equal to the greater margin. This would relieve Treasury of the need for extensive investigations to determine the bona fide nature of the exporting subsidiary in such cases. Section: 3. Comment: Article 2 (e) is permissive. It appears to envision some sort of a work-back from retail sales to an independent buyer, or if such sales are not available or if there is further manufactured by importer before sale the resort is to "such reasonable basis as the authorities may determine. The last sentence of 2 (f) is less permissive, using the words, also be made. The question raised is whether Treasury could claim that almost any situation would enable it to use `such reasonable basis as the authorities may determine" so that any hope of getting more specific provisions such as are proposed by 5. 1726 may be permanently foreclosed. PAGENO="0177" 1963 [Adjustments for Differences) International Antidumping Code: 2 (f) In order to effect a fair comparison between the export price and the domestic price in the exporting country (or the country of origin) or, if applicable, the price established pursuant to the provisions of Article VI: 1 (b) of the General Agreement, the two prices shall be compared at the same level of trade, normally at the exfactory leveL and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for the differences in conditions and terms of saw, for the differences in taxation, and for the other differences affecting price comparability. tiast sentence is shown with~ 2 (e)]. Article VI, GATT: I ... "Due allowance shall be made in each case for differences in conditions and terms of sale, for differences inlaxation, and for other differences affecting price comparability. An~~~ing Act, 1921, As Amended: Section 202 (b) and (c) and Sections 203, 204, and 205, taken together, would give substantially the same results. However, Section 212 (4) describes `usual wholesale quantities" as being the price of the quantity in an aggregate volume which is greater than the aggregate volume for any other quantity. U.S. Treasury Regulations: Section 14.7 (b) expands on differences in ~uantities in relation to discounts, differences in circumstances of sale, offers, cost of manu- facture, the use of sales agencies, and sales at varying prices. Also to be considered are Mjustments for differences in merchandise: Due allowance will be made for variation in the quality of the merchandise being sold in the U.S. and the home market. Treasury will be guided primarily by the effect of such differences upon the market value of the merchandise, but in appropriate circumstances will also make adjustments for differences in the cost of manufacture where it is established that a price differential is wholly or partly due to such differences. 14.7 (b) (3). Quantity discounts will be allowed if actually enjoyed by 20 percent of the exporter' s home market for six months and freely available; ~, in the alternative, are cost-justified. 14,7 (b) (1). 95-159 0-68-pt. 5-12 PAGENO="0178" 1964 S. 1726 (90th Congressl: Circumstances of Sale: The Bill would specify that due allowance shall be made for other differences in circumstances of sale affecting the cost of doing busines~ to the extent that such differences were actually considered and taken into account by the vendor in establishing his price. This attempts to get at the realities of the transactions and to discourage sham manipulations and theories developed after-the-fact as spurious defenses to thwart Treasury's administration of the Act. Section: 2 [202(b)(2) and (c)(2)] Quantity Discounts: Must reflect differences In costs resulting from different wholesale quantities actually considered and taken into account in setting price. Section: 2 [202(b)(1) and (c)(1)] Usual Wholesale Quantities: The level of trade in general is those quantities at which offered for sale and sold in the ordinary course of trade to wholesale purchasers, but excluding wholesale quantities offered for sale or sold at quantity discounts only available to selected or preferred purcha~~~, all transactions between related parties, and exclusive dealing arrangements. Section: 7(1) Comment: The real infightingin an antidumping case involves the allowances for differences affecting price comparability. Sizeable dumping margins may be reduced to de minimis or even explained away completely. U.S. industry has been aiming for more specific regulations which would pin down the application of factors affecting comparability. S. ~726 would add the principle that such factors must have actually been considered by the vendor and taken into account in setting his price. On the other hand, there must be a possibility for weeding out exclusive dealing arrangements, preferential quantity discounts, and transactions between related parties if price-rigging for purposes of avoiding dumping Is to be dealt with effectively. Conceivably, Treasury could now say that a number of the more specific provisions in U. S. law and regulations are not covered by Art. 2 (f) and therefore invalid. Article 2 (f), for example, contains no provision such as in Sec. 212(4) of U * S. law which requires the products in the greater aggregate volume to be the basis for finding "usual wholesale quantities." PAGENO="0179" 1965 (State Trading Monopolies) International Antidumping Code: 2 (g) This Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I of the General Agreement. Article VI, GATT: The second Supplementary Provision to paragraph 1 of Article VI found in Annex I of the GATT recognizes that prices in state-trading monopolies may not be appropriate. Antidumping Act, 1921, As Amended: No comparable provision. S. 1726 (90th Congress): In dealing with countries which control home market prices by State fiat, Treasury has had to resort to procedures not explicitly authorized heretofore by the Act. The Bill makes it clear that Treasury may continue this necessary flexibility to determine the foreign market value of merchandise produced in Communist or centrally-planned economies or adopt other reasonable standards. Section: 4 (205 (b)] Comment: As East-West trade increases this will become increasingly important. Article 2 (g) merely would allow authorities to disregard State trading monopoly prices, but offers no positive guidelines. To date, the U .S. has no legislation to deal with this problem. PAGENO="0180" 1966 B. Determination of Inj~y Article 3 tPrincipal Cause of Material Injury] International Antidumping Code: 3 (a) A determination of injury shall be made only when the authori- ties concerned are satisfied that the dumped imports are demonstrably the principal cause of material injury or of threat of material injury to a domestic industry or the principal cause of material retardation of the establishment of such an industry. In reaching their decision the authori- ties shall weigh, on one hand, the effect of the dumping and, on the other hand, all other factors taken together which may be adversely affecting the industry. The determination shall in all cases be based on positive finding and not on mere allegations or hypothetical possibilities. In the case of retarding the establishment of a new industry in the country of importation, convincing evidence of the forthcoming establishment of an industry must be shown, for example, that the plans for a new industry have reached a fairly advanced stage, a factory is being constructed or machinery has been ordered. Article VI, GATT: 6 (a) "No contracting party shall levy any antidumping or counter- vailing duty on the importation of any product of the territory of another contracting party unless it determines that the effect of the dumping or subsidization, as the case may be, is such as to cause or threaten material injuryto an established domestic industry, or is such as to retard materially the establishment of a domestic industry. Antidumping Act, 1921, As Amended: The Antidumping Act, 1921, delegates to the Tariff Commission the determination of whether an industry in the United States is being or is likely to be injured or is prevented from being established, by reason of the importation of such merchandise into the U. S. There are no specific guidelines for finding injury. S. 1726 (90th Congress): Section 201(b) of the Bill would set forth several tests for deter- mining whether material injury exists or is likely to exist. (See dis- cussion under Article 3 (b)]. Section 1 t201(b)(2)(3) and (4)] of the Bill recognizes that dumping may be one of several contributing causes of injury. (See discussion under Article 3 (c)]. PAGENO="0181" 1967 Comments: Adherence to Code provision not only would limit the Commission's judgment function without any offsetting benefit, but also would prevent Tariff Commission from giving relief from dumping where dumping is only a contributing cause not of, "principal' proportions. It would also be likely to preclude S. 1726 purpose of allowing dumpirg to be found even if concurrent causes are present. S. 1726 rationale asks why relief against one cause of injury should be denied merely because other causes also exist. It is extremely doubtful that any dumping effect ever could outweigh all other factors taken together which may be adversely affecting an industry. If Article 3 (a) had been written without the second sentence, it is likely that the "principal cause of material injury" concept could be considered as making it easier to show injury than having to show that dumped imports caused all of the material injury. But the second sentence, by requiring that all other factors which "may be adversely affecting industry" be put on the scale, has replaced the concept of material injury with one which is open-ended concept of adverse effects which can be expanded to infinity. U. S. acceptance of GATT provided that GATT would apply only to the extent it is "not inconsistent with existing legialation" which, o~ course, included the Antidumping Act of 1921 and thereby excluded the U. S. from the need to base its injury test on "material" injury. PAGENO="0182" 1968 [Forms of Injury) International Antidumping ~Qp~: 3 (b) The valuation of injury--that is the evaluation of the effects of the dumped imports on the industry in question--shall be based on examina- tion of all factors having a bearing on the state of the industry in question, such as: development and prospects with regard to turnover, market share, p~, p~ces ~~udi~g the extent to which the delivered, y-paid price is lower or flj2~r than the comparable price for the like product prevailir4q in the course of normal commercial transactions in the importing cow~y), export performance, employment, volume of dumped and other imports, utilization of capacity of domestic industry, and productivity; and restrictive trade practices. No one or several of these factors can necessarily give decisive guidance. Antidumping Act, 1921, As Amended: No comparable provisions; Tariff Commission has complete discretion in determining what amounts to injury. S. 1726 (90th Congres~1: Definitions of "Inlury" Section 201 (b) of the Bill sets forth the following tests for determining whether material mu exists or is likely to exist: Test 1. Percentage Loss of Market Share THE NEED Members of the Tariff Commission have tended to agree that a domestic industry must show "material" injury to obtain relief, but have disagreed on the percentage of a market which dumped imports must seize to be deemed "material". PROPOSAL Injury shall be found if imports determined by Treasury to be dumped: Capture 5% of the total domestic sales of the relevant product in the competitive market area. DEFENSE Unless there is clear and convincing evidence that had su AVAILABLE dumped sales not been made, the industry in the U.S. still woi not have increased its sales. The Commission could measure dumping in any 3-month tix span during a period starting six months before the initiation o the investigation by the ~easury Department and ending at th~ conclusion of the Commission's investigation. PAGENO="0183" 1969 COMMENT The choice of 5% can be justified on the basis of concepts borrowed from U. S. antitrust laws, and on the fact that domestic industry cannot be expected to suffer a 5% loss of sales to dumped merchandise without serious adverse effects. Section: 1 [201 (b) (1). Test 2. Forcing a Price Break THE NEED There has been wide disagreement within the Tariff Commission as to the role dumped imports must play in forcing a price break before they are considered injurious. PROPOSAL Injury shall be foundif imports determined by Treasury to be dumped are: A contributing cause of a decline in the prices of ~Q~o or more of the relevant domestic merchandise supplied to the competitive market area. The price break must occur in any month within the period starting six months before the Treasury investigation and ending at the close of the Commission~s investigation. COMMENT Injury may be caused when, in order to protect their market position from .dumping, domestic producers are forced to reduce prices. Even small quantities of imports at dumped prices can cause widespread price breaks in the competitive market area. Section: 1 [201(b)(2)]. Test 3. Losses by Labor THE NEED The interests of domestic labor cannot be separated from those of domestic industry in the face of dumped imports. At present the Act makes no direct reference to injury to labor, only to an industry." PROPO SAL Injury shall be found if imports determined by Treasury to be dumped are: A contributing cause of a decline of 5% or more (in man-hours worked or in wages paid) of direct labor em~ployed by a domestic industry in producing merchandise of the same class or kind supplied to a competitive market area. PAGENO="0184" 1970 COMMENT To measure a decline the Commission would compare man-hours worked or wages pair1 during any three of the months from six months before the initiation of the dumping investigation to the conclusion of the injury Investigation, with the average monthly level of such employment during the year ending on the date the Treasury investigation began. Section: 1 [201(b)(3)] Test 4. Other Anticompetitive Effects THE NEED To allow the Tariff Commission the necessary flexibility to deal with factors indicative of unfair competition other than those listed above, there is a need for a "basket' clause. PROPOSAL Injury shall be found if imports determined by Treasury to be dumped: Have been a contributing cause of any anticompetitive effects in any competitive market area. COMMENT Market disruption which follows dumped imports could be sufficient to justify the imposition of dumping duties. The Commission also should be expected to consider the disruptive effects of dumped imports on established patterns of trade, customer relationships and market habits which force serious adjustments in the reasonably expected results of a business venture, to name a few examples. Section: 1 [201(b)(4)]. Defenses: A Necessary Clarification No Domestic Sales Lost-- Under Test 1 the importer has a defense if he can show by clear and convincing evidence that the domestic industry would not have supplied that share of the market taken over by dumped imports even if no dumping had occurred. Section: 1 [201(b)(1)]. Meeting Competition--Meeting competition from other nondumped imports would not alone constitute a defense. Section: 1 [201(d)] . Predatory Intent --In recent years, the Commission has introduced into its determinations the irrelevant question of whether foreign merchandise was sold with predatory intent, as though this psychological inquiry had something to do with the question of injury to domestic industry. The Bill would make it clear that the exporter's or importer's intent is irrelevant. Section: 1 [201(d)] COMMENT: The last sentence of Article 3 (b) is a two-edged sword. On the one hand, U.S. industry has lost injury cases because of Tariff Commission focus on one or several factors. On the other hand, U.S. adherence to such multi-factored approach would preclude any future U. S. legislation to create several automatic injury tests which have been suggested by domestic industry. Without statutory tests such as those which are proposed by 5. 1726 experience has shown that there is no assurance the Commission will find injury in even such obvious situations. PAGENO="0185" 1971 [Contributing Cause] International Antidumping Code: 3 (c) In order to establish whether dumped Imports have caused injury, all other factors which, individually or in combination, may be adversely affecting the industry shall be examined, for example: the volume and prices of undumped imports of the product in question, competition between the domestic producers themselves, contraction in demand to substitution of other products or to changes in consumer tastes. Antidumping Act, 1921, As Amended: No comparable provision. 5. 1726 (90th Congress): Recognizing "Dumping" as a "Contributing Cause" The second, third and fourth tests of injury, outlined in connection with Article 3 (b), require that the dumping of foreign merchandise must be a contributing cause of the stated effects. It is rarely the case that any event is the sole or even the predominant cause of any other event, especially in the field of economic cause and effect. Yet, the Tariff Commission has recently refused to recognize injury from dumping because injury might have been explained in part by causes other than dumping. The Bill would make clear that the mere presence of concurrent causes may not be used to avoid a findiflg of injury from the dumping. Section: 1 r201(b)(2), (3), and (4)]. Comment: Article 3 Cc) seems to be a causal relation test (whereas ArtIcle 3 (b) is concerned with the scope of injury Article 3 (c) picks up several of the defenses which Tariff Commission used to deny injury finding. The words "individually, or in combination" in Article 3 (c) are particularly damaging because they require the "principal cause" of Article 3 (a) not only to be the largest single cause, but also of greater effect than all other causes combined. Read in conjunction with the words in Article 3 (a), "all other factors taken together" this becomes the inescapable intent of the Code which the Tariff Commission would have to implement because no exception has been accorded the U.S. as was originally done regarding Article VI of the GATT. PAGENO="0186" 1972 [Competitive Product Market] International Antidumping Code: 3 (d) The effect of the dumped imports shall be assessed in relation to the domestic production of the like produ~ when available data permit the separate identification of production in terms of such criteria as: the production process, the producers' realizations, ~ When the domestic production of the like product has no separate identity in these terms the effect of the dumped imports shall be assessed by the examination of the productio~~ of the narrowest group or ra~gQ of products, which includ~s the like prod~c~, for which the necessary information can be provided. Antidumping Act, 1921, As Amended: No comparable prov;ision. The "such or similar" provisions in Section 2 12(3) of the U.S. Antidumping Act apply to comparability for purposes of determining whether there is dumping, not to the injury question. S. 1726 (90th Congress): The product market would include merchandise which is reasonably interchangeable in use with the class or kind involved. Other lines of commerce in which one or more members of a domestic industry may be engaged, but which are outside the scope of competition with dumped imports, are not to be considered by the Commission in weighing the impact of dumping upon a domestic industry. Section: 1 ~201(f)(4)]. Comment: Article 3 (d) attempts to solve the "relevant.product line" problem. This concept would be superimposed upon the definition of industry as set out in Article 4 by Article 4 (c). The Code's reference to p~çduction process would seem to preclude any subsequent possibility of legislation to allow a claim on injury to be made by a competing product not necessariiy of the same mater~i or made by similar proc esses, although such broadening of product line may be dangerous where broadening the relevant market base may make it more difficult to show injury. The usefulness of this provision would depend upon whether the availabilil of data and "necessary information" provisions can be satisfied. PAGENO="0187" 1973 [Threat of Injury] International Antidumplng Code: 3 (e) A determination of threat of material Injury shall be based on facts and not merely on allegation, conjecture or remote possibility. The change In circumstances which would create a situation in which the dumping would cause material injury must be clearly foreseen and imminent. ~ One example, though not an exclusive one, Is that there. is convincing reason to believe that there will be, in the immediate futur~, substantially increased importations of the product at dumped prices. Antidumping Act1 1921, As Amended: Section 201 (a) gives the Tariff Commission the responsibility for determining whether an Industry `is being or Is likely to be injured." S. 1726 (90th Congress): Likelihood of Injury THE NEED The Tariff Commission has recently ruled that "likelihood of injury" can be found only on a showing of clear and imminent injury. This rigid standard, borrowed from an irrelevant concept defined under wholly different words used in the old Escape Clause, is almost impossible to satisfy. In keeping with the rule in .other laws designed to curb unfair competition, the Commission should be able to cope with future dumping on a showing of reasonable likelihood of injury. PROPOSAL Likelihood of injury shall be found when: The Commission finds a reasonable likelihood that an injury described In the tests above will occur by reason of dumping. Section:~ 1 [201 (c)1. Comments: Neither the Act nor Its legislative history gives any explicit Indication as to the meaning of "likelihood of injury." None of the domestic antitrust laws has been interpreted so narrowly as the Commission's "clear and Imminent" requirement. It Is generally accepted that the effective implementation of unfair trade laws requires the judging body to make some estimates from evidence of records plus common business experience, and a probability of injurious effects -even though this probability could not be demonstrated to a certainty. PAGENO="0188" 1974 Comments (Cont~): By its very nature, the likelihood of injury concept is forward-looking in time. Its purpose is to be prepared to deal with an inflow of dumped imports so that their impact may be headed off by rapid imposition of a special dumping duty. As the Tariff Commission cases have shown, if the clear and imminent injury test is required, any attempt to show the threat of injury will become a dead letter in antidumping cases. Internptional Antidumpine Code: 3 (f) 3 (f) With respect to cases where material injury is threatened by dumped imports, the application of antidumping measures shall be studied and decided with special care. Comment: A meaningless provision. The requirement of study and decision `with special care" would seem to be at cross-purposes with the need for speedy action where dumping is imminent. PAGENO="0189" 1975 ArtIcle 4 Definition of Industry [National and Regional Markets] International Antidumping Code: 4 (a) In determining injury the term "domestic industry" shall be inter- preted as referring to the domestic pràducers as a whole of the ~ijjc~jroducts or to those of them wh~ose collective output of the products constitutes a major proportion of the total domestic production of those products except that: (I) when producers are importers of the allegedly dumped product the industry j~~y be interpreted as referring to the rest of the producers (ii) in ~çg~ptional circumstances a country j~y, for the production in question, be divided into two or more competitive markets and the p~qçiucers within each marketregarded as a s~parate industry, ~, because of transport costs, all the producers within such a market sell all or almost all of their production of the p~düct in question in that market, and none, or almost none, of the product in question ~p~duced elsewhere in the country is sold in that market or if there exist ~pecial regional marketing conditions (for example, traditional patterns of distribution or consumer tastes) which result in an equal degree of isolation of the producers in such a market ~ the ~ of the induspy, provided, however, that injury may be found in such circumstances' ~ if there is ~j~to all or almost all of the total production of the product in the market as defined. * * 4 (c) The provisions of Article 3 (d) shall be applicable to this Article. ~ritidumping Act, 1921, As Amended: No comparable provision. The Tariff Commission in only a few cases departed from the nationwide concept of industry and measured injury of dumped imports in relation to the portion of the total U. S. industry selling in the market area affected by the dumped imports. 1726 (90th Congre~~): Definitions of "Industry" The Bill borrows from antitrust principles in defining the domestic industiy, the ,g~qgraphica1 market and the product market so as to assure that the Tariff Commission will focus upon the effects of dumping in a competitive market ar~, and to reverse the recent tendency of the Commission to consider the overall health of domestic industries, dogmatically presumed to be nationwide, before deciding whether the dumping caused injury. PAGENO="0190" 1976 ~~726 (90th Congress) Con~4~: The competitive market area would be the geographical area in which the dumped imports compete with the domestic meràhandise. Section: 1 [201(f)(3)]. The domestic industry would be those domestic vendors who supply merchandise directly or Indirectly to the competitive market area. Section: 1 [201(f)(2)] The product marjc~would include merchandise which is reasonably interchangeable in use with the class or kind being dumped. Section: 1 [201(f)(4)]. Comment: Article 4 (a) defines domestic industry generally as "the domestic producers as a whole of the like products or to those providing a j~j~ proportion of the total domestic production. Article 4 (c) superimposes the "relevant product line" requirement in Article 3 (d) upon the industry concepts In Article 4. Recognition is given (in only exceptional cases) to the possibility of a country being divided into two or more "competitive markets" which the producers within each market regarded as a separate industry. However, this feature is severely li~nited. by the requirement that the producers within such market sell all or almost all of their production of such product in that market because of transport costs and that there be no, or almost no, sales into that area of other U.S. production situated outside such market. The Code also recognizes the possibility of special regional marketing conditipiis such as traditional patterns of distribution or consumer tastes, which result in an equal degree of isolation of the producers in such a market from the rest of the industry. Both of the aforementioned possibilities are also strictly limited by a further provision that injury must be found "to all or almost aU' of the production of the product in the market defined. S. 1726, on the other hand, incorporates a regional geographic market concept but is not restricted by requiring all those produgers selling in that market to sell exclusively in that market. If the Code provisions are adopted injury in any regional market could never be shown if there were some sales in that market by a producer selling Qfl a broader or nationwide basis. PAGENO="0191" 1977 Comment (Qo~): Subparagraph 4 (a) (1) raises the question of whether the production of a domestic producer would be excluded merely because he has some imports from his foreign subsidiary of "the allegedly dumped product?" While the decision to divide a country into two or more competitive market areas is permissive, the requirements for doing so are mandatory. Although there seems to be no rational basis for the extreme isolation of the prQduction in this market area which is the goal of Article 4 (a)(li) It Is conceivable that the Tariff Commission could follow this concept rather than their earlier regional market decisions. 4 (b) [Integrated-countries Markets] International Antidumpin~ Code: 4 (b) Where two or more countries have reached such a level of integra- tion that they have the characterlstibs of a single, unified market, the industry In the entire area of integration shall be taken to be t~ie industry referred to in Article 4 (a). Comment: Apparently not applicable to U.S. but since "level of integration" is not defined as either pQlltical or economic integration, where negligible tariff or other barriers exist It might be argued that the "Integration" referred to in Article 4 (b) of the Code is the type of economic integration resulting in certain Industries, such as is fostered by the U.S. -Canadian Automotive Pact. The effect of this would be to :expand the industry and make an injury finding more difficult. 4 (c) [Geographic/Product Market] Internatioi~1 A~tidumping Code:. 4 (c) The provisions of Article 3 (d) shall be applicable to this Article. Comment: . . Superimposes a "relevant product line" requirement upon the industry concepts in Article 4. This approach is also envisaged in S. 1726. PAGENO="0192" 1978 C. Investigation & Administration Procedur~ Article 5 Initiation and Subsequent Investigation tSubstantiatiOn of Complaint] International Antidump~g~Qg~: 5 (a) Investigations shall normally be initiated upon a request on behalf of the industry1 affected, supported by evidence both of ~p~p~n and of ~j~j~~ry resulting therefrom for this industry. If in special circum- stances the authorities concerned decide to initiate an investigation without having received such a request, they shall proceed only if they have evidence both on dumping and on injury resulting therefrom. As defined in Article 4. Antidumping Act, 1921, As Amended: Section 201 (b) implies that there be a preliminary dumping investigation by Treasury to determine whether the Secretary has "reason to believe or suspect, from invoice or other papers or from information presented to him or his delegate" that a margin of dumping exists. Section 201 (a) requires the Tariff Commission to initiate the question of injury upon receiving advice from the Secretary of Treasury that merchandise is being, or is likely to be sold in the United States or else- where at less than its fair value. U . S. Treasury Regulations: The domestic industry's complaint must present detailed data reasonabjy available, as well as suggestions concerning specific avenues of investi~ tion. 14.6 (b) (2) and 14.6 (b) (4). Secretary may defer making an affirmative determination during the pendency of proceedings relating to similar merchandise from another country. He must consider the date of the complaints, the volume of sales involved in each proceeding, any hardship, and probably extent of delay which defeiral would entail. 14.8 (a). S. 1726 (90th Congre~): Regarding the consolidation of complaii , the Secretary of the Treasury would be required to consolidate all affirmative findings on complaints filed simultaneousy, and to keep them consolidated when he forwards them to the Tariff Commission in order to permit appraisal of total impact of such dumped imports by the Commission. Hitherto, there have been as many PAGENO="0193" 1979 separate antidumping proceedings before the Treasury and the Commission as there have been foreign sources~ of merchandise dumped in the United States. This fragmented way of dealing with what really is a singular j~j~y to a domestic industry has caused needless repetition and expense in the administration of the Act, and has led the Commission unjustiflably to deny the remedy in cases where that injury is the result of dumping from several foreign sources. Sections: 1 1201 (a)] and 6 1212 (a) (1)]. Unsupportable complaints can be dismissed within 15 days, and where imports from a country or countries are found not to be dumped, they can be dismissed from the consolidated investigation. Section: 6 [212(b) and (c)]. Comment: Complainant cannot merely show injury to his own company--he is required to show evidence of injury to the entire industry at the time he initiates his complaint. 95-159 0 - 68 - pt. 5 - 13 PAGENO="0194" 1980 ISimultaneous Dumping and Injury Investigations] International Antidumping Code: 5 (b) Upon initiation of an investigation and thereafter, the evidence of both dumping and injury should be considered simultaneously. In any event the evidence of both dumping and injury shall be considered simultaneously in the decision whether or not to initiate an investigatiog~, and thereafter, during the course of the investigation, start~ on a date not later than the earliest~~ on which provisional measures may be applied, except in the cases provided for in Article 10 (d) in which the authorities accept the request of the exporter and the importer. Antidumping Act, 1921, As Amended: Antidumping Act, 1921. The Code provision requiring the simultaneous consideration of dumping and injury with regard to the basic question of whether or not to initiate an investigation is patently contrary to the specific intent of Congress as expressed in the legislative history of the 1954 amendment of the U.S. Antidumping Act of 1921. U.S. Treasury Regulations: Section 14.8 (a) states, "Whenever the Secretary makes a determination of sales at less than fair value he will so advise the United States Tariff Commission." S. 1726 (90th Congre~) Section 1 [201(a)] of S. 1726 was modified slightly compared to 5. 2045, the Antidumping Act Amendment offered in the 89th Congress to make it clear that the Tariff Commissions injury determination shall be made within three months "after notification from the Secretary" of the Treasury of sales at less than fair value. Comments: Article 5 (b) would require simultaneo~ consideration of the evidence of dumping and injury. The U.S. Congress in 1954 specifically removed the injury determination from the Treasury Department, giving it to the U.S. Tariff Commission, and requiring the Tariff Commission to conclude its inju~y determination within 90 days after receipt of a finding of a dumping margin by the U.S. Treasury Department. The Code does not make it clear whether Treasury again would make both a preliminary dumping and injury determination for which there is no basis in U.S law, especially after the 1954 amendment, or require the U.S. Tariff Commissi PAGENO="0195" 1981 to determine ab initio the injury question without the benefit of knowing the margin of dumping, if any, which may exist. The requirement in Article 5(b) for simultaneous consideration of dumping and injury not only duringthe course of such investigation but also in the decision whether or not to initiate an investigation, is a complete innovation from the statutory scheme set up by the 1954 Amendment which required the determination of sales at less than fair value to be made before the question of injury even became pertinent. The sentence beginning "In any event" makes no sense except as an attempt to require the U.S. Tariff Commission to begin consideration of evidence of injury once a preliminary decision has been taken that there is dumping and sufficient evidence of injury (the earliest date on which provisional measures may be applied--see Article 10 (a)). The Tariff Commission could informally be supplied with information by Treasury on the injury question prior to a formal finding of a dumping margin--and conceivably could make a finding of "no injury" on the first day of the statutory 90 day period available for its injury determination-- unless the domestic complainant requested the Tariff Commission to hold a public hearing on the question of injury. Conceivably, this is what our U.S. negotiators have in mind. The unavoidable question, however, is how the Tariff Commission is supposed to determine the Injury question prior to knowledge of the margin of dumping involved in a finding of sales at less than fair value which, according to U.S. law, must be first supplied to the Tariff Commission by the U.S. Treasury so that the Tariff Commission can measure the impact of the goods containing the margin of dumping. [see also discussion on page iii] PAGENO="0196" 1982 [Dismissal of Insubsta ntial Complaints] International Antidumping Code: 5 (c) An application shall be rejected and an investigation shall be terminated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either dumping or of injury to justify proceeding with the case. There should be immediate termination in cases where the margin of dumping or the volume of dumped imports, actual or potential, or the injury is negligible. Antidumping Act, 1921, As Amended: No comparable provision. U.S. Treasury Regulations: Under Section 14.6 (d) (1) the Commissioner of Customs can close a case after conducting a summary investigation to determine if the merchandise is not being and is not likely to be imported in more than insignificant quantities. S. 1726 (90th Congress): Where no evidence to support a dumping complaint is found from a particular source, the Secretary can dismiss the complaint within 15 days. Section: 6 [212(b)] Furthermore, where complaints have been consolidated in a single antidumping proceeding, the Secretary may prepare and publish a proposed negative dumping determination as to a country or countries whose exports to the U.S. are found not to be dumped, rather than wait until the preparation and publication of any proposed affirmative dumping determination Section: 6 [212(c)] Failure to dismiss complaint would not cause automatic withholding of appraisement. Comment: Section 14.6 (d) (1) of the Treasury Regulations has no specific basis in the present Antidumping Act, 1921, as amended. Because the Tariff Commission only gets intothe antidumping picture after the Treasury has found dumping--the Commission never sees "the ones that got away". It might be claimed that any residual administrative power regarding injury rests with the Secretary of Treasury, particularly insofar as before 1954 the Treasury could dismiss a case on the basis of either no dumping or no injury. PAGENO="0197" 1983 comment (Cont'd): However, as the law stands today, it appears that Treasury is usurping the Tariff Commission's injury function if it dismisses a case for a lack of injury where there was potential for an affirmative dumping finding to have been made. Should the combined impact from several sources of dumping have been injurious--the Tariff Commission would never have had an opportunity to find injury-- because the Treasury could have dismissed each case piecemeal. 5(d) [No Customs Clearance Delay] International Antidumping Code: 5 (d) An antidumping proceeding shall not hinder the procedures of customs clearance. Antidumping Act, 1921, As Amended: Section 201 (b) authorizes the Secretary of the Treasury to withhold appraisement, on unappraised entries made up to 120 days before dumping complaint was lodged if he has reason to believe or suspect a margin of dumping to exist. Such withholding applies "until further order of the Secretary," or until a finding of dumping plus injury has been made public. If the goods have already been appraised at the time of the withholding notice, they are not subject to the special dumping duty. (Section 202(a)). U.S. Treasury Regulations: Section 14. 10 provides that if there has been a withholding of appraisement notice or a Tariff Commission finding of injury, the customs collector may release any involved merchandise in his custody or which is thereafter imported if aC appropriate bond is filed or on file, or if he is advised by the appraiserthat merchandise involved in a specified entry will be appraised without regard to the Antidumping Act. PAGENO="0198" 1984 Article 6 Evidence [Right to Present Evidence] International Antidumping Code: 6 (a) The foreign suppliers and all other interested parties shall be given ample opportunity to present in writing all evidence that they consider useful in respect to the antidumping investigation in question. They shall also have the right, on justification, to present evidence orally. U.S. Treasury Regulations: Section 14.8 (a) gives interested persons an opportunity to make written submissions regarding Tentative Determinations. The Secretary of the Treasury retains the discretion (1) if an opportunity for oral presentation will be accorded, and (2) to whom it will be accorded. S. 1726 (90th Congress): The Bill provides that both importers and domestic industries shall receive a fair hearing in any antidumping proceeding, and shall have at any oral hearing the right to counsel, to present evidenceS to confront interested parties, and to conduct whatever cross-examination may be required for a full and fair disclosure of pertinent facts. Section: 6 [2 12(d) and (h)] General Comment on Article 6: While Code Standards regarding treatment of evidence are similar to current Treasury Regulations in many respects and can be conformed with by Treasury and Tariff Commission administrative regulations, they should be compared with the provisions of 5. 1726 because of a number of significant differences based on the practical experiences of industry in antidumping cases are reflected therein. PAGENO="0199" 1985 Right to Examine Evidence] International Antidumping Code: 6 (b) The authorities concerned shall provide gpportunitles for the complainant and the importers and exporters known to be concerned and the governments of the exporting countries, to see all information that is relevant to the presentation of their cases, that is not confidential as defined in paragraph (c) below, and that is used by the authorities in an antidumping investigation, and to prepare presentations on the basis of this information. U.S. Treasury Regulations: Section 14.6 a (a) makes generally available to any person all information, but not necessarily all documents, obtained by Treasury in connection with any antidumping proceeding. (There is no specific mention of the governments of exporting country). Summaries of factual documents prepared by officers or employees of the U. S., as distinguishe.d from recommendations or evaluations, will be made available. Information will be made available in specific or generalized form unless competitors would get a significant advantage, or the persons supplying the information would be adversely affected. Though Trea sury has discretion over degree of disclosure, the names of particular customers, business or trade secrets, production costs, or distribution costs unless accepted for justifying quantity discounts or differences in circumstances of sale, ordinarily will not be disclosed. 14.6 a (c)(3). 5. 1726 (90th Congress): Complainant and reviewing court would receive supplemental statement of information relied onby the Secretary, except confidential used to ascertain constructed value or justify claimed discounts for differences in quantities or circumstances of sale. Section: 6 [212 (c) and U)]. PAGENO="0200" 1986 Confidential Information] International Antidumping Code: 6 (c) All information which is by nature c~nfidential (for example, because its disclosure would be of significant competitive advantage to a competitor or because its disclosure would have a significantly adverse effect upon a ~erson supplying the information or upon a person from whom he acquired the information) or which is provided on a confidential basis by parties to an antidumping investigation, shall be treated as strictly confidential by the authorities concerned who shall not reveal it, without specific permission of the party submitting such information. U.S. Treasury Regulations: Section 14 .6 a (c) sets out standards for determining whether information will be regarded as confidential. This ordinarily includes situations where disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom he acquired the information. The final decision rests with the person supplying the information. Section 14.6 a (b) sets out the provisions for strict confidentiality and the control of the party submitting the information. 5. 1726 (90th Congress): Parties involved should know the evidence used against them. The provision for "reasoned opinions" contained in Section: 6 [212(c)(d)(e) (1)] usually will help accomplish this. While Treasury and the Tariff Commission would retain discretion to refuse publication of information which would impede them from obtaining similar information in the future, they would be required to prepare a supplemental statement of the information withheld for the use of the interested parties and a reviewing court to enable them to analyze the agency findings. Section: 6 [212(c) and (1)] An importer would be provided with the right to review date in Tariff Commission injury investigation similar to that in proposed 1963 Antidumping Act Amendment for domestic complainant review in Treasury dumping proceeding. In addition, right to review data in the case at Treasury level would be limited to exclude the costs of manufacture in justification of quantity discounts, as well as costs used in determining "constructed value." Section: 6 [212(c) and (1)] PAGENO="0201" 1987 [Confidentiality~ Unwarranted] International Antidumping Code: 6 (d) However, if the authorities concerned find that a ~gq~est for confidentiality is not warranted and if the supplier is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the authorities would be free to disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct. U.S. Treasury Regulations: If, however, disclosure is requested and it is determined that confidentiality is unwarranted, and the submitting party does not agree to disclose any specific part or summary or approximation thereof--to the extent it is self-serving, it will be disregarded by Treasury in determining sales below fair value and will not be relied on in this connection. 5. 1726 (90th Congres~: If an importer or exporter fails or refuses to furnish the information requested by the Secretary, all doubts relating only to such information will be resolved against the person failing or refusing to furnish it. Section: 6 E212(f)] 6(e) [Foreign Investigations] International Antidumping Code: 6 (e) In order to verify information provided or to obt~'in further details the authorities may carry out investigations in other countries as required, provided they obtain the, agreement of the firms concerned and provided they flQ~jf the representatives of the government of the country in question and unless the latter object to the investigation. Comment: No comparable provision. PAGENO="0202" 1988 [Notice of Investigation] International Antidumping Code: 6 (f) Once the competent authorities are satisfied that there is sufficient evidence to justify initiating an antidumping investigation pursuant to Article 5, representatives of the exporting country and the exporters and importers known to be concerned shall be notified and a public notice may be published. Antidumping Act, 1921, As Amended: The first notice requirement is contained in Section 201 (b) which requires Secretary of Treasury to publish notice in the Federal Register that he has reason to believe or suspect a dumping margin to exist. U.S. Treasury Regulations: Section 14.6 (d) (1) (i) merely provides for an "Antidumping Proceeding Notice" upon the Secretary's decision that the information received in complaint is "in proper form," and will specify the shipments by certain firms or persons involved, the date received and a summary of the information. Section 14 .6 (e) provides for a withholding of Appraisement Notice in the Federal Register where "reasonable grounds to believe or suspect a dumping margin to exist." Where the investigation is limited to transactions of certain shippers or producers the notice shall name them. Section 14.9 (a) requires each appraiser to notify the collector and importer immediately of each lot of merchandise with respect to which appraisement is withheld. PAGENO="0203" 1989 [Confrontation and Rebuttal] International Antidumping Code: 6 (g) Throughout the antidumping investigation all parties shall have a full opportunity for the defense of their interests. To this end, the authorities concerned shall, on request, provide opportunities for all directly interested parties to meet those parties with adverse interests, so that opposing views may be presented and rebuttal arguments offered. Provision of such opportunities must take account of the need to preserve confidentiality and of the convenience to the parties. There shall be no obligation on any party to attend a meeting and failure to do so shall not be prejudicial to that party's case. j,~S. Treasury Regulations: Section 14.8 (a) gives interested persons an opportunity to present views including new or additional information or arguments after a Notice of Tentative Determination is published in the Federal Register. Where accuracy of information before Treasury is challenged, oral presentation of information or argument in person or through counsel is possible for all parties who the Secretary decides are concerned. The Notice of Tentative Determination includes a statement of reasons on which the tentative determination is based. 5. 1726 (90th Congress): The Bill provides that both Treasury, with regard to dumping, and the Tariff Commission, with regard to injury, give an opportunity for a fair hearing and, at any oral hearing, the right to counsel, to present evidence, to confront interested parties, and to conduct whatever cross-examination may be required for a fair disclosure of pertinent facts. Section: 6 [2 12(d) and (h)J A Proposed Dumping Determination would be published indicating non-confidential specific data, concepts, and computations relied on by Treasury in making its proposed decision. Parties would have opportunity to be heard on whether relevant documents should be made part of the record. Section: 6 [2 12(c)] PAGENO="0204" 1990 [Notice of Determinations] International Antidumping Code: 6 (h) The authorities concerned shall notify representatives of the exporting country and the directly interested parties of their decisions regarding imposition or non-imposition of antidumpinq~ duties, indicating the reasons for such decisions and the criteria applied and shall, unless there are special reasons against doing so, make public the decisions. Antidumping Act, 192 1, As Amended: Section 201 (a) requires the Secretary of Treasury to make public notice of any affirmative dumping and injury findings. Section 201 (c) requires Treasury and the Tariff Commission to publish their respective dumping and injury findings in the Federal Reçister with a statement of the reasons therefor. U.S. Treasury Regulations: Section 14. 13 (a) requires publication in the Federal Register of both the Notice of Tentative Determination" regarding Treasury's dumping investigation and the Tariff Commission's determination regarding injury, including statements .of the reasons therefor. Tariff Commission findings will also be published in the weekly issues of Treasury Decisions. S. 1726 (90th Congress): The Bill requires the Tariff Commission, as well as the Treasury Department, to publish full reports indicating specific data such as manufacturers, dates, prices, discounts, quantities, home consumption, cost of containers, taxes, duties and commissions, as well as delivery, selling, advertising, technical service, and other expenses, but not including confidential cost information used in ascertaining constructed value or costs of manufacture. Section: 6 [2 12(c)(d)(e)(i)] PAGENO="0205" 1991 [Preliminary Determinations] International Antidumping Code: 6 (1) The provisions of this Article shall not preclude the authorities from reaching preliminary determinations, affirmative or negative, or from applying provisional measures expeditiously. In cases in which any interested party withholds the necessary information, a final finding, affirmative or negative, jj~y be made on the basis of the facts available. U.S. Treasury Regulations: Section 14.6 (d) (ii) allows the Commissioner of Customs to "conduct a brief preliminary investigation" and still "promptly" decide whether reasonable grounds exist to believe or suspect a dumping margin to exist. Section 14.6 (e) specifies that where insufficient information exists to state whether purchase price or exporter' s sales price are to be used for the comparison with fair value, he may publish a supplementary notice "as soon as possible" with such information and that withholding of appraisement shall not begin until such supplemental notice is received by the appraisers. S. 1726 (90th Congress): If an importer or exporter fails or refuses to furnish the information requested by the Secretary of Treasury, all doubts relating only to such information will be resolved against him. Section: 6 [212(f)] Comment: There is no provision in U.S. law or regulations allowing a final finding on the basis of the facts available where any interested party withholds "necessary information." PAGENO="0206" 1992 Article 7 Price Undertakings [Conditions for Terminating Investigations] International Antidumping Code: 7 (a) Antidumping proceedings may be terminated without imposition of antidumping duties or provisional measures upon receipt of a ~o1untary undertakin~g by the exporters to revise their orice~ so that the margin of dumping is eliminated or to cease to exoort to the area in question at dumped prices if the authorities concerned consider this practicable, e.g., if the number of exporters or potential exporters of the product in question is not too great and/or if the trading practices are suitable. 7 (b) If the exporters concerned undertake, during the examination of a case, to revise prices or to cease to export the product in question, and the authorities concerned accept the undertaking, the investigation_pg injury shall nevertheless be completed if the exoorters so desire or the authorities concerned so decide. If a determination of no injury is made, the undertaking given by the exporters shall automatically lapse unless the exporters state that it shall not lapse. The fact that exporters do not offer to give such undertakings during the period of investigation, or do not accept an invitation made by the investigating authorities to do so, shall in no way be prejudicial to the consideration of the case. However, the authorities are, of course, free to determine that a threat of injury is more likely to be realized if the dumped imports continue. U.S. Treasury Regulations: Section 14.7 (b) (9) allows Secretary of Treasury to terminate a dumping investigation if "promptly after the commencement of the investigation" either (1) price revisions have been made which eliminate the likelthood of sales below fair value and there is no likelthood of the resumption of such prices, or (2) sales have terminated and will not be resumed, or (3) the Secretary determines there are other changed circumstances [undefined] on the basis of which it may no longer be appropriate to continue an antidumping investigation. Opponents are given 30 days after public notice in the Federal Register to challenge the facts relied on with "persuasive evidence or argument to the contrary." Otherwise, there will be a finding that "there are not and are not likely to be sales below fair value." 5. 1726 (90th Congress): The Bill would require that an investigation once beg~ be terminated only if (1) dumping ceased promptly after the start of the investigation, (2) assurances were given that such dumping would not be resumed, and (3) the ~ntitje~ involved are insignificant. Section 6 [212(a)(2)]. Comment: Denies complainant the right to have injury investigation completed merely because of voluntary price revisions or cessation of the exports (unless the authorities concerned so decide). This is contrary to U.S. law which has no provision allowing the Tariff Commission not to complete its investigation. PAGENO="0207" 1993 D. Antidumping Duties and Provisional Measures Article 8 rmposition and Collection of Antidumping Duties [Discretion of Authorities] International Antidumping Code: 8 (a) The decision whether or not to impose an antidumping duty in cases where all requirements for the imposition have been fulfilled and the decision whether the amount of the antidumping duty to be imposed shall be the full margin of dumping or less, are decisions to be made by the authorities of the importing country or customs territory. It is desirable that the imposi- tion be p~ermissive in all countries or customs territories parties to this Agree- ment and that the duty be less than the ma~g~p, if such lesser duty would be adequate to remove the injury to thedomestic industry. Article VI, GATT: 2. In order to offset or prevent dumping, a contracting party may levy on any dumped product an antidumping duty not greater in amount than the margin of dumping in respect of such product. For the purposes of this Article, the margin of dumping is the price difference determined in accordance with the provisions of paragraph I. Antidumping Act, 1921, As Amended: Section 202 (a) requires a special dumping duty to be applied for which the full margin of dumping is to be the basis. 5. 1726 (90th Congress): Judicial Review Rather than allow `the authorities the ultimate decision, the Bill makes clear that judicial review is available to both importers and complainants when proceeding concluded. This would clarify the con- fusion as to the extent courts can review Treasury Department and Tariff Commission findings. Appeals would be direct to the Court of Customs and Patent Appeals. The Court would be authorized only to continue, not to initiate, the withholding of appraisement pending an appeal. Section: 6 [212(j)]. Comment: [NOTE] The fact that once dumping and injury have been found the authorities still have a decision (1) whether or not to impose an anti- dumping duty, and (2) whether the amount of duty to be imposed is the full margin of dumping is a direct cirdurnvention of Section 202(a) of the Antidumping Act, 1921, as amended, In which the imposition of a special dumping duty in the full amount of the dumping margin is mandatory. PAGENO="0208" 1994 [Suppliers Named] International Antidumping Code: 8 (b) When an antidumping duty is imposed in respect of any product, such antidumping duty shall be levied, in the appropriate amounts in each case, on a non-discriminatory basis on imports of such product from all sources found to be dumped and causing injury. The authorities shall name the supplier or suppliers of the product concerned. If, however, several suppliers from the same country are involved, and it is impracticable to name all these suppliers, the authorities may name the supplying country concerned. If several suppliers from more than one country are involved, the authorities may name either all the suppliers involved, or, if this is impracticable, all the supplying countries involved. Antidumping Act, 1921, As Amended: Section 201 (a) requires Secretary of Treasury after an affirmative finding of injury by the Tariff Commission to describe the class or kind of merchandise involved in such detail as he shall deem necessary for the guidance of customs officers. U.S. Treasury Regulations: No comparable provision for notifying and naming the supplier of the product concerned. Comment: Treasury Regulations could interpret the phrase `for the guidance of customs officers" to authorize naming suppliers or countries involved. [Duties Limited by Dumping Margin] 8 (c) International Antidumping Code: 8 (c) The amount of the antidumping duty must not exceed the margin of dumping as established under Article 2. Therefore, if subsequent to the application of the antidumping duty it is found that the duty so collected exceeds the actual dumping margin, the amount in excess of the margin shall be reimbursed as quickly as possible. Comment: - No comparable provision. PAGENO="0209" 1995 [Basic Price System] International Antidumping Code: 8 (d) Within a basic price system, the following rules shall apply, provided that their application is consistent with the other provisions of this Code: If s~everal suppliers from one or more countries are involved, antidumping duties may be imposed on imports of the product in questionfound to have been dumped and to be causing injury from the country or countries concerned, the duty being equivalent to the amount by which the export price is less than the basic price established for this purpose, not exceeding the lowest normal price in the supplying country or countries where normal conditions of competition are prevailing. It is understood that for products which are sold below this already established basic price a new antidumping investigation shall be carried out in each particular case, when so demanded by the interested parties and the demand is supported by relevant evidence. In cases where no dumping is found, antidumping duties collected shall be reimbursed as quickly as possible. Furthermore, if it can be found that the duty so collected exceeds the actual dumping margin, the amount in excess of the margin shall be reimbursed as quickly as possible. Antidumping Act, 1921, As Amended:~ Section 202 (a) requires the special dumping duty in an amount equal to the difference between purchase price or exporter's sales price and foreign market value (or, in the absence of such value, the constructed value, which are defined in sections 203, 204, 205 and 206 of the Antidumping Act, 1921, as amended, respectively. Comment: Neither U.S. Antidumping Act, 1921, as amended, nor Treasury Regulations contain any "basic price system" concept for finding the amount of the special dumping duty. If the Secretary of the Treasury were to incorporate this into the Treasury Regulations it is quite probable that it would create an anomalous situation in which sales at less than fair value are found by Treasury on the basis of one price [the actual price] , but any special dumping duty is assessed on the basis of an entirely different price, [the base price], e. g., where the particular supplier's home market price is higher than the "lowest normal price" which Article 8 (d) requires to be the basic 95-159 0 - 68 - pt. 5 - 14 PAGENO="0210" 1996 Comment (Contd): price. Conceivably, the low home market price in Country A on wire rods, for example, would set the base price. Export sales by Countries B and C at prices below this price would precipitate a new antidumping investigation of B and C sales. Since B and C home market sales are at a higher price, their margin would be their export price compared to their home market sales, but the margin for dumping duty purposes would only be their export price compared to A's home market price, the base price. In this situation, a foreign supplier could raise his home market price and know that the only dumping duty he might have to pay would be equivalent to the margin that his export price was below the "lowest normal price." If his export price were the same as, or higher than, the "lowest normal price" he would not pay any special dumping duty at all. How this basic price would be established is not clarified in ArtIcle 8 (d). Neither are "normal conditions of competition" defined. In effect, the entire mechanism for determining the margin of dumping under U.S. law would be circumvented and all parties dumping at prices higher than the ba sic price could continue to dump with impunity. PAGENO="0211" 1997 [Dumping Cessation in Regional Markets] International Antidumping Code: 8 (e) When the industry has been interpreted as referring to the producers in a certain area, i.e., a market as defined in Article 4 (a) (ii), antidumping duties shall, only be definitively collected on the products in question consigned for final consumption to that area, except in cases where the exporter shall, prior to the imposition of antidumping duties, be given an opportunity to cease dumping in the area concerned. In such cases, if an adequate assurance to this effect is promptly given, antidumping duties shall not be impos~, provided, however, that if the assurance is not given or is not fulfilled, the duties may be imposed without limitation to an area. U.S. Treasury Regulations: Section 14.7 (b) (9) merely allows the Secretary of Treasury to find no likelihood of sales at less than fair value if sales to the U.S. have terminated and will not be resumed. Comment: Giving the exporter an opportunity to cease dumping in the particular market area, and thereby absolving himself of antidumping duties on products consigned for consumption in that area, would seem to enable him to be home free on the dumping he has already done. This will encourage such area dumping, and exporters may dump into one different area after another with impunity. It would not be possible to claim that Treasury regulations already cover this point since Section 14.7 (b) (9) only applies to a time period before a determination on the question of the likelihood of sales at less than fair value has been made, insofar as Treasury's authority under its regulations is only to make a finding of no likelihood of sales at less than fair value. Conformity with Article 8 (e) would enable dumper to absolve himself from dumping duties merely by terminating such sales at some time during the Tariff Commission's injury investigation, insofar as Article 8 (e) enables such termination any time "prior to the imposition of antidumping duties" which occurs after the Tariff Commission finds injury. It is difficult to conceive of the Congress delegating authority of the Secretary of Treasury to set up without any prior Congressional approval such a system of duty avoidance when the market area concept is not even spelled out in the U.S. law. PAGENO="0212" 1998 Article 9 Duration of Dumping Duties International Antidumping Code: 9 (a) An antidumping duty shall remain in force only as long as it is necessary in order to counteract dumping which is causing injury. 9 (b) The authorities concerned shall review the need for the continued imposition of the duty, where warranted, on their own initiative or if interested suppliers or importers of the product so request and submit information substantiating the need for review. U. S. Treasury Regulations: Section 14. 12 provides that to modify or revoke a finding of dumping plus injury, detailed information must be submitted in writing showing any change in circumstances or practice which has prevailed for a substantial period of time, or other reasons, which the applicant believes will establish that the basis for the finding no longer exists. Notice of intent to modify or revoke a finding will be published in the Federal Register and comments received from interested parties within 30 days will be given consideration. Comment: The use of the present tense, `is causing injury" would require lifting an antidumping duty finding as soon as the dumped imports have entered the commerce of the United States in spite of any threatened injury or the possibility that another dumped shipment may airive imminently. PAGENO="0213" 1999 ArtiOle 10 Provisional Measures [Preliminary Decision Required] International Antidumping Code: 10 (a) Provisional measures may be taken only when a preliminary decision has been taken that there is dumping and when there is sufficient evidence of jgj~y. Antidumping Act, 1921, As Amended: Antidumping Act, 1921, requires withholding of appraisement in section 201 (b) whenever the Secretary has reason to believe or suspect that the purchase price or exporter's sales price is less or likely to be less, than the foreign market value (or in the absence of such value, then the constructed value). U.S. Treasury Regulations: Section 14.6 (e) requires a determination that reasonable grounds to believe or suspect a dumping margin exists to be made by the Commissioner before he publishes,a "Withholding of Appraisement Notice. Comment: Clearly, there is no injury test involved in the U.S. provision for withholding of appraisement. 10 (b) [Forms of Provisional Mea sure 5] International Antidumping Code: 10 (b) Provisional measures j~y take the form of a provisional ~ or, preferably, a security--by deposit or bond--equal to the amount of the antidumping duty provisionally estimated, being not greater than the provisionally estimated margin of dumping. Withholding of appraisement is an appropriate provisional measure provided that the normal duty and the estimated amount of the antidumping duty be indicated and as long as the withholding of appraisement is subject to the same conditions as other provisional measures. Antidumping Act, 1921, As Amended: The only provisional measure is withholding of appraisement.as provided in Section 201 (b). U.S. Treasury Regulations: Section 14. 10 (a) allows for a release on bond for all merchandise subject to a Notice of Withholding of Appraisement or a finding of dumping plus injury. PAGENO="0214" 2000 {Notice of Provisional Measures] International Antidumping Code: 10 (c) The authorities concerned shall inform representatives of the exporting country and the directly interested parties of their decisions regarding imposition of provisional measures indicating the reasons for such decisions and the criteria applied, and shall, unless there are special reasons against doing so, make public such decisions. Antidumping Act, 1921, As Amended: Section 201 (b) does not specifically require publication of notice in the Federal Register that appraisement is being withheld; he is required to publish notice in the Federal Register that he has reason to believe or suspect that a dumping margin exists. He then shall authorize the withholding of appraisement. U.S. Treasury Regulations: The Withholding of Appraisement Notice is described in Section 14.6 (e) to include a description of the merchandise, the name of the country of exportation, certain shippers or producers involved, the date of the receipt of information in proper form, and the appropriate basis of comparisons for fair value purposes. PAGENO="0215" 2001 [Time Limit on Provisional Measures] International Antidumping Code: 10 (d) The imposition of prdvisional measures shall be limited to as short a period as possible. More specifically, provisional measures shall not be imposed for a period longer than three months or, on decision of the authorities concerned upon request by the exporter and the importer, six months. Antidumping Act, 1921, As Amended: Section 201 (b) requires appraisement to be withheld "until such order of the Secretary" or until the results of an injury investigation are made public. Thus, there is no such 3 months time limit as is contained in Article 10 (d) of the International Code. S. 1726 (90th Congress): The Amendment would impose a limitation of six months on Treasury proceedings--and has an "escape valve" for added time when needed. The provision is a reasonable one; in 1954 Congress limited Tariff Commission "injury" investigations to three months. Section: 6 (212 (e)]. Comment: The 3-months time limit would be an incentive to keep on importing at dumped prices beyond the 3-month period because all dumped imports after that time would be home free (in the absence of a new investigation and the corresponding provisional measures). 10(e) (Other Limits on Provisional Measures] International Antidumping Code: 10 (e) "The relevant provisions of Article 8 shall be followed in the application of provisional measures Comment: The intended scope of this provision is unclear without further clarification by negotiators of the International Code. PAGENO="0216" 2002 Article 11 Retroactivity [General Rule] International Antidumping Code: Article 11 Antidumping duties and provisional measures shall g~ly be applied to products which enter for consumption aft~ the time when the decision taken under Articles 8(a) and 10(a), respectively, enters into force, except that in cases: Antidumping Act, 1921, As Amended: Section 202 (a) allows reach-back for unappraised entries made ~ to 120 days before question of dumping was raised. U.S. Treasury Regulations: Section 14.9 (a) provides that if the Withholding of Appraisement Notice finds the proper basis of comparison for fair value purposes is Exporter's Sales Price or if the notice does not specify the appropriate basis of comparison, the withholding of appraisement is retroactIve 120 days before the question of dumping was raised; if p~ghase price is the proper basis, the withholding of appraisement starts after the date of publication of such notice. This provision that dumping duties will no longer be assessed retroactively in cases where purchase price is controlling as the basis for comparison with foreign market value is reasonable since Importers in such cases are not related by ownership or control to their foreign supplier, and hence cannot be presumed to know the home market price of the forelpn supplier. 14.9 (a). Comment: The general rule of Article 11 is no retroactivity with certain exceptions. Section 202 (a) of U.S. law merely sets outside limit of 120 days on retroactivity. Treasury can, reduce the length of this reach-back to less than 90 days by regulation without violating U.S. law. PAGENO="0217" 2003 Retroactivity (Cont' d) [Exception: For Duration of Provisional Measures] [Exception: Final Duty Limited by Provisional Duty] International Antidumping Code: 11(1) Where a determination of material iniu~y (but not of a threat of material injury, or of a material retardation of the establishment of an industry) is made or where the provisional measures consist of p~pvisional duties and the dumped Imports carried out during the period of their application would, in the absence of these provisional measures, have caused material injury, antidumping duties may be levied retroactively for the period for which provisional measures, if any, have been applied. If the antidumping duty fixed In the final decision is higher than the provisionally paid duty, the difference shall not be collected. If the duty fixed in the final decision is lower than the pri~vlslonally pald duty or the amount estimated for the purpose of the security, the difference shall be reimbursed or the duty recalculated, as the case may be. ~nt1dumping Act, 1921, As Amended: Section 202 (a) limits retroactivity to a reach-back for unappraised entries made up to 120 days before question of dumping was raised. Comment: Retroactivity Is limited to the period covered by provisional measures. However, since provisional measures would have a limited 3-month life,as per Article 10 (d), the application of antidumping duties would also be limited to those products entered within the 3-month operation of provisional measures. If the investigation took longer to complete than 3 months after the start of provisional measures, all entries after the 3-month period could be dumped with impunity. Where no provisional measures were taken at all, there would seem to be no basis for any retroactivity. PAGENO="0218" 2004 Retroactivity (Cont' d) [Exception: Unrelated Suspension] International Antidumping Code: 11 (ii) Where appraisement is suspended for the product in question for reasons which arose before the initiation of the dumping case and which are ~nrelated to the question of dumpi~g~, retroactive assessment of antidumping duties may extend back to a period not more than 120 days before the submission of the complaint. Antidump~ng Act, 1921, As Amen~4: Section 202 does not require, as does Article 11 (ii) of the International Antidumping Code, that the 120 day reach-back before submission of the complaint only apply to entries on which appraisement was suspended "for reasons which arose before the initiation of the dumping case and which are unrelated to the question of dumping." Comment: Article 11 (ii) seems to make a concession to 120-day reach-back provision in U.S. law but limits this to exclude products on which appraisement was suspended after the initiation of the dumping case for reasons related to the question of dumping. Thus, any suspension of appraisement after initiation of complaint and before provisional measures (see Article 11 (i)) would not be subject to dumping duty. [This would seem to be aimed at informal withholding or "foot dragging" by appraisers sympathetic to complainant; the "workload" excuse would still seem to be unaffected because "unrelated to the question of dumping. "] PAGENO="0219" 2005 Retroactivity (Cont'd) [Exceptions: Historic and Sporadic Dumping] International Antidumping Code: 11 (iii) Where for the dumped product in question the authorities determine (a) either that there is a history of dumping which caused material injury or that the importer was, or should have been, aware that the exporter practices dumping and that such dumping would cause material injury, and (b) that the material injury is caused by sporadic dumping (massive dumped imports of a product in a relatively short period) to such an extent that, in order to preclude it recurring, It appears necessary to assess an antidumping duty retro- actively on those imports, the duty may be assessed on products which were entered for consumption not more than 90 days prior to the date of application of provisional measures. Antidumping Act, 1921, As Amended: No special provision for historical or sporadic dumping In the U.S. law. The 90-day reach-back provision of Article 11 (iii) does not add anything not contained in the present U. S. law which allows a 120 day reach-back, except that in situations described in Section 14.9 (f) of the Treasury Regulations, where purchase price is the basis for comparison with foreign market value, retroactivity which is not allowed under Section 14.9 (f) of the Treasury Regulations would be possible under Article 11 (iii) if the importer should have known about the exporter's practice of dumping and that material Injury would be caused thereby. Comment: As a practical matter, since provisional measures would only be initiated upon a preliminary decision of dumping and sufficient evidence of injury, any benefits of such 90-day "reach-back" may be watered down by a delay in reaching such preliminary decision. For example, If such decision is reached 30 days after complaint, the "reach-back" would only be retroactive 60 days before the complaint, etc. The Treasury could completely negate the effectiveness of this provision by delaying its preliminary decision untIl 90 days after complaint so that there could be no reach-back to entries made before the complaint. PAGENO="0220" 2006 Antidumping Action on Behalf of A Th1rd_Co~~ry Article 12 International Antidumping Code: (a) An application for antidumping action on behalf of a third country shall be made by the authorities of the third country requesting action. (b) Such an application shall be supported by price information to show that the imports are being dumped and by detailed information to show that thE alleged dumping is causing injury to the domestic industry concerned in the third country. The government of the third country shall afford all assistance to the authorities of the importing country to obtain any further information which the latter may require. (c) The authorities of the importing country in considering such .an application shall consider the effects of the alleged dumping on the industry concerned ~ a whole in the third countryj that is to say the injury shall not be assessed in relation only to the effect of the alleged dumping on the industry's exports to the importing country or even on the industry's total exports. (d) The decision whether or not to proceed with a case shall rest with the importing country. If the importing country decides that it is prepared to take action, the initiation of the approach to the CONTRACTING PARTIES seeking their approval for such action shall rest with the importing country. Article VI, GATT: 6(b) The Contracting Parties may waive the requirement of subparagraph of this paragraph so as to permit a contracting party to levy an antidumping or countervailing duty on the importation of any product for the purpose of offsetl dumping or subsidization which causes or threatens material injury to an indu~ in the territory of another contracting party exportiflg the product concerned to territory of the importing contractin~g party. Comment: Although there is no comparable concept in U . S. law or regulations, by having originally subscribed to Article VI of GATT, the U.S. might be deemed to have accepted this provision in principle. Insofar as the Antidumping Act, * 1921, as amended requires injury to be measured in terms of whether an in the United States" is being or is likely to be injured, it would seem to reqi~ a change in U.S. law to authorize the Tariff Commission to find~injury to a th country. PAGENO="0221" 2007 Article 13 [Accession, Effective Date] International Antidup~ping Code: This Agreement shall be open for acceptance, by signature or otherwise, by contracting parties to the General Agreement and by the European Economic Community. The Agreement shall enter into force on 1 July 1968 for each party which has accepted it by that date. For each party accepting the Agreement after that date, it shall enter into force upon acceptance. Comment: Was signed for the United States by Ambassador Michael Blumenthal in Geneva, Switzerland on June 30, 1967. Article, 14 [Conformity to Code] Each party to this Agreement shall take all necessary steps, of a general or particular character, to ensure, not later than the date of the entry into force of the Agreement for it, the conformity of its laws, ~gulations and administrative procedures with the provisions of the Antidumping Code. Article 15 [Notice of Changes to GATT] Each party to this Agreement shall inform the CONTRACTING PARTIES to the General Agreement of any ~bg~ in its antidumping laws and regulations and in the administration of such laws ~nd regulations. Article 15 [Annual Roport to GATT] Each party to this Agreement shall report to the ~NTRACTING PARTIES annually on the administration of its ~ntidumping laws and regulations, giving summaries of the cases in which antidumping duties have been assessed definitively. Article 17 [Consultation with GATT Committee on Antidumping Practices] The parties to this Agreement shall request the CONTRACTING PARTIES to establish a Committee on AntidumpingPractices composed of representatives of the parties to this Agreement. The Committee shall normally meet once each year for the purpose of affording parties to this Agreement the opportunity of consulting on matters relating to the administration of antidumping systems in any participating country or customs territory as it might affect the operation of the Antidumping Code or the furtherance of its objectives. Such consultations shall be without prejudice to Articles XXII and XXIII of the General Agreement. PAGENO="0222" Appendix A TITLE OF ARTICLE MANDATOEX PERMISSIVE AFFECTED INVESTIGATIQN 8. Imposition & Collection of Anti- dumping Duties 8 (a) (Part] Discretion of Authorities (b) (Part] Suppliers Named (c) Duties Limited by Dumping Margin (d) (Part] Basic Price System (e) (Part] Dumping Cessation in Regional Markets 8 (a) (Part] Discretion of Authorities (b) (Part] Suppliers Named (d) [Part] Basic Price System (e) (Part] Dumping Cessation in Regional Markets Dumping, Injury Dumping Dumping Dumping Injury 12. Antidumping Action on Behalf of a Third Country 13 -17 Final Provisions Duration of Dumping Duties 10 (a) Preliminary Decision Required (c) Notice of Provisional Measures (d) Time Limit on Provisional Measures Ce) Other Limits on Provisional Measures 11 General Rule 11 (i) (Part] Exception:Final Duty Limited by Provisional Duty 10 (b) Forms of Provisional Measures 11(i) [Part] Exception: For Duration of Provisional Measures 1 1(u) Exception: Unrelated Suspension (iii) Historic and Sporadic Dumping 12 (d) Implementation of Article 12 Dumping, Injury Dumping, Injury Dumping Dumping Dumping, Injury Dumping Dumping, Injury 9. Duration of Dumping Duties 10. Provisional Measures 11. Retroactivity Dumping Dumping, Injury Dumping, Injury 12 (a) (b) (c) 13 Accession; Effective Date 14 Conforming to Code 15 Notice of Changes to GATT 16 Annual Report to GATT 17 Consultation with GATT Committee on Antidumping Practices PAGENO="0223" Appendix A International Antidumping Code Tabular Summary of Mandatory and Permissive Provisions 3. Determination of Material Injury, Threat of Material Injury and Material Retardation 5 (b) [Part]- Simultaneous Dumping & Injury Investigations (c) [Part] Dismissal of Insubstantial Complaints (d) No Customs Clearance Delay 6 (a) Right to Present Evidence (b) Right to Examine Evidence (c) Confidential Information (f) [Part] Notice of Investigation (g) Confrontation & Rebuttal (h) Notice of Determination PERMISSIVE 2 (c) Trans-shipments (d) [Part] 3rd Country Sales (e) Unreliable Prices (f) [Part] Unreliable Prices (g) State Trading Monopolies 5 (a) Substantiation of Complaint (b) Simultaneous Dumping and Injury Investigations (c) [Part] Dismissal of Insub- stantial Complaints (d) Confidentiality Unwarranted (e) Foreign Investigations (f) [Part] Notice of Investigation (i) Preliminary Determinations 7 (a) Conditions for Terminating Investigations (b) [Part] Exceptions and Consequences AFFECTED INVESTIGATION Dumping, Injury Dumping Dumping, Injury Dumping Dumping Dumping Dumping Dumping Dumping, Injury Dumping, Injury Dumping, Injury Dumping Dumping, Injury Dumping, Injury Dumping, Injury Dumping, Injury Dumping Dumping Dumping, Injury Dumping Dumping, Injury Dumping, Injury Dumping, Injury TITLE OF ARTICLE 1. Antidumping Code 2. Determination of Dumping MANDATORY Code, the Exclusive Remedy 2 (a) Fair Value v. Normal Value (b) Like Product 2 (d) [Part] 3rd Country Sales (f) [Part] Adjustments for Differences 3 (a) Principal Cause of Material Injury Injury (b) Forms of Injury Injury (c) Contributing Cause Injury (d) Competitive Product Market Injury (e) Threat of Injury Injury (f) Threat of Injury Injury t>Z) 4 (a) [Peril National Markets ---~-~----~- 4 (a)-[Part] Regional Markets Injury - - (b) Integrated-Countries Markets Injury (c) Geographic/Product Markets Injury 4. Definition of Industry - - - - 5. Initiation & Subsequent Investigation 6. Evidence 7. Price Undertakings 7 (b) [Part] Exceptions & Consequences PAGENO="0224" 2010 Appendix B AGRE~ENT ON IMPL~{~NTATION OF iRTICLE VI OF TH~ G~ERAL AGRE~~T ON TARIFFS AND TRADE The parties to this Agreement, Considering that Ministers on 21 May 1963 agreed that a significant libera- lization of world trade was desirable and that the comprehensive trade negotia- tions, the 1964 Trade Negotiations, should deal not only with tariffs but also with non-tariff barriers; Recc~gnizing that anti-dumping practices should not constitute an unjusti- fiable impediment to international trade and that anti-dumping duties may be applied against dumping only if such dumping causes or threatens material injury to an established industry or materially retards the establishment of an industry; Considering that it is desirable to provide for equitable and open pro- cedures as the basis for a full examination of dOriping cases; and Desiring to interpret the provisions of Article VI of the General Agreement and to elaborate rules for their application in order to provide greater uni- formity and certainty in their implementAtion; Hereby agree as follows: PART I - ANTI-DUMPING CODE Article 1 The imposition of an anti-dumping duty is a measure to be taken only under the circumstances provided for in Article VI of the General Agreement. The following provisions govern the application of this Article, in so far as action is taken under anti-dumping legislation or regulations. A. DET1~NINATION OF DUMPING Article 2 (a) For the purpose of this Code a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than *its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country. (b) Throughout this Code the term "like product" ("produit similaire") shall be interpreted to mean a product which is identical, i.e. alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has charac- teristics closely resembling those of the product under consideration. PAGENO="0225" 2011 (c) In the case where products are not imported directly from the country of origin but are exported to the country of. importation from an intermediate country, the price at which the products are sold. from the country of export to the country of importation shall normally be compared with the comparable price in the country of export. However, comparison nay be rIade with the price in the country of origin, if, for example, the products are merely trans..shipped through the country of export, or such products are not produced in the country of export, or there is no comparable price for then in the country of export. (d) When there are no eales of the like product in the ordinary course of trade in the domestic narket of the exporting country or when, because of the particular market situation, such sales do not permit a proper comparison, the ilargin of dumping shall be determined by comparison with a conparabie price of the like product when exported to any third country which may be the highest such export price but should be a representative price, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and any other costs and for profits. As a general rule, the addition for profit shall not exceed the profit normally realized on sales of products of the SaT:le general category in the domestic market of the country of origin. (e) I~ cases where there is no export price or where it appears to the authorities concerned that the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or. a third party, the export price clay be constructed on the basis of the p~ice at which the imported products are first resold to an independent buyer, or if the products are not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as the authorities may determine. (f) In order to effect a fair cociparicon between the export price and the domestic price in the exporting country (or the country of origin) or, if appli- cable, the price established pursuant to the provisions of Article VI:l(b) of the Deneral Agreement, the two prices shall be compared at the same level of trade, normally at the cx factory level, and in respect of sales made at as nearly as possible the saiie tine. Due allowance shall be mAde in each eAse, cm its merits, Icr the differences in conditions and terms of sale, for the differences in taxa- tion, and for the other differences affacting price comparability. In the eases referred to in Article 2(e) allowance for costs, including duties and taxes, in- ~urred between importation and resale, and for profits accruing, should also be made. (g) This Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I of the General Agreement. 1when in this Code the term `authoritiest' is used, it shall be interpreted ~s meaning authorities at an appropriate, senior level. 95-159 0 - 68 - pt. 5 - 15 PAGENO="0226" 2012 B. D~~NATION OF M&T~RIAL INJURL TBRE~T OF M&TERIA~.I~ INJURY AND MkTERIAL R~ARDATION Article ~ Determination of Iniur~ (a) A determination of injury shall be made only when the authorities concerned are satisfied that the dumped imports are demonstrably the principal cause of material injury or of threat of material injury to a domestic industry or the principal cause of material retardation of the establishment of such an industry.~ In reaching their decision the authorities shall weigh, on one hand, the effect of the dumping and, on the other hand, all other factors taken to- gether which may be adversely affecting the industry. The determination shall in all cases be based on positive findings and not on mere allegations or hypo- thetical possibilities. In the case of retarding the establishment of a new industry in the country of importation, convincing evidence ofthe forthcoming establishineiit of an industry must be shown, for example that, the plans for a new industry have reached a fairly advanced stage, a factory is being con- structed or machinery has been ordered. (b) The valuation of injury - that is the evaluation of the effects of the dumped imports on the industry in question - shall be based on examination of all factors having a bearing on the state of the industry in questions such as: development and prospects with regard to turnover, market share, profits, prices (including the extent to which the delivered, duty-paid price is lower or higher than the comparable price for the like product prevailing in the course of normal commercial transactions in the importing country), export performance, employment, volume of dumped and other imports, utilization of capacity of domestic industry, and productivity; and restrictive trade practices. No one or several of these factors can necessarily give decisive guidance. (c) In order to establish whether dumped imports have caused injury, all other factors which,. individually or in combination, uay be adversely affecting the industry shall be examined, for example: the volume and prices of undumped imports of the product in question, competition between the domestic producers themaelves, contraction in demand due to substitution of other products or to changes in consumer tastes. 1~When in this Code the term "injury" is used, it shall, unless otherwise specified, be interpreted as covering cause of material injury' to a domestic industry, threat of material injury .to a domestic industry or material retar- dation of the establishment of such an industry. PAGENO="0227" 2913 (d) Th~ ci'fect of tho du~cd i~ports shall bc asacs~cd in relation to the domestic production of the like product when available data permit the separate identification of production in terms of such criteria as: the production pro- cess, the producers' realizations, profits. When the domestic production of the like product has no separate id~i~tiL~ in these terms the effect of the dumped imports shall be assessed by the examination of the production of the narrowest group or range of products, which includes the like product, for which the necessary information can be provided. (e) A determination of threat áf material injury shall be based on facts and not merely on allegation, conjecture or remote possibility. Th~ change in circumstances which would create a situation in whic~i the dumping would cause material injury must be clearly foresden and imminent.'- (f) With respect to cases whth'e material injury is threatened by dumped imports, the application of anti-dumping measures shall be studied and decided with special care. Article 4 Definition of Industry (a) In determining injury ~the tern `domestic industry" shall be inter.- preted as referring to the domestic prcducers as a whole of the like produ~ts or to those of then whose collective output of the products constitutes a major proportion of the total domestic production of those products except that (i) when producers are importers of the allegedly dunped.product the in- dustry may be interpreted as referring to the rest of the producers; (ii) in exceptional circumstances a country may, for the production: in question, be divided into two or more competitive markets and the producers within each market regarded as a separate industry, if, because of transport costs, all the producers within such a market sel-l all or almost all of their production of the product in question in that market, and none, or almost none, of the product in question produced elsewhere in the country is sold in that market or if there exist special regional marketing conditions (for example, tra-. ditional patterns of distribution or consumer tastes) which result in an equal degree of isolation of the producers in such a market 1One example, though not an exclusive one, is that there is convincing reason to believe that there will be, in the immediate future, substantially increased importations of the product at dumped prices. PAGENO="0228" 2014 from the rest of the industry, providd, however, that injury may be found in such circumstances only if there is injury to all or almost all of the total production of the product in the market as defined. (b) l4here two or more countries have reached such a level of integration that they have the characteristics of a single, unified market, the industry in the entire area of integration shall be taken to be the industry referred to in Article 4(a). (c) The provisions of Article 3(d) shall be applicable to this Article. C. INVESTIGATION AND ADMINISTRATION PROCEDURES Article 5 Initiation and Subsequent Investigatio~~ (a) Investigations. shall normally be initiated upon a request on behalf of the industry~- affected, supported by evidence both of dumnpin~ and of injury resulting therefrom for this industry. If in special circumstances the authorities concerned decide to initiate an investigation without having received such a request, they shall proceed only if they have evidence both on dumping end on injury resulting therefrom. (b) Upon initiation of an investigation and thereafter, the evidence of both dumping and injury should be considered simultaneously. In any event the evidence of both dumping and injury shall be considered simultaneously in the decision whether or not to initiate an investigation, and thereafter, during the course of the investigation, starting on a date not later than the earliest date on which provisional measures may be applied, except in the cases provided for in Article 10(d) in which the authorities accept the request of the exporter and the importer. (c) An application shall be rejected and an investigation shall be ter- minated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either dumping or of injury to justify pro- ceeding with the case. There should be immediate termination in cases where the margin of dumping or the volume of dumped imports, actual or potential, or the injury is negligible. (d) An anti-dumping proceeding shall not hinder the procedures of customs clearance. 1As defined in Article 4. PAGENO="0229" 2015 Article 6 Evidence (a) The foreign suppliers and all other intei~ested parties shall be given ample opportunity to present in writing all evidence that they con- sider useful in respect to the anti-dumping investigation in question. They shall also have the right, on justification, to present e~iidence orally, (b) The authorities concerned shall provide opportunities for the con- plainant and the importers and exporters known t be concerned and the governments of the `exporting countries-, ~o see all informatIon that is relevant to the presentation of their cases, that is not confidential as de- fined in paragraph (c) below, and that is used by the authorities in an anti-dumping investigation, and to prepare presentations on the basis of this information. (c) All information which is by nature ôonfidential (for example, because its disclosure would be of significant competitive advantage to a competitor or because its disclosure would have a significantly adverse! effect upon a person supplying the infornation or upon a person from whom he acquired the information) or which is provided on a confidential basis by parties to an anti-dumping investigation shall be treated as strictly confi- dential by the authorities concerned who shall not reveal it, without specific permission of the party subr4tting such information. (d) However, if the authorities càncerned find that a request for con~ fidentiality. is not, warranted and if the supplier is either unwilling to make the information public or to authorize its disclosure in generalized or' summary form, the authorities would be free to disregard such information unless it can, be demonstrated to their satisfaction from appropriate sources that the information is correct. (e) In order to verify information provided or to obtain further de- tails the authorities nay carry out investigations in other' countries as required, provided they obtain the agreement of the firms concerned and pro- vided they notify the representatives of the government of the couittry in question and unless the latter object to the investigation. (f) Once the competent authorities are satisfied that. there is sufficient evidence to justify initiating an anti-dumping investigation pur- su.ant to Article 5 representatives of. the exporting country and the exporters and iraporters 1mo~rn to be concerned shall be notified and a public notice may be published. (g) Throughout the anti-dumping investigation all parties shall have a full opportunity for the defence of their interests. To this end, the authorities concerned shall, on request, provide opportunities for all directly interested parties to meet those parties with adverse interests, so PAGENO="0230" 2016 that opposing views nay be presented and rebuttal arguments offered. Provision of such opportunities must take account of the need to preserve confidentiality and of the convenience to the parties. There shall be no obligation on any party to attend a meeting and failure to do so shall not be prejudicial to that party's case. (h) The authorities concerned shall notify representatives of the ex- porting country and the directly interested parties of their decisions re- garding imposition or non-imposition of anti-dumping duties, indicating the reasons for such decisions and the criteria applied, and shall, unless there are special reasons against doing so, make public the decisions. (i) The provisions of this Article shall not preclude the authorities from reaching preliminary determinations, affirmative or negative, or fror~ applying provisional measures expeditiously. In cases in which any interested party withholds the necessary information, a final finding, affirmative or negative, may be made on the basis of the facts available. Article 7 Price Undertakin~e (a) Anti-dumping proceedings may be terminated without imposition of anti-dumping duties or provisional measures upon receipt of a voluntary under- taking by the exporters to revise their prices so that the margin of dumping is eliminated or to cease to export to the area in ~question at dumped prices if the authorities concerned consider this practicable, e.g. if the number af exporters or potential exporters of the product in question is not too great and/or if the trading practices are suitable. (b) If the exporters concerned undertake during the examination of a case, to revise prices or to cease to export the product in question, and the authorities concerned accept the undertaking, the investigation of injury shall nevertheless be completed if the exporters so desire or the authorities con- cerned so decide. If a determination of no injury is made, the undertaking given by the exporters shall automatically lapse unless the exporters state that it shall not lapse. The fact that exporters do not offer to give such undertakings during the period of investigation, or do not accept an invita- tion made by the investigating authorities to do so, shall in no way be pre- judicial to the consideration of the case. However, the authorities are of course free to determine that a threat of injury is more likely to be realized if the dumped imports continue. PAGENO="0231" 2017 D. -DUMPING DUTIES PROVISIQ~J2~~ Article S ~onandCoUectiAnti-Dunrnk~.~es- (a) The decision whether or no~ to impose an anti-dumping duty in cases where all requirenents for the imposition have been fulfilled and the decision whether the amount of the anti-dumping duty, to be imposed shall be the full margin of dumping or less, are decisions to be made.b~, the authorities of the importing country or customs te~ritory. It is desirable that the impositton be permissive in all countries or customs territorie~ parties to this Agreernc.nt, and that the duty be less than the margin. if ~uch ~esser d~ity would be adequate to remove the injury to the done~tic industry. (b) When an anti-dumpIng duty is imposed in respect of any produnt, such anti-dumping duty shall be levied, in the appropriate amounts in each caso, on a non-discriminatory basis on imports of such product from a~.1 sou:c~s fou"i'Lu be dumped and causing injury. The authorities shall name the supplier or suppliers of the product concerned. If, however, several suppliers from the came country are involved, and it is impracticable to name all, these suppliers, the authorities may name the supplying country concerned. If several suppliers from more than one country are involved,' the authorities may name either all the suppliers involved, or, if this is impracticable, all the supplying countries involved~ . 1. (c) The amount of the anti-dumping duty nust not exceed the margin of dumping. as established under Article 2, Therefore, if subs~quent to the application of' the. anti-dumping duty it is found that the dt~;y so coj.lected exceeds the'aotual dumping margin, the amount in excess of the margin shall be reimbursed as quickly as possible. (d) Within a basic price system the following rules shall apply provided that their application is consistent with the other çro~isions of this Code: If several suppliers from one `or more countries are involven, anti- dumping duties may be imposed on imports of the product in question found to have been dumped and to be causing injury from the country or countries concerned, the duty being equivalent to the' amount by which the export price is less than the basic price established for this purpose, not exceeding th~ lowest normal price in the supplying country or countries where normal conditions of competition ore prevailing. It is understood that for products which are sold below this already established basfc price a new anti-dumping investigation shall be carried out in each particular case, when so demanded by. the interested parties and the demand is supported by relevant evidence. In cases where no dumping is found, anti-- dumping duties collected shall be reimbursed as quickly as possible. Furthermore, if it can be found that the duty ez collected exceeds the actual dumping margin, the amount in excess ~f the margin shall be reimbursed as quickly as possible. PAGENO="0232" 2018 (e) ~then the industry has been interpreted as referring to the producers in a certain area, i.e. a parket as defined in Article 4(a)(ii), anti-dumping duties shall only be definitively collected on the products in question, con- signed for final consumption tothat area, except in cases where the exporter shall, prior tc the imposition of anti-dumping duties, be given an opportunity to cease, dumping in the area concerned * In such cases, if an adequate assurance to this effect is promptly given, anti-dumping duties shall net be imposed, ,provided, however, that if the assurance is not given or is not fuU~i1led, the duties may be imposed without limitation to an area. Article 9 Dur&tion of'Anti-Dusjping Duties (a) An anti.dumping duty shall remain in force only as long as it is neces~ary in order to counteract dumping which is causing injury. (b) The authorities concerned shall review' the need for the continued imposition of the duty, where warranted, *n their own initiative or if interested suppliers or importers of the product so request and sutcit inforina- tion substantiating the need for review. Article 10 Provisional Me&sm~es (a) Provisional measures may be taken only when a preliminary decision has been taken that there ~is' dumping and' when there is sufficient evidence of injury. (b) Provisional measures may take the form, of a provisional duty or, preferably, a security - by deposit or `bend - equal to the amount of the anti- dumping duty. provisionally estimated, being not greater than the provisionally estimated margin of' `dumping. Withholding of appraisement is an appropriate provfsional measure `provided' that the normal duty and the estimated amount of the anti-dumping duty be indicated and as long as the withholding of appraise- ment is subject to the same conditions as other provisional measures. (c) The authorities concerned shall inform representatives of the exporting country and the directly interested parties of their decisions regarding imposition of *provisional measures indicating the reasons for such decIsions and the criteria applied, and shall, unless there are special reasons again~t doing so', make public such decisions. (d) The imposition of provisional measures shall be limited to as short a period as possible. More specifically, provisional measures shall not be imposed for a period longer than three months or, on decision of the authorities' concerned upon request by the exporter and the importer, six months. (e) The relevant provisions of Article ~ shall be followed in the application of provisional measures. PAGENO="0233" 2019 ArticlO 11 RetTeactivitx Anti-dumping duties and provisional neaa~ires ehali or4y be applied to products ~c~'enter for consuinptib~ after the tithe when the decision taken under Artic1e~ .8(a) and 10(a), respectively, enters into force, except that In cases: (i) Where a determination of material injury (t*it not or a threat of material injury, or of. a inat~riaI retai'dation of the establishment of an industry) is made or where the provisional measures consist of provisional duties and the dtvnpe~: imports carried . outrduring the period of their application would, in the absence of these provisional measures, have caused material injury, anti-dumping duties thay be levied rçtzoactively for the period for which trovisional measureO, ~if any, have been applied. I~ the anti-dumping duty fixed in the final decision is higher than the provisionally paid duty, the difference shall hot be colleOted. If the.duty fixed .in the final decisi6n is lower than thO'provisiónaliy paid duty or the amount estimated for the purpose of the security, the differ- ence shall be reimbursed or the duty recalculated, as the case may be. (ii) Where appraisement is suspended for the product in question for reasons which arose before the .initiatiom~ of the dumping casO and which are unrelated to the question of dumping, retroactive asseasment : of anti- d~nnping duties may extend back to a period not more than. 12.0 days. before the suhmission of the cc~pláint. (iii) Where for the dumped product in question.the authorities determine (a) either that there is a, history of "dumping . which, caused material injury or that the importer was, or should haye been, aware that the exporter practices dumping and that ouch dumping would cause material injury, and (b) that the material: inju~'y j8 caused by sporadic dumping (massive duiliped imports of a product in a relatively shàrt period) to such an extent that, in order to preclude it recur.- ring, it appears necessary ~ assess an .ant1-duL~4ng duty retroactively on those imports. the duty may be assessed on products which :were entered far consumption not more than 90 days prior, to the date of application of provisional measures. PAGENO="0234" 2020 E~ ~MPIW~ ACTION ON ~IALF ~ A `flIED COUNT~ Article 12 (a) An application for anti-4~ing action on beha].f:~ of a third country shall be made by the aut~orities of the third country requesting action. (b) -SiuI~ an applièation shall be supported by price information to show that the~i~orta are being dumped and by detailed information to show that the alleged di~ing is causing injury to the domestic industry concerned in the third country. The government of the third country shall afford all assistance to the ant»=x,rities of the importing country tb obtain any further information which the latter may require. (~e) The authorities of the importing country in. c~nsidering such an application shall consider the effects- of the alleged dumping on the industry concerned as a whole in the third country; that is -to say the injury shall not be aaseaeed in relation only to the effect of the alleged dumping on the induetry~e exports to the importing, country or even on the~ industry! a total exporta. (a) ThO:deciBion whether or nOt to proceed with a case shall rest with the importing country. If the importing country decides that it is prepared to take action, the initiation of the approach to the CONTR~C1TNG PARTIES seeking their approval for such action shall rest with the importing country. PART II .~FINAL PROVISIONS Article 13 Thin Agreement shall be open for acceptance, by signatur.e or otherwise, by contrasting parties to the General - Agreement and by the Ecropean Economic Coirziunity. The Agreement shall enter into force on 1 July 1968 for each party which has accepted it by that date. For~ each party accepting the Agreement after that `date, it shall enter into: force upon acceptance. Article 14 Each party to this Agreement &~]J. take all necessary uteps, of a general or particuls±~ character, to ensure, not later than . the date of the entry into force of the Agreement for it, the conformity of its laws,, regulations and ac]ininietrative procedures with the provisions of the -Anti-Dumping Code. PAGENO="0235" 2021 Article 15 Each party to this Agreement shall inform the CONTR~C1'rNG PARTIES to the Genera]. Agreement of any changes in its anti-dumping laws arid regulations and in the administration of such laws and regulations~ Article 16 Each party to this Agreement shall report to the CONTRACTING PARTIES annually on the administration of its ánti.~dunping laws and regulations, giving a~aries of the cases in which anti.dumping duties have been assessed deflni~vely. Article 17 The parties to this Agreement shall request the CONTRACTING PARTIES to establish `a Conmiittee on Anti-Dumping Practices composed of representatives of the parties to this Agreement. The Committee shall normally meet once each year tor the purpose of affording partieó `to this Agreement the opportunity of consulting an matters relating to the administration :of anti-dumping systeme ir any participating country or customs territory as it might affect the ,opc~r~t~ cn of the Anti-Dumping Code or the furtherance of it8 objectives. Sttch co~:~ I tioua shall be without prejudice to. Articles mI and XXIII of the Genev4 Agreement. . . . This : Agreement shall be deposited with . the Director~4enera1 to the CONThACTI~G PARTIES who shall promptly furnish a certified copy thereof and a notificatfon of' each acceptance thereQf to each contracting party t~ the Genera.]. Agreement and to the EcropOan Economic Community. This Agreement phall be registered in accordance with the provisions, of Article `102* of the Chhrtei~ of `the United Nations. DONE `at Geneva this thirtieth day of June, one thousand nine hundred and sixty-seven, in a single copy, in the Ehglish and French languages; both texts being authentic. PAGENO="0236" 2022 Appendix C THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) * * * Article VI Anti-dumping and Countervailing Duties 1. The contracting parties recognize that dumping, by which products of one country are introduced into the com- merce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purposes of this Article, a product is to be considered as being Introduced Into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another (a) is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or, (b) in the absence of such domestic price, is less than either (i) the highest comparable price for the like product for export to any third country in the ordinary course of trade, or (ii) the cost of production of the product inthe country of origin plus a reasonable addition for selling cost and profit. Due allowance shall be made in each case for differences in conditions and terms of sale, for differences in taxation, and for other differences affecting price comparability. 2. In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti-dumping duty not greater in amount than the margin of dumping in respect of such product. For the purposes of this Article, the margin of dumping is the price difference determined in accordance with the provisions of paragraph 1. - 3. No countervailing duty shall be levied on any product of the territory of any contracting party imported into the territory of another contracting party in excess of an amount equal to the estimated bounty or subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in the country of origin or exportation, including any special subsidy to the trans- portation of a particular product. The term "countervailing duty" shall be understood to mean a special duty levied for the purpose of offsetting any bounty or subsidy bestowed, directly or indirectly, upon the manufacture, production or export of any merchandise. 4. No product of the territory of any contracting party imported into the territory of any other contracting party shall be subject to anti-dumping or countervailing duty by reason of the exemption of such product from duties or taxes borne by the like product when destined for consumption in the country of origin or exportation, or by reason of the re- fund of such duties or taxes. 5. No product of the territory of any contracting party imported into the territory of any other contracting party shall be subject to both anti-dumping and countervailing duties to compensate for the same situation of dumping or export subsidization. PAGENO="0237" 2023 6. (a) No contracting party shall levy anyanti-dumpingor countervailing duty on the importation of any product of the territory of another contracting party unless it determines that the effect of the dumping or subsidization, as the case may be, is such as to cause or threaten material injury to an established domestic industry, or is such as to retard mate- rially the establishment of a domestic industry. (b) The CONTRACTING PARTIES may waive the re- quirement of sub-paragraph (a) of this paragraph so as to permit a contracting party to levy an anti-dumping or counter- vailing duty on the importation of any product for the purpose of offsetting dumping or subsidization which causes or threatens material injury to an industry in the territory of another contracting party exporting the product concerned to the territory of the importing contracting party. The CONTRACTING PA~RTIES shall waive the requirements of sub-paragraph (a) of this paragraph, so as to permit the levying of a countervailing duty, in cases in which they find that a subsidy is causing or threatening material injury to an industry in the territory of another contracting party export- ing the product concerned to the territory of the importing contracting party. (c) In exceptional circumstances, however, where delay might cause damage which would be difficult to repair, a contracting party r~nay levy a countervailing duty for the purpose referred to in sub-paragraph (b) of this paragraph without the prior approval of the CONTRACTING PARTIES; Provided that such action shall be reported immediately to the CONTRACTING PARTIES and that the countervailing duty shall be withdrawn promptly if the CONTRACTING PARTIES disapprove. 7. A system for the stabilization of the domestic price or of the return to domestic producers of a primary com- modity, independently of the movements of export prices, which results at times in the sale of the commodity for export at a price lower than the comparable price charged for the like commodity to buyers in the domestic market, shall be presumed not to result in material injury within the meaning of paragraph 6 if it is determined by consultation among the contracting parties substantially interested in the commodity concerned that: (a) the system has also resulted in the sale of the corn- modity for export at apricehigherthanthe comparable price charged for the like commodity to buyers in the domestic market, and (b) the system is so operated, either because of the ef- fective regulation of production, or otherwise, as not to stimulate exports unduly or otherwise seriously prejudice the interests of, other contracting parties. PAGENO="0238" PAGENO="0239" Appendix D NOTE The Antidumping Act~ 1921, ~is amended is set out as Footnote 14 on pages 1 7 through 25 CUSTOMS REGULATIONS RELATING TO PR0CEIgJBES UNDER ANTIDUMPING ACT, 1921 ASAMEND~ Revised. December 1961~ (2025) PAGENO="0240" 2026 Part 14 -- APPRAIS~EM 114.6 Suspected Bumping -- (a) If any appraiser or other princi- pal customs officer has knowledge of any grounds for a reason to be- lieve or suspect that any merchandise is being, or Is likely to be, imported into the United States at a purchase price or exporter's sales price less than the foreign market value (or, in the absence of such value, than the constructed value), as contemplated by sec- tion 201(b) Antidumplng Act, 1921, as amendedl1~ (19 U. S.c. 160(b)), or at less Lhaii its fair value as that term ih def'j~~~rJ in cectiin 14.7 he shall coinicate his belief or suspicion promptly to the Co~nissioner 01' Customs. Every such conaninication shall contain or he accompanied by a statement of substantially the sane information as required in paragraph (b), if in the possession of' the appraiser or othtr officer or readily available to him. ~b) Any person outside the Customs Service whe has ~niorzriation that merchandise is being, or is likely to be, imported into the United States under such circumstances as to br~ing it within the pur- view of the Antiduxping Act, 1921, as aznended,1~ may conaa~ica~c tu'fn information in writing to the Connaissioner of Customs. Every su'th conaninication shall contain or be aceompanied by the folJ.ow~ng: (1) A detailed description or sample of the merchandise; the name of the country from which it is being, or is likely to be, imported; the name of the exporter or ex- porters and producer or producers, if known; and the ports or probable ports of importation into the United States. If no sample is furnished, the Bureau of Customs may call upon the person who furnished the information to furnish samples of the imported and competitive domestic articles, or either. (2) Such detailed data as are reasonably available with respect to values and prices indicating that such inerchan- dise is being, or is likely to be, sold in the United States at less than its fair value, within the meaning of the Antiduxping Act, 1921, as amended, including information as to any differences between the foreign market value or constructed value and the purchase price or exporter's sales price which may be accounted for by any difference in taxes, discounts, incidental costs such as those for packing or freight, or other items. (3) Such information as is reasonably available to the per- son furnishing the information as to the total value and volume of domestic production of the merchandise in question. PAGENO="0241" 2027 (1~) Such suggestions as the person furnishing the infor- mation may have as to specific avenues of investigation to be pursued or questions to be asked in seeking perti- nent information. (c) If any information filed pursuant to paragraph (b) does not conform with the requirements of that paragraph, the Coimnissioner shall return the conununication to the person who submitted it with detailed written advice as to the respects in which it does not con- fOrm. (d)(l) Upon receipt pursuant to paragraph (a) or (b) of this section of information in proper form, (i) the Consnissioner shall conduct a summary in- vestigation. If he determines that the informa- tion is patently in error or that the merchandise is not being and is not likely to be in~orted in more than insignilicant; quantities he shall so advise the person who submitted the information and the case shall be closed. Otherwise, the Com- missioner shall publish a notice in the Federal Register that information in proper form has been received pursuant to paragraph (a) or (b) of this section. This notice, which may be referred to as the `Antidun~ing Proceeding Notice, will specify whether the information relates to all shipments of the merchandise in question from an exporting country, or only to shipments by certain persons or firms; in the latter case, only the names of. such persons and firms will be specified. The notice shall also specify the date on which infor- mation in prciper form was received and that date shall be the date on which the question of dun~ing was raised or presented for purposes of sections 201(b) and 202(a) of the Antidun~ing Act, 1921, as amended (19 U.S.C. 160(b) and 161(a)). The notice shall also contain a suzmnary of the information received. If a person outside the Customs Service raised or presented the question of du.n~ing, his name shall be included in the notice unless a deter- mination under section 1t~.6a of these regulations requires that his name not be disclosed. ii) The Coimnissioner shall thereupon proceed pron~tly to decide whether or not reasonable grounds exist to believe or suspect that the merchandise is being, or likely to be, sold at less than its foreign market value (or, in the absence of such value, than its constructed value). To assist him in making this decision the Commissioner, in his discretion, may 95-159 0 - 68 - pt. 5 - 16 PAGENO="0242" 2028 conduct a brief preliminary investigation into such matters, in addition to the invoice or other papers or information presented to him, as he may deem necessary. (2) If the Coimnissioner decides, after such preliminary investigation, if any, that reasonable grounds do exist to believe or suspect that the merchandise is being or is likely to be, sold at less than its foreign market value (or, in the absence of such value, than its con- structed value) he will thereafter proceed, by a full- scale investigation, or otherwise, to obtain such additional information, if any, as may be necessary to enable the Secretary to reach a determinatlon as pro- vided by section ll~.8(a). (3) [f Jie Conmissioner decides, after such preliminary investigation, if any, that reasonable grounds do not exist to believe or suspect that the merchandise is being, or is likely to be, sold at less than its foreign market value (or in the absence of such value, than its con- structed value), he will thereafter (i) proceed, by a full-scale investigation, or otherwise, to obtain such additional information, if any, as may be necessary to enable the `Secre- tary to reach a determination as provided by sec- tion llh8(a), or (ii) recoannend to the Secretary that a full-scale investigation is not warranted by the facts of the case and that the case be closed by a finding of no sales at less than fair value. (e) If the Coranissioner determines pursuant to paragraph (d)(l) (ii) of this section, or in the course of an investigation under para- graph (d)(3)(i) of this section, that there are reasonable grounds to believe or suspect that any merchandise is being, or is likely to be, sold at less than its foreign market value (or, in the absence of such value, than its constructed value) under the Antiduxping Act, he shall publish notice of that fact in the Federal Register, furnishing an adequate description of the merchandise, the name of each country of exportation, and the date of the receipt of the information in proper form, and shall advise all appraisers of his action. This notice may be referred to as the "Withholding of Appraisement Notice." If the belief or suspicion relates only to certain shippers or producers, the notice shall specify that this is the case and that the investigation is limited to the transactions of such shippers or producers. The notice shall also specify whether the appropriate basis of con~arison for fair value purposes is purchase price or exporter's sales price if PAGENO="0243" 2029 ~ufflcietL Information Is available to so state; otherwise a sup- plementory notice will be published in the Federal Register as soon as pc)ssIl).IP which will specify which of such prices i'~ the appropriate basis of. comparison for fair value purposes. Upon receipt of such advice, the appralnero shafl proceed to withhold appraisement in ac- cordance witti the pertinent provisions of section 114.9. (Sees. 201, 1407, 1~2 Stat. 11, as amended, 18; 19U.S.C. i6o, 173.) i14~on Diaciosure 01' information In antidumping proceedings.- (a) Information_gener~Ily available. In general, dli information, but not neecaisrily au documents, obtained by the Treasury Department, in- c1udiii~: LI' Ibireou 01 Customs, La connection with any antidumping pro- ceeding will ~e nimble for inspection or copying by any interented person, such as the producer of the merchandise, any importer, exporter, or domestic producer of merchandise similar to that which is the subject of the proceeding. With respect to documents prepared by an officer or employee ol' the United States, factudi material, as distinguished from recommendations and evaluations, contained in any such document will be made available by summary or otherwise on the same basis as information contained in other documents. Attention is directed to section 214~l2 relating to fees charged for providing copies of documents. (b) Requests for confidential treatment of information. Any per- son who submits information in connection with an antidumping proceeding may request that such information, or any specified part thereof, be held confidential. Information covered by such a request shall be set forth on separate pages from other information; and all such pages shall be clearly marked "Confidential Treatment Requested. The Commissioner of Customs or the Secretary of the Treasury or the delegate of either will determine, pursuant to paragraph (c) of this section, whether such information, or any part thereof, shall be treated as confidential. If it is so determined, the information covered by the determination will not be made available for inspection or copying by any person other than an officer or employee of the United States Government or a person who has been specifically authorized to received it by the person requesting cc)nfideati 0. treatment. If it Is determined that information submitted with such a request, or au~ part thereof, should not be treated as con- fidential, or that surimar:Lzed or approximated presentations thereof should be made available for disclosure, the person who has requested confidential treatment thereof shall be promptly so advised and, un. less he thereafter agrees that the information, or any specified part or summary or approximated presentations thereof, may be disclosed to all interenteci parties, the information will not be made available for disclosure, hut to the extent that it is self-serving it will be dis- regarded for `the purpose of the determination as to sales below fair value and no reliance shall be placed thereon in this connection. (c) Standards for determining whether information will be regarded as confidential. PAGENO="0244" 2030. (1) Information will ordinarily be considered to be confidential only if its disclosure would be of signif- icant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom he acquired the information. Further, if disclosure of information in specific terms or with identifying details would be in- appropriate under this standard, the information will or- dinarily be considered appropriate for disclosure in gen- eralized, summary or approximated form, without identifying details, unless the Commissioner of Customs or the Secretary of the Treasury or the delegate of either determines that even in such generalized, summary or approximated form, such disclosure would still be of significant competitive advantage to a competitor or would still have a significantly adverse effect upon a person supplying the information or upon a person from whom be acquired the information. As indicatec~. in (b), however, the decision that information is not entitled to protection from disclosure in its original or in another form will not lead to its disclosure unless the person supplying it consents to such disclosure. (2) Information will ordinarily be regarded as appropriate for disclosure if it (i) relates to price information; (ii) relates to claimed freely available price allowances for quantity purchases; or (iii) relates to claimed, differences in cir- cumstances of sale. (3) Information will ordinarily be regarded as confidential if its disclosure would (i) disclose business or trade secrets; (ii) disclose production costs; (iii) disclose distribution costs, except to the extent that such costs are accepted~ as justifying allowances for quantity or differences in circum- stances of sale; (iv) disclose the names of particular customers or the price or prices at which particular sales were made. (Sec. 1407, 142 Stat. 18; 19 U.S.C. 173.) PAGENO="0245" 2031 114.7 Fair Value. -- (a) Definit1on~-5 -- For the purposes of sec- tion 201(a) of the Antidumping Act, 1921, as amended (19 U.S.C. l60(a)), the fair value of the imported merchandise shall be ~teterrnined as follows: (1) Fair value based on price in country of exportation - the usual test. -- Merchandise imported into the United States will ordinarily be considered to have been sold, or to be likely to be sold, at less than fair value if the. purchase price or exporter's sales price (as defined in sections 203 and 2014, respectively, of the Antidumping Act, 1921, as amended (19 U.S.C. 162, 163)), as the case may be, is, or is likely to be, less than the price (as defined in sec- tion 205, after adjustment as provided for in section 202 of the Antidumping Act, 1921, as, amended (19 U.S.C. 1614, 161)), at which such or similar merchandise (as defined in section 212(3) of the Antidumping Act, 1921, as amended (19 U.S.C. 170a(3))) is sold for consumption in the coun- try of exportation on or about the date of purchase or agreement to purchase of the merchandise imported into the United 5tates if purchase price applies, or on or about the date of exportation thereof if exporter's sales price applies. (2) Fair value based on sales for exportation to countries other than the United States.-- If, however, it is demon- strated that during a representative period the c~uantity of such or similar merchandise sold for consumption in the country of exportation is so small, iri.relation to the quantity sold for exportation to countries other than the United States, as to be an inadequate basis for comparison, then merchandise imported into the United States will ordinarily be deemed to have been sold, and to be likely to be sold, at less than fair value if the purchase price or the exporter's sales price (as defined in sections 203 and 2014, respectively, of the Anti- dumping Act, 1921, as amended (19U.s.C. 162, 163)), as the case may be, is, or is likely to be, less than the price (as defined in section 205, after adjustment as provided for in section2D2 of the Ant.idumping Act, 1921, as amended (19 U.S.C. i614, 161)), at which such or similar merchandise (as defined in section 212(3) of the Antidumping Act, 1921, as amended (19 U.S.C. l7Oa(3))) is sold for exportation to countries other than the United States on or about the date of purchase or agreement to purchase of the merchandise imported into the United States if purchase price applies, or on or about the date of exportation thereof if exporter's sales price applies. (3) Fair value based on constructed value. -- If the inforina- tion available is deemed by the Secretary insufficient or inadequate for a determination under paragraph (a)(1) or (2) above, he will determine fair~1ue on the basis of the con- structed value as defined in sectiàn2D6 of the Antidumping Act, 1921, as amended (19 U.S.C. 165). PAGENO="0246" 2032 (b) Calculation of fair value.-- In calculating fair value under section 20]~aJ, Antidumping Act, l~2l, as azznded (19 U.S.C. 160(a)), the following criteria shall be applicable: (1) Quantities. In comparing the purchase price or exporter's sles~i~[ce, as the case may be, with such applicable criteria as sales or offers, on which a determination of fair value is to be based, reasonable allowances will be made for differences in quantities if it is established to the satisfaction of the Secretary that the amount of any price differential is wholly or partly due to such differences. In determining the question of allowances for differences in quantity, consideration will be given, among other things, to the practice of the industry in the country of exportation with respect to affording in the home market (or third country markets, where sales to third countries are the basis for comparison) discounts for quantity sales which are freely available to those who purchase in the ordinary course of trade. Allowances for price discounts based on sales in large quantities ordinarily will not be made unless (i) the exporter during the six months prior to the date when the question of dumping was raised or presented had been granting quantity discounts of at least the same magnitude with respect to 20 percent or more of such or similar merchandise which he sold in the home market (or in thIrd country markets when sales to third countries are the basis for comparison) and that such discounts had been freely available to all purchasers, or (ii) the exporter can demonstrate that the discounts are warranted on the basis of savings specifically attributable to the quantities involved. (2) Circumstances of sale . -- In comparing the purchase price or exporter's sales price, as the case may be, with the sales, or other criteria applicable, on which a determination of fair value is to be based, reasonable allowances will be made for bonn fide differences in circumstances of sale if it is established to the satisfaction of the Secretary that the amount of any price differential is wholly or partly due to such differences. Differences in circumstances of sale for which such al- lowances will be made are limited, in general, to those cir- cumstances which bear a reasonably direct relationship to the sales which are under consideration. Examples of differences in circumstances of sale for which reasonable allowances gen- erally will be made are those involving differences in credit PAGENO="0247" 2033 tree, guarantees, warranties, technical assistance, ser- viciug, and assumption by a seller of a purchaser's ad- yertising or other selling costs * Reasonable allowances Vill also generally be made for differences in conmissions. Except in those instances where it is clearly established that the differences in circtunstancf 5 of sale bear a rea. sonably direct relationship to the sales which are under consideration, allowances generally will not be made for differences in research and development costs, production costs, and advertising and other selling costs of a seller unless such costs are attributable to a later sale of mer- chandise by a purchaser; provided that reasonable allowances for selling expenses generally will be made in cases where a reasonable allowance is made for àoimnissions in one of the markets under consideration and no conunission is paid in the other market under consideration, the amount of such allowance being limited to the actual selling expense in- curred in the one market or the total amount of the com- mission allowed in such other market, whichever is less. In determining the amount of the reasonable allowances for any differences in circumstances of sale, the Secretary will be guided primarily by the effect of such differences upon the market value of the merchandise but, where appro- priate, may also consider the cost of such differences to the seller, as contributing to an estimate of market value. (3) Similar merchandise * In comparing the purchase price or exporter's sales price, as the case may be, with the selling price in the hone market, or for exportation to countries other than the United States, in the case of similar merchan- dise described in subdivisions (c), (D), (E), or (F) of section 212(3), Antidumping Act, 1921, as amended (19 U.S.C. l7Oa (3)), due allowance shall be made for differences in the merchandise. In this regard the Secretary will be, guided primarily by the effect of such differences upon the market value of the mar- chanxlise but, when appropriate, he may also consider differ- ences in cost of manufacture if it is established to his satisfaction that the amount of any price differential is wholly or partly due to such differences. ~) Offering price. In the determination of fair value, offers will be considered in the absence of sales, but an offer made in circumstances in which acceptance is not reasonably to be expected will not be deemed to be an~offer. PAGENO="0248" 2034 (5) Sales agency. -- If such or similar merchandise is sold or, in the absence of sales, offered ~`or sale through a sales agency or other organization related o the seller in any of the respects described in section 207 of the Antidumping Act, 1921, as amended (19 u.s.c. 166), the price at which such or similar merchandise is sold or, in the absence of sales, of- fered for sale by such sales agency or other organization may be used in the determination of fair value. (6) Fictitious sales.-- In the determination of fair value, no prétèthed sale or offer for sale, and no sale or offer for sale intended to establish a fictitious market, shall be taken into account. (7) Sales at varying prices.-- Where the prices in the sales which are being examined for a determination of fair value vary (after allowances provided for in subparagraphs (1), (2), and (3) of this paragraph), determination of fair value will take into account the prices of a preponderance of the mer- chandise thus sold or weighted averages of the prices of the merchandise thus sold. (8) Quantities involved and differences in price.-- Merchan- dise will not be deemed to have been sold at less than fair value unless the quantity involved in the sale or sales to the United States, or the difference between the purchase price or exporter's sales price, as the case may be, and the fair value, is more than insignificant. (Sec. 1~07, ~2 Stat. 18; 19 U.S.C. 173.) (9) Revision of prices or other changed circumstances. When- ever the Secretary of the Treasury is satisfied that promptly after the commencement of an antidumping investigation either (i) price revisions have been made which eliminate the likelihood of sales below fair value and that there is no likelihood of resumption of the prices which prevailed before such revision, or (ii) sales to the United States of the merchandise have terminated and will not be resumed; or whenever the Secretary concludes that there are other changed circumstances on the basis of which it may no longer be appro- priate to continue an antidurnping investigation, the Secretary shall publish a notice to this effect in the Federal Register. The notice shall state the facts relied on by the Secretary in publishing the notice and that those facts are considered to be PAGENO="0249" 2035 evidence that there are not and are not likely to be sales below fair value * The notice shall also state that unless persuasive evidence or argumant to the contrary is pre- sented within 30 days the Secretary will determine that there are not and are not likely to be sales below fair value. (Sec. 1407, 142 Stat. 18; 19 U.s.C. 173.) 114.8 Determination of fact or likelihood of sales at less than fair value; determination of injury; finding of dumping. (a) Upon receipt from the ConinsaI~ier of CIustoins of the information referred to in section 14.6(d), the Secretary of the Treasury will proceed as promptly as possible to determine tentatively whether or not the mer- chandise in question is in fact being, or is likely to be, sold in the United States or elsewhere at less than its fair value. As soon as possible the Secretary will publish in the Federal Register a "Notice of Tentative Determination," which will include a statement of the reasons on which the tentative determination is based. In- terested persons will be given an opportunity to make such written submissions as they desire, within a period which will be specified in the notice, with respect to the contemplated action. Appropriate consideration will be given to any new or additional information or argument submitted. If any person believes that any information ob- tained by the Bureau of Customs in the course of an antidumping pro- ceeding is inaccurate or that for any other reason the tentative de- termination is in error, he may request in writing that the Secretary of the Treasury afford him an opportunity to present his views in this regard. Upon receipt of such a request the Secretary will notify the person who supplied any information, the accuracy of which is questioned. and such other person or persons, if any, as he in his dis- cretion may deem to be appropriate. If the Secretary is satisfied that the circumstances so warrant, an opportunity will be afforded by the Secretary or his delegate for all such persons to appear, through their counsel or in person, accompanied by counsel if they so desire, to make known their respective points of view and to supply such fur- ther information or argument as may be of assistance in leading to a conclusion as to the accuracy of the information in question. The Secretary or his delegate may at any time, upon appropriate notice, invite any such person or persons as he in his discretion may deem to be appropriate to supply him orally with information or argument. As soon as possible thereafter, the Secretary will make a final de- termination, except that the Secretary may defer making an affirmative determination of sales below fair value during the pendency of any other antidumping proceeding which relates to the same class or kind of merchandise imported from another foreign country. The Secretary will defer making an affirmative determination only if he is satisfied that deferral is appropriate under all of the circumstances. Circum- stances which the Secretary will take into consideration will include the dates on which information relating to the various antidumping proceedings caine to his attention, the volume of sales involved in PAGENO="0250" 2036 each proceeding, elements of hardship, if any, and probable extent of delay which deferral would entail. No determination that sales are not below fair value will be deferred because of this provision. Whenever the Secretary makes a determination of sales at less than fair value he will so advise the United States Tariff Coirnnission. (Secs. 201, 407, 42 Stat. ll, as amended, 18; 19 U.S.C. 160, 173.) (b) If the Tariff Coimnission determines that there is, or is likely to be, the injury contemplated by the statute, the Secretary of the Treasury will make the finding coartemplated by section 201(a) of the Antidumping Act, 1921, as amended (19 U.S.C. 160(a)), with respect to the involved merchandise. (Secs. 201, 407, 42 Stat. ll, as amended, 18; 19 U.S.C. 160, 173.) 14.9 Action by the appraiser. -~ (a) Upon receipt of advice from the Coimnissioner of customs pursuant to section l4.6(e), if the com- missioner's "Withholding of Appraisement Notice" shall specify that the proper basis of comparison for fair value purposes is exporter's sales price or if that notice does not specify the appropriate basis of comparison for fair value purposes, each appraiser shall withhold appraisement as to such merchandise entered, or withdrawn from ware- house, for consumption, on any date after the 120th day before the question of dumping was raised by or presented to the Secretary of the Treasury or his delegate. If the conmissioner's "Withholding of Appraise- ment Notice," including any supplementary notice, shall specify that the proper basis of comparison for fair value purposes is purchase price, the appraiser shall withhold appraisement as to such merchandise entered,, or withdrawn from warehouse, for consumption, after the date of publication of the `Withholding of Appraisement Notice." Each ap- praiser shall notify the collector and importer immediately of each lot of merchandise with respect to which appraisement is so withheld. Upon advice of a finding made in accordance with section 14.8(b), the appraiser shall give innnediate notice thereof to the collector and the importer when any shipment subject thereto is imported after the date of the finding and information is not on hand for completion of ap- praisement of such shipment. Customs Form 6459 shall be used to notify the collector and importer whenever appraisement is withheld under this paragraph. (b) If, before a finding of dumping has beenmade, or before a - case has been closed without a finding of dumping, the appraiser is satisfied by information furnished by the importer or otherwise that the purchase price or exporter's sales price, in respeàt of any ship- ment, is not less than foreign market value (or, in the absence of such value, than the constructed value), he shall so advise the Corn.. missioner and request authorization to proceed with his appraisement of that shipsent in the usual manner. PAGENO="0251" 2037 (c) If a finding of dtuping has been mad., the appraiser .1*11 require the importer or his agent tO file a certificate ot the Importer on the appropriate one of the following forms * A separate certificate shall be required for each shipment. Form .1. Nonexporter's Certificate Antiduniping Act, 1921 Port of______________________ Date_____________ ,19 Re: Entry No. ~ dated - , 19 Import carrier: __________________. Arrived -, 19 I certify that I sin not the exporter as defined in section 207, Antidumping Act, .L921~ of the merchandise covered by the aforesaid entry. I further certify that the merchandise was purchased for liii.. portation by _______________________ on _________________ , 19 ~,, and that the purchase price is ___________ (Signed) _____________________ Form 2. Exporter's Certificate When Sales Price is Known Antidumping Act, 1921 Port of ______________ Date _~,l9. Re: Entry No. __________ dated ~ 19 Import carrier: ~. Arrived _____________, 19 I certify that I am the exporter as defined in section 207, Antidumping Act, 1921, of the merchandise covered by the aforesaid entry; that the merchandise is sold o~ agreed to be sold at the price stated in the attached statement; and, that, if any of such merchan- dise is actually sold at any price different from the price stated therefor in the attached statement, I will iimned.iately notify the appraiser of all the circumstances. The merchandise was acquired by me in the following manner: and has been sold or agreed to be sold to ~J~ncme and address) at (price) . (signed) - PAGENO="0252" 2038 Form 3. Exporter's Certificate When Sales Price Is Not Known Antiduinping Act, l9~.i Port of ___________________ Date ____________,19 Re. Entry No. ____________, dated ___________________________, 19 Import carrier: ________________. Arrived ___________________~, 19 I certify that I am the exporter as defined in section 207, Anti- dumping Act, 1921, of the merchandise covered by the aforesaid entry, and that I have no knowledge as to any price at which such merchandise will be sold in the United States. I hereby agree that I will keep a record of the sales and will furnish the appraiser within 30 days after the sale of any of such merchandise a statement of each selling price. I further agree that, if any of the merchandise has not been sold be- fore the expiration of 6 months from the date of entry, I will so report to the appraiser upon such expiration date, The merchandise was acquired by me in the following manner: (Signed) ______________________ Form ~. Exporter's Certificate When Merchandise Is Not, And Will Not Be, Sold Antidumping Act, 1921 Port of _______________________ Date _____________________, 19 Re: Entry No. _________, dated _________________________, 19 Import carrier: _______________* Arrived __________________, 19 -. I certify that I am the exporter as defined in section 207, Anti- dumping Act, 1921, of the merchandise covered by the aforesaid entry, and that such merchandise has not been, and will not be, sold in the United States for the following reason: _____________________________ (Signed) _______________________ (d) If an unqualified certificate on Form J~ is filed and the ap- praiser is satisfied that no evidence can be obtained to contradict it, he shall notify the collector promptly that the shipment will be ap- praised without regard to the Antidumping Act and proceed to appraise the merchandise in the usual manner. (e) If the importer fails to file an appropriate certificate within 30 days following notification by the appraiser that a certif i- cate is required under paragraph (c) above, the appraiser shall proceed upon the basis of the best information available. PAGENO="0253" 2039 (t) In calculating purchase price or exporter' a sales price, as the case ~j be, there shall be deducted the ame~mt of any special dumping duties which are, or will b~, paid by the manufacturer, pro. ducer, seller, or exporter, or which are, or will be, refunded to the importer by the manufacturer, producer, seller, or exporter, either directly or indirectl~ but a warranty of nonapplicability of dumping duties granted to an importer with respect to merchandise which is (1) purchased, or agreed to be purchased, before publication of a "Withholding of Appraisement Notice" with respect to such merchandise and (2) exported before a determination of sales below fair value is made, will not be regarded as affecting purchase price or exporter's sales price. (Secs. 201, 202, 203, 204, 208, 407, 42 Stat. U, as amended, 12, 13, 14, 18, sec. 486, 46 Stat. 725, as amended; 19 U.S.C. 160, 161, 162, 163, 167, 173, 1486.) 14.10 Release of merchandipçj bond.-- (a) When the collector has received a notice of withheld appraisement provided for in section or when he has been advised of a finding provided for in sec- tion 14.8(b), and so long as such notice or finding is in effect, he shall withhold release of any merchandise of a class of kind covered by such notice or finding which is then in his custody or is thereafter imported, unless an appropriate bond is filed or is on file, as speci- fied hereafter In this section, or unless he is advised by the appraiser that the merchandise covered by a specified entry will be appraised with- out regard to the Antiduinping Act. (b) If the merchandise is of a class or kind covered by a notice of withheld appraisement provided for in section 14.9(a) or by a find- ing provided for in section 14.8(b), a single consumption entry bond covering the shipment, in addition to any other required bond, shall be furnished by the person making the entry or withdrawal, unless (1) a bond Is requIred under subsection (c), or (2) in cases In which there Is no such requirement the col- lector Is satisfied that the bond under which the entry was filed is sufficient. The penalty of any additional bond re- quired under this subsectIon shall be in such amount as will assure payment of any special duty that may accrue by reason of the Antidumplng Act, but in no case less than $100. PAGENO="0254" 2040 (c) If the merchandise is of a class or kind covered by a finding provided for in section 14.8(b) and the importer or his agent has filed a certificate on Form 3 (section 14.9(c)), the bond req~iired by section 208 of the Antidumping Act, 1921, as amended (19 U.S.C. 167), shall be on customs Form 7591. In such case, a separate bond shall be required for each entry or withdrawal, and such bond shall be in addition to any other bond re~üired by law or regulation. The record of sales required under the conditions of the bond of customs Form 7591 shall identify the entry covering the merchandise and show the name and address of each purchaser, each selling price, and the date of each sale. The penalty of such bond shall be in an amount equal to the estimated value of the merchandise covered by the finding. (Secs. 208, 407, 42 Stat. 14, 18; 19 U.S.C. 167, 173.) 14.11 Conversion of currencies. In determining the existence and amount of any difference between the purchase price or exporter's sales price and the foreign market value (or, in the absence of such value, the constructed value) for the purposes of section 14.7 of these regulations, or of section 201(b) or 202(a) of the Antidumping Act, 1921, as amended (19 U.S.C. 160~(b), 161(a)), any necessary conversion PAGENO="0255" 2041 of a foreign currency into its equivalent in United States currency shall be matte in accordance with the provisions of section 522, Tariff Act of l9~0, as amended (31 U.s.c. 372) and section 16.14 of these regu- lations, (a) as of the date of purchase or agreement to purchase, if the purchase price is en element of the comparison, or (b) as of the date of exportation, if the exporter's sales price is an element of the comparison. (Secs. 201, 202, 1407, 142 Stat. 3.1, as amended, 18; 19 U.S.C. 160, i6i, 173.) 14.12 Modification or revocation of findin~-- An application for the modification or revocation of any finding made as provided for in section 3.14.8(b) will receive due consideration if submitted in writing to the Coemissioner of Customs, together with detailed information con- cerning any change in circumstances or practice which has obtained for a substantial period of time, or other reasons, which the applicant be- lieves vii). establish that the basis for the finding no longer exists with respect to all or any part of the merchandise covered thereby. Notice of intent to modify or revoke a finding will be published by the Secretary in the Federal Register. Coements received from interested parties within 30 days following date of publication will be given con- sideration. (Secs. 201, 1407, 142 Stat. ii, as amended, 18; 19 U.S.C. 160, 173.) 114.13 Publication of findings. -- (a) Each determination made in accordance with section 114.8ti), whether such determination is in the affirmative or in the negative, and each finding made in accordance with section 114.8(b), wili be published in the Federal Register, to.. gether with a statement of the reasons therefor. Findings made in accordance with section 114.8(b) will be published also in a weekly issue of the Treasury Decisions. (b) The following findings of dumping are currently in effect: Merchandise Country Chromic acid Portland ce~nt, other than white, nonstain.. ing portland cement Portland gray cement Steel reinforcing bars Carbon steel bars, bars- shapes under 3 inches, and structural shapes 3 inches and over Australia Belgium Dominican Republic Sweden Portugal Canada Ca~da P.D. 56130 551428 55883 55369 55501 56150 562614 (Secs. 201, 407, 142 Stat. 11, as a~nded, 18; 19 U.S.C. 160, 173.) PAGENO="0256" 2042 1~ `Sec. 201. (a) Whenever the Secretary of the Treasury (hereinafter called the "Secretary") determines that a class or hind of foreign mer- chandise is being, or is likely to be, sold ~n the United States or else- where at lessthan its fair value, he shall so advis~ the United States Tariff Commission, and the said Cossnission shall determine within three months thereafter whether an industry in the United States is being or is likely to be injured, or is prevented from being established, by reason of the importation of such merchandise into the United States. The said Commission, after such investigation as it deems necessary, shall notify the Secretary of its determination, and, if that determina- tion is in the affirmative, the Secretary shall make public a notice (hereinafter in this Act called a `finding") of his determination and the determination of the said Commission. For the purposes of this subsection, the said Commission shall be deemed to have made an affirma- tive determination if the Commissioners of the said Commisuion voting are evenly divided as to whether its determination should be in the affirmative or in the negative. The Secretary's finding shall include a description of the class or kind of merchandise to which it applies in such detail as he shall deem necessary for the guidance of customs officers. `(b) Whenever, in the case of any imported merchandise of a class or kind as to which the Secretary has not so made public a finding, the Secretary has reason to believe or suspect, from the invoice or other papers or from information presented to him or to any person to w~om authority under this section has been delegated, that the purchase price is less, or that the exporter's sales price is less or likely to be less, than the foreign market value (or, in the absence of such value, than the constructed value), he shall forthwith publish notice of that fact in the Federal Register and shall authorize, under such regulations as he may prescribe, the withholding of appraisement reports as to such merchan- dise entered, or withdrawn from warehouse, for consumption, not more than one hundred and twenty days before the question of dumping has been raised by or presented to him or any person to whom authority under this section has been delegated, until the further order of the Secretary, or until the Secretary has made public a finding as provided for in sub- division (a) in regard to such merchandise. `(c) The Secretary, upon determining whether foreign merchandise is beIng, or is likely to be, sold in the United States at less than its fair value, and the United States Tariff Commission, upon making its determination under subsection (a) of this section, shall each publish such determination in the Federal Register, with a statement of the reasons therefor, whether such determination is in the affirmative or in the negative. "Sec. 202. (a) In the case of all imported merchandise, whether dutiable or free of duty, of a class or kind as to which the Secretary PAGENO="0257" 2043 o~ the Treasury has made public a finding as provided for in section 201, or withdrawn from warehouse, for consumption, not more than one huudre& and twenty days before the question of dumping was raised by or prelented to the Secretary or any person to whom authority under sec- tion 201 has been delegated, and as to which no apprais~nent report has beed made before such finding has been so made public, if the purchase price or the exporter's sales price is less than the foreign market value (or, in the absence of such value, than the constructed value) there shall be levied, collected, and paid, in addition to any other duties imposed thereon by law, a special dumping duty in an amount equal to such difference. "(b) In determining the foreign market value for the purposes of subsection (a), if it is established to the satisfaction of the Secre- tary or his delegate that the amount of any difference between the purchase price and the foreign market value (or that the fact that the purchase price Is the same as the foreign market value) is wholly or partly due to-- (1) the fact that the wholesale quantities, in which * such or similar merchandise is sàld or, in the absence of * sales, offered for sale for exportation to the United States in the ordinary course of trade, are less or are * greater than the wholesale quantities in which such or similar merchandise is scid or, in the absence of sales, offered for sale In the principal markets of the country of exportation in the ordinary course of trade for home consumption (or, if not so sold or offered for sale for home consumption, then for exportation to countries other than the United States), (2) other differences in circumstances of sale, or (3) the fact that merchandise described in subdivi- sion (C), (D), (E), or (F) of section 212(3) is used in determining foreign market value, then due allowance shall be made therefor. * "(c) In determining the foreign market value for the purposes of subsection (a), if it is established tO the satisfaction of the Secre- tary or his delegate that the amount of any difference between the exporter' a sales price and the foreign market value (or that the fact that the exporter's sales price is the same as the foreign market value) is wholly or partly due to-- - 95-159 0-68-pt. 5-17 PAGENO="0258" 2044 (1) the fact that the wholesale quantities in which such or similar merchandise is sold or, in the absence of sales, offered for sale in the principal markets of the United States in the ordinary course of trade, are less or are greater than the wholesale quantities in which such or similar merchandise is sold or, in the absence of sales, offered for sale in the principal markets of the country of exportation in the ordinary course of trade for home con- sumption 4r, if not so sold or offered for sale for home consumption, then for exportation to countries other than the United* States), (2) other differences in circumstances of sale, or (3) the fact that merchandise described in subdivision (C), (D), (E), or (F) of section 2.12(3) is used in deter- * mining foreign market value, then due allowance shall be made therefor. tSec. 203. That for the purposes of this title,, the purchase price of imported merch~ndise shall be the price at which such merchandise has been purchased or agreed to be purchased, prior to the time of ex- portation, by the person by whom or for whose account the merchandise is imported, plus, when not included in such price, the cost of all containers and coverings and all other costs, charges, and expenses incident to placing the merchandise in condition, packed ready for ship- ment to the United States, less the amount, if any, included in such price, attributable to any additional costs, charges, and expenses, and United States import duties, incident to bringing the merchandise from the place of shii~nent in the country of exportation to the place of delivery in the United States; and plus the amount, if not included in such price, of any export tax imposed by the country of exportation on the exportation of the merchandise to the United States; and plus the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States; and plus the amount of any taxes imposed in the country of exportation upon the manufacturer, producer, or seller, in respect to the manufacture, production or sale of the merchandise, which have been rebated, or which have not been col- lected, by reason of the exportation of the merchandise to the United States. "~ec. 20I~. That for the purpose of this title the exporter's sales price of imported merchandise shall be the price at which such merchandise PAGENO="0259" 2045 is sold or agreed to be sold in the United States, befi,re or after the time of importation, by or for the account of the exporter, plus, when not included in such price, the cost of all containers and coverings and all other costs, charges, and expenses incident to placing the mer- chandise in condition, packed ready for shipment to the United States, less (1) the amount, if any, included in such price, attributable to any additional costs, charges, and expenses, and United States import duties, incident to brinj~ing the merchandise from the place of shipment in the country of exportation to the place ot~ delivery in the United States, (2) the amount of the commissions, if any, for selling in the United States the particular merchandise under consideration, (3) an amount equal to the expenses, it any, generally incurred by or for the account of the exporter in the United, ~3tates in selling identical or substantially identical merchandise, and (1~) the amount of any export tax imposed by the country of exportation on the exportation of the merchandise to the United States; and: plus the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States; and plus the amount of any taxes im- posed in the country of exportation upon the manufacturer, producer, or seller In respect to the manufacture, production, or sale of the merchandise, which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States. `Sec. 205. For the purposes of this title, the foreign market value of imported merchandise shall be the price, at the time of expor- tation of such merchandise to the United States, at which such or similar merchandise is sold or, in the absence of sales, offered for sale In the principal markets of the country from which exported, in the usual wholesale quantities and in the ordinary course of trade for home consumption (or, if not so sold or offered for sale for home con- sumption, or if the Secretary determines that the quantity sold for home consumption is so small in relation to the quantity sold for exportation to countries other than the United States as to form an inadequate basi8 for comparison, then the price at which so sold or offered for sale for exportation to countries other than the United States), plus, when ilot included in such price, the cost of all containers and coverings and all other costs, charges, and expenses incident to placing the merchandise in condition packed ready for shipment to the United States, except that in the case of merchandise purchased or agreed to be purchased by the person by whom or for whose account the merchandise is imported, prior to the time of exportation, the foreign market value shall be ascertained as of the date of such purchase or agre~nent to purchase. In the ascer- tainment of foreign market value for the purposes of this title no pretended sale or offer for sale, and no sale or offer for sale intended to establish a fictitious market, shall be taken into account. If such PAGENO="0260" 2046 or similar merchandise is sold or, in the absence of sales, offered for sale through a sales agency or other organization related to the seller in any of the respects described In section 207, the prices at which such or similar merchandise is sold or, in the absence of sales, offered for sale by such sales agency or other organization may be used in deter- miming the foreign market value. "Sec. 206. (a) For the purposes of this title, the constructed value of imported merc1iand1~e ~iha1l be the sum of- - (1) the cost of materials (exclusive of any internal tax applicable in the country of exportation directly to such materials or their disposition, but remitted or refunded upon the exportation of the article In the production of which such materials are used) and of fabrication or other processing of any kind employed in producing such or similar merchandise, at a time preceding the date of exportation of the merchandise under consideration which would ordinarily: permit the produc- tion of that particular merchandise in the ordinary course of business; (2) an amount for general expenses and profit equal to that usually reflected in sales of merchandise of the same general class or kind as the merchandise under consideration which are made by producers in the country of exportation, in the usual wholesale quantities and in the ordinary course of trade, except that (A) the. amount for general expenses shall not be less than 10 per centumn of the cost as defined in paragraph (1), and (B) the amount for profit shall not be less than 8 per centurn of the sums of such general expenses and cost; and (3) the cost of all containers and coverint~s of what- ever nature, and all other expenses incidental to placing the merchandise under consideration in condition, packed ready for shipment to the United States. `(b) For the purposes of this section, a transaction directly or indirectly between persons specified in any one of the paragraphs in subsection (c) of this section may be disregarded If, in the case of any element of value required to be considered, the amount representing that element does not fairly reflect the amount usually reflected in sales in the market under consideration of merchandise of the same general class or kind as the merchandise under óonsideration. If a transaction is dis- regarded under the preceding sentence and there are no other transactions PAGENO="0261" 2047 available for consideration, then the determination of the amount re- q~aired to be considered shall be based on the best evidence available as to what the amount would have been if the transaction had occurred between persons not specified in any one of the paragraphs in subsec- tion (c). "(c) The persons referred to in subsection (b) are: (i) Members of a family, including brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; (2). Any officer or director of an organization and such organization; (3) Partners; (L~) ~hiployer and employee; (5) Any person directly or indirectly owning, controlling, or holding with power to vote, 5 per centum or more of the out- standing voting stock or shares of any organization and such organization; and (6) Two or more persons directly or indirectly controlling, controlled by, or under common control with, any person. `Sec. 207. That for the purposes of this title the exporter of irs- ported merchandise shall be the person by whom or for whose account the merchandise is imported into the United States: (1) If such person is the agent or principal of the exporter, manu- facturer, or producer; or (2) If such person owns or controls, directly or indirectly, through stock ownership or control or otherwise, any interest in the business of the exporter, manufacturer, or producer; or (3) If the exporter, manufacturer, or producer owns or controls, directly or indirectly, through stock ownership or control or otherwise, any interest in any business conducted by such persons; or (1~) If any person or persons, jointly or severally, directly or indirectly, through stock ownership or control or otherwise, own or con- trol in the aggregate 20 per centum or more of the voting power or PAGENO="0262" 2048 control in the business carried on by the person by whom or for whose account the merchandise is imported into the United States, and also 20 per centum or more of such power or control in the business of the ex- porter, manufacturer, or producer. "Sec. 208. That in the case of all imported merchandise, whether dutiable or free of duty, of a class or kind as to which the Secretary has made public a finding as provided In section 201, and delivery of which has not been made by the collector before such finding has been so made public, unless the person by whom or for whose account such mer- chandise is imported makes oath before the collector, under regulations prescribed by the Secretary, that he is not an exporter, or unless such person declares under oath at the time of entry, under regulations pre- scribed by the Secretary, the exporter's sales prices of such merchandise, it shall be unlawftl for the collector to deliver the merchandise until such person has made oath before the collector, under regulations pre- scribed by the said Secretary, that the merchandise has not been sold Or agreed to be sold by such person, and has given bond to the collector, under regulations prescribed by the Secretary, with sureties approved by the collector, in an amount equal to the estimated value of the merchan- dise, conditioned: (1) that he will report to the collector the expor- ter's sales price of the merchandise within 30 days after such merchandise has been sold or agreed to be sold in the United States; (2) that he will pay on demand from the collector the amount of special dumping duty, If any, imposed by this title upon such merchandise; and (3) that he will furnish to the collector such information as may be in his possession and as may be necessary for the ascertainment of such duty, and will keep such records as to the sale of such merchandise as the Secre~ry may by regulation prescribe. "Sec. 209. That in the case of all imported merchandise, whether dutiable or free of duty, of a class or kind as to which the Secretary has made public a finding as provided In section 201, and as to which the appraiser or person acting as appraiser has made no appraisement report to the collector before such finding has been so made public, it shall be the duty of each appraiser or person acting as appraiser, by all reasonable ways and means to ascertain, estimate, and appraise (any invoice or affidavit thereto or statement of constructed value to the contrary notwithstanding) and report to the collector the foreign mar- ket value or the constructed value, as the case may be, the purchase price, and the exporter's sales price, and any other facts which the Secretary may deem necessary for the purposes of this title. "Sec. 210. That for the purposes of this title the determination of the appraiser or person acting as appraiser as to the foreign market PAGENO="0263" 2049 value or the constructed value, as the case may be, tht~ purchase price, and the exporter's sales price, and the action of the collector in assessing special dumping duty, shall have the same force and effect and be subject to the same right of appeal and protest, under the same conditions and subject to the same limitations; and the general ap- praisers, the United States Customs Court, and the Court of Customs and Patent Appeals shall have the same jurisdiction, powers, and duties in connection with such appeals and protests as in the case of appeals and protests relating to customs duties under existing law. "Sec. 211. That the special dumping duty imposed by this title shall be treated in all respects as regular customs duties within the meaning of all laws relating to the drawback of customs duties. "Sec. 212. For the purposes of this title-- (1) The term "sold or, in the absence of sales, offered for sale" means sold or, in the absence of sales, offered-- (A) to all purchasers at wholesale, or (B) in the ordinary course of trade to one or more selected purchasers at wholesale at a price which fairly reflects the market value of the merchandise, without regard to restrictions as to the disposition or use of the mer- chandise by the purchaser except that, where such restrictions are found to affect the market value of the merchandise, adjustment shall be made therefor in calculating the price at which the merchandise is sold or offered for sale. (2) The term "ordinary cour~e of trade" means the conditio~is au~i practices which, for a reasonable time prior to the exportation of the merchandise under consideration, have been normal in the trade under consideration with respect to merchandise of the same class or kind as the merchandise under consideration. (3) The term "such or similar merchandise" means merchandise in the first of the following categories in respect of which a determina- tion for the purposes of this title can be satisfactorily made: (A) The merchandise under àonsideration and other mer- chandise which is identical in physical characteristics with, and was produced in the same country by the same person as, the merchandise under consideration. PAGENO="0264" 2050 (B) Merchandise which is identica' in physical character.. istics with, and was produced by another person in the same country as, the merchandise under consideration. (C) Merchandise (i) produced in the same country and b the same person as the merchandise under consideration, (ii like the merchandise under consideration in component material or materials and in the purposes for which used, and (iii) ap- proximately equal in commercial value to the merchandise under consideration. (D) Merchandise which satisfies all the requirements of subdivision (C) except that it was produced by another person. (E) Merchandise (1) próthiced in the same country arid by the same person and ot the seine general class or kind as the merchandise under consideration, (ii) like the merchandise under consideration in the purposes for which used, and (iii) which the Secretary or his delegate determines may reasonably be compared for the purposes of this title with the merchan- dise under consideration. (F) Merchandise which satisfies all the requirement;s nt subdivision (E) except that it was produced by another person. (1~) Th~ term "i~sual wholesale quantities, in any case hA which the merchandise in respect of which value is being determined is sold in the market under consideration at different prices for different quantities, means the quantities in which such merchandise is there sold at the price or prices for one quantity in an aggregate volume which is greater than the aggregate volume sold at the price or prices for any other quantity. `Sec. 213. That this title may be cited as the `Antidumping Act, 1921'. "Sec. 1~o6. That when used in Title II * * * -- "The term `person' includes individuals, partnerships, corporations, and associations; and "The term `United States' includes all Territories and possessions subject to the jurisdiction of the United States, except the Virgin Islands, the islands of Guam and Tutuila, and the Cana]. Zone. "Sec. 1~07. That the Secretary shall make rules and regulations necessary for the enforcement of this Act." (Antidumping Act, 1921, as amended; 19 U.S.C. 160-173.) PAGENO="0265" 2051 15 The definition of fair value does not in any way modify or affect * definitions of foreign market value given in section 205 of the Anti- dumping Act, 1921, as amended (19 U.S.C. l61~), or of constructed value given in section 206 (19 U.S.C. 165) or the application of a foreign * market value (or, in the absence of such value, constructed value) as defined in the Antidumping Act, 1921, as amended, as a basis for deter- mining whether or not to withhold appraisement under section 201(b) (19 U.S.C. 160(b)) or for imposition, of duty under section 202 (19 U.S.C. 161). An industry in the United States which considers that it is being injured by sales of merchandise at less than fair value will ordinarily have insufficient information on which to submit proof either of fair va.lue as herein defined, or foreign market value or constructed value as defined in said sections 205 and 206 (19 U.S.C. l61~, 165). The industry may, however, submit, and appraisers will consider, such material as is available to it, including information indicating the market price for similar merchandise in the country of exportation and in any third countries in which merchandise of the producer complained of is known to be sold. Information submitted by an industry and infor- mation submitted by the foreign producer and others will be of value in assisting the Treasury to establish the basis for fair value, foreign market value, or constructed value. Fair value is computed on the basis of sales for consulnptioL in the country of exportation or for exportation otherwise than to the United States at or about the date of the purchase or agreement, to pur- chase of the merchandise to be imported into the United States, 0" the date of exportation. However, in cases where it may be important to determine either the stability of the market or its trend, as well as to determine vhethei~ there has been a fictitious sale as described in paragraph llh7(b)(6) of these regulations, it will be helpftl to the Secretary to have information as to sales made for consumption in the country of exportation or for exportation otherwise than to the United States over a significant period of time immediately preceding the date of purchase or agreemeLlt to purchase, or exportation. EXAMPLES FOR PURPOSES OF ILLUSTRATION A few examples of what would and what would not be considered sales at less than fair value are given below. Unless otherwise indi- cated, it is assumed that individual sales are in the same average quantities and that they are also made under the same circumstances of sale. PAGENO="0266" 2052 It must be understood that these examples of necessity oversimplify for purposes of illustration. Each actual case of alleged sales at less than fair value must be considered in the light of all relevant facts, and it may be seldom that cases will be presented for consideration which are as free of complications as are the cases cited in these exam- ples. The tentative conclusions set forth below cannot, therefore, be considered as decisions which are binding upon the Secretary of the Treasury. They are in particular subject to the qualification that there nay be other factors present, not here stated, or not sufficiently emphasized for the purposes of an actual case, which would lead to dif- ferent or opposite results. As in the case in respect of other laws administered in whole or in part by him, the Commissioner of Customs stands ready to answer spe- cific inquiries arising under the Antidumping Act, 1921, as amended, which relate to contemplated transactions, to the best of his ability, notably those involving questions as to whether paragraph 11h7(a)(l) or (a)(2) of these regulations applies, and questions as to the method of computation which may be used in connection with paragraph llh7(b)(7) hereof. Example 1 A foreigp producer has made the following sales of a particular product over a representative period: Sales for Consumption Sales for Exportation to in Country of Exporta- Countries Other than the Sales to the tion United States United States 75,000 units © $1.00 25,000 units © $.85 15,000 units The quantity of sales of this product in the country of exportation, amounting to 75,000 units, is sufficiently large in relation to the total of 25,000 units sold for exportation to countries other than the United States to constitute an adequate basis for comparison with sales to the United States. (See paragraphs llh7(a)(l) and (2) of these regulations.) The price for sale to the United States is less than the price in the country of exportation. The foreign producer is, therefore, selling in the United States at less than fair value. Home market sales will form the basis of comparison whether or not they are restricted. This example concerns home market prices which are either free of restrictions or accompanied by restrictions that do not affect the value of the merchandise. If there should be restrictions PAGENO="0267" 2053 which affect the value of the merchandise, appropriate adjustment of the home market price vi]). be made. Third country prices, even though un- restricted, will not be resorted to in this set of circumstances. Example 2 A foreign producer has made the following sales of a particular product: Sales for Consumption Sales for Exportation to Sales to the in Country of Exporta- Countries Other than the United States tion United States 25,000 units @ $.95 75,000~units @ $.90 15,000 unitd The foreign producer can show that the quantity of sales of this product in the country of exportation, amounting to 25,000 units, is so small in relation to the total of 75,000 units sold for exportation to countries other than the United States, as to be an inadequate basis for comparison with sales to the United States. Determination of fair value will therefore be based on the selling price for exportation to countries other than the United States, pursuant to paragraph 1~.7(a)(2) of these regulations. In the absence of special circumstances, it would appear that the sales for exportation to the United States were not be- low fair value * Third country sales will form the basis of comparison whether or not they are restricted. This example concerns third country sales which are either free of restrictioné or accompanied by restrictions which do not affect the value of the merchandise. If there should be restrictions which affect the value of the merchandise, appropriate adjustment of the third country price will be made. flome market prices, even though unrestricted, will not be resorted to in this set of circum- stances. EXSZIIPL1C 3 A foreign producer has sold his merchandise for consumption in the country of exportation at or about the date of the sale or exportation to the United States at the following prices: 2,000 tons @, ~32.80 ton 1,000 tons @ $32.85 ton 2,000 tons @ $33.00 ton 1,000 tons @ $33.10 ton PAGENO="0268" 2054 It is conceded that the price depends upon the bargaining of the par-. ties rather than upon quantity purchased. Sales to the UnIted States have been made by this supplier in the B8ifl:~ average quantities at a uniform price of' $32.90 per ton during the period. The difference in price between the producer's ho~ market sales or any average thereof and his sales to the United States is so slight that it will not be regarded as more than insignificant unless unusual market con- ditions in the United States or the quantities involved as compared to United States production justify a contrary conclusion. Example ~ A foreign producer makes all of his sales, other than those to the United States, for consumption in the country of exportation. The majority of the merchandise thus sold by him is sold in 50-ton lots at list prices, net. However, a discount of 5 percent is granted on sales of more than 500 tons and is freely available to those who purchase in the ordinary course of trade. During the six months preceding the date when the question of dumping was raised, the producer made sales of more than 500 tons each with respect to 15 percent of such or sim- ilar merchandise which he sold in the home market. Sales for exporta- tion to the United States are at list prices less 5 percent and have been in quantities of over 500 tons. The 5 percent will not be allowed as a quantity discount because less than 20 percent of such or similar merchandise was sold in the home market in quantities to which such discount was applicable, un.less the 5 percent discount can be justified by cost savings. Cost savings can also be used to justify a quantity discount where there were no sales in the home market in q.uantities sufficient to warrant the granting of the 5 percent discount, and no offers because there is no potential market for such quantities. In determining whether a discount has been given, the presence or absence .of a published price list reflecting such a discount is not controlling. In certain lines of trade, price lists are not conmionly published and in others although conmionly published they are not commonly adhered to. The following example also relates to quantity allowances. Example 5 A foreign producer has the following record of sales at or about the date of sale or exportation to the United States: Price per lb. Sales for for Sales in Consumption Sales to Units of 100 lbs. in Country of the and 1,000 lbs. Exportation United States $.85 ( 100 lbs.) 200,000 lbs. -0- $.8o (1,000 lbs.) 20,000 lbs. 100,000 lbs. PAGENO="0269" 2055 Although the lower price in the home market appears to obtain for quantities the same aa those sold for exportation to the United States at the same price, the quantity sold for home consumption at the lower price is less than 20 percent of the quantity sold in the home market.~ Accordingly, the price for exportation to the United States is not justified, unless cost savings can be shown to justify' the lover price. If ~ pounds had been sold in the home market at the $.8o price, the lower price would have been justified for corn-. pariion with the price for exportstipn to the United States. Example 6 A foreign producer sells for consumption in the country of exporta- tion at $12 a unit, regardless of quantities and regardless of whether thecales are to wholesalers or retailers. He sells to retail pur- chasers in the United States at $12 a unit and wholenule purch~zers in the United States at $io a unit, in each case ret~nrdieus of qu~ittities The circumstances in this case indicate that the foreign producer will be deemed to hawe been selling to wholesalers in the United States at less than fair value. Should, however, his record of sales for con- sumption in the country of exportation show that he sells, reL'ardleus of quantities, at $10 a unit to wholesalers and at $12 a unit to retailers, then, making allowances for the circurastancen of sale, the sales in the United States will not be deemed to be sales at less than fair value. Example 7 A foreign producer sells for e~sumption in the country of exporta- tion at $105 a unit, delivered anywhere within the country of exportation. He has no f.o.b, factory price for home consUmption. He sells to the United States f.o.b. factory for $100 a unit. ~idence indicates that it costs the producer on time average $. 50 a unit to dejive~' on home con~.uunpt ion ~inles. Giving due considerat.tcn tc, t~e circusistoruces of aa1e~ the ~aic~ to United States purchasers at $100 a unit will he deemed to be sales at less than fair value. Should the delivery cost on home consumption sales average $5 a unit thct.ead ~ $~5o. the sales to tinited States purchasers at $100 a unit will not he deemed to be sales at less than fair value. Part 16 -- LIQUIDATION OF DtJ2IES 16.21 ~4ng duty; nc~tice to~iij~orter. -- (a) Special dumping duty shall be assessed on all importations of merchandise, whether dutiable or free, as to which the Secretary of the Treasury has made public a finding of dumping, entered or withdrawn from warehouse, for consumption, not more than 120 days before the question of dumping was raised by or presented to the Secretary or his delegate, provided PAGENO="0270" 2056 the particular importation has not been appraised prior to the publica- tion of such finding, and the appraiser reports that the purchase price or exporter's sales price is less t~n the foreign market value or con- structed value, ac the case may be. (b) Before dumping duty is assessed, the collector shall notify the importer of theappraiser's report, as in the case of an advance th value. If the importer files an appeal for reappraisement, liqui- dation shall be suspended until the appeal for reappraiseinent is finally decided. (c) If the necessary conditions are present, special dumping duty shall be assessed on samples imported for the purpose of taking orders and making sales in this country. (Sees. 202, 209, 1407, 42 Stat. ii a~ amended, 15, 18; 19 US.C. 161, 168, 173.) 16.22 Method of conputing dumping duty.-- If it appears that the nerehandise has been purchased by a person not the exporter within the meaning of section 207, Antidumping Act, 1921, as amended (19 U.S.C. 166), the special dumping duty shall equal the difference between the purchase price and the foreign market value on the date of purchase, or, I~f there is no foreign market value, between the purchase price and the constructed value, any foreign currency involved being converted into United States money as of the date of purchase or agreement to purchase. If it appears that the merchandise is imported by a person who is the exporter within the meaning of such section 207, the special dumping duty shall equal the difference between the exporter's sales price and the foreign market value on the date of exportation, or, if there is no foreign market value, between the exporter's sales price and the con- structed value, any foreign currency Involved being converted into United States money as of the date of exportation. (Sees. 202, 207, 42 Stat. II, as amended, 114, as amended; 19 U.S.C. i6i, 166.) 16 See section 14.13 of these regulations. For regulations regarding finding of dumping by the Secretary and procedure under the Antidumping Act, 1921, see sees. 14.6..14.13. The fact that the importer has added on entry the difference be- tween the purchase price or the exporter's sales price and the foreign market value or constructed value and the appraiser has approved the resulting entered value shall not prevent the assessment of the special dumping duty. However, a mere difference between the purchase price or exporter' s sales price and the foreign market value or constricted value, without a finding by the Secretary of the Treasury, as above referred to, is not sufficjent for the assessment of the special dumping PAGENO="0271" 2057 Appendix E [S. 1726, 90th Cong., 1st sess., introduced by Mr. Hartke (for himself, Mr. Scott, Mr. Bayh, Mr. Bennett, Mr. Bible, Mr. Boggs, Mr. Brewster, Mr. Brooke, Mr. Burdick, Mr. Byrd of West Virginia, Mr. Carison, Mr. Clark, Mr. Curtis, Mr. Dirksen, Mr. Dodd, Mr. Dominick, Mr. Ervin, Mr. Fannin, Mr. Hansen, Mr. Hickenlooper, Mr. Inouye, Mr. Kuchel, Mr. Lausche, Mr. McCarthy, Mr. Metcalf, Mr. Miller, Mr. Morse, Mr. Moss, Mr. Mundt, Mr. Murphy, Mr. Pearson, Mr. Prouty, Mr. Randolph, Mr. Ribicoff, Mr. Sparkman, Mr. Symington, Mr. Talmadge, Mr. Thurmond, Mr. Tower, Mr. Yarborough, and Mr. Young of Ohio) on May 9, 1967] A BILL To amend the Antidumping Act, 1921. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of Amer jca in Congress assembled, 3 That section 201 of the Antidumping Act, 1921 (19 U.S.C. 4 160), is amended to read as follows: 5 "DUMPING INVESTIGATION 6 "SEc. 201. (a) Whenever the Secretary determines in 7 accordance with the procedure prescribed in section 212 that 8 foreign merchandise of a class or kind has been sold at any PAGENO="0272" 2058 1 time after the date six months preceding the date of corn- ~ plaint, or is likely to be, sold at less than fair value, he shall 3 so advise the Commission. Whenever the Secretary, from 4 H1VO1CCS or other papers or from information presented to 5 hull, is a(lViSed by a complaint or complaints filed simultane- 6 ously flint such sales have been made, or are likely to be 7 made, of merchandise from more than one foreign source or 8 count.ry~ :uid if such sales have in fact been made, or are 9 likely to be made, he shall so advise the Commission, but 10 not until his investigation as to all such foreign sources or 11 countries is complete. The Commission shall determine 12 within three months after notification from the Secretary 13 whether a domestic industry or labor in the United States 14 has been, is being, or is likely to be, materially injured (or, 15 in the case of any industry, is prevented from being estab- 16 lished) by reason of the sale at less than fair value of mer- 17 chandise from one or more foreign sources or countries. 18 "(b) Material injury to a domestic industry shall be 19 established, and the Commission shall make an affirmative 20 determination, when it finds that the foreign merchandise 21 determined to have been sold at less than fair value and 22 supplied to any competitive market area- 23 "(1) has amounted to 5 per centum or more (in 24 units sold or in gross receipts from the sales under con- 25 sideiation) of domestic merchandise of the same class PAGENO="0273" 2059 1 or kind sold by the domestic industry and supplied to 2 the same competitive market area, during any three of 3 the months from six months before the initiation of the 4 investigation by the Secretary to the conclusion of the 5 Commission's investigation, unless clear and c1onvincing 6 evidence is presented that, had such sales of foreign rner- 7 chandise not been made, the domestic industry would 8 not have increased its sales during the three months 9 involved; or 10 "(2) has been a contributing cause of a decline in 11 the prices at which 50 per centum or more (in units sold 12 or in gross receipts from the sales under consideration) 13 of domestic merchandis~ of the same class or kind sup- 14 plied to the competitive market area has been sold by 15 the domestic industry, during any month from six months 16 before the initiation of the investigation by the Secre- 17 tary to the conclusion of the Commission's investigation; 18 or 19 "(3) has been a contributing cause of a decline 20 amounting to 5 per centum or more (in man-hours 21 worked or in wages paid) of direct labor employed by a 22 domestic industry in producing merchandise of the same 23 class or kind supplied to a competitive market area, dur- 24 ing any three of the months from six months before the 25 initiation of the investigation by the Secretary to the 95-159 0 - 68 - pt. 5 - 18 PAGENO="0274" 2060 1 conclusion of the Commission's investigation, compared 2 with the average monthly level of such employment dur- 3 ing the year ending on the date the Secretary's investiga- 4 t.iori I)ega.fl; Or 5 "(4) has been a conLnl)uting cause of any anti- 6 competitive effects iii any competitive market area. 7 ~` (c) The Commission shall render an affirmative de- 8 termination of likelihood of injury when it finds a reasonable 9 likelihood that an injury cogmzable under subsection (li) of 10 this SeCtiOll wil I ()(~OH 1 1 )y iPO 5( ~i of sales of foreign ineicI 011- 11 disc at less thati fair value. 12 "(d) The Comnuission shall make the determinations 13 required I)y this section without regard to whether foreign 14 mecharmdise was sold with l)1edatOry intent or at prices ``~ e(1lnvalent to or higher than prices of foreign merchandise I ~ of the sonic class or kind. T1~11(. Coimimnission. after procee~l 17 trig and heai~mmg under the provisions of section 212, shall 18 notify the Secretary of its deternuination, raid, if that deterini- 19 nation is in the affirmative, the Secretary shall make public 20 a notice of his determination and the determination of the 21 Commission. For time purposes of this section, the Commnis- 22 SlOfl shall be deemed to have made an affirmative determina- 23 tion if the (Jomnmissioners of the Commission voting are 24 evenly divided as to whether its determination should be in 25 the affirmative or in the negative. The Secretary's dumping PAGENO="0275" 2061 1 finding shall include a (lescription of the class or kind of 2 merchandise to which it applies in such (letail as he shall 3 dcciii iiecessn.r,v for the guidance of Customs officers. 4 `` (e) Whenever, in lie case of any tin purt('d nierehan- 5 disc of a. class or k i rid as to which the Secretary himis 1u)t pub- 6 lished a (huuIiuluuut~ liuu(luig, the Se(wctary has reason to 7 hielieve 01. suisl)e(t . fr an the in v ace or other papers 01' from 8 information pi'csciitcd to him, that 511(511 mncrchmuu(hise has 9 been, or is likely to he, sold at less than fair value, lie shall 10 forthwith publish notice of that fact in the Federal Register 11 and shall authorize, under such regulations as he may pre- 12 scribe, the withholding of appraisement reports upon such 13 class or kind of mercl)andise entered, or withdrawn from 14 warehouse, for consumption, not nioi'e than one hundred and 15 twenty days before the ~tiestion of dimiping has been raised 16 by or l)resentc(l to him until the further oi'der of the Secre- ~ tary, or until the Secretary has published a. dumping finding 18 relating to such merchandise. "(f) For ~he purposes Of this section- 20 " (1) The term `at less than fair value' means that 21 either the piu1'(~lIase price, or the exporter's sales price of 22 foreign merchandise, as defined in sections 203 and 204, 23 is less than its foreign market value (or, in the absence 24 of such value, less than its constructed value), as defined 25 . in sections 205 and 206. PAGENO="0276" 2062 1 "(2) The term `domestic industry' means domestic 2 vendors who supply directly or indirectly to the competi- 3 tive market area merchandise which is of the same class 4 or kind as foreign merchandise sold at less than fair 5 value and supplied to the same competitive market area. 6 "(3) The terni `competitive market area' means 7 any geographical area of the United Sthtes to which the S foreign merchandise determined to have been sold at 9 leSS than lair value has been supplied in competition 10 with domestic merchandise of the same class or kind. 11 "(4) Domestic merchandise which is reasonably 12 interchangeable in use with a class or kind of fore~n 13 merchandise shall be deemed to be `of the same class or 14 kind' as such foreign merchandise. Two or more units 15 of foreign merchandise shall be deemed to be `of a class 16 or kind' whenever reasonably interchangeable in use 17. with one another." 18 SEc. 2. Section 202 of the Antidumping Act, 1921 (19 19 U.S.C. 161), is amended to read a.s follows: 20 "SPECIAL DUMPING DUTY 21 "SEC. 202. (a) In the case of all imported merchan- 22 dise, whether dutiable or free of duty, of a class or kind as to 23 which the Secretary has published a dumping finding as 24 provided for in section 201, if either the purchase price or 25 the exporter's sales price is less than the foreign market PAGENO="0277" 2063 1 value (or, in the absence of such value, than the constructed 2 value) there shall be levied, collected, and paid, in addition 3 to any other ditties imposed thereon by law, a. special dump~ 4 ing duty iii an amount equal to such difference. If both the 5 purchase price amid the exporter's sales price are less than the 6 foreign market value (or, in the absence of such value, than ~ the constructed value) , such special dumping duty shall he 8 an amount equal to the greater difference. This subsection ~ shall apply to imported inerchamidise entered, or withdrawn 10 from warehouse for consumption, not more than one hun- dred and twenty days prior to the receipt of a complaint by 12 the Secretary, and as to which no appraisement report has 13 been ma.de before such dumping finding has been published. 14 "(b) In determining the foreign market value for the 15 purposes of this title, if it is established to the satisfaction 16 of the Secretary that the amount of any difference between 17 the purchase price and the foreign market value (or that the 18 fact that the purchase price is the same as the foreign market 19 value) is wjiolly or partly due to- 20 "(1) differences in the cost of manufacture, sale, or 21 delivery resulting from the fact that the wholesale quan- 22 tities, in which such or similar merchandise is sold or, 23 in the absence of sales, offered for sale for exportation 24 to the United States in the ordinary course of trade, arc 25 less or are greater than the wholesale quantities in which PAGENO="0278" 2064 1 such or similar iiierchandise is sold or, in the absence of 2 sales, offered for sale in the l)nncipal markets of the 3 country of exportation in the ordinary course of trade for 4 home consumption (or, if not so sold or offered for sale 5 for home consumption, then for exportation to countries 6 other thaii the United States), except that no allowance 7 shall be made for such differences unless they were 8 actually considered and taken into account by the vendor 9 in establishing his price, 10 "(2) other differences in circumstances of sale 11 affecting the cost of doing business, to the extent that 12 such differences were actually considered and taken into 13 account by the vendor, in establishing his price, or 14 "(3) the fact that merchandise described in sub- 15 division (0), (1)), (E), or (F) of section 213 (3) is 16 used in determining foreign market value, 17 then due allowance s~ha11 be made therefor. 18 "(c) In determining the foreign market value for the 19 purposes of this title, if it is established to the satisfaction of 20 the Secretary tha.t the amount of any difference between the 21 exporter's sales price and the foreign market value (or that ~ the fact that the exporter's sales price is the same as the 23 foreign market value) is wholly or partly due to-. "(1) differences in the cost of manufacture, sale, or delivery resulting from the fact that the wholesale PAGENO="0279" 2065 1 quantities in which such or similar merchandise is sold 2 or, in the absence of sales, offered for sale in the prin- 3 cipal markets of the United States in the ordinary course 4 of trade, are less or are greater than the wholesale quan- 5 tities in which such or similar merchandise is sold or, in 6 the absence of sales, offered for sale in the principal 7 markets of the country of exportation in the ordinary 8 course of trade for home consumption (or, if not so sold 9' or offered for sale for hGme consumption, then for ex- 10 portation to countries other than the United States), 11 except that no allowance shall be made for such differ- 12 ences unless they were actually considered and taken 13 into account by the vendor in establishing his price, 14 "(2) other differences in circumstances of sale 15 affecting the cost of doing business, to the extent that 16 such differences were actually considered and taken into 17 account by the vendor in establishing his price, or 18 "(3) the fact that merchandise described in subdi- 19 vision (0), (D), (E), or (F) of section 213 (3) is 20 used in determining foreign market value, 21 then due allowance shall be made therefor." 22 SEc. 3. Section 204 of the Antidumping Act, 1921 (19 23 U.S.C. 163), is amended by inserting "and profits" im- 24 mediately after "(2) the amount of the commissions", and PAGENO="0280" 2066 1 by striking out "and (4)" and inseiiing in lieu thereof 2 "(4) an amount equal to the expenses and profits of the 3 exporter in the foreign country (unless (A) the exporter 4 is the foreign manufacturer or is owned or controlled by the 5 foreign manufacturer, or (B) the foreign market value in- 6 cludes such expenses and profits), and (5) ". 7 SEO. 4. Section 205 of ~he Antidumping Act, 1921 (19 8 U.S.C. 164), is amended to read as follows: 9 "FOREIGN MARKET VALUE 10 "S~o. 205. (a) For the purposes of this title, the for- 11 eign market value of imported merchandise shall be the 12 price, at the time of exportation of such merchandise to the 13 United States, at which such or similar merchandise is sold 14 or, in the absence of sales, offered for sale, in the usual 15 wholesale quantities (as defined in section 213) and in the 16 ordinary course of trade- 17 "(1) in the principal markets of, and for home 18 consumption in, the country from which exported, so 19 long as at least 15 per centum of the ~ota1 sales (ex- 20 eluding sales to the United States) of such or similar 21 merchandise by any vendor who supplies any of those 22 markets are sales for home consumption in that country, 23 or 24 "(2) if paragraph (1) is inapplicable, in the prin- 25 cipal markets of that country (other than the United PAGENO="0281" 2067 1 States and the country of export) which is, for any vendor in the country of export whose sales are under, 3 consideration, the largest consumer of such or similar 4 merchandise sold by thitt vendor. 5 pIns, when not included in such price, the cost of all con- 6 tainers and coverings and all other costs, charges, and cx- 7 penses incident to placing the merchandise in condition 8 packed ready for shipment to the United States, except that 9 in the case of merchandise purchased or agreed to be pin'- 10 chased by the person by whom or for whose account the 11 merchandise is imported, prior to the time of exportation, 12 the foreign ma.rket value shall be ascertained as of the date 13 of such purchase or agreement to purOhase. The price at 14 which such or similar merchandise is sold or offered for 15 sale shall be deemed to be seller's list or published price in 16 the absence of conclusive evidence that the merchandise 17 was actually sold or offered for sale in the usual wholesale 18 quantities and in the ordinary cOurse of trade at a different 19 price. In the ascertainment of foreign market value for the 20 purposes of this title no pretended sale or offer for sale, 21 and no sale or offer for sale intended to establish a fictitious 22 market, shall be taken into account. If such or similar 23 merchandise is sold or, in the absence of sales, offered for 24 sale through a sales agency or other organization related PAGENO="0282" 2068 j. to the seller in any of the respects described in section 207, 2 the prices at which such or similar merchan~Ase is sold or, 3 in the absence of sales, offered for sale by such sales agency 4 or other organization may be used in determining the foreign 5 market value. 6 "(b) If any of the imported merchandise is manufac- 7 tured or produced in a country or area in which, in the 8 opinion of the Secretary, the method of establishing prices is 9 not realistically related to cost or profit factors, the Secretary 10 shall determine the foreign market value in any manner he U deems appropriate, such as by reference to (1) the price at 12 which such merchandise is sold or offered for sale for ex- 13 portation to countries other than the United States from such 14 country or area, (2) the foreign market value of mer- 15 chandise of the relevant class or kind in appropriate non- 16 Communist countries, and (3) the constructed value of mer- 17 chandise of the relevant class or kind in appropriate non- 18 Communist countries." 19 SEe. 5. Sections 208 and 209 of the Antidumping Act, 20 1921 (19 U.S.C. 167, 168), are amended by striking out 21 "finding" each place it appears in each such section and 22 inserting in each such place "dumping finding". 23 SEe. 6. The Antidumping Act, 1921, is amended by 2. redesignating sections 212 and 213 as sections 213 and 214, PAGENO="0283" 2069 1 respectively, and by inserting alter section 211 the following 2 new section: 3 "PROCEDURE 4 "S~o. 212. (a) iNITIATION AND CONTINUANCE OF 5 ANTIDUMPING PROCEEDING.- 6 "(1) INTTIATION OF PROCEEDING.-An antidump- 7 ing proceeding shall be initiated by the Secretary at the 8 earliest practicable time after receiving a complaint. 9 The Secretary shall consolidate in a single antidumping 10 proceeding all complaints received together regarding 11 the same class or kind of merchandise regardless of the 12 number of importers, exporters, foreign manufacturers, 13 and countries involved. The~ Secretary shall make rea- 14 sona.ble effort to give notice of the initiation of an anti- Li dumping proceeding to all known interested parties and I 6 shall publish such notice in the Federal Register. The 17 notice shall identify the date and nature of the complaint. 18 "(2) DISCONTINUANCE OF PROCEEDING.-The 19 Secretary may not discontinue an antidumping proceed- 20 ing unless (A) he is satisfied that promptly after the 21 initiation of the proceeding, the dumping (if any) of 22 imported merchandise of the class or kind under investi- 23 gatiori has been terminated by revisions in price or by 24 cessation of sales of such merchar~4jse to the United PAGENO="0284" 2070 1 States, (B) lie has received bona flde assurances from 2 the exporter that dumping will not be resumed, and (0) 3 he coiicludes that the quantities of merchandise in- 4 volved in the sales of imported merchandise under 5 investigation are insignificant. 6 "(b) 1)1s~tIssAT~ T)W3IS1ON.-The Secretary may de- 7 eide within fifteen days after receiving a complaint that there 8 is no evidence to support it supplied by the complaint and 9 no evidence to support it available to the Secretary from 10 customs forms or other sources, and that any differential 11 between the prices at which the imported merchandise and 12 domestic merchandise of the relevant class or kind are offered 13 for sale in the United States cannot reasonably be attributed 14 in whole or in part to the possibility that either the purchase 1~ price or the exporter's sales price of a class or kind of foreign 1 (~ inerchaiidise has been, is, or is likely to he, less than the for- 17 eign market vahin~ (or, in the absence of such value, than IS the (`OllStfll(ted value) . If the Secretary so decides lie sh~ill 1 9 forthwith notify the complainant of his disniissal decision, 20 together with the reasons therefor amid such of the supporting 21 information of the character required l)y subsection (c) of 22 this section as is available to the Secretary, without initiating 23 an antidumping proceeding or publishing any document in 24 the Federal Register. For purposes of subsection (j) of 25 this section such decision shall be considered a negative PAGENO="0285" 2071 1 dumping determination, Published as of the date the corn- 2 plainant is notified. 3 "(c) PHOPOSED i)uMPING DETERMINATION.--ThC 4 Secretary shall obtain sufficient information to enable him to 5 prepare for each .antidumnping proceeding at the earliest 6 practicable time a proposed affirmative or negative dumping 7 determination which he shall publish in the Federal Register S and make reasonable effort to send to all known interested 9 parties. Where complaints have been consolidated in a 10 single antidumping proceeding,: the Secretary may prepare 11 and publish a proposed negative dumping determination as 12 to a country or countries prior tO the preparation and publi- 13 cation of any proposed affirmative dumping determination in 14 such consolidated antiduinping proceeding. Each proposed 1 ~ affirmative or negative diunping determination shall indicate - ~ the specific data. (`such as manufacturers, dates, prices, dis- 17 counts, quantities, home consumption, cost. of containers. 18 taxes, duties, and comnhisslons. as well as delivery, selling,' 19 advertising, technical service, and other, expenses, but not 20 including con~fidentia1 casts used in ascertaining constructed 21 value in the absence of foreign market value or costs of manu- 22 facture used pursuant to sections'. 202 (b) (1) and 202 (c) 23 (1)) used by the Secretary and hi,s computations and reason- 24 ing in arriving at and applying the concepts used in this 23 title (such as foreign market value, such ~r similar merchan- PAGENO="0286" 2072 1 disc, purchase price, exporter's sales price, and constructed 2 value). If, iii a particular aiitidumping proceeding, the dis- 3 closure of some of the detailed information required by this 4 subsection woul(l. in the judgment of the Secretary, impede 5 `his obtiuiiing similar information in - the fature, he may so 6 declare in his proposed negative or affirmative dumping de- `~ terminatioli and omit that information. If the Secretary does 8 withhold such information, however, he shall prepare for ~ the use of the complainant a supplementary statement of the 10 information required by this subsection which has been so 11 withheld, and the reasons for so withholding. The informa- 12 tion in such supplementary statements shall not be published 13 or otherwise be made public by the complainant, subject to 14 such sanctions as may be established l)y the Secretary l)y 1.) regula.tioii, hut may be considered by a reviewing court as 16 if otherwise a. part of the record. 17 "(d) A NTII)UMPING IIEARTNG.-The Secretary shall 18 accord an antidiunpiiig hearing by permitting any interested 19 party to conimunicate in writing with the Secretary regard- 20 ing a. proposed affirniative or negative dumping determina- 21 tioli within thirty days after its publication in the Federal 22 Register. This communication may include such matters as 23 factual or legal argument, additional factual information in 24 the form of affidavits or oilier documents, and requests for 25 informal conferences or an oral antidumping hearing. The PAGENO="0287" 2073 1 Secretary may call for an oral .antidumping hearing on his 2 own motion, or on the request of any interested party. Any 3 denial of a request for an oral antidumping hearing shall be 4 in writing with reasons. Notice of an oral atitidumping bear- 5 ing, or denial of a request for one, shall be given to all known 6 interested parties and shall be published in the Federal 7 Register. Notice of an oral antiduinping hearing shall state 8 the time and place of such hearing, and summarize or refer to 9 the Federal Register publications of the notice of the initia- 10 tion of the antidumping proceeding, and the proposed affirm- 11 ative or negative dumping determination. All interested 12 parties will be accorded at an oral antidumping hearing the 13 rights to counsel, to present evidence, and to conduct such 14 cross-examination as may be required for a full and fair dis- 15 closure of the facts. A transcript shall he made of all oral 16 antidumping hearings, and the Secretary may prescribe such 17 regulations as he deems necessary for their fair and orderly 18 conduct. The record in an antidümping hearing shall consist 19 of the notice of initiation of an antidumping proceeding, the 20 proposed affirmative or negative dumping determination, any 21 written communications between interested parties and the 22 Secretary regarding the proposed affirmative or negative de- 23 termination (unless the Secretary has made a judgment 24 regarding a given document, or part thereof, under the PAGENO="0288" 2074 1 standard of subsection (c) of this section, which shall then 2 be made available only to interested parties and a reviewing 3 court), the transcript of any oral antidumping hearing, the 4 aflirrnative or negative dumping determination, and any other 5 relevant documents the Secretary chooses to include on his 6 own motion or the request of any interested party after hay- 7 ing heard the parties to be affected. $ 8 "(e) DUMPING DETEnMINATION.-The Secretary shall 9 prepare an affirmative or negative dumping determination and 10 shall publish it in the Federal Register. The Secretary shall 11 make reasonable effort to send copies to all known interested 12 parties. The contents of the affirmative or negative dump- 13 ing determination shall comply with the standards for a pro- 14 posed dumping determination contained in subsection (c) 15 of this seotion. In addition, it shall contain the Secretary's 16 reply to any new facts or arguments advanced during the 17 antidumping hearing pursuant to subsection (d) of this 18 section. The Secretary shall make his affirmative or nega- 19 tive dumping determination at the earliest practicable time 20 after receiving a complaint or complaints, but in no event 21 more than six months after such date, unless, within the said 22 six months, he shall have submitted a report to the chairman 23 of the Committee on Ways and Means of the House of Repre- 24 sentatives and to the chairman of the Committee on Finance 25 of the Senate stating the reasons why a longer period is re- PAGENO="0289" 2075 1 quired within which to reach such dumping determination 2 and the estimated extent of such longer period. 3 "(f) FAII2uRE OR REFUSAL To FURNISH REQUESTED 4 INFORMATION.-Whenever in any antidumping proceeding. 5 the Secretary decides that an importer, exporter, or foreign 6 manufacturer has failed or refused to furnish information 7 which the Secretary has requested and deems necessary to 8 make his proposed dumping determination pursuant to sub- 9 section (c), the Secretary shall resolve all doubts relating 10 to such information against the person failing or refusing to 11 furnish it, and shall base his proposed dumping determina- 12 tion upon information from other sources, including, but not 13 limited to, the complainant. 14 "(g) INflJRY PROCEEDING.-An injury proceeding 15 shall, be initiated by the Commission at the earliest practi- 16 cable time after receiving an affirmative dumping determina- 17 tion from the Secretary. The Commission shall make 18 reasonable effort to give notice ~f the initiation of an injury 19 proceeding to all known interested parties, and shall publish 20 such notice in the Federal Register. 21 "(h) INruRY HEAnING.-The Commission shall accord 22 an injury hearing by permitting any interested party to 23 communicate in writing with the Commission regarding an ~ injury proceeding. This communication may include such 25 matters as factual or legal argument, factual information in 95-159 0 - 68 - pt. 5 - 19 PAGENO="0290" 2076 1 the form of affidavits or other documents, and requests for 2 informal conferences or an oral injury hearing. The Corn- 3 mission may ccli for an oral injury hearing on its own mo- 4 tion, or on the request of any interested party. Any denial 5 of a request for such oral injury hearing shall be in writing 6 with reasons. Notice of an oral injury hearing, or denial of 7 a request or requests for one, shall be given to all known 8 interested parties and shall be published in the Federal 9 Register. Notice of an oral injury hearing shall state the 10 time and place of such hearing, and refer to the Federal 11 Register l)ubliCation of the notice of the initiation of the 12 injui.y proceeding. All interested parties will be accorded 13 at an oral injury hearing the rights to counsel, to present 14 evidence, and to conduct such cross-examination as may be 15 required for a full and fair disclosure of the facts. A tran- 16 script shall be made of all oral injury hearings, and the Corn- 17 mission may prescribe such regulations as it deems necessary 18 for their fair and orderly conduct. The record in any injury 19 hearing shall consist of the notice of initiation of the injury 20 proceeding, the transcript of any oral injury hearing, the 21 injury determination, and any other relevant written corn- 22 munications or documents the Commission chooses to include 23 on the request of an interested party or its own motion after 24 having heard the parties to be affected. 25 "(i) INJunY DETERMINATI0N.-The Commission shall PAGENO="0291" 2077 1 obtain sufficient inforniation to enable it to prepare an in- 2 jury determination for each injury proceeding, shall publish 3 its injury determination in thi Federal Register, and shall 4 give notice thereof to the Secretary. rl~Iie Commission shall 5 make reasonable effort to send copies to all known interested 6 parties. Each iflJiiF3' determination shall fully indicate the 7 specific data used by the Commission, and its computations 8 and reasoning in arriving at and applying the concepts used 9 in this title. If, in a particular injury proceeding, the dis- 10 closure of some of the detailed information required by this 11 subsection would, in the judgment of the Oommission, im- 12 pede its obtaining similar information in the future, it may so 13 declare in its injury determination and omit that information. 14 If the Commission does withhold such information, however, 15 it shall prepare for the use of any interested party a supple- 16 menta.ry statement of the information required by this sub- 17 section which has been so withheld, a.nd the reasons for so 18 withholding. Such supplementary statements shall not be 19 published or otherwise be made public by any interested 20 party, subject to such sanctions as may be established by the 21 Commission by regulation, but may he considered l)y a. re- 22 viewing court as if otherwise a part of the record. The Corn- 23 mission shall render its injury determination within three 24 months after receiving an affirmative dumping determination. 25 ~ JurncJAl4 REVTEW.TAny interested party shall PAGENO="0292" 2078 1 be entitled to seek judicial review in the United States Court 2 of Customs and Patent Appeals of (1) any negative dump- 3 ing determiiiation; within thirty days after its publication in 4 the Federal Register, and (2) any afflrinative dumping de- 5 termination and injury determination, or any dumping find- 6 ing. within thirty days after the publicatiomi of the Commis- 7 sion determnina.tioii or dumping finding. Such judicial re- 8 view shall be on the records made in the antidumnping hear- ~ ing and Commission hearing, shall be in accordance with ~ section 10 (e) of the Administrative Procedure Act (5 ~ U.S.C. 1009 (e) ), and shall be independent of that provided 12 in section 516 of the Tariff Act of 1930 (19 U.S.C. 1516). ~ Any reviewing court may, in its discretion, order the con- 14 tinued withholding of appraisement reports as to the mer- chandise in question, pending the outcome of its appeal. 16 The United States Court of Customs and Patent Appeals 17 shall establish rules or procedure necessary to effectuate 18 this subsection." 19 SEa. 7. The section of the Antidumping Act, 1921, 20 redesignated as section 213 by section 6 of this Act is 21 amended- 22 (1) by adding at the end of paragraph (4) the 23 following new sentence: "In determining what is the 24 usual wholesale quantity, the Secretary shall exclude 25 from his determination (A) all sales at a quantity dis- PAGENO="0293" 2079 1 count which was not freely available to all purchasers at 2 the time the sales in question were made; (B) all trans- 3 actions between persons who are related to one another 4 in aiiy of the ways described in section 207; and (C) all 5 transactions pursuant to any agreement or arrangement 6 for exclusive dealing, such as, hut. not limited to, an 7 exclusive distributorship or an exclusive requirements 8 contract.", and 9 (2) by adding at the end thereof the following new 10 paragraphs: 11 "(5) The term `Secretary' means the Secretary of the 12 Treasury or any person to whom authority under this title 13 has been delegated. 14 "((3) The term `antidumping proceeding' means the 15 inquiry by the Secretary pursuant to this title to decide 16 upon an affirmative or negative determination. 17 "(7) The term `complaint' means a communication to 18 the Secretary from any customs officer or other person set- 19 ting forth reasons why an antidumping proceeding should be 20 initia.ted or a withholding order entered, along with such 21 supporting information as the Secretary may by regula- 22 tion require and as is reasonably available to the complainant. 23 "(8) The term `complainant' means any person or per- 24 Sons outside the customs service ~who files a. complaint with 25 the Secretary. PAGENO="0294" 2080 1 (9) `l1hc t.erni `withholding order' iueans the order 2 entered by the Secretary pursuant to SeCtion 201 (e) author- 3 izing the withholding of a1)1)fll.iselnent reports. 4 " (10) The terni `dismissal decision' nicans the decision 5 of the Secretary to (IiSI1HSS a complaint pursuant. to section 6 212(b). 7 " (II) `l'he terni `affirmative dumping (leterinillation' 8 means a determination by the Secretary of the Treasury pur- 9 suant to section 201 (d). 10 "(12) The term `negative dumping determination' 11 means a decision by the Secretary not to render an affirma- 12 tive dumping determination. 13 "(13) The term `Commission' means the United States 14 Tariff Commission. 15 "(14) The term `injury proceeding' means the inquiry 16 by the Commission to decide upon au injury determination. 17 "(15) The term `injury determination' means a deter- 18 mination by the Commission pursuant to section 201, whether 19 such determination is in the affirmative or in the negative. 20 "(16) The term `dumping finding' means the notice 21 published by the Secretary pursuant to section 201 (d) of 22 his* affinnative dumping determination, and the injury de- 23 termination of the Commission." 24 SEc. 8. Section 406 of the Act of May 27, 1921 (19 PAGENO="0295" 2081 1 U.S.C. 172) , is amended by inserting "Puerto Rico and" 2 immediately after "The term `United States' includes". 3 SEc. 9. The antidumping regulations of the Treasury 4 Department in effect on the date of the enactment of this 5 Act are ratified and approved, except insofar as they are 6 inconsistent with the provisions of this Act. 7 S~o. 10. (a) Subject to the provisions of subsections 8 (b) and (c) of this section, the amendments made by this 9 Act shall apply with respect toall merchandise as to which 10 no appraisement report has been made on or before the date 11 of the enactment of this Act. 12 (b) The amendments made by this Act shall not apply 13 iii the case of any article if- 14 (1) before the date of the enactment of this Act 15 the Secretary of the Treasury or his delegate has made 16 public a finding of dumping with respect to a class or 17 kind of merchandise which includes such article, and 18 (2) such finding of dumping is in effect with re- 19 spect to such article on the date it is entered, or with- 20 drawn from warehouse, for consumption; 21 except that in the case of any, such article exported from 22 the country of exportation on or after the date of the enact- 23 nient of this Act, the special dumping duty applicable to such PAGENO="0296" 2082 ~ article shall be computed under section 202 (a) of the Anti- 2 dumping A ct, 1921, as amended by this Act. (c) If the question of dumping with respect to any class or kind of foreign merchandise has been raised by or ~ presented to the Secretary of the Treasury or his delegate 6 before f he date of time enactment of this Act and either such 7 question is pending on such date before the Secretary of the s Treasury or his delegate, or the questiomi of injury by rca- ~ son of the importation of such merchandise into the United 10 States is pending on such date before the United States Tariff ~ Commission, then in applying the Antidumping Act, 1921, 12 as amended by this Act- 13 (1) if such question of dmunping is pending before 14 the Secretary of the Treasury or his delegate on such 15 date, the Secretary of the Treasury or his delegate shall ,16 make his affirmative or negative dumping determination 17 at the earliest practicable time, but in no event more 18 than six months after such date, or 19 (2) if such question of injury is pending before the 20 United States Tariff Commission on such date, the Corn- 21 mission shall be treated as having received the affirma- 22 tive determination of the Secretary of the Treasury or 23 his delegate on such date. PAGENO="0297" Dear Colleague: 2083 The Office of the Special Representative for Trade Megotiations has only recently made public the provisions of the Internationol Anti- dumping Code which was signed on June 30. Ambassador Roth, the President's Special Representative for Trade Ilegotiifionn, rorently teotilierl before the Joint Eqonomic Committee of the Con. tint no Congressional action is required to make the Code effective. [hr (rlr is scheduled to become effective on July 1, 1968. The position of Ambassodor Roth evidently is that the Code does not conflict with the Antidumping Act of 1921 and therefore no Congres- sional approval or implementation is necessary. By the same process of reasoning, Ambassador Roth presumably would agree that if the Code in any wa~r amends the Act, Congressionol approval or implementation is necessary before the Code becomes binding in the United States. It seems to me that Ambassador Roth's position that there is no conflict between the Antidurnping Act of 1921 and the Code is clearly erroneous. At this stage, I am not concerned with whether the provisions of the Code are desirable or undesirable as a matter of economic policy, but only with whether the Congress has been improperly bypassed and whether Senate Concurrent Resolution 100, described below, has been defied by the failure of the Office of the Special Representative to present the Code to Congress for approval. The crucial question at this point, there- fore, is whether the provisions of the Code conflict with any of the sub- stantive provisions of the Act. As noted, it is my position there is direct conflict between the Code and the Act and that the Code can become effective in the United States only if approved by Congress. While the Code would subject the Antidumping Act to a multitude of amendments, I limit myself here to an examination of three fundamental amendments of the Act. First, Article 3 of the Code specifies that a determination of injury may be made only if it is found that "dunped imports are demonstrably the principal cause of material injury or of threat of material injury to a domestic industry...." Section 201 (a) of the Antidumping Act vests the Tariff Coranission with authority to Appendix F PU510U, U. LONG, LA, CHAISMAN VANCE HASUIIO, IllS, ` rwI-rMcKPILIYD;rn(sLw.ILL. `~JCUdC~>J ,)t(XtC~ ,)Cflt21C LIE METCAI~. MONT. COMMITTEE ON FINANCE WASHINGTON,O.C. 20510 TOM VAIL CNIEP COUNSEL July 2S, 1967 PAGENO="0298" 2084 determine whether "an industry in the United States is being or is likely to be injured... .by reascn of the importation of (dumped) merchandise." The Act does not restrict the Tariff Corr~nission to affirmative findings of injury or likelihood of injury only when satisfied that dumped imports are ~demonstrably the principal cause of material injury." Thus, it is clear that the Tariff Ccrrnission' s authority to make injury determinations, as conferred upon it by Section 201 of the Anti... dumping Act, would be materially altered and circumscribed by Article 3 of the Antidumping Code. Secondly, Article 1~ of the Code defines the term "domestic indus-. try~l to include all of a country's producers of a product which is ~ the dumped i~ported product under consideration. Cnly in "exceptional circumstances~~.niay a regional competitive market be considered as the industry affected. Such exceptional circumstances can be found only if the producers supplying a regional c~mpetitive market sell "all or almost afl of their products in such market." Further, an additional restriction on the Tariff Ccmnissicnts authority to find injury is imposed, since "all or almost all of the total production" in the regional market must be injured. Section 201 of the Antidumping Act does not restrict the Tariff Coxr.rnissicn in its determination of what constitutes "an industry in the United ~ In a considerable number of cases, the Corr.micdon has concluded that regional markets and regional industries may be found without regard to whether the producers supplying a limited competitive market "sell all or almost all their products" in such market, and without regard to tthether "all or almost aU" of the producers are injured. Thus, it is clear that Article I~ of the Code in providing sub- stantial limitations in its definition of industry and in adding a further restriction on the authority to make affirmative determinations of injury, would severely curtail the present powers of the Tariff Corrnission under Section 201 of the Antiduxping Act. Thirdly, Article 5 of the Code provides that a dumping investiga- tion shall be initiated only when supported by evidence of both dumped prices and of injury to the industry involved, and requires that evidence of dumping and of injury shall be "considered simultaneously." In addi- tion, Article 10 forbids the institution of any provisional measures, which specifically include the authority to order withholding of appraise-. PAGENO="0299" 2085 ment unless there is "sufficient evidence of injury" as well as of dumping. Section 201 (a) of the Antidumping Act was amended in l9Sti and transferred from Treasury to the Tariff Commission sole responsibility for injury determinations. This subsection specifies that the Commission shall make a determination of injury only after being advised by Treasury that a dumping price has been found by that agency. The Senate Finance Committee Report on the 19SL~ amendment made this crystal clear: `This title would also transfer the injury deter- mination under the dumping law to the Tariff Com- mission and provide that it be made within 3 months from the determination of the question of a dumping price by the Secretary." Furthermore, Section 201 (b) of the Act specifically requires that Treasury `shall authorize.. . .the withholding of appraisement" whenever Treasury, in the course of an investigation and before a formal finding of dumping prices, "has reason to believe or suspect" that sales have been made at a dumping price. The Act specifies Treasury then "shall forthwith publish notice of that fact... .and shall authorize... .the withholding of appraisement reports." At that stage the Tariff Commission, not having been advised by Treasury of a determination of dumping, has no authority to institute an investigation, much less make a finding of injury or of the existence of "sufficient evidence of injury", whatever this phrase as used in the Code nay mean. Thus, it is patently clear that by requiring simultaneous investi- gations of dumping and of injury, and by requiring decisions on dumping and on the existence of "sufficient evidence of injury" as conditions pre- cedent to the withholding of appraisement, Articles 5 and 10 of the Code conflict directly with the provisions of subsection (a) and (b) of Section 201 of the Antidumping Act. The refusal of the Office of the Special Representative to recog- nize and respect the areas of policy determinations which are the province of Congress, can hardly be viewed as a mere oversight, attributable to in- adequate familiarity with the well-established doctrine of the separation of powers. Last summer the Senate overwhelmingly adopted Senate Concurrent Resolution 100, advising the Executive Branch generally and warning the Office specifically against including in the Kennedy Round negotiations matters outside the scope of the Trade Expansion Act of 1962. Dumping was PAGENO="0300" 2086 one of the matters which was specified. As summed up by the Senate Finance Committee in its report on Senate Concurrent Resolution 100: `This problem (dumping) concerns unfair trade practices in a domestic economy and it is difficult for us to understand why Congress should be bypassed at the crucial policymak- ing stages, and permitted to participate only after policy has been frozen in an internat- ional trade agreement. Notwithstanding this clear warning by the Senate, the Office of the Special Representative persisted in negotiating the Antidumping Code which conflicts directly with, and, if the Code becomes effective, would amend the Antidumping Act of 1921 in many substantive respects. In point of fact the Code would emasculate the Antidumping Act of 1921 and for all practical purposes strike the Act from the statute books. As I mentioned earlier, thethree points of conflict listed above are merely illustra- tive of a multitude of substantive changes in the Act. In my opinion, these changes would prevent it from imposing any meaningful restraint on the unfair trade practice of dumping. This usurpation of Congressional functions should not be allowed to go unchallenged. I therefore intend to urge the Chairman of the Senate Finance Committee that an appropriate resolution should be favorably re- ported by the Committee and should be adopted by the Senate and by the House, expressing the sense of Congress that the Code should not become effective in the United States unless and until the Code has been approved by the Congress. The resolution should also advise the President to with- draw from the Code immediately, well before it is scheduled to become effective on July 1, 1968. The resolution should further advise the President that if he desires to have the Code become effective in this country, the United States must first withdraw from the Code and then submit it as a proposed international agreement to the Congress for approval. At that time, I will, of course, oppose Congress giving its approval to the complete emasculation of the Antidumping Act. The Act, which is concerned with the unfair trade practice of price discrirnina- tion in this market, needs to be strehgthened not weakened and emascu- lated. This is the purpose sought to be achieved by S. 1726 which I introduced on i~ay 9, 1967 for myseLf and for forty other Senators on both sides of the aisle. I hope th3t you will o~ree ~;ith ::e th3t the action of the Office of the Special Representative in defiance of the clear will of the Senate constitutes usurpation of Congressional authority and must not be allowed to go unchallenged. If you do agree with me, I urge you to communicate your views to the Chairman of the Senate Finance Committee, to other mem- bers of the Senate and also to the Chairman of the Ways and Means Committee of the House and other members of the House. * Sincerely, Vance Hartke United States Senator PAGENO="0301" 2087 Mr. VANIK. My distinguished colleague, Mr. Freighan, of Ohio, was ready to testify here this morning, and I would ask unamimous consent that his statement be placed in the record at this point. Mr. HERLONG. Without objection, it will be done. (Representative Feighan's statement referred to follows:) STATEMENT OF HON. MICHAEL A. FEIGHAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIo Mr. Chairman and members of the committee, I appreciate this opportunity to testify on behalf of H.R. 14120 of which I am a co-sponsor. I wish to express my whole-hearted support for this legislation, which seeks to prevent further erosion of American steel markets to foreign producers. I hope it will be noted and remembered that this legislation does not build a wall around our domestic industry. It does i~ot, shut out foreign steel. Indeed, it will allow steel imports to grow in volume as the American market for steel grows in volume. It simply limits the share of the domestic steel market that can be served by foreign steel to what has already become a very significant level- a level that today is larger than that enjOyed by this country's fifth and sixth largest steel producers combined. The two companies to which I refer-Armco Steel and Jones & Laughlin Steel Corporation-employ 80,000 people and channel over $600 million dollars a year into our economy through payroll costs alone. Even larger sums are expended by these companies for supplies and services. So, we are not talking about an insignificant amount of business lost to American industry, to American steel- workers and to the American economy. And over the last several years, this loss has grown at a very rapid rate. What H.R. 14120 seeks to do is to put the brakes on a trend which is almost certain to reach damaging proportions unless we afford some measure of pro- tection to our home industries from governmentally subsidized industries abroad. What the owners and the employees of the American steel industry ask from us is not exclusion from fair and open competition with those who participate under equal ground rules. What they seek is a check on the further invasion of the American marketplace by others whose wages, costs, obligations and gov- ernmental relationships bear no resemblance to our own. Mr. Chairman, in the arena of foreign trade we deal with factors totally differ- ent from those that exist with respect to interstate commerce within our own borders. For the time being at least, they are factors beyond the control of our domestic industries, and they include factors that bear a close relationship to the standards of living and the mometary burdens of each and every one of us. Hence I ask: Can we afford to sit by and see vital American industries and their employees penalized because our pay rates, our living costs, our capital requirements, our debts, our taxes and our expenditures to keep the free world secure involve an entirely different scale áf numbers and set of values than our competitors aboard? Can we conscientiously risk the impairment of this basic industry's efforts to modernize and expand its facilities in order to better serve this country's economy and national defense? How much further, I ask, must our domestic steel industry's share of our home markets deteriorate before we become aroused and say: "Enough is enough?" To me, there is compelling evidence that the situation calls for immediate remedy that lies within our power. I urgently, ask that you extend this legislation the most careful consideration. Mr. HERLONG. The committee will recess now until 2 o'clock this afternoon. (Wheret~pon, at 12:40 p.m., the committee recessed, to reconvene at 2 p.m. the same day.) AFTER RECESS (The committee reconvened at 2 p.m., Hon. James A. Burke, presiding.) Mr. BIJRXE. The first witness this afternoon is Mr. Kurt Orban. If you will identify yourself for the committee you may proceed. PAGENO="0302" 2088 STATEMENT OP KURT ORBAN, PRESIDENT, AMERICAN INSTITUTE FOR IMPORTED STEEL, INC.; ACCOMPA1~1ED BY SEYMOUR GRAU- BARD, OOUNSEL Mr. ORBAN. My name is Kurt Orban. I am president of the American Institute for Imported Steel and with me is Mr. Seymour Graubard, counsel for the Institute. Mr. Chairman and members of the committee, on behalf of the American Institute for Imported Steel, Inc., I thank you for this op- portunity to present testimony concerning the need of this Nation for continued steel imports. The Institute consists of some 60 of the lead- ing importers of steel in the United States. The import primarily from the Common Market nations and the United Kingdom. They also im- port from Japan and from other nations. Many members of the Institute export as well as import not only steel but other commodities. They would like to be in a position to become major exporters of steel as they once were. The Institute wishes to record its approval of the bill cited as the Trade Expansion Act of 1968 (H.R. 17551). In this presentation, how- ever, we wish to devote ourselves only to the issue of the interna- tional trade in steel. The Institute opposes all legislation designed to impose quotas or special import taxes on steel, whether such legis- lation be specifically devoted to steel or is of an omnibus nature. STEEL AND INFLATION According to last year's Senate Finance Committee staff study, during the period 1946 to 1966 the prices of all commodities in this country increased by 60.3 percent but steel increased by 150.4 per- cent. Clearly, steel prices are one of the principal generators of our present dangerous inflationary spiral. (See annexed table I.) Because steel prices have accelerated so rapidly, other materials have become more economical for many uses. The cement, plastics, aluminum and glass industries, among others, must be grateful to the steel mill executives for having kept steel prices so high as to cause substitution of other materials for steel. Imports have been the major brake on this escalationof steel prices. Steel imports could not have approached their present level without, in effect, being invited in by the domestic steel industry. As table I shows, price escalation diminished as imports increased. It is hard to imagine how high the domestic steel price level would be today had it not been for the competition by imports. Steel industry spokesmen have reiterated that 73 companies "com- pete" with each other, but price competition is considered vulgar in the steel industry. Rather, the mills play the game of "follow the leader," also known as "administered pricing." During the period 1951 to 1955 while wholesale prices fell 0.9 per- cent annually, the price index for steel rose 4.8 percent annually. During the period 1955 to 1958, steel prices increased almost three times as fast as all wholesale prices. Showing the harmony that existed among the steel mills in the years 1962 to 1967 is a tabulation of some 77 reported price changes. PAGENO="0303" 2089 Steel imports have been responsible for changing some of the do- mestic pricing practices. They caused the elimination, between 1962 and 1966, of the enormous and unjustified $20 per ton differential be- tween east coast and west coast prices. They have recently caused some mills to discontinue published pricing and to negotiate prices for such items as wire rods, wire prod- ucts, and reinforcing bars. They have now induced some producers to make contracts at firm prices rather than the burdensome "price in effect at time of shipment." Steel prices in the United States are higher than those in any other major steel-producing nation, making all products using steel more expensive. This fact makes it difficult for exporters of steel end prod- ucts to compete abroad, unless they too have access to steel at world market prices, as do their competitors abroad. If they don't it will simply worsen the balance of payments. The evils of the steel pricing system have a corrupting effect on the domestic steel industry itself. Refusing to compete in price, the U.S. mills allegedly compete in service. The costs of white collar employees and the overhead of the domestic steel mills are much higher than abroad. RESEARCH AND DEVELOPMENT Another and almost disastrous effect of having the steel mills act as an oligopoly rather than as competitors is the lack of pressure on each mill to do research and development to get ahead of its com- petitors. In spite of enormous overhead, only 60 cents per $100 of sales is going into R. & D. In recent years the steel industry has claimed to have upped its expenditures. The latest data indicate only $110 million H. & D. against approximately $17 billion in sales. This represents virtually no relative change since 1964. Furthermore, it took the major steel mills nearly 15 years to put the basic oxygen process into significant use.~ During this hiatus, the U.S. steel industry invested billions of dollars to construct 40 million tons of open hearth capacity. Yet, it is well known that it costs $20 to $25 less per ton to build basic oxygen capacity and the operational sav- ings run from $5 to $10 per ton. While the industry has finally seen~ the light of the basic oxygen furnace, we now see a similar lag in the adoption of continuous casting. In the late 1940's and early 1950's, continuous casting experimenta- tion was more advanced in the United States than elsewhere. None- theless, the large domestic steelmakers have shied away from wholesale adoption of this radical innovation. Instead, they have chosen to invest in conventional blooming and slabbing mills. The Europeans and Japanese were less hesitant. Today, the only use of continuous casting on a regular production basis, for the major portion of mill output, is found abroad and in a number of smaller plants in the United States which have sprung up in recent years and which are operating profitably. These plants, of which there are a number in operation and more being built, operate on the basis of local scrap, electric furnaces, continuous casting, and conventional rolling mills. PAGENO="0304" 2090 Despite these questionable management decisions by the domestic industry, we find that it has continued to increase sales and to main- tain profits, as indicated in amended table II. The table also shows that there is no correlation between industry profits and imports. This is demonstrated even more clearly by the first quarter 1968 perform- ance of the steel mills when imports were at an all-time high. One factor which adversely affects steel profits today is twofold depreciation: one for the 40 million tons of open hearth steel con- structed in the 1950's and 1960's, and one for capital and startup ex- penses for more modern oxygen furnaces which are replacing the ~pen-hearth furnaces. Having made a major mistake in failing to keep up with modern technology, the domestic steel leaders are compounding past errors by raising prices still higher, thereby forcing the public to pay for their mistakes. Consequently, more imported steel enters the nation to meet the consumers' demand for lower-priced steel. The domestic steel leadership answers by raising prices still further. They visit the sins of past managements on present consumers. PRODUCTION AND PROFITS The domestic industry has no reason to be afraid of the future. This is confirmed by projections which show steel ingot production in ex- cess of 200 million tons a year by 1980. The domestic industry's drive to modernize and expand is well underway and is confirmed by every industry financial report pub- lished in 1968. Analysis of these reports demonstrates that these steel corporations are now paying the penalty for abdicating their research and development leadership to others. The disease of the steel industry is inflation; imports are only a symptom. LABOR AND STEEL IMPORTS Last year, L. B. Worthington, chairman of the American Iron & Steel Institute, claimed that the elimination of 11 million tons of im- ported steel would result in the employment of an additional 70,000 steelworkers. This figure assumes that the elimination of imports would result in the construction of new mills to supply the additional production. It is dubious, however, that one new single installation would be added to make up for the elimination of imports. Instead, the existing automated mills would run the additional hours to pro- duce what is needed. It is doubtful that even 10,000 additional em- ployees would be added if all steel imports were stopped. But, even if 10,000 additional employees were required to replace the imports, there is no indication that these employees could easily be found. Un- employment in the Steelworkers Union is, and has been, at a low. Vacationing college students and women have been employed in the mills to compensate for the lack of mature, trained personneL Weighed against the employment of some additional steelworkers would be the employment of over 2 million workers in this country who rely upon exports for their jobs. It is well known that many more man-hours per ton are needed for the finishing and fabricating of steel than for basic steelmaking. PAGENO="0305" 2091 Thus, many fabricating plants, newly established or expanded due to the availability of lower cost imported steel, are able to contribute more, rather than less, to employment; more than they could if the making of their basic steel was pushed back into the high-cost steel- making centers, thereby denying them expansion opportunities or even forcing them out of business. It is true that obsolete facilities have been shut down. It is equally true that new plants have not only taken their place but have increased overall capacity from year to year. That steel imports do not markedly affect domestic employment is indicated by annexed table ITT-taken from the ATSI 1967 Statistical Report-which shows that while steel imports have been increasing, so have domestic steel production and~ the number of domestic wage employees. Nevertheless, there is no question that increasing automation means fewer man-hours per ton. In our country, between 1957 and 1967, steel production rose from 112.7 to 116.8 million tons, while the number employees decreased by 10.7 percent. In the European Common Market, the change is even more strik- ing. During that 10-year period, while output rose 50 percent, the number of steelworkers dropped by 7 percent. However, the European figure covers only hourly workers, whereas the U.S. figure includes salaried people as well-see annexed table IV. We note that during the past 2 years, the United Steelworkers Union has changed its policy in regard to steel imports. Previously, the union urged management to cut prices so that it might sell more steel both in the United States and overseas, thus giving greater em- ployment to steelworkers. Two years ago, in a sharp reversal in posi- tion, the union leadership decided to play along with management. It now joins in asking for limitations on steel imports. Presumably, this would put the mills in an improved financial position and, of course, enable them to pay higher wages. The union has closed its eyes to the inflationary effects of high steel prices, both at home and on our ex- port trade. Union wages have outstripped productivity, as shown in annexed table V. The inflationary effects of the union's present position must ultimately harm the union members, since other unions will demand the same kind of increases. Nevertheless, the possible immediate gains to the union members and to its leadership are such that the union policy seems fixed. In 1968, as in the previous labor contract negotiation, imports have soared. The threat of a strike has caused all consumers of steel to stock- pile domestic steel and to cover additional anticipated needs abroad. If there should be a strike, the entire economy will owe thanks to the steel importers w~ho hav~e supplied this country with the means of maintaining production during strike months. The shortsightedness of present union policy should not determine the policy laid down by this Congress for the good of all Americans. It would be far better for the steel industry and the union to do now what they will do ultimately-arrive at a negotiated agreement. If steel prices merely went up consistently with the increased cost of labor, this would not be too bad. However, the steel industry has consistently increased prices far beyond the increases in labor costs 95-159 0-68-pt. 5-20 PAGENO="0306" 2092 to which it points in justification. Each dollar of wage increase has brought $2 in increased prices. This does not deter the domestic steel industry from claiming that cheap labor abroad is the basis for the ability of imports to undersell domestic steel in this country. During the past year, once again, price increases totaled $350 mil- lion, while labor increases totaled $175 million. As just published by the Bureau of Labor Statistics, Department of Labor, wages in the steel industry in France, Germany, and the United Kingdom run about one-third of those in the United States. However, because of the labor laws abroad and the higher productivity in the United States, the labor cost per unit abroad .is about two- thirds of that in tjrie United States. The report points out that "unit labor cost alone cannot measure the cost competitiveness of an indus- try in international trade." Certain costs overseas, such as coal and electricity, are higher than in t.he United States. In addition, since international competition takes place "where the steel-consuming in- dustries are located, the cost of transportation is an important factor in assessing the competitive position of a particular country in inter- national markets." Our labor unions have urged the Trade Information Committee to pattern our international trade policy on the principle of equal wages for labor in all trading countries. Without such equality, the unions are asking for special duties or quotas. This argument overlooks the fact that such a stand would make it impossible for less prosperous nations to trade with t.he United States. It also assumes quite falsely that the purchasing power of equivalent wages is the same abroad as in the United States. Were this Congress to consider favorably the pleas of the various groups to impose quotas or special duties on steel and other commodi- ties, then labor itself and, even more, people on fixed incomes, whether through retirement or otherwise, would suffer the terrible consequences of the subsequent inflation. The cure for what ails the steel industry in this country does not lie with higher prices. It lies in the desire to compete and to produce goods of better quality more efficiently. In short, it lies in a return to the American system of competition and not in cries for Government assistance. INDIJSTRY ARGuMENTS AGAINST IMPORTS REFUTED I now turn briefly to certain arguments frequently made by the domestic steel leadership, and hold them up to the light: (a) Difference in capital costs.-Industry spokesmen have recently cited a differential of $275 per ton of capacity in the cost of building new steel plants in the United States versus new capacity in Japan. This figure has never been documented. Yet, only some 5 years ago, the experts gave the cost of building new capacity as between $250 and $300 per ton of annual capacity. It is well known today that a plant for the production of 100,000 tons per year of such products as bars and rods can be built for a capital invest- ment of less than $10 million, which is a capital cost per ton of less than $100. (b) Foreign government subsidi~ation of steel exports.-We are re- peatedly told by industry spokesmen that foreign countries subsidize PAGENO="0307" 2093 their steel exports and that most exporting mills are, in effect, gov- ernment controlled. Amended table VI, column I, shows steel imports in 1966 broken down by country of exportation. Column 2 shows the percent of government ownership of the industry in each of the export- ing countries. The final column shows the tonnage which might have come from government-controlled mills. We wind up with a grand total of 229,000 tons, or 2 percent of total imports. This should, once and for all, dispose of the argument that foreign governments control steel exports to the United States. Even if we consider the recent nationalization of the steel industry in the United Kingdom, total steel imports coming from government-con- trolled mills would still be less than 10 percent of total steel imports. Within the past year, there have been two complaints in which the Treasury Department found Government subsidization. Countervail- ing duties have been imposed in these áases. The present law is adequate to protect us against export subsidies. The failure of the domestic industry to file more charges indicates two possibilities: Either it has no basis for such charges or it prefers complaining in public to presenting the facts. A remedy is available for those who say they are injured by dump- ing. It is true that a majority of dumping cases have been found base- less. It is also true that in a significant number of cases penalties have been imposed. The new international accord on dumping, adopted in Geneva last year, should go a long way toward providing American exporters with the same protection under due process that the Ameri- can Government has long given to foreign exporters. (c) Steel imports cause the Government to lose revenue.-Claims have been made that the Federal Government loses considerable in- come tax because of imports. The opposite is true, as shown in table VII in the annex. In 1966 steel imports paid 7.41 percent of the value of the imported items, or a total of $93.9 million in customs duties. In 1967 this rose to 7.73 percent and $96.8 million. At the same time, the domestic industry paid in taxes 4.1 percent of sales in 1966 and 2.4 percent in 1967. In other words, imports paid three times as much on the sales dollar as did the domestic industry in 1967. This is customs duty only, but, in addition, everyone connected with the movement of imported steel pays his share of taxes. There is a further consideration. The selling price of imported steel averages about 15 percent below the domestic steel price, and this saving is either passed on to the end user or shows up as extra profits in the balance sheets of fabricators and distributors. If we assume that perhaps 5 percent is passed on to the end user, then 10 percent stays with the distributor, which means another 5 percent to the Internal Revenue Service. (d) Discriminatory border taxres.-The domestic steel industry has attacked the European nations for imposing discriminatory "border taxes." They point out that steel from this country going into, say, West Germany, would have to pay, over and above the normal duty, a tax of 10 percent on the sales price. They also point out that steel exported by West Germany to the United States does not pay any such tax, and, in fact, any portion of such tax already assessed is remitted. Superficially, this sounds as though there were a serious PAGENO="0308" 2094 situation which should be rectified to make international trade truly a two-way street. But these so-called border taxes are merely a different form of sales taxes or excise taxes. They are comparable to our State and local sales taxes and to the Federal excise taxes which have been in effect for many years for certain products. The fact is that the tax system in European countries takes a much greater percentage of the gross na- tional income than does the tax system in the United States. The Germans have an excise tax of approximately 10 percent and the French have one of some 20 percent. As an example of an American equivalent of the so-called European border tax, take the case of an imported car sold in the city of New York. In addition to the regular import duty, there is a Federal excise tax of 7 percent and a New York City sales tax of 5 percent, or a total tax of 12 percent. This is exactly the same as a buyer of an American auto would pay, and is exactly comparable to the European excise tax system. Incidentally, Japan has no such system. Steel is being imported into Japan, particularly from Australia. The statements about a complete prohibition against imports of steel into Japan are simply not correct. (e) Domestic mills cannot m~eet European corn pet ition.-T he charge has been aired that there is a price difference of about $40 per ton between domestic and imported steel; that pretax profits on domes- tic steel amount to only $17 per ton, and, therefore, it is impossible for domestic steel to compete on a price basis with imports. First, let me state that it is not necessary for a domestic mill to match import prices dollar for dollar, since it can offer the advantages of quick delivery, easy communication, the elimination of transport hazards, and the carrying of big inventories. As a rule, people will not buy imports unless there is a saving of 10 percent or better. Thus, even if the $40 figure were correct, the domestic mills would not be forced to reduce prices to the extent of $40, in order to hold customers. Annexed to this document are some actual selling prices during the past 4 years. I believe this is the first time such data have been pre- sented to the Government (see annexed tables `\TIII_XIII). In no case did price differentials run as high as $40 per ton. In absolute figures, they ran about half of that amount. It would take only a small price reduction to enable the domestic mills to compete effectively with imports. The U.S. Steel Corp. and several others of giants have already demonstrated how they can take business away from imports by abandoning their pricelists in selling soncrete rein- forcing bars, wire rods, structural, and even sheets. (f) National defense and the balance of paym~ents.-Another claim is that, without Government protection the industry may wither away and be unable to meet the Nation's defense needs. But does this make sense? At present, the industry is not dying but showing signs of re- newed vigor. Imports of 10 percent of apparent consumption, and even imports of 15 percent., or possibly even 20 percent of consumption, are not likely to put it out of business. PAGENO="0309" 2O~5 After all, defense set-asides for the Vietnam war amount to only 6 percent of prochiction and, even if imports should rise to 20 percent- w~hich is tecimically unlikely-_-and even if set-asides rose to three times the present rate, there would be plenty of steel for direct defense. When it comes to indirect defense needs, the Korean and the Vietnam crises have shown that, in actual practice, imported steel has been a real boon to the economy. It prevents shortages and holds down the resulting inflationary effect. Further, how can an industry which im- ports 36.3 percent of its basic raw material, iron ore, and nearly 100 percent of its chrome and manganese ore, say that a national emergency would cut off steel imports, but igncre the fact that any such emer- gency would also cut off the flow of its ow-n raw material imports. Realistically, it cannot. This committee has heard so much from government experts and others concerning international trade and the balance of payments that I will comment only briefly on the subject. The domestic industry must bear the major responsibility for the ever increasing volume of steel imports. Following World War II, our steel industry was the world leader. It abdicated this leadership by choosing to become noncompetitive in world steel markets. This deliberate choice turned a highly favorable balance of steel trade into a chronic deficit. Constant]y increasing steel prices have contributed substantially to an alarming inflationary trend for this Nation-an inflationary trend that is damaging our, trade surplus. CONCLUSION We believe that the demand by the domestic industry for the limita- tion of steel imports to less than 10 percent of apparent consumption is completely unreasonable. In contrast, the nations of the European `Common Market are importing approximately 25 percent of their steel consumption. While the European steel executives are no happier about such import competition in their home markets than are their Amer- ican counterparts, they rather compete in the marketplace than revert to the protectionism of the past. The present level of steel imports should cause no more alarm than the constantly rising level of ore imports. William Johnstone, vice president of Bethlehem Steel, has stated before the Tariff Commission, with respect to iron ore imports, that "import restrictions would have injurious effects." What logic then is there in restricting steel imports to one-tenth of consumption while ore impOrts exceed one-third of consumption and are rising? Such restrictions would not be in the best interest of the United States. ` Thank you. (The appendix referred to the follows :) PAGENO="0310" TABLE I 2096 APPENDIX STEEL PRICE TRENDS VS. ALL COMMODITIES (1940 100) Finished Steel Products' All Commoditi~ I I +150.4% 1966 1965 1964 1963 1962 1961 1960 1959 1958 1957 1956 1946 280.7 276. 9 275.6 273.5 271.8 272.7 273.7 274.3 269.7 260.6 238.1 112.1 246.3 238.4 233.7 233.3 234.0 233.3 234.2 +60.3% 234?0 233.5 230.2 223.7 153.7 Source: Weidenhammer, ~Page 357, Table F-2 Steel Imports Staff Study Committee on Finance, U.S. Senate PAGENO="0311" i-~ I-~ ~ ~D ~O ~D %O ~JI 0% 0' 0% ~4 0 *l~ ~4 U) 0 Pt C) CD p.3 C). ~). 0 I-I *.4 (I) H I I + ~j I t,3 S .IS(.i)t%3H :i I H U) CD Cr C~ S~. t~.) ~ U) Cr P~. U) C) CD 5-' CD 0 Pt Cr 0% %0 0 0 I + I I Ut I 0' p.) U) Ut * I I I I L~ -4 3 0 w 3 5- 0 F', * 5-a 5-a `.o i-a %o ~J 0' C) t-'ID. 0 5-ac i~& I-'. id o 0) Pt ~irP 0 CD C)~ tPCD~ h~ o i-' c~ 3 rr 03 1.' 0 U) * C) 0 I Ut Ut ~4 Ut 5-; U) Ut Ut Ut Ut Ut 0 C,, - 0 C/) -U rE C/) C, U)0 C/) ~Tj DId 0 C/I I-I c oo~, ~c,) F.), ~N)U)QO ~ O)F.)~aQ000 I- m C) 0 I C,) 3 L~ h-r 3 C) i~rt4'~ 0 10t1P-' I-; 1000 Irn `< IP~ CD 1i CD 1 C/i C-) C;, I-) -D 0 C, I -~ ~~~~F.3-J Q F.) C, C, U) C, C, C, C, ~ C, CD PAGENO="0312" 2098 TABLE V Column 1 Column 2 Steel Output Average Payroll per all employee man hours cost per hour Index 1957-59 = 100 - 1967 120.8 -----~ $4.32 ~ 1966 123.7 4.24 1965 121.5 1964 116.6 4.01 1963 111.8 3.92 18.9% 38.!4% 1962 106.9 3.87 1961 101.7 3.74 1960 98.6 3.57 1959 105.0 3.66 1958 93.5 3.43 1957 101.6 3.12 Source: Column .1 - Weidenhaminer, Page 162, Table 86 Steel Imports - Staff Study Committee on Finance, U.S. Senate. Column 2 - AISI Statistical Report 1966 Page 14,.Table 6. PAGENO="0313" 2099 TABLE VI.-GOVERNMENT OWNERSHIP AND CONTROL OF MAJOR STEEL EXPORTERS TO THE UNITED STATES U.S. imports (1966), steel pr-ducts, million tons ~ Percent produced by government owned industry Million tons, foreign government con- trolled, imported to United States' (1) (2) (3) Japan 5.00 0 United Kingdom .70 10 Canada .70 0 Belgium-Luxembourg France 1.60 .70 0 0 Italy West Germany Netherlands .20 1.20 . 07 58 2 40 0.116 .024 028 Australia 15 0 . Mexico Total . .13 48 .061 10.45 .229 I Recently nationalized. 2 2 percent of U.S. imports produced by government-controlled mills. Note: All steel products imported by United States, 1966, 11,100000 tons. Source: Col. 1, AlSl Annual Statistical Report, p. 45, table 34. Col. 2, Weidenhammer, steel imports, staff study,Senate Finance Committee, p. 305, table C-3. TABLE Vll.-U.S. GOVERNMENT REVENUE, IMPORTS VERSUS DOMESTIC Federal * U.S. Customs duty paid (millions) ~ Percent of value income tax, domestic industry (millions) Percent of sales 1966 1967 $93.9 96. 8 7.41 7. 73 $721.5 405. 8 4.1 2. 4 Note: On an average pretax profit of approximately 0.5 percent, importers pay an additional 0.25 percent in Federal taxes. Further, stevedores, longshoremen, truckers, railroads, and insurance companies pay taxes on revenue generated by imported steel. TABLE VIII.-HOT-ROLLED CARBON STEEL WIRE RODS, CHICAGO VIA LAKES, PRICES PER NET TON 1964 1965 1966 1967 1968 Size and quality - Import Domestic Import Domestic Import Domestic Import Domestic Import Domestic 7/32 in., 1008-1015, 1Q $110 1 $122. 50 $115 I $122. 50 $99 2 $105. 00 $98 2 $103. 00 $97 2 $103. 00 7/32in.,WEQ(ordinary)_ 114 (2) 113 (2) 112 ~116.00 107 3116.00 107 ~116.00 7/32 in., CH Ki, 1018_ 139 3 160. 50 139 3 160. 50 139 3 160. 50 139 164. 50 139 164. 50 7/32 in., 1060, Plain HR 125 146. 50 125 3 146. 50 122 3 146. 50 122 146. 50 122 146. 50 1 Commercial quality. 2 Negotiable. Published PAGENO="0314" 2100 TABLE IX Import prices, Domestic price, Difference c.i.f., Chicago fob. mill in dollars Percent duty paid per net ton per net ton difference per net ton Hot-rolled coils, 14 gage, 3610.: 1965 1966 1967 1968 Cold-rolled coils, 18 gage, 36 in.: 1965 1966 1967 1968 Hot-rolled bars, C-1018, 110. rounds: 1965 1966 1967 1968 Stainless sheet, 304-2B, 14 gage, 36 in. by 96 in.: 1965 1966 1967 1968 Stainless bars, 304, 1 in. rounds: 1965 1966 1967 1968 $109 $118.00 $9.00 1.6 108 121.00 13.00 10.7 104 121.00 17.00 14.0 94 121.00 27.00 22.3 124 139.50 15.50 11.1 123 142.50 19.50 13.7 125 146.40 21.40 14.6 125 146.40 21.40 14.6 122 133.50 11.50 8.6 121 133.00 12.00 9.0 119 145.50 26.50 18.2 124 145.50 21.50 14.5 735 875.00 140.00 16.0 765 930.00 165.00 17.7 825 975.00 150.00 15.4 860 975.00 115.00 11.7 840 1,175.00 335.00 28.5 840 1, 175. 00 335. 00 28. 5 840 1,175.00 335.00 28.5 900 1,260.00 360.00 28.5 TABLE X.-BASED ON ACTUAL SALES IN MAY 1968 AND ON FIELD SALESMEN'S REPORTS (WHERE DOMESTIC PRICE IS BELOW LIST, THE LOWER PRICE IS SHOWN) Import prices Domestic Difference cit. Chicago price in -Percent duty paid f.o.b. mill dollars difference per net ton per net ton per net ton Wide flange beams/A-36 S in.(17 lbs/ft.) by 40 fL: 1965 116.20 132.00 15.80 11.97 1966 117.20 135.00 17.80 13.19 1967 118.20 135.00 16.80 12.44 1968 116. 20 135. 00 15. 80 13. 93 10 in. (21 lbs/fL) by 40 ft.: 1965 112.60 129.00 16.40 12.71 1966 113. 60 132. 00 18. 40 13. 94 1967 114.60 132.00 17.40 13.18 1968 112. 60 132. 00 19. 40 14. 69 NEGOTIATED Deformed reinforcing bars A-15/A-305 intermediate grade % in. by40ft.: 1965 103.00 109.00 6.00 5.50 1966 103.00 109.00 6.00 5.50 1967 102.00 109.00 7.00 6.42 1968 98.00 109.00 11.00 10.09 Plate OH/LD A-36 3~ in. by 72 in. by 240 in.: 1965 108.80 123.00 14.20 11.54 1966 107.80 123.00 15.20 12.36 1967 109.80 123.00 13.20 10.73 1968 102.80 127.00 24.20 19.05 PAGENO="0315" 00 -u Cl, -l Cl) Cl, C, a C, Cl) - -4 o ~ CD a Cl) -4 0) 2 Cl) C/) -u C, C/) 2 C, 2 -u -1 00 -u C, C) -u a CD u -` 0 CD 2 I~ - C/) 0 - 0 Cl) -4 C, Cl) C/, -u 0 -4 C,, C, -C) a 3 C) 00 F°~1F'F~8 F°~3F~ ~ C/i 0)0)0) ~ 00 ~ ~ 00 (Ji~~ ~ 0)0)0)0) C/iaiUi0) -I 2 >< C - 2 00 C/, ~- CO COCOC0~ 0)0)000) ~ ~ Co a) 0 2 -4~ ~c) - 3 28 ~ a ~ 0~0) ~3 a_CO CO 0 PAGENO="0316" 2102 Mr. BURKE. Are there any questions? Mr. Conable. Mr. CONABLE. Mr. Orban, can you tell me do the Japanese import ore? They do, don't they? Mr. ORBAN. Practically all of it, yes, sir. Mr. CONABLE. Where do they get it? Mr. URBAN. They get some of it from the United States, some from Canada, some from Australia, Philippines-India., I believe. Mr. CONABLE. Do you have any idea how much of their ore they im- port from the United St.ates. Mr. ORBAN. I am quoting strictly from memory. The last chart I saw was somewhere between 10 and 15 percent. They have a contract with Kaiser on the west coast. Mr. CONABLE. Do they still buy scrap from us? Mr. ORBAN. As far as I am informed they buy substantial quan- tities of scrap. The scrap people should be able to give you accurate figures on this. Mr. CONABLE. You say we import a substantial amount of ore. Do we export a substantial amount of ore? Mr. ORBAN. We export very much less. Mr. CONABLE. We don't export any to Europe? Mr. ORBAN. Not to my knowledge. Mr. CONABLE. Are there any other offsetting exports from this coun- try to the steel-producing countries who are now, in the words of this morning's witnesses, intruding on our market here? Mr. ORBAN. The most substantial export would be coal. Mr. CONABLE. Coal? We do export substantial coal. Mr. Oi~Ax. Most of the European coal imports come from the United States and the Japanese split theirs between the United States and Australia. Their own coking coal is rather poor quality and they don't use too much of it. Mr. CONABLE. How much of a factor is this type of raw material in offsetting the balance of payments deficit? Mr. ORBAN. I don't have the figure but we can look it up and submit it. (The following information was received by the committee:) U.S. BALANCE OF TRADE-STEELMAKING RAW MATERIALS, 1967 Code Material Imports Exports Balance~of- (dollar value) (dollar value) trade dollars 281 Iron ore 444,450,504 71,585,032 -372,865,472 282 Iron and steel scrap 11,614,303 250,929,019 +239,314,716 283.7 Manganese 55,741,933 1,502,044 -54,239,889 321.3 Coal, lignite briquets 2,251,673 -2,251,673 321.4 Bituminous coal 482,475,420 +482,475, 420 321.8 Coke of coal (suitable for fuel) 1,692,936 16,491,821 +14,798,885 671 Pig iron, sponge iron, ferroalloys 83,654,503 22,482,014 -61,172,489 Total 599,405,852 845,465,350 +186, 118, 913 Plus 10 percent adjustment from f.o.b. to c.i.f. basis 659, 346, 437 Source: Imports-FT 135 December 1967 U.S. Department of Commerce. Exports-FT 410 December 1967 U.S. Department of Commerce. Mr. CONABLE. Thank you. Mr. BURKE. Thank you, Mr. Orban. PAGENO="0317" 2103 Mr. ORBAN. Mr. Chairman, there is one more point I would like to make and that is that we forgot to append a table of the cross ship- ments and imports of the Common Market. Mr. BURKE. We can leave the record open at this point and without objection if you will submit it we will include it. Mr. ORBAN. We have a breakdown of the cross shipments within the Common Market and also from third countries and we find that the statement made that these countries limit the imports to a maximum of 5 percent from third countries of origin is not quite correct. It is higher for Holland and also for Belgium, Luxembourg, and also for France. (The following information was received by the committee:) DELIVERIES OF ROLLED STEE L PRODUCTS IN COUNT RIES OF THE EUR OPEAN COAL AN 0 STEEL COMMUNITY National Imports from Imports from Total Total deliveries Year production other Community countries third countries imports in tons Tons Percent Tons Percent Tons Percent Percent Tons Percent (1) Germany: 1965 18.262 78.40 4.154 17.83 879 3.77 21.60 23.295 100 1966 17.220 76.50 4.314 19.17 975 4.33 23.50 22.509 100 1967 16.183 76.69 3.944 18.69 976 4.62 23.31 21.103 100 (2) Belgo-Luxembourg Economic Union: 1965 1. 972 67. 98 825 28. 44 104 3. 58 22. 00 2. 901 100 1966 2.096 61.81 1.159 34.18 136 4.01 28.2 3.391 100 1967 2.132 59.75 1.204 33.75 232 6.50 40.25 3.568 100 (3) France: 1965 9. 048 72. 76 3. 324 26. 73 64 0. 51 27. 24 12. 436 100 1966 9. 266 70. 87 3. 708 28.36 101 0. 77 29. 13 13. 075 100 1967 9.253 67.64 4.290 31.36 137 1.00 32.36 13.680 100 (4) Holland: 1965 771 29. 29 1. 721 65. 39 140 5. 32 70. 71 2. 632 100 1966 948 32.06 1.832 61.95 177 5.99 67.94 2.957 100 1967 954 30.33 1.793 57.01 398 12.66 69.67 3.145 100 (5) Italy: 1965 7.945 81.35 1.313 13.45 508 5.20 18.65 9.766 100 1966 8.506 78.43 1.665 15.35 675 6.22 21.57 10.846 100 1967 9.875 78.45 2.041 16.21 672 5.34 21.55 12.588 100 (6) Total for Coal and Steel Community: 1965 37.998 74.46 11.337 22.22 1.695 3.32 23.55 51,030 100 1966 38.036 72.07 12.678 24.02 2.064 3.91 27.93 52.778 100 1967 38. 397 71. 00 13. 272 24. 54 2. 415 4. 46 29. 00 54. 084 100 Mr. BURKE. Thank you very much. Mr. ORBAN. Thank you. (The following article was subsequently submitted by Mr. Orban:) [From May 1968 issue of 33/The Magazine of Metals Producing] CONTINUOUS CASTING: TAKING OVER 10% OF SEMI-FINISHED STEEL PRODUCTION By the end of 1969 over 13 million net tons of continuous casting capacity will be on stream in the U.S.. Here's a look at what steel plants have continuous casting units, their problems and some of the likely candidates, along with a list of engineering and machine builder companies associated with the :process in the U.S. and Canada. . By the end of 1969 10% of steel made in the U.S. could be continuously cast. With the advent of those slab casters going on stream in 1968 there will be 13,200,000 tons of continuous casting capacity in this country. This revolution in steelmaking practice is even more precedent shattering than the BOF wave of the 60s. PAGENO="0318" 2104 The question, Can steelmaking be done continuously?, can no longer be asked. The question now is, Under what circumstances will continuous steelmaking make sense? As to a major problem of continuous steelmaking-productiofl scheduling-the advent of continuous casting in its present batch form has added new dimensions to production scheduling problems. Nevertheless many companies are already scheduling continuous casting machines on a day-to-day basis. Is continuous casting the w-ave of the future? Can all steels be continuously cast as readily as they can be ingot cast? Will all steel production in all steel mills be continuously cast at some date in the future? If so, when? If not, why not? And if so, who is going to supply all the equipment, the engineering know- how and the capital if this new process wave sweeps the industry? About 35 production casting units have been installed in the U.S. in the period from 1960 to 1968. These machines are the ones which will be able to cast the 13 million tons in 1969. Most varieties of steel are (or will be) cast, from con- crete reinforcing bars through high quality carbon steels, alloy constructional steels, and flat rolled products of all types including plates, sheets and strip of both carbon and alloy types. (Hardenable alloys are still not castable on produc- tion basis.) As with all other steel mill equipment, the capital cost of continuous casting machines vary according to what is included in the "machine." Based on pub- lished capital costs of equipment for steel plants such as Phoenix Steel, Tennessee Forging Steel, etc. it seems $15 per annual ton of capacity is the casting machine's share.1 This adds up to $200 million spent since 1962 for the 13,200,000 tons of installed casting machines. This sum represents about 2% of capital investment by the U.S. steel industry during the period `62 to `68. As to the immediate future, the most optimistic continuous casting enthusiast does not believe that as much as 50% of steel can be made by continuous casting. Yet, a sober analysis of possible installations, company by company, indicates that some 30 million tons of casting capacity could be under contract in the period of installations 1971-72, less than five years from now. This possible addition to the 13 million tons already being cast today would give 40 million tons of continuous casting capacity at the start of the process' second decade in 1972. Such casting capacity will represent about 25% of 1972's raw steel- making potential, a not unreasonable proportion. The machines will cost $500,000,000 a figure representing about 10 percent of steel industry capital investment to 1972. This proportion of capital investment would be readily tolerable to an industry spending at a $2 billion a year rate. Why has continuous casting suddenly caught on.? Low cost increase in capacity is the key reason why continuous casting ma- chines figure so high in steel industry plans today. How this need for increased capacity works can be most readily seen in the recent history of small steel plants in the U.S. In the carbon and low alloy steel products field there are 33 steel plants in the country each with annual raw steel capacities less than 200,000 net tons. (See table at end of article.) These plants have a combined capacity of 3.6 million tons of steel, representing less than three percent of total U.S. steelmaking potential. Yet these 33 plants have 15 of the 35 production continuous casting machines in operation (or under construction) in the U.S. Quite clearly, continuous casting represents a major breakthrough in produc- tion layout. Many small plants have been built around a continuous caster as their only semi-finished production unit. Such plants are based on scrap remelting using electric furnaces of less than 30 ton capacity. Rolling is generally done in roughing mills of 18 in. size with finished bar (usually hot rolled, rebars and light angles) rolled in 12 in. cross country mills. Prior to the advent of con- tinuous casting machines, these plants cast billet size ingots. Continuous casting practices for these hot rolled bars and structural plants result in a major saving through increased yields. In addition, continuous casting machines iiiake a more nearly continuous steelmaking practice with advantages in quicker scheduling and lower cost operations throughout. Finally, it is easier for a small steel- maker to make higher quality products by continuous casting than with billet ingots. 1 Capital costs per anual ton of capacity will be less than $15 as machine capacities be- come greater, and designs less compler. Nevertheless, 33's survey indicates that $15 is a useful order-of-magnitude cost figure. PAGENO="0319" 2105 As a result, it is likely that no more small tonnage carbon steel plants will be built on .a greenfield site except around a continuous casting machine. This has been true in the U.S. since 1964. In addition, any expansion of capacity in existing steel plants of less than 200,000 ton capacity will be by way of con- tinuous casting. (Oregon Steel is an interesting exception. It soon will install pressure casting fQr carbon steel slabs which will be rolled into plates.) Thus, companies like Kentucky Electric Steel or Structural Metals will almost cer- tainly install continuous casting machines as their production needs grow. Kentucky Electric with its second electric furnace on the line now has produc- tion capability of 140,000 tons/year. "We're talking to continuous casting engineering companies right now," says Sam Mansbach, sec.-treas. "We'll install a machine within the next year-if imported steel let's us," concludes Mansbach. Continuous casting could also be the way, of modernizing the older plants with open hearths (Judson Steel in the West and Washburn Wire on the East Coast) as open hearths become more costly to operate especially in regard to air pollution. As noted, continuous casting practice also makes it simpler for these smaller steel companies to upgrade their product mix. This is a prime reason Pollak Steel, for example, chose continuous casting. One of the most successful produc- tion records for continuous casting quality steels is held by Roblin Steel. Roblin has been making forging and cold-heading grades of steel since the com- pany started new steelmaking in 1965. Making these grades of steel in a mill setup of less than 200,000 tons capacity with billet ingots would be very difficult. From a competitive commercial standpoint it would probably be impossible. But with its continuous casting machine Roblin has been able to successfully pene- trate the high quality bar market. Where do their machines come from? The list of small steel plants shows the useful role these companies have played in development of continuous casting in the U.S. The engineering com- panies supplying machines to the small steel companies include all major pro- moters of the process now operating in the U.S. (except for newcomers like Dravo, Penn. Eng., Danieli etc.). Thus, the small steel companies have furnished the battle and breeding ground for production development of commercial casting machines in the U.S. Allegheny-Ludlum was a pioneer with its Watervliet con- tinuous casting machine, going on stream in 1949. This installation was an example, however, of the hazards of being an early bird. Watervliet's specialty steel mix is still the kind of steelmaking least daptable to continuous casting. Allegheny-Ludlum bowed out in the `50's and it's still standing on the sidelines. Another group which worked on continuous casting of specialty steels in the early 50s only to drop it, was a team from Bethlehem Steel's tool steel research. Subsequent to the Watervliet installation it was to be the small companies who jumped into full scale production with continuQus casting machines. This occurred in the late `SOs and early `60s, as more small steel companies were formed or expanded their operations. In this period there were only a few engineering companies offering continuous casting know-hqw. Today, a decade later, these are a baker's dozen offering continuous casting know-how and machine building expertise, (There are also patent and licensing situations, especially regarding curved mold machines, creating an unpredictable future for straight vs curved mold machines.) For those steel companies in the market for continuous casting machines- and 33 believes most steel companies are-there's a list of engineering (and machine builders) to call in along with some background on their experience in the field. (See table at end of article.) There are several possible groupings of these engineering companies as related to continuous casting. Some are concerned with conceptual design, others with machine building, others with steel plant engineering and construction. Some offer combinations of capabilities. Continuous casting concept engineering has become one of the most international of activities in the steel industry. Several leading companies, particularly Concast, Inc. (but also including Demag in Germany and Olsson in Switzerland), have adopted the policy of being a central clearinghouse for patents and engineering know-how as the basis for their expertise. Continuous casting machine contracts are then let to machine builders and and other contractors (either as affiliates or as sub-contractors) usually dcmestic to the country where the casting machine is being installed. PAGENO="0320" 2106 U.S. CASTING MACHINE BUU~DERS In the U.S. there are five machinery companies actively associated with con- tinuous casting. These are Mesta Machine, E. W. Bliss, United Engineering, Blaw Knox and Birdsboro Corp. illesta Machine Co., Pittsburgh, Pa~ Mesta has established a continuous casting division headed up by Herb Lem- per. This group has developed and patented several mechanical improvements in continuous casting machines including among others, a progressive shear, a braking control on the mold oscillating equipment, a dummy bar and a horizontal continuous casting machine (still in the design stage) .~ Mesta designed and built for Concast the Atlas Steel slab machine (start-up 1965), and The Steel Company of Canada's six-strand billet machine (start-up 1966). Both machines use the curved mold concept with the design, engineering and fabrication by Mesta. In addition. Mesta is furnishing the six-strand Jones & Laughlin (Aliquippa) Koppers billet caster (start-up early 1969). To just which company the conceptual aspects of the J & L machine should be assigned is one of those steel plant equipment puzzles: Mesta states about the Jones & Laughlin machine "it is our own complete design." Various engineers and operating people from Jones & Laughlin privately state they had a major influ- ence in the machine's design. What is certain is that Jones & Laughlin is pur- chasing and installing in its Aliquippa w-orks through a turn-key contract with Koppers a new- steelmaking facility including a six-strand continuous casting machine being built in Mesta's Homestead shops. Mesta has evolved its own continuous casting machine design which is offered by the company on a turn-key basis as the company does with its rolling mill services. It is of interest that Mesta has several machine builder licensees of its casting machine design. (These include: Italmesta SpA, Italy; Maschinenfabrik Sack, GmbH.. Germany; and Beloit Sorel, Ltd. of Canada.) E. TV. Bliss Co., galem, Ohio Bliss's Rolling Mill Division has established a continuous casting group, headed by chief engineer Joe Heigel, which works in cooperation with the firm's Engineering Research and Development Center in Swarthmore, Pa. The com- J)any's activity in this field includes a twin-strand curved mold billet caster at Manitoba Rolling Mills built to Concast designs (start-up 1966). Bliss is cur- rently building the Concast designed twin-strand curved mold slab caster at Phoenix Steel, w-hose 80" x 12" maximum size is the largest in the world (start-up 1968). The arrangements w-ith Bliss included the entire plate making equipment installation as part of a $27,500,000 turn-key contract. Bliss is also building the Timken four-strand billet caster as the machinery building sub- contractor to Concast (start-up 1968). The twin-strand slab casting machine for Republic Steel at Canton, Ohio of Babcock and Wilcox design is also being built by Bliss. United Engineering ~- Foundry, Pittsburgh, Pa. United is the other U.S. heavy steel mill machinery builder w-hich has evolved its own continuous casting machine. (United in the early 60s worked with BISRA and related groups on continuous casting.) United's is a low-head straight mold, curved apron design. Two such machines have been put into op- eration to date. A tw-in-strand 2 in. and 4 in. square unit was started in 1965 at Wickwire Brothers, Cortland, N.Y. The machine was technically successful but costs of producing the small tonnage needed by Wickwire made the operation unprofitable and the unit has been shut down. United's second machine started in 1967 at Etiwanda Steel and is presently making 41/a in. billets on a produc- tion basis. United's continuous casting operation is headed .up by Frank Kyes. United also produces pressure pouring equipment under license from the de- veloper of the process. Amsted Industries. United has built installations for stainless slabs at Ingersoll Steel. New Castle, Indiana, and Nyby Bruks Aktieho- lag, Sweden. The company will also build a pressure pouring installation for stainless slabs at Kawasaki Steel, Japan, as well as Oregon Steel's facility for carbon slabs. 2 Horizontal casting may be the wave of the future. In the course of getting this article together. 33 has learned that both the Concast and Olsson grouns are puttinc horizontal casting units into production-in the U.S. and overseas, respectively. It is still too early for production information from these units (it is believed that the Olsson unit went on the line first) but it can be stated that this `machine of the future" is aireadr here. PAGENO="0321" 2107 Birdsboro Corp., Birdsboro, Pa. Birdsboro has built three of the Demag-designed machines now operating in the U.S. While maintaining interest in continuous casting under direction of Robert Miller, Birdsboro at the present time does not have any machine in fabrication. Blaw-Knrnv Co., Aetna-Standard Division, Pittsburgh, Pa. Blaw-Knox continues casting activity is carried out by its Aetna-Standard Divison. Blaw-Knox is the machine builder for National Steel's Weirton dual twin slab caster (start-up 1968) which has the largest productive capacity of any unit made by a U.S. machine builder. The Weirton unit was designed by Schloemann AG of Dusseldorf, Germany under license by Concast, Inc. of N.Y. Other machinery builders A sixth machinery builder, Dominion Engineering Works Ltd., a Canadian General Electric affiliate, is now fabricating the Great Lakes Steel continuous casting machine to Concast designs. This machine is a 4-strand Concast curved mold unit, designed to cast 71/4 in. blooms. Approximate cost of the machinery contract held by Dominion Engineering is $2½ million. Both small and large steel companies, notably Tennessee Forging Steel and U.S. Steel, have independently designed and built their own casting machines. These units were fabricated either in company shops or in various contract ma- chine shops. One such shop is the Gladwin Corporation in Detroit, Michigan area. This company has fabricated both continuous casting molds and casting machine assemblies. Where does a U.S. steelman go? The most important companies in the continuous casting field are those with basic design know-how which usually includes patent ownership or rights and varying degrees of originality in machine design. In addition, particularly for smaller steel companies, it is useful if the casting machine design and engi- neering company can also provide fabrication and erection services. Surprisingly few companies in the casting machine field can supply a turnkey job from A to Z. In the U.S., Koppei's Co. is the largest company that has been doing this. Koppers now has nine machines operating (or soon to start) in the U.S. Babcock and Wilcox has also been involved in continuous casting for many years. Con- cast, which has the most machines in the field, is a U.S. based operation with international affiliations. As noted earlier, United and Mesta are two U.S. ma- chine builders with their own casting machine designs. All other basic idea companies are based outside the U.S. working in the country through direct sales representatives, or U.S. affiliates. ill. S. continuous casting machines now on line or to go on within a year Number of Company (Concept basis) : machines Concast, Inc 13 Koppers Co 8 Demnag Group 5 Babcock & Wilcox 3 Designed by steel company user 2 Mesta-Koppers 1 Gamma Engineering 1 Olsson/Western Gear 1 United Engineering & Foundry 1 Total 35 Production unit deactivated 1 Developmental units 6 Total in U.S 42 The following brief description of these conceptual continuous casting com- panies outlines their activities primarily as they affect developments of the process in the U.S., and to some extent, in North America. 9~-159 O-68-pt. 5-21 PAGENO="0322" 2108 Babcoch cQ Wilcos', Tubular Products Division, Beaver Falls, Pa. Babcock & Wilcox is a major diversified supplier of industrial equipment and goods used in consumer products. Its Tubular Products Division is a captive steel- maker with approximately 600,000 tons of raw steel capacity manufactured mostly into seamless tubing. In the early 40s B&W entered into joint development work, with Republic Steel on the continuous casting of steel. The company was the first to continuously cast steel on any consistent scale in the U.S. and is one of the pioneers of the process. B&W's original caster with its 6 ton electric furnace hot metal supply located on the casting floor (at 75 feet above the shop floor, it is probably the highest melting unit anywhere) has not been in opera- tion since the beginning of the Roanoke project. B&W has continued development work on continuous casting by having Roanoke cast heats for other steel com- panies. Nevertheless ,the Tubular Products Division has not installed continuous casting in its own production operations. "Too great a product mix of known castable steels with not enough production of any one item at any one time," explains Isaac Harter, Jr., B&W's long-time head of continuous casting develop- ment and promotion. Engineering and sales of continuous casting equipment has been an important activity of B&W's Tubular Products Division under Harter. The group's first corn- niercial machine came into production at Roanoke Electric Steel in 1062. This unit was also the first production continuous caster in the United States. B&W's second and third commercial machines are presently under construction at Republic Steel's Canton plant. One of these, a four strand bloom caster, is being completely handled by B&W. The second unit, a twin strand slab caster, was laid out by Babcock & Wilcox, and detailed and built by E. W. Bliss Company under a sub-contract. ICoppers Co., Pittsburgh, Pa. Koppers has been associated w-ith continuous casting of steel almost since the process started in the U.S. In combination with the Rossi-Junghans group, Koppers was the contractor for the pioneer steel casting machine at the Water- vliet plant of Allegheny-Ludlum in 1947. Koppers maintained joint ventures with the Rossi group (through Continuous Metalcast Inc.) until 1962. In the early SOs Rossi-Koppers built the pioneer slab-bloom casting machine for Atlas Steels at Welland, Ontario. Several other Rossi-Koppers machines w-ere built in Switzer- land, Mexico and Canada before their split in 1962. Since then, Koppers has built or has under construction, twelve machines world-wide. All are straight mold machines, some with bending, some with vertical cut-off configuration. One of the Kopper's machine under construction is a 18 strand billet caster at Ensedesa, Spain. The set up consists of 3 machines, each of six strands with a range from 4 to 8 in. squares. This high-production unit is certainly the most daring of its kind because of the large number of strands. Start-up of this machine will be watched closely for an indication of design trends for larger ca- pacity machines. This installation will take the entire output of 1.5 million tons/yr of a three furnace BOF shop. Koppers has become one of the major exponents of straight mold casting machines. Koppers has not built any large slab casting units after the first Atlas unit-perhaps because of its feeling about straight mold, perhaps because of metallurgical problems. At the company's annual meeting this year. Fletcher Byrom, president, said that Koppers has the know-how to design and build slab casters and he indicated strong interest on the part of Koppers in getting orders for such units. Several technical factors in regard to slab casting are probably affecting Koppers' decision. Vertical slab casting in straight mold machines results in very high ferrostatic heads in the solidifying slab. This high head could be a cause of metallurgical problems with such units. In any event, supporting the 30-plus ton weight of the slab in vertical position creates problems in pinch roll design. Persumably, these are some of the factors creating difficulties for U.S. Steel at its Gary slab caster. (It should be noted that Russian designers have so far opted entirely for vertical slab casting, with nearly 15 million tons installed.) In any event, at present slab casters of curved mold, low head types are unquestion- ably simpler from an installation standpoint. Whether Koppers, the major ex- ponent of straight mold casting, can overcome these problems by some yet-undis- closed design improvement remains to be seen. PAGENO="0323" 2109 Concast, Inc., New York, New York The Concast group, by the yardstick measure of number of machines in opera- tion, is the world's largest. Under the leadership of Irvin Rossi, Concast has been active worldwide in engineering, design, construction and promotion of continuous casting. Concast, Inc. is the present U.S. organization whose anti- cedents go back to Rossi-Junghans days of nonferrous casting (World War II days). In :1947 the pilot Watervliet (Allegheny-Ludlum) machine was installed. In 1949 Rossi formed Continuous Metalcast Corp. Inc., N.Y. and in 1954 Concast AG, Zurich. Rossi's method of advancing the development (and use) of con- tinuous casting machines has been that of creating plant-scale machines in three way arrangements between steel companies, machine builders (or steel mill engineering groups) and Concast. In addition, Rossi has license agreements with continuous casting machine users. These licensing agreements provide for ex- change of information between licensees (the steel companies) with Concast (either in New York or Zurich) acting as the clearing house. The licensing agreements also usually contain a requirement that "operationol results are re- ported on a confidential basis." As a result, Concast licensees have frequently been reluctant to discuss their operations with outsiders. This secrecy posture, however, has been somewhat diminished in recent years. The Concast group's list of pioneering cOncepts includes promotion of curved molds (beginning in 1963), slab casting with curved mold, and large scale beam blank casting (now in operation in Algoma Steel). Gamma Engineering, Ltd., Whit by, Ontario, Canada Gamma Engineering designed, engineered and, on a turnkey basis, supervised erection of the North Star Steel 100,000 ton/year hot rolled bar mill at St. Paul, Minn. Production is based on a three-strand Gamma-designed billet caster for 4 x 4 to 6 x 6 in. product. North Star has been operating since June 1967 and is the second plant (Newfoundland Steel was the other) completely engineered by Gamma and based entirely on continuous casting practice. Gamma Engineer- ing machines are of the comparatively low head, straight mold, curved bender type. Demag Stranggies-Technik GmbH, Dvisbvrg, Germany; American Demag Corp., New York, New York Demag is a German steel mill machinery and equipment builder. The first Demag built continuous casting machine went into operation in Terni, Italy in 1958. Since then Demag has maintained active association with continuous cast- ing through various corporate combinations. The company is presently building casting machines based on Mannesmann's know-how. (Mannesmann now has over one million tons of slab casting capacity, the largest total production units currently operating). Through Mannesmann, Demag. also has access to the MBC Continuous Casting Ltd. patent exchange (worldwide, except U.S. and Canada). Demag is represented in the U.S. by American Demag. Machines presently in- stalled are at Armco's Butler and Sand Springs plants and at Copperweld Steel. The present Butler machine is for development work. Armco has a new Demag production twin-strand slab caster on order. The McLouth slab caster now being installed (of Concast design and Schloemann manufacture in the upper section) will have a Demag built withdrawal system patterned after the Mannesmann 1967 slab caster. ~n.rface Combustion Div., Midland-Ross Corp., Toledo, Ohio Surface Combustion Div. has been building furnaces for the steel industry for many years. Recently, Surface Combustion has expanded into process develop- ments for industry, especially those related to heating. As part of possible con- tinuous steelmaking, the company has acquired world sales rights for the Hazelett belt caster. (See Sept. `65 issue of 33, pagee 61). Three experimental belt casters have been in operation in the U.S., (1) Bethlehem Steel Research Laboratory, (2) Oregon Steel Mills, Portland Oregon and (3) U.S. Steel Research at South Works, Chicago, Illinois. There is also an experimental unit in Japan. These units have successfully cast steel (Bethlehem's machine has cast ten ton heats into slabs of 4 in. by 12 in. cross-section). Bethlehem has reportedly had similar metallurgical performance on the belt caster as on its more conventional continuous caster. Ugine Kuhlman at Avignon, France will put into operation, sometime this year, a production strip caster. This unit is designed to make stain- less slabs up to 51 in. wide. Nevertheless, Surface Combustion expects the Hazelett casters to become an essential part of its continuous steelmaking in- PAGENO="0324" 2110 stallations. The belt casters (now widely used in the nonferrous industry) are manufactured by the Hazelett Strip Casting Corp. in Winooski, Vermont. Western Gear Corp., Direct Steel Casting Dept., Lof tus Engineering snbsidiary, Pittsburgh, Pa. Western Gear is a California based special machines builder and is the U.S. rep- resentative and builder of Olsson designed continuous casting machines (see 33, September 1966). Two such units are operating in the U.S.: A straight mold 37 in. by 8 in. slab caster installed (1965) in Bethlehem Steel's Research Depart- ment and a 4 strand production billet machine at Pollak Steel, Marion, Ohio. Olsson's machines are unique in having horizontally adjustable mold tables along with an Olsson design hydraulic mold reciprocation. Their general design is straight mold, with subsequent bending of cast material. The Western Gear-Olsson relationship exists also in Japan (through the Loftus Engineering subsidiary). There are five Olsson designed machines operating in Japan, all production units for casting billets of various sizes from approximate- ly 3 in. to 7 in. square or rectangular. Several other Olsson-designed machines are operating in Europe. Newcomers to the scene Many other companies are taking various steps with the expectation of parti- cipating in the expected continuous casting machine growth in the U.S. market. These companies cover steel industry spectrum from engineering construction companies (Kaiser Engineers and Swindell-Dressler, for example) through over- seas machine builders to major components builders such as Zak, Inc. (molds) and the instrument and systems equipment suppliers. It is probable that several hundred companies have already (or will) supply something for continuous casting machines. Although a listing of all such companies would be outside the scope of 33's review, some are worthy of mention either because of pioneering effort or un- usual circumstances surrounding their continuous casting activities: Interlake Steel Corp., Chicago, Ill. This U.S. steelmaker has developed a vibrating mold casting machine several units of which are now going into production in high alloy plants ( Driver Harris and Triangle Conduit). Here's how Interlake describes their new units: "Inter- lake Steel has developed a new high speed continuous casting machine adaptable to a wide variety of small cross section casting needs, from low temperature alloys to extremely high temperature alloys or pure metals. The machine will yield casts of finer than usual metallic grain and highly uniform metallurgical structure. Present Interlake models are particularly suited to the needs of manu- facturers of wire, rods, bars and light structural shape. According to an Inter- lake spokesman, the secret of the casting lies in a unique mold system which enables the machine to run cooler, yet faster, because of elimination of much of the contact between molten metal and molds common in other casting systems. This should also result in extremely low wear rate and low maintenance cost, the company says. Continua International Casting, Italy; American Ligurian Company, N.Y.; Danieli of America, Baltimore, Md. This group of companies, the oldest established in 1962, working with an Italian engineer (Dr. E. Colombo previously with the Concast group) designed a straight mold, low head casting machine. To date 19 of these units for billet casting in the under 200,000 annual ton range have been installed in Greece, Italy, Spain and Switzerland. These machines were engineered and manufactured by Danieli SpA, an Italian heavy machinery builder. Dravo Corp., Pennsylvania Engineerin.g Corp., TToest International These engineering-construction companies are organizing for activity in the continuous casting field. Dravo has U.S. license rights to the BSR process and know-how. Pennsylvania Engineering is also staffing for turn-key continuous casting plant installation capabilities. Voest International is the New York-based representative of Vereinigte Oster- reichische Eisen and Stahiwerke AG. Voest (a supplier of BOF vessels to sev- eral U.S. steel companies) has designed and built the first production machine to use the BSR strand reduction process (this single strand billet machine is presently going into operation at Gebr. Bholer, Kapfenberg, Austria). PAGENO="0325" 2111 Cutting strands to length Worldwide, there are about 240 continuous casting machines with about 570 strands. A critical design aspect is the parting method for cutting the strands to length. For cast sizes under 4 in. square, the least expensive and most effec- tive cut-off is with the use of shears. Both mechanical and hydraulic shears are made for this service by most machine builders or specialty suppliers to the steel industry. For billet and bloom sizes greater than 4 in. square an upper limit of prac- ticability for shears is quickly reached. Shearing of hot steel blooms and slabs as large as any that can be rolled is readily accomplished in rolling mills where the space for the rugged equipment required is no problem. In continuous casting installations, however, especially for multistrand machines, mechanical shears for larger size pieces normally take up too much room. Mesta has recently patented a mechanical progressive shear that can be installed in close quarters. Even hydraulic shears present problems of adapting to close clearances desir- able in casting machine design. Finally for slab cut-off, after certain size ranges are exceeded, in general only oxygen torch cutting permits practicable machine dimensions. Because of its flexibility and comparative low capital cost, torch cutting has been widely applied to continuous casting installations. Most of the oxygen-cut- ting equipment manufacturers have built torch cut-off units (in the U.S., Linde has been a major supplier). Worldwide, particularly for slab cutting, one of the largest oxygen cut-off machine manufacturers is Messer-Griesheim of Frankfurt, Germany (Airco is the U.S. representative). This company has furnished nearly 100 cut-off installations, including those at Algoma, Armco, Phoenix and Timken. Some of the larger slab torch cut-off installations cost over $100,000 because of their required high degree of ruggedness and complete automation. New practices: new problems Start up problems experienced with recently commissioned continuous cast- ing machine have been formidable-the process is still not a simple button-push- ing affair. At the recent AIME meeting in Atlantic City the reports from five plants which had 66-67 start ups had this, common theme-it ain't easy. Mannesmann's H. Schrewe described his company's 5 years of wide (up to 2000 mill) slab casting. Mannesmann's Huckingen plant is now at nearly 2 million net tons slab casting capacity. Huckingen's last machine (commissioned in about 1964) started up with minimum of difficulty. Within a few months it was producing 2000 tons of slab daily. Current rate is 4000 tons daily. Mannesmann's slab caster is operated with normal production concepts. Man- nesmann still scarfs all surfaces of all cast slabs. This is primarily to allow for closer surface inspection, but also to give as good a surface as possible. "If we roll a 40,000 lb. coil," says H. Schrewe, "and there's only one defect in the middle of it, we would have to divert that coil." Then Schrewe echoes flat rolled steel producers world wide: "This diversion would be more expensive than our con- ditioning operations on the as-cast slab." U.S. & Canadian machines put into production line in the last several years have been mostly for blooms and billets. Four such units (three in Canada and one in U.S.) have broadened American steelmakers' knowledge of casting to include both easy and tough specifications steels. The question of the interrela- tion of mechanical design and metallurgical problems cannot be precisely an- swered. It is likely that tens (maybe hundreds) of variables affect the final product-the billet, bloom or slab-when teeming liquid steel through a casting machine. Since continuous cast steels do represent a major change in steelmaking prac- tice, they also represent a major problem in developing a new set of metallurgical controls. To paraphrase George Newton of Stelco: Over the years certain optimiz- ing operating factors have been developed in conventional ingot-billet practices. Such techniques as hot topped ingots, large top and bottom discards, a usual 40 to 1 reduction of area, and other procedures are all being used to produce high quality steels. Steelmakers are now being challenged to learn what similar tech- niques are necessary for getting required quality in direct cast steelmaking. On the subject of metallurgical practices the following comments were made to 33 by a steel plant metallurgist. "Acceptance of continuous cast parts or ma- terial for uses in the automotive trade is not automatic. Long trial tests are still required to prove the method and materials. As to application of a given cast PAGENO="0326" 2112 heat to an order diversions are still necessary, 10 percent is not uncommon. This puts a double load on metallurgical departments which must continue to sell continuous cast billets and products and dispose of the off specification heats." Rebars and. light structurais Most continuous casting plants in routine production in the U.S. and Canada make steel products to strength and surface specifications that are less demand- ing. Connors Steel Div. of H. K. Porter, and Roanoke Electric, two of the first into continuous casting, both operate straight mold machines making either struc- turals or rebars. Florida Steel, Soule Steel and Armco at Sand Springs, have gone into production in the last several years with curved mold machines making similar products. (For a complete listing of these under 200,000 ton/yr plants.) Quality steels still require rigorous testing Roblin Steel went on stream in 1964 with a straight mold machine making quality rod and bar stock. Cold heading steel made by Roblin must meet demand- ing specifications, both for internal cleanliness and defect-free surfaces. Roblin's practice has evolved into the customary close inspection familiar to quality alloy steelmakers for many years: 100% surface inspection with defect removal by chipping or grinding with top, middle and bottom acid etch tests for internal soundness and cleanliness checks. Roblin, from the start of its steelmaking, has had a corner crack problem. This is being "solved" by continuous corner removal during casting operation. As to internal cleanliness and soundness, Roblin has evolved an elaborate argon gas shrouding practice to maintain existing levels of deoxidation as liquid steel is teemed from the ladle to mold. Roblin has applied for patents on the practice and given it the name "Impact." All continuous casting operators making top quality products are concerned with keeping nonmetallic inclusions under control. Gas shrouding, of which the Roblin closed system is the most elaborate, is in common use. Various kinds of shielding powders are also used, especially in slab casting. Here, also the use of snorkel tubes for submerged pouring keeps liquid steel away from the atmos- phere. Though these systems are more or less effective, the ultimate system of completely sealed transfer of liquid steel to the casting mold has yet to be developed. In the U.S. the most recent addition to continuous cast quality steelmakers is Wisconsin Steel Div. Mel Nickel, manager of steel production, has had the job of setting up quality steel practices for continuous casting high quality forging and constructional alloy steels made in BOF furnaces (some 75 specifications are cast). Wisconsin has a raw steel capacity of 1.2 million tons annually, and has an 8 strand casting machine of some 0.4 million tons capacity as well as a Dortmund-Horder vacuum degasser with capacity equal to that of casting machine. With a straight mold, vertical cut-off machine Wisconsin has no question of effect of bending on internal soundness (Wisconsin's "straight" casting practice was selected to insure trouble-free high sulfur steel product casting). Wisconsin's inspection methods include spot billet surface and internal inspec- tion at the discharge end of the casting machine. Results of this spot inspection give a statistical pattern of casting machine (and strand) performance for con- trol purposes. 100% inspection is performed on all heats at the usual conditioning beds ahead of Wisconsin's bar and billet mills. These control procedures have enabled Wisconsin Steel to develop a continuous casting practice for "routine" production of quality steels. The important conclusion to be drawn is that Wis- consin's experience demonstrates that this is possible. It must also be observed that developing metallurgical controls is a never ending process both to accom- plish the necessary upgrading of steel quality and to reduce operating costs. In this sense, Wisconsin Steel along with all other continuous casters is still pio- neering both in developing the ideal casting machine design and the ideal steel- making practices to use with that ideal design. Stelco (Steel Co. of Canada Ltd.) has also been continuous casting for about a year and a half. Stelco's machine is a six strand curved mold billet (4 x 4 in.) caster, using open hearth steel. Stelco has cast a fairly wide range of carbon steels for hot rolled bar and rod, including cold heading and manganese spring steels. Results to date demonstrate that multi-strand small size casters can be PAGENO="0327" 2113 cantankerous machines-but that quality steels can be made. Metallurgical and operating problems were discussed by G. Newton at the spring AIME meeting. His list of recommendations: Close attention must be given to maintaining machine, tundish and ladle in top condition. Tapping temperatures must be closely controlled. Argon stirring of molten steel in ladle is essential for maintaining uniform metal temperature. Sensible casting speeds must be used. Proper guiding of billet helps maintain shape and consistent cooling. An experienced crew is required. It will be noted that some of these recommendations cover machine charac- teristics and some metallurgical aspects. Newton's further descriptions of de- velopment of Stelco's deoxidation practices, argon degassing, changes in guide design, inclusion control all demonstrate the as-yet unavoidable difficulties of continuous casting of higher quality billet and bloom steels. Some of these are: corner cracks, pinholes in silicon killed steel, and trapped slag and non-metallics in aluminum killed steels. Casting acceptable centers Continuous casting experience of Copperweld's Aristoloy Division, an impor- tant U.S. producer of high quality constructional steels, has not yet been officially disclosed. Copperweld's Demag-designed curved mold 4-strand machine was com- missioned several years ago, but there were some start up problems. Also, in order to work center porosity sufficiently to achieve satisfactory bar physicals, Copperweld has had to go to a minimum of 10 to 1 reduction. This metallurgical problem of center porosity seems to be inherent in cOntinuous casting of steels. Sound centers become essential when making high quality constructional steels. This is the basis for the improvement claims of BSR (Bohier Strand Reduction). Bohier has patented a process for reducing the cast section by rolling while the center is still liquid to a maximum 20% reduction. The first production machine using this process went on stream a short while ago at Bohler's plant in Kapfenberg. Bohler Brothers Ltd. of Kapfenberg, Austria is an alloy and specialty steel- maker, and has had a continuous casting machine in operation since 1952 (twin strand vertical, squares to 150 mm sq and fiats up to 300 by 100 with 4 and 10 ton electric furnace steel supply). Not surprisingly, Bohier has developed a great deal of know-how in continuous casting technology (see 33 issue of September and October 1960 for report on Bohler mold developments). Two steel companies in the U.S., Timken and Great Lakes, are adapting their casting machine practice to use the BSR in-line bloom reduction. The single- strand BSR units are being supplied by Concast. In the case of the Timken in- stallation, Selas Co. is supplying reheating units between the secondary spray chamber and the BSR stand. Exactly what effect the strand reducing process has on center conditions in quality steelmaking under U.S. conditions will not be know-n until the two machines are operating. Beneficial effects are presently being extrapolated from Bohler's development work. The need for some kind of metal- lurgical tool for "working" direct cast alloy steel centers is suggested by Copper- weld's experiences as well as by general appearances of as-cast bloom cross sec- tions. There is also some indication from Stelco's experience that continuous casting creates directional agglomeration of non-metallics on certain grades. Whether this results from the curved mold design or from some other cause is not presently known. The whole question of non-metallic segregation in con- tinuous cast products is one of the major quality problems, regardless of machine configurations, as the grade quality requirements become more severe. In summary, from a metallurgical standpoint, continuous casting of bloom and billet size steels is a firmly established process in the U.S., with 5 million tons of capacity now in production or going into production shortly. Only hot rolled merchant bar and structural steels casting can be considered metallurically a completely predictable operation on the basis of U.S. experience to date. For these products, every machine design type with any liquid steel source can be expected to make saleable products. PAGENO="0328" 2114 Continuous cast steels of bloom and billet size, of most constructional alloy steels are now being made in the U.S., (and Canada) sucessfully, but with metal- lurgical difficulties requiring development of new techniques. These include: Changes in liquid steelmaking practices (this is equally true of electric furnace, open hearth and basic oxygen steelmaking all of which are being used for continuous cast steels). Changes in pit practices on ladles for continuous casting. Use of argon stirring of steel in large ladles. Modified deoxidation practices. Some of the factors affecting this are: Alumi- num killed steels are preferred for many applications but there are problems in casting such steels in small billets and blooms. Aluminum oxide plugging of nozzles is one of the serious problems in small nozzle bores. Substitution of columbium or vanadium for deoxidation is acceptable but these alloy residuals affect established heat treating cycles in mass production shops. Mechanical modifications to the continuous casting machines as originally designed. The probability of using direct strand reduction as an integral part of the casting process. Extensive inspection practices at the same levels used for traditional ingot- rolling practices. Slab casting-U.S. steelmen just getting under the tent For stainless (of the 300 series) and silicon transformer steels, Atlas Steels' historic (1953) Welland casting machine and more recent (1966) Tracy machine, along with Armco's Butler Plant experiences demonstrate conclusively that slabs of these alloys can be and are being cast on a production basis. While there are quality control metallurgical problems, these are solvable within the limits of normal shop operating practices. Two more stainless slab casters are under way. Republic's Canton Plant slab caster will go into production this year, making stainless slabs from electric furnace heats. At 200 tons these will be among the largest stainless heats ever made. Crucible's Midland Works will also start stainless slab casting, probably sometime in 1969. With stainless being made in an oxygen converter, in addition to Crucible's arc furnaces, this too will be a unique set up. For plates, returns to date are based only on European practices and there the evidence is overwhelming (33, January `68, page 94) that most grades of plate steels can be successfully cast. The industry concensus is that no unsolvable metallurgical difficulties will arise when Phoenix Steel starts up its plate caster. Making plate slabs by continuous casting will, in all probability, be- come the norm for the industry. It should be noted that there will be some formidable scheduling problems involved for plate niakers as well as the question of reduction ratios for plates over 2 in. thick. For sheets~ and strip McLouth Steel is spending $105 million for a large tonnage sheet slab caster system starting up in 1968. McLouth's decision is based on substantial quantities, probably in the 100,000's, of sheet tonnage shipped to automotive and other users and made from slabs cast in their developmental continuous caster. This has demonstrated the metallurgical feasibility of making automotive sheet grades by continuous casting. McLouth gave 33 its policy in regard to continuous cast steel this way, "McLouth announced that it will make `rimmed' steel which will meet automotive or appliance, or any use to which sheet steels are normally applied." As to precise details of their continuous casting practices, McLouth will not talk for the record until after their new equipment is in production. It should be noted that McLouth is making a substantial extrapolation of its development work. The new McLouth casting machines are of Concast curved mold design vs the earlier Concast straight mold in their development unit and have capacity of possibly 3 million tons/year vs less than a quarter of that in their original unit. PAGENO="0329" 2115 U. S. Steel's Gary production slab caster is presumably making a product similar to that of McLouth's. No official comment has been made by U. S. Steel, either about their machine or their operating practices or the products they are making. The following observations have been gathered by 33 from various sources. The U. S. Steel caster is a vertical mold single strand machine with vertical cut-off (the casting floor is very high for this reason). The casting machine is located in a building adjacent to U. S. Steel's 3 vessel BOF shop and uses oxygen steel in its operation. Casting was started in April `67 and is continuing to date. Some 80% of steels cast are 0.10 max carbon and as many as 16 heats (of nominal 150 ton size) have been cast in one day. U. S. Steel is hand scarfing all surfaces cast, a common industry practice for high quality sheet steel. U. S. Steel's experience with customer acceptance of continuous cast steel is not known. On the basis of fact that they are continuing production casting it must be assumed that their product is acceptable to sheet users. National Steel's Weirton plant will soon start producing continuous cast slabs on its 4-strand curved mold machine. This unit is located in the same building with Weirton's new BOF furnaces and their R-H vacuum degassing equipment. Weirton's caster has slab size ranges from 7 in. by 30 in. to 11 in. by 40 in. for their tinplate mills. Weirton will be casting on a 1.5 million annual ton production basis (heat sizes from Weirton's BOF are over 300 net tons). Weirton Steel is pioneering with 1) its casting machine, a back-to-back curved mold dual twin-strand machine, 2) with its overall process (including the world's largest heat sizes being cast) and 3) with the product, tin plate, which the company is making for the first time on a production basis using continuous cast slab. U.S'. status of slab casting In summary, slab casting practices are in a lively state of development in U.S. steel plants. By the end of this year production casting of slabs for all major steel products will be a reality. At this moment, the likelihood of success by each of the plants about to cast slabs can only be guessed except for stainless, particularly the 300 series, where continuous casting practice is already proven and commercial. What is more certain is that the level of success of the casting systems just described will markedly influence decision making regarding the next round of slab casting installations. The net `67 shipment of tin mill products at 5.05 mil- lion tons, 7.1% of total, and 32.57 million tons of sheets and strip, 38.5% of total and 7.05 million tons of plates for 9.5%, give a combined total of 55.1%. Thus, considerably more semi-finished form as slabs. The combined capacities of slab casters going into production (in 1968 & 1969) is 8.3 million tons for plate, sheet & strip and in plate products, and for practically every analysis of steel rolled. At 18% of total, the steel industry in the U. S. is witnessing the most gigantic and costly steel mill scale experiment imaginable. At this moment, it does not seem likely that making slabs on rolling mills will become obsolete in the same way as early steelmaking processes have. Yet, such technological revolutions occur frequently in the steel industry: BOFs are replacing open hearths, hand sheet mills were obsoleted in the `30's, open hearths replaced Bessemers a generation earlier, and the hand puddling furnaces of the `80's are gone. It could happen again. PAGENO="0330" STEEL PLANTS IN U.S. WITH LESS THAN 200,000 NET TONS ANNUAL CAPACITY Connors Steel Division, H. K. Porter: Birmingham, Ala 3-20 ton EF Huntington, W. Va 2-30 ton EF Etiwanda Steel Producers, Etiwanda, Calif 2-10 ton EF Florida Steel Corp.: Tampa, Fla 1-25 ton EF 2-15 ton EF Croft, N.C 1-25 ton 1-15 ton Georgetown Steel Corp., Georgetown, S.C 2-55 ton EF Harrisburg Steel Co., Harrisburg, Pa 3-50 ton OH_ - - - Hawaiian Western Steel, Ltd. Ewa, Hawaii 1-15 ton EF Intercoastal Steel Corp., Nor(olk, Va 1-20 ton [F Judson Steel Corp., Emeryville, Calif 3-50 OH Kankakee Electric Steel, Kankakee, Ill 1-15 ton EF Kentucky Electric Steel, Coalton, Ky 2-15 ton EF Knoxville Iron Co., Knoxville, Teen 2-10 ton EF 1-25 ton Lelourneau, Inc., Longview, Tex 3-27 ton EF Mississippi Steel Corp., Jackson, Miss 2-10 ton EF North Star Steel Co., St. Paul, Minn 1-50 ton EF Northwest Steel Rolling Mills, Inc., Seattle, Wash 1-30 ton EF Oregon Steel Mills, Portland, 0mg 3-20 ton EF Owen Electric Steel Co., Cayce, S.C (1) Pollak Steel Co., Marion Ohio 1-30 ton EF Roanoke Electric Steel, l!loanoke, Va 1-12 ton EF 2-25 ton Roblin Steel Corp., North Tonawanda, N.Y 2-25 ton EF Soule Steel Co., San Francisco, Calif 1-15 ton EF Southern Electric Steel, Birmingham, Ala 2-14 ton EF Southwest Steel Rolling-Mills, Inc., Los Angeles, Calif 2-18 ton EF 1-15 ton Structural Metals, Inc., Sequin, Tex 2-25 ton EF Tennessee Forging Steel, Harriman, Teen 1-20 ton EF Texas Steel Co., Fort Worth, Tex 1-25 ton EF 1-12 1-4, 1-3 Washburn Wire Co., Phillipsdale, R.l 2-3d ton EF Total capacity 200, 000 Yes, Koppers 1964 200, 000 Structurals and merchant bars. 150,000 No 90, 000 Yes, United 1967 100, 000 Hot rolled bars and rods and rebars. 200, 000 Yes, Concast 1965 200, 000 Hot rolled bars and structurals. 100,000 No 200, 000 Yes, Concast 1969 75, 000 Wire rods and hot rolled. 80, 000 No Forging blooms. 50, 000 do Hot rolled and rebars. 50, 000 do Hot rolled and reinforcing bars. 80, 000 do Hot rolled and rebars. 70, 000 do Do. 140, 000 do Structurals and merchant bars. 100, 000 do Hot rolled and rebars. 200, 000 do Slabs and plate. 80,000 do Hot rolled and rebars. 100, 000 Yes, Gamma Eng 1967 100, 000 Do. 100,000 No Do. 200, 000 Pressure casting 1970 Hot rolled bars, plate. (1) No Do. 100, 000 Yes, Olsson-Western Gear 1968 100, 000 Do. 100, 000 Yes, Babcock & Wilcox 1962 100, 000 Do. 140, 000 Yes, Koppers 1964 140, 000 Hot rolled and wire rods. 60, 000 Yes, Concast 1965 60, 000 Hot rolled and rebars. 120,000 No Do. 150,000 do Do. 50,000 do Do. 70, 000 Yes, Tennessee Forging Steel__ 1967 70,000 Do. 100, 000 No Hot rolled, rebars and alloy steels. 120,000 do Hot rolled bars and rods and strip and wire. 3,670, 000 15 plus 1 pressure casting 1,265, 000 Percent conticasting, 36. Approximate raw steel- Date Continuous Company and location Hot metal annual Continuous capacity, net tons casting installed casting Product, hot rolled and rebars capacity Allison Steel Mfg. Co., Tempo, Ariz 3-20 ton EF 150, 000 No Reinforcing bars. Armco Steel Corp., Sand Springs Works, Tulsa, OkIa 1-70 ton EF 140, 000 Yes, Demag 1965 140, 000 Hot rolled and rebars. Border Steel Rolling Mills, El Paso, Tex 2-25 ton EF 140, 000 No Do. Calumet Steel Division, Borg-Warner, Chicago Heights, Ill 2-30 ton EF 180, 000 Yes, Koppers 1967 180, 000 Hot rolled bars, structural and special shapes. `Not available. PAGENO="0331" HOW TO SPEND YOUR MONEY FOR STEELMAKING CONTINUOUS CASTING MACHINES Company name Con- ceptual Casting macli me design Approximate number of Fabri- Erection machines installed cation License required of user Engaged in continuous Comments casting since- Engineering American Demag, Inc., New York, N.Y Yes Yes Yes About 30 worldwide, includes Probably. 1940's U.S. representative of Demag Stranggiess, United States. Duisberg, Germany. American Ligurian Co., New York, N.Y Yes Yes 19 in Europe No 1960's U.S. representativeof Continua International, Italy. Babcock & Wilcox Corp., Tubular Products Yes 3 in United States Yes 1940's Division, Beaver Falls, Pa. Birdsboro Corp., Birdsboro, Pa As needed... Yes Several in United States Machine builder. Blaw Knox Co., Pittsburgh, Pa do Yes 1, United States Do. E. W. Bliss Co., Salem, Ohio Yes Yes Yes Yes 4 in United States and Canada Do. Concast, Inc., New York, N.Y Yes Yes Yes Yes Over 100 worldwide including Yes 1930's ~ owned by National Steel. United States. Danieli of America, Inc., Baltimore, Md Yes Yes No Mid-1960's U.S. representative of Italian mill machinery builder. Dominion Engineering Works, Montreal, Quebec As needed.... Yes Several in Canada, 1 in Machine builder. United States. Dravo Corp., Pittsburgh, Pa Yes Yes...... Yes None to date No 1967 Licensee of Gebr. Boehler Austria for metall ~ lurgical and BSR strand reduction know- how Gamma Engineering Ltd Whitby Ontario Yes Yes Yes Probably 1 in United States and 1 in No Mid 1960 Canada Canada Interlake Steel Corp., Chicago, Ill Yes Yes Probably several nonferrous, Probably. -- 1960's Interlake has developed vibrating mold United States. machine. Koppers Corp., Pittsburgh, Pa Yes Yes Yes Yes 20 worldwide No 1940's Koppers has 9 straight mold production machines operating in the United States Mesta Machine Co., Pittsburgh, Pa Yes Yes Yes...... Yes 6 in United States and No 1950's Mesta casting machine design licensed Canada. abroad. Pennsylvania Engineering, New Castle, Pa Possibly...... Yes Yes None to date No 1967 Steel millconstruction engineering company. Surface Combustion Division, Toledo, Ohio Yes Yes Yes Yes 5, of which 4 are experi- Yes Mid-1960's Surface Combustion has rights to the mental, worldwide and Hazelett belt caster. United States. United Engineering & Foundry, Pittsburgh, Pa_ Yes Yes Yes Possibly.... 2 in United States No 1960's U.S. steel mill machine builder. Has its own casting machine design. Voest International, New York, N.Y Possibly.... Yes Yes 1 in Austria No 1966 U.S. representative of Voest (Austria) and licensee of BSR process of strand reduc- tion. Western Gear Corp., Direct Casting Division, Yes Yes Yes 20 worldwide and United No Early 1960's...... Western Gear is U.S. representative of Erik Pittsburgh, Pa. States. Olsson, AG, Switzerland. Note: The list is in accordance with our best knowledge and is not claimed to be necessarily complete. It should also be noted that 2 steel companies, Tennessee Forging Steel and United States Steel have independently designed and built their continuous casting machines. PAGENO="0332" 2118 Mr. Btnu~. The next witness is Mr. Robert L. Phelps. STATEM~ENT OP ROBERT L. PHELPS, IN BEHALF OP NORTHWEST INDEPENDENT STEEL MILLS Mr. Pm~ri's. My name is Robert L. Phelps. I am connected with the Northwest Steel Rolling Mills in Seattle, Wash. We are a small mill. It is one of the eight independent mills in the Western States. Northwest Steel is a small business with approximately 250 employees and has operated in Seattle since 1926. I will read these other mills that we represent, that we are speaking in behalf of, and then from that I think I will get away from the text and answer some questions. Mr. BURKE. If you wish to summarize you may, and then your en- tire statement will appear in the record following your oral statement. Mr. PHELPS. Thank you, sir. Those other independent mills are sim- ilar to all cold metal mills. One is located in Arizona, five in California, and one in Oregon. They are all listed in this text. We are a hundred percent scrap mill. This is our prime raw mate- rial. Our prime raw material is old auto bodies, of which there are about 50 million tons in inventory in the United States and there are about 10 million tons of old discarded washing machines and stoves, et cetera. It is our type of mill, sometimes called a scavenger mill, that uses this material. That is all we use. We don't use any of this ore that they are talking about. We are a small electric furnace operation, anywhere from 50 to 250,000 tons a year, and there are over 100 of us in Mis- sissippi, Texas, all over the West, all over the East. I think that there is an important factor here that these mills do get rid of this eyescore and does work along with this Highway Beau- fication Act of 1965. I don't know what would happen to all this stuff if we didn't use it because the scrap market is extremely depressed now. It is the lowest it has been in years. The Japanese are not buying scrap in the tomiages that they were. They are buying ore-as the gentleman who preceded me said-some from Australia, some from the United States. They are going to get some coal out of Canada and I understand they are also exploring some deposits in Red China and in Russia. So this scrap is our prime product. It is going to build up. There is an increase in the market every year of approximately 5 million tons of auto bodies. What have we done about this? Our small mills have gotten together occasionally to see what could be done regarding the laws that are in effect. It was very interesting to hear Mr. Curtis' remarks this morning. We have done something about this. One of the things we did was have an attorney from Olym- pia, Wash., prepare a study on the nine cartels that are in operation that fix prices and quantities of steel that are sold in the United States by Japan; fix prices and quantities of scrap that they buy from the United States for Japan. I have been told by this man, Mr. Collier, that any foreign country doing business in the United States must abide by the laws of the United States. These people aren't doing this. I have turned this study over to Senator Hart of the Antitrust Subcommittee and they are, I understand, going to have hearings on this. PAGENO="0333" 2119 I am most anxious that they be held. Another thing that we have done is we participated in this dumping case against Canada in 1964, Oregon rolling mills of Portland, Oreg., and our company, and I testified back here twice, once in February and once again in March. This was a very lengthy, expensive operation to small people like ourselves. We are the only case that was ever won by the steel industry since that law was enacted in 1921. Now, the interesting thing about this is it seems that 2 years after the ruling was set down that they were dumping and we were being injured, and arbitrarily it provides that in the law that this be thrown out, that they have a dump for 2 years, so now we can forget that ruling that we spent so much money to prove. Now, what is going to stop them from dumping again. The reason they were dumping is their overproduction. They couldn't consume their production in western Canada so they dumped it into Wash- ington and Oregon. This same situation, by the way, is going on in Japan right now. In Japan it is extremely difficult to prove because they move through cartels, so how are we going to know what the steel mill is charging for steel in Japan. There is no way. The only way we can look at this is this remark that Mr. Abel made this morning, which frankly we observed also, that the Japanese metal trade bulletin of January 11 said: 11 you don't export ten percent more in 1968 than you did in 1967 we are going to fine you $28 a ton and cut off your coking coal. Naturally if they can sell it for $25 .a ton less they are going to save $3 a ton and maintain the capacity~ and save their coking coal, so that is exactly what they are doing. The steel that came into Seattle ports in January of 1968 against January of 1967 is double, gentlemen, double. By the way, we now haye a case that the Tariff Commission will be on very soon-dump- ing-against Australia. We have a better case against them by the way than we had against Canada. Another question was asked this morning about has anybody ever gone to the administration. Yes; I did. I wrote them a letter in No- vember of 1967. I received a very courteous answer from the Office of Special Representative for Trade Negotiations and as yet that is all I have received. Now, the last point I would like to bring out is I met with some of you Congressmen on March 12 of this year, the ad hoc committee of the Congress on this problem chaired by Congressmen Tunney and Pettis, and there were six, I believe, or seven of us men of industry from the West and we gave a little story about what our problem was and then we had questions from these Congressmen. One of these Congressmen asked me how we could feel that the State Department or the administration could change their position now after these many years of the Marshall plan, et cetera. My remark to him was this: That in my opinion the problem is now, but prior to World War II Japan's ingot capacity was less than 9 mil- lion tons. I have heard 7 million and 9 million so let's give them the benefit of the doubt and say 9 million tons; this when they are prepar- ing for war with our country. Naturally when the war came the first thing we have to do is destroy their instruments of war so we bombed all their plants naturally as PAGENO="0334" 2120 we did in Germany. At the end of the war their capacity was a half million tons. Our Marshall plan was wise, I think, to develop these people economically and industrially because, after all, this was a com- munist problem if we didn't do it, but the odd thing about this is that 10 years after the war was over their capacity was 10 million tons or more than it was prior to the war, and as you heard, last year it was 68 million tons. Their goal by 1975 is 110 million tons and the world today is over- produced about 50 million tons. Japan's steel industry is about 69 per- cent financed. Ours is about 34 percent in the United States, so if we don't do something now, gentlemen if this legislation or some legisla- tion is going to do something about it-and if we wait too long it is my personal opinion-this is not the other 7 mills; it is me talking now- that it will be a crisis, it will be chaos. I can't see how we can delay this any longer. Thank you, gentlemen. If there are any questions you might have I will try and answer them. (Mr. Phelps' prepared statement follows:) STATEMENT OF ROBERT L. PHELPS IN BEHALF OF NORTHWEST INDEPENDENT STEEL MILLS Northwest Steel is a small business with about 250 employees and has operated In Seattle, Washington, since 1920. It produces reinforcing bar and other products from scrap steel. Scrap is first melted, cast into ingots, then bloomed and rolled into the final product. Northwest Steel is known in the industry as an inde- pendent producing mill. My statementis made on behalf of all eight of the inde- pendent mills on the west coast, They are: Allison Steel Manufacturing Company, Tempe, Arizona Etiwanda Steel Producers, Inc., Etiwanda, California Judson Steel Corporation, Emeryville, California Northwest Steel Rolling Mills, Inc., Seattle, Washington Oregon Steel Mills, Portland, Oregon Pacific States Steel Corporation, Union City, California Soule Steel Company, Los Angeles, California Southwest Steel Rolling Mills, Los Angeles, California We support the "Iron and Steel Orderly Trade Act of 1967" introduced October 16, 1967 by Senator Hartke and co-sponsored by 32 other senators if amended as has been proposed to provide for quotas on a regional basis. Regional quota legislation is essential to: (a) Our nation's security, economy and other interests; (b) The health of our domestic steel industry in general; and (c) The health and perhaps survival of independent producing mills in particular. The proposed act and amendment Would establish regional quotas, determined by the historical pattern of imports during the base years 1964 through 1966, for four regions. These regions are: (1) Pacific Coast and Mountain or Western States (2) South Central or Gulf states (3) Atlantic Coast states (4) North Central or Midwest states Adoption of the proposed regional quota legislation at this time is essential for many reasons, including: STEEL IMPORTS ARE INCREASING AT AN ALARMING RATE, THE HEALTH OF OUR DOMESTIC STEEL INDUSTRY, ESPECIALLY ITS WEST COAST MILLS, IS BEING THREATENED BY THE IMPORTATION OF FOREIGN STEEL Imported steel, as a percentage of the total steel consumed in the United States has increased every year since 1961. In the national market the increase w-as from five percent in 1961 to 12 percent in 1967. In the western market the increase was from nine percent in 1961 to 22 percent in 1907, or almost twice the national increase. The following graph illustrates this alarming rate: PAGENO="0335" Steel Imports 2121 Percent of Total National and Western Markets 25 -- - ~ - - - - ~ ~ -~ ~Z ~ NATIONAL `YEA1~ `S8 `S9 `60 `61 `62 `63 `64 `65 `66 `67 Source: Commercial Research Department, Kaiser Steel. 1967 figures are preliminary. Western market includes seven Western state area. The western states disproportionate share of imports in 1967 (22 percent versus 12 percent nationally) is even more pronounced with respect to specific products. Percentages by products are shown in the following table (Source: "Western Steel Market 1967," recently published by Kaiser Steel Cornoration). Product group 1966 1967 Total Percent of Total Percent of market market Plates 199 18 191 20 Structurals 121 16 170 23 Hot rolled bars 89 13 105 16 Reinforcing bars Hot rolled sheet and strip Cold rolled sheet and strip Galvanized sheet 63 281 226 143 6 33 40 28 61 282 212 134 7 28 42 28 Tin mill products Standard and line pipe All other steel mill products 1 62 319 387 5 36 28 80 274 314 6 39 26 Total 1 ,890 21 1,823 22 20 z ILl 0 ILl A, 10 PACIFIC COAST IMPORTS 1 Includes in 1967 241,000 tons and in 1966 313,000 tons of wire and wire products. The rate of increase is continuing into 1968. During the first two months of this year imported steel consumed in the western states increased 45 percent over the same two month period in 1967, representing approximately 25 percent of the total consumption in these states. In the last ten years over 96 percent of the market increase has been pre- empted by foreign imported products. A continuation of the present situation can only lead to the stagnation of domestic steel production and the loss of many independent mills. These mills will be forced to go out of business or at best PAGENO="0336" 2122 operate at a substantially curtailed level of production. The injury to these mills, their employees and the economy of the area they serve is obvious. STEEL IS BEING OVERPRODUCED THROUGHOUT THE WORLD, EXCEPT IN THE UNITED STATES We believe there is no question that steel is being overproduced in all nations except the United States and perhaps the communist countries. The Committee on Finance of the United States Senate, in its 1967 report on steel imports, found that: "(3) World steel capacity on January 1, 1966, has been estimated as 590 to 600 million tons (MT) compared to world output in 1966 of 520 MT, leaving a surplus capacity of 70-80 MT. An official estimate of the ECSC published in June 1967 projects annual increases of 33 MT in world capacity to 1970. This study estimates increases in world demand of only 20-25 MT, indicating a progressive aggravation of the world steel surplus problem. "(4) Because the U.S. steel industry promptly adjusts output to orders and in the Communist countries output and capacity are about equal, the rest of the free world has a surplus capacity of some 45-55 MT." NOTICE MUST BE GIVEN TO JAPAN AND THE OTHER NATIONS NOW THAT THEY CANNOT OVERE~AND AND E~ORT THEIL EXCESS PRODUCTION TO THE UNITED STATES. DELAY IN ADOPTING REGIONAL QUOTA LEGISLATION WILL INJURE OUR WESTERN MILLS AND COULD BE FINANCIALLY DISASTROUS TO THESE NATIONS AND THE UNITED STATES Japan presently exports about 75% of its steel production. 50% in the form of sheets, plates, pipe, structurals, reinforcing bar, etc. Another 25% is exported in the form of products using steel such as cars and ships. Japan's steel industry has major expansion plans. We estimate that by 1975 Japan will have excess capacity of 40 million tons over its domestic needs which it will try to place on the export market. Total U.S. imports in 1967 was approximately 11.5 million tons. The principal market for Japan's excess capacity will be the United States. Many of Japan's present markets are smaller nations which are establishing steel production facilities of their own. Virtually all of these nations place import restrictions on the steel products they produce domestically. This will soon reduce or eliminate their requirements for import steel. As Japan loses these numerous smaller markets it will of necessity increase efforts to export steel into the United States. Unless effective regional quota legislation is adopted, the mills located in the western United States will be the ones most injured by these increased exports. Effective regional quota legislation is necessary now! Such quotas would en- able the Japanese and other foreign producers to continue to participate in this market and in its growth. The foreign producers would know how to plan their own orderly future expansion. Failure to adopt such legislation will permit these foreign producers to continue to believe that they can over expand their production and export their excess production into the United States mar- ket, at dump prices if necessary. If not enacted now, such legislation will surely be enacted in a few years when the import situation becomes even more critical. If this occurs after the foreign producers have over expanded, the results could be financial disaster. This is especially true in countries such as Germany, France, Italy and Japan where the steel industry's ratio of debt to assets was 60, 65, 73 and 69 percent, respectively, in 1965. In the United States the same debt to asset ratio was 34 percent in 1965. There is considerable pressure upon the Japanese steel producers to increase exports. In the Japan Metal Trade Bulletin of January 11, 1968, it was stated that the Japanese Steel Industry was being advised by the M.I.T.I. that failure to export ten percent more tonnage in 1968 than in 1967 would result in a penalty of $28.00 a ton and curtailment of their coke and coal supply. OUR NATIONAL DEFENSE IS THREATENED BY INCREASING IMPORTS The security of this country is threatened by the increasing importation of steel. We believe that the defense of the United States will be seriously impaired if imports are allowed to take a larger and larger share of the market as they have in recent years. In time of war or other national emergency we must rely upon our domestic industries for the goods nec~ssary to defend our country. It PAGENO="0337" 2123 goes without saying, that an industry which has been weakened and stagnated by excessive imports, may not be able to meet our defense needs. There is evidence that our national defense effort has already been seriously impaired by the present rapidly expanding importation of steel. I was recently advised that the military was unable to purchase barbed wire for use in Viet Nam in the quantities required and within the time desired. The cause of the shortage and delay was that the principal producers of barbed wire in this coun- try had shut down their plants and/or reduced production of barbed wire be- cause they could not compete with barbed wire imported from Japan. DOMESTIC EMPLOYMENT IS ADVERSELY AFFECTED BY INCREA5ING IMPORTS The adverse effect upon employment by the rapidly expanding and excessive importation of steel into the United States will undoubtedly be pointed out by representatives of labor. At Northwest Steel employment would be increased by approximately 40 percent if previously made plans to enlarge and modernize its fabrication shop and operate the blooming and finishing mills at more than one shift could be put into effect. The principal reason for not doing ~o is the exces- sive amount of steel imported into our marketing area. OUR BALANCE OF PAYMENTS IS ADVERSELY AFFECTED BY INCREASING IMPORTS The adverse effect of excessive importation of steel upon our country's balance of payments is obvious and does not require further discussion. IT IS OUR NATIONAL POLICY TO PROMOTE THE EXISTENCE OF MANY COMPETITIVE UNITS IN AN INDUSTRY Our national policy, as evidenced by the anti-trust and other laws, is to promote the existence of many competitive units in a given industry. Allowing a continua- tion of the present import situation can, lead only to stagnation of domestic steel production and a reduction in the number of independent mills, especially in the coastal areas, contrary to our national policy. SCRAP STEEL CONSUMPTION IS ADVERSELY AFFECTED BY INCREASED IMPORTS Mills such as Northwest Steel are called scavenger mills in that scrap is our sole raw material source. Japan, once a large user of scrap, now produces steel primarily from ore. This change by Japan and the lower production levels of domestic independent mills because of increasing imports has depressed the scrap market. There is just too much scrap in this country. The National Highway Beautification Program would be assisted greatly by the adoption of regional quota legislation. Domestic production would increase and utilize many of those old car bodies that are an eyesore in junk yards along our nation's highways. IMPORTED STEEL HAS TOO MANY COMPETITIVE ADVANTAGES Foreign steel producers have enjoyed many competitive advantages in addition to the lower labor and other costs of production. These advantages include: (a) Freedom from local personal property taxation until actually used. In the State of Washington, an unbroken bundle of steel from Northwest Steel in a dis- tributor's warehouse is taxed by the state. A similar unbroken bundle of imported steel in the same distributor's warehouse at, the same time is not so taxed. (b) The ability to dump their product in the United States. The dumping of foreign steel into this country will not be stopped unless it can be established that an industry in the United States is being or is likely to be injured, or is pre- vented from being established, by reason of such dumping. The proof of such injury is difficult when the dumping is by different countries at different times or as in the case of Japan, the fact of dumping is difficult if not impossible to prove because of price collusion between the Japanese steel cartels. Dumping by foreign producers is a real problem to the independent mill. We have been and are being subjected to competition from foreign producers dump- ing in our market area. In 1004 the Tariff Commission for the first time in the history of the act found both dumping and injury in a case involving steel. The dumping was by a Canadian mill into Washington and Oregon. There is presently before the Commission of Customs a claim of dumping by Australian producers into the northwest. The cost to the independent mills of prosecuting these cases is most burdensome. As previously indicated, the Japanese steel industry has been advised by the M.I.T.I. that failure to export ten percent more tonnage in 1908 than in 1907 would result in a penalty of $28.00 a ton and curtailment of their coke and coal 95-159 0-08--pt. 5-2~ PAGENO="0338" 2124 supply. There is thus considerable pressure upon the Japanese producers to in- crease exports, at dump prices if necessary. THE LEGISLATION PROPOSED BY THE ADMINISTRATION IS INADEQUATE, IT WILL NOT SOLVE THE PROBLEMS OR ELIMINATE THE INJURY CAUSED BY INCREASING IMPORTS The legislation proposed by the Administration is inadequate. Changing the language of the present act from "have caused" to "have been a substantial cause" will not save our domestic steel industry from the adverse consequences of imported steel. First it is doubtful that this change will have any significant effect on the ability of affected conipanies or employees to be con1pensated for in- juries caused by increased imports. It will not compensate a region for the loss of a business serving that region. The national defense of this country will be seri- ously impaired by any significant reduction in the number of operating steel mills whether or not such mills and their employees are compensated by reason of the injury to them resulting from increased imports. The administrative cost of the program proposed by the Administration will be far greater than would be the administrative cost of regulating imports on a regional quota basis. THE NEED IS FOR REGIONAL RATHER THAN NATIONAL QUOTA LEGISLATION We believe that the case has been clearly made for regional quota legislation. A national quota system w-ill not adequately assist the independent mills, espe- cially those located in the coastal regions. The large national mills marketing throughout the United States and particularly in the mid-west area, where com- petition from import steel is the least, may feel that national quota legislation is adequate. The reason for this is shown in the following table: 1967 Market area Percentage of Imported steel total U.S. con- as a percentage sumption of total con- sumption in market area Western region (Pacific Coast and Mountain States) 8 22 South Central or Gulf States 14 18 Atlantic Coast States 25 15 North Central or Midwest States The Mid-West states are the most difficult for imports to penetrate because to a large degree the states involved are inland and inaccessible to cheap water transportation. Because this is the region of major consumption it is also the region where many of the large major mills are located. When these major mills look at the various regions of the country their major concern is with this Mid-West region because it represents 53 percent of the national steel con- sumption. Naturally these major mills are not as concerned with the West Coast region as it only represents eight percent of their national market. I would like to point out that as far as we are concerned the western market represents 100 percent of our market and as a result it is a life and death matter to us. We cannot lose an ever increasing percentage of this market and survive. Because of this situation you can see why the Independent mills located in coastal regions feel so strongly about regional as distinguished from natural quotas. To us as Independent mills on the west coast a national quota will not allow our w-estern steel industry to operate at profitable levels. It should be pointed out that if a national quota is used the w-est coast will continue to re- ceive well over 25 percent or more of its steel consumption from imports while the mid-west region which is the largest consuming area w-ill only receive ap- proximately five percent of their consumption in the form of imports. We feel that this disparity is too great and would bring about a geographically, un- balanced steel industry in the United States, to the injury and deteriment of the nation. There is precedent for establishing quotas on a regional rather than a national basis. Oil and meat imports are now subject to quotas established on a regional basis. In conclusion, and as previously stated, we recommend and urge the adoption of regional quota legislation. It is essential that it be adopted now instead of later. PAGENO="0339" 2125 Thank you for your attention. If there are any questions I will answer them if I can. Mr. BTJRKE. Mr. Schneebeli. Mr. SCHNEEBELI. Mr. Phelps, you indicated the percentage of scrap going into Japanese steel is less today than it was 5 years ago. Mr. PHELPS. Yes, sir. Mr. SOHNEEBELI. That means then that scrap is not a good ingredi- ent for them to make their product at a good price. Mr. PHELPS. It is more expensive, sir. Mr. SCHNEEBELI. Then how do you compete with big steel in this country if all you use is high cost scrap? Mr. PHELPS. All of the steel mills on the Pacific coast with the exception of Kaiser are cold metal mills, scrap mills. There is no coking coal on the Pacific coast. There are now ideas which are being developed right here in this country on cinderizing and pelletizing it and eliminate the necessity of the blast furnace. Mr. SOHNEEBELI. You are increasingly becoming at a disadvantage to big steel through your limitation to scrap use. Mr. PHELPS. Not in our area. Mr. SCHNEEBELI. Even with the new oxygen plants? Is this be- cause of transportation? Mr. PHELPS. Cost, yes. Geography is one of your biggest barriers, or should be rather, in your cost of producing steel. I have learned that the freight rates, the shipping rates, from Japan to the United States are considerably different than from the United States to Japan, so this is another tool of course one can use in the control of his selling price of steel and his cost. Mr. SOHNEEBELI. What percentage of the Japanese steel production is achieved through the use of scrap? Mr. PHELPS. Gee, I couldn't tell you now, sir. I don't know. I know now that this new development in Australia is a big factor with them in their ore. Ore is a cheaper basic material to use than scrap. After all, when you process scrap you haveto prepare it. You just can't take an auto body and `dump it in the furnace. What they used to do was squeeze them all up into a bale and in this were a lot of contaminants, wood and dirt., and grass and oil, and what have you, and you dumped that into the furnace and smoke would come out of the roof. WTe have all put in smog control devices but even so there is a limit to what they can handle. The new method of handling scrap bodies is what they call a shredder or a hammer. This is a very large machine that you feed the old car into and it shreds it into small pieces about the size of your hand. Now, the ferrous metals go this way through a magnetic control and the nonferrous metals and the dirt and what have you go that way. By the way, the interesting factor in this is t.hat there is about 20 to 25 percent less scrap steel that they now sell than they used to. This is a new system going in all over the country, again a wonder- ful method of cleaning up these eyesores in the country side. These people can't sell me any scrap if I am not making any money and I am laying off a crew in the mill in July.' We have inventories, running out of our ears. So here is a strike approaching the scene and we are loaded with inventory. PAGENO="0340" 2126 Mr. SCHNEEBELI. I find it very interesting to see little steel lined up with big steel because you are usually competitive. Mr. PHELPS. Thank you, sir. Mr. BURKE. The Chair will be compelled to call a short recess be- cause there is an automatic rollcall on the House floor. Mr. Nelson Stitt will be the first witness when the committee resumes its hearings. Mr. PHELPS. Thank you. (A brief recess was taken.) Mr. BURKE. `Will you identify yourself, Mr. Stitt, for the committee, please. STATEMENT OF NELSON A. STITT, DIRECTOR, UI~1TED STATES- ~APA~ TRADE COUNCIL Mr. STIrr. Yes, Mr. Chairman. I am Nelson Stitt, director of the United States-Japan Trade Council. The United States-Japan Trade Council is a trade association with a membership of over 700 firms located in the United States, which conduct among them most of the trade between the United States and Japan. Our members, like all those buying and selling abroad, are enor- mously concerned about bills to restrict trade which are pending be- fore this committee. We believe that these bills not only threaten U.S. relations with other nations but also pose a serious danger to the health of the U.S. economy. Obviously, Mr. Chairman, our written statement is far too long to be given in the time allotted nie. Therefore, I respectfully request that it be incorporated in the record in its entirety. Mr. BURKE. Without objection, it will be included in its entirety. Mr. STITT. Since today is steel day, I shall first like briefly to sum- marize our whole position on the issues before this committee and then move on to steel. For instance, we believe there would be a great number of unfortu- nate consequences of trade restrictions for the U.S. economy. They would negate the benefit of imports in helping to maintain moderate price levels in the United States. Restrictions would lead to a serious decline in U.S. exports. Proposed quota bills would affect 900 million dollars' worth of American imports from Japan in 1967. Japan and all other nations have the right under GATT to retaliate against the U.S. restrictions upon imports. `We believe there would be unfortunate consequences of losmg the momentum of leadership in international trade. It is particularly im- portant for the United States not to backslide into protectionism be- cause of the worldwide productioii of multinational corporations chiefly owned by Americans. Restrictive trade proposals would mean the end of a whole era of U.S. leadership in international economic cooperation, and would cause the free world to collapse into autarchic states or trading blocs. The political consequences of a U.S. retreat into protectionism would be most serious for Japanese-United States relations. On the general problem of import quotas, our council is opposed to all import quota proposals which in both the short and long run would be self-defeating. PAGENO="0341" 2127 Moving along to the balance-of-payments considerations, about which you have heard, an import surcharge would result in higher U.S. prices, impairing the U.S. ability to export. A levy high enough to cause a significant decline in imports and comfort U.S. protectionist interests would be unacceptable to America's trading partners, who would take retaliatory measures. If U.S. costs and prices were rising so rapidly that exports were seriously impaired and imports greatly encouraged, which is not now the case in our view, it would be better diplomatically to seek revalua- tion of strong foreign currencies rather than an increase in tariffs or the imposition of a general import surcharge. `With respect to the Trade Expansion Act of 1968, we recommend that the President's negotiating authority be extended, that adjust- ment assistance should be made easier to obtain without easing the criteria for adjustment of tariffs and, finally, that the American sell- ing price and the final list, which is not incorporated in the bill at present, should be abolished. Furthermore, we believe that multilateral trade principles should be maintained. Moving along, Mr. Chairman, to the steel quota bills: During the past several years, the largest dollar earner for Japan in exporting to the United States has been steel mill products. Naturally, our council is, therefore, much concerned about the Iron and Steel Orderly Trade Act and the Iron Ore, Iron, and Steel Orderly Trade Act. As all here are aware, imports of steel mill products into the United States were inconsequential until the lengthy steel strike of 1959. Therefore, we are confining our review of the TJ.S. steel market situation to the intervening years, 1960 to date. If the U.S. steel industry is having difficulties, this is the only time in which growing imports could have been a contributing factor. Obviously, the U.S. steel industry has not seen such a rate of growth in recent years comparable to that of newer and more dynamic in- dustries-electronics, computer, jet aircraft, et cetera. However, I direct your attention to table 1 attached to my written statement which shows the following: From 1960 to 1967, according to the Federal Trade Commission and the Securities and Exchange Com- mission, annual steel industry sales have increased by $5.6 billion; an- nual net profits have increased by $220 million; liquid position, which is current assets minus current liabilities, has improved by $1.2 billion; earned surplus and surplus reserves have increased by $2.1 billion; current assets have increased by $2.4 billion; investment in property, plant, and equipment, after depreciation, has increased by $3.2 bil- lion; total assets have increased by $6 billion; and net worth or stock- holders' equity, which is total assets minus total liabilities, has in- creased by $2.3 billion. Despite the modest and we believe short-lived downturn in the over- all trend in 1967, these figures do not seem to portray an industry ma- terially damaged by foreign competition: For most modern economists an even more accurate measurement of the health of an industry is its annual net cash flow, that is, the sum of its retained profits, after payment of dividends, plus additions to reserves attributed to depreciation and depletion. PAGENO="0342" 2128 Table 3 attached to my written statement shows the cash flow of the U.S. steel industry from 1960 through 1967. While the industry has recently been investing heavily in newer and more productive plant and processes, it is clearly evident that it has been able to do so with little need to resort to moneymarkets or new issues of equity shares. Again, this is hardly a demonstration of an industry mortally beset by admittedly sharp import competition. It has been maintained by a kind of modified straight line projec- tion that steel imports into the United States within 10 years would reach "a staggering 40 million tons." We acknowledge that neither the U.S. industry nor the U.S. Govern- ment could view such a prospect with equanimity. On the other hand, let me draw your attention to table 9 attached to my written statement. This table is extracted from a recent book pub- lished by he University of Michigan and presents an entirely different view of the future U.S. steel market. The book's section on steel was written by the marketing research director of McLouth Steel Corp., who should not be considered inexpert on the subject. This article projects not only a steadily growing demand for steel in the United States, but by 1980 a virtual balance between U.S. steel product imports and exports. It seems obvious that the continuing massive modernization of American plant and equipment will bear fruit in future years and this is the assumption of the author of that article. Whoever is right in crystal-balling, we submit that the present sit- uation is far from justifying a reversal of the long-standing liberal foreign trade policy of the United States in the interest of the steel industry. It has been contended that steel imports represent 70,000 to 80,000 jobs-in fact this morning I think Senator Hartke got that up to about 120,000 jobs-that would otherwise be held in the United States. In the first place, even the most. extreme proposals by the domestic in- dustry would not. suggest eliminating all imported steel. Second, and most importantly, they totally ignore the three and one- half million American jobs created by TTnited States exports-jobs that would not exist if American trading partners abroad had not the dollars to purchase the farm and industrial products of this country. Third, while there may exist in some communities in some parts of the country some distress with respect to steel layoffs it should be em- phasized that materials published by the American Iron and Steel Institute always speak in terms of job opportunities, not actual jobs. In fact, metal trade publications have for the past 6 months been pointing out the shortage of steel workers in the growing Chicago area. and describing the efforts of the steel companies there and else- where to induce the migration of skilled or unskilled workers into the steel mills. We strongly doubt that any reputable steel economist would en- clorse the figures on import-generated job losses that have received such wide publicity. Much has been made of lower wages abroad, a fact which is in- dubitably and inevitably true. Foreign steel workers~ operating in economies and societies much less wealthy than the United States, could not possibly be paid the equivalent o~ about $4.75 ap hour. How- PAGENO="0343" 2129 ever, I believe that for most steel producing countries-and I know that for Japan-steel employees are among the highest paid group of workers in their own countries. Allegations of "cheap labor" are unfounded. Furthermore, while U.S. steel wages have increased at a steady pace, steel labor productivity has increased even more. I draw your atten- tion to tables 4 through 7, indicating that from 1960 to 1967 industry sales and shipments have risen mOre rapidly than have employment costs, whether measured by total employees or by productioii workers. We maintain that such employment as may exist in the steel indus- try is far more the result of technological advances and more intensive capital investment than it is of rising steel product imports. In my next section, sir, I discuss a matter which has already been discussed today, the apparent lack of interest of the U.S. steel indus- try in research and development. I will skip that portion. Vague and generalized statements have been made that, compared with the U. S. steel industry, foreign steel industries have been greatly advantaged by their respective governments in terms of financing, ex- Port promotion, and import protection of their home markets. These widely disseminated assertions, upon examination, are best character- ized by their total lack of specific detail. With regard to the European or other steel industries, we must leave answer to others more knowl- edgable. We believe that the allegations are lacking in substance insofar as the Japanese steel industry is concerned. It has been stated that the Japanese industry "is heavily favored in terms of capital supply." Statistics on this matter, for the years 1960 through 1966, have been submitted to Professor Weidenhammer in connection with his steel study for the Steel Finance Committee. An examination of these figures does not bear out the allegations. First, governmental loans to the steel industry are at the same rate of interest as those from private banks; this rate (8.2 percent per annum) can hardly be considered favorable, especially when compared with the rate at which the U.S. steel companies even today are able to borrow money. Second, at no time over this 7-year period have governmental loans exceeded 1 percent of new capital for the industry. Third, the major sources of investment funds for the industry have been retained profits and depreciation, the flotation of bonds, an in- crease of capitalization by the increase in share, and loans from private-commercial banks. Over the period 1960 to 1967, the new financing `provided by foreign loans, such as the World Bank, the U.S. Export-Import Bank, and so on, has rapidly decreased and by 1966 the payment on these foreign loans is well in excess of new capital so acquired. By and large, over the period the major source of new investment has been retained profits and depreciation. This is similar to the prac- tice of most U.S. steel companies. Thus, the Japanese Government has played a small role in the capital supply of that nation's steel industry. Since Japan became a full-fledged article 8 member in April of 1964 of the International Monetary Fund, no special income tax advantage has accrued to export industries, steel `or otherwise. Japan, like the PAGENO="0344" 2130 United States, has an Export-Import Bank to help promote Japanese exports of all kinds. In the national interest the Japanese Ministry of International Trade and Commerce has exhorted its industries to extend their best efforts to expand exports, just as has the U.S. Department of Com- merce exhorted American industries. Export goals have been set which industries try to meet. This can hardly be considered much different from the U.S. Government's efforts to promote exports and to dis- courage investment abroad-on the basis of voluntary industry action. It has been stated that the Japanese steel market iS insulated from steel imports. We would like to point out that during the recent Kennedy round the Japanese duties on steel imports were reduced by an average of 50 percent, and table X attached to my statement demon- strates this fact. The problem for prospective U.S. exporters of steel to Japan is not nontariff barriers; it is rather that the prices of U.S. steel products are so high that they could not be sold in the Japanese market, whether or not nontariff barriers existed. A vice president of the Bethlehem Steel Corp. testifying before the Federal Maritime Commission in hearings involving freight rate dif- ferentials between the United States and Japan said this: Even if there w-ere no freight rate ocean charge for the export of U.S. steel to Japan, Bethlehem could sell little or no steel in the Japanese market because it could not meet the Japanese home market prices. In any event, it is our understanding, that contrary to the usual assertions, the Japanese Government does not exercise a restrictive import licensing system-in fact that was conceded this morning- with a few minor exceptions, I may say, in certain small varieties of specialty steels. We wish to draw your attention to table 8 attached. It should be noted that during 1967 steel from Japan represented in volume on'y 92 percent of Japanese steel imports during 1966-in other words, in 1967 less Japanese steel entered the United States than in 1966-while at the same time total steel imports from all sources in 1967 reached 107 percent of 1966 imports. To seek quotas on steel imports is to seek an extraordinary degree of protection. That is obvious. It is equally obvious that a country dedicated to private enterprise cannot lightly or easily impose quotas on products competitive with those of its own industries. Extraordinary reasons must support extraordinary restraints. These extraordinary reasons have not been demonstrated for the U.S. in- dustry, and I submit cannot be demonstrated. It may be that the American steel industry has not experienced the growth which other industries have experienced or that the steel industry stocks are less attractive to speculators than the stocks of other industries or that steel company profits have not achieved so high levels as those of the more glamorous newer industries. These facts in themselves, even if true, do not furnish reasons suffi- cient for quotas, particularly when the industry has shown a steady pattern of growth which, whatever its impressiveness in relative terms, is undeniably impressive in absolute terms. PAGENO="0345" 2131 Finally, Mr. Chairman, we reassert that a growing world trade in all commodities is over the short, medium, and long term 111 the best interests of the United States and its citizens as a whole. I thank you, sir. (Mr. Stitt's prepared statement follows:) STATEMENT OF NELSON A. STITT, DIRECToR, UNITED STATES-JAPAN TRADE COUNCIL INTRODUCTION The United States-Japan Trade Council is a trade association with a member- ship of over 700 firms located in the United States, which conduct among them most of the trade between the United States and Japan. Our members, like all those buying and selling abroad, are enormously con- cerned about bills to restrict trade which are pending before this committee. We believe that these bills not only threaten U.S. relations with other nations but also pose a serious danger to the health of the United States economy. It is fitting that this committee is holding these hearings, because this is a critical moment not only for U.S. trade, but also for general U.S. economic policy. It is a moment of fear and hope. On the one hand, fear over domestic inflationary pressures and the persistent balance of payments deficit. On the other hand, hope that the successful conclusion of the Kennedy Round and further hard-nosed bargaining on nontariff barriers will reap benefits for present and future pro- ducers and consumers whether these be farmers, industrial works, business man- agers, or government servants. You gentlemen have met and in a statesmanlike way are dealing with the fear of inflation in the U.S. economy. When the fiscal package becomes law it is rea- sonable to assume that inflationary danger will turn into the hope and promise of a stable price economy. Such a fiscal policy used to be called the liberal Keynes- ian approach to dealing with a national economy. Now these accepted policy actions are considered conservative. We all expect that such conservative fiscal action will not only bring the domestic economy into control but will have a salutary effect on the balance of payments. There is also a conservative position -concerning trade between nations. The 1934 Reciprocal Trade Agreement Act was considered, in its time, to be a liberal trading arrangement, based on reciprocity through the "most-favored-nation" principle. This policy has continued now for almost 34 years and should now be called a conservative policy. Examined together, proposals to restrict imports into the United States rep- resent nothing less than abandonment of thetrade policy followed by the United States for the last 34 years, and most recently approved by the Congress when it enacted the Trade Expansion Act of 1962. Certainly no one should call these proposals to restrict imports "conservative." They are better termed "radical" reactions of those industries unwilling or unable to adjust to the changing demands of an open and dynamic economy. Change is the essence of an open economy. Changes in the structure and the value of imports and exports are brought about both here and abroad by changes in technology, marketing, managerial skills, and labor productivity. The key to the last 34 years of U.S. trade policy is the conservative economic philosophy of competition more highly developed in the United States than any- where else in the world. Competition is an essential means of regulating the economy. For example, if you have inflationary pressures, as we now do in the United States, imports will rise. But this rise in imports also sets in motion measures tending to reduce imports and disinflate the economy. A good example of this is the effect of steel imports on the United States economy. On the one hand, the domestic steel industry has been urging that quotas be established to protect their oligopolistic price leadership pi~actices. On the other hand, iiiiport competition has encouraged some companies to cut prices. This is the conserva- tive and classical way of regaining markets or expanding markets, benefiting all. And not incidentally, price competition has a disinflationary effect on the overall economy. But if you abandon competition in the face of inflation, the inflationary pies- sures worsen. This first step in closing the economy will inexorably lead to further steps. The bureaucracy needed to maintain closed borders against for- PAGENO="0346" 2132 eign goods would be small compared to the bureaucracy that would be needed to regulate wages, prices, and profits to prevent the rapid inflation that is sure to arise from the elimination of competition. We earnestly submit that the quantitative controls over a wide range of American imports that are proposed would spell the end of a whole era of expand- ing trade and would introduce a new period of inward-looking, self-impoverishing policies. UNFORTUNATE CONSEQUENCES OF TRADE RESTRICTIONS FOR THE U.S. ECONOMY A program of trade restrictions would be unfortunate for the U.S. economy for tw-o main reasons. First, it would negate the incalculable benefits of imports in helping to maintain moderate price levels in the United States. This effect is much greater than is indicated by the amount of imports actually received, because the very possibility of imports exercises a restraining influence upon prices. Inflation brings a wide variety of economic evils, the most obvious of which is that ordinary people have to pay more for the products that they buy. The important service rendered by imports-largely ignored in most discussions of trade policy-is to make a wider variety of products available at lower prices. Secondly, the enactment of the pending trade restrictive bills would be un- fortunate for the American economy because it would inevitably lead to a serious decline in American exports. At this point, I should like to offer as part of my testimony two statistical publications of the U.S-Japan Trade Council: (1) United States Imports froni Japan, 1967; and (2) United States Exports from Japan, 1967, both by customs districts. Note first that iron and steel imports from Japan, totalled $533 million in 1967. Note second that textile articles were imported to the value of $215 million, and clothing to the extent of $164 million. a total of $379 million. Thus, the bills on textiles and steel alone w-ould control about $900 million of American imports from Japan in 1967-to say nothing of the array of other products entering into the grand total of almost $3 billion imported from Japan last year that could be affected by the more general quota bills under consideration. Since 1960 U.S. trade w-ith Japan, both ways, has totalled $28 billion, with imports and exports almost evenly balanced. Japanese exports to the U.S. in 1967 were up less than two percent while our exports to Japan were up 15 percent over the same period. When w-e look at 1967 exports to Japan we see that of the $2.7 billion shipped by the U.S. about $650 million consisted of food and feeds, and this of course w-as mostly grains: w-heat. corn, soybeams. We see cotton valued at $118 million, oil seeds (soybeans) valued at $188 million, including tobacco, hides, and skins, a total of about $900 million in agri~u1tural products. In another big category we see machinery and transport equipment, $502 million, including aircraft valued at $71; $79 million in office machines; and $53 million in power generating machinery. These figures are simply a brief illustration, w-hich could be expanded at length, of the fact that American ships to Japan the products of its most efficient in- dustries, its farm products, its computers, its aircraft, and many other products and receives from Japan those products in w-hich the United States is not necessarily inefficient or even less efficient than Japan, but for which the com- parative advantage tends to favor that country. If American markets are restricted for Japanese steel, Japanese textiles, and Japanese miscellaneous manufatcure of various kinds w-hich are also produced in the United States, then the Japanese are denied the dollars to buy goods from America's most efficient producers. The American people as a whole will be the poorer for it. U.S. exports could be affected in yet another way. If the United States vio- lates the Kennedy Round Agreement by instituting quantitative restrictions on trade, other nations have the right under GATT to retaliate against U.S. prod- ucts, as the United States retaliated several years ago against the products of the EEC in the "chicken war." We have been examining in detail the trade between the United States and Japan, but what has just been said is applicable to U.S. trade with Europe and indeed with the whole world. PAGENO="0347" 2133 UNFORTUNATE CONSEQUENCES OF LOSING THE MOMENTUM OF LEADERSHIP IN INTERNATIONAL TRADE I should like now to refer to the consequences of trade restrictive proposals in both economic and political terms. Trade agreements which have been entered into contain "escape clauses" and there are various means, from a legal stand- point, whereby parties to the agreements may take action to protect a particular industry considered to be in serious danger of injury from imports. But if such measures extend over a wide variety of products, and if they are not based upon serious and well-founded dangers of intolerable dislocations within the economy of the receiving country, then such measures destroy the structure of inter- national economic cooperation. It is important for all nations that the world not backslide into protectionism, but it is particularly important for the United States because of the world-wide production of the multinational corporations chiefly owned by Americans. De- liveries from production abroad by U.S.~dominated companies are estimated to equal five times all U.S. direct exports. U.S. receipts-interest and dividends- from investments abroad amount to $5 billion annually, equal to one-sixth of the proceeds of all U.S. exports. Thus the international financial strength of the United States, to a degree far exceeding that of any other country, depends on the absence of obstacles to the movement of goods and money, even obstacles existing between other countries. The necessity for continued U.S. leadership in trade and investment policies is not only moral and political-it relates di- rectly to the economic interests of the United States. As the largest and the wealthiest trading nation, the United States sets the pattern. The enactment of legislation along the lines of restrictive proposals now pending before this Com- mittee would mean the end of a whole era of U.S. leadership in international economic cooperation, causing the free world to collapse into autarchic states or trading blocs, each the poorer for its inability to trade freely with the others. The political consequences are sobering, in terms of the ability of the United States to wield its power effectively toward peace and international cooperation. In no country and area would this be more serious than Japan and the other nations of the Pacific basin. We tend to dwell more on our problems than our successes, but it is important to note that the postwar history of Japan is a remarkable success story for both the Japanese people themselves and for American policy toward that nation. From the ashes of defeat and destruction, Japan has achieved a modern tech- nological society comparable to many parts of the United States and Europe, the highest economic growth rate of any country in the world, and a democratic political system. It is a shining beacon to all the peoples of the underdeveloped world, particularly in Asia. And, most important for present purposes, it is a vital part of the United States security system. Our naval vessels use the ports of Japan, and one of the most important overseas air bases of the United States is located in Okinawa. It remains true, as we said in a paper submitted to a Congressional Committee in 1958, that . . . "The United States can feel confident of Japan's role only so long as the people of Japan are convinced that their interest lies in such cooperation. The people of Japan are now so convinced, and their own commitment to the free world and the principles of the United Nations is so great that they will not easily alter their view. The first considera- tion, however, in the mind of a Japanese, as in the minds of people the world over, is that he and his family have a decent living. Competing perhaps with this consideration for the first place is self-respect. It is true, therefore, in a very real sense, that the United States can cOunt upon Japan as a friend so long as Japanese are satisfied that on the whole policies of the United States are compatible with Japanese livelihood and Japanese self-respect." We must remember that Japan's economic dependence on the LTnited States is much greater than U.S. dependence on Japan. To illustrate, in 1967 each Japanese purchased, on the average, more than twice as much American goods ($32 worth) as each American purchased of Japanese goods ($15 worth). Furthermore, Japan's imports from the U.S. were 27.5 Percent of its total imports, representing 2.8 percent of its GNP, as compared to U.S. imports from Japan representing 11.2 percent of total 11T.S. import, only 0.4 percent of U.S. GNP. In popular terms, this lopsided interdependence is expressed by the fact that while these hearings today are receiving modest attention in the press in most cities of the United States, they are undoubtedly making headlines in the news- papers of Japan. PAGENO="0348" 2134 GENERAL PROBLEMS OF IMPORT QUOTAS The inherent vice of all quotas, of course, is that they distort the normal patterns of trade and do not permit market forces to operate freely. In his re- spect, they are worse than customs duties. A limit on the quantiy of any par- ticular commodity that may come in either creates a chaotic struggle for priority-distorting normal business decisions in the interest of participation in the limited supply-or, like a cartel, involves some mechanism for allocation of the quota among exporters or importers or both. The disturbance to trade resulting from such restrictions can hardly be exaggerated. Because of them, importers have been unable to gain access to a source of supply, have had to pay premiums for quotas assigned to others, or have made their purchases when they were able to get the goods at the additional cost of higher prices or storage charges to keep them until needed. These handicaps to importers have been reflected in damage to consumers, in terms of higher prices and limited supply. It is hardly necessary to point out that the principle of governmentally fixed limitations on imports for a w-ide range of goods is altogether opposed to the principles of economic freedo~n on w-hich this nation has grown great and is much closer to the cartel philosophy that the U.S. deplores when practiced by other nations. One of the reasons for the vigorous growth of the U.S. economy is that the society has resisted the notion that any producer has a fixed right to a share of the market, whether it be threatened by technological or mana- gerial innovation, a shift to low-er wage areas within the United States, im- proved transportation, or competition from abroad. In the case of quotas, the distinguished Harvard Professor of Economics, Gottfried Haberler, said: importing . . . ceases to be a business w-here entrepreneurial ability and sound business judgment determine w-ho w-ins. Under the quota system the Government has to decide who is going to do the importing and the allotment of an import license become equivalent to a Government handout. "Anyone who asks for quotas in effect asks for Government handouts and, whether he knows it or not, demands the replacement of the businessman and market forces by public officials and Government fiat. "It is for this reason that I said before that quantitative restrictions on trade and payments are poison to the Free Enterprise System." Americans have bitterly resisted internal controls over the economy, and when they came in World War II, got rid of them as soon as possible. The proposed legislation, nevertheless, proposes to install similar odious controls over the import trade of the United States, involving not only the limiting of imports but a vast and complex bureaucratic machinery. To illustrate, we sug- gest that this Committee ask the Department of Commerce and the Department of Treasury how many people are employed in the administration of the con- trols on cotton textiles, how many man-hours are spent, how many pages of publications are spew-ed forth, and w-hat the administration of this program costs the taxpayers of the United States. Then ask for an estimate fo,r the administration of the proposed quotas. Some members of the Ways and Means Committee have been arguing, not without reason, that the tariff reductions achieved under the Kennedy Round are being subverted by quantitative and other nontariff barriers to U.S. exports. But in all candor, gentlemen, the United States cannot overlook the bad example ~of the quantitative restrictions that it continues to maintain. Permit me to quote an exchange between Undersecretary of State George Ball and Congressman Curtis during the hearings of the subcommittee of foreign economic policy of the Joint Economic Committee on July 20, 1967. Representative Curtis: ". . . I have been deeply concerned with whether we haven't in many, many instances been replacing the tariff techniques for regu- lating trade with something that I w-ould regard as much more regressive. I refer to, the license and quota approach. And I think the long-term cotton tex- tile agreement w-ould give grounds for this concern. "Of course, we have had the sugar license and quota setup for some time. And we now have an international coffee agreement. We are talking about an international cocoa agreement. And they are talking about extending the cotton textile agreement to include wool and man-made fibers. We have got the oil import quota agreement. Do you see a danger of moving forward to what we call mercantilism, at the same time we have been taking down the tariff barriers, so that we w-ill end up with not having keyed up trade, but having restricted it by the use of the other techniques." PAGENO="0349" 2135 Mr. Ball: "You touch me on a very sore point, Mr. Curtis, because I invented and negotiated the cotton textile agreement, and it has always been on my con- science. I think that it was a bad thing. But I did it only because if I hadn't I was very much afraid that Congress was going to impose mandatory quotas, which would have been even worse." We respectfully suggest that proposals such as the Herlong bill, H.R. 16936, and the Bates bill, HR. 87, which establish generalized formulas for ceilngs on U.S. imports, would deny to America's trading partners the benefits of the tariff reductions just negotiated and invite retaliations against U.S. exports that would wreck U.S. trade policy of the last 35 years. As soon as you seek to establish a set of standards that would make relief mandatory at the behest of every industry whose members think it should have relief, then you have struck at such a wide area of imports that the result is the destruction of trade based on competition. I would now like to move along to some of the circumstance surrounding pro- posed item quotas now under consideration by the Committee. QUOTA PROPOSALS steel During the past several years, the largest dollar-earner for Japan in exporting to the United States has been steel mill products. Naturally, our Council is, there- fore, much concerned about the "Iron and Steel Orderly Trade Act" (H.R. 13543 and similar bills) and the "Iron Ore, Iron and Steel Orderly Trade Act" (H.R. 14698 and similar bills). As all here are aware, imports of steel mill products into the United States were inconsequential until the lengthy steel strike of 1959. Therefore, we are con- fining our review of the U.S. steel market situation to the intervening years- 1900 to date. If the United States steel industry is having difficulties, this is the only time in which growing imports could have been a contributing factor. Obviously, the U.S. steel industry has not seen a rate of growth in recent years comparable to that of newer and more dynamic industries-electronics, com- puters, jet aircraft, etc. However, I direct your attention to Table I, attached to my written statement: from 1960 to 1907, according to the Federal Trade Commission and the Securities and Exchange Commission, annual steel industry sales have increased by $5.6 billion; annual net profits have increased by $220 million; liquid position (current assets minus current liabilities) has improved by $1.2 billion; earned surplus and surplus reserves have increased by $2.1 bil- lion; current assets have increased by $2.4 billion; investment in property, plant and equipment (after depreciation) has increased by $3.2 billion; total assets have increased by $6 billion; and net worth or stockholders' equity (total assets minus total liabilities) has increased by $2.3 billion. Despite the modest and-we believe-short-lived downturn in the overall trend during 1967, these figures do not seem to portray an industry materially damaged by foreign competition. For most modern economists, an even more accurate measurement of the health of an industry is its annual net "cash flow," that is, the sum of its re- tained profits (after payment of dividends) plus additions to reserves attributed to depreciation and depletion. Table 3 attached to my written statement shows the "cash flow" of the U.S. steel industry from 1960 through 1967. While the U.S. industry has recently been investing heavily in newer and more productive plant and processes, it is clearly evident that it has been able to do so with little need to resort to money markets or new issues of equity shares. Again, this is hardly a demonstration of an industry mortally beset by admittedly sharp import competition. It has been maintained, by a kind of modified straight line projection, that steel imports into the United States within ten years would reach "a staggering 40 million tons." We acknowledge that neither the U.S. industry nor the U.S. Government could view such a prospect with equanimity. On the other hand, let me draw your attention to Table 9, attached to my written statement. This table is extracted from a recent book published by the University of Michigan and presents an entirely different view of the future U.S. steel market. The book's section on steel was written by the marketing research director of McLouth Steel Corporation, who should not be considered inexpert on the sub- ject. This article projects, not only a steadily growing demand for steel in the United States, but by 1980 a virtual balance between U.S. steel product exports and imports. It seems obvious that the continuing massive modernization of American plant and equipment will bear fruit in future years and this is the assumption of the author of the article. PAGENO="0350" 2136 Whoever is right in crystal-balling, we submit that the present situation is far from justifying a reversal of the long-standing liberal foreign trade policy of the United States in the interest of the steel industry. It has been contended that steel imports represent 70,000 to 80,000 jobs that would otherwise be held in the United States. In the first place, even the most extreme proposals by the domestic industry w-ould not suggest eliminating all imported steel. Second, and most importantly, they totally ignore the 3.5 mil- lion American jobs created by U.S. exports-jobs that w-ould not exist if Ameri- can trading partners abroad had not the dollars to purchase the farm and in- dustrial products of this country. Third, while there may exist in some communi- ties in some parts of the country some distress with respect to steel layoffs, it should be emphasized that materials published by the American Iron and Steel Institute alw-ays speak in terms of job opportunities, not actual jobs. In fact, metal trade publications have for the past six months been pointing out the shortage of steelworkers in the grow-ing Chicago area and describing the efforts of the steel companies there and elsew-here to induce the migration of skilled or unskilled workers into the steel mills. We strongly doubt that any reputable steel economist w-ould endorse the figures on import-generated job losses that have received such wide publicity. Much has been made of lower steel w-ages abroad, a fact which is indubitably and inevitably true. Foreign steel w-orkers, operating in economies and societies much less wealthy than the United States, could not possibly be paid the equiva- lent of about $4.75 per hour. However, I believe that for most steel producing countries-and I know- that for Japan-steel eniployees are among the highest paid group of w-orkers in their ow-n countries. Allegations of "cheap labor" are unfounded. Furthermore, w-hile U.S. steel w-ages have increased at a steady pace, steel labor productivity has increased even more. I draw- your attention to Tables 4 through 7 (attached to the written statement) indicating that from 1960 to 1967 industry sales and shipments have risen more rapidly than have employ- ment costs, whether measured by total employees or by production workers. We maintain that such unemployment as may exist in the steel industry is far more the result of technological advances and more intensive capital investment than it is of rising steel product imports. The U.S. steel industry has claimed with pride that it is spending money for research and development at an annual rate w-ell above $150 million, implying that the industry is not 1aggard in foresight. It is true that in recent years, the industry has indeed increased its effort to make up for its lack of innovation in prior years. However, in this connection, permit me to quote from an article entitled "The Trouble with Steel," from the prestigious Challenge/The Magazine of Economic Affairs for Jviy/A~~'gust 1967: "The record of the steel industry in this respect is rather shocking. Thus a 1966 report of the National Science Foundation revealed that in 1964 the steel industry devoted less of its sales dollar to research and development than all but three of the 16 industries surveyed. The industry spent only 60 cents of every hundred dollars of sales revenues on R&D, compared to a $1.90 average for all manufacturing industry. Even more revealing, all the industries that pro- duce substitutes for steel products-aluminum cement, plastics and glass-spent more on R&D than the steel industry, sometimes five and six times as much." Vague and generalized statements have been made that, compared with the United States steel industry, foreign steel industries have been greatly advan- taged by their respective governments in terms of financing, export promotion. and import protection of their home markets. These widely disseminated asser- tions, upon examination, are best characterized by their total lack of specific detaiL With regard to the European or other steel industries, we must leave answer to others more knowledgeable. We believe that the allegations are lack- ing in substance insofar as the Japanese steel industry is concerned. It has been stated that the Japanese industry "is heavily favored in terms of capital supply." Statistics on this matter, for the years 1960 through 1966, have been submitted to Professor Weidenhammer in connection with his steel study for the Senate Finance Committee. An examination of these figures does not bear out the allegations. First, governmental loans to the steel industry are at the same rate of interest as those from private banks: this rate (8.2 percent per annum) can hardly be considered favorable, especially when compared with the rate at w-hich the U.S. steel companies even today are able to borrow- money. Second, at no time, over this seven year period, have governmental loans exceeded 1 percent of new- capital for the industry. Third, the major sources of investment funds for the industry have been retained profits and depreciation, the flotation PAGENO="0351" 2137 of bonds, an increase of capitalization by the increase of shares, and loans from private-commercial banks. Over the period 1960-1967, the new financing provided by foreign loans (the World Bank, the U.S. Eximbank, etc.) has rapidly de- creased and by 1966, the payment of interest on these foreign loans is well in excess of new capital so acquired. By and large, over the period, the major source of new investment has been retained profits and depreciation; this not unlike the experience of most U.S. steel companies. Thus the Japanese government has played a small role in the capital supply of that nation's steel industry. Since Japan became a full-fledged Artide 8 member in April oi~ 1964 of the International Monetary Fund Agreement, no special income tax advantage has accrued to export industries, whether steel or other. Japan, like the United States, has an Export-Import Bank to help promote Japanese exports of all kinds. In the national interest, the Japanese Ministry of International Trade and Industry has exhorted its industries to extend their best efforts to expand exports, just as the United States Department of Commerce has exhorted Ameri- can industries. Export goals have been set, which industries try to meet; this can hardly be considered much different from the U.S. Government's efforts to promote exports and to discourage investment abroad-on the basis of voluntary industry action. It has been said that the Japanese steel market is "insulated from steel imports." We would like to point out that, during the recent Kennedy Round, the Japanese duties on steel imports were reduced by an average of 50 percent (see Table 10 attached to our written statement). The problem for prospective United States exporters of steel to Japan is not nontariff trade barriers; it is rather that the prices of United States steel products are so high that they could not be sold in the Japanese market, whether or not non-tariff import barriers existed. A Vice President of the Bethlehem Steel Corporation testifying before the Federal Maritime Commission in hearings involving freight rate differentials between the United States and Japan said that, even if there were no ocean freight charge for the export of U.S. steel to Japan, Bethlehem could sell little steel in the Japanese market because it could not meet the Japanese home market prices. In any event, it is our understanding that-contrary to the usual assertions- the Japanese government does not exercise a restrictive import licensing system (with a few minor exceptions in certain small varieties of specialty steels). We wish to draw your attention to Table 8 attached. It should be noted that during 1967, steel from Japan represented in volume only 92 percent of Japanese steel imports during 1966; this compares with a total steel import from all sources in 1967 of 107 percent of 1966 imports. To seek quotas on steel imports is to seek an extraordinary degree of protec- tion. That is obvious. It is equally obvious that a country dedicated to private enterprise cannot lightly or easily impose quotas on products competitive w-ith those of its own industries. Extraordinary reasons must support extraordinary restraints. These extraordinary reasons have not been demonstrated for the United States steel industry, and, I submit, `cannot be demonstrated. It may be that the American steel industry has not experienced the growth which other industries have experienced or that steel industry stocks are less attractive to speculators than the stocks of other industries or that steel company profits have not achieved so high levels as those of the more glamorous newer industries. These facts, in themselves, even if true, do not furnish reasons sufficient for quotas-particularly when the industry has shown a steady pattern of growth which, whatever its impressiveness in relative terms, is undeniably impressive in absolute terms. Tewtiles and apparel Other significant items in the import trade from Japan which would be affected by measures before this Committee are textiles, apparel and other made-up goods which together totalled about $400 million in 1967. It is clear that there has been no injury to the domestic textile and apparel industries by these imports. This assertion is completely substantiated by the re- port of the United States Tariff Commission requested by the President and the Chairman of this Committee. The report is an objective examination of all of the relevant data on the performance of the United States industries and the impact of imports. It documents the substantial growth and progress of these industries and the strong position they have attained in competition against imports. There has been, in our view, considerable misrepresentation of the import trade from Japan in textiles and apparel. A principal finding of the Tariff Commission PAGENO="0352" 213~ and one which was agreed to by the domestic industry, American importers and foreign exporters is that these are all-fiber industries. Distinctions based upon fibers are misleading and are not representative of the true picture. Table 11 shows an increase from 1965 to 1967 of 17 percent in manmade fiber products. However, it also shows that in the same period cotton imports declined by 6.8 percent and wool imports declined by 1.6 percent resulting in a total in- crease of only 3 percent. Given the all-fiber nature of the industry, it is the total figure which is significant. The table shows imports from Japan of all manufactures in millions of equiv- alent square yards. There is an increase in total imports from 1965 to 1966, which was a year of extremely high demand. The United States industry, in all sectors, also had unprecedented increases in production in 1966. The table also shows a precipitous drop in imports from 1966 to 1967, a year in which the United States industry in most sectors maintained about the same levels of production as in 1966. On an overall basis imports from 1966 to 1967 declined by 14.4 percent. Measur- ing from 1965 to 1967 (so as to avoid the distortions introduced by the high de- mand conditions of 1966) imports from Japan showed a very small increase: 3.0 percent. There may be some increase in total imports in 1968 but domestic industry production, sales and profit all should be considerably above 1967 levels as w-ell. There have been complaints of imports in particular segments. In the case of wool textiles, imports from Japan have been declining for two consecutive years. Indications based upon forward orders are that 1968 will be at about the 1966 level. At the same time the trade press reports that the domestic worsted mills are booming, with orders booked well in advance, and indications that an extremely tight supply situation is developing. In the worsted trade Japan is marketing very high quality fabrics which have their own markets and do not compete to any appreciable extent with the worsted cloth produced in the United States. A major part of worsted imports from Japan has been silk w-orsted blends, a specialty which simply cannot be duplicated in the United States. Without doubt the Japanese w-orsteds, along with British and Italian worsteds, have a large share of the business in fabrics for men's suits in the more expen- sive lines. On the other hand, the domestic industry is practically without com- petition in its principal line, cheaper worsteds for low cost suits, slacks and casual clothes, fields which are growing more rapidly than the suit market. In the manmade fiber field much of the imports consist of specialties which are also not produced in the United States, such as rayon crepes, habutai and bemfany fabrics of rayon with about 40 denier yarn counts. There are also non- competitive imports of fancy weave fabrics of rayon and acetate including brocades and other fancies. There are many other examples of non-competitive imports from Japan in the manmade fiber field. It has been estimated that about 25 percent of manmade fiber fabric imports from Japan were non-competitive, although it is very difficult to make precise estimates. The drop in imports of manmade fiber products as shown on the table was about 21 percent from 1966 to 1967. Given the strong record of the United States industry through 1966 and the complete recovery in 1968 from the general economic dullness of 1967. it appears to us that quotas on textiles are entirely inappropriate. We understand that other w-itnesses before this committee will go into the textile and apparel fields in greater depth and will point out the detrimental consequences of the adoption of such restrictions. Electronics The plea for quota restrictions on imports of electronic products clearly comes from only a segment of one of the United States most sophisticated. specialized, w-orld-wide industries. The United States is a substantial net exporter of elec- tronic products and has investments, joint ventures and licensing agreements throughout the free world. This is preeminently an industry w-here the theory of comparative advantage is carried out in practice. The United States exports products where it has a technological lead, e.g., computers, and imports less sophisticated electronic products. Even in the consumer product segment of the industry in its operations in the U.S. market, you find U.S. companies specializing in higher priced items PAGENO="0353" 2139 and filling out their lines with lower priced products obtained abroad. Many U.S. producers of consumer electronics are sharing in a growing market that was created by foreign producers, e.g., pocket-sized radios and small-screen TVs from Japan. Because of standardization there is an international market for components. Here again the U.S. industry has large export earnings. U.S. production has been rising, whether considered in terms of general elec- tronics, consumer electronics or electronië components. Indeed, there have even been short supply situations. Congress itself acted to alleviate a tight supply situation in color TV tubes (P.L. 89-241). It would be clearly shortsighted to approve an electronics quota bill.' The strongest initial adverse impact would be felt by U.S. companies in the electronics industry itself. They have come to rely on certain imported components and finished products in their drive for specialization. In recognition of this fact, the major manufacturers of consumer electronics products generally oppose the elec- tronics quota bill. The products of this industry play such a pervasive role that inflationary price effects would be felt very quickly throughout the U.S. economy. Because the U.S. electronics industry has a large export surplus, its own products would be obvious targets of retaliation. These considerations demonstrate that S. 2539 would be adverse to the interests of the U.S. electronics industry and patently adverse to the U.S. national interests. Footwear The position of the American footwear producers who support H.R. 13602 or HR. 13613 and similar bills with respect to imports ignores two very important factors. First, the imports of Japanese footwear about which the National Shoe Manufacturers Association is complaining are almost all footwear with vinyl uppers. According to the Department of Commerce, approximately half of all imports consist of such products, and they had an average f.o.b. value in 1967 of (~0 cents. Such products are for women and misses, and such shoes in the first three months of 1968 also had an average f.o.b. value of 60 cents. Now, 60 cents f.o.b. means that these shoes are selling at retail somewhere around $1.75, perhaps from $1.39 to $1.99. From American production, there is no serviceable footwear available at all in this price range. This means two important things: that these products are not displacing American sales on any- thing like a one-to-one basis because the people who buy them would often not be buying a more expensive shoe; and that imports are rendering a great service in making footwear available for poor people at a price that they can afford. The second factor which should be noted is that there is today, and has been for several years, a shortage of labor in the American footwear industry. The trade press has been full of stories about the difficulties in obtaining labor. The shoe industry itself has often recognized the problem. The jobs said to have been lost in the shoe industry are theoretical jobs which there are no workers to .tUl. For this reason, there is a great impetus to shoe production in Puerto Rico and stress upon training shoe workers there. From the standpoint of the American economy, imports have been serving the valuable traditional function of meeting the needs of the market and making it possible for American labor to concentrate on the more sophisticated, higher paid, efficient lines of production. These facts and many others-such as the rOle of the large vertically integrated American footwear firms in bringing imports in-will no doubt be described in the report to be made as a result of the Tariff Commission's current investigation of footwear. Hairdwood plywood The limitation by quota of the important of plywood would not serve any desirable public purpose. Imported plywood is virtually all hardwood species, used for decorative rather than structural functions. Japan supplies a major portion of these imports and is especially known for several exotic, indigenous, decorative plywoods such as sen. It is no accident that imported hardwood ply- wood has come to supply more than 50 percent of total consumption in the United States, for, as indicated by projections prepared by the Forest Service and other agencies of the Government, the supply of domestic veneer quality hard- woods has been inadequate to meet the demand and will become even less capable of doing so as the present rates of increase in demand for these products are projected into the fñture. Consequently, to restrict by quota the importation of 05-159 0-68-pt. 5-23 PAGENO="0354" 2140 products such as hardwood plywood, in the face of certain decrease in domestic supply relative to demand, is simply not in the public interest. Glass Imports of fiat glass have been under attack. These complaints have come from an industry that is an exceptionally healthy profit position, that engages in very favorable international operations, and that already enjoys special protec- tion from certain imports. Libbey-Owens-Ford Glass Company, as one of the principal companies in the industry, has consistently maintained one of the highest ratios of net profit to sales of any major U.S. corporation. The annual "Fortune 500" shows this profit ratio has ranged between 23 and 30 percent in the last several years for L.O.F., and around 10 percent for the Pittsburgh Plate Glass Company. Public statements by industry executives confirm that the relative decline in. 1966 from these exceptionally high levels is attributable to declines in automobile production and residential and building construction, on which the industry depends so heavily. This industry is reported to have substantial investments in productive facili- ties in Europe. Its technological superiority is the basis for world-wide licensing arrangements and is also the best guarantee against loss of markets to imports. The sheet glass segment of the industry has been under the special protection of escape clause restrictions since 1962. The alleged difficulties of this segment have been the subject of extensive annual review by the Tariff Commission. Sheet glass was exempt from any duty reductions in the Kennedy Round. And now President Johnson has extended the escape clause restrictions on certain sheet glass imports until 1970. In short, this is a healthy industry that does not need any additional protec- tion. Furthermore, a decade surely should be adequate time for an industry with such favorable capital and technological resources to adjust to competition with- out the crutch of escape clause restrictions. BALANCE OF PAYMENTS CONSIDERATIONS It is occasionally suggested, usually by industries seeking protection, that vari- ous import limitations should be adopted to assist the U.S. international pay- ments position. For the reasons pointed out above, the quantitative limitations suggested would in fact be disastrous for the U.S. international accounts, by limiting total trade. Also at times suggested-but at this writing rejected by the Administration- is the idea of a special levy or surcharge on imports. There are precedents for such temporary action, i.e., the United Kingdom and Canada in recent years. In the case of the United Kingdom, the import surcharge did not prevent devalua- tion of the pound sterling, and it is doubtful that it had any significant short run economic effect on the balance of payments. The effectiveness of a U.S. import surcharge is also doubtful. A surcharge would operate in four ways: (a) to some extent, it would be absorbed by the foreign supplier, resulting in fewer dollars earned; (b) to some extent, it would lead to a decline in sales (orders cancelled or just not placed) ; (c) to some extent, it would be absorbed by the importer (but this would be very small, because of the margins on which importers work) ; (d) and to some extent, it would be passed on to the U.S. consumer in the form of higher prices. Only the first two would assist the U.S. balance of payments, and the last would make matters worse, by reason of the inflationary effect of higher prices. Inflation, of course, would impair U.S. ability to export. The longer a surcharge remained in effect, the more serious its effect would be on U.S. prices. The natural tendency would be to pass on the price increase as soon as markets permitted. For instance, a five percent increase in the landed duty paid cost of dutiable imports would mean a commensurate increase, over time, in the price level of competitive domestic products. One of the great values of imports is that they tend to keep down domestic prices. Their anti-inflationary impact far transcends the actual volume imported. There are not adequate tools to predict with confidence the effect of such a surcharge upon billions of dollars of varied imports. Some knowledge of a number of important commodities leads us to believe that if the rate of the sur- charge were low, then after a painful period of trade disruption, trade would pick up again with the increase predominantly passed on in higher prices, thus working against rather than for the objectives of the surcharge. PAGENO="0355" 2141 The same fatal dilemma exists at the domestic U.S. political level. A levy high enough to cause a significant decline in imports and comfort U.S. protectionist interests would be violently unacceptable to America's trading partners, who would take serious retaliatory measures. The conclusion is unavoidable. An import surcharge is not a practical medicine for the international payments ills of the U.S. in 1968. Historically the United States trade balance has been the strongest and most positive element in the overall balance of payments picture. We realize that this is less true in 1968 than it was in previous years, but there is certainly no such trade deficit as would suggest the existence of a "fundamental" dis- equilibrium. If U.S. costs and prices were rising so rapidly in comparison to those of other countries that the capability of exporting was seriously impaired and U.S. imports greatly encouraged, then a better case could be made for a selective adjustment in exchange rates than for an overall increase in tariffs. There are some economists who believe that an upward adjustment in relation to the dollar of some of the "strong" currencies of Europe-notably the deutschmark and the guilder-is in order. To revalue such currencies would require painful and patient negotiations, but this would be preferable to either unilateral United States devaluation or the imposition of a general import surcharge which would strike impartially at both strong and weak nations. Either of these drastic alternatives would hit particularly hard and particu- larly unfairly at Japan, which ships approximately 30 percent of its exports to the United States. Unlike the EEC countries, but like the United States, Japan has a serious balance of payments problem. It must be noted that Japan has con- sistently used domestic fiscal and monetary measures in recent years to protect its own balance of payments position, and has cooperated in all programs to maintain confidence in the dollar. To prevent a situation of fundamental disequilibrium from developing in trade, the United States Government, at all levels, must take fiscal measures to slow down the rate of inflation so that United States goods remain competi- tive with other goods in world markets. It now appears that such measures may at last be taken. Even more important, there is hope at this writing that the drain on human and financial resources of the war in Vietnam may begin to decline. It is these plus the expenditures for the maintenance of military forces elsewhere that are above all responsible for the balance of payments difficulties. Regardless of the merits of various remedies for the international payments ills, it is essential to avoid drastic measures which have consequences far ex- ceeding their objectives. TRADE EXPANSION ACT OF 1968 According to Ambassdor Roth, "This bill is not designed like the Trade Ex- pansion Act of 1962 to present a complete program for future action. At the direction of the President, the Executive Branch is studying the whole area of international trading relations so that we can make overall recommendations concerning our future policy." We might add that we support the Congress in its study of international trading relations as reflected in these hearings. Our association, like others, is pleased at the opportunity to express its views on the world economy as it affects the United States economy, and on the United States economy as it affects the world economy. Indeed, we hope that future foreign economic policy will truly reflect the national interest of the United States as extracted from the interplay of ideas and facts among members of Congress, the business community, labor, and as- sociations such as ours. But in the meantime, as Ambassador Roth stated before your committee, "There are certain steps that cannot wait. These are incor- porated in the bill that the President has asked your Committee and the Con- gress to consider." Support ea~tension of Presidcnt'e negotiating autl&ority The request that the President's negotiating authority be extended until July 1, 1970, within the unexpired authority and limitations of the Trade Expansion Act of 1962 is a modest one. It will simply enable the executive to make tariff adjustments to prevent default in the international obligations that have already been undertaken. PAGENO="0356" 2142 The significance of failing to grant such authority would be considerably greater than the significance of granting it. Granting it will permit the con- tinuity in the exercise of U.S. foreign trade policy pending more far-reaching decisions upon future directions. Refusal to grant could signal to the rest of the world a breakdown in U.S. leadership in trade matters. Adjustment assistance According to Ambassador Roth and other Administration spokesmen, adjust- ment assistance under the 1062 TEA has not worked as was intended. We believe that the impact of imports has been exaggerated, by both industry and labor. If governmental help is desirable because imports contribute to a displacement, then governmental help is also in order if these displacements arise from tech- nological developments, changes in taste, a shift in defense orders, or still other factors. Nevertheless it is a fact that the support of labor for the Trade Expan- sion Act of 1902 was based, in no small part, upon the promise of adjustment assistance. That being so, it would be prudent to do everything possible to make it a reality. Accordingly the U.S.-Japan Trade Council supports legisla- tion to make it easier to obtain adjustment assistance. At the same time the Council hopes that the Congress will stand fast against any changes in the criteria leading to adustment of tariffs. In this respect, the much criticized decisions of the Tariff Commission can be fully defended on both legal and policy grounds. It is not surprising in the least that there have been no cases of relief under Title III of the Trade Expansion Act of 1962. Most of the tariff changes had taken place long before and the changes effected by the Kennedy Round are scarcely now in effect. The whole notion of adjustment, under the Trade Expansion Act, implies that an industry has already had time to attempt to adjust to tariff changes that took place long ago. American selling price valuation We think that the problem of American Selling Price valuation or ASP has been inflated well out of its proper proportions. This abnormal method of valu- ation applies to only a very small part of all of the imports into the United States and one would suppose that it was of general application from all the attention it has been given. Nevertheless, it is contrary to the GATT (except for the saving clause on existing legislation) and the United States has been inviting trouble by not doing the sensible thing years ago and removing this anomaly from the American customs law. Such unilateral removal was proposed by the Administration back in 1950 when the customs simplification legislation was being first proposed. It seemed a very normal and natural thing to ask the Tariff Commission to find the equivalent rates, as near as may be, on the normal valuation methods and to convert as a unilateral U.S. matter. It is unfortunate that it was not done in this way. We think an enormous amount of confusion and misunderstanding has arisen because of the attempt to bargain for the removal of ASP, and to combine the process of converting into rates giving comparable protection with the process of reciprocal reduction of tariffs. The chemical tariffs to which the American Selling Price applies are of con- siderable interest to the trade between Japan and the United States, as also is sneaker-type footwear entered under Item 700.60 of the Tariff Schedules of the United States. There was no bargain in Geneva on the footwear because the United States delegation took an unacceptable position with respect to the rate of conversion. The United States sought to negotiate on a basis which meant an actual increase in duty. This was highly unacceptable not only to the principal supplying country, Japan, but also to importers in the United States. Now, the Administration requests authority to enter into an agreement elimi- nating ASP on footwear, which we heartily approve. But it includes a quite unjustified minimum rate, effective not before 1971. The rate is a compound rate of 20 percent plus 2.5 cents a pair coupled with a floor of 58 percent ad valorem. This proposal is entirely wrong in principle because it departs from the conception of converting at the same level of protection that has been enjoyed during a recent historical period. The Tariff Commission found a level of 58 percent in 1965. We submit that the bill should be amended so as not to tie the hands of the negotiators, and allow rate and product definitions consistent with the 1966 Tariff Commission report, or a new report. The "Final List" and customs administration The United States-Japan Trade Council urges that abolition of the "Final List" be approved by the Committee as part of this bill or as a separate bill. PAGENO="0357" 2143 The Final List is an anomaly, a nuisance for the Customs Service and a serious vexation for the trade with Japan, for three reasons. First, the Final List affects the valuation of vacuum tubes from Japan, which presents serious commercial difficulties. Second, it causes the American Selling Price valuation of footwear to be considerably higher than it would otherwise be, and thus makes this method of valuation even more unfair. Third, the Final List hangs like a sword of Damocles over the trade. What happened on vacuum tubes was unanticipated, and there are a variety of other products for which unanticipated high duties could be demanded at any time. We understand some of the reasons why the Congress and Administration have not made any effort for some years to abOlish the Final List. However, we sub- mit that this is a mistake. This comment also applies to some other reforms in customs administration which are long overdue. For instance, the Congress should adopt legislation to merge the statutory procedures for review of valuation and for review of classification. Such a bill was introduced as a trial balloon in the 89th Oon~gress, but has not been heard of since. If we wait to propose the reforms that were due years ago, then how will we ever make the reforms of tomorrow? MAINTAIN MIJTILATERAL TRADE BASED ON "MOST FAVORED NATION" PRINCIPLE The General Agreement for Tariffs and Trade iS based on the "Most Favored Nation" principle. Simply stated this principle means that the terms of trade granted by one nation to another is extended to third nations. Both tariff preferences and economic blocs seriously violate this principle. Preferences for the less developed co~untries The developed nations of the free world, including the United States and Japan, have come reluctantly and for essentially political reasons to accept the idea of tariff preferences for the products of the less developed nations. The failure of the second UNCTAD meeting in New Delhi to reach any meaningful agreements should cause both developed and less developed countries alike to review their positions. The economic case against preferences ha~ been ably stated by many com- mentators. First, they tend to promote and perpetuate economic inefficiency. second, preferences would be least helpful to those developing countries that are least developed and would most help those who have reached a stage where they have least need of the help. Third, there is no clear definition of "less developed" as this term applies to the cost of producing various products. Fourth, tariff pref- erences would create a vested interest against further efforts to liberalize world trade because the general reduction of tariffs would then automatically reduce the margin of preference. Fifth, a preferential system is extremely complex to administer and would give rise to `additional bureaucratic regimentation. Siath, the existence of a system of preferences would cause many industries in devel- oped countries to insist that legislative safeguards be established against so- called market disruption. Finally, if tariff preferences were regarded as a form of aid the developing countries could measure this aid and deduct it from the aid that would otherwise be given. This could have the effect of reducing infra- structure aid while artificially stimulating uneconomic export industries. The U.S-Japan Trade Council urges that the objections to preferences be realistically re-examined instead of pursuing a course that is bound in the end to cause disappointment. E1fforts should rather move in the direction of opening the doors of the highly industrialized nations to, those products which the under- developed countries can best produce, and this on a non-discriminatory basis. For instance, abolishing the international agreements limiting the movements of cotton textile's would probably do more for the underdeveloped countries than any system of generalized preferences that could conceivably be accepted. These comments are made in full sympathy for the problems that the less developed countries face, and indeed, in the belief that assistance to these countries to achieve acceptable rates of development is a major task which faces the world today. The task would not be advanced, however, by pursuing illusory methods for momentarypolitical adcantàge. Avoid more trading blocs If the rate at which trade barriers are dismantled is disappointingly slow, then inevitably attention turns toward the creation of regional blocs which PAGENO="0358" 2144 can serve somewhat the same purpose for countries that need to belong to larger markets. The accidents of history that have given rise to national states have not created the most desirable economic units. If the less developed countries insist, as they apparently will do, on protection for their infant industries and expanding their markets, then the formation of trade areas may make sense, particularly in Latin America and in Africa, in order to create larger market areas which would lead to the benflts associated with economies of scale. This is, of course, the basis in logic for the blocs that have been formed in Latin America, the Latin American Free Trade Association and the Central American Common Market. In general, however, the U.S.-Japan Trade Council submits that for the United States to consider seriously participating in any customs union comparable with the European Common Market would be a step in the wrong direction and away from the multilateral reduction of tariffs and trade barriers which is in the true interests of the United States and the world as a whole. The reason is simply that the United States, by economic geography, is not a member of any logical group. It is itself already a bloc in the only sense which is really justifiable, a bloc that was brought into existence in 1789 and that received its latest accretion when Alaska and Hawaii became states. It has its owrn interest everywhere in the world-in Europe, in Africa, in Latin America, and in Asia. TABLE 1.-SALIENT FINANCIAL STATISTICS: U.S. PRIMARY IRON AND STEEL INDUSTRY lIn mil lions of dollars) Earned Reserves Year Sales Net profits 1 Liquid posi- tion 2 3 surplus and surplus reserves 3 Current assets 3 Property, plant and equIp- ment34 for depre- ciation and deple- tion n a Total assets Stock- holder equity 1960 18,590 945 5,089 7,916 8,131 9,946 10,678 19,091 13,051 1961 17,532 803 5,460 8,017 8,547 10,176 11,242 19,793 13,152 1962 18,555 720 5,525 8,084 8,356 10,049 11,941 19,568 13,221 1963 19,435 938 5,837 8,463 9,109 10,055 12,743 20,262 13,532 1964 21,993 1,225 6,012 8,978 9,752 10,614 13,712 21,464 14,099 1965 24,451 1,401 6,270 9,697 10,346 11,401 14,639 22,907 14,578 1966 25,735 1,487 6,234 9,573 10,649 12,240 15,699 24,183 14,853 1967 24,146 1,165 6,296 9,978 10,491 13,190 16,670 25,165 15,284 Change 1960 to 1967_...~ +5, 556 +220 +1,207 +2, 062 +2, 360 +3,244 +5,992 +6, 074 +2,263 1 After Federal taxes. 2 Current assets minus current liabilities. 3Atthe end of the period. 4 Deducting reserves for depreciation and depletion. ° Of property, plant and equipment. Source: Quarterly Financial Reports for Manufacturing Corporations," Federal Trade Commission and Securities and Exchange Commission. TABLE 2.-GROWTH IN U.S. STEEL INDUSTRY PROFITS IDollars in millions) Year Sales . Stockhold- Net Profits as p ercent of- - ers' equity profits 1 Sales Stockhold- ers' equity 1960 1961 1962 1963 1964 1965 1966 1967 $18,590 17,532 18,555 19,435 21,993 24,451 25,735 24,146 $13,021 13,115 13,225 13, 592 14,083 14, 597 14,853 15,284 $945 803 720 938 1,225 1,401 1,487 1,165 5.1 4.6 3.9 4. 8 5.6 5. 7 5.8 4.8 7.3 6.1 5.4 6. 9 8.7 9. 6 10.0 7.6 1 After Federal taxes. Source: FTC-SEC "Quarterly Financial Reports for Manufacturing Corporations." PAGENO="0359" 2145 TABLE 3.-NET "CASH FLOW" OF THE U.S. STEEL INDUSTRY [In millions of dollars~ Addition to Net profit Calendar year retained in business 1 reserve for depreciation and Total depletion 2 1960 $297 $825 $1,122 1961 176 863 1,039 1962 146 430 576 1963 424 1,144 1,568 1964 679 1,224 1,903 1965 817 1,274 2,091 1966 885 1,365 2,250 1967 549 1,427 1,976 1 Net Profit after taxes minus dividends. 2 Including accelerated amortization of emergency facilities. Source: "Quarterly Financial Reports for Manufacturing Corporations," Federal Trade Commission and Securities and Exchange Commission. TABLE 4.-U.S. STEEL INDUSTRY SALES PER EMPLOYEE Industry sales I Wage earners 2 All employees 2 Year (Millions) ~ Sales per- Wage earner Employee 1960 $18,590 449,900 571,600 $41,320 $32,523 1961 17,532 405,900 523,300 43,193 33,503 1962 18, 555 402,700 520, 500 46, 076 35, 648 1963 19, 535 405, 500 520, 300 47,928 37,353 1964 21,993 434,700 553,600 50,594 39,727 1965 24,451 458,500 583,900 53,328 41,875 1966 25,735 446,700 575,500 57,611 44,718 1967 24,146 424,200 555,100 .56,921 43,498 1 Source: FTC-SEC "Quarterly Financial Reports for Manufacturing Corporations." 2AISI. TABLE 5.-U.S. STEEL IN DUSTRY SALES PER EMPLOYEE COMPARED TO TOTAL EMPLOYMENT COSTS Year Industry sales 1 (Millions) Total employees 2 ~ Sales per employee- Dollars Index Employment costs per hour-2 Dollars Index 1960 $18, 590 571, 600 32, 523 100. 0 3. 58 100. 0 1961 17,532 523,300 33,503 103.0 3.75 104.7 1962 18 555 520,500 35,648 109.6 3.87 108.1 1963 19,435 520,300 37,353 114.9 3.93 109.8 1964 21,993 553,600 39,727 122.2 4.01 112.0 1965 24,451 583,900 41,875 128.8 4.14 115. 6 1966 25,735 575, 500 44,718 137. 5 4.25 118. 7 1967 24,145 555,100 43,498 133.7 4.32 120.8 1 Source: FTC-SEC "Quarterly Financial Reports for Manufacturing Corporation." 2 Source: AISI (does not include fringe benefits). TABLE 6.-U.S. STEEL INDUSTRY SHIPMENTS PER WAGE EMPLOYEE COMPARED TO WAGE EMPLOYMENT COSTS Industry Average Shipments per wage em- Total hourly employment shipments number of ployee cost 1 Year finished wage em- products ployees Net tons Index Dollars Index 1960 71,149,000 449,900 158.1 100.0 3.82 100.0 1961 66,126,000 405,900 162.9 103.0 3.99 104.4 1962 70,552,000 402,700 175.2 110.8 4.16 108.9 1963 75,555,000 405,500 186.3 117.8 4.25 111.3 1964_ - 84,945,000 434,700 195. 4 123.6 4.36 114. 1 1965 92,666, 000 458, 500 202. 1 127. 8 4. 48 117. 3 1966 89,995,000 446,700 201.5 127.5 4.63 121.2 1967 83, 897, 000 424, 200 197. 8 125. 1 4. 76 124. 6 1 Including all fringes. Source: AISI. PAGENO="0360" Cl) 3 RD Cl) ~ ~ > ~ 3 ~ - ~ ~ g ~. ~. ~. -a) ~" g5- a) ~. CD = CD Cl) g) 5. 5. CD. U~O) C) -.J 0)0)0)01 N) C) CO ~ 01 .J N) -J~-. ~-~-.~-- -4 a) -a a) C) -4 a) C!) -u -4 a) C) 0 -a -4 0 z 0 ~1~ Cl) -4 -1 a) Cl) -4 -1 Cl) -& -~ -~ ,: -~: -~ -a1 a~ N) 00,~) ~ ~ OO#~ a)'~ CD.-. U) C) a) C) N)C) ~ N) -~ CO -C a) ~ C) 0) 00 00 01~ (C1~ ~ C) - a) a) C) 0) ~ C!) 0) 0~0)0)~)-~ C)) -1 :10 a) rn 0 -C! o C/) 1!) -n CC) CD CD 0 C) -4 C/) a) -< C/) 0 C) C/) 2 3 C) 2 (0 N) a) ~ N) Q1J C/, -I a) m C/) C/) -4 a) C,) -4 :i~ a) 0 -a 0 a) C) -4 -4 -< 3 ~. DC) 30. C) 0 -4 I~. ~)1~C) CC) -~ CD ~ ~O ~-Dq PAGENO="0361" 2147 TABLE 10.-JAPANESE KENNEDY ROUND CONCESSIONS ON IRON AND STEEL PRODUCTS Ad valorem duties (percent) 1 Brussels tariff nomenciature Description After Kennedy No. Present round negotiations 7301 Pigiron, etc 10 5 73021 Ferrosilicon 10 5 73022 Ferromanganese 15 12 73023 Ferrochromium 10 10 73024 Ferronickel 15 12 73025 Otherferroalloys 10-15 5-7.5 7303 Iron and steel scrap Free Free 7304 Shot and grit, etc 10 5 7305 Powders, sponge iron, etc 10-12. 5 5-6. 25 73051 Same(lessthat90percentiron) 5 5 7306 Puddled bars, ingots, blocks, etc 12. 5 6. 52 7307 Semi-finished iron and steel 12. 5 6. 25 7308 Coils for re-rolling 15 7. 5 7309 Universal plates 15 7. 5 7310 Bars&rods 15 7.5 7311 Angles, shapes, and sections 15 7. 5 7312 Hoop and strip 15 7. 5 7313 Sheets and plates 15 7. 5 7314 Iron or steel wire 15 7. 5 73151 1 High-speed steels 2 15-25 15-20 73151 2 Bimetal of 10 percent or more nickel 25 18 73151 Otheralloysteels3 15 15-10 73152 3 High carbon steels 15 10 7316 Railroad construction materials 15 7. 5 7317 Cast iron tubes and pipes 15 7.5 7318 Tubes and pipes 15 7. 5 73181 Same (of alloy steel) 15 12 7319 Hydroelectric conduit 15 7. 5 7320 Tube and pipe fittings 15-20 7. 5-10 7321 Structures and parts 10-15 57. 5 7322 Tanks, vats, etc 10-15 57. 5 7323 Casks, drums, etc 15 7. 5 7324 Compressed gas cylinders, etc 15 7. 5 7325 Wire strand, cable, etc 15 7. 5 7326 Barbed wire, fencing wire, etc 15 7. 5 7327 Nets, netting, etc 15 7. 5 7328 Expanded metal 15 7. 5 7329 Chains and parts 15 7. 5 7330 Anchors and grapnels 15 7. 5 7331 Nails, stables, etc 15 7. 5 7332 Bolts, nuts, rivets, etc 15 7. 5 7333 Needles, etc 10 5 7334 Pins, hairpins, etc 10 5 7335 Springs, including spring leaves 15-30 7. 5-15 7336 Stoves, etc 15 7. 5 7337 Central heating boilers, heaters, etc 15 7. 5 7338 Sanitary and domestic wares 15 7. 5 7339 Steel wool, scouring pads, etc 20 10 7340 Other articles of iron or steel 15-20 7. 5-10 1 Based on CIF (cost, insurance, freight) values ex Japan. 2 Subject to a tariff quota. Some alloys (tool steel, free-cutting steel, hollow drill steel) subject to quantitative import quotas. Source: Japan Tariff Association. PAGENO="0362" 2148 TABLE 11.-UNITED STATES GENERAL IMPORTS OF MAJOR TEXTILE FIBER MANUFACTURES FROM JAPAN, 1965-67 [In millions of equivalent square yards] Cotton Wool I Manmade Total fiber 1965 1966 404.2 412.0 55. 1 58.2 301. 0 445.0 760. 3 915.2 1967 376. 7 54. 2 352. 1 783. 0 Change 1965 to 1967: Quantity Percent Change 1966 to 1967: Quantity Percent -27. 5 -6. 8 -35. 3 -8. 6 -0. 9 -1. 6 -4. 0 -6. 9 +51. 1 +17. 0 -92. 9 -20. 9 +22. 7 4 3. 0 -132. 2 -14. 4 1 Includes floor coverings. Source: U.S. Department of Commerce. PAGENO="0363" 1967 UNITED STAlES ______ EXPORTS TO JAPAN By Customs District of Shipment This publication presents statistical data on United States exports to Japan of domestic merchandise dur- ing 1967. The figures are arranged according to Customs Districts of shipments, using the Standard International Trade Classification (StTC) system. This system classifies commodities into ten one-digit sections, with further subdivisions into two-digit divi- sions and three digit commodity groups. This study is almost directly comparabte to similar Council publications put out annually since 1963, listing exports by Customs District of shipment. Rela- tively minor changes in Customs District classification and a new regional grouping of districts, adopted in 1966, are the only differences. The commodity classi- fication remains the same. Identical commodity com- parisons cannot be made with the 1962 edition because of the change in the commodity code classification system made by the Census Bureau, effective in January of 1963. The material upon which these reports are based is obtained by the United States-Japan Trade Council from the United States Bureau of the Census. The Council contracts with the Cè~~us Bureau for the raw data on computer tapes. A priv~tv-p~gramming firm, retained by the Council, programs ~he data into a unique, individualized tabulation offering more de- tailed and varied statistical information. The research staff of the Council then summarizes and prepares the data for publication. Alt ports of entry and departure in the continental United States, Alaska, Hawaii, and Puerto Rico are grouped into forty-one (formerly forty-six) Customs Districts. The geographic extent of each is defined in the January 1, 1966 edition of "Schedule D-Code Classification of United Slates Customs Districts and Ports" published by the Census Bureau. Last year the Council abandoned the grouping of Districts by geographic area, as used in earlier publications, in favor of the new Census Bureau method of grouping Districts by Region. The changes incorporated in the reclassification were explained in the 1966 pamphlet. Export figures for each District are not necessarily indicalive of the place of origin of the merchandise, but represent the value of the merchandise at the sea- port, border point or airport of exportation. As defined by the Census Bureau in its FT-450 and FF- 455 reports, figures used herein represent the value at port of exportation, including selling price, inland freight, insurance, and other costs included in ship- ment to the port. Special category (military) shipments and reshipments of foreign merchandise are excluded. A supplementary table on page 8 gives a compari- son for the years 1966 and 1967 of total U.S. exports and U.S. exports to,,Japan by Customs District. Also shown is the percentage distribution among the dis- tricts of exports to Japan and to the world. The data presented wilt tend itself most readily to geographic or commodity analysis. For example, export information for a specific area, e.g., Portland, Oregon, wilt be found in Region VIII, the San Fran- cisco Region, as Customs District 29. All commodities wilt be listed down the column. If interested in a specific commodity, such as aircraft, the user can find SITC group 734 and read across the table to identify the ports of shipment. UNTED STATES-JAPAN TRADE CDUNCIL 1000 CONNECTICUT AVENUE, NW., WASHINGTON. O.C. S p 5 Add I (2149) PAGENO="0364" Page 2 UNITED STATES EXPORTS TO JAPAN BY CUSTOMS DISTRICT OF (VALUE IN $1,000) b~&~Z~ 2:12 35.101 23335' 4,043' 7,476' 65 453,425 226.656 50.OHO7.816146.s: R20~ W~~g Ch4d~ 55061? ~: 05 rOt &6~,255ss 25,145 24 24 410 206 55 152 172 170 2 050 F~i~3sh,&~tto 13,023 22 22 1 13 33 ::1I1 :~ !~ !P~ I! ~T ! T~ 2150 See Page 8 for notes PAGENO="0365" 2151 SHIPMENT AND SITC SECTION, DIVISION, AND GROUP, 1961 Page 3 "; °~: 20 a 21 2 T~a~ 2 24 23 Tel Algola, 25 21 VUI Fa~a O~. W~th. Alak~ ~ 20 32 TI oap~, M~o. #akoo, AilS. IL 33 31 41 330,177 54,564 275,633 235,025 09,596 102, 242 5,095 77 98,015 343,704 29,949 313,155 850.766 414,397 220,111 167,669~ 41,553 7.037 85.641 6,734 1,431 5, 577 12,855 22,353 28,238 104,478 28,591 75,847 61,676 763 35, 649 3,926 21.338 32.902 220 32,632 178.218 29,632 125,803 22,783 376 1 375 8 8 10 10 4,728 40 4,638 19,173 16,152 710 1,799 514 436 5 369 32 2,264 2.264 85 85 1.162 994 27 27 114 2,920 46 2, 397 419 57 516 `516 82 82 : E 1,046 : E 919272 6 114 59 1 57 ! : E : E : :: ~E ; E~ : E : E ~E~E EH IEEh~E~ ~I E PAGENO="0366" 2152 1063, & tSbIi53tSd 53i1di~j 702227143 Page 4 UNITED STATES EXPORTS TO JAPAN BY CUSTOMS DISTRICT OF SHIPMENT (VALUE IN $1,000) - 29 C3348 Ai~*I &Vs~st1514 MCsa5.Lsj. 8.245 2 2 1.535 20 18 2 59 5 45 7 2 33 Pl~~ & P715883 Pndotts 332 P2t7411270 p1001153 43 431 33831&6515s312 345 &re~,P.~64 5 CHEMICALS 51 Ck~33t 01523324£ C 947015 52 521 MIssosiTo &CO8ASH5O840t8M 76.729 33 33 5,354 5,354 1,726 5.145 5,145 10 4,644 501 4,644 501 15.650 6,313 6,832 2,304 17 10 3,301 1,829 5 5 139 7,524 3,231 333 10 220 216 2 2 2 2 123 1,531 3,219 720 212 180 1 2,005 23 224 265 20 203 75:336 33 33 2.437 226.853 83.530 12.277 8 721 415 8 73.3 407 12 63,039 25,520 8 20.232 11,015 57 17 54 541 MsAi4~l & P546880833331P3$4474 15,551 6,845 59 27 30 2 176 176 5 04~s70isI3ils, P~t,s, M~t~145; P4594743334 22,471 91 91 6,170 731 538 133 56 56 57 571 045471,85&Pr,30407P4542ts 30.4 212 1~E: :~ ~: 70~ 66 ~133033~M~b44 732 18~ 613 347 fl~ 1051 See Page 8 for notes PAGENO="0367" 2153 AND SITC SECTION, DIVISION, AND GROUP, 1961 (Continued) Page 5 E I I I I I I I 1± I I I 13,347 185 134 13,34 51 16,383 9,218 20 7,145 25,237 4 25,233 9,675 9,574 62 5 34 143 8 31 22 76 66 66 21701 10,087 7,460 1,789 167 32,194 8,933 4,757 1.677 5.693 167 26,501 8,932 4,757 1,677 179 34,398 8,497 4,574 6,483 179 31,660 7.926 4,332 6,488 1,270 67 2 1,616 3 464 1 201 1 49 39 38 14 4,026 13 1,393 986 17 46 19 7 14 1,805 588 583 1,158 470 533 154 170 153 19,636 2,256 17,342 39,784 5,336 13, 447 5,194 3 5.181 26.572 4,844 11, 645 4,349 835 2 4,347 885 23,889 2,766 4,338 11, 450 591 517 60 60 5 5 474 474 7.286 7.236 636 - 2 14 - 63 335 - 163 163 63 63 1,153 1,158 3,749 2,321 692 734 2 212 6 90 51 163 183 163 183 26 36 26 36 94 450 13,2 62 5.655 94 450 7,607 `352 1,207 1 350 1,184 1 ~- 23 -- 2 3 114 6 3 86 9 I II~ I~ 11111 1 i I I I II I II `I I I 226 3 203 21 21 872 872 630 562 57 7 6 157 3 130 2 21 127 21 127 15 19 18 22 18 22 13 272 13 211 54 6 3 1 PAGENO="0368" Page 6 UNITED STATES EXPORTS TO JAPAN BY CUSTOMS DISTRICT OF SHIPMENT (VALUE IN $1,000) GRA:D T ~:1 ]ui~j' 68 ~ M~O~ 65.422 274 264 10 24192 4819 2.164 2,354 301 472 189 292 - 69 ~s302o 57 - 65 33 30 66 - - - 73 3s~~~ss1 579;sse 89.029 115 115 17,395 447 327 125 15 332 3 97 282 T::641 2154 See Page 8 for notes PAGENO="0369" C,, C-, C,, C-, C,, C -~ I. c-y' 0 iii IL JJ J~I~ -~ H HHI HI H H JI HI - - - - J~I It :~ I II I II - HI HH~I I H~HHH -HI I H' H HHI tt - 1 II ii HL ~ ~LI 11 ~LL_ I~I ~ ._______ kI~ ~ ~I H:: I~I - L H LI L__HI~LL L I LI I H:: kI ~ HuH L LI LH~LI_~-_ PAGENO="0370" Distnict totals and commodity ontoies may not equal them nespeotiuesu btotals and goand totals because of ocunding. Dash (-I donates values less than $50,000 and pencentag Os less than 0.05%. FOOTfIOTES a Beginning in 1067 special categony Imilitany) shipments to indiuidual ccuntcies weco included by the Census Buneau in that countny'sannu al espcit total. Pcouiously, such shipments none net bnoken dome as to countoy of destination, but mene included in the total of U.S. espoots to all countoins. Special catognoy shipments ann not identitied by commodity types ron assigned to specitio Cus- toms Diatniots. The Onand Total ton Japan also includes 005 thousand of vet- sets unden them own powen 00 afloat, $3,507 thousand of tom value lundeo $1001 shipments and $4,c63thousan d of mail shipments, which one not assigned to specific Customs Distoiols. °Customs Distoiots totaling less than $65,000 any not indiuidually shown on the main table. The values ot these distoicts Con, howeven, included in the negional total. The total shipments and poincipal commodities of these Customs Dis- nets ace icon below with value figunes (in thousands 00 dollans). Included in Region I Total: St. Atbans, Voeenont 656)-crude minerals 1561; Buffalo, Now Took 162)-pulp and waste papeo 122), machinnny (14), hides and skins, endoessed 1131, chemicals (12). Thene mono no U. S. esponts to Japan in 1007 foom the following Customs Dislnicts: Pontland, Maine; Nogales, Arizona; focal Falls, Montana Pembina, Sooth Dakota; and St Lcuis, f,lissouni. 2156 SUPPLEMENTARY TABLE U.S. EXPORTS TO ALL COUNTRIES AND TO JAPAN BY CUSTOMS DISTRICT OF SHIPMENT, 1966 & 1967 (Value in $ million) CUSTOMS DISTRICTS EXPORTS TO JAPAN (A) PERCENT CHANGE EXPORTS TO ALL COSNTRIES (8) PERCENT CHANGE JAPAN'S % SHARE (AiR 0 100) PERCENTAGE DISTRIBOTION OF * EXPORTS TO EXPORTS TO JAPAN ALL COUNTRIES 0966 1967 596A'A7 0966 0987 SRAAA7 S9AA 0967 1966 SRA7 196) 1967 GRANS T0TAL~ 2,311.7 2,864.9 15.3 29,A99.O 31,147.2 4.2 7.7 A.5 100.0 000.0 100.0 100.0 REGION 0-805309, MOSS. 20.9 39.1 67.9 2,532.0 2,Ao3.9 6.0 O.A 1.3 0.9 1.3 0.5 0.8 Pontland, Maine St. Albans, Vermont Boston, f,fassachusetts Ptcuidence, Rhode Island Boidgepoot, Connectiout Ogdeosbvog, See Took Buttalo, New Took 0.1 0.) 14.0 3.4 3.2 - 0.) 0 0.) 23.4 4.0 7.5 0.) 0.1 - 66.6 20.6 135.9 - 64.0 IRI.4 162.3 4.3 8.0 776.) 1,335.9 61.0 174.0 205.0 4.5 8.8 758.0 1,471.4 - 4.7 - 3.6 26.3 4.7 10.0 - 2.3 10.2 0.1 - 0.7 78.6 39.5 - - - - 11.4 09.9 84.9 - - - - 0.6 0.1 0.1 - - 0 - 0.0 0.2 0.3 - - 0.2 0.6 0.5 - - 2.6 4.5 0.2 0.6 0.7 - - 2.4 4.7 REGION tI-NEW YORK CITY 329.A 453.4 37.A 7,000.3 7,975.2 2.2 4.2 5.7 04.3 07.0 26.1 25.A flew 000k City, cow Ycok 329.6 453.4 37.6 7,603.3 7,975.2 2.2 4.2 5.7 14.3 17.0 26.1 25.6 REGION Ill-BALTIMORE, MO. 149.0 226.7 52.1 2,073.0 2,257.0 3.9 8.9 00.0 8.4 9.5 7,3 7.2 Philadelphia, Pennsyluania Rallimoco, Maryland Noctolk, Vinginia 23.2 21.9 97.9 50.2 27.8 040.6 72.3 27.2 50.0 405.4 650.5 1,049.2 514.0 615.2 1,128.7 10.4 - 6.6 7.6 6.3 3.3 9.3 9.8 4.5 13.2 1.3 0.9 4.2 1.9 1.0 5.6 1.6 2.2 3.5 1.7 2.0 3.6 REGION to-MIAMI, FLORIDA 78.5 74.9 - 4.6 1,204.1 5,329.0 10.4 A.5 5.A 3.4 2.8 4.0 4.3 Wilmington, floclh Canolina Charleston, South Canclina Savannah, Georgia Tampa, Flonida San Juan, Pueoto Rico Miami,Flooida 35.3 9.) 7.0 24.0 - 3.1 22.4 9.3 10.5 28.6 0.3 3.9 -36.7 2.9 51.0 18.0 25.0 169.7 160.8 186.6 200.5 52.6 427.9 163.8 160.0 187.3 260.4 68.4 481.1 - 3.5 4.5 0.4 26.1 30.0 12.4 20.8 5.6 3.7 11.6 0.0 0.7 13.6 5.6 5.6 11.0 .4 .8 1.5 0.4 0.3 1.0 - 0.) 0.8 0.3 0.4 1.) - 0.) 0.6 0.5 0.6 0.7 0.2 0.4 0.5 0.5 0.6 0.8 0.2 1.5 REGION V-NEW ORLEANS, LA. 355.2 330.2 - 7.0 2,066.0 2,086.3 4.2 12.4 11.1 15.4 12.4 9.A 9.6 Mobile, Alabama flee Orleans, Louisiana 63.9 291.3 54.6 275.6 -14.6 - 5.3 438.9 2,427.0 493.5 2,492.9 12.4 2.7 14.6 12.0 11.1 11.) 2.8 12.6 2.0 10.3 1.5 8.) 1.6 8.0 REGION UI-HOUSTON, TEXAS 199.7 235.0 17.7 3,397.4 3,293.9 - 3.0 5.9 7.3 A.A A.A 11.4 1O.A Pont Vothur, Tesas Galueston,Teaae Lanedo, Teeas El Paso, Teaae Houston, Oases 31.9 83.2 8.2 - 76.4 19.6 0)2.2 5.) 0.1 03.0 -30.6 35.0 -37.0 100.6 28.3 536.4 705.9 785.3 56.5 0,313.3 431.5 632.5 005.2 66.9 1,357.9 -19.6 -10.4 2.5 10.4 3.4 6.0 18.8 1.0 - 5.8 4.5 17.7 .6 .1 7.2 1.4 3.6 0.4 - 3.3 0.7 4.2 0.2 - 3.7 1.8 2.4 2.6 0.2 4.4 1.4 2.0 2.6 0.2 4.4 REGION 611-LOS ANGELES, CAL)P. 315.9 343.7 8.0 1,143.0 1,305.3 17.A 27.8 25.5 13.7 12.9 3.A 4.3 San Diego, Calitonnia flogales,Aoiaona Los Angeles, Calitonnia 29.7 0 200.2 29.9 0 313.8 .8 0 9.6 160.2 41.2 942.4 17).) 39.7 1,134.5 6.8 - 3.6 20.4 18.5 0 30.4 17.5 0 27.7 0.3 0 12.4 0.) 0 11.8 0.5 0.1 3.2 .5 0.) 3.6 REGION 6111-SAN FRANCISCO, CALIF. 702.4 850.8 8.7 2,011.7 3,218.1 14.5 27.0 28.4 33.0 31,9 9.4 10.3 San Francisco, Calitoonia Pootland, Ucegon Seattle, Washington Juneau, Alaska Honolulu, Hawaii Goeat Falls, Montana 4)1.5 179.4 145.) 30.9 7.5 0 414.4 220.1 167.7 41.6 7.0 0 .0 22.2 15.3 6.4 - 6.5 0 1,058.8 551.7 853.6 43.3 39.9 165.0 1,263.2 633.6 1,045.8 47.5 46.2 181.8 9.0 14.8 22.6 9.7 15.8 10.2 35.5 32.5 10.0 89.8 18.9 0 32.8 34.7 16.0 87.4 15.2 0 17.8 7.8 6.3 1.7 0.3 0 15.5 8.3 6.3 0.2 0.3 0 3.9 1.0 2.9 0.) 0.) 0.6 4.0 2.0 3.4 0.2 0.1 0.6 REGION OX-CHICAGO, OLLONOIS 72.8 77.2 8.0 4,29S.A 4,542.2 5.0 1.7 1.7 3.1 2.9 14.3 14.6 Pembina, Sooth Dakota Minneapolis, Minnesota Duluth, Minnesota Milwaukee, Wisconsin DetrOit, Michigan Chicago, tll:nris Cleveland, Ohio St Louis, f3issouoi Vessels under them own powon on afloat Estimated Icw-oalue shipments flail shipments Spnoialoategooylonilitaoy( shipments° 0 1.5 3.6 4.1 3.7 41.0 16.9 0 0 4.6 3.7 0 6.7 1.4 5.6 12.9 22.4 28.2 0 0.) 3.5 4.9 29.5 0 345.7 -60.0 37.0 243.1 -45.4 43.3 0 -23.2 00.6 420.8 8.) 350.6 00.5 2,506.4 479.1 332.6 5.5 33.4 262.3 041.0 1,201.3 458.5 12.7 272.5 06.3 2,917.5 437.9 337.6 9.2 00.0 245.5 146.6 1,103.2 9.0 06.8 -04.) 6.4 12.4 - 8.6 1.5 67 3 -43.7 - 6.4 3.4 -10.7 0 18.7 1.0 4.5 0.1 0.5 5.7 0 0 1.0 2.6 0 52.8 .5 5.8 .4 5.1 8.4 0 .5 1.4 7.3 2.7 0 0.1 0.2 0.2 0.2 1.8 0.8 0 0 .2 .2 0 0.3 0.) 0.2 0.5 0.8 1.1 0 - 0.) 0.2 1.1 1.4 - 1.2 0.3 8.7 1.6 1.) - 0.1 0.9 0.5 4.2 1.5 - 0.9 0.3 9.4 1.4 1.) - 0.1 0.8 0.5 3.6 PAGENO="0371" 2157 UNITED STATES IMPORTS FROM JAPAN by customs district of entry, 1967 This pamphlet presents statistical data on United States imports for consumption from Japan during 1967 by Customs Districts of entry, using the Standard International Trade Classification (SITC) system. This system classifies commodities into ten one-digit sec- tions, with further subdivisions into two-digit divisions and three-digit commodity groups. The data are based on imports for consumption, as distinguished from general imports, which are a combination of imports for immediate consumption and entries into bonded ware- houses. Values shown are on the basis of f.o.b. foreign ports. A supplementary table on page 8 compares imports from Japan with total imports from the world for each Customs District for 1966 and 1967. Also shown is the percentage distribution among the districts of imports from Japan and from the world. This study is almost directly comparable to similar Council publications put out annually since 1963, listing imports by Customs District of entry. Relatively minor changes in Customs District classification and a new regional group- ing of districts, adopted in 1966, are the only differences. The commodity classification re- mains the same. Identical commodity compari- sons cannot be made with the 1962 edition be- cause of a change by the Census Bureau in the commodity classification system in January of 1963. The material upon which these reports are based is obtained by the Council from the United States Bureau of the Census. The Coun- cil contracts with the Census Bureau for the raw foreign trade data on computer tapes. A private programming firm, retained by the Council, programs the data into a unique, indi- vidualized tabulation offering more detailed and varied statistical information. The research staff of the Council then summarizes and prepares the data for publication. All ports of entry and departure in the con- tinental United States, Alaska, Hawaii, and Puerto Rico are grouped into forty-one (for- merly forty-six) Customs Districts. The geo- graphic extent of each is defined in the January 1, 1966, edition of "Schedule D-Code Classi- fication of United States Customs Districts and Ports" published by the Census Bureau. Last year the Council abandoned the grouping of Districts by geographic area, as used in earlier Council publications, in favor of the new Cen- sus Bureau method of grouping Districts by Region. The changes incorporated in the re- classification were explained in the 1966 pam- phlet. The data presented will lend itself most readily to geographic or commodity analysis of trade with Japan. For example, import in- formation for a specific area, e.g. Seattle, Wash- ington, will be found in Region VIII, the San Francisco Region, as Customs District 30. All commodities will be listed down the column. If interested in a specific commodity, such as woven cotton fabrics, the user can find SITC group 652 and read across the table to identify the ports of entry. UNITED STATES-JAPAN TRADE COUNCIL 1000 CONNECTICUT AVENUE, NW., WASHINGTON, CC. 5 ~ s~ppIy is sshs~stsd. PAGENO="0372" Page 2 UNITED STATES IMPORTS FROM JAPAN BY CUSTOMS DISTRICT (VALUE IN $1,000) ~i~LCI>4C~~ GT62~ 2 66~ - - !Mk a !~i~i~:! RLX~ - 1~'~TH~'!' H'~ 2jj_CRUDE MATERIALS. INEDIBLE, EXCEPT FUELS 25.430 1.815 20 FL30kiDX,l,d~X54,d LII 23 238 0th R438M(IUlXB5SJBIAB5I) 1,684 564 24 W448. 14M5M. & ERA 3.10 60 ` 251 P214&B5M 31 1; - 491 6957 2,696~1,O94~1.204I 354 7.174 127 1,148 5.744 - 60 88 - 734 U~ U9~ - 5O1~ 65 565 385 377~ 8 60 I 341 543; 22A~ 122 197 120 43 26 5 7 39 39 I I 4 26 s~ 26 I 53,012 81284 &WSItB 13,42 677 677 3.112 52613651 161 6,853 48 1 .258 5,722 7 2158 See Page 8 for notes PAGENO="0373" 2159 OF ENTRY AND SITC SECTION, DIVISION, AND GROUP, 1961 Page 3 R ~; ~Lc~th~ ~ ~j ~j~: 225,933~ 856161 81,241~ 5.205~ 39,147 ~a0 35~5A40~955 ~j; ~ 107,996 13,752~ 94.244 96373 4.640~ 811~ 2,140! 88,128 586.393 ~647 WFL535 ~3 us! - 1.628 ~13 21.129 ~2 565,12 ~083 437,172 27~93 356.990 5.348~ 1,767~ 9,524~ 4l,350~ 201,902~ 45,720 4~4 15! 269 351 L053: LTh91 577 50 50 106 106 40 40 271 60 159 7 42 PAGENO="0374" Page 4 UNITED STATES IMPORTS FROM JAPAN BY CUSTOMS DISTRICT OF (VALUE IN $1,000) : a ~J ! I 3 DyT:,&C,!M~3~~~ 2160 See Page 8 for notes PAGENO="0375" 2161 ENTRY AND SITC SECTION, DIVISION, AND GROUP, 1961 (Continued) Page 5 - - -- -~- -- - -- 3~O Th 3,669 840 2,829 2,358 1, 177 26 1,165 7,244 505 6,739 7,911 2,328 2 .451 2,003 24 1.105 3,31 95 54 211 481 1,483 827 160 ~E E~E EE~ I ii ~EI I~ I PAGENO="0376" w I~ I~I~ ~ I I~~I ~ ~ ~ r ~:H~ - ~ ~ I ~4 - .~ ,. I IIJI~ I I ~ ~ ~ - ~. ~J______ ~ - - j i~iL :r~i~ ~ ~ L1~i~fi~~ C-, -I -l C-, -I C-, C- -a -< C-, C,, -4 ~ C-, --4 ~ -I ~E ~ PAGENO="0377" ~~~------------- - J~I L. I L. ~ ~ ~ - ~ - - - I - II - I g ~ ~ i~LI ;!;~~ ~ -~ Liii L ~ ~ -< C-, C., C-, C., -I C-, PAGENO="0378" C 3 -u 0 0 3 C) x U,> 09 CU) ~ C ~ -D ~ U)() ~ 00 FT1 ~C P1 b~ ~ z ~ -4~ -I 0~ ~ 0 ~,1 -< p ~ -<3 > ~> w P1 toO G)C -Jz > z 0 0 3 -U > z ~aa U -. § 9)) 9 ~ ~ 2 Z;~;~~ - ?:~U~ 2 2 2 2 9 9 ~ ~ 2 ~j III I (~~9I - I~ *j_~_1I II ; ~ -I----- - I~E~L~ ~ I ~ -i-~.~ - ~ ~ I ~-bi~ o~~- I- ~i,i~- ~I I §~ ~ 0 5 9 oI5~o o-oooo~ oo S SI -~ 5 I~I~ 00000~~ 0 -- ~ 9 PAGENO="0379" 2165 Mr. BURKE. Thank you. I would like you to comment on this story that appeared in the New York Times of Thursday, June13. Japan to Ease Quotas. Tokyo, June 13. Associated Press. Japan soon will in- form .the United States that beginning next year it will permit an annual import of 30,000 automobile engines, the Trade Minister said today. Japan currently permits 1,000 foreign automobile engines to be imported annually. The move to ease the quota is part of Japan's efforts to soften United States opposition to Japan's restrictive measures aimed particularly at the United States. A ministry official said the government had instructed its emissary now in the United States, to rei~y the decision on the new quota to the United States government. Japanese automobile officials generally were opposed to the new quota. Apparently Japan must have many quotas that they have set up. I know they `have them in footwear, and this is a kind of a sensitive sub- ject with myself. You represent the Trade Council an'd I wonder whether or not it is possible for a council like your own to bring this to the attention of the industries in Japan, those who are causing some of the problems. It is all right for you to say all you have said about the steel industry but steel is a basic industry and if imports do get up higher than, say, 20 percent, then of course we are reaching a danger point. In footwear this year the figure is 35 percent of domestic production, and you state here that there is a shortage of shoe workers. There is no shortage of shoe workers. Actually~ what has happened in my area where there is a shoe industry, is that these family-owned shoe firms have gone out of business. Many of these people who were unemployed for many years have finally gotten a job some other place `and they have been away from the shoe industry and they are afraid to go back into it. Of course if this continues to grow we will have no shoe industry or we will have no steelworkers, so I think your answers to me here fail to say anything. I do not believe that you have solved any problems. You have just said, "Well, let the thing continue," and of course if it does there would be very little trade because when you see large industries closmg down you are going to see a. reaction in Congress. Do you think it is possible to get `together with the Japanese indus- tries, say in footwear and steel, and say, "Well, here, you can't expect to get all the market. Why not take a fair share and keep it within a reasonable limit." Do you think that this is possible, or do you think, if they are going to continue to build all these factories and all these industries over there to get the trade of America, then finally the day will come when an- other Smoot-Hawley Act is passed and they will have empty factories over there. Trade barriers will be set up so there will be no trade. In other words, you can't hog all the business and expect to get it and say, "Well, we are going to take this all because this happens to be a good market for us right now. We are going to drive these other people out." Mr. STITT. Mr. Chairman, th'at is about 12 questions. Mr. BURKE. It really revolves `around one question. Is there a possi- bility of bringing to the attention of these foreign industries, these in- PAGENO="0380" 2166 dustries that are generating this problem today, the problem that they are creating and there can be voluntary action on their part to restrict their exports to this country. Mr. S~nrr. With respect to the automobile problem, liberalization of Japanese automotive imports, that is a matter currently, as you know, under active negotiation between the Governments of the United States and Japan and I understand some progress is being made in that area. The restriction on automotive is a hangover from the days when Japan had a large number of foreign exchange controls for a balance of reasons. These are gradually being dismantled and it is indeed the hope of our council that perhaps some speedup óan be made in that process. When it comes to the problem of footwear, sir, to the best of our knowledge, despite the fact perhaps that some small family-owned foot- wear concerns have gone out of business for competitive reasons, and I suggest perhaps some of the competition is from the larger footwear manufacturers in this country as well as from imports, this as an econ- omist, I would have to say, is a natural change. Mr. Bmiun. I know there are a lot of these footwear people who are playing a dual role. I know that they have located their factories in Italy and Spain and invested their money in Japan and other countries. I know that, that they are creating a problem. I am concerned about the American worker. That is what I am con- cerned about, and if they are going to glut the market as they are do- ing in the first quarter of this year and they continue to spiral these imports, it is going to destroy the industry. One of the cities that I represent, the city of Brockton, a large em- ployer in the footwear industry. It is j~ist going to destroy this in- dustry. I have been in office for 10 years and I think thait seven shoe firms have gone out of my area since I came into office. We have to do something. Somebody has to come up with some answers, and I think your organization is in a good position to relate to the Japanese indus- tries what is happening over here. As I pointed out the other da.y, we saw the flight of the textile mills from New England. We saw other industries go out and we have areas up there where they have these tremendous mills completely empty, no one working, just ghost mills. We don't want that to happen again. Mr. Siirr. Mr. Chairman, my understanding is that during this same time or perhaps shortly thereafter some of the newer industries, such as electronics, have moved into New England. Mr. Buii~. That is right. Mr. STrr'r. And as a result the workers in New England are making higher wages today then they were making in the footwear factories or in the textile markets. Mr. BuR~. Of course Japan has an absoiute embargo, as I under- stand it, on electronics, so they don't hire the same type of people. We are looking to put people to work in the ghetto areas of this country. The shoe industry, for instance, is an ideal place to take people and train them for jobs where they can work and earn a living and support their families. Some of these people can't go into the electronic industries. They are highly technical and it is not possible to offer them enough jobs in these industries. PAGENO="0381" 2167 Mr. STITT. Sir, you say that Japan has an absolute quota on elec- tronics? Mr. BURKE. I have been informed that they do. Mr. STITT. I have before me the record of exports to Japan in 1957. It shows over $78 million worth of office machines, most of which are electronic computers. It shows exports of electro-medical and radio- logical apparatus of $2 million and other electrical- Mr. BURKE. A member of staff will show you. Mr. STITT. Thank you, sir-other electrical machinery and appa- ratus of $59 million. Now, it .has been brought to my attention that the Governmment in Japan only permits the import of computers-how would you put this, sir ?-if they are not made in Japan. The letter says, "In absolute terms, however, U.S. exports of digital computers and parts have risen as follows: 1965, $25 million; 1966, $30 million; 1967, $46 million." These are sales creating American jobs, Mr. Chairman. Mr. FULTON (presiding). The acting chairman had to leave to vote during your recitation. Mr. Betts. Mr. BETTS. As I understand it, they have a "Buy Japan" program in Japan. The Government leases cmputers and after the market is all taken care of so far as Japanese production is concerned if there is any deficiency then they permit sale of imports of computers. Mr. STITT. You are speaking about governmental procurement, sir? Mr. BETTS. I am talking about the Japan program. The only one that can buy them is the Government. They have the market. By law they are the only ones that can buy computers so they buy from the Japanese manufacturers and then they lease them out. They permit no purchase of imported computers unless there is a deficiency in the Jap- anese production. That is the way I understand Japan works and that applies not only to computers but, as I understand it, from the enclosure attached to the June 3 letter from the Office of the Special Representative, Mr. Roth, it includes 14 items: motor vehicles, mac~iine tools, printing and bookbinding machines, and then in addition to that a whole list of items restricted under quantitative quotas. So the point I am making is you objected to an import quota on Japanese steel, whereas Japan has this whole list of restricted items. Mr. STITT. Mr. Congressman, as a matter of policy our council be- lieves in free trade in both directions. I was unaware of the fact that, as seems to be indicated in this letter, digital computers are only pur- chased by the Government, of U.S. make if they are the only ones available. However, we are perfectly willing to urge the Japanese Government to eliminate buy Japanese requirements, whch incidentally, I must point out don't begin to meet the buy American requirements that are applied in this country. The Department of Defense applies a 50-percent differential upon its purchases of goods, 50 percent differential in favor of American goods, which obviously eliminates foreign goods. We might perhaps be able to negotiate with Japan if we eliminate our buy American requirements. Possibly then they would be willing to eliminate their buy Japanese requirements, but why should they eliminate theirs while we still have ours? PAGENO="0382" 2168 Mr. BETrS. Well, of course, that isn't under consideration in the steel import quota. Mr. STrrr. They have no quota on steel imports. Mr. BETrS. Buy American doesn't apply to steel. Mr. &rirr. Well, you were talking about digital computers a mo- ment ago. If you want to talk about steel, there is no steel quota in Japan. The fact is we cannot sell steel to Japan because American steel is so high priced it can't compete in the Japanese market. Mr. BETTS. Well, of course, Japanese steel can compete over here so we are asking for a quota, but the Japanese computer probably couldn't compete with an American computer but they won't let it in under the buy Japan program. I am just simply pointing out that simply objecting to an imposition of a quota on steel by Japan is the complete answer. Mr. STrvr. We are speaking of foreign exchange controls' now. Ja- pan has liberalized I think by this stage 92 percent to 95 percent, has dismantled, of its former foreign exchange `controls. There are still some items under foreign exchange control which are gradually, as I understand it, planned to be abolished. Mr. SCHNEEBELI. Will the gentleman yield? Mr. BErrs. Yes. Mr. SOHNEEB1~LI. There are still about 123 items on a residual list and that hasn't changed much in the last 4 or 5 years. Mr. STITT. Yes, sir. Just for the fun of it let's read some of those- live horses, meat and offal of pigs, unrendered pig meat, ham and bacon, herring, cod, hard roe of cod, sterilized meat and milk and cream with fatty content, 13 percent-we have the same thing-pro- cessed cheese, small red beans, grapes, apples, pineapples, other black tea, black tea., wheat flour, groats, and meat. Gentlemen, these are agricultural commodities. Mr. S0HNEEBELI. May I read some more? `Mr. Sm'r, Yes, sir. Mr. SCIINEEBELI. OK. How about coal, tungsten ore, motor vehicles, automobile engines, coai brickets, and similar solid fuels manufactured from coal, tariff item 2701. Mr. STrrr. In 1957 Japan bought from the United States $131 mil- lion worth of coal, coal and brickets. What this list tells you is that the Government still retains some exchange control over the purchase of coal and brickets. Mr. SOHNEEBELI. Why is it necessary to have any list? There are lots of things on this list, aren't there? Mr. STITr. Yes, sir; there are quite a few things, but this list is not an exclusionary list. Mr. SOUNEEBELI. Machine tools, typewriters, grinding machines, plainers. There are lots of things on `here. I `can take the other extreme of this list if you take one extreme. There are a lot of items on there that are very important to our economy. Mr. S'rirr. Yes, sir; but this is not a exclusionary list. Mr. SCHNEEBELI. Don't just limit yourself to giving me a list of all these smaller items. Mr. STrrr. I think you will find that three-quarters of the list are agricultural products. Mr. SOHNEBBELI. I don't agree with your understatement of the case. PAGENO="0383" 2169' Mr. STITT. And agricultural products are products which are re- stricted by every country in the world, including our own. Japan pro- tects its agriculture community just as the United States protects its and as EEC does. Mr. SCHNEEBEIJI. Are four-wheel vehicles important items? Mr. STITT. Yes, sir, they are, and, all that list says is that-this is an extremely complicated subject. The `so-called cabinet order to which this letter refers i's not a law. It is more of an exhortation and there is a selected list of people who can bid on Government contracts and these people can supply either American-made or Japanese-made goods, as I understand it, and price and quality being equal, the Japanese will be purchased. I may misunderstand this but my understanding is if these selected bidders were to bid American products of this nature and it is a lower price and equality with the Japanese that the Japanese Government would buy the American. I can't state that as a hundred-percent fact. This is just how I un- derstand it. Mr. FULTON. Mr. Schneebeli, do yOu have additional questions? Mr. SOHNEEBELI. No. Mr. FULTON. Mr. Conable. Mr. CONABLE. Mr. Stitt, I asked s meone earlier about ~Importat)on of iron ore by Japan. Mr. STIrr. Yes, sir. Mr. CONABLE. As I recall, the answer was that they got somewhere between 10 and 15 percent of their iron ore `from this country. Mr. STITT. I can give you an absolute figure on that. Mr. C0NABLE. What is that? Mr. STI~r. In 1957 Japan imported from the United States $42 mil- lion worth of iron ore and concentrates. Of this I would suspect 90 percent comes from California, the Eagle Mountain reserves of the Kaiser Steel Corp., and about 10 percent from Nevada. On iron and steel scrap, $174 million of American iron `and steel scrap were exported to Japan in 1957; `coal, coking coal, mostly for the Japanese steel industry~ $131 million. I don't have petroleum coke broken down. Most of their purchases of American petroleum coke goes into the Japanese steel industry. Mr. CONABLE. My understanding is, there is a possibility of `a sharp increase in iron ore sales to Japan because of an Arizona project in- volving pelletized iron ore. Do you know anything about that? I have heard something about competition with the Australians for sale of these pellets. May I ask, is Australia a major importer of Japanese steel, as we are? Mr. STITT. First, on the Arizona project, I do understand a Japa- nese team took a look at that project audi don't know what conclusions they reached. Japan `has many teams of experts going around the world searching out rich deposits of iron ore `because Japan is absolutely deficit in iron ore. Mr. CONABLE. This would not be rich iron ore. This would be low- grade iron ore pelle'tized. Mr. `STIYr. Of course, but once you pelletize poor iron ore you have quite a rich supply for the blast furnace and pelletization is more and more coming to the fore, as you know. PAGENO="0384" 2170 If this is an economic process it might well be Japan would `be in- terested. It is also true that while Australia today does not supply a tremendous quantity of iron ore to Japan, there are deposits there underdeveloped which in the future, unquestionably under long-term contract, will be supplied the Japanese steel industry. Mr. CONABLE. My understanding is that this Arizona project could contribute 5 million tons a year over a substantial period of time and it would make a very substantial contribution to the balance-of-pay- inents situation we have, which is, of course, one of our major concerns here. Mr. STrrr. Japan is already buying pellets from Kaiser, the Blue Mountain reduction facilities. If the Arizona project is an economic one and can be provided at the righ't price I see no reason why Japan wouldn't be interested, the Japanese steel industry. Mr. CONABLE. Nobody starts out with the idea that protectionism per se is good. We have a very serious problem here and we have to find ways of balancing imports and exports. One possibility that oc- curs to me is this sort of exchange. I think we ought to explore it very thoroughly. Apparently this is all very much in the preliminary stage, though. Is that correct? Mr. `Smrr. From what I have seen about it. I am really not too well acquainted with that particular exploration. Mr. CONABLE. There are no sales of pellets at the present time? Mr. Smrr. Not to my knowledge. Mr. CONABLE. Thank you. That is all, Mr. Chairman. Mr. FULTON. Mr. Stitt, thank you for your appearance before the committee. It has been very helpful. Mr. S~rn'r. You are welcome. Mr. FULTON. The next witness is Mr. R. L. Cunningham. Mr. Cun- ningham, we welcome you and ask you if you will identify yourself and your associate for the benefit of the record. STATEMENT OP RONALD L. OUNNINGEAM, COMMITTEE OP PRO- DUCERS OP PERROALLOYS & RELATED PRODUCTS; ACCOM- PANIED BY LLOYD SYMINOTON, COUNSEL Mr. CUNNINGHAM. Mr. Chairman and members of the committee, my name is Ronald L. Cinmingham. I am president of Ohio Ferro- Alloys `Corp. I appear before you today on behalf of the Committee of Producers of Ferroaii.oys & Related Products, which comprises vir- tually all of the domestic producers of such products. My statement today is a summary of a more complete statement which we have prepared, together with J?ertinent charts and statistics, `which I would like to submit at this point for the record, if the com- mittee so desires. Mr. FULTON. Without ~bjection, your full statement wifi appear immediately following your oral presentation. Mr. CUNNINGHAM. With me today is Mr. Lloyd Symington of Washington, D.C., our counsel. Mr. Bliss, president of Foote Mineral Co., one of our committee's member companies, was here but had to leave due to another appointment. PAGENO="0385" 2171 SUMMARY The domestic producers of ferroalloys and related products, repre- sented by our committee, are deeply concerned over the adverse effects of imports upon this industry, which is an essential part of our coun- try's mobilization base. We are small compared to the steel industry, but without us there would be no steel industry. Imports of the basic ferroalloy products over the past few years have skyrocketed, and have reached levels ranging from 15 to 42 percent of the available U.S. market in 1967. To stay competitive with these low-cost imports, domestic ferro- alloy prices have been forced down to uneconomic levels in most cases. As a result, domestic profits are at inadequate levels, and de- clining. Producers are also finding it more and more difficult to justify the capital investments necessary for research and growth. This process of attrition is undermining the viability of the ferro- alloys industry, particularly for the future, and is contrary to our national security interests. It can be stopped only by affirmative gov- ernmental action in the form of reasonable import quotas on ferroalloy products, to permit both importers and domestic producers to share? equitably on an expanding U.S. market. Legislation to accomplish this was introduced as H.IR. 13996 by Congressman Wayne L. Hays, of Ohio, on November 14, 1967, and J-I.R. 15417 was introduced by Congressman William R. Anderson, of Tennessee, on February 20, 1968. A companion bill 5. 2563, was introduced by Senator Howard Baker, of Tennessee, on October 20, 1967. We are here today to urge your prompt and favorable consideration of this legislation. NATURE OF FERROALLOY INDUSTRY The ferroalloys and related products produced by members of our committee include low-, medium-, and high-carbon ferromanganese, silicompanganese, maganese metal, low-, and high-carbon ferrochrome, ferrochrome silicon, chromium metal, ferrosilicon, and silicon metal. Manganese is indispensable, particularly in times of national emer- gency, in the production of steel, aluminum, certain chemicals, and other vital products. Each ton of steel produced requires an average of almost 14 pounds of manganese. Similarly, chromium is essential in both peacetime and wartime as an alloying element for a long list of, important ferrous and non- ferrous alloys. Stainles steels, for example, contain between 18 percent and 25 percent chromium. The metallic element silicon is used to deoxidize molten steel, and to develop desirable physical and electrical properties when employed as an alloying element. Silicon is a necessary alloying agent in all aluminum castings ranging between nine to 15 percent of the total weight of the castings. Silicon metal is also the base raw material for the production of silicones utilized in a variety of special purpose products. 95-159-68-pt. 5-25 PAGENO="0386" 2172 ESSENTIALITY OF THE FERROALLOY INDUSTRY In 1964, the OEP found "that the ferroalloy industry is an essential part of our mobilization base." This is because conventional and stain- less steels, sophisticated alloys, and many forms of aluminum and non- ferrous products could not be produced without one or more of the ferroalloy products in question. And in wartime, these products are in greatly increased demand, as demonstrated in World War II, Korea, and more recently, in Vietnam. One think we have learned in the pursuit of our objectives in Viet- nam is that heavy steel weaponry is by no means outmoded by the advent of nuclear warheads and that conventional and sophisticated military hardware requiring conventioni and sophisticated steel is by no means obsolete. Indeed, the Defense Department is currently signifying its interest in this regard by designating certain ferroalloy plants as part of the industrial defense progTam. In May 1963, this industry asked the OEP for relief under section 232 of the Trade Expansion Act of 1962. This application was denied in July 1964 on the ground that there was not at that time a sufficient impairment of national security. However, conditions have further deteriorated since that time, and we feel that prompt action to control imports is the oniy way to prevent a drastic weakening of our industry and its mobilization base. INCREASE IN IMPORTS Imports of manganese ferroalloys have almost doubled since 1964 and imports of chromium ferroalloys have gone up 21/2 times during that period. Moreover, by 1967, imports of the large volume ferroalloy products had captured alarming percentages of the U.S. available market; for example: High-carbon ferromanganese-42 percent of the U.S. noncaptive market. Medium- and low-carbon ferromanganese-26 percent of total U.S. market. Silicomanganese-25 percent of total U.S. market. Low-Carbon ferrochromium-3i.5 percent of total U.S. market. Imports of 75 percent ferrosilicon, the most widely used grade of silicon in world markets, jumped from almost nothing in 1961 to an estimated 31 million pounds in 1967, accounting for about 14.7 percent of the domestic market. (Exhibits A-i through A-3 attached to my prepared statement show these figures in detail.) Significantly, the bulk of these ferroalloy imports come from foreign facilities which in great measure were built in the interests of supply- ing our U.S. national stockpile requirements during the 1950-1961 period. In other words, with the foreign producers having expanded their ferroalloy capabilities far beyond their own domestic require- ments-thanks largely to this U.S. encouragement-they came inevi- tably to look upon the U.S. marketplace as a dumping ground for their excess capacities. DEPRESSED PRICE LEVELS Overseas producers have a significant cost advantage over domestic ferroafloy producers in several areas. As a result, domestic prices PAGENO="0387" 2173 have been forced down to seriously depressed levels-dropping by an average of about 30 percent from 1960 through 1967. (The specific figures are shown in exhibit B attached to my prepared statement.) This decrease in average domestic prices for ferroalloy products has ocurred over a period when the domestic production of steel- our major customer-has grown by about 30 percent. Unfortunately, however, the domestic ferroalloy industry has not shared in this growth; most of this expanded market has been grabbed off by imports. I should add that many of these imports are coming increasingly from low-cost countries such as SOuth Africa, India, and the Scan- dinavian countries, which makes it that much easier for such imports to exert injurious price pressure upon the domestic market. Another adverse factor is the rising tide of steel imports themselves, as known to all of you and commented on here this morning. These steel imports naturally contain foreign-produced ferroalloys, which obviously serve to restrict even further the domestic market for our own ferroalloy products. DECLINING PROFITABILITY This invasion of low-cost foreign ferroalloys, together with the de- pressed domestic price levels, have had a predictably drastic effect upon the earnings and futu.rè propects of the domestic producers. The average profitability, after taxes, of the domestic industry as a whole has declined about 7.7 percent of sales in 1965 to an estimated 5 percent in 1967-which is not an acceptable return in this industry. Several individual producers actually suffered losses on their ferroalloy production during one or more of the past 8 years. For the manganese alloy segment, the industry's average profita- bility figures are even more alarming; from 7.1 percent in 1965 to an estimated net loss of 0.5 percent in 1967. This is for the industry. (See exhibit C attached to my prepared statement.) This serious decline in earnings has been due in large part to in- creasing costs of wages, related services, and supplies-along with the uneconomic prices which, as shown above, domestic industry must charge to compete with lower-priced imports. DOMESTIC PRODUCTION AND EMPLOYMENT As I have indicated above, domestic shipments are either static, or are not keeping pace with the demands of the expanding U.S. market. Indeed, domestic shipments of manganese ferroalloys by noncaptive producers actually showed a slight decrease in 1967 as compared with 1960. In other words, despite a 30-percent expansion in the U.S. avail- able market during that period, domestic producers are enjoying no part of that increase. Concurrently, since 1960, employment, in the various segments of the domestic industry has had little or no growth-in sharp contrast to conditions in related industries such as steel, automobiles, and agri- cultutral equipment. With imports taking larger and larger shares of the U.S. available market for various ferroalloy products, the result 1S a net "loss" of U.S. workers. ]n effect, jobs that normally PAGENO="0388" 2174 would have been provided1 by domestic industry have, been and are being exported. DISCOURAGING GROWTH CLIMATE AND PROSPECTS FOR FUTURE During the middle 1960's, many domestic producers macic substan- tial capital investments designed to modernize their facilities. This was at a time when demand for domestic ferroalloys and related metals had temporarily strengthened-thanks primarily to reductions in domestic prices in efforts to meet import competition, together with a substantial expansion in demand from our customers in the steel and other industries. Unfortunately, these capital investments failed to arrest the eco- nomic disparity between foreign and domestic goods, and the U.S. producers face the future with increasing uncertainty. In particular, they lack adequate funds to support research, new technology, and sim- ilar development programs needed to keep this industry dynamic and competitive. For example, calculations show that under today's conditions, a producer could expect a return after taxes of only about 1.2 percent if he built an 82,000-ton standard ferrornanganese furnace of the most modern type. See exhibit D attached to my prepared statement. The U.S. ferroalloy producers are thus in a serious dilemma. On the one hand, if they do not add new capacity or continue their moderniza- tion programs, the snowballing effect of their declining participation in the U.S. ferroallo.y market will be accentuated in favor of imports. On the other hand, they are finding it ever more difficult to justify the capital investments needed in the future to remain viable and competitive. In most cases, the producers will have no practical eco- nomic choice under present conditions but to operate present furnaces until they are obsolete-at which point the co.untry will be largely dependent upon foreign sources for its ferroalloy needs. NEED FOR IMPORT QUOTAS `We, as an industry, acknowledge the need for worldwide trade. On the other hand, we do not feel we should be expected to give up increas- ing shares of our American market to foreign producers-at the cost of lower and lower earnings, elimination of any growth potential, and, in effect, the export of domestic jobs overseas. The only way to prevent further deterioration is prompt action to control imports in the form of import quotas-which would permit both domestic producers a.nd importers to share equitably in the expanding U.S. ferroallo.ys market. Specifically, we urge that imports of each ferroalloy product be limited each year, in respect to estimated U.S. consumption, to the following percentages of domestic consumption which such imports accounted for during the base period 1961-65 inclusive. (See exhibit E attached to my prepared statement.) This is a relatively normal base period, prior to the recent tremendous surge of imports. Under this approach imports of high carbon ferroiuanganese would be allowed 27.7 percent of the U.S. market; medium- and low-carbon PAGENO="0389" 2175 ferromanganese, 20.3 perc~nt; silicdmanganesé~ 12.8; manganese metal, 8.5; high carbon ferrochrome, 6.6; low carbon ferrochrome, 19.7; chromium metal, 37.4; 8-GO percent silicon ferroalloys, 1.6; 60-80 per- cent silicon ferroalloys, 0.9-averaging about 13.5 perc~nt. H.R. 13996, introduced on November 14, 1967, by Representative Wayne L. Hays, of Ohio, which is similar to the steel quota bill, would accomplish this result, also H.R~. 15417 introduced by Representative William Anderson, `of Tennessee, the same type of bill. Mr. Chairman, I hope you and your committee will look carefully at the very serious import problems facing our industry, which I have tried briefly to describe. And I hope, too, that after doing so, you will agree with us on the need for prompt and favorable action on our problem. We have filed again with the Office of Emergency Planning on Ma~ 24, 1968. No action has been taken. (Mr. Cunningham's prepared statement follows:) STATEMENT OF RONALD L. CuNNINGIIA~f, COMMITTEE OF PRODUCERS OF FERROALLOYS AND RELATED `PRODUCTS PRODUCERS AND PRODUCTS The Committee of Producers of Ferroalloys and Related Products comprises virtually all of the producers of these products. Its members include Chromium Mining & Smelting Corp., Foote Mineral Company, Interlake Steel Corp. (Globe Metallurgical Division), Ohio Ferro-Alloys Corp., and Air Reduction Co., Inc. (Airco Alloy Division). The products in question include low-, medium- and high-carbon ferromanga- nese, silicomanganese, manganese metal, `,low- and high-carbon ferrochrome, ferroclirome silicon, chromium metal, ferrosilicon, and silicon metal. Manganese is indispensable__particularly in times of national emergency-in the production of steel, aluminum, welding' and rod coating, welding fluxes and certain chemicals. It is needed to prevent tearing or cracking during hot-rolling and forging, and may be used also to impart such properties as strength, tough- ness, and hardness to structural, engineering and military steels. Every ton of steel produced requires an average of almost fourteen pounds of manganese. Similarly, chromium is essential in both peacetime and wartime. It is used as an alloying element for a long list of important ferrous and non-ferrous alloys, including super-alloys for major space age' applications, high-temperature and super-strength steels, aluminum and copper-base alloys, etc. Stainless steels, for example, contain between 18% and 25% chromium. The metallic element silicon is used to deoxidize molten steel and to develop desirable physical and electrical properties when employed as an alloying e1emei~t. It is also a raw material for the production of silicones utilized in the production of high-temperature lubricants, rubber, varnish and a variety of other special- purpose products. ESSENTIALITY OF THE FERROALLOYS INDUSTRY In 19G4, the Office of Emergency Planning' (OEP) found "that the ferroalloy industry is an essential part of our mobilization base." This is because conven- tional and stainless steels, sophisticated alloys, and many forms of aluminum and other non-ferrous products could not be', produced without one or more of the ferroalloy products in question. And in wartime, these ferroalloy products are in greatly increased demand-as demonstrated in World War II, Korea, and more recently, in Vietnam. One thing we have learned in the pursuit of our objectives in Vietnam is that heavy steel weaponry is by no means outmoded `by the advent of nuclear war- heads-and that conventional and sophisticated military hardware requiring conventional and sophisticated steel is by no means obsolete. Indeed, the Defense Department is currently signifying its interest in this regard by designating certain ferroalloy plants as part of the Industrial Defense Program. PAGENO="0390" 2176 OEP INVESTIGATION (1963-64) In the late 1950's and early 1960's the domestic ferroalloy industry began to experience severe reversals, in part due to increasing imports of low-cost ferro- alloy products produced in modern foreign facilities. Accordingly, in May 1963, the industry asked the Office of Emergency Planning for relief from im- ports under Section 232 of the Trade Expansion Act of 1962. On July 17, 1964, the OEP denied this application on the ground that there was not at that time sufficient impairment of national security. While this de- cision seemed to discount the significance of the economic problems facing th~ industry, it did contain several significant statements germane to the current plight of the industry. In particular, as noted above, the OBU Director acknowl- edged the defense essentiality of this industry. In addition, he re~ogrized: "that the industry is facing serious economic adjustments and problems; and that there is a fluidity in the economic and import situation which, while not presently anticipated, could be resolved so adversely as to require further review under Section 232 of the Trade Expansion Act. Both the Government and the industry should continue to watch present trends and potential developments regarding ferroalloys." (p. 23) (Emphasis added). The industry feels that its "economic and import situation" has deteriorated considerably since 1964, and that `only affirmative action to control imports will prevent further weakening of the industry `and its mobilization base. A brief re- view of current `and prospective conditions follows. DETERIORATING CONDITIONS SINCE 1963-64 Paradoxically, at the time the OEP decision was released in 1964, demand for domestic ferroalloys and related metals bad `begun to strengthen. This was due primarily to reductions in domestic prices in efforts to meet the competition of the lower-cost imports, along with a substantial expansion of domestic demands for ferroalloys by the steel producers and others. Unfortunately, how- ever, imports have grabbed off the lion's share of this increase. During the past several years, the domestic ferroalloy producers made sub- stantial efforts to improve their competitive position-including expenditures of some ~75,OOO,000 to improve and modernize their facilities. But despite these efforts, the temporary upturn in the industry's prospects soon evaporated, and conditions are steadily deteriorating today. INCREASING IMPORTS Imports of manganese ferroalloys have almost doubled since 1904, and im- ports of chromium ferroalloys have gone up 21/2 times during that period. More- over, by 1907, imports of the large volume ferroalloy products had captured alarming percentages of the United States available market; for example: High-carbon feromanganese, 42% of U.S. non-captive market. Medium- and low-carbon ferromanganese, 26% of total U.S. market. Silicomanganese, 25% of total U.S. market. Low-carbon ferrochromium, 31.5% of total U.S. market. Imports of 75% ferrosilicon, the most widely used grade of `silicon in world markets, jumped from almost nothing in 1901 to an estimated 31 million pounds in 1907, accounting for about 14.7% of the domestic market. (See Exhibits A-i through A-3.) Significantly, the bulk of these ferroalloy imports come from foreign facilities which in great measure were `built in the in'terests of supplying our U.S. national stockpile requirements during the 1950-1961 period. However, by 1063 the Government had ceased its stockpile purchases-resulting, predictably, in substantially increased imports for the commercial market. In other words, with the foreign producers having expanded their ferro- alloy capabilities far beyond their ,own domestic requirements-thanks largely to this U.S. encouragement-they came inevitably to look upon the U.S. market place as a dumping ground for their excess capacities. PAGENO="0391" w ~0~ H C C C c12 w C l1IItIIILLLLLI1~L1I1IIlLI1L11IlII1IIilILIIILIIIt11IIIIII~~IIII~L .1 - ~ ~ C ~ ~ ii ~ ~ ~ I w ~ L1 ~ ~ .~I [iii(~iti1ItII1I_I11i(1LI11i1t1ItiliiI11Ei111!i111~lIii_Iii11Ii1li[i - -- *___iiii-_:i: ~ ~ 1II11II1IIIE!iiIi11I1i11[iII1IIii1~I1IIii11I11!1iIII!III1l!I!iT'~'iIi ~ I 1JJI1III!I1iiIII1li1[1I111i!11I1fflh11l!{fflfflffl1ffl1fflI!E~ ~ 0 0 Q 0 0 0 0 0 0 0 0 0 0 0 0 -- t 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 L() ~ (~) N 0 0) 0~ N (0 (0 1') (`4 > ~ 0. 3S~NVDNVV~ GBNIVINO3 SONflOd NOI11M PAGENO="0392" 0 H) ~F~J2 CD ~ 12 H 12 Ct2 c'q ~ CDcrq CD ~ CI2M ~I2 MILLION POUNDS CONTAINED CHROMIUM CD CD CD 0 0 0 0 C) H H CD C H H H H 01 0 0 0 (0 1 I1lIlI~ :!tI11~IH111Il1IJII~I1l1lJJt.1[111ilihiilll 0) .1 ii Dill' -`C ~i~~'1'''IIl1i1IJlijliI1iill]lillJill!iiiiiiilll ~ ~1 ~ ii......1II~i iiillliliIlillliiiilll.lil1i~Iill1111~''' !~lllll!lllIElFlilliiiiliiillliilll,iilili1llli]l1illiil ~0O) 22 ~ ~ ``I. ~ ~~T~.iliii~iliilil1llliliiffllllilliiilililiilJllllillilliliiillllilll!l ~ oil (0 ~,~Jililiiil[fill'liilliiiii'iiliillii'l'iliilii'lilli1illiliIll (31 0) ________ ~ `0) liliiltilillliiIllllllllllliiilliIlllllllliilliillilliillliiililillili C a-C) 00 S~:3 C) :33 ~+-0 0 -0~ C `~3m :- ~ ~ (1)-h 0 oC)~ -02 a- 0 a- :30 :3 PAGENO="0393" 2179 as shown ahove, domestic industry muct charge to compete with lower-priced imports. DOMESTIC PRODUCTION AND EMPLOYMENT As indicated above, domestic shipments are either static, or are not keep- ing pace with the demands of the expanding U.S. market. As an example, the U.S. available market for manganese ferroalloys has grown by about 30%- i.e. increasing by some 264 million pounds in non-captive consumption between 1960 and 1967. During the same period, imports increased by about 277 million pounds. (See Exhibit A-i). Thus, despite a substantially expanding market, it appears that domestic ferrornanganese producers actually shipped less in 1967 than in 1960. Concurrently, since 1960, employment in the various segments of the domestic industry has had little or no growth--in sharp contrast to conditions in related iadustries such as steel, automobiles and agricultural equipment. With imports taking larger shares of the U.S. available market for various ferroalloy products, the result is a net "loss" of U.S. workers. In effect, jobs that normally would `have been provided `by domestic industry have been and are being exported. DISCOURAGING GROWTH CLIMATE AND PROSPECTS FOR FUTURE For the past several years, as shown above, important segments of the domestic ferroalloys industry `have not kept pace with the `tremendous expansion of the U.S. market. Imports have `been increasing and profits declining, despite substantial efforts and expenditures by the industry to modernize facilities and otherwise improve its competitive position. As a result, the U.S. producers face the future with increasing uncertainty. In particular, they lack adequate fun'ds to support research, new technology, an'd similar development programs needed t'o keep this industry dynamic an'd competitive. For example, a pro forma operating and revenue statement for a new, modern, stand'ard ferromanganese furna'ce, starting from scratch, would show an invest- ment totaling about $18,000,000 on which the expected return after taxes would be only about 1.2%. (See Exhibit D.) Few if ~`ny producers are able to justify such an investment under today's conditions. The U.S. ferroalloy producers are thus in a serious dilemma. On the one hand, if they do n'ot add new capacity or con'tinue their modernization programs, the snow-balling effect of their declining participation in the U.S. ferroalloy mar- ket will be accentuated in favor of imports. On the other hand, they are finding it ever more difficult to justify the further capital investments needed to remain viable and competitive. In most cases, the producers will have no practical eco- nomic choice under present conditions but to operate present furnaces until they are obsolete-at which point the country will be largely dependent upon foreign sources for its ferroalloy needs. NEED FOR HEALTHY DOMESTIC INDUSTRY IN EMERGENCY In wartime emergencies, if `access to oversea supplies is cut off, the increased needs for ferroaioys for steel and other vital defense items can `be met only from government stockpiles, and from what domestic industry might then still be in existence. However, the present trend of increasing imports, if not checked, will make it more and more difficult `for some of the domestic industry's major segments to maintain a viable operation. And we are concerned that, w-ithout a viable do- mestic industry of `some minimum proportions in any such emergency, the stock- piles and nondomestic sources of these products would be insufficient for national security purposes. STOCKPILE NO SUBSTITUTE FOR HEALTHY DOMESTIC INDUSTRY In the 1964 OEP decision, the adverse economic trends facing the domestic in- dustry were virtually ignored from a national security standpoint on account of the relatively large government stockpiles of ferroalloys and ores. It was felt that these otockpiles would protect the national security against loss of overseas supplies in any emergency for long enough to permit "expansion" of the domestic ferroalloy industry. But any such reliance on the stockpile would have to assume the continuing existence of a viable domestic industry that ca'n so "expand" its capacity within PAGENO="0394" 2180 a relatively short period before the stockpiles are exhausted. For the reasons already indicated, we feel that the adverse economic trends affecting major seg- ments of the domestic industry today, and particularly for the future, do not justify such an assumption. To be sure, the present government stocks of ferroalloys serve to reduce the mobilization base (domestic industry capacity) considered to be needed at the beginning of any emergency. But most of these ferroalloys would represent less than a 1-year supply under conditions of increased wartime demand, as- suming imports were cut off. Consequently, for a continuing emergency these stockpiles should not be considered as taking the place of a healthy domestic Industry in being. In this connection, it should be noted that the 3-year stockpile of ores obviously does not meet the problem, since these ores must first be processed into the various ferroalloy products before they can be used. The value of the ore stockpile in time of emergency is thus obviously dependent upon a viable domestic industry with the capacity to convert it into alloys before exhaustion of the ferroalloy stockpiles. NEED FOR IMPORT QUOTAS As shown above, major segments of the domestic ferroalloys industry already are facing serious economic problems which, under present conditions, can only get worse. And if other segments are still somew-hat better off, that is only because the pattern of increasing imports is more recent in their case. The only way to prevent further weakening and deterioration of this industry is firm action by the Government to control imports in the form of import quotas. An increase in duty rates would not be effective for this purpose, and would be inconsistent with our government's present trade policy. But an import quota system, on a reasonable percentage-of-consumption basis, would permit both do- mestic producers and importers to share equitably in the expanding U.S. market. Specifically, we urge that imports of each ferroalloy product be limited each year, in respect to estimated U.S. consumption, to the following percentages of domestic consumption which such imports accounted for during the base period 1961-1965, inclusive. (See Exhibit E). This is a relatively normal base period, prior to the recent tremendous surge of imports. Percent High-carbon ferromanganese 27. 7 Medium- and low-carbon ferromanganese 20. 3 Silicomanganese 12. 8 Manganese metal 8. 5 High-carbon ferrochrome 6. 6 Low-carbon ferrochrome 19. 7 Chromium metal 37. 4 8-60% silicon ferroalloys 1. 6 60-80% silicon ferroalloys 0. 9 Proposed legislation to establish reasonable import quotas for ferroalloy prod- ucts along these lines has been introduced in both the Senate (5. 2563, Senator Baker), and the House of Representatives (H.R. 13996 by Congressman Hays of Ohio, and H.R. 15417 by Congressman Anderson of Tennessee). (See Exhibit F). Such quota action has also been requested by these producers in their application filed with OEP on May 24, 1968, under Section 2~32 of the Trade Expansion Act. CONGLU5ION The maintenance of a healthy domestic ferroalloy industry is essential to our national security. But, as a result of mounting imports, the economic health of many segments of this industry is deteriorating seriously, and the prospects of the entire industry are equally discouraging for the future. This process of at- trition is clearly contrary to the interests of this industry and to our national se- curity interests. It can be stopped only by affirmative governmental action to control its cause-the increasing flood of imports. We urge prompt and favorable consideration of S. 2653, H.R. 13996, and H.R. 15417. Respectfully submitted. CoMMIrrEr~ OF PRODUCERS OF FERROALLOYS AND RELATED PRODUCTS. PAGENO="0395" 2181 EXHIBIT A-i AVAILABLE MARKET-NON-CAPTIVE, U.S. CONSUMPTION OF MANGANESE PRODUCTS VERSUS IMPORTS FOR CONSUMPTION, 1960-67 [Value of imports shown at domestic price. Pounds and dollars in thousands. Percent whole figures[ 1960 1961 1962 1963 Cont. Cont. Cont. Coot. manganese, Dollars manganese, Dollars manganese, Dollars manganese, Dollars pounds pounds pounds pounds High-carbon ferromanganese: 1 Total U.S. consumption (noncaptive) 589, 600 86, 400 598, 100 87, 700 636, 000 88, 000 700, 000 78, 000 Imports for consumptinn__. 82, 000 12, 000 144, 000 21, 100 160, 300 22, 200 204, 400 23, 000 Percent imports 13.9 24. 1 25. 1 29. 1 Siliconmanganese: Total U.S. consumption 131, 200 22, 300 148, 700 25, 300 162, 000 17, 500 190, 000 22, 000 Imports for consumptisn~. 20, 100 3, 400 26, 900 4, 600 23, 100 3, 700 29, 700 3,600 Percent imports 15. 3 18. 1 21. 0 21.2 Medium- and low-carbon ferromanganese: Total U.S. consumption 11,0000 26,400 104,200 25,000 111,000 29,000 125,000 29,700 Imports for consumption__ 16, 300 3,900 13, 900 2,300 22, 900 6,000 26, 000 6,200 Percent imports 14. 8 13. 3 20. 6 21. 3 Electrolytic manganese: Total U.S. consumption 30,800 10,800 31,900 11,150 29,700 10,700 36,000 10,500 lmportsforconsumption~_ 485 169 1,129 395 3,000 1,100 5,700 1,600 Percent imports 1. 6 3. 5 10. 1 13. 1 Tots! (above products): Total U.S. consumtpion 891, 600 145, 900 882, 900 149, 150 938, 700 140, 200 1, 051, 000 140, 200 Imports for consumption__ 118, 885 20, 200 185, 929 31, 400 220, 300 33, 000 265, 800 34, 400 Percent imports 13. 8 21. 1 23. 5 25. 5 1964 1965 1966 Estimate 1967 Cent. Cont. Cont. Coat. manganese, Dollars manganese, Dollars manganese, Dollars manganese, Dollars pounds pounds pounds pounds High-carbon ferromanganese: I Total U.S. Consumption (eon-captive) 790, 000 65, 000 812, 000 80, 500 788, 000 78, 000 700, 000 66, 500 Imports for consumption. __ 184, 000 15, 400 288, 000 28, 700 328, 000 32, 500 295, 000 28, 000 Percent imparts 23. 3 35. 4 41. 6 42. 2 Siliconmanganese: Total U.S. consumption 230, 000 24, 400 254, 000 29, 000 225, 000 18, 600 193, 000 16, 000 Imports for consumption..__ 13, 800 1,460 22, 000 2, 500 46, 400 3,680 48, 000 4, 000 Percent imports 6. 0 8. 7 20. 4 24. 9 Medium- and low-carbon ferromanganese: Total U.S. consumption 135, 000 27, 500 143, 000 26, 800 172, 000 31, 000 188, 000 34, 000 Imports for consumption~__ 19, 400 3,900 43, 000 8, 000 37, 600 6, 700 48, 200 8,800 Percent Imports 14. 4 30. 0 21. 9 25. 6 Electrolytic manganese: Total U.S. consumption 50, 700 15, 300 51, 200 14, 800 48, 400 14, 000 45, 000 13, 000 Imports for consumption..._ 1,760 500 2,760 800 4,030 1,200 4,600 1,330 Percent imports 3. 5 5. 4 8. 3 10. 2 Total (above products): Total U.S. consumption 205, 700 131, 300 1,360, 200 150, 100 1,233,400 141, 600 1, 126, 000 129, 500 Imports for consumption._ 219, 000 21, 260 355, 800 30, 000 416, 000 44, 080 395, 800 42, 130 Percent imports 18. 2 26. 1 32. 7 35. 4 1 Includes low Fe Fe Mn. Snurce: U.S. Department of the Interior and U.S. Department of Commerce. PAGENO="0396" 2182 EXHIBIT A-2 AVAILABLE MARKET-TOTAL U.S. CONSUMPTION OF CHROMIUM PRODUCTS VERSUS IMPORTS FOR CONSUMPTION, 1960-67 [Value of imports shown at domestic price. Pounds and dollars in thousands. Percent whole figure[ 1960 1961 1962 1963 Coot. Coot. Coot. Coot. chromium, Dollars chromium, Dollars chromium, Dollars chromium, Dollars pounds pounds pounds pounds High-carbon ferrochrome: TotalU.S.consumpl~ion 103,650 23,000 112,100 23,200 120,550 26,600 133,800 20,000 Importsforconsumption_~_ 2,550 565 6,950 1,440 14,900 2,940 7,920 1,500 Percentimports 2.5 6.2 12.3 5.9 Low-carbon ferrochrome: Total U.S. consumption 124, 250 42, 800 132, 250 42, 500 132, 500 42, 900 166, 800 37, 500 Importsforconsumption__ 7,300 2,550 8,900 2,880 34,600 11,206 31,980 7,200 Percent imports 5.9 6.7 26.1 19.2 Chromium metal: Total U.S. consumption 3,200 3,750 3,550 4,150 3,700 4,350 NA. NA. lmportsforconsumption__ 435 510 1,115 1,300 1,295 1,515 1,719 NA. Percentimports 13.6 31.4 35.0 N.A. Totalchromium: 1 Total U.S. consumption 301,400 323,900 330,900 353,600 lmportsforconsumption...... 10,285 16,965 50,795 41,600 Percentimports 3.4 5.2 15.3 11.8 Average price per pound of chromium, in cents: High-carbon FeCr 22.2 20.7 22.0 15.00 Low-carbon FeCr 34.4 32. 4 32. 35 24. 20 Chromium metal 117.0 117.0 115.00 115.00 1964 1965 1966 Estimate 1967 Cont. Cont. Cont. Coot. chromium, Dollars chromium, Dollars chromium, Dollars chromium, Dollars pounds pounds pounds pounds High-carbon ferrochrome: Total U.S. consumption 164,600 25,000 175,400 26,600 186,300 28,800 183,000 28,000 Imports for consumption.. - - 9, 110 1,700 7,960 4, 200 31, 200 5,900 12, 000 1, 348 Percent imports 5. 5 4. 0 17. 0 6. 6 Low-carbon ferrochrome: Total U.S. consumption 206, 200 50, 500 225, 000 47, 500 235, 000 58, 600 236, 000 57, 600 Importsforconsumption_.... 26,200 6,400 68,000 17,400 103,000 25,800 74,400 12,378 Percentimports 12.7 30.0 42.8 31.5 Chromium metal: Total U.S. consumption NA. N.A. NA. NA. NA. NA. NA. NA. Importsforconsumption._ 1,465 1,680 2,024 2,300 4,980 5,400 4,140 4,050 Percentimports NA. NA. NA. NA. Total chromium: 1 Total U.S. consumption 435, 300 102, 000 461, 300 100, 900 488, 800 105, 000 480, 000 99, 000 Imports for consumption__ 36, 800 9,800 78, 900 29, 200 139, 000 37, 200 90,000 18, 000 Percent imports 8. 5 17. 1 28. 5 18. 7 Average price per pound of chromium, in cents: High-carbon FeCr 15.25 15.15 15.30 15.30 Low-carbon FeCr 22. 00 25. 50 25. 20 24. 40 Chromium metal 115.00 115.00 108.00 97.00 I ncluding ferrochrome silicon. N.A.= Not available. Sources: U.S. Department of the Interior and U.S. Department of Commerce. Available prices from American Meta Market. PAGENO="0397" 2183 EXHIBIT A-3 SILICON FERROALLOYS-TOTAL U.S. CONSUMPTION VERSUS IMPORTS FOR CONSUMPTION, 1961-67 [In thousands Of poundsJ 1961 1962 1963 1964 1965 1966 1967' 8to 60 percentsilicon: Total U.S. consumption 356, 616 500, 668 571, 530 716, 958 720, 086 640, 000 650, 048 Importsforconsumption 4,527 5,044 3,934 3,541 28,056 35,752 29,130 Percent imports 1. 3 1. 0 . 7 . 5 3. 9 5. 6 4. 5 60 to 80 percentsilicon: TotaIU.S.consumption 151,910 171,436 171,174 228,562 232,950 206,600 212,384 Importsforconsumptjon 76 102 1,303 2,082 4,804 24,290 31,174 Percentimports .05 .05 .8 .9 2.1 11.8 14.7 80 to 90 percent silicon: TotaIU.S.consumption 11,006 18,304 29,270 32,702 50,326 40,400 45,584 Imports for consumption 442 668 370 Percentimports .9 1.7 .8 90 percent or over: Total U.S. consumption 14, 098 7, 164 4, 604 3, 256 1, 048 1, 000 1, 240 Importsforconsumption Pe mentirnports Silicon metal: TotaIU.S.consumption 46,506 122,768 130,010 143,180 154,356 152,000 167,760 Imports forconsumption 62 24 3, 160 186 Percentimports .1 .02 2.1 .1 Consumption figures annualized based on 1st 3 quarters. Source: U.S. Department of Interior and U.S. Department of Commerce. EXHIBIT B DOMESTIC PRICES OF MANGANESE ALLOYS [In cents per pound manganese] Year High-carbon Silicon Medium-carbon ferromanganese manganese ferromanganese Electrolytic manganese 1960 15. 2 17. 8 23. 5 35. 3 1961 15. 1 17. 0 23. 3 35. 0 1962 13. 1 15. 5 22. 6 33. 7 1963 11. 9 12. 8 18. 4 32. 3 1964 11.6 11.4 17. 1 30. 1 1965 12. 1 12. 4 17. 0 31. 0 1966 11.5 12.7 16.7 1967 10.8 12.6 16.5 31.2 30.3 Source: "American Metals Market," and "Steel" magazine. DOMESTIC PRICES OF CHROMIUM ALLOYS (CONTAINED CHROMIUM) [In cents per pound] Year High FeCr 40-43 percent (charge chrome) FeCrSi Low carbon FeCr 1960 22. 2 17. 75 34. 1961 20.7 16.20 32. 1962 19.75 12.10 32.3 1963 15.8 11.10 24.2 1964 14.4 11.80 22.0 1965 16. 3 12. 0 25. 5 1966 16.1 12.0 25.2 1967 16.0 12.5 24.5 Source: "American Metals Market," and "Steel" magazine. PAGENO="0398" 2184 EXHIBIT C FERROALLOYS AND RELATED PRODUCTS-INDUSTRY SALES AND PROFITS, 1960-67 [Dollar amounts in thousandsj All ferroalloys 1 Ma nganese alloys 2 Total sales Net profits after taxes Average percent profits to sales Total sales Net profits (or loss) after taxes Average percent profits (or loss) to sales 1960 1961 1962 1963 1964 1965 1966 1967 (estimated) $217,406 227,920 231,467 231,711 291,047 326, 932 347,047 297, 804 $5,370 8,528 2,599 3,068 7,407 25, 313 22,772 14, 933 2.5 3.7 1.1 1.3 2.5 7. 7 6.6 5. 0 $72,108 73,301 70,738 68,687 86,245 91, 449 99,021 80, 155 $4,937 5,718 2,237 2,133 5,490 6, 448 3,726 (387) 6.8 7.8 3.2 3.1 6.4 7. 1 3.8 (.5) 1 Based on sales and net profits (or losses) of all ferroalloys and related products by 7 producers. 2 Based on sales and net profits (or losses) of manganese alloy products, including manganese metal, by sll such pro- ducers (other than I nterlake, whose production of such products is negligible). Note: Theforegoing net profit figures forthe industry as a whole include, in some cases, losses by individualcompanies. Some of the net profit figures for manganese alloys include estimated figures by certain producers who do not break down their profit figures by product lines. Some of the sales figures include barter transactions by one producer. Figeresfor 1960 and 1961 are lacking data pertaining to 1 producer (whose figures were available only from 1962 on). EXHIBIT D Pro form a operating and. revenue statement for new standard ferromanganese facility (82,000 net ton capacity) $AI/Yr. Fixed capital $12, 166 Working capital: Cash 1 Accouxits receivable 5, 780 Inventory Total investment 17, 946 Net income froth sales (82,000 net tons ~ $142.76, U.S. domestic market price) 11, 706 Cost of goods shipped (with contract power @ 5 mills/Kw hour) 8, 520 Distribution 708 Gross margin 2,478 Overhead 784 Operating income 1, 694 Depreciation 676 Interest (~d~ 61/2% x average investment) 583 Pre-tax income 435 Income taxes ~J 50% 217 Return on investment-income 218 % return on investment 1. 2% PAGENO="0399" c;5 c'iE C C,) 0 C-) 0 C,) F- 0 cIJ ooj ~ ~ ~ I ~ : ~:o? ~ g ~, ~ ~ IC) I ~ ~ ~ E E 2 ~~:: E~C) ~ w CCr-oo2~ ~ ~. :~ ~ ~ : , ~ I . t'~ 2 ~ ~ ~ ~. c~ ~ ~ ~ INJ ~ C) C) N- ~ g ~ ~t C) 0 ~ C > IC~ I~ ~ ~ 1 H C) C) ~- CD C) ~- CD CD N) (DC) CO C) C) CO C) C) ~ ~ I ~ ~ cIOCOr~~r-~co 2 ~ ~ C ~ 0 I~ !C N = ~ - C) C) C) C) C) C) c~j C) C) C) C) - C) ~ 2~2~ ~ ~ C) ~ C) ~ ~ ~ ~ ~ ~ N- 2 ~ 0 C) ~ ~ ~ ~ ~ C)ç~ ~`-~ ~ r- ~ C) ~ I ~ ~ I C) ~CI~ C-) ~ ~I CI ~ ~ CO CO ~ It) C N- C') N- C) N- ~ ~ E ~ P')L H C\J~C-DN) ~ ~` ~ C) C) C) C) ~ 2 ~ ~ ~ C) ~ -C C'C)(OC) ~ C C)C)OOC)C) 00 ~ - - - - - - .~--- E~ N)COC') Z 1 -: C ~ ~ C) 1.1 ~ C) C) C) ~ 00 C ~ ~ C -~ cCcCcCc ~c CD C-~CN4N-0CI I IIHI IIIIII~ III ~I H ~ 11)1 CI IIII~ C ~ ~1° D ~ - ~ -~: ~ 2 0 C) ~ ~ c~ ~ b1 ~ 0 ~ ~ C) o C) ~ C) ~ 0 ~ E ` ~) ~ ~ ~ ~ C) ! II I~ E -~ ~ = >- 0 0 U- 0 0 0 F- C- 0 Ct) 0 C-) 0 PAGENO="0400" 2186 threaten the economic viability of the said domestic industry and the national security. It is, therefore, declared to be the policy of the Congress that access to the United States market for ferroalloys and related products produced abroad should be on an equitable basis to alleviate United States balance-of-payments problems, provide an opportunity for a strong and expanding United States ferroalloys and related products industry, and prevent further disruption of United States markets and unemployment of United States workers in that industry. SEC. 3. The President shall by proclamation restrict the total annual imports of ferroalloys and related products to an amount determined by applying the per- centage of total imports to total domestic consumption during the years 1961 through 1965, inclusive, to total domestic consumption during the year immedi- ately preceding the year in which the restriction is to apply. SEC. 4. The President shall apportion such total imports so that the percentage of imports in a particular category (as defined in section 8(2) below) in any year to total imports shall not exceed the average percentage of imports in that category to total imports during the years 1961 through 1965, inclusive. SEC. 5. (1) Within the limitations imposed under sections 3 and 4, the Presi- dent may adjust the share of United States imports in any category which may be supplied by any nation. In making this adjustment the President shall be guided principally by historical import patterns, but may modify such patterns to accommodate interests of developing nations or other changing conditions of international trade. (2) The President may suspend any proclamation made under section 3 or 4 or increase any quantity proclaimed under such section if he determines and proclaims that such action is required by overriding economic or national security interests of the United States, giving special weight to the importance to the Nation and the national defense of the economic well-being of the domestic pro- ducers of ferroalloys and related products. SEC. 6. (1) The amount of imports of any category in either half of any year shall not exceed 60 per centum of the total permissible amount of imports in that category for such year. (2) Should any limitation take effect on any day other than January 1 of a year, such limitation shall apply pro rata during the remaining portion of such year. SEC. 7. (1) Imports limitations established by this Act shall be administered by the Secretary of Commerce. The Secretary may issue such regulations as may be necessary or appropriate to carry out the purpose of this Act. (2) Upon the expiration of five years after the date of enactment of this Act, the Secretary of Commerce shall submit a report to the Congress as to the effects of the import limitations established under this Act upon (a) the United States balance of payments, (b) the economic viability of the ferroalloys and related products industry, (c) employment opportunities in such industry, and (d) the national security, together with his recommendations as to whether such import limitations should be continued, modified or revoked. Before making such report, the Secretary shall conduct an investigation and hearing at which all interested parties shall have an opportunity to be heard. SEC. 8. As used in this Act- (1) The term ferroalloys and related products" means low- and high-carbon ferrochrome, low-, medium-, and high-carbon ferromanganese, ferrosilicon, ferro- chrome silicon, siliconmanganese, chromium metal, manganese metal, and silicon metal in the categories defined blow. (2) The term "category" or "categories" means one or more of the following seven-digit item numbers appearing in the Tariff Schedules of the United States Annotated (1965) published by the United States Traiff Commission as in effect on the date of enactment of this Act: 607.3000 607.5000 632.3200 607.3100 607.5100 632.4200 607.3500 607.5200 607.3600 607.5300 607.3700 632.1800 (3) The term "imports" refers to United States imports in any category or categories within the meaning of paragraph (2) of this section. (4) The term "consumption" means, with respect to any category or with respect to all categories, the sum of United States mill shipments plus imports minus United States exports. (5) The term "year" means calendar year. PAGENO="0401" 2187 Mr. FULTON. Thank you, Mr. Cunningham. Your statement refers to the OEP finding that the ferroalloys industry is essential to our national security. Is this still true? Mr. CUNNINGHAM. It is still true. They answered it and recognized us as being a part of the mobilization base in 1964, but thought we were not harmed enough for them to take action, and it was denied after a year of waiting. Now we have filed again. We are a lot worse off than we were then. Mr. FULTON. Could you spell outwhat your industry has done in the past wars for the benefit of the record? Mr. CUNNINGHAM. In the Second World War the first priority was the building of ferroalloy plants because ferroalloys come before steel. It is a base part of steel and I know in the case of our company two plants were built, one by the Defense Plant Administration, and one by our own company. The ferroalloys industry was expanded about 50 percent at that time in order to carry on the Second World War. The Korean war came along and I think about 25-percent expansion took place in the ferroalloy industry, mostly by industry itself, in some cases by Defense Plant or by writeoffs of tax credits. During the Vietnam war we haven't had that problem because again so much of the business has been taken by imported ferroalloys. Mr. FULTON. Could you possibly predict what your role will be in possible future emergencies? Mr. CUNNINGHAM. Well, as long as steel is required and as long as aluminum castings are required and as long as stainless steel and the specialties are required, ferroalloys have to be available or these prod- ucts could not be made. Mr. FULTON. Your statement refers, Mr. Cunningham, to the in- creased imports of various ferroalloys during the past few years. Do you foresee a continuing increase in these imports, and if so, why? Mr. CUNNINGHAM. Yes. Well, the main reason is that their labor rates are about one-sixth of ours and they can continue to ship in here with little or no tariff. The tariffs will be virtually removed through the Kennedy round. Even before now, there was very little tariff protection. What there was is being removed, already 20 percent, and in the next 4 years it will be almost completely eliminated, and they have a won- derful market here and they are taking advantage of it. Mr. FULTON. Do you possibly foresee a continuing increase in these imports? Mr. CUNNINGHAM. I think so. The profitability of the domestic in- dustry is falling off rapidly, particularly the manganese alloys, which is a sizable part of our industry; we have taken a survey of our group and the net for 1967 was a loss, so this is pretty good evidence of where we stand. We can't build furnaces on a loss. Mr. FULTON. I just wonder what steps your industry has taken to reduce costs in order to compete with imports. Mr. CUNNINGHAM. Our company built the largest ferroalloy furnace in the world and turned it on here about a year ago. The industry h.fts recently built big furnaces, the most modern that are known. We still have to pay $4.60 an hour for labor as opposed to the same furnace maybe in Norway or in Japan at 60 or 80 cents an hour. 95-159-68-pt. 5-26 PAGENO="0402" 2188 Mr. FULTON. Mr. Cunningham, one last question. Your statement also mentions the decline in profits in your industry. Is this true in all segments of your industry? Mr. CUNNINGHAM. Yes. We represent the major ferroalloy pro- ducers and this is based on a survey that we have taken going back over a period of years. My company, Ohio Ferro-Alloys, is involved in sili- con manganese and chromium-and this is all we produce-it affects us in all categories of our operations. Mr. FULTON. Do you consider it a short-term trend, or do you think it is something that will continue? Mr. CUNNINGHAM. No; it started in the late 1950's and has con- tinued, and it is continuing at a more rapid rate now in the last 2 years than before. Mr. FULTON. Thank you, Mr. Cunningham. Mr. Curtis. Mr. CURTIS. Has your industry taken a position on the administra- tion bill? Mr. CUNNINGHAM. We have read it but our position would be that it wouldn't be of any help to us because we cannot export and- Mr. CURTIS. I appreciate that but I am referring `to the machinery more than anything else. Have you taken a position on extending the present machinery we have for handling international trade? That is one of the aspects of the administration bill. Mr. CUNNINGHAM. In our industry it is a one-way street. The im- ports are coming in and we can do nothing about them. Mr. Crurns. Well, you just haven't taken a position on the bill. I guess that is what the facts are. Mr. CUNNINGHAM. That is right, as a group, no. Mr. CURTIS. What about the Kennedy round? In answer to ques- tions here you indicated that it had possibly adversely affected you. Have you taken a position in respect to how the Kennedy round has affected you? Mr. CUNNINGHAM. It has adversely affected us. Mr. CURTIS. To what degree? Mr. CUNNINGHAM. Because it reduced what tariffs we have. Mr. CURTIS. To what degree? Seriously? Mr. CUNNINGHAM. In one case we had a 4-cent tariff on silicon metal that sells for around 16 cents and that has already been reduced now by 20 percent to 3.6 cents. In a matter of 5 years there will be no tariff on silicon metal. Mr. CURTIS. Has your industry taken an overall reading of the im- pact of the Kennedy round? You mention one item but I am interested in the whole package. Mr. CUNNINGHAM. Some of the other items had so small a tariff on them that it didn't have much effect. Mr. CURTIS. I appreciate that and as each industry comes before us I am anxious to find out what impact they think the Kennedy round will have on it. One of the first questions to be answered is whether or not the industry has made a study of the overall picture. If you would supply a memorandum for the record rather than trying to answer it at this time. I would appreciate it. Mr. CUNNINGHAM. I shall do that. (See p. 2191.) Mr. CUR1~s. Do you think that the machinery we have for establish- ing a national security finding is satisfactory, or do you tdiiuk that we ought to possibly change that machinery? You say that you were PAGENO="0403" 2189 turned down by the OEP. Do you feel that you were granted full, comprehensive hearings or do you think there is something m error in the legislation or the machinery as we have it? Mr. CUNNINGHAM. We filed and were turned down. We filed the second time. I have no indication of what is going to happen. Mr. Cmrns. Congress is essentially in the business of trymg to estab- lish the machinery, the structure, to evaluate the problems of your industry as a necessary part of oulr mobilization base. The question is what is the impact of imports on' that base? We established what I thought was fairly good machinery to make these findings. Sometimes there are going to be differences of opinion on the facts but maybe we need to do something with the machinery. Mr. CUNNINGhAM. We think it is inadequate. I think you asked the steel industry this morning whether they filed with OEP. Mr. Cuirrrs. Yes.' Mr. CUNNINGHAM. In our case we did earlier, in 1963, and we spent a lot of time. We waited a year and finally got a decision and `the decision was against us. We have just recently spent a lot more time and Mr. Symington prepared a brief bringing our situation up to date. We filed this on May 24 with Gov. Price Daniels. What is going to happen to that we don't know but in the meantime we lmo'w this: That the security of this country we, believe is being endangered. Mr. CURTIs. I am sure you `believe it, but hopefully these people at OEP are concerned the same way you are. Maybe I can draw the point out this way. You use the courts for a number o'f reasons for determining differ- ences of opinion. Just because the court rules against you doesn't mean that the structure of the court is wrong, but it can be. The machinery itself can be inadequate and I am seeking to learn whether or not our machinery is inadequate or perhaps our guidelines and criteria of how we determine what is national security are inade- quate. Just because you have lost the case doesn't mean to me neces- sarily that the case wasn't heard fairly. The decision, weighing every- thing, was that national security wasn't involved. On the other hand, maybe it was and the problem is that we just aren't set up to evaluate national security adequately. Mr. CUNNINGHAM. We asked for import quotas in this application and I think this is handled by the executive branch of the Government. Whether we are going to get quotas ", thrOugh this avenue or not or whether we are going to get some kind of protection-maybe that isn't the word, but some kind of relief or implementation that will- Mr. CURTIS. Yes; but you are appealing to this committee and the Congress `saying that there is national defense involved and you present data here in a very proper way.' Congress is the one that created the OEP. Well, I have explored this issue, I `guess, about as far as I can. You are asking for quotas directly ~but one of the bases for asking for quotas is the same basis on `which we gave the power to OEP to grant them. So in one sense, and this is .a proper sense, we sould `be looking oyer the shoulder o'f OEP to see how it has rendered its decisions to see whether our guidelines are right. Your testimony on this point would be very helpful. I wish you would state if you think `that the Congress did not set up this machinery correctly, just as I said to the steel people this morning, or whether the fault lies in administration. Writing addi- PAGENO="0404" 2190 tional laws, which again will put power in the hands of bureaucrats. is no answer. I mean that kindly-these are good people, mostly civil servants-but there is no reason to believe that we can write laws that will solve problems if they are not carried out the way we intended. Laws written well, but not being administered well don't call for new laws. (Seep. 2191.) Mr. CUNNINGHAM. I think that your committee could help us with what we have already done when we filed. At least we are one jump, maybe, ahead of some of the other industries. We have already filed a second time. If your committee can do something in this regard-and we have all the data in here, I think, or it can be worked up-this would be appreciated. Mr. CURTIS. Of course it is very helpful. One ot;her question. You have been asking for quotas. Do you regard this as a temporary device, or would you expect from now on to operate under a quota basis? Mr. CUNNINGHAM. I would have to answer it pretty much the way the steel people answered this morning-temporarily, if some arrange- ment can be worked out where world producers of ferroalloys all compete on an equal basis. If there is going to be allowance for wage differentials in various countries taken into consideration or the stand- ard of living is the same in Japan as it is in the United States, then 1 think we can compete with them anywhere. Mr. CURTIS. You feel that your `basic problem in competition is wage rates? Mr. CUNNINGHAM. Yes; it is a major part. On some of these alloys, the origin or the virgin ore, such as manganese ore, may lay in India, and they build a plant on that mine site. Naturally they have an ad- vantage over us, where we have to bring the ore here to convert it. On the other hand, I think the major problem is the differential in wage rates that is hurting the industry. Mr. CURTIS. Are there any unfair trade practices that you have been able to identify or suspect such as Government subsidies? (See p. 2192.) Mr. CUNNINGHAM. I just happen to have one from the London Metal Bulletin. It is an article on May 17, 1968. It says: Subsidy for Indian ferromanganese. The Indian Government has decided to grant a cash subsidy of 150 rupees per metric ton to producers exporting standard high carbon ferromanganese. The need for the subsidy, which works at about 20 percent ad valorem at current prices, has arisen as a result of the low prices in export; markets. Minerals and Metal Trading Corporation is the sole exporting agency. What they are saying is that the market price here in the United States, the import market price, is too low so they are going to help out their producers by 20 percent to meet it. Mr. CURTIS. It is possible that this would give rise to the application of countervailing duties. Mr. CUNNINGHAM. We understand that and we are investigating this. This happened-at least they advertise this-in India., but it is a minor producer from the standpoint of imports to the United States. Mr. cURTIS. But again here the machinery exists and I am anxious to examine it to see whether the machinery is adequate, or whether there has been a failure to administer the machinery, or whether we might be of assistance through amending our laws. Anything you would care to supply further along these lines for the record I would appreciate. PAGENO="0405" 2191 Thank you, Mr. Chairman. The CHAIRMAN. Any further questions? If not, Mr. Cunningham, we appreciate your coming to the committee. Mr. ~UNiNINGHAM. Thank you. (The following letter was received by the committee:) COMMITTEE OF PRODUCERS OF FERROALLOYS AND RELATED PRODUCTS, Washington, D.C., July 12, 1968. Hon. WILBUR MILLS, Chairman, House Ways and Means Committee, TVashington, D.C. DEAR MR. CHAIRMAN: This is in response to several questions addressed by Mr. Curtis to Mr. Cunningham when the latter testified before your Committee 011 June 18th on behalf of the Committee of Producers of Ferroalloys and Related Products. (1) Mr. Curtis's first question had to do with the anticipated impact of the Kennedy Round upon the ferroalloys industry. The Kennedy Round imposed further duty reductions for most ferroalloys products, but in assessing its impact one must bear in mind also the already sub- stantial reductions in duties for these products which were made in the several negotiations prior to the Kennedy Round. (See Table 1, attached, showing for each product the successive reductions from the 1930 duty levels). These earlier duty reductions had substantial adverse effects upon the domestic industry, par- ticularly in terms of lower and lower domestic selling prices as the duties kept going down. (See examples in Tables 2a and 2b, attached.) As a result, when the Kennedy Round negotiations were announced, the duties applicable to most segments of the ferroalloys industry were already so low that they were largely ineffectual as a factor in controlling imports of these products. Nevertheless, in 1964, as part of the hearings preceding the Kennedy Round, the industry as a whole, and many of its individual producers, submitted oral and written statements to the Tariff Commission to show why further duty reduc- tions would serve only to accentuate the injury already suffered by the domestic industry on account of imports. As is evident from Table 1, these statements w-ere apparently ignored by our negotiators, and the already low duties were cut even further as a result of the Kennedy Round. The domestic ferroalloy producers feel that the Kennedy Round will probably stimulate foreign producers of most of the products involved to intensify their efforts in the American market, with imports continuing to increase. In all l)robability, too, the sales prices of the foreign-produced products will be reduced proportionately with the reductions in duty, just as happened following the earlier duty reductions. (See Tables 2a and 2b.) On the other hand, it should be noted that there are virtually no exports of U.S.-produced ferroalloy products, and no reasonable likelihood that the industry will derive any benefit from the Kennedy Round in that respect. In sum, the result of the Kennedy Round will be a further undermining of the viability of the domestic industry. As indicated in Mr. Cunningham's testi- mony, our Committee recently filed an application with the Office of Emergency Planning under Section 232 of the Trade Expansion Act seeking the Govern- inent's help in maintaining the viability of this industry for national security purposes. It is the Committee's strong hope that you, Mr. Curtis, and other members of your Committee will deem it appropriate to advise the OEP of your interest in our problem. (2) Secondly, Mr. Curtis asked whether the machinery established by the Congress in Section 232 of the Trade Expansion Act is adequate to protect the national security in the case of domestic industries which are threatened by increasing imports. As you may know, the domestic ferroalloy industry unsuccessfully sought relief under Section 232 in 1963-64. The industry felt that the facts and figures developed in that earlier investigation warranted favorable action by OEP under the language of Section 232-particularly since OEP acknowledged that this industry was an essential part of our country's mobilization base. As it hap- pened, however, conditions improved somewhat about that time, and the industry was able to modernize its facilities and maintain its position in the U.S. market for a relatively brief period. Shortly thereafter, however, the situation began PAGENO="0406" 2192 to deteriorate seriously once more, and the current application was filed with the OEP in May of this year. In filing this OEP application, our Committee assumed the adequacy of the mechanism established by the Congress, and the language of Section 232 itself, to provide relief from imports in cases where the national security is threat- ened-even though the industry was and is fully aware that, in the past, the Executive Branch has felt free on many occasions to depart from the apparent Congressional intent by reason of the administrative discretion written into that section. If the OEP should deny the current application, the domestic producers would undoubtedly feel that this would represent a misapplication or misinter- pretation of the authority delegated to the President and the OEP under that Section. Indeed, as suggested in Mr. Curtis's questions to Mr. Cunningham, the Sec- tion 232 language and machinery alone are no assurance that the Section will be properly administered. It was for this reason that, because of the seriousness of the plight in which the industry finds itself and the forecasts of continuing increases in imports. the industry felt it necessary to recommend specific import quota legislation to the Congress. in the form of HR. 13996 (Mr. Hays, of Ohio), and H.R. 15417 (Mr. Anderson, of Tennessee). A companion bill S. 2653 has been introduced in the Senate by Senator Baker. Perhaps, as suggested by Mr. Cunningham in his testimony before your Com- mittee, the best way to make the present language w-ork as the Congress in- tcnded would be for members of your Committee and others in the Congress who might support our OEP application (as against the alternative of import quotas via the legislative route), to make their views known to the OEP. On the other hand, if the OEP should turn down this application-which we believe presents an unusually strong factual case in respect to an industry which OEP itself has found to be defense-essential-then the industry might w-ell urge that the Congress should strengthen the law by, perhaps, reducing the measure of executive discretion. (3) Thirdly, Mr. Curtis asked whether there are any unfair trade practices which help foreign producers in the American market to the disadvantage of domestic producers, and whether the machinery to combat such practices is adequate. On several occasions in recent years, when the prices of imports of certain ferroalloys appeared to be low-er than those in the foreign producing countries, several of the domestic producers filed anti-dumping complaints with the Cus- toms Bureau. After investigation, these cases w-ere dismissed on the grounds that sales at less than fair value could not be established, or imports suspended from the countries against which the complaints were filed. It is our Committee's feeling, again, that the machinery provided by the Congress in the anti-dumping statute is probably adequate, but that it n-as misinterpreted or misapplied in this instance by the Executive Branch. Another unfair trade practice is the subsidizing of exports, in which case domestic industry may obtain relief from injury by the imposition of counter- vailing duties. For example, Mr. Cunningham testified to the recent action by the Indian Government in granting cash subsidies equivalent to about 20 per- cent ad valorem for producers exporting standard high-carbon ferromanganese. During 1967, India exported 19,023 tons of this product to the Ijnited States, which was approximately 10 percent of the total imports of this product from all countries during that year. This information will be presented to the Treasury Department, asking for an investigation under the countervailing duty statute, and it is our hope that the machinery provided therein by Congress will be prop- erly and adequately administered by the Executive Department in this case. Finally, at the time the domestic producers w-ere preparing their application for filing with the OEP in 1963, they considered other alternatives that might be available to them, particularly the escape clause. After considerable investi- gation, including informal discussions with Government officials, the industry decided that this statutory provision, as written, n-as not adequate to meet their problem. Thus, the escape clause is one area hi which strengthening añ~end- ments are needed in order to provide relief for domestic industries, such as the ferroalloy industry, which are seriously and adversely affected by increasing imports. We would be pleased to try to furnish any further information, or to answer any further questions that you or other members of the Committee may have, relating to the problems of this industry in relation to imports. Sincerely, LLOYD SYMINGTON. PAGENO="0407" TABLE 1.-TARIFF ON FERROALLOYS 1930 THROUGH 1972 TSUSA item_ 607. 37 607. 36 607. 35 607. 57 632. 32 607. 31 607. 30 632. 18 607. 50 607. 51 607. 52 607. 53 Ferromanganese Ferrochrome Ferrosilicon Silico- Electrolytic Low manganese manganese Chromium Over Over Over High Medium carbon (cents per (cents per High Low metal 8 percent, 60 percent, 80 percent, Over Article year carbon carbon (cents per pound pound carbon carbon (percent not over not over not over 90 percent (cents per (cents per pound + 90 + percent (cents per (percent ad valorem) 60 percent 80 percent 90 percent silicon pound) pound) + percent ad valorem) ad valorem) pound) ad valorem) silicon silicon silicon (cents per ad valorem) (cents per (cents per (cents per pound) pound) pound) pound) 1930 1. 875 1. 875 1. 875 1. 875 1. 875 2. 5 30. 0 30. 0 2. 0 3. 0 4. 0 8. 0 +15 +15 +15 1935 1.00 1.25 25.0 25.0 1948 `~1e `~`ie 0.625 +10 1951 10'ie `~`Ie 12.5 12.5 1.0 1.5 2.0 4.0 ~ +10 +7.5 1955 `5Ie +7Y~ 1956 0.9 11.0 11.5 0.9 1.4 - +7 1957 0.85 10.5 11.0 1.3 1958 0.8 10.5 0.8 1.25 +6 1959 0.7 g.~ +5 1960 0. 9375 0.6 8.5 0.72 0.84 +4.5 1968 0.55 0.80 0.5 0.84 1.875 7.5 9.0 0.5 0.75 1.8 3.6 +4 +6.5 +14 1969 0.50 0.70 0.4 0.75 1.7 6.5 8.0 0.4 0.70 1.6 3.2 +3~ +6.0 +13 1970 0. 43 0. 60 0. 4 0. 65 1. 6 5. 5 7. 0 0. 2 0. 60 1. 4 2. 8 +3 +50 +12 1971 0. 35 0. 55 0. 3 0. 56 1. 5 5. 0 6. 0 0. 1 0. 55 1. 2 2. 4 +23'~ +4.5 +11 1972 0. 30 0. 46 0. 3 0. 46 1. 5 4. 0 5. 0 Free 0. 50 1. 0 2. 0 +2 +3.5 +10 PAGENO="0408" 2194 TABLE 2a.-EFFECT OF TARIFF ON IMPORTS AND DOMESTIC PRICE (TSUSA ITEM 607.30) [Ferrochrome less than 3 percent carbon] Duty Imports Imports as Domestic Year (percent (million percent of price ad valorum) pounds) I domestic cents per consumption pound I 1930 30 1954 123/~ 2. 9 1. 9 1955 l23/~ 6.4 2.9 1956 11 9.0 3.8 1957 1O3~~ 9. 4 6. 1 39. 0 1958 93/b 8.9 7.6 39.0 1959 8/~ 16.5 10.6 39.0 1960 83-~ 7.3 1961 83/~ 8.9 6.7 32.4 1962 83/2 34.6 26.1 32.3 1963 83/2 32.0 19.2 24.2 1964.. 83/b 26. 2 12. 7 22. 0 1965 83-~ 68.0 30.0 25.5 1966 83/2 103.0 42.8 25.2 1967 83/~ 74.4 31.5 24.5 1968 73/~ 1972 4 I Contained chromium. TABLE 2B.-EFFECT OF TARIFF ON IMPORTS AND DOMESTIC PRICE (TSUSA ITEM 607.35) [Ferromanganese less than 1-percent carbon] Imports Imports as Domestic Year Duty (cents per pound I plus percent ad valorem) (million percent of price pounds 1) domestic (cents per consumption pounds 1) 1930 1.875 cents±15 percent 1954 15/16 cent+73/~ percent 0.25 2.3 28.0 1955 do .23 1.7 29.2 1956 0.09 cerit-+-7 percent.. .10 .8 31.0 1957 0.085 cent+6 percent. 1.00 9.7 34.5 1958 0.80 cent+6 percenL .12 3.0 34. 5 1959 0.70 cent+5 percent .06 1.1 34.5 1960 0.60 cent-l-43/~ percent .43 6.0 34.5 1961 do .72 9.5 34.5 1962 do 1.87 18.7 32.0 1963 do 1.12 8.5 30.0 1964 do 1.07 4.8 25.5 1965 do 1.81 7.1 27.0 1966 do 3.27 13.6 27.0 1967 do 8.15 33.5 28.0 1968 0.50 cent+4 percent 1972 0.30cent±20percent_ 1 Contained manganese. The CHAIRMAN. Mr. Mimtwyler. If you will identify yourself for our record we will be glad to recognize you, sir. STATEMENT OP P. C. MUNTWYLER, PRESIDENT, INDEPENDENT WIRIE DRAWERS ASSOCIATION; ACCOMPANIED BY NORMAN GELLER, DIRECTOR, AND ALAN D. HUTCHISON, OOUN~SEL i\Ir. M17NTWYLER. Mr. Chairman and members of the House Com- mittee on Ways a.nd Means, my name is Fred Muntwyler and I am president of the Independent Wire Drawers Association, as well as chairman of the board, and president of the Wire Sales Co. of Chicago. It. is a grea.t honor for me to appear before this distinguished con- gressional committee to discuss foreigii trade and tariffs, with particu- lar emphasis on the suT~ject of steel imports. WTe have prepared a PAGENO="0409" 2195 position or background paper on the subject of wire rod imports and the President's Trade Expansion Act of 1968 which we now offer for the written record. My company, Wire Sales Co., like other members of the Independ- ent Wire Drawers Association, is a consumer of hot rolled carbon steel wire rod-a semifinished steel mill product. This wire rod is nianufactured into wire by us by drawing it through a series of dies which reduces the diameter of the rod while increasing its length. Thus, the description term "wire drawer." The term "independent" is used to indicate these firms are not sub- sidiaries, divisions, or captives of the major steel corporations. We are "nonintegrated" in the sense that we do not possess basic steelmaking capacity. Most members of our association also fabricate some wire products in addition to drawing wire. A wire fabricator manufactures a th~- ished wire product from the wire, producing such things as nails, barbed wire, woven fence wire, and welded wire concrete reinforcing mesh. I am here today primarily to tell you that imported wire rod has been the economic salvation of the independent wire drawers for the past 12 years. Big steel has consistently applied single and double price squeezes to the independents in the past. The details of these price squeezes is outlined in our position paper. There have been times when major domestie steel mills refused to sell wire rod to Wire Sales Co. If it weren't for the availability of imported wire rod, my company would not be in business today. The situation is no better now. While American mills are in some 1nStances virtually offering to meet import prices on rods, they are on the other hand, totally unable to give delivery on wire rods even to the extent of 10 to 20 percent of our needs or requirements. So the price offer is really a false token and is not a valid one, and not of very much use. There has been and, still is, a very tight competitive market on wire rods. Within the last 3 months American mills have all increased their rod prices in spite of President Johnson's requests to the con- trary. They have done this by increasing quality extras and the size extras. This is not a base change, although there actually was an addi- tional $3-per-ton increase in the base price of rods. The result has been a definite increase in costs as far as independent wire drawers are concerned. Meanwhile, the domestic steel mills main- tained, and in some instances, definitely reduced the price of finished wire products-another double price squeeze for us. My company does a fair amount of defense contract work. While we use American-produced rods for all our Government contracts, we have a great deal of difficulty in obtaining enough wire rods from American mills to even meet our Government commitments. This is indeed a regrettable situation. The domestic mills cannot possibly supply the balance of our rod requirements. Yet, the domestic steel industry continues to complain about steel imports and seeks congressional approval of a steel import quota which would restrict wire rod imports. Without wire rod imports today, most independent wire drawers could not operate. A free market in wire rod is essential to the economic survival of independent wire PAGENO="0410" 2196 drawers. We are, therefore, adamantly opposed to the imposition of steel import quotas, border taxes, or tariff surcharge which would impede the free flow of imported wire rod. As a matter of general principle, we support the President's Trade Expansion Act of 1968 with the addition of one technical amendment which is discussed in our position paper. Mr. Chairman, I would like to make one further comment. As an independent businessman operating a small wire drawing plant which employs approximately 200 people organized by the United Steel- workers of America, I am alarmed to see the big steel corporations and the Steelworkers Union cooperating as they are here today at this hearing. This can only result somewhere in additional cost to the American consumer and in all probability an additional squeeze on the small in- dependent wire drawers. Obviously, t.hey make strange bedfellows at this or any other con- gressional hearing. Gentlemen, it has been a pleasure and an honor to appear before you today. I would like my colleague, Mr. Norman Gefler, of the Re- public Wire Corp., of Carteret, N.J., to tell you of the recent experi- ences of his company in dealing with the United States Steel Corp. I would like to comment, for the committee's information, that just last month Mr. Geller received the annual "New Jersey Small Busi- nessman of the Year" award from Gov. Richard J. Hughes. Mr. Norman Geller. The CHAIRMAN. Let me ask you this before Mr. Geller begins. You have a position paper to which you referred. Would you like that to follow your remarks or at the conclusion of Mr. Geller's remarks. Mr. MUNTWYLER. The conclusion of both remarks, Mr. Chairman. The CHAIRMAN. Without objection it will appear then at the con- clusion of Mr. Geller's remarks. Mr. Geller. STATEMENT OP NORMAN GELLER Mr. GELLER. Mr. Chairman, members of the House Ways and Means Committee, my name is Norman Geller. I am a director of the Inde- pendent Wire Drawers Association and vice president of the Republic Wire Corp., of Cateret. It is a privilege to appear before you today to discuss the subject of steel imports, in particular imports of hot rolled carbon steel wire rod. My company, Republic Wire Corp., of Carteret, N.J., is basically a wire drawing mill, an independent nonintegrated wire drawer. Wire rod is our raw material. Since the inception of our company we have been a sometimes buyer of domestic wire rod due to the nature of the integrated steel mill's attitude toward us as a nonintegrated converter. This dual distribution position of the big integrated steel mills cre- ates a type of convenient myopia in that they find it difficult seeing us as a customer rather than a competitor. Up until 2 years ago we relied to a large extent on imported rod but were then approached by a large integrated steel corporation who contracted to supply us a major portion of our rod requirements at prices competitive with imports and a promise of uninterrupted continuity. PAGENO="0411" 2197 Republic Wire accepted the offer and we converted from imported rod to domestic rod. But earlier this year when the wire rod market developed in short supply in response to increased demand, our source began to indicate in conversations that a cut was forthcoming in our monthly requirement due to a shortage of hot metal for our rods. We received one cut of approximately 40 percent for the month of May and then were informed of a cut to 10 percent for the coming month of July. At the present time subsequent to a recent newspaper account of the plight of the small steel business in the dual distribu- tion industry our full allocation was restored. It is my firm conviction that a steel import quota, border tax, or tariff surcharge would cause a rapid strangulation of the nonintegrated ~rire mills and wire fabricators and would eventually lead to their disappearance from our domestic industrial scene. Thank you. (The position paper referred to follows:) POSITION P~uER OF THE INDEPENDENT WIRE DRAWERS ASSOCIATION I. INTRODUCTION The Independent Wire Drawers Association is a national trade association rep- resenting over 30 independent non-integrated wire drawers and fabricators. The term "independent" is used to indicate these firms are not subsidiaries, divisions or captives of the major steel corporations. The term "non-integrated" is used in the sense that these firms do not possess basic steel-making capacity. We would like to explain the term "wire drawer". Wire is manufactured from w-ire rod, a semi-finished steel product, by drawing it through a series of dies which reduces the diameter of the wire rod and at the same time increases its length. Thus, the descriptive term "wire drawer". A wire fabricator manufactures a finished wire product from the wire, pro- ducing such things as nails, barbed wire, woven fence wire and welded wire concrete reinforcing mesh. iViost members of the Independent Wire Drawers As- sociation fabricate some wire products in addition to drawing wire. II. IMPORTED WIRE ROD HAS BEEN THE ECONOMIC SALVATION OF THE INDEPENDENT WIRE DRAWERS BECAUSE OF THE PRICE SQUEEZES BIG STEEL HAS APPLIED TO THE INDEPENDENTS IN THE PAST The basic raw material for the steel wire and wire products industry is hot- rolled carbon steel wire rod. In the United States, wire rod is produced by 15 vertically integrated steel mills; and 93 percent of U.S. wire rod capacity is con- trolled by a mere 12 of these producers, including such industry giants as United States Steel, Republic and Bethlehem. Steel~ wire and wire products, however, are produced by both the major integrated producers of wire rod and by many small, independent, non-integrated wire drawers and fabricators, who are de- pendent upon the integrated producers for their wire rod. Economists character- iZe this situation where a Supplier is also a competitor as "dual distribution." There is, however, nothing inherently evil about this dual distribution situa- tion so long as a normal relationship exists between wire rod, wire and wire product prices which permit an adequate margin for converting wire rod into wire, and wire into products. But beginning in 1955, the behavior of these prices has not been normal, instead, these prices illustrate how an integrated producer in a dual~distribution industry can apply anticompétitive price squeezes to their non- integrated competitors. The case of a typical wire product, annealed balling wire, graphically illus- trates the double price squeeze experienced by the independent wire drawers and fabricators. Prior to 1955 most independent producers purchased their wire rods from domestic steel mills at an average price of approximately $105 per ton. At that time bailing wire sold for around $192 per ton which permitted the fabri- cators a reasonable markup on the wire drawing and fabricating process. But the major steel producers raised wire rod prices in 1955, 1956, 1957 and again in 1958. According to the Bureau of Labor Statistics, wire rod prices rose more than PAGENO="0412" 2198 dny other steel product during the post-war period. The price of the finished product did not increase proportionately, instead it decreased. A point was reached, iii many areas, where the raw material was selling at a higher price than the finished wire product. For example, during 1963 hot-rolled carbon steel wire rod was sold for $144.50 per net ton. Yet, the same integrated steel mill was selling annealed bailing wire for $141.50 per net ton. The independent producer, of course, could not purchase wire rod from the integrated producers at $144.50, clean and draw the rod into wire, fabricate the wire into annealed bailing wire and then compete against a price of $141.50. As a matter of survival the independent producer had to turn to imported wire rod. As a result of the double price squeeze applied by the integrated mills, wire rod imports increased from 47,800 tons in 1955 to 1,076,467 tons in 1967, about 10 percent of total U.S. steel imports. These imports are consumed almost en- tirely by the independent wire drawers, and it is estimated that imports account for about 50 percent of the non-captive wire rod market. Over a 5-year period, when domestic prices were perfectly rigid at $144.50 per ton, comparable foreign wire rod was being sold at $110, $105 and at times even less than $100 per ton. Steel mill spokesmen were quick to boast of their un- willingness to meet foreign competition. Instead the big steel corporations sought the protection of the U.S. Antidumping Act by claiming the foreign wire rod was being dumped in the United States. The two Federal agencies charged with the administration of the Antidumping Act disagreed. The Treasury Department found Japanese wire rod prices were "not less than fair value", and the Tariff Commission dismissed the complaints against wire rods from West Germany, Belgium, France and Luxembourg on the grounds of "no injury to a domestic industry". III. DOMESTIC 5TEEL MILLS CANNOT 5UPPLY THE CURRENT TIGHT WIRE ROD MARKET, YET BIG STEEL STILL SEEKS IMPORT QUOTAS In early 1065 the domestic steel industry reduced the price on so-called "com- mon quality" wire rod from around $144 to approximately $125 per ton. For all practical purposes, this was a meaningless price reduction as far as the independ- ent wire drawers and fabricators were concerned. In the first place, the price of $125 per ton was not competitive with the imported wire rod nor was it low enough to permit a fabricating markup. In the second place, the definition of "common quality" only applied to certain types of wire rod and other important types of wire rod used by independent wire draw-ers and fabricators w-ere still sold at the old high, uncompetitive price. On March 1, 1966, the U.S. Steel Corporation announced it was withdrawing published prices on low carbon w-ire rod, in order to aggressively compete against imported wire rod. Salesmen from the U.S. Steel Corporation have offered wire rod to most independent wire drawers at a price competitive with imported wire rod during the past two years. This price decrease has been met by most of the other major domestic steel producers. At that time the Independent Wire Draw- ers Association commended the domestic steel industry on its decision to meet foreign competition in the market place. Now, while American mills are in some instances virtually offering to meet import prices on rods, they are on the other hand, totally unable to give delivery on wire rods even to the extent of 10 to 20 percent of the needs or requirements of most independent wire drawers. So the price offer is really a false token offer and is not a valid one, and not of very much use. There has been and still is, a very tight competitive market on wire rods. For example, according to the 7 March 1968 issue of The Iron Age: "In certain sections of the country, domestic steel producers are literally turn- ing away business. Wire rod is the only product actually on allocation, says one steel executive." Within the last two months American mills have all increased their rod prices in spite of President Johnson's requests to the contrary. They have done this by increasing quality extras and the size extras. This was not a base change. The price increase was accomplished by methods other than an open price base in- crease. Although there was also a subsequent $3.00 per ton increase in the base price of rods additionally. The result has been a definite increase in costs as far as independent wire drawers are concerned. Meanwhile, the domestic steel mills maintained, and in some instances, definitely reduced the prices of finished wire products to put the squeeze on the independents. PAGENO="0413" 2199 If an import quota, a border tax or a~ tariff surcharge is imposed on imported wire rod it will definitely result in a drastic increase in the total overall cost of wire rods to all of the independent wire drawers throughout America. In some instances it would literally threaten to put them out of business, and in most cases it would create a very definite hardship. The American mills simply cannot supply the present demand for rods. Yet the domestic steel industry continues to complain about steel imports and seeks Congressional approval of a steel import quota which would restrict wire rod imports. Without wire rod imports today, most independent wire drawers could not operate. A free market in wire rod is essential to the economic survival of independent wire drawers. Wire rod is a raw material, the same as iron ore. Last year, 30.8% of all iron ore consumed by the domestic integrated steel mills was imported. The independ- ent wire drawers believe the open-door policy should be maintained on wire rods just as it is on iron ore. The Independent Wire Drawers Association is opposed to import quotas or border taxes or any tariff surcharges on imported wire rod. As a matter of general policy the Independent Wire Drawers Association favors the enactment of the President's Proposed Trade Expansion Act of 1908, with one suggested amend- ment w-hich is discussed in Part IV of this Position Paper. IV. DURING THE KENNEDY ROUND THE UNITED STATES REDUCED TARIFFS ON FINISHED WIRE AND WIRE PRODUCTS A VULL 50 PERCENT BUT DID NOT REDUCE THE U.S. DUTY ON WIRE ROD, THIS INEQUITY SHOULD BE CORRECTED UNDER THE TRADE EXPANSION ACT OF 1968 BY AUTHORIZING THE PRESIDENT TO ELIMINATE DUTIES WHICH ARE 5 PERCENT OR LESS The Trade Expansion Act of 1902 authorized the President to completely elim- inate duties on articles with an ad valorem or an ad valorenl equivalent duty of 5 perecnt or less.' The Independent Wire Drawers Association and steel importer groups petitioned the Tariff Commission and the Trade Information Committee to place wire rod, an important industrial raw material, on the duty free list. Instead, in an effort to harmonize U.S. and E.E.C. steel tariffs, the U.S. trade negotiators slashed U.S. duties on wire and wire products a full 50 percent and made no change in wire rod duties. This is particularly unfortunate, since U.S. independent wire drawers face severe competition from imported fabricated wire products, particularly welded wire concrete reinforcing mesh. The duty on welded wire concrete reinforcing mesh (TSU'S Item No. 642.80) was reduced from 19 percent ad valorem to 9.5 percent ad valorem during the Kennedy Round. As an alternative to placing wire rod on the duty free list, the Independent Wire Drawers Association and steel importer groups urged a single duty for wire rod, since the price of wire rod generally varies at just about 4~ a lb. or $88.00 per metric ton, the breaking point for customs duty. Thus, the indepedent wire drawer is never quite sure what duty will be applicable. This is a matter of great inconvenience to steel importers and independent wire drawers and tends to create uncertainties in the trade. It w-as unfair to the U.S. independent wire drawers to reduce the U.S. customs duties on competing fabricated wire end products a full 50 percent and not have reduced the duties on his basic imported raw material-wire rod. In all fairness to the U.S. independent wire drawer, the small duty on wire rod should be com- pletely eliminated. Unfortunately, this cannot be accomplished under the pro- posed Trade Expansion Act of 1908. Therefore, we recommend that the Congress give serious consideration to authorizing the President to completely eliminate U.S. duties as part of a reciprocal trade arrangement where dhe duty involved is 5 percent ad valorem or ad valorem equivalent or less as was done in Section 202 of the Trade Expansion Act of 1902. `The U.S. tariff treatment of wire rod is as follows: Wire rods of iron or steel; other than alIo~yi iron or steel; not tempered, not treated, and not partly manufactured: TSUAS' Cents pes Item No. pound 608.70 00 Valued not over 4 cents per pound 1 6O8.7i1 00 Valued over 4 cents per pound 25 On an average, the ad valorem equivalent of these two specific dudes is appro~mately 5 percent. PAGENO="0414" 2200 V. CONCLUSION In the U.S. wire and wire products industry, imports of wire rod have been the economic salvation of the independent wire drawers. These imports have helped reduce the price of U.S. wire rod and now we are enjoying, to some de- gree, the benefits of a relatively free and open wire rod market in the United States. However, domestic steel mills, at the present time, are totally unable to give delivery on wire rods even to the extent of 10 to 20 percent of the require- ments of most independent wire drawers. Consequently, American independent wire drawers are dependent upon imported wire rod as their basic raw material. The imposition of a steel import quota, border tax or tariff surcharge would have a disastrous result on these small manufacturing firms. Therefore, the Independ- ent Wire Drawers Association favors an open door policy on steel imports and is opposed to the imposition of any restrictions on steel imports. The Independent Wire Drawers Association favors the enactment of the Presi- dent's "Trade Expansion Act of 1968" with the addition of an amendment au- thorizing the President to completely eliminate U.S. duties as part of a recipro- cal trade arrangement where the duty involved is 5 percent ad valoren~ or ad valorem equivalent or less in the hope that the present small nuisance duty on imported wire rod can be completely eliminated. The CIL&n~rAN. Thank you, Mr. Geller. Thank you Mr. Muntwyler. Are there any questions of the gentlemen at the table? Mr. Cnm'is. Mr. Chairman. The CHAIRMAN. Mr. Curtis. Mr. C-una~is. It is not a question but I would appreciate it if the previous witnesses representing the steel industry would respond to the points that have been made. I personally will send a copy of this testimony to them and ask them to respond. I think one of the main purposes of these forums is to have a con- frontation between people who have different points of view and I would be very much interested in what response the steel industry which testified this morning would have on the testimony that you gentlemen have given us. Then you would have an opportunity of course to reply further. Could the record be left open? The CHAIRMAN. The record is open. Mr. Cum~s. Very good. (The following letter was received by the committee:) UNITED STATES STEEL CORP., Pittsburgh, Pa., Jniij 18, 1968. Hon. THOMAS B. CURTIS, House of Representatives, Longwort Ii. Bvilding, TVasbington, D.C. DEAR MR. CURTIS: At the request of Mr. T. F. Patton, I am responding to your letter of June 24, 1968, which asks for comments on certain testimony made by Mr. Muntwyler, President of the Independent Wire Drawers Association before the House Ways and Means Committee on June 18, 1968. The circumstances outlined by Mr. Muntwyler evidence the need for some rea- sonable limitation on steel imports if a viable American steel industry both in- tegrated and nonintegrated is to be retained. The attached exhibit of AISI statistics demonstrates the tremendous market penetration achieved by imports of wire and wire products which were sold at prices well below domestic market prices. These imports had an early disruptive effect on the ability of American producers both integrated and nonintegrated to market their products profitably. Many nonintegrated wire drawers lowered their wire and wire product prices in an effort to meet this foreign competition and were supported in their efforts by the growing influx of foreign rods also selling at severely depressed prices. U.S. steel lowered its wire product prices in certain instances in order to be competitive. To endeavor to pinpoint domestic wire and wire product price deterioration chronologically or geographically to either group would be impossible. That the PAGENO="0415" 2201 root cause lay with the flood of low-priced foreign wire and then later of rod products is clear. It is a matter of record that during the late 1950's and early 1960's we elected to continue to sell our wire rod availability at profitable levels in remaining end use markets, since the extremely low-priced foreign small diameter rods rapidly captured the independent wire drawer rod market. Our sale of small diameter rods for redrawing had been reduced almost to zero by 1965. Faced with the alternative of discontinuing this product line and the operations of the related production facilities or attempting to meet import prices, we elected to do the latter for this specification of rod with individual rod users for specific periods. Since 1966 our wire rod mills have operated generally at a high level, but this incremental business has provided an inadequate return by itself and, obviously the procedure cannot be extended on all products. At no time did U.S. Steel indicate its intention or capability to entirely sup- plant imported wire rods. To the extent we have been able to negotiate supply contracts with customers that purchase foreign rod, delivery performance has been satisfactory with the exception of the most recent period during which unexpected production mill outages reduced availability at a time when there was abnormally high demand for rods due to strike hedge buying. A comprehensive study by the Senate Finance Committee staff showed that integrated steel companies, for the economic reasons similar to those that plagued the independent wire drawers, have discontinued operations at certain plants because of the lack of profitable business which was created in large measure by the great influx of foreign wire rod and fabricated wire products as shown in the attached exhibit. The adverse effect of low-priced wire rod and fabricated wire products on the domestic steel industry is graphically described by the Staff Study of the Committee on Finance Of the Unitde States Senate of December 19, 1967, where at Page 243 it details the serious impact: "LIST OF FACILITIES CLOSED DUE TO IMPORTS "Jones & Laughlin: Barbed wire and woven wire fence (February, 1065) ; nails (Aliquippa, March, 1966). "Armco: Barbed wire and fence (Houston, 1963) "Pittsburgh Steel: Merchant Trade Products Division (1959) ; remaining rod and wire operations (Monessen, June, 1966). "Colorado Fuel & Iron: Steelmaking facilities and hot mills for blooms, billets and rods (Buffalo, N.Y., 1963). "United States Steel: Steelmaking and finishing facilities of Donora plant. In this case, however, imports were not the only reason for closing the plant-- others include shifting markets, high costs of the mill, and air pollution (over a period of years 1961-64)." This certainly shows the end result of massive importation of an individual mill product: gradually reduced domestic availability caused by the abandonment of production facilities and attendant loss of employment opportunities. Mr. Muntwyler asserts that there have been times when major domestic steel mills refused to sell wire rod to Wire Sales Company. United States Steel has traditionally sold large quantities of semifinished products and other basic steel products to nonintegrated companies. We necessarily look to a strong and healthy nonintegrated steel manufacturing industry as a market for our products. We certainly have no attitude or general policy of refusing to sell available rod pro- duction to any class of buyer. In conclusion, it should be evident that if imports of wire rods and wire and wire products continue to increase the United States would become virtually de- pendent upon imports,. Under the steel quota bill neither the Independent Wire Drawers Association nor any other group served by imports would be harmed by quotas based on recent import levels. Imports also would have the opportunity to compete for any growth of the domestic market. The independent wire drawers would be protected against unlimited quantities of low-cost foreign wire and wire products which they now are faced with in the market place. The position paper of the Independent Wire Drawers Association, submitted to the Ways and Means Committee June 18, 1968, points out their similar concern for the adverse effect of imported wire and wire product competition. "In an effort to harmonize U.S. and E.E.C. Steel tariffs, the U.S. trade nego- tiators slashed U.S. duties on wire and wire products a full 50 percent and made no change in wire rod duties. This is particularly unfortunate, since U.S. inde- PAGENO="0416" 2202 pendent wire drawers face severe competition from imported fabricated wire products . . . ." We trust this will serve to answer the questions in your letter to Mr. Patton. Yours very truly, R. HEATH LARRY, Executive T7ice President, Pnblic and. Personnel Services, and Assistant to Cl, airman. IMPORT MARKET PENETRATION Wire rods Nails and staples Barbed wire Draws wire Year _______________________ ___________________ ___________________ __________________- Percent of Percent of Percent of Percent of Imparts U.S. Imparts U.S. Imparts U.S. Imparts U.S. market market market market 1949 5,731 0.7 2,366 0.3 100 0. 1 3, 199 0. 1 1950 112, 308 8. 9 67, 122 7. 1 9, 505 4. 0 20, 400 . 7 1951 122, 014 9.2 56, 304 6. 1 7,242 3. 1 33, 323 1. 0 1952 44, 005 4. 3 18, 509 2. 8 26, 250 10. 1 12, 595 . 5 1953 65,415 5.3 40,173 7.1 16,090 9.1 21753 .7 1954 39,849 3.6 92,694 14.1 53,380 28.8 44,979 1.8 1955 47, 762 2.9 132, 841 17.1 60, 084 35.0 46, 417 1.4 1956 64, 192 4. 1 113, 683 17. 1 62, 297 46.0 60, 045 1.9 1957 54,370 4.2 137,558 23.7 63, 108 52.2 82,063 3.0 1958 181,283 13.9 201,226 32.7 59,253 51.9 169,853 6.6 1959 447,747 26.2 314,931 44.8 78,287 61.9 317,512 10.3 1960 408,213 27.3 239,549 43.1 52,973 52.8 270,651 9.8 1961 451.210 28.1 252,730 43.5 82,466 53.0 237, 162 8.7 1962 64.4,611 35.0 281,595 47.0 66,601 47.6 313,149 10.9 1963 800,882 39.0 308,904 50.3 90,043 50.6 368,495 12.6 1964 952, 778 39. 8 309, 665 49. 6 72,424 47. 9 460, 327 14. 7 1965 1,283,627 46.3 329, 080 51.2 74, 856 41.6 520, 186 15. 1 1966 1, 150,303 42. 7 288, 987 47. 1 76, 506 31. 4 581, 049 16. 9 1967 1,076,467 41.5 229,485 41.3 69,407 40.6 575,368 18.3 1968 (4 months) 430, 078 39. 6 97, 264 44. 9 29, 657 33. 8 209, 015 17. 6 Soarce: Imparts, AISI; U.S. market, AIS-lO less AIS exports plus AIS imports. The CHAIRMAN. Any further questions? If not, again we thank you, gentlemen. Mr. M~NTWYLER. Thank you, sir. (The following telegram was received, for the record, by the committee:) DOWNEY, CALIF., June 14, 1968. Congressman WILBUII D. MILLs, House of Representatives, Washington., D.C.: We are opposed to steel import quotas. Our trade association representative for independent wire drawers will appear House Ways and Means Committee Tuesday, June 18, 1968. Please consider presentation. He states the case for many thousands of small independent businessmen. DAVID P. PiuRING, President, Diversified Wire c~ Steel Corp. The CHAIRMAN. Mr. Miranda. Mr. MIRANDA, Secretary, of the Industrial Wire Cloth Institute. Mr. Miranda? Mr. Hugo Neu. Mr. Nen if you will identify yourself for our record we will be glad to recognize you. STATEMENT OP HUGO NEU, CHAIRMAN, SCRAP INDUSTRY TRADE POLICY COUNCIL Mr. NEC. Thank you. My name is Hugo Neu. I am president of the Hugo Neu Corp. of New York City, which is owned by myself and my family. The main PAGENO="0417" 2203 activity of our company and its subsidiaries is the export of steel scrap, international trade in scrap and ore, and the shipping Of ore. Our com- pany has engaged in this world trade for 20 years and I have been in the business for 47 years. I am appearing `before you as chairman of the Scrap Industry Trade Policy `Council, which speaks for those firms in the United States that export iron and steel scrap plus some 300 iron and steel scrap proc- essors who, because of the depression in the industry, have to rely on exports to continue in business. With your permission I would like to file my complete statement for publication in the record of these hearings and will make a brief oral statement summarizing the position of the Scrap Industry Trade Pol- icy `Council. The CHAIRMAN. Without objection your statement will `appear in the record, Mr. Neu, following your oral statement. You are recognized. Mr. NEU. My general purpose in testifying today i's to oppose any unilateral restri'ctions in trade between nations and to support the Trade Expansion Act of 1968 submitted to Congress by President Johnson on May 18, 1968. My specific purpose is to oppose the', proposal that has been made `for import quotas for iron and steel. Since our Council experience relates' primarily to international trade in iron and steel scrap my testimony is limited to these areas. For the benefit of those members of this committee who are not familiar with our industry, let me say that our 1,500 companies convert iron and steel into raw material used by steel mills and foundries in the pro- duction of new steel. Unfortunately, there has been a steady decline in the proportion of scrap used in making new steel. As the result there `has `been lessening of demand for our products `in the dOmestic market. T'here also has been increasing spiraling of railroad freight rates on scrap making it economically impossible to move the products over long distances by rail. This has meant that our process must rely increasingly upon the export of products in order to stay in business. Troubled with the drop in domestic demands and higher transportation costs there has been a dramatic increase in the supply of domestic scrap, increased automo- bile production for example resulting in some 7 million vehicles annually being thrown into the national junk heap `and littering our cities and countryside. All `of this has produced an economic depression in our industry. Prices of some scrap `have dropped more than 50 percent in the last 10 years. Many of our yards are being forced out of business. Despite this, let me make it clear that unlike the"steel industry we are not ask- ing for government control. Foreign `steel mills have been almost the sole outlet for American obsolescent iron and steel on the west Coast, Gulf coast, and Atlantic coast with the exception o'f some small areas. Exports have been our lifesaver. Without the export rate scrap prices would be at an even lower level than today and our producers would have been `forced to close shop. Last year we exported 7.1/2 million net ions of scrap. This produced $245 million on the plus side in the balance-of-payments. 95-159-68--pt. 5-27 PAGENO="0418" 2204 Our statement shows scrap shipments over the past 10 years and the countries to whom we export. Looking at the 1967 figures you can see that one of every six tons of scrap produced in the United States went to foreign steel mills. Many of these foreign mills ship out the finished products back to the United States. When one realizes that much of the scrap comes from old cars one can easily draw a picture of what our landscape would look like if the export market for scrap were reduced. For example, I am interested in three shredding mills which are using every day about 1,000 cars plus refrigerators, washing machines and all kinds of light iron. We use about 750,000 cars per year in these three plants. They are located in Los Angeles, Boston a.nd outside of New York City. If you visualize that this 750,000 cars would not be consumed if there was no export market for scrap, you could visualize what the country- side would look like and this is only 10 percent of what is being scrapped every year in old cars. This is the major project. This is not a question of beautification but it is a question of eliminating the tremendous dirt which would be accumulated in the countryside. So it is a major problem which is before you gentleman to decide because if there is no import there will be no export. Those of us who are scrap exporters recognize that domestic steel makers are very important customers of ourselves and we want these customers to prosper for the entire scrap industry could not prosper unless there is a viable steel industry in this country. But we know something about our customers. We know that in order to compete effectively in world markets domestic industry must move rapidly ahead to match the technological development which is being achieved abroad. Only with these improvements can the American steel industry suc- ceed in maintaining its position in the world market but we can hardly expect capita.l improvement of this kind if our steel industry were to be granted Government protection against competition. The steel industry itself appears to recognize this because they buy machinery wherever they find it most convenient. They buy raw materials as well. The foreign machinery is better and less expensive, the steel industry imports it. If iron ore is cheaper the steel industry imports it rather than pur- chase domestic scrap or domestic ore. Last year for example the steel industry imported about 50 million tons of foreign iron ore abroad which competes directly with scrap iron and steel. In making this point we wish to make it clear that we are not requesting a shield against competition from foreign raw material. We export vigorously and competitively. We have not gone soft. I have spoken here of the adverse effect of steel imports restrictions on our domestic scrap industry, on our export of scrap and our own steel industry. There will be other adverse effects as well. Take for example~ some- thing from my own experience. My company is presently negotiating with the leading Japanese steel mills for the export from Arizona of PAGENO="0419" 2205 *~ome ~750 million worth of iron ore pellets over a period of 10 years slarting in 1970. The choice presently open to the Japanese steel mills is to supply their needs for these pellets from mines to be developed either in Arizona or in Australia. As a result, any import restriction on Japanese steel would fore- close this possibility for the export of Arizona products to Japan. Thus in the example I have given the results for our balance of pay- ments would be a double loss, about $750 million for favorable export loss directly and additionally large sums debited against our balance- of-payments as a result of the transfer of American sales to Australian mines. Import restrictions if adopted would have a long-term adverse effect in limiting assisting U.S. export trade and the choking of the possi- bility of expanding the trade. I summarize as follows: What steel import quotas will mean. First, upset our balance of trade. Two, cause further damage to the scrap industry. Three, adversely affect national defense. Four, stimulate inflationary trends. Five, accentuate the solid waste problem. Six, reproduce unemployment especially among the unskilled and semi- skilled who make up a large part of our labor force. Cut back the highway beautification program. Damage the domestic steel industry. Information supporting each of these points is included in the pre- pared statement. In conclusion I ask the members of this committee to remember that imported steel is partly an American product made from the scrap we export. Thank you. (Mr. Neu's prepared statement follows:) STATEMENT OF HUGO NEU, CHAIRMAN, SCRAP INDUSTRY TRADE POLICY COUNCIL Mr. Chairman and members of the committee, my name is Hugo Neu. I am president of the Hugo Neu Corporation of 45 Nassau Street, New York City, which is owned by myself and my family. The main activity of our company and its subsidiaries is the export of steel scrap, international trade in scrap and ore, and the shipping of ore. Our company has engaged in this world trade for 20 years and I have been in the business for 47 years. I am appearing before you as Chairman of the Scrap Industry Trade Policy Council, which speaks for those firms in the United States that export iron and steel scrap plus some 300 iron and steel scrap processors who, because of the depression in the industry, have to rely on exports to continue in business. A list of the members of our executive committee, representing firms across the country, is attached. Our general purpose in testifying today is to oppose any unilateral restrictions on trade between nations and to support the "Trade Expansion Act of 1968," submitted to the Congress by President Johnson on May 18, 1968. Because of our personal knowledge and experience in the international iron and steel scrap trade, we will limit our remarks today to the specific legislative proposals for quotas or ceilings on the import of iron and steel products. We are opposed to these quota proposals-on steel or any other products being imported into the United States. They would have disastrous implications for Our industry, which last year contributed 245.3 million dollars on the plus side of our ledger in the balance of payments through scrap exports to foreign steel mills. They would ignore the fact that the imported steel is in great part an American product, made from scrap produced by our industry within the United States. PAGENO="0420" 2206 They would result in more community blight-by adding to the pyramids of junked automobiles and other solid wastes now littering our cities and the countryside. They would lessen the competitive impetus for the further technological improvement of our domestic steel industry which is so essential for it to main- tain its position in the world market. THE SCRAP INDUSTRY TODAY For the benefit of those members of this Committee who are not familiar with the iron and steel scrap processing industry, let me say that our companies convert the nation's obsolescent iron and steel into a raw material used by steel mills and foundries in the production of new steel. There are approximately 1500 companies in this country engaged in this cycl- ing process. They take waste metals from manufactures; the iron and steel from wrecked buildings, ships, and railroad cars; abondonecl autos, refrigerators and other household products; and from these they manufacture usable scrap for steelmaking. Our industry plays an essential role in ridding our cities and countryside of ever increasing mountains of old cars, outworn equipment, and other waste materials. For example, rnddern scrap processing plants in which my own com- pany has an interest, located on both the East and West Coasts, are presently converting automobiles into scrap without smoke, dust, or other pollution at the rate of about 1,000 cars per day for each of our plants. The product we produce also plays an important role in the nation's con- servation program, for the use of scrap by mills and foundries makes it possible to conserve irreplaceable natural resources. One and a `half tons of iron ore, one ton of coke, and a half-ton of limestone can be saved for every ton of scrap used in making new steeL Unfortunately, in relation to total steel production in the United States, there has been a steady decline in the proportion of scrap purchased and used in mak- ing new steel. Steel mills have increased their dependence on basic oxygen furnaces, and are gradually dis~arding the old standard open hearth. But the basic oxygen furnace consumes only 30 percent scrap on the average in contrast to the 40-50 percent which open hearths consume. It is predicted that within a few years' time there will be no more open hearths. A rapidly increasing spiral of railroad freight rates on scrap has made it eco- nomically impossible to move the product over long distances. This has meant that coastal processors of scrap have come to rely increasingly upon the export market of their product in order to maintain their existence. Coupled with lessening demand and higher transportation costs, there has been a dramatic increase in the supply of scrap. Increased automobile produc- tion, for example, has resulted in some seven million vehicles annually being thrown on the nation's junk heap. These factors have brought about an economic depression in our industry. The price of scrap has dropped by more than 50 percent in the last 10 years. For example, a No. 2 bundle, which is the equivalent of one `baled car, brought an average price of $20.42 in 1067. Today it stands at $18.67. Compare this to $42.86 in 1956. That means the processor had to purchase the car, burn out all of the non-metallic components, remove all of the no-ferrous metals, bale it and then pay all transportation costs to the mill for less than 20 dollars. One result: many of our yards `have `been forced out of business. According to business census statistics, there were 2700 companies in our business in 1958. By 1964, this figure bad dropped to 1800. We know that the downwhrd trend is continuing. Let me make it clear to this Committee that unlike the steel industry, we are not asking for government controls. Even though we are considered an essential defense industry by the Office of Emergency Planning, even though the Depart- ment of Interior views us as a key to the conservation of natural resources, even though the national beautification program has recognized the vital role we play in ridding the landscape of unsightly wastes, we still believe in private enterprise. We are `investing our own funds in seeking technological breakthroughs that will make our product more competitive and many of the companies in the in- PAGENO="0421" 2207 dustry got together just last year tO organize a Scrap Industry Research Foundation. THE ROLE OF SCRAP EXPORTS Until improved steelmaking and scrap processing technology lead to more scrap use, we need to bridge the gap between supply and demand by continuing our drive for overseas markets. Without the stabilizing influence of an export trade, scrap prices would be at an even lower level than they are today and our coastal producers, who are handicapped by high freight rates to majo~- consumthg areas, would have been forced to close shop. Foreign steel mills have been almost the sole outlet for America's obsolescent iron and steel on the Pacific Coast, the Gulf Coast, and to a lesser degree, the Atlantic Coast. Export sales have been a lifesaver by removing a part of the surplus that has been building up as a result of decreased domestic consumption and the increased supply. Beginning in 1954, when it became apparent that steelmaking technology was working against domestic scrap use, we have made it our business to promote our product vigorously in foreign markets, as you will see on this table of scrap tonnage, and dollar volume. TONNAGE AND DOLLAR VOLUME OF SCRAP EXPORTS Year Net tons Value -- --- ----- -~ _--~ ----- ~- 1954 1695861 $51612364 1955 5,171,774 178,559,324 1956 6,446,461 300,619,633 1957 6,765,992 329,511,242 1958 2,927,860 95,411,786 1959 4,939,043 167,715,580 1960 8, 039,668 241, 572, 314 1961 9,713,863 353,928,015 1962 5,112,266 149,037,480 1963 6,363,617 174,611,169 1964 7,881,055 243,064,735 1965 6,248,728 199,745,000 1966 5,773,666 172,418,000 1967 1 7,504,177 245,302,138 1 Preliminary. The significance of this trade Is apparent when you view Its relationship to the total consumption of purchased scrap. Last year, in 1967, the total domestic and foreign consumption of purchased scrap was 42.6 million net tons, with a value of 2.5 billion dollars. `Thus, our exports of 7.5 million tons meant that one out of every six tons went to a foreign steelmaker. When you realize that much of this scrap comes from item-s like old cars, refrigerators, rtoves, and other solid metallic wa-stes, one need not draw a picture of what -our landscape would be like if export markets were reduced. Historically our largest customer has been the steelmaking industry of Japan. Last year Japan purchased 5.3 million net tons of U.S. scrap for its mills. - When we speak of increasing America's export trade, we must always bear in mind that trade is a two-way street. By creating rather than reducing harriers, we end up -by injuring our own economy, our own industries, -and our own workers. There is no question in our mind that restrictions on the importation of new steel from Japan would mean an automatic cutback in scrap exports. The result would be a blow to our balance of `payments, further depression for the scrap iron and steel industry, unemployment of our workers, and a -demand that tax money be utilized as local governments are forced in to the handling of solid, metallic wastes-a function that has always ~een a role of private enterprise. One has to look at imported steel and realize that it is partly an American product-made from scrap we export. - PAGENO="0422" 2208 Members of this Committee should know that we are busy promoting and selling our product all over the world. Last year, in 1967, we shipped to the following countries. Country: Net ton.~ Argentina 22, 287 Benelux 2, 322 Canada 542,373 France 13, 510 West Germany 1, 142 Italy 217, 139 Japan 5,300, 261 Korea 306, 757 Mexico 747, 280 Spain 85, 150 Taiwan 83,076 Total ~ 504, 177 Gentlemen, though the figures I have given you on our exports indicate a healthy and vigorous trade, with 1967 being our best year since 1964, the pos- sibility that this country will adopt a quota system on steel imports has already had an impact on our business. Japanese mifis are playing it safe and reducing their buying and their inven- tories of U.S. scrap. In the first four months of this year, from January through April, our exports dropped 656,371 net tons over the same period in 1967. Our four month shipments in 1968 totaled 1,745,564 tons. During the same period the year before, we shipped 2,401,935 tons. It appears to us that as prudent businessmen, the Japanese steelmakers are keeping their inventories low in the event that they may have to cut their production. It is a straw in the wind. Many other U.S. industries may also suffer if the Congress acts to provide an umbrella for the domestic steel industry. Though it is far afield from our business, I wonder if the U.S. companies who use imported steel to manufacture products sold abroad will ~e able to remain competitive in the marketplaces of the world. And I wonder what the impact will be on steel service centers or steel distributors who have been buying foreign steel for their customers here at home. THE STEEL INDUSTRY'S DOUBLE STANDARD `~\Te realize that import restrictions on foreign steel have been a fond dream of some domestic steel producers for many years. The reasons are obvious. The most important limiting factor in prices and profits of domestic steel pro- ducers have been the competition afforded by imported steel. We who are concentrating in the export field recognize steelmakers are the biggest of customers of the entire industry. We exporters want the domestic industry to prosper, for the scrap industry could not prosper unless there is an economically viable steel industry in this country. But at the same time, we know something about our customer. We know that in order to compete effectively in world markets it is essential that the domestic steel industry move rapidly ahead in steel technology which will match the technical advances being achieved ajroad. Take, for example, the steel plants which were built in the United States immediately after World War II. In order to compete effectively with the latest plants in Japan and elsewhere, it is essential that the best of American "know- how" and American technology be used to the hilt. We can hardly expect capital improvements of this kind to be made if our industry were to be afforded Government protection against competition. Yet it is only with these improvements that American steel can succeed in maintain- ing its position in the world market. The true answer to this question is that all segments of American industry must always be prepared to compete with foreign producers by making the best possible use of modern technology. Our steel industry itself appears to recognize this axiom in its approach toward the proceurement of machinery and raw PAGENO="0423" 2209 materials. These are purchased by the steel industry from whatever source can supply the best merchandise at the best price. Thus if foreign machines are better and less expensive than American machines the steel industry has recognized the facts of life by importing those foreign machines. For another example, take iron ore-which competes with vast stocks of do- mestic scrap as a basic raw material in steelmaking. Last year the domestic steel industry imported approximately 50 million net tons of iron ore from foreign mines. Domestic iron ore and scrap is certainly available for our steel furnaces. There is no problem of supply. Yet the U.S. industry sees no inconsistency in buying its equipment and raw materials from foreign sources in the open market while demanding a closed market for its products. In making these points, we wish to make it clear that we are not requesting a shield against competition from foreign raw materials, such as iron ore, which competes directly with scrap. We exporters are vigorous and competitive. We haven't gone soft. OTHER ADVERSE AFFECTS OF IMPORT RESTRICTIONS I have spoken here of the adverse effects of steel import restrictions on our domestic scrap industry, on our exports of scrap, and on our own steel industry as well. There will be other adverse effects as well. Take one case which is famil- iar to me from my own personal experience. My company is presently involved in negotiating with leading Japanese steel mills for the export from the United States to Japan of some $750,000,000 worth of iron ore "pellets" to be produced from mines in Arizona over a period of 10 years, starting in 1969. The choice presently open to the Japanese mills is to supply their long-term needs for these "pellets" from mines to be developed either in Australia or in Arizona. I fear that the result of any import restriction on Japanese steel would be to foreclose this possibility for the export of Arizona products to Japan. The result, from our balance of payments, would be a double loss: About $750,000,000 of favorable exports would be lost directly; and additional large sums would be debited against our balance of payments as the result of the transfer of American capital to finance the Australian mines. This example can no doubt be multiplied in case after case. The plain fact is that import restrictions, if adopted, would have a long-term adverse effect on a broad range of American industries dependent on export. They can be expected not only to limit existing export trade but also to choke off possibilities for ex- panding that trade. SUMMARY On the basis of this testimony, it is our hope that the Congress will carefully consider the consequences of any new and artificial restraints on world trade. We hope that you will take the opposite position and enact the Trade Expansion Act of 1968. In summary, we argue that quotas on steel imports could: 1. Further upset our balance of trade. The 245 million dollars we receive from foreign scrap sales and the sub- stantial amounts coming in from steel exports would be drastically reduced. 2. Effect national defense. On June 12-last week-Governor Price Daniel, Director of the Office of Emergency Planning, publically stated that "scrap metals have always been considered part of our resource of strategic materials; this is especially true of iron and steel scrap . . . any serious effect in this sector of our economy would, in turn, have an adverse effect on our defense position in an emergency." 3. Stimulate inflationary trends. The greatest deterrent to unreasonable price increases by the domestic steel industry is the competition afforded~ by foreign steel products. Import barriers will automatically produce higher prices on domestic steel, thus further inflating the economy to the detriment of the American consumer. 4. Accentuate the soild waste problem. President Johnson, in his March 8, 1968, message to Congress said that "the problem is not only to learn how to get rid of these substances (solid waste)-but also how to convert waste economically into useful materials." PAGENO="0424" 2210 Much of this conversion process would be cutback by a loss of foreign markets. Our streets and roads would be littered with ever increasing mountains of used cars and other solid wastes. 5. Produce unemployment. Many of the 50,000 employees of the scrap industry are directly involved in the export trade. Reduction of exports will bring job losses for employees. in our firms. It will also reduce job opportunities for those workers employed by firms which sell domestically but which also rely on export sales. 6. Cutback the highway beautification program. There is growing recognition that no amount of screening or landscaping can possibly hide the ever-mounting piles of junked cars along the nation's highways. Beautification can be best accomplished by accelerating the scrap cycle, by finding new uses and new markets for these discards of our civiliza- tion. Reduction in scrap exports will make the job more difficult, because more and more scrap from old automobiles is being exported. 7. Cause further damage to the iron and steel scrap industry. Without the export market's leveling effect on prices; the bottom will drop out of the market. For many processers, it will not be economically possible to stay in business. This is particularly true for firms located in our coastal areas. 8. Damage the domestic steel industry. Foreign steelmakers hampered by American quotas would defend them- selves by reducing prices to customers who now import steel from the United States. This would be a death blow to our steel industry's remaining export market. I would like to thank the members of this committee for the opportunity you have given me to present the views of the Scrap Industry Trade Policy Council on the tariff and trade proposals now before you. We will be most happy to furnish you with any additional facts on our industry which will be helpful to your further study of the subject. _______ SCRAP INDUSTRY TRADE P0LICR COUNCIL Chairman: Hugo Neu, Hugo Neu Corp., New York, N.Y. EXECUTIVE COMMITTEE Nathan S. Addlestone, Steelmet Inter- Ralph Michaels, Hyman-Michaels Co., national Corp., Charleston, S.C. Chicago, IlL E. J. Afram, Afram Brothers Co., Mu- S. A. Newirth, Associated Metals & Mm- waukee, Wisconsin erals Corp., New York, N.Y. Gerard V. Bonomo, ~Schiavone-Bonomo Joseph S. Schapiro, National Iron & Corp., Jersey City, N.J. Metal Co., Terminal Island, Calif. Myron L. Chase, Schiavone-Chase Corp., Joseph Schiavone, M. Schiavone & Sons, New York, N.Y. Inc., New Haven, Conn. Joseph Cohen, General Scrap Iron, Inc., Leonard Schnitzer, Schnitzer Steel Prod- Providence, Rhode Island ucts Co., Portland, Oregon Stanley Diefenthal, Southern Scrap Richard Schwartz, Commercial Metals Converting Co., Ltd., New Orleans, La. Co., Dallas, Texas Frank B. Gordon, Harcon Corp., Chel- Marshall Shapiro, The Purdy Company, sea, Mass San Francisco, Calif. Paul W. Learner, The Learner Co., Oak- Leslie Sussman, General Metals of Ta- land, Calif. coma, Inc., Tacoma, Wash. Edward D. Levy, Edward Levy Metals, Sol Walker, Sol Walker & Co., Tampa, Inc., New Orleans, La. Fla. The CHAIRMAN. Thank you, sir. Are there any questions? Mr. Cuna'is. Yes. I wonder if you would clear up one point for me. You point out the decline of the use of scrap by our domestic steel industry essentially because they are moving to the oxygen process. Yet there is an increase apparently in the exporting of scrap abroad but yet it has been pointed out that Japan and Western Europe to some degree were ahead of us in using the oxygen process. PAGENO="0425" 2211 Why is there an increased market for scrap iron? Mr. ,NEU. That is a good question. The steel industry abroad has grown. Therefore, formerly, say 10 years ago, the Japanese steel indus- try used 40 percent steel, 40 percent scrap on 20 million tons imported which meant 8 million tons. Today they use 10 percent on 70 million tons so that it still means 7 million tons. Mr. CURTIS. I see. It is true that they use less scrap per ton but they are producing more tons and therefore they are a bigger market for scrap. Mr. NEU. Right. Mr. Cmrns. Thank you. The CHAIRMAN. Are there any further questions? Mr. BUSH. Mr. Chairman. The CHAIRMAN. Mr. Bush. Mr. BUSH. Mr. Neu, one of my colleagues told me that your com- pany, together with a company from Arizona, is involved in a project of selling several million tons per year of iron pellets to the steel mills in Japan which he tells me will substantially and favorably affect our balance of payments. Recognizing that we have a time problem, could you tell us just briefly for the record about this project and what effect it might have. Mr. NEU. It is a low grade mine which is being studied at the moment, being opened up. It looks qñite favorable. We are negotiating for the sale of five million tons of these pellets for 10 years to Japan. It has been indicated to us that Japan recognizes the necessity of having to buy more products or more material in the United States because of their exports of steel to theUnited States. I am, frankly, as I stated before, afraid if there was any such thing as restrictions on the import of steel that they would not buy these pellets. Mr. BUSH. That answers the question. Thank you, sir. I have no more questions. The CHAIRMAN. Are there any further questions? If not, again we thank you for coming to the committee. Mr. NEU. Thank you. The CHAIRMAN. Mr. 0-annaway. Mr. Gannaway, we are happy to have you with us today and with you Mr. Scans. STATEMENT OP CHARLES B. GANNAWAY, CHAIRMAN, AD HOC COMMITTEE OP GALVANIZED ELECTRICAL TRANSMISSION TOWER FABRICATORS; ACCOMPANIED BY DAVID T. SEARLS, COUNSEL Mr. GANNAWAY. Thank you very much. Mr. Chairman and members of the House Committee on Ways and Means, I certainly appreciate the opportunity of being afforded the opportunity to appear in front of you this evening on a subject that vitally affects my industry. My name is Charles B. Gannaway. I am currently consultant to and a member of the board of directors of Flint Steel Corporation of Tulsa. Okla. PAGENO="0426" 2212 Prior to retiring on January 1, 1968, I was executive vice president of this company and the operating head. My service with this company extends from 1935 to the present time. We have been in the business of fabricating transmission towers since 1937. I am chairman of the ad hoc committee of Galvanized Transmission Tower Fabricators who, on June 21, 1966, filed a complaint with the Honorable Lester D. Johnson, Commissioner of Customs alleging that the Italian Government was subsidizing exports of cell transmission towers into this country. This committee is comprised of representatives of nine principal domestic fabricators of transmission towers, with a total of 18 plants. Galvanized electrical transmission towers are used by the utility companies to support high voltage lines for the transmission of electric power across country. With me today is Mr. David Searls, a senior partner in the law firm of Vinson, Elkins, Weems, and Searls, in Houston. Mr. Searis is counsel for our ad hoc committee. Mr. Chairman, with your permission I would like to make a few brief comments concerning the problems that we face with respect to foreign imports of transmission towers and I have filed for your con- sideration and offered for the record a more complete statement. The CHAIRMAN. That will appear in the record without objection. Mr. Gannaway. Mr. GANNAWAY. Our company first became aware of the serious situation that we faced in the importation of transmission towers from Italy in 1964 when we lost a rather sizeable contract to an Italian fab- ricator. The amount of the contract was in the neighborhood of one and a quarter million dollars. We lost this contract by something like $70,000. At that time I visited with members of the TI/A. I visited with our representatives in the House and Senate and we made a rather intensive study in an effort to convince the Tennessee Valley Authority that it was in our interest and the interest of this country to purchase these towers locally but the contract was eventually awarded to the Italians. Imports of galvanized transmission towers have been increasing at an alarming rate since 1964. In the year 1965, 25 percent of the total domestic market was fur- nished by foreign concerns. We are a small company and, realizing that we were facing increased competition from foreign sources selling at prices significantly below what we at Flint could meet, we enlisted the help of other domestic producers and formed an ad hoc committee in early 1966, the purpose being to determine what was happening to our industry as a result of these imports. Our investigation revealed that the Italian producers of electrical transmission towers shipping into this country were being subsidized in one way or another by the Italian Government under Italian law No. 639 of July 5, 1964, and in the amount of approximately $25 per ton and also they were being subsidized in the amount of 7.8 percent of the export price under Italian law No. 570 of July 31, 1954, and as implemented by law number 1162 of November 15, 1964. PAGENO="0427" 2213 it is our estimate that the total subsidies paid under these two Italian laws amounts to somewhere between $38 and $45 per ton. Our further investigation revealed that our Treasury Department was not imposing countervailing duties against the Italian producers as required under section 303 of the Tariff Act of 1930 and the law plainly states that subsidies shall be, countervailed. Mr. Chairman, the above-mentiOned conditions were pointed out in our submission to Director of Customs and the Treasury Department on June21, 1966. Since our filing and `to date on all electrical tower contracts on which foreign competition was invited to bid an estimated 191,000 tons or 88 percent went to foreign producers and 26,500 or a mere 12 percent went to our domestic producers. I might add that all governmental agencies invite foreign bids. This does not happen to be the case with private power companies. We do not, as a company, bid on a great many of these large governmental contracts, the reason being that we are not competitive, we have not been competitive for the last several years with the Italians and can- not go to the expense of preparing a bid that would be obviously lost. After 10 months of investigation, the Treasury Department issued an order effective May 22, 1967, that provided for the countervailing duty assessment of $20 per net ton against the refund of galvanized electrical transmission `towers under Italian law 639. I highly commend the Treasury for the action taken. However, according `to judicial interpretation of a grant or bounty under our countervailing law I believe the Treasury Department should have countervailed in the full amount of our request. Now, after another 14 months we still have not received a de- cision from the Treasury Department on the remission of taxes under Italian `law No. 570, and strongly feel that Treasury should counter- vail in the full amount of the su'bsidy granted under this law. We have made repeated contacts with the Treasury Department for a decision but as of this time we have not received any decision one way or the other. I wish to again emphasize that we have very serious problems with our subsidized competition and with Our much higher labor cost and with the subsidies that are granted to our competition we cannot com- pete for the domestic tower business in this country. We do not believe that it is within the interest of our national security that the domestic tower fabricators `be completely put out of business by foreign competition. Were it not for the fact that we do receive a number of contracts from private utility companies who will not accept foreign bids, we would not have been able to maintain our plants at a percent of capacity. Mr. Chairman, we urge that in fairness to us and to our employees and to the baJance-of-payments problem that this `country faces and in the interest of our national security, as I mentioned, that this case be brought to a successful conclusion as soon as possible. My more complete statement has been `filed for your consideration, sir. PAGENO="0428" 2214 The CHAIRMAN. Yes, it will be included in the record. (Mr. Gannaway's prepared statement and statement of David T. Searls, counsel, follow:) STATEMENT OF CHARLES B. GANNAWAY, JR., CHAIRMAN OF THE AD Hoc COMMITTEE OF GALVANIZED ELECTRICAL TRANSMISSION TOWER FABRICATORS INTRODUCTORY COMMENTS My name is Charles B. Gannaway, Jr. I am currently a member of the Board of Directors and consultant to Flint Steel Corporation, which is headquartered in Tulsa, Oklahoma. Prior to retiring on January 1, 1068, I Was Executive Vice President and chief operating officer of Flint Steel and in the fabricating tower business for over 40 years. Also, I am Chairman of the Ad Hoc Committee of Gal- vanized Electrical Transmission Tower Fabricators (representing 05% of the available production), which filed the complaint With the Treasury Department that Italy was subsidizing exports of steel transmission tower components. The Ad Hoc Committee consists of the following fabricators with a total of eighteen plants: Anchor Metals, Hurst, Texas; Bethlehem Steel Corp., Bethlehem, Pa.; Blaw-Knox Company, Pittsburgh, Pa.; Creamer and Dunlap, Tulsa, Okla- homa; Flint Steel Corp., Tulsa, Oklahoma; Lehigh structural Steel Co., Allentown, Pa.; Muskogee Iron Works, Muskogee, Oklahoma; Nashville Bridge Co., Nashville, Tennessee; and United States Steel Corp., Pittsburgh, Pa. With me today is Mr. David T. Searls, a senior partner in the law firm of Vin- son, Elkins, Weems and Searls in Houston, Texas. Mr. Scans is counsel for our Ad Hoc Committee. I would like to provide some information as to what a small company faces in dealing with foreign imports. Flint Steel has two plants located in Oklahoma and Tennessee and employs 225 workers in the production of electrical transmission towers. Although imports of galvanized fabricated structural steel units for the erec- tion of electrical transmission towers, especially those produced in Italy, have been coming into the United States at an increasing rate since 1956, the influx of these imports became quite alarming to our company and its workers in 1065 because they commanded over 25% of the market in the United States and were selling at prices significantly below what we could meet. What should a company like ours do in that situation? First, we evaluated our competition, both domestic and foreign. Our evaluation showed that foreign competition had taken a large share of the increasing demand that should have been produced by domestic producers and their employees. In addition to being a problem for us, imports of electrical transmission towers were, and still are, an industry problem also. What alternatives were available to Flint Steel to combat this competition? Wholly aside from the fact that any effort to solve the problem by purchase of lower cost foreign steel mill products would have further aggravated an already critical problem for the steel industry, it would not have tended to solve the problem of the tower industry because here the real problem is the granting of rebates to encourage exports. Since the Italian Government was granting rebates to encourage exports and these rebates are established within the Italian Government's tax system, any cost saving that Flint Steel might realize by purchasing foreign steel could readily be offset by the Italian Govern- ment merely by granting higher rebates under their tax system to make their producers more competitive in the export market. We wanted to go with reliable availability of domestic suppliers of steel mill products. Consequently, Mr. Chairman, we immediately recognized that only the govern- ment could assume the responsibility of providing an international trade climate in which our business enterprise could compete fairly. Since our problem with foreign competition was generated by subsidies from the Italian Government, we enlisted the help of other domestic producers to seek government assistance under our countervailing duty laws. With this as background, I will describe our experience in pursuing counter- vailing duties against imports of Italian electrical transmission towers. PAGENO="0429" 2215 REQUEST FOR COUNTERVAILING DUTIES ON IMPORTS OF ELECTRICAL TRANSMISSION TOWERS FROM ITALY The Ad Hoc Committee under date of June 21, 1966, filed with the Commissioner of Customs certain information which they believed was sufficient to require the imposition of countervailing duties under Section 303 of the Tariff Act of 1930 (19 U.S.C. § 1303) on imports of these goods from Italy. This information showed that the countervailing duty should be in the sum of (1) at least $24.32 per net ton as the subsidy granted under Italian Law No. 639 and (2) an amount equal to 7.8% of the export sales price which is the subsidy made under Italian Law No. 570. These refunds are not granted on market sales in Italy. Imports of electrical transmission towers increased during the period 1956 through 1965 to the point that one of the major Italian tower manufacturers was able in 1965 to contract for the sale of 57,000 net tons, or over 25% of the estimated market in the United States. Even more distressing is the fact that since May, 1966, on all electrical transmission tower contracts on which foreign competition was invited to bid, an estimated 191,000 tons went foreign and 26,000 tons went to domestic producers. More simply stated, while countervailing duties were being pursued during the last two years, foreign producers received about 88% of the total business that they were invited to bid on in the United States while domestic producers received only 12%. Approximately 34% of the total electrical transmission tower business placed with foreign producers during this period was ordered by our federal and local governmental agencies; and to the best of my knowledge, all governmental agencies invited foreign bids. This is not always the case when private utilities seek bids for electrical transmission towers. This foreign market penetration has become intolerable. If current uncer- tainties connected with imports and our foreign trade policy generally should con- tinue, it will be too great a risk for our industry and other industries to continue to make large capital investments in facilities. If we cannot compete in our own market, we face the prospect of extinction. PRODUCT DESCRIPTION Ulectrical transmission towers are designed and built to support transmission wires and cables through which electrical current in potentials of 66 KY to as much as 500 KY is transmitted between electrical generating stations and sub- stations. Most transmission towers are specially designed for the terrain over which the transmission line will pass `and to carry the particular stresses and loads which will be imposed on the tower, by wind pressure, by the pulls exerted by the wires and cables when attached to the tower structure, and by other forces. The structural steel units for electrical transmission towers are sold in the United States to private utilities and government agencies, such as the Tennes- see Valley Authority, Bonneville Power Administration, and the Bureau of Reclamation. ITALIAN LAWS THAT PERMIT BOUNTIES OR GRANTS Law No. 639 of July 5, 1964, of the Republic of Italy provides for refunds of customs duties, border fees, stamp taxes, mortgage and insurance taxes, regis- tration taxes, manufacturing excise taxes, vehicle taxes, and other like taxes `on the exportation of selected products, including fabricated galvanized structural steel units for electrical transmission towers. The report of the Minister of Finance on the introduction of Law No. 639 to the Italian Cabinet clearly demonstrates that the intent of the Italian Govern- ment was to use such law as a financial inducement to encourage its export program. The following statement made by the Minister of Finance described the social and economic conditions that the provisions of Law No. 639 were designed to overcome: "Legislative measure was in answer to the ascertained necessity of cor- recting, even though partially, those disparities which, because of different social `and fiscal systems in variOus countries, were `altering at Cur expense the competitive position of our products compared to foreign products, putting Italian industry in a position of inferiority. * * * PAGENO="0430" 2216 "For this purpose, the enelosed 1)111 has been designed to provide, beginning January 1, 1964, for reimbursement of custom duties and expen~es and of internal indirect impositions different from the general transaction tax, which have burdened, directly or indirectly, on the manufacture of metal- mechanical industry products." It is significant to note that the Court of Justice of the European Economic `Community questioned the refunds granted under Italian Law No. 639 as being contrary to the provisions of the Treaty of Rome. As a result of the court's investigation, the Italian Government has progressively reduced from $26.13 per net ton to $5.23 per net ton the refund on exportation of products of its metal- mechanical industry to Common Market countries. However, it continued to maintain the rate of $26.13 per net ton on exports to the United States and other countries not members of the Common Market. Law No. 570 of July 31, 1954, as implemented by a decree of the President of the Republic of Italy and by Law No. 1162 of November 15, 1964, provides for the refund of transaction taxes (more commonly referred to as IGE taxes) on the exportation of Italian products generally. The Italian transaction *tax is a pyramiding tax in that the product is subject to the tax based on its invoice price at each transfer of title. A highly integrated producer of a given product suffers less incidence of transaction tax in the manufacture of his product than a manufacturer with less vertical integration in his manufacturing facilities. However, the rate of refund for the exported product is a fixed per cent of the invoice value which is available to all exporters regardless of the amount of tax incurred. In other words, a large producer is granted a refund on exports regardless of whether or not it paid any transaction taxes. ENFORCEMENT OF COUNTERVAILING DUTY LAW While this case involves only fabricated structural steel units used in the erection of electrical transmission towers, great importance is attached to the decision yet to be made on other taxes refunded under Italian Law No. 570. American commerce generally will be affected by this decision. It offers some help to one of the foreign trade problems facing the American business commu- nity which the President recently recognized publicly by saying that: "American commerce is at a disadvantage because of the tax systems of some of our trading partners. Some nations give across-the-board rebates on exports which leave their ports and impose special border tax charges on our goods entering their country." One of the most pressing problems faced by the United States today is the constant deficit in our balance of payments. The domestic tower fabricators feel that no country has the right to obtain dollars from the United States by subsidizing exports through tax rebates while using the same taxes to discourage imports into its territory. Because the Countervailing Duty Law affords an im- portant means of dealing with this unfair trade practice which is disruptive of international trade, the domestic tower fabricators urge that this case be brought to a successful conclusion as soon as possible. STATEMENT OF JUDICIAL INTERPRETATION OF U.S. COUNTERVAILING DUTY LAW AND THE SUBsIDIES GRANTED BY TAX REBATES IN FOREIGN COUNTRIES BY DAvID T. SEARLS OF THE LAW FILM OF VIN5ON, ELKIN5, WEEMS & SEARLS, HOUSTON, TEx. JUDICIAL INTERPRETATION AS TO WHAT Is A BOUNTY UNDER COUNTERVAILING DUTY LAW In the most wide-sweeping and explicit language used by a court in defining the broad scope of the Countervailing Duty Statute in applying to all types of boun- ties or grants, the Court of Customs Appeals stated in Nicholas ~ Co. v. U.S., 7 Ct. Cust. App. 97, affirmed 249 U.S. 34, 1916: "The plain, explicit, and unequivocal purpose of this section is that when- ever a foreign power or dependency or any political subdivision of a govern- ment shall give any aid or any advantage to exporters of goods imported into this country therefrom, whereby they may be sold for less in compe- PAGENO="0431" 2217 tition with our domestic goods, the duties on them shall be increased to that extent, and it is the result of such aid or advantage that Congress seeks to countervail, regardless of whatever name or in whatever manner or form or for whatever purpose it was given, and whether the thing done be called `allowance,' `bonification,' `bounty,' `grant,' `drawback,' or what, matters not; the question is whether or not the result would be to admit the mer- chandise to our markets at a lower cost price." In the Nicholas case Treasury had imposed countervailing duties on imported British spirits after finding that the British government gave an allowance of a specified sum upon export of the item from the United Kingdom. An appeal was taken from the Court of Customs Appeals to the United States Supreme Court, which affirmed the lower court in an opinion written by Mr. Justice McKenna. The British contended that the allowance that provided for exportation was not a bounty but was compensation to the distiller and rectifier for costs due to excise restrictions. In reviewing this contention the Supreme Court said the issue was much more simple than the British were attempting to make it and concluded that the allowance paid to the exporter of spirits resulted in the sale of such spirits to other countries being "relieved from a burden that their sale in the United Kingdom must bear. There is a benefit, therefore, in exportation,-an inducement to seek the foreign market." The Su- preme Court addressed itself to the meaning of the term "bounty" or "grant" used in the Tariff Act of 1913 and made the following definition: "The statute was addressed to a condition, and its words must be con- sidered as intending to define it, and all of them-'grant' as well as `bounty'- must be given effect. If the word `bounty' has a limited sense, the word `grant' has not. A word of broader significance than `grant' could not have been used. Like its synonyms `give' and `bestow', it expresses a concession,- the conferring of something by one person upon another. And if the `some- thing' be conferred by a country `upon the exportation of any article or merchandise,' a countervailing duty is required by Paragraph E." In an earlier case the Supreme Court of the United States had supported the Treasury finding that sugar exported from Russia was receiving a bounty; Treasury had applied countervailing duties to this commodity under the Tariff Act of 1897. In that case the effect of the Russian law was to impose a tax on all sugar produced but to remit that tax upon all sugar that was exported. The court said in part: "When a tax is imposed upon all sugar produced, but is remitted upon all sugar exported, then, by whatever process or in whatever manner, or whatever name, it is disguised, it is a bounty upon exportation." (Downs v. U.S., 187 U.S. 496 at 515.) The Downs and Nicholas cases are very important to this country. Both cases establish the fact that the statute in using the terms "bounty" or "grant" meant to include any type of advantage given to the exportation of goods whether by direct or indirect means and whether by tax remission or otherwise. Although both of these Supreme Court decisions antedated GATT and interpreted ~arlier provisions of the Tariff Statute, it is believed that unless the Supreme Court of the United States overrules these decisions that they must be controlling in the application of the present Countervailing Duty Statute. Under the Protocol of Provisional Application of the GATT, the signatories provided that they would apply that part of the agreement which dealt with countervailing duties "to the fullest extent not inconsistent with existing legislation", and in any event the treasury decision in deciding part of our transmission tower case shows they recognize that GATT is not an impedient to the application of the Countervailing Duty Statute which remains unaffected by the General Agreement. TAX HARMONIZATION BETWEEN MEMBER COUNTIUES OF EUROPEAN ECONOMIC COMMUNITY If the use of the internal tax systems of foreign countries to grant refunds on exports remains unchecked, the steel industry-indeed all industries-will be placed at an even greater disadvantage in the future since all EEC countries are to adopt a uniform value-added tax system by 1970. In many of these coun- tries, including Italy, this will mean that the VAT system will replace the ex- isting transaction tax. Reportedly Italy is considering reducing its payroll taxes, PAGENO="0432" 2218 which are not rebatable, for turnover taxes which are rebatable under the GATT rules. It is possible that the taxes under Italian Law No. 639 could be incorporated into the VAT system. The new value-added tax will raise the existing rates in all countries except France. Although it is not certain what the tax rate will be, it is generally considered that it will be about 15% as compared to Italy's present rebate of 7.8% on these transmission tower components. Germany has already gone to the value-added tax this year with a 10% rate which will increase to 11% on July 1, 1968, and presumably to around 15% by 1970. The proposed rates under the VAT systems will be higher by virtue of a shift in the incidence of taxation between different tax sources. Consequently, the border tax will be higher for imports, and the tax remission on exports will be greater. Furthermore, the border tax is imposed on the CIF value of the steel products we send into EEC countries plus the tariff duties added to the CIF price. And in Germany the cost of freight from the port to the first inland point of destination is added into the base upon which the value-added tax rate is imposed. In effect this will likely more than offset any reductions of tariffs recently made by EEC countries during the Kennedy Round Negotiations. It will be more costly for us to export to these countries, and foreign manufacturers will be given greater incentive to export to the United States. Another objective of the tax harmonization program is to eliminate tax frontiers between EEC countries. Taxes would not be refunded on exports or imposed on imports when the sales transaction takes pince between these EEC countries. Tax harmonization was brought about in the EEC because there were complaints within the Community that the system of providing compensation tax on imports and tax rebates on exports did not work fairly. It was alleged that differences in tax structure of member countries lead to inequities. West Germany lodged the most vigorous protest against these inequities. The Report of the Subcommittee on Foreign Economic Policy of the Joint Economic Committee of the Congress of the United States stated: "The European Common Market practice of rebating their own indirect taxes on their exports and levying these same taxes on imports-a practice sanctioned, incidentally, by the rules of the GATT-constitutes a con- spicuous form of discrimination against U.S. exports. Moreover, similar border adjustments by the United States would be an ineffective weapon, neither mitigating nor offsetting the discriminatory process, because the tax structure of the Unitud States places relatively small emphasis on indireet taxes. This issue is one that the United States will have to resolve." (90th Congress, First Session, 1067) In an industry closely related to the transmission tower business, Mr. John R. Morrill, of Kearney-National, Inc., commented on the effect of the remission of these turnover taxes on circuit breakers. He cited a striking example to demon- strate the importance of the remission of these taxes on the ability of foreign manufacturers to sell in the United States market: "In addition to such grants, these governments also give credits or rebates of taxes because of export shipments. They suspend excise, value-addGd or turnover taxes which would normally be paid on materials these manu- facturers use. "In France, the remission of the value~added tax allows a French circuit- breaker manufacturer to sell a high-voltage breaker in the US at around $200,000 while the French power system pays around $350,000 to these same manufa~cturers for comparable breakers. US suppliers price comparable breakers at $300,000. "Furthermore, foreign governments finance development programs. It seems likely that French President Charles deGaulle did this for the French manufacturer, Dde, so that Delle could develop the 735-ky circuit breakers for Hydro Quebec." (Electrical World, March 11, 1068) TREASURY'S INTERPRETATION OF COUNTERVAILING DUTIES COVERED BY GENERAL AGREEMENT ON TARIEFS AND TRADE The United States is a contracting party under the General Agreement on Tariffs and Trade (commonly referred to as GATT). The GATT permits signa- tory nations to impose countervailing duties, but under more stringent require- ments than those of our domestic legislation. Article VI of the GATT, the pro- PAGENO="0433" 2219 vision authorizing countervailing duties,~ requires a showing that the importation of the products in question either causes or threatens "material injury to an established domestic industry, or is such as to retard materially the establishment of a domestic industry". Section 303 of the Tariff Act of 1930 requires no such showing. The most significant difference, however, is that Article VI of the GATT pro- hibits the imposition of countervailing duties where the exporting country has exempted "such product from duties or taxes borne by a like product when des- tined for consumption in the country of, origin or exportation, or by reason of the refund of such duty or tax." [Ad Article XVI of GATT makes the distinction in this language: "The exemption of an exported product from duties or taxes borne by the like product when destined for domestic consumption, or the remission of such duties or taxes in amounts not in excess of those which have accrued, shall not be deemed to be a subsidy."] This exception under GATT is commonly described as prohibiting counter- vailing duties as an offset to "indirect taxes". "Indirdct taxes" is understood to mean those taxes assessed against the product itself as distinguished from, a tax related to the manufacturer. There is no such exception, and surely no such distinction, either statutory or judicial, under the United States law. When the United States became a contracting party to GATT, it entered into the agreement pursuant to a Protocol of Provisional Application. This Protocol provided, inter alia, that Part II of the GATT (Part II includes Article VI relating to countervailing duties) would not affect existing inconsistent domestic legislation of the Contracting Parties passed prior to October 30, 1947. Inasmuch as our domestic law relating to countervailing duties is part of the Tariff Act of 1930, it clearly falls within the anTbit of the Protocol of Provisional Applica- tion. Consequently, it would not be violative of the GATT for the United States to impose countervailing duties pursuant to the standards of Section 303. However, it may be that the delay we are experiencing in obtaining a decision on the rebate of the Italian transaction tax is prompted by a desire to follow the GATT "indirect taxes" exception when deciding whether to impose counter- vailing duties under Section 303. We submit that the distinction between direct and inidrect taxes and the tax incidence of each was unsound when formulated in GATT; that most economists today repudiate the rationale behind such differ- ence in treatment under GATT. Most important, we emphatically contend that under our Countervailtng Duty Law such distinction is totally irrelevant. The concept of a "subsidy" as enunciated by our courts is controlling; Treasury must recognize these judicial decisions which hold that any rebate of taxes would be a grant or bounty. CURRENT 5TATUS OF ENFORCEMENT OF COUNTERVAILING DUTY LAW IN THE SALES OF IMPORTED ITALIAN STRUCTURAL UNITS FOE ELECTRICAL TRANSMISSION TOWERS After almost ten months of investigation, the Treasury Department issued an order on April 21, 1967, that provided for an assessment commencing May 22 of a countervailing duty of $20.00 per net ton on galvanized frabricated structural steel units for the erection of electrical transmission towers imported from Italy. The Treasury Department is to be highly commended for taking this action against the refunds granted under Italian Law No. 639, and indeed we appreciate their attempt to deal with this trade practice. However, according to the judicial interpretation of a grant or bounty under our Countervailing Duty Law, we believe that an additional amount should have been assessed under Italian Law Na 639. To date (almost two years since our complaint was filed) Treasury has not mad~ a decision on the remission of taxes under Italian Law No. 570. We strongly feel that the full amount of 7.8% of the export value of fabricated steel units con- stitutes a grant or bounty under our statute and that countervailing duties in such an amount should be promptly imposed. The amount of subsidy involved in Italian Law No. 570 will vary with the export sales price. In the electrical transmission tower case, we are requesting countervailing duties that range from $14.00 to $22.00 per net ton. 95-159-68-pt. 5-28 PAGENO="0434" 2220 (The following letter was subsequently received by the committee for inclusion in the record:) Vixsox, ELKIN5, WTEEMS & SEARLS, Houston, Tew., May 31, 1967. Re Imposition of countervailing duties on imports of Italian galvanized electrical transmission towers. Mr. CHARLES B. GANNAWAY, Jr., Chairman, Ad Hoc Committee, (laivan ized Transmission Tower Fabricators, Flint ~Steei Corp., Tulsa, Okia. DEAR MR. GANNAWAY: On behalf of the Ad Hoc Committee, you have asked our opinion as to the advisability of and the procedure for contesting the Secre- tary of Treasury's decision to impose countervailing duties on the import of Italian electrical transmission towers only to the extent of $20 per net ton under Italian Law 639 and to impose no countervailing duties with respect to Italian Law 570. Before relating our detailed legal analysis of the problem, it seems appropriate to summarize, at the outset, our recommendations which are as follows: (1) That the Secretary of the Treasury, or his delegate, be approached with a view to demonstrate that the amount of the countervailing duty as set forth in his Order filed Api~il 20, 1967, should be increased because it underestimates the subsidy or bounty resulting from refunds pursuant to Italian Law 039 and does not reflect at all the subsidy or bounty resulting from refunds pursuant to Italian Law 570; (2) That in the event the Secretary of the Treasury, or his delegate, does not accept such a position, we should request him to ask for the Opinion of the Attorney General of the United States as to the applicability of countervailing duties in the instant circumstances; (3) That in the event the Secretary of the Treasury, or his delegate, refuses to so request the opinion of the Attorney General or in the event the Attorney General does not sustain our position, the procedural steps outlined in Section 1516(b), Title 19, of the United States Code, be complied with in order that the Customs Court may be petitioned to uphold our position and impose the desired countervailing duties; and (4) That in the event the importers of Italian electrical transmission towers protest the imposition of the countervailing duties in the amount of $20 per net ton and proceed to litigation in the Customs Court, an amicus curiae brief be filed in that action on behalf of the domestic fabricators. OPINION The statute which authorizes the imposition of countervailing duties on im- ports into the United States is Section 303 of the Tariff Act of 1930, as amended 19 U.S.C. § 1303. This section provides as follows: Whenever any country, dependency, colony, province, or other political sub- division of government, person, partnership, association, cartel, or corporation shall pay or bestow, directly or indirectly, any bounty or grant upon the manu- facture or production or export of any article or merchandise manufactured or produced in such country, dependency, colony, province, or other political sub- division of government, and such article or merchandise is dutiable under the provisions of this chapter, then upon the importation of any such article or merchandise into the United States, whether the same shall be imported directly from the country of production or otherwise, and whether such article or mer- chandise is imported in the same condition as when exported from the country of production or has been changed in condition by remanufacture or otherwise, there shall and levied and paid, in all such cases, in addition to the duties other- wise imposed by this chapter, an additional duty equal to the net amount of such bounty or grant, however the same be paid or bestowed. The Secretary of the Treasury shall from time to time ascertain and determine, or estimate, the net amount of each such bounty or grant, and shall declare the net amount so de- termined or estimated. The Secretary of the Treasury shall make all regula- tions he may deem necessary for the identification of such articles and merchan- dise and for the assessment and collection of such additional duties. PAGENO="0435" 2221 This section, as it appeared in earlier Acts, has been interpreted by the Courts to have extremely broad application. In Nicholas c~ Co. v. United States, 7 Ct. Cust. App. 97, aff'd, 249 U.S. 34 (1916), the Court stated: The plain, explicit and unequivocal purpose of this section is that whenever a foreign power or dependency or any political subdivision of a government shall give aid or any advantage to exporters of goods imported into this country there- from, whereby they may be sold for less in competition with our domestic goods, the duties on them shall be increased to that extent, and it is the result of such aid or advantage that Congress seeks to countervail, regardless of whatever name or in whatever manner or form or for whatever purpose it was given, and whether the thing done be called "allowance," "bonification," "bountij," "grant," "drawback," or what, matters not; the question is whether or not the result would be to admit the merchandise to our markets at a lower cost price. (Em- phasis added.) Likewise, in somewhat more succinct language, the Supreme Court stated, in Downs v. United States, 187 U.S. 496 (1962): When a tax is imposed upon all sugar produced, but is remitted upon all sugar exported, then by whatever process, or in whatever manner, or under whatever name it is disguised, it is a bounty upon exportation. The Court's intepretation of this statute was just as broad in Passavant V. United States, 169 U.S. 16 (1898) and United States v. Hils Bros. Co., 107 Fed. 107 (2nd Cir. 1901). It should be pointed out that the courts which decided the cases cited were construing language more narrow in scope than the present language of section .303. For instance, in the Downs case, the Court was construing the language of Section 5 of the Tariff Act of 1897 which was virtually identical to the present language of Section 303 except in one important particular. Whereas, the present language of Section 303 prohibits "any bounty or grant upon the manufacture or production or export of any article or merchandise" imported into this country, Section 5 of the Tariff Act of 1897 prohibits "any bounty or grant upon the exportation of any article or merchandise" imported into this country. ~Ihe expansion of the language to include the "manufacture or production" can probably be attributed to the fact that in the Hills Bros. case, the argument was made that the excise tax refunds upon the export of sugar from Russia was a refund Or bounty upon production rather than upon exportation. The Court held that the refund was in fnt a refund upon exportation and not a refund upOn production. This hol~' ! the Hills Bros. case was quoted in the Downs case, which likewise held :~ the bounty was upon exportation. Although no legislative his~o'.y to this effect has been found, it seems likely that Congress .amertde~ the language cf the statute to make it broad enough to prevent evasion of the countervailing duty by the exporting country's denominating or disguising some type of subsidy as being upon "production." ~\ e believe that a reading of section 303, especially in light of the judicial interpretations, makes it clear that any time a government exempts from or remits taxes upon exported goods that are levied upon or not remitted for goods destined for domestic sale, such action requires the Secretary of the Treasury to impose a countervailing duty to the extent of the net amount of such exemp- tion or remission. It is quite clear that the duty of the Secretary of the Treasury in this regard is mandatory rather than discretionary. The Attorney General of *the United States so advised the Secretary of the Treasury in his Opinion dated June 2, 1936, 38 Op. Atty. Gen. 489, by stating that "it will thus be observed that the duties of the Secretary of the Treasury under the Act are mandatory." In the same Opinion, the Attorney general observed that: "It is obvious from the language itself that the scope of the Act is very broad." From what has thus far been said, it would seem that all that would be necessary to effectuate the imposition of countervailing duties would be to show that the refunds under Italian Laws 570 and 639 are not made with respect to goods destined for domestic sale in Italy. However, the situation is complicated by the fact that the United States is a Contracting party under GATT (General Agreement on Tariffs and Trade). GATT also permits signatory nations to impose countervailing duties, but under more stringent requirements than those of our domestic legislation. Article VI of GATT (the provision authorizing countervailing duties) requires a showing that the importation of the products in question either causes or threatens "material injury to an established domestic indu~try~ or is such as to retard materially the establishment of a domestic PAGENO="0436" 2222 industry." Section 303 requires no such showing. Further, Article VI of GATT prohibits the imposition of both anti-dumping and countervailing duties to compensate for the same subsidization situation, whereas United States law contains no such prohibition; however, the United States has never attempted to levy both types of duty on the same importation. The most significant difference, however, is that Article VI of GATT prohibits the imposition of countervailing duties where the exporting country has exempted "such product from duties or taxes borne by a like product when destined for consumption in the country of origin or exportation, or by reason of the refund of such duty or tax." This exception under GATT is commonly described as prohibiting countervailing duties as an offset to "indirect taxes." "Indirect taxes" is understood to mean those taxes "indirectly" imposed on the manu- facturer or producer by virtue of being assessed "directly" against the product itself (perhaps a sales tax on a finished product is the best example of a tax imposed directly on the product). There is no such exception, either statutory or judicial, under the United States law. When the United States became a contracting party to GATT, it entered into the argeement pursuant to a Protocol of Provisional Application. This Protocol provided, inter alia, that Part II of GATT (Part II includes Article VI relating to countervailing duties) would not affect existing inconsistent domestic legisla- tion of the Contracting Parties passed prior to October 30, 1947. Inasmuch as our domestic law relating to countervailing duties is part of the Tariff Act of 1930, it clearly falls within the ambit of the Protocol of Provisional Application. Consequently, it would not be violative of GATT for the United States to impose countervailing duties pursuant to the standards of section 303, which are ad- mittedly at variance with the standards of Article VI of GATT. However, it is our understanding that the Secretary of the Treasury, perhaps at the behest of the Secretary of State, has indicated his intention to follow the GATT `indirect taxes" exception when deciding whether to impose countervail- ing duties under section 303. Indeed, the Treasury Department has publicly stated the foregoing to be their position. See Hearings on H.R. 1535, Customs Simpli- fication Act of 1951, before the House Committee on Ways and Heans 16 (1951) The Contracting Parties to the General Agreement on Tariffs and Trade, Anti- Dumping and Countervailing Duties 9-10 (1958). This position is taken despite the fact that the Treasury Department does not feel that GATT supersedes our domestic legislation as is evidenced by the fact that in none of the instances where countervailing duties havebeen imposed (see 19 C.F.R. ~ 12.24(f) for a listing of such items) has a showing of material injury been made. Because of the position taken by the Treasury Department, it may well be that we will be limited to arguing that countervailing duties should be imposed in the instant situation even under the GATT exception for indirect taxes. Such an argument can be made on two different bases. First, it can be pointed out that the refunds under Italian Laws 570 and 639 are made on a fiat-rate basis; that is, these refunds are calculated on a product-by-weight basis without regard to the taxes actually paid by the particular exporter. The common result of a fiat- rate refund procedure, even when the fiat rate is determined with every inten- tion to refund only the average taxes actually paid and nothing more, is that some exporters will receive more by way of refund than they actually paid in taxes and others will receive less. Because of this inherent difficulty, a fiat-rate refund at best can be considered only a refund of "estimated" or "average" taxes and not a refund of actual "duties or taxes borne by the like product" as the GATT exception provides. It is acknowledged that even under GATT, if the re- fund exceeds the amount of taxes actually paid, the excess should be consid- ered a subsidy. See Anti-Dumping and Countervailing Duties, a Report of a Group of Eaperts for the General Agreement on Tariffs and Trade 20 (1961). An argument of considerable force can be made to the effect that if a govern- ment choose to premise its refunds on a fiat-rate or "estimated" basis, where it is certainly impractical, if not impossible, for the country of importation to de- termine whether the refund exceeds the amount of taxes actually paid, the ex- porting country should expect such exported goods to bear the burden of counter- vailing duties or, at the very least, the exporter to have the burden of proof as to the amount of direct taxes actually paid by him. Support for such an argu- ment may be found in a recent EEC decision, The Commission of the European Economic Community v. The Republic of Italy, Case No. 45/64 (Court of Justice of the European Communities, 12-1-65), wherein the Court dealt specifically with PAGENO="0437" 2223 Italian Law 639. Although the opinion of the Court did not accept the ECC Commission's argument that the flat-rate refund was violative per se which argu- ment had been accepted and recommended by the Advocate General at the hear- ing of the case, the Court did hold as follows: "Since the Republic of Italy freely chose a flat-rate method, it must prove that in all cases this method remains within the limits of Article 96 [Countervailing Duties provision of the EEC Treaty]." Thus, the Italian Government was ordered to furnish the necessary informa- tion, supported by figures, regarding the products in question. A second approach to the position that the imposition of countervailing duties in this instance would not be inconsistent with the GATT exception would be to argue that the taxes forming the basis of, the refunds under Italian Laws 570 and 639 are not, at least in the greater part, the type of "indirect taxes" envisioned by the GATT exception. These taxes, it ~vi1l be recalled, include custom duties on the importation of zinc into Italy, transaction (IGE) taxes on product transfers at every stage of production beginning with the raw materials, and transaction taxes on the furnishing of heat, light and power which can be directly traced to the manufacturing process. It can readily be seen that most of these taxes cannot be traced any more directly into the finished product than can a "direct" tax such as an income tax. It can be said that such taxes find their way into the cost of the end product by virtue of being part of the total cost of manufacturing the goods finally produced, but the same can be said of an income tax which is concededly a "direct taxj" The situation envisioned by the GATT exception is that where a transaction or sales tax is levied on the transfer of a finished product from one entity to another before being exported and that tax is refunded or where a transfer of a finished product is made f.o.b. the exporting country and all such export sales are exempted from the exporting country's normally imposed sales tax. Such a position is given considerable support by the language of the GATT exception which provides: "No product of the territory of any contracting party imported into the terri- tory of any other contracting party shall be subject to anti-dumping or counter- vailing duty by reason of the exemption of such product from duties or taxes borne by the 111cc product when destined for consumption in the country of origin or exportation, or by reason of the refund of such duties or taxes." Emphasis added.) The terms "such product" and "like prod~uct" are meaningful only as a refer- ence to the phrase "product. . . imported into the territory of any other contract- ing party" at the beginning of the sentence. The taxes imposed upon raw mate- rials or semi-finished stages of production, to say nothing of taxes on heat, power aiid light, can hardly be said to be imposed on a product "like" the product which arrives in the importing country. In essence, not every tax that is "indirect" in the sense that it is imposed upon some form of property as opposed to being im- posed upon an economic entity, is "borne" directly by the finished product. It would be formalistic indeed to except from the imposition of countervailing duties, the exemption or refund of certain taxes, simply because of their de- nomination, which can be no more directly traced into a finished product than an income tax. As we understand the facts, the type of taxes which formed the basis for the refund under Italian Laws 570 and 639 are too remote to be traced directly into the products being imported into the United States~ If relief cannot be obtained from the Secretary of the Treasury, or his dele- gate, we would suggest asking him to request the Attorney General's Opinion as to the applicability of Section 303. Section 306 of Title 5 of the United States Code requires the Department of Justice to render all legal opinions requested by certain specified persons in the Executive Branch of the government, includ- ing the head of the Treasury Department. Section 304 of Title 5 of the United States Code authorizes the head of any Eiecutive Department to require the opinion of the Attorney General on any questions of law arising in the adminis- tration of his Department. Of course, it is within the discretion of the Secretary of the Treasury whether he makes such a request of the Attorney General. Con- sequently, it is difficult to asses the probability of his so doing in the present situation. The Attorney General has on three prior occasions given opinions re- lating to countervailing duties and, as mentioned earlier in this opinion, has indicated both that the application of such duties is mandatory and not discre- tionary and that Section 303 has a "very brOad" application. See 38 Op. Atty. Gen. 489 (1936) : 39 Op. Atty. Gen. 261 (1939) : 39 Op. Atty. Gen. 282 (1939). PAGENO="0438" 2224 In the event the administrative procedures outlined above do not result in a satisfactory decision to impose additional countervailing duty, it is recommended that the necessary procedural steps be taken to place the mater within the juris- diction of the Customs Court. Section 1583 of Title 28 of the United States Code vests jurisdiction in the Customs Court as follows: "The Customs Court shall have exclusive jurisdiction to review on protest the decisions of any Collector of Customs, including all orders and findings entering into the same, as to the rate and amount of the duties chargeable and as to all exactions of whatever character within the jurisdiction of the Secretary of the Treasury. . . ." It has been held that this exclusive jurisdiction of the Customs Court includes all protests made pursuant to Section 1516(b) of Title 19 of the United States Code. See worth. American Cement Corporation v. Anderson, 284 F.2d 591 (D.C. Cir. 1960). Section 1516(b) governs protests by American manufacturers of Treasury Department findings as to value of, classification of and rates of duties on imported goods. Before detailing the procedural steps required by Section 1516 (b), it should be pointed out that if it ultimately becomes necessary to litigate this matter in the Customs Court, the Ad Hoc Committee will rio longer be able to function as such. Each of the procedural steps under Section 1516(b) must be taken by the companies represented on the Ad Hoc Committee as individual entities, although each company will be filing identical papers to comply with each step of the procedure. See AIannfactnrers and Producers of Goat, Sheep and Cabretta Leath- ers. etc. v. United States, 21 C.C.P.A. 591 (1934). Section 1516(b) sets forth the following procedure to come within the juris- diction of the Customs Court: (1) The domestic manufacturer shall make a written request of the Secretary of the Treasury to furnish the classification of and the rate of duty, if any, im- posed upon designated imported merchandise of a class or kind manufactured, produced, or sold at wholesale by him; (2) If dissatisfied with the status quo as reflected by the Secretary of the Treasury's response to that request, the domestic manufacturer must file a complaint with the Secretary setting forth a description of the merchandise and the classification and rate of duty he believes to be proper, and the reasons for that belief; (3) If the Secretary decides that the domestic manufacturer is correct, he shall issue an order changing the classification and rate of duty and so inform the complainant. If the Secretary decides that the status quo is correct, be shall so inform the complainant. If dissatisfied with the decision of the Secretary, the complainant must, within 30 days after the date of such decision, notify the Secretary that he desires to protest the classification of or rate of duty assessed upon the merchandise in question; (4) Upon receipt of such notice of intent to protest, the Secretary will publish notice of his decision of the proper classification and rate of duty and of the domestic manufacturer's desire to protest. Thereafter, the complainant shall be notified of all entries of such merchandise after publication of the notice by the Secretary at the ports of entry designated by the complainant in his notice of desire to protest. The Secretary of the Treasury shall direct the Collector at such port to notify the complainant immediately when the first of such entries is liquidated. Within 30 days after the date of mailing to the complainant of notice of such liquidation, the complainant must file with the Collector at such port a protest in writing setting forth a description of the merchandise and the classification and the rate of duty which he believes to be proper; (5) A copy of such protest will be mailed by the Collector to the consignee or his agent within 5 days after the mailing thereof so that such consignee or his agent shall have the right to appear and be heard as a party in interest before the United States Customs Court; and (6) The Customs Court will then take jurisdiction of the protest and the case will be set for hearing. Sections 2631, et seq. of Title 28 of the United States Code set forth the proce- dure to be followed in the Customs Court. Among these procedural provisions is Section 2638 which provides that Section 1516(b) cases shall be given prece- dence on the docket. Section 1516(b) cases are also given precedence in the Court of Customs and Patent Appeals, pursuant to Section 2602 of Title 28 of the United States Code. PAGENO="0439" 2225 If this matter reaches the Customs Court, we would no longer be faced with the problem of reconciling the imposition of the desired countervailing duty with the standards set forth in Article VI of GATT. It is our opinion that even if a trade agreement such as GATT should conflict with domestic legislation, the domestic legislation should control. This is so even though under interna- tional law, the United States would be deemed guilty of violation of the inter- national trade agreement. In the present matter, however, as we explained above, the domestic legislation is not in conflict with GATT because of the Protocol of Provisional Application. It should be pointed out that it is quite possible that the Secretary of the Treasury's decision to impose countervailing duties to the extent of $20 will be protested by the importer of Italian electrical transmission towers. If so, domes- tic manufacturers do not have the right to intervene as parties-in-interest in such an action under the Customs Court's Rules of Procedures. However, Rule 35 of the Customs Court's Rules provides that the Court may permit other parties to appear as am~icns cariae and file briefs on the legal questions involved. Such amicus curiae are not permitted to participate in the trial of the issues involved. We believe that it would be advisable to request the Court to permit us to file amicus curiae briefs in the event the importers do bring their protest to the Customs Court. Inasmuch as domestic manufacturers are apparently not per- mitted to participate as parties-in-interest, the outcome of that litigation should not prejudice the domestic manufacturers' own protests pursuant to section 1516 (b). As a protective measure, it may be advisable to attempt to intervene even though no provision for intervention is made so as to lessen the chance of some type of res judicata or collateral estoppel argument being successfully made in the subsequent section 1516(b) case. In conclusion, therefore, we believe that there iS a good legal basis for the imposition of additional duty to countervail the refunds under Italian Laws 570 and 639 and that such action should be sought first with the Treasury Department and then, if necessary, in the Customs Court. On the basis of the authorities cited and the arguments set forth above, we believe the possibility of success in one or the other of these forums justifies proceeding in the sug- gested manner. Very truly yours, DAVID T. SEARLS, Counsel.. The CHAIRMAN. Are there any questions? Mr. CuuTI5. Yes. The CHAIRMAN. Mr. Curtis. Mr. CURTIS. First I want to thank Mr. G-annaway for his statement and for coming before us and giving us this information. I am deeply interested in the subject matter. To some degree you have pointed up some of the inadequacies that you have experienced in application of the countervailing duty statute. I am wondering if ~OU have any recommendations of where the law might be amended in a statutory way that would make it more useable. Mr. GANNAWAY. Do you mean law 303? Mr. CURTIS. Yes. Mr. GANNAWAY. Mr. Congressman, I don't believe the law needs to be amended. I think it needs to be just followed. Mr. CURTIS. Pardon me. Would you repeat that. Mr. GANNAWAY. I say I don't feel that the law needs to be amended. I think it needs to be followed and it has not been followed. The law is on the books. Maybe I should direct that question to Mr. Searis. Mr. CURTIS. Yes, please respond to that if you would. Mr. SEARLS. MTe don't think there needs to be an amendment of this law, Congressman, because the law makes it mandatory upon the Sec- retary of the Treasury to impose countervailing duties any time that there is a bounty or grant made by a foreign country and, if the Sec- retary of the Treasury w-ould just go ahead and impose these counter- PAGENO="0440" 2226 vailing duties because of the remission of taxes under Italian Law 570, tha.t would take care of the matter as far as these electric transmission towers are concerned. (See letter dated July11, 1968, at bottom of the page.) Mr. CcTRTIS. In your position statement you refer to the testimony of John R Morrill of Kearney-National. Inc. I am familiar with this. It is possible to make the countervailing duty remedy more comprehen- sive perhaps. but I agree with you that it could be used right now with greater effect. I would also like to say for the purpose of the record here that the very fact tha.t you don't have to prove damage, w~hich some people point out as a weakness is in my judgment the very strength of the countervailing duty. In these areas of unfair trade practices, just as we found in our fair trade laws and our antitrust laws domestically it is very difficult t.o prove damage. Therefore we use the device of treble damage and other techniques to provide the individual companies that are affected with a remedy that answers the economic problem. If we would have this kind of self-discipline built into international trade I think we would have a lot less of these unfair trade practices being utilized. I am most hopeful that the administration people who tend to audit these hearings will pay attention to these points and will pay atten- tion to what you have said here. I feel a great deal of the reason we have these problems today, these serious problems of imports. ha.s been the failure, not just of this ad- ministration but as a~ Republican I must say t.ha.t it was true in the Eisenhower administration, the failure to use the tools that we have when legitimate cases were made against unfair trade practices. The administration didn't really respond. I am very grateful to you gentlemen for taking the time to present this case to us. Mr. GANNAWAY. I mentioned this TVA contract. Had the $20 a ton been assessed at that time, we would have won this contract by the neighborhood of $190,000 at the $20 a ton that is being assessed now against Italian Law 639. Mr. CURTIs (presiding). The committee has heard testimony over the years from some governmental agencies like T\TA a.s to purchasing. Allegations have been made that they are not very careful about look- ing to see whether or not there are these kind of subsidies on the for- eigners part and whether or not there are also cost items imposed on our domestic uroducers which the foreign competitor is not subject to. I want to thank you on behalf of the chairman and dismiss you. (The following letter was subsequently received by the committee:) ITINsoN, ELKINs, WEEMS & SnARLS, Houston., Tex., July 11, 1968. Hon. WILBTJR MILLS, Chairman of the Ways and. Means Committee, House of Represeata.tives. U.& Congress, Washington, D.C. DEAR SIR: On June 18, 1968, Mr. Charles B. Gannaway testified on behalf of the tower fabricators Ad Hoc Committee to discuss the problems which these domestic concerns encountered from subsidized foreign imports; he related the delay experienced in getting the Treasury Department to render a decision with respect to the rebate of indirect transaction taxes by the Italian government to PAGENO="0441" 2227 Italian exporters. Representative Thomas Curtis asked Mr. Gannaway and my- self if anything needed to be done to strengthen our Countervailing Duty Statute to guard against subsidized foreign products. Our answer at that time was that the Countervailing Duty Statute was reasonably adequate, and the main in- gredient required was proper enforcement by the government. I would ask that this letter be included as part of the record to supplement our testimony on the question asked. Judicial interpretation of our Countervailing Duty Statute makes it clear that any time a foreign government exempts from or remits taxes upon exported goods while such taxes are levied upon or are not remitted for goods destined for domestic sale such action constitutes a subsidy which requires the Secretary of Treasury to impose a countervailing duty to the full extent of the amount of such exemption or remission. Treasury in 1951 and again in 1958 publicly stated its intention to follow the distinction made in the General Agreement on Tariffs and Trade between the remission of direct and indirect taxes. [Hearings before House Committee on Ways and Means, August 6-September 19, 1951, 82nd Cong., 1st Sess., p. 16; Response to Questionnaire from GATT, see GATT Antidumping and Countervailing Duties. Report of Group of Experts, p. 139 (1958).] How- ever, these statements have been opinions of Treasury and not administrative decisions. To our knowledge Treasury has never ruled on the question so that it should feel free to conform to the Supreme Court interpretations of our statute. These judicial interpretations make any distinction between direct and indirect taxes totally irrelevant. It is clear that remission of any type of taxes on exports constitutes a subsidy within the meaning of our statute. The Protocol of Pro- visional Application of the GATT clearly exempted existing statutes; and the Countervailing Duty Act has been in effeCt since 1897, so that it obviously comes within the grandfather clause of GATT. Furthermore, Treasury has recognized and understood this fact, since in applying the Countervailing Duty Statute it does not require any showing of injury, which is required by the GATT. We submit that earlier Treasury statements about adhering to the distinction be- tween direct and indirect taxes were in conflict with the existing statute. The current disenchantment by many economists with the entire rationale behind the direct and indirect tax distinctions made in GATT should make it easier for Treasury to conform its present views to our Countervailing Duty Law and treat the remission of any taxes as a subsidy. The need for Treasury today to speak Out in support of the existing Counter- vailing Duty Statute and conform its interpretation to judicial decisions is most important in view of the tax harmonization agreement of the European Economic Community. By 1970 the effective rate on the value-added tax in the EEC countries will likely be in the neighborhood of 15%. We are concerned that a 15% rebate on steel products will permit exporters an unfair advantage and surely a substantial incentive to ship their products to this country. We are quite hopeful that our Treasury Department will now take a position which makes no distinction between direct and indirect taxes and looks only to the clear and compelling language of our statute. Another possible deficiency in the administration of the statute is the manner in which the amount of subsidy is calculated by the Treasury. The administra- :tive agency is not obliged to make known how it calculated the amount of subsidy. As a matter of consistent practice, Treasury has merely published the final amount it has determined constitutes a grant or bounty under our statute. No explanation of the calculation is furnished to any interested parties. Further- more, there is no adequate provision to judicially test the soundness of the administrative calculations. We believe that this situation could be corrected by a change in the Treasury Regulations which would require it to publish the method of calculation. The factual underpinning of their calculations would serve tq demonstrate the reasonableness of their actions and would not make such findings subject to attack unless the calculations show~ed a clear abuse of discretion. Such a change in administrative practice would merely conform the agency determinations to that conduct which is governed by the Administrative Procedure Act for most other administrative action. Although judicial prec- edent has held that under our act Treasury is permitted almost complete dis- cretion in the manner of calculating the subsidy, we submit that confidence in the fairness of administrative action would be enhanced by Treasury publish- ing the basis of its calculations. Another procedural amendment in the regulations could be made. A time limit should be prescribed within which Treasury must make its decisions. We believe PAGENO="0442" 2228 that a business which is experiencing difficulties with subsidized foreign im- ports should be entitled to relief within at least a six-month period after it has made known its complaint. In the transmission tower case two years have elapsed without a final decision having been made. The countervailing duty procedures do not lend themselves to very effective relief for an entire industry if a domestic producer must pursue his remedies on a product-by-product, nation-by-nation basis. In the steel industry, for example, with the hundreds of TSLTS product classifications and the fact that seven or eight nations are major exporters of steel products to this country, it is easy to visualize the complexities and time involved in seeking relief for the industry when the remedies must be pursued on a product-by-product and nation-by-nation basis. Without altering the substantive concept of our statute, perhaps an ex- pedited and comprehensive procedure could be written into the regulations to permit ndjudication of subsidies granted on all steel products from a country which rebates indirect or other taxes in an across-the-board manner. This would certainly serve to provide a more efficacious remedy for an industry and not just specific products within that industry. It must also be kept in mind that our statute is only applicable to dutiable items and does not apply to products on the free list. In negotiating on tariffs this should be a fact this country keeps in mind. A caveat that we wish to express is that economic policies followed by other nations may thwart effective relief under this statute. For example, if Japan and other nations pursue a policy of very low wage rates while this nation pursues inflationary wage policies, it is entirely conceivable that even the im- position of countervailing duties will not offset the significant cost differentials betw-een products made in low wage foreign countries and domestic products of the United States. We appreciate the opportunity afforded us of testifying on what we consider to be an important trade matter. It is our hope that the foregoing suggestions and comments may be of some assistance to this Committee in formulating a proper trade policy. Very truly yours, DAVID T. SEARLS, Con nsel. i~\'Ir. CURTIS. The next. witness is Mr. Perrish, director, West Coast Metal Importers Association. Mr. Perrish, will you identify yourself for the record and proceed. STATEMENT OF JOHN QUIMBY, PAST DIRECTOR, WEST COAST METAL IMPORTERS ASSOCIATION Mr. Qii~i:~in~. Mr. Chairman and gentlemen of the committee, my name is *John Quimby, stand-in for Mr. Perrish who was unable to make it today. Mr. CURTIs. I see. Would you just identify your association. Mr. QUIMInT. I am a past. director of the WTest Coast Metals Impor- ters Association and professionally ~ ~ vice president of the Banton Corp., a San Francisco-headquartered firm of importers of metals and industrial supulies. Mr. CURTIS. We are glad to have you here and you may proceed. Mr. QUIMBI-. Thank you. As our name indicates, our association is an organization of about 1 00 firms and individuals primarily engaged ~n supplymg metal prod- ucts to American industry. Mr. Chairman, in view of the time of the clay, you have our written testimony which we would request be entered into the record. The CI-IAIR~IAN. Without. objection that will appear in the record. Mr. Q.unnue. Thank you. I would like to make a very brief oral statement. PAGENO="0443" 2229 The CHAIRMAN. We appreciate your cooperating with us. You are recognized. Mr. QUIMBY. Basically we have found that there are three main reasons that we do have imports: that, one, the item or the quality is presently not available in the United States; second, the strong desire of small manufacturers to so-called tweak the nose of large, and in the past quite indifferent, major steel mills; and, third, where there has been a net cost savings after considering the much larger quantities that most buyers must purchase, the fact that they do have to live with inflexibility of delivery of 60 to 90 days or more into the future and they must have more restrictive credit terms. Speaking very briefly about the questions of possible continued growth of the imports of steel and whether otir present situation is contrary or not, we have found in the past few years on the west coast that United States Steel Corp., for example, has almost stopped the import growth completely on bars, wire rods, baling wire, concrete reinforcing mesh, and nails. Basically this has been done through a readjustment of their pric- ing system and much better service and much better quality to their customers. Actually, if you were to talk to an overseas manufacturer you would find that the United States is the last place he wishes to sell his prod- uct. This is true because the U.S. customers are the most demanding customers in the world. They are very quick to reject a shipment because the quality or the condition of that shipment is not as it should be. This is true because with their high labor costs they cannot afford to recondition this material and still make a profit. Naturally the overseas markets are much less critical for these manufacturers to sell to. We have found also that imports have been hurt by the new domestic steel policies of extremely prompt ship- ment, mill stocks in many cases for their important customers, and recently as you gentlemen are aware they have granted extended credit terms to customers who would buy hedge-stricken inventories. The preceding speakers have thoroughly covered, I believe, every other conceivable facet of the issues before you, particularly the matter of import quotas as to their relation to the import posture. Suffice it to say that our association is opposed to the erection of new trade barriers including import quotas. Our reasons are given in detail in the written testimony submitted to your committee. They are the same valid arguments advanced by the preceding speakers who favor retention of our liberal trade policy which has proved in the past to be in the best interest of our nation. Considering the hour anything further would be redundant. I would like to add our voice to those who oppose protectionism. (Mr. Quimby's prepared statement follows:) STATEMENT OF JOHN QUIMBY, WEST COAST METAL IMPORTERS ASSoCIATIoN (Testifying is WCMIA delegate John Quimby, vice, president, Banton Corp., San Francisco, Calif.) Mr. Chairman and members of the Committee, the West Coast Metal Importers Association welcomes this opportunity to present the case for foreign steel as it affects the nation and especially the millions of consumers residing in our PAGENO="0444" 2230 western states. Our organization represents more than 100 of the leading metal importers of the West Coast, and we are therefore perhaps as close to the question under discussion today as any group of individuals could possibly be. Based on our extensive experience in handling foreign steel, then, as well as our natural concern over charges that the commodity we handle is disruptive to the economy of our own country, we have found ourselves in a very necessary position of making a highly-qualified appraisal of the demands of the domestic steel industry. Our findings and our objective decisions `should be of considerable valuable to the intensive investigation now being conducted by this powerful Committee. We sincerely appreciate the burden which rests on the shoulders of the Committee members. It is our considered opinion that upon your decision concerning the U.S. foreign trade position, whether it be for steel or for any commodity, lie two very clear courses for the future: the decision you make can either take us into an era of further domestic and international economic development, or, it could bring us to the precarious point of an international trade war. Those seem to be the alternatives we are facing as we weigh the evidence presented to this Committee on the subject of our general trade policies. Whether the steel industry, or any other industry, likes it or not, this country's trade position must be considered within the framework of its total economy-and it is an exceptional economist who does not espouse the value of world trade to the United States. As citizens, we object to current trade restrictions and to proposed trade restrictions. As steelmen we object specifically to the proposed measure which would place quotas on steel imports and to any dther measures contrived to protect the domestic industry from cOmpetition. Our domestic steel industry is like the awakening giant. It is capable of accomplishing most anything it sets its mind to, but during its sleep other countries modernized and developed their own steel industries to become effec- tively competitive. In the past eight years the awakening giant has roused itself to bring about marvelous steps to modernization, through research and development. Virtualy each year since that time, according to the U.S. Depart- ment of Labor, it has lowered its employment cost per unit of output. But it still claims to be unable to compete with foreign steel, so it very logically appeals to the Government for protection from the intruder. We say "logically" because as businessmen ourselves w-e certainly can't blame the domestic industry for seeking every device available to it to hold down the competition. Whether or not it is successful in bringing the device of legislated import quotas into play is another matter. Should we, as taxpayers, provide what amounts to a subsidy to an industry that neglected its own research and development until it discovered what the rest of the world was doing? Should we provide a subsidy to the steel industry to allow it more leverage to compete with other intruders into its self-proclaimed market-such as our own plastics and aluminum industries? Any trade policy that would prevent a free flow of imported steel would be just that: a subsidy. Imported steel has actually forced the domestic industry into its modernization program which is reducing the per unit production costs every year. Would the industry be modernizing at a cost of nearly $3 billion per year if steel imports had not brought it some competition? And let us not forget the consumer. Without increasing foreign competitiOn since 1959, where would the cost per unit of steel production be today? And, consequently, where would the cost of steel manufactures, consumer items, be today? If the domestic industry succeeds in controlling steel imports through quotas or other devices, it is then free again to grow at its own pace and to set its own price. Steel imports have kept prices down, providing greater purchasing power to the consumer. Remove the import competition and you remove a check and balance system which has improved consumer purchasing power. Once removed, the consumer pays more, and we are, thereby, out of our own pockets, subsidizing domestic steel. The West Coast Metal Importers Association would not expect our elected representatives to support any legislation which has at its base a "consumer be damned" principle. Yet, protection from foreign imports would seem to be saying just that. As a stimulator for domestic modernization, then, steel imports have been a friend to the domestic industry-and certainly to the consumer. PAGENO="0445" 2231 The very serious question of balance of payments most certainly must be con- sidered in the context of trade controls. An important part of the balance of pay- ments matter is the nation's balance Of trade-which last year registered a surplus of $3.6 billion, one of the few bright spots in keeping the balance of pay- ments from worsening. Trade controls, we are sure the Committee has been and frequently will be reminded, would be mOre than likely to wipe out that surplus. Nations which have threatened to retaliate against our further trade controls are not just registering idle protests. Our exports are needed by the world, that is true, but we are not the only source of supply for our present trading part- ners-and already these partners are preparing to buy from other countries, including the Communists, if they find their own products turned back at our borders. Gentlemen, it is hard for those of us who have grown accustomed to the inherent wealth of our own economy and the rich resources of our own country to realize what it is like for a resource-poor country~ like Japan, for instance, to live under the constant threat of losing its major customer. If we were to seal off our country from the rest of the world, if we were to halt all exports and imports, all trade and diplomatic relations, we could still: survive quite adequately. What an interesting prospect that presents! But very few countries could do the same. Japan would perish, as we know her today. Japan, who, incidentally, is our best customer overseas, who buys more U.S. products than any other country except Canada, is a prime example of what we mean-and this is a very opportune period to point to Japan. It was just 100 years ago this year, at the beginning of the Meiji Era, that Japan began seriously trading with the world. That trade made Japan a powerful nation, and it turned every Japanese businessman into an internationalist. Without trade Japan would revert to the nation she was 100 years ago. Without trade, the United States would not so revert. There is nothing more vital to Japan today than her worldwide sources of raw materials and other commodities which ~he can `not or does not produce, combined with worldwide markets for her own products. Japan's industries are quite young, compared with ours, but her indus- trial growth since the war has been a technological miracle. Aid from the United States has been a major part of that growth, but such aid has not been completely eleemosynary. We obviously need a strong~ and friendly Japan on the coast of Red China. So, countries like Japan, to which trade is so vital for their very existence in the modern world, must continue to import and export. Trade to them is a basic economic requirement, and if we turn them away at our borders they will be forced to do `their business through trade channels which could well isolate the United States. Costs of many of our commodities are already pricing them out of foreign markets; yet, we need the ability to expand our exports. Shall we make the final business blunder by putting new controls on imports, and thereby create our own barriers for our own exj~orts? The problem of export expansion is directly related to our own inflationary trend. Domestic steel is one of the leaders in the inflation- ary trend. Since 1946, according to a Senate Finance Committee report, domestic steel has increased its price on finished steel products by more than 150 percent- compared to the average increase of all commodities during the same period of just over 60 percent. The Weidenhammer report, to which we are referring, shows that steel prices increased almost 150 percent between 1946 and 1959. That year 1959 is critical to consideration of imported steel since it was the year of the last long steel strike and it was the year that American importers and especially manufacturers were forced to turn to foreign sources for their steel. American Iron and Steel Institute figures show 1.8 million tons of steel imported in 1958 jumping to 4.6 million tons in 1959. Imports then slackened somewhat until 1963, when they passed the 4.6 million ton figure for the first time and have `been climbing to 11.5 million tons last year. But the interesting fact relating to inflationary trends in the domestic steel industry is that during the period of generally increasing import competition since 1959, until 1966, steel prices increased less than seven index points. Seven index points in seven years, as opposed to more than 162 index points in the 13 years between 1946 and 1959. Is it not possible, then, that the impact of imports was a major contributor to that slowdown in the domestic steel inflationary spiral? Would not removal of foreign competition give the domestic industry a PAGENO="0446" 2232 blank check to continue its pre-1959 inflationary spiral? The West Coast Metal Importers Association firmly believes that import competition is a healthy control on U.S. inflation-and that the country needs more such competition, not less. What about all those jobs lost by the domestic steel industry due to imports? The American Iron and Steel Institute reports that the 11.5 million tons of steel imports in 1967 would have given work to 85,000 men. Yet, the U.S. Department of Labor reports that our own steel exports account for 87,000 jobs. And just where would the domestic industry find men to fill those 85,000 job opportunities lost to imports? Department of Labor statistics show that annual layoffs in the steel industry have dropped from a high of 3.4 percent in 1960 to 0.5 percent in 1960, while imports were rising from 4.8 percent of the total domestic market to 11.5 percent. Actually, from various reports, including a Wall Street Journal survey, the steel industry is facing a labor shortage. Several thousand workers are needed in areas like Chicago, Gary, Buffalo, Baltimore, and even the West Coast It is an unreasonable argument to say that imports in general are stealing jobs from Americans. More than three million Americans are today working in jobs directly related to exports, handling our .$30.3 billion worth of exports last year. And certainly the imports of S20.7 billion "create jobs directly for those engaged in their processing, distribution, or transportation, and indirectly for those employed in both export industries and in those industries dependent upon reasonably-priced imported supplies for their own ability to compete." That quote? From our late President John F. Kennedy in his trade message to Congress, January 25, 1962. President Kennedy was referring to the thousands of jobs imports create for dock workers, shipping concerns, port authorities, financial institutions, truckers and other transportation workers, insurance people, and many different serv- ices-as well as the American firms which rely on imports to compete in an economy that has been nurtured on competition, that has survived because of competition, that is the most advanced, because the competitive spirit made i~t so. The question of jobs being lost due to imports is definitely a moot issue, as is every other issue offered by domestic industry. Monies generated by domestic and by imported steel is another one. Last year customs duties on steel imports amounted to almost one-fourth the total Federal income tax paid by domestic steel industry, but import customs duties averaged 7.73 per cent of total value while income tax averaged 2.4 per cent of total sales in the domestic industry. Importers themselves pay income taxes on their sales, as do other services handling imported steel. As an example, if 1,000 tons of imported oilfleld tubular products are sold in California, $15 to $20 thousand in duty goes to the U.S. Treasury and, in part, supports hundreds of people who work for U.S. Customs, the customs brokers of California, insurance brokers, and so forth. Even before the duty is paid, about $2,000 would go perhaps to the Los Angeles Harbor Department for wharfage, dockage, and other direct fees. Possibly another $7,000 is paid to longshoremen and stevedoring companies for removing the 1,000 tons of pipe from the vessel onto the dock. Still another $5,000 is circulated to move the material from dock to storage. The 1,000 tons of tubular goods has thus put as much as $34,000 into circulation, plus an unknown amount of taxes. If the same tubular goods were bought domestically, less than half that amount would go into the California economy, based on a 6 per cent gross profit to the local agent of the domestic mill. Steel imports have without question been rising, but that rise has not been as deleterious to the domestic industry and economy as the domestic industry would have us believe. Between the fateful years of 1959 and 1906, domestic pro- duction increased more than 40 million tons, then dropped off about 17 million tons in 1967. Between 1959 and 1960 imports increased 6.5 million tons-about one-sixth of the domestic increase. But efforts to blame imports for the 1907 do- mestic drop of 17 million tons are incorrect. Total steel imports increased only 800000 tons in 1907. The long auto industry strike of 1967 would account for a large share of the domestic industry decline, and therefore the domestic produc- tion trend should be considered unrealistic for that year. As a point of caution, both domestic production and steel imports for 1908 will also show figures that should not be regarded as realistic to the overall trends. Much early 1968 buying to build inventories against a potential steelworkers strike in August has placed domestic mills' profits out of proportion, and at the PAGENO="0447" 2233 same time will likely send total imports for the year skyrocketing. Japan, for instance, actually showed a drop in steel exports to the United States from 4.7 million tons in 1966 to 4.3 million tons in 1967. But at least one leading Japanese steelmaker, basing a prediction on orders already placed, is expecting Japan's exports for 1968 to exceed 6 million tons. Even with record-setting domestic production, members of this Committee can be expected to receive voluble complaints and sharp finger-pointing at the 1968 import figures. But we oniy ask that when you encounter those new pressures from the domestic industry, you take into account the circumstances of 1968. If it ~rero possible to remove the periodic threat of a clash between the huge powers of labor and management, such irregularities would not appear in the natural growth of steel consumption. And once the 1968 inventories are accumulated, we can expect a reversal of the sudden increase as inventories are being disposed of. Perhaps one of domestic steel's most frequently heard arguments against lie- ports to bolster its demands for protection, involves the great price differential. Domestic steel claims it would be many years before the costs of labor, which is primarily blamed for the price differential, would bring equality between do- mestic and foreign steel. In Japan, for instance, the steelworker's wage is about one-fourth that of the U.S. steelworker. Other countries have wage scales some- what closer to that of the United States. But in Japan, where steel companies are so eager to maintain their market in the U.S. that they have offered voluntary export controls in order to help this country to avoid the harmful quota system, actual wages are a small part of maintaining the worker. It is impossible to put a price on the Japanese, steelworker's other benefits, for how can one evaluate job security, housing, subsidized meals, vacation resorts, twice- a-year bonuses of perhaps two months wages, company hospitals for complete medical care, company stores with prices frequently below wholesale., recrea- tional and schooling facilities, retirement income after age 55, and so forth? Then, too, wages around the world are rising faster than in the United States. Added up, the differential in steel prices must be the result of something else; which takes us back to our general thesis. Modernization of facilities can produce more and better steel in less time. It is efficiency of operation which brings the price differential of perhaps 17 per cent below the domestic market price. There are several points, then, which the West Coast Metal Importers Associ- ation would like to make quite clear. The first is a fact which we have learned by experience: In general, to sell imported steel, there should be a price advantage of about 10 per cent. The second is related: If the price advantage now is about 17 per cent, what would it take for the domestic industry to improve its price by 7 per cent to become competitive with foreign steel? Domestic industry claims such competi- tion would be impossible. U.S. Steel Corporation has already proved that wrong. It has reduced prices on several products and Pittsburgh can't keep up with demand. Competition is possible, even today. The third point is further related: Research and development, which the do- mestic industry should have been doing in the 1950s, can bring domestic prices well within the competitive range of imports. And fourth: All of this can be accomplished without the false protection of import quotas or other controls on imports, which would only reward an industry for its lack of foresight and at the same time alienate countries whose friend- ship we must have. The real issue at stake should not be protection of an industry that is quite capable of taking care of itself, but rather protection of the consumer, who does not have the resources to prepare a campaign on his own behalf as the powerful domestic industry has done. In summary, then, it is the position of the West Coast Metal Importers Associ- ation that: 1. Imports of pig iron and steel mill products have not adversely affected the United States balance of payments; and in fact controls on imports would adversely affect the U.S. balance of payments. 2. Imported steel has not contributed `to reduced employment in the do- mestic steel industry; and in fact has created new income and new jobs. 3. Imported steel has not captured such a share of the domestic market as to threaten the soundness of the domestic iron and steel industry; and in fact said industry can and should compete more vigorously for both domestic and foreign markets to become a more valuable member of the U.S. economic community. PAGENO="0448" 2234 4. Imported steel does not threaten the national security; and in fact has forced the domestic industry to adopt improvements that have been and will continue to be of greater significance to the national security. The West Coast Metal Importers Association expresses its sincere appreciation to each member of the Ways and Means Committee for permitting it to voice its views in this hearing, and begs the Committee to take no action which would in any way interfere with normal growth of world trade. The CIiAn~L~x. We thank you, Mr. Quimby, for substituting for Mr. Perrish and giving the statement. Are there any questions? We thank you, sir. Mr. QUIMBY. Thank you. The CHAIRMAN. Mr. Perry. Mr. Perry, we are pleased to have you with us today. If you will identify yourself for the record and those at the table with you we will be glad to recognize you, sir. STATEMENT OP ~. WILEY PERRY, ER., CHAIRMAN, IMPORT STUDY COMMITTEE, CAST IRON SOIL PIPE INSTITUTE; ACCOMPANIED BY JEROME 0. HENDRICKSON, EXECUTIVE VICE PRESIDENT, AND FREDERICK D. RUNT, FOREIGN TRADE CONSULTANT Mr. PERRY. Mr. Chairman and members of the committee, my name is J. Wiley Perry, Jr. I am chairman of the import study committee of the Cast Iron Soil Pipe Institute and vice president of the Ala- bama Pipe Co. of Aimiston, Ala. The CHAIRMAN. You may have a seat if you desire. Mr. PERRY. With me today are Mr. Jerome 0. Hendrickson, execu- tive vice president of the Cast Iron Soil Pipe Institute and the insti- tute's foreign trade consultant, Frederick Drum Himt. The CHAIRMAN. We appreciate having all of you with us and I want to suggest that the members pay special attention to what you are going to say, Mr. Perry. I have had an opportunity to talk with you ahead of the hearing and I know that you are pinpointing some specific cases having to do with antidumping. Mr. PERRY. Thank you, sir. The institute is a trade associa.tion representing 23 manufacturers of cast iron soil pipe a.nd fittings who manufacture about 95 percent of the total production in the United States with an approximate annual value of $150,000,000. You can readily understand that on the average we are speaking for an industry composed of relatively small com- panies with plants located in nearly all sections of the country-New Jersey, Pennsylvania, Virginia, North Carolina, Florida, Alabama, Tennessee, Texas, Iowa, Missouri, Colorado, Oregon, and California. Our purpose in appearing before this distinguished committee is to support House Concurrent Resolution 447 which would make the adop- tion of the international Antidumping Code, negotiated during the Kennedy round at the GATT, ineffective without specific congres- sional approval and to implore that iimnediate action be taken to delay the July 1st effective date so that the Congress may have the time for its deliberate consideration. PAGENO="0449" 2235 Second, we seek to voice our support of House Resolution 16936, known as the Fair International Trade Act of 1968, which is now be- fore this committee and, third, we propose the strengthening of the requirement for identifying the country of origin on imports and de- letion of the so-called "j" list from section 304 of the Tariff Act. A brief review of our problems in the area of imports will help to clarify our position on these three pOints. Imports of cast iron soil pipe and fittings was nil until after World War II when with the aid of the Marshall plan the plants in Europe were rebuilt. In connection with this we had visitations from Enropean delegations at our plants at the request of our State Department and gave them the benefit of the latest production techniques available at that time. During this same period due to information received by the Iron Curtain countries from captured German plants, they expanded their production and by the early 1950's we began to experience serious economic pressure from imported material. In 1952 we asked the Treasury Department to investigate an anti- dumping case against the importation of cast iron soil pipe and fittings at less than fair value from Mexico into southern California. In this case the Treasury Department ruled that there was no likelihood of injury because the quantity imported from this source was, in coin- parison to the total IJ.S. production, very negligible although none of it reached eastward beyond the western part of Nevada and Arizona. The effect on the California market ~as not considered. During this same period, wages and prices began moving rapidly upward in rela- tion to output and far more rapidly than those in Europe. By 1954, European plants were exporting to the United States at prices lower than those existing here. It was about that time that the importation of cast iron soil pipe, especially from France, began in considerable quantity. Other European countries quickly followed and commenced to sell soil pipe in the United States at prices which appeared to be be'ow those in their own countries. Importers aimed especially at those points in the United States where there was the greatest demand for housing and the situation became so unbearable in California that American producers of cast iron soil pipe asked the Customs to investi- gate imports from the United Kingdom which it was believed were being sold in this country at less than fair value within the meaning of the antidumping legislation. In 1956, the Commissioner of Customs found that British pipe was, indeed, entering the United States at "less than fair value" and the case went before the U.S. Tariff Commission whose members found that there had definitely been injury caused American pipe producers in the west coast region. During the late 1950's, imports commenced to arrive from non- European countries not previously engaged in the export of cast iron soil pipe and fittings. The U.S. foreign aid program had been extended far beyond Europe and had built a large iron and steel industry in India. To compete with India, Australia found it necessary to reduce export prices and, again, the American producers of cast iron soil pipe and fittings found it necessary to request the Bureau of Customs to investigate. It was determined that there was importation "at less than fair value" but, when the case reached the Tariff Commission, the Aus- 95-159-68-pt. 5-29 PAGENO="0450" 2236 tralians agreed to "cease and desist" and the Tariff Commission then decided that there would be no injury. By 1963, the importation of soil pipe and fittings had reached such proportions that some of the smaller American plants had to cease production, particularly on the west coast. In 1964 Poland began exporting pipe and fittings to this country and at declared values which were so low they obviously were being dumped. On November 1, 1965, we petitioned the Commissioner of Customs to investigate these imports from Poland with respect to their fair value. Twenty-two months later there was a finding of injury by the Treasury Department in the case of pipe but not in the case of fittings. How a.nd i.rnder what regulation they could separate the two has never been explained. It was simply a. matter of accepting a- hal-f loaf of 22-month-old stale bread or we presume we were at liberty to ea.t cake. Again the Tariff Commission found that there was injury in the case of pipe from Poland but they could not, under the adopted procedures, consider fittings. These two go together like a pitcher and a catcher on a ball team-one is useless without the other. During the investigations into the Polish case we found that their export.ation of fittings to this country were growing at an alarming rate. Normally in usage, the proportion by weight is approximately 25 percent to 30 percent fittings to 70 percent to 75 percent pipe. At one time their export ratio ra.n as high as 60 percent- fittings to 40 percent pipe.. The reason for this is quite obvious when you consider that labor costs account for 70 percent to 75 percent of the tot-al cost for manu- facturing fittings whereas only 30 percent to 35 percent of the cost of manufacturing pipe is in the item of labor. These people are not exporLing pipe or fittings or nuts and bolts. They are exporting man-hours of labor in one form or another. We had no compunctions of conscience in setting ra.ther low quotas on immigra- tion to -this country when our labor market became glutted. Ellis Island became a decaying monument to that period in our history. Why should we shy away from setting quotas on the products of this same labor which we prohibit as such? In the antidumping case against cast iron soil pipe and fittings from Poland, the attorney for the Polish importer made this statement before the Treasury Depa.rtment-"Polish pipe does not compete in the U.S. marketplace with French pipe." I might add the-re that they were comparing Polish prices with French prices which is the reason for that remark. "Polish pipe competes here with India-n pipe, which is much lower in price than the Polish pipe." Again. I have a letter from the Don~ Kwang Manufacturing Com- pany of Seoul, Korea, which states: We would like to draw your kind attention on our cheap and abundant labor resources in Korea. Therefore, we confidently assure you that our products can be competed against Yugoslavia and Italian products of the same in American markets for its price and quality. Do either of them offer to compete with American industry and labor for the American market? How do the underprivileged occupants of the American ghettos benefit from this type of competition? PAGENO="0451" 2237 Unless the American manufacturer receives fair and just treatment in this consideration we can promise you that every port in the Unitecl States will become an Ellis Island of the late 1800's and early 1900's, overflowing with foreign labor in one form or another. So who cares about our immigration quotas? Flow inconsistent can we be? We question some of our actions on the internationa.l front as for example, and again referring to our case against Polish imports, my colleagues and I also question some actions in the administration of foreign aid. For example: during the long wait for a Treasury decision on dumping by Poland, we found that large amounts of soil pipe were being imported from Brazil at prices which appeared to be too low even for the Brazilian economy. We found that in 1965-06 U.S. imports from a certain company in France declined considerably and that during this time Brazilian imports increased a similar amount We also found that AID, our foreign aid program, had loaned or granted money to a. Brazilian importer for a blast furnace to produce pig iron, used in the production of cast iron pipe. It was notable that this same French company held the controlling ownership in this Brazilian operation. Who, may we ask, benefits from the Alliance for Progress? Brazil or France? Into whose pocket does our AID money finally drift? American labor and industry certainly receive no benefit. They pay the bill hut like the monkey that made love to the skunk, they have about enjoye.d all of this pleasure they can stand. An interesting observation on the manipulations of this same French company which is responsible for all of the French imports and 20 percent to 30 percent of the total imports annually owns and operates a foundry at Lynchburg, Va., and in its distribution is limited largely to the Southeast and Middle W~est. They do not ship to the west coast and little if any into Florida. Into what regions do we find French and Brazilian pipe entering this country? They're too smart to foul up their own nest, so their imports are directed largely to Florida and the west coast. I think of no illustration to impress upon you the importance of protecting American labor than the actions taken by this same French company, which by the way is a member of our institute. Following their purchase of the Virginia foundry and instituting there the manufacture of cast iron soil pipe, they then bought control of a Maryland foundry, presumably for their fittings production which the Virginia shop did not have. After operating this for a year or so, it was closed and I understand is now in the process of liquida- tion. Could it be that the competition in the case of fittings from Poland, which found their way mainly into the eastern seaboard from Baltimore to Boston and in the area. served by the Maryland foundry have gotten too rough for the French? Could they possibly have found that the difference in labor rates paid in the United States compared to those in France and Brazil posed a barrier to a successful operation in the face of competition from Iron Curtain countries? The American manufacturer is expected to accomplish this feat. They can, with help. We don"t want protection. We don't need that. We need a broad under- standing of our prdblems and substantive assistance. PAGENO="0452" 2238 Referring again to the Polish case, we found that on other acknowl- edgements and quotations furnished by the Polish counsel the state- ment on a number of them read "Cast Marking: KZO." On some others we found the notation "Cast Marking: SALEM." It so happened that there was a Salem Pipe & Iron Manufacturing Co. located at Bridge- ton, N.J., and subsequent investigation showed that they were an importer of Polish pipe and fittings. It would be reasonable to assume that the Polish material would be corningled with their own produc- tion in sales to American customers. With this information we petitioned the Treasury Department to remove cast iron soil pipe and fittings from the "J" list on October 25, 1967, for the third time, having made unsuccessful attempts on two pre- vious requests. On March 5, over 4 months later, we received notice that our request was denied. The latter part of March we went back to them to seek information on how we could obtain reconsideration based on precedents estab- lished in other similar cases or what recourse there was for us to fol- low. The answer was loud and clear-"Get the law changed." On the 9th of April of this year we consulted with Alaibama Sena- tors and Congressmen about obtaining a rider on some bill to do just that but were advised to use another tactic and a joint letter from all the Alabama congressional delegation was addressed to Secretary Fowler asking for reconsideration in this case. On May 23 Secretary Fowler advised the congressional delegation that he had instructed the Commissioner of Customs that the allega- tions concerning possible misrepresentation or deception as to coun- try of origin warrant an investigation and that such should be done on a priority basis. We have reviewed these cases in order to emphasize the importance to our industry of the legislation mentioned at the start of our testi- mony and, in fact, to the entire American economy. We feel that in light of the present tempo in the market place our present laws are inadequate, that tariffs as a control device are no longer effective, and that any reforms or cha.nges must be instituted by the Congress. We hope you will be just as adamant in this connection as you have exhibited recently with regard to other very important domestic legis- lation and we commend you for your tremendous courage and foresight. Please accept the gratitude of our industry for the valuable time and attention given us this morning and if there are questions we would be happy to answer to the best of our ability. The CHAIRMAN. We thank you, Mr. Perry, for bringing to us the experiences of your industry. Are there any questions? Mr. Curtis. Mr. CURTIS. I would just like to inquire briefly about why your in- dustry feels that the International Antidumping Agreement is inadequate. First of all, you didn't think that the negotiators had the authority to negotiate it. Frankly, I though they did. I might have been wrong. I am interested in any brief that you might have as to why you thought our negotiators went beyond their powers. But I am primarily PAGENO="0453" 2239 concerned as to why you think that it would not be a good idea to have an international agreement on what dumping is and protection against it. Your problem was that you didn't get the kind of quick remedy that you sought in going the antidumping route. Am I right? Mr. PERRY. That is true, but we feel this way: we kind of agree with the report submitted by the Tariff Commission on that. We think this is a function of the Congress of the United States. Mr. CURTIS. We write the laws but we don't execute the laws. Mr. PERRY. Well, that is the law. That is the Tariff law that we have got to abide by, the one that is written. T~'1r. CURTIS. That is right, but someone else actually administers it and determines whether there has been an actual violation of the antidumping law. We don't actually perform that function but we can change the law if we think that the criteria are wrong that we have established for finding what is illegal under antidumping. We can change the remedies. One of the things that I thought was accomplished through the inter- national agreement was to make the processing of antidumping claims quicker, more certain, so that if there was a cause for complaint the remedy would be quicker. Now, from listening to your presentation, it looks like you experi- enced a lot of delay in having your claims processed. I would think that shortening the processing time would be advantageous and that is why I was raising the question of why you would approve of a resolution that seeks to set aside what I would have thought was im- provement of our antidumping laws. Mr. PERRY. Well, I think this: in that antidumping code that was negotiated at Geneva if I read it right the actions of the Treasury and the Tariff Commission parallel each other and overlap and it is hard to tell which one has jurisdiction and which one does not have jurisdiction. Maybe Mr. Hunt here has another answer to that. Mr. CURTIS. But they neither one had anything to do with the ne- gotiations in Geneva. They might have given advice but we came back to the key point, how do we improve our antidumping procedures in the United States? Here it seems to me that making them quicker and more certain is im- provement rather than the other way around. Mr. PERRY. I believe Mr. Hunt could answer that for you better than I can, Congressman. Mr. HUNT. Congressman Curtis, one of the troubles is at the Treas- ury Department. I have heard you ask several witnesses questions to- day as to whether or not they think that the present administrative machinery is satisfactory. This is where the trouble lies. This could occur under either law. In the first place, the new Antidumping Code changes the regulations which certainly make it an amendment to our present antidumping law. I don't see how you can deny that. Mr. CURTIS. The Treasury does deny it and that is why I am seeking your advice as to why it does. That is the question. I was very concerned that our negotiators be responsive to Congress and not go beyond the law and that any new regulations or any agree- ments be within the four corners of our present law. PAGENO="0454" 2240 I can be in error. There are others besides yourself who have alleged that the new International Antidumping Code goes beyond the au- thority they had, but I am looking for the reasons you think so. Mr. HtrNT. In our case with Poland it was a classic example because in the first place the Treasury said that because it was in the Soviet bloc, it took an especially long time, they could not use figures from Poland. In other words, they had to treat that country differently from any other country although the present law does not specify a difference be- tween countries. It seems to me, Mr. Curtis, that all we have to do is set a legal time limit on the Treasury Department's investigation in the same manner as is now set upon the Tariff Commission. Mr. CURTIS. Well, the international agreement sought, as I under- stand it, to try to cut back these delays. In these other countries who have antidumping laws, too, if we have delays they have even more serious delays. In fact, their antidumping actions are not even by law but are fre- quently by bureaucratic action. Mr. HUNT. That is correct., and I know that Canada through their delegation to Geneva agreed in principle to this also they specifically stated it was subject to parliamentary approval. Mr. CURTIS. I think in their instance it probably is because they do not have the damage aspect and the International Code does. There I think there was a change in substance in respect to Cana- dian law but I don't see any change presently in substance between the International Antidumping Code and our present antidumping law. The better way to answer this question, rather than to take the com- mittee's time, is to submit a brief on this issue. Just explain why you think that we are exceeding the authority. I am also interested in this brief if you would set out why you think this new code isn't an im- provement. I think it is an improvement and would have benefited your industry in the process of your antidmnping claim. Whether you won it or not at least it would have been certain and quicker. Mr. HUNT. I think that we can show that a case like the one against Poland would not have improved our case but the main thing, Mr. Congressman is, getting back to the theory, who is under the Constitu- tion regulating the international commerce of the United States. Is it a staff in the executive department or is it the Congress? Mr. CURTIS. Well, it is obviously both. I am getting a little tired of this question because surely you recognize the answer. Congress legislates and in legislating what we essentially are doing is giving power to the Executive under guidelines, but the Executive is the one who has to execute the laws. Now, surely the witnesses who come before this committee recog- nize this. You are not asking Congress to get into the business of ad- ministering laws, are you? You are not. Mr. HUNT. No. sir. Mr. CURTIS. Then let's deal with this on the proper basis. Mr. PERRY. I would like Mr. Hunt to come up with a brief on that to give you a clearer picture. PAGENO="0455" 2241 Mr. CURTIS. Thank you. The CHAIRMAN. Thank you gentlemen for coming to the committee. (The following letter was received by the committee:) FREDERICK DRUM HUNT, Washington, D.C., ,July 22, 1968. Hon. THOMAS B. CURTIs, Lomgworth House Office Building, Washington, D.C. DEAii REPRESENTATIVE CURTIS: I regret very much that I have taken so long to reply to your kind letter of June 24th concerning testimony before the Committee on Ways and Means given at the hearing held on June 18th. Your letter poses two questions: (1) Why I think the negotiators at Geneva exceeded their author- ity in negotiating the International Anti-Dumping Code, and (2) my reasoning as to why the new code is not an improvement over the old one. It seems to me that a long brief on this subject would be superfluous in view of the vast amount of information already in the records of both your Committee and the Senate Finance Committee. I agree with the points made there by several people and I trust that you have had an opportunity to read the transcript of the hearings before the Senate Committee on Finance held June 27th. In reply to your first question, the Trade Expansion Act of 1962 served as the terms of reference for the Special Representative of the President and his dele- gation to the so-called Kennedy Round of Tariff Negotiations under the General Agreement on Tariffs and Trade. This Act authorized the Delegation to negotiate with other members of the GATT to reduce tariffs and permitted such reduction to go as low as fifty percent. It is my assumption that the intent of the Congress was to limit the negotiations to tariff concessions and this seemed quite proper within the Constitutional authority of the Congress to regulate the foreign trade of the United States. I fail to find any authority in the Act of 1962 to negotiate an international agreement on dumping or any other subject except a general re- duction of tariffs within the rules of GATT. You will surely recall that there was very little activity at the meeting in Geneva for the first year and one half. It was apparent to all that most of the European members of the GATT were not very interested in reducing tariffs and were certainly not in a hurry. In my personal opinion, the United States dele- gation should have been called home after one year but I realize that the Ad- ministration felt they must have something to show. At about this time, the Special Representative, acting under the power of the President to negotiate international agreements, decided to take advantage of the presence of so many experts from so many countries, to negotiate an agreement on an international code to settle dumping cases. Discussion is one thing, but to make an agreement which changes the dumping laws of the United States, is another, and there should not be more than mere preliminary discussion until the Congress has had an opportunity to hold hear- ings and vote authorization. The mere presence of one or more of six members of the Congress as observers with our Delegation, does not imply Congressional approval. Ambassador Roth said that he thought he had the approval of the Congressional observers but one of those six stated in the Senate that he was not taken into the confidence of the negotiators and that "all I knew was what I read in the papers". He said that he was told that the question of dumping was being discussed between the GATT members, but he was not aware that an interna- tional agreement was about to be signed. When it became apparent in 1966 that the President's Special Representative to the Tariff Negotiations was about to bring home as a fait accomplis an inter- national agreement that had nothing to do with tariffs, the United States Senate passed Concurrent Resolution number 100. This was sent to your Com- mittee on Ways and Means and should have been reported out to the whole House as soon as possible. This Resolution stated clearly that the agreement was a usurpation of the legislative functions of our government and should be sub- mitted to Congress for study, hearings, and final action. It is my understanding that the pressure from the Administration was so great that the Chairman felt that hearings should be held on such a controversial matter and there was not sufficient time left in the 89th Congress. However, one would have thought that such action by the branch of the Congress which usually ratifies treaties, should have served as a warning to Ambassador Roth and his colleagues. It was, there- PAGENO="0456" 2242 fore, rather astonishing to have them go ahead and ask the Treasury Depart- ment to promulgate new regulations to be effective July first of this year. Coming to the second question, I would like to refer you to the very fine study of the International Anti-Dumping Code made during the summer of 1967 by the American Mining Congress. A copy was sent to each member of the Ways and Means Committee. I am also very sorry that you had to be absent from the com- mittee room during the hearings in June when a spokesman for the cement indus- try presented testimony. Cement is a product like cast iron soil pipe which is not readily moved very far from the port of entry. Therefore, imports at less than fair value can so disrupt the market in just one section of this country as to injure the entire industry. This feature has been recognized under the exist- ing anti-dumping law of this country but would not be given such recognition under the definition of injury given in the international code. I hope that you have read the Cement industry's brief carefully. I agree with it whole-heartedly and I see no use in repeating the thought here. In view of your great interest in this question, I am sure that you must have read the report of the Tariff Commission on Senate Concurrent Resolution 38 regarding the International Anti-Dumping Code. This report w-as published March 13th. On June 27th, Commissioner Clubb gave further testimony before the Senate Finance Committee at which time he pointed out that in all proba- bility, four of the last five dumping cases brought before the Commission would have been decided differently if the terms of the Code had been used instead of those of the existing law. Nothing I could say here would give you any more information than the transcript of testimony before the Senate Finance Committee on June 27th and, although you are a member of the House of Representatives, I recommend that you read this. On June 27th, the Senate Committee also heard testimony from the Counsel for Ambassador Roth and from the General Counsel of the Treasury Department. The former was unable to give a satisfactory explanation of his statement that the Code was consistent with present law. The latter admitted that the Treasury Department had already gone beyond its powers in the consideration of the merits of dumping complaints. The Customs Simplification Act of 1954 had a section which amended the Act of 1921 to make it clear that the Treasury Department through its Bureau of Customs was to make only the "arithmetical" determina- tion that there was importation at less than fair value, and that the Tariff Com- mission was to decide whether or not there was injury. In the complaint against Poland for the importation of cast iron soil pipe and fittings, the Commissioner of Customs found that both pipe and fittings were being imported at "less than fair value." Later the Assistant Secretary of the Treasury decided that pipe was being dumped but not fittings. Besides the fact that you cannot have a drainage system without both pipe and fittings, what right did the Treasury Department have to certify cast iron soil pipe to the Tariff Commission but not fittings? In my opinion, it was a means of appeasing the Poles without throwing out an obviously valid case. General Counsel Smith told Senator Hartke that he thought the Treasury Department should make some decision after receiving the "threshold facts" and be thought this might save the taxpayer's money in the event the complaint was a minor one. During the hearings before the Ways and Means Committee in June, I heard you say several times that the Congress only makes the laws and it is up to the Executive to carry them out. You asked several witnesses if they had sought remedies through the executive branch. Most had and had been rebuffed. Is not the case cited in aforegoing paragraph an example? In the tw-elve years following the Act of 1954 which gave the Tariff Commis- sion the sole right to decide injury, the Treasury Department received 371 dump- ing complaints, 230 of these were dismissed on the grounds that there was im- portation at less than fair value. Of the remainder, only 52 w-ere referred to the Tariff Commission for a finding of injury. (Only 12 of those were decided in favor of the complainant.) In the other 89 cases, the Treasury decided that there had been importation at less than fair value but these were dismissed as being de minimis or because "price revision" had suddenly take place. This informal arrangement denied the Tariff Commission an opportunity to decide the question of injury or threat of injury. If American industry has obtained so little protection under the existing law, how- could it expect any from the new regulations established under the Interna- PAGENO="0457" 2243 tional Code which would limit withholding of appraisement to three months and would give the Treasury Department the opportunity to decide a question of injury-possibly based on the current whim of the Administration in office? I hope, Mr. Curtis, that this letter answers some of your questions which arose on June 18th and please feel free to call upon me lf I can be of any possible assistance to you or the Committee in the future. Sincerely yours, FREDERICK D. HUNT, Foreign Trade Consultant. The CHAIRMAN. If there is no objection, the Chair would like to include in the record immediately following the testimony of Mr. Patton and Mr. Abel this morning a statement delivered to us by the Tool and Stainless Steel Industry Committee. This committee decided to submit the statement rather than appear in person and deliver it. (See p. 1929.) Mr. Epstein, we purposely held you to the last here because we knew you would be able to sum up in 5 minutes all the testimony of the iron and steel group. We appreciate your coming to the committee. STATEMENT OP LAWRENCE D. EPSTEIN, VICE PRESIDENT, PERRY PRODTJCTS CO. Mr. EPSTEIN. Mr. Chairman and members of the committee, my name is LawrenceEpstein. I am vice president of Perry Products Co., an independent stainless steel fabricating company in Philadelphia. The CHAIRMAN. You may have a seat. If you omit any parts of your statement do so with the knowledge that the entire statement will appear in the record. Mr. EPSTEIN. Thank you. I would like to just highlight my state- ment. The CHAIRMAN. You don't want that in the record? Mr. EPSTEIN. If possible, sir, it is a good advertisement for our company. The CHAIRMAN. We charge for that. Mr. EPSTEIN. Actually the little piece of paper that Mr. Mills is referring to will highlight what our company really does and that is fabricate stainless steel ta.nks, reactors, heat exchangers and other pieces of equipment which is used in the chemical, pharmaceutical, chemical whiskey and beer, and other industries both here in the United States and throughout the free world. Perry Products Co. fabricates only stainless steels and our only volume is $2 million a year. It is a wholly owned subsidary of Perry Equipment Corp., the largest used equipment dealer in the country. Perry Equipment Corp. buys and sells complete chemical and other plants for resale in the chemical industry both here in the United States and throughout the entire free world. Perry Equipment does export quite a bit of surplus used machinery and scrap to various foreign nations. Another Perry operation is Perry Products Co. of Puerto Rico which fabricates and distributes stainless steel products in the Carib- bean area. Perry Products Co. is against any imposing of quotas for steel. WTe have several reasons for this. As a stainless steel fabricator we PAGENO="0458" 2244 import almost all of our raw materials. We import material from both Europe and from Japan. We find tha.t the importation of stainless steel gives us several advantages not offered by the domestic steel producers. We find specifically that we are able to buy materials in 60- and 72-inch widths at commercial prices and very competitive prices. This material to date is not available in any sort of volume from the domestic steel mills. We also find that we are able to get extended terms and have certain factors added to our orders such as material being rolled within commercial tolerances but on the light side of the tolerance which gives us an edge as a fabricator. We are definitely against elimination of competition from the for- eign market as we feel that this would permit arbitrary price setting here in the domestic market. We are afraid that higher costs of stain- less steels would hurt us in several ways. No. 1, it would make us noncompetitive as a small stainless steel fabricator where we do not have the volume to purchase in large quan- tities and take advantage of discounts that. are available only in very, very large volume purchases from domestic mills. Secondly, we are afraid that higher prices of stainless steel would make our products noncompetitive against the materials of other con- struction, specifically lined steel tanks, plastic tanks, rubber lined steel tanks, items which are not fabricated from stainless but may be substituted. We are now able to get a large part of this market by offering stain- less steel equipment at very competitive prices. In summary, we believe a quota system would be a restriction of free trade and would result in limitations of sources and suppliers of raw materials for us. We feel it would directly result in higher costs of stainless steel raw materials for our production. We feel the higher cost of stainless steel would endanger our competitive position as a stainless steel fabri- cator in both the domestic and foreign market. I would like to add that we do import approximately $200,000 to $300,000 worth of finished goods to Latin American countries a year; also some to Asian countries under AID programs. It is also felt that higher prices of stainless steel materials would result in a loss of the share of the market for stainless steel products to other materials of construction. We strongly hope that domestic producers might choose to meet international competition. We would very much like to purchase our stainless steel materials from the domestic producers should they choose to compete in both product and prices. Thank you, gentlemen. (Mr. Epstein's prepared statement follows:) STATEMENT OF LAWRENCE P. EPSTEIN, VICE PRESIDENT. PERRY PRODUCTS Co. COMPANY DESCRIPTION Perry Products Company is a moderate size, independent stainless steel fabricator, located in the north-central section of Philadelphia. Approximately 100 people are employed in the manufacturing of stainless steel storage, mixing and process tanks, pressure vessels, heat exchangers, chemical reactors and cus- PAGENO="0459" 2245 torn fabricated stainless s:teel process equipment. This equipment is sold to the chemical, pharmaceutical, beverage, paper, distilling, `brewing, and other process industries in the United States and throughout the free world. Annual sales for the company are approximately $2 million dollars. Perry Products Company is a `wholly owned subsidiary of the Perry Equipment Corporation. Perry Equipment deals in the buying and selling of surplus chemical and processing plants and auxiliary equipment. Perry sells used processing equipment throughout the free world. Another Perry operation, Perry Products Company of Puerto Rico fabricates and distributes stainless steel products in the Caribbean area. OBJECTIONS TO PROPOSED LEGISLATION Our objections to legislation restricting importation of steel and other items are as follows: 1. Restriction of Free Trade-4t `is our belief that it is imperative to our economy and to the free world's economy to maintain an atmosphere conducive to trade amongst various nations. Arbitrary restrictions such as the proposed quotas will limit the trade between nations, and specifically injure the competi- tive position of Perry Products Company. 2. Limitation of Sources-The proposed Import Steel Quotas would limit the available sources for raw materials necessary in the fabrication of our stainless steel products. These limitations would prevent our utilization of materials presently not generally available at competitive prices in the domestic market. Specifically 60" and 72" wide sheet material which is currently available in the international market at very competitive prices. These products are currently not available except as special orders with correspondingly higher prices. 3. Elimination of competition from foreign materials permits arbitrary price setting in the domestic market. We believe the removal of foreign competition eliminates of the most important factors in price competition and will permit higher prices to be established by domestic producers. 4. Higher Cost of Stainless Steels-It is believed that the fixing of quotBs On steel products will result in higher prices in the domestic market place. Instead of making efforts to meet the imported competition, there will be a tendency to continue at present rates and in effect subsidize the inefficiencies through higher prices. As an independent fabricator higher cost of material would severely endanger our operation. 5. Loss of Business Because `of Higher Oo'sts-~Steel import quotas would re- quire our purchasing of stainless steel products at domestic prices which in many cases are 20% higher than comparable imported materials. This 20% material increase must be passed on to our customers in the form of higher prices and will make our products much less competitive in the market place. This is espe- cially true where our stainless steel products must compete against other mate- rials, `such as, polyvinyl cloride, lined steel tanks, or other materials less costly than stainless steel. It is especially feared that an increase cost in stainless steel prices will drastically reduce our ability to compete in the process industry against other materials of construction. 6. Restriction of Export Sales-It is strongly believed that our sale of finished products and scrap to foreign countries may be deterred through these trade restrictions. We are of the belief that other nations will put restrictive trade regulations into effect as a result of United States legislation in this area. SUMMARY Perry Products Company is strongly opposed to passage of legislation which will permit establishment of quotas on the importation of steel and other prod- ucts. We believe such quotas would be a restriction of free trade, would result in limitation of sources and suppliers of raw materials and would directly result in higher costs of stainless steel raw materials for our production. In addition, we feel that the higher cost of stainless steel would endanger our competitive position as a stainless steel fabricator in both the domestic and foreign markets. It is also felt that higher prices of stainless steel materials would result in a loss of a share of the market for stainless steel products to other materials of construction. PAGENO="0460" 2246 CONCLUSION It is our strong belief that legislation of Steel Import Quotas would greatly hurt our business and create a market place of arbitrary and unfair price setting. We strongly hope that the domestic producers will chose to meet international competition and increase their share of the international market. We would very much like to purchase our stninless steel materials from domestic producers should they choose to compete. i-lw LOWER T ~:LE;~ 3.~R~i~ED I I !WS ~ COST ~ DOVINIIME ~ MAMEIWJCE Coct ~. m~kes h~ Fe~~ ~ ~ **~ t d~~s ~ *~;:>. S*C,~ ~ sc&~M, ~ t4~me~* ~ I GET LOWEST PRICES FROM PERRY FOR YOUR STAINLESS STEEL NEEDS ~ 8~c%~ ~ C~C~41t~X : S~E~1K4~ ~ flMNLESS sna. *~ $T41$LES~ SlEEt cTMstESS ThEL { STttflLE4i SIE~t STAINLESS stEa ~ J~CVE1ED VACUU ~ TANKS 1US$ ~ S1CRM~1 a~d ~ SEACTOIS ~ ~ECW/ER5 sn~ I ~ MIAJfl T~KK ~-~: ~ P~d$SURL TA~5S A ~N STOCK KOC Th~ ~cK TOT 04 STOCK TOT UT STOCK UITTSCUATS !MMTO!ATE TMMEOLATF OEtWETYT y OTLWSTY~ y OSTFSSTYI y STMSLESS STEEL STMHLESS STEEL STAINLESS STEEL STAWLESS STEEL CUSTOM.SWLT NEAT EXONANOERS OPEN TOP OPEN TOP RIMPLE JASNET STAINLESS STEEL RECTANGULAR TANKS JECEETED KETTLES REAETORS TANKS asd VESSELS 0 1. ~JL~ I~ FERRY PRODUCTS COMPANY OF FUFETO 0CC - W4 JUAN. FURYTU 0CC - PAGENO="0461" 2247 PAGENO="0462" 2248 The CuAIR~rAN. Thank you, Mr. Epstein, for bringing to us the V1OWS that you have expressed. Mr. Schneebeli. Mr. Sc.IINEEBELI. What percentage of your total stainless steel pur- chases of raw materials are purchased from foreign countries and what percentage domestic. Do you have that? Mr. Ers~nnx. Yes, sir. We purchase about 70 percent of our material from foreign sources. That would be all of our sheet products. Mr. Sc.HXEEBELI. Why not the other 30 percent? Mr. EPsTEIN. Because they are plate products which today are not imported in great quantities. That is material thicker than three- sixteenths of an inch. We find it not economical to import that. We don't use it in the volume. Mr. SOTIXEEBELI. The 20 percent differential is only restricted to what did you say? Mr. EPsITIN. To our sheet product. We feel there is at least a 20 per- cent differential. Mr. SCHNEEBELI. Is much stainless steel sheet sold in the U.S.? Mr. EPsTEIN. We purchase approximately $500,000 worth of stain- less steel sheets for our operation. Mr. Sc.HXEEBELI. No sheet from the United States? Mr. EPSTEIN. WTe purchase some, not very much. Mr. SCHNEEBELI. From what you say I don't see how the United States sells any steel sheet if there is a 20-percent differential in price to all customers. Mr. EPSTEIN. We have experienced that 20 percent differential. We find that constant over the past 3 years. Mr. SCHNEEBELI. I don't see how we have any domestic industry in stainless steel sheet. I will have to ask the stainless steel industry how they make any sales of sheet in the light of what you say. That is all. The ChAIRMAN. Are there any further questions ~ Again we thank you, Mr. Epstein for coming to the committee. I mentioned that he was the last of the witnesses in the category of iron and steel. (The following letters and statements were received, for the record, by the committee:) STATEMENT or Anvo E. SUNDBERG, REPRESENTING THE CITY or CONNEAUT, OHIO, AND LOCAL No. 3256. AFL-CIO, STEELWORKERS OF AMERICA My name is Arvo E. Sundberg, 414 Detroit Street, Conneaut, Ohio. I am a member of the Steelworkers of America, AFL-CIO, Local No. 3256 and a Direc- tor of the Conneaut Port Authority. I am representing the City of Conneaut (population 16,000) by appointment of Council President William Wilson and unanimous approval of City Council, and Local No. 3256, AFL-CIO, Steelworkers of America, the bargaining unit at The Pittsburgh & Conneaut Dock Company. We go on record supporting House Resolution 14120, introduced by Representative Charles Vanik of Ohio and its counterpart in the Senate: Bill 2537, introduced by Senator Vance Hartke, Indiana. Conneaut City Council unanimously passed a resolution Monday-May 6, 1968, in support of this proposed legislation. Conneant located in the Northeast corner of the State of Ohio, is one of the leading bulk cargo ports on the Great Lakes, and ranks high in the nation. Iron ore from the Upper Great Lake Ports (Minnesota area) and Canadian ores PAGENO="0463" 2249 (Labrador area) via St. Lawrence Seaway is our main import. These ores, un- loaded at our port, are transshipped inland to the steel mill area, mainly Youngs- tow-n and Warren in Ohio, and Pittsburgh and Sharon in Pennsylvania. Lime- stone is an important import, too; coal an export. The Pittsburgh & Conneaut Dock Company is well on its way towards corn- pleting a modern high-speed coal loading facility and beginning the construction of similar facilities for ore and limestone unloading. Foreign ore imports have been harmful to our harbor and City economy. Since it does not imiove through our port, I do not have exact dollar figures, but let me bring some points to your attention. Exhibit A shows 13,282,414 Gross Tons of ore unloaded in 1053; 12,699,685 Gross Tons were unloaded in 1957. Normal tonnage in those years ranged from 9 to 11 million tons. This was what is called group ores, from Upper Great Lakes Ports (Minnesota areas), American ores- hauled by American ships-between American ports. We were rated as the fastest single dock for unloading iron ore in the world. Discovery of foreign ore deposits with higher iron contents later shipped into our ports and steel mill areas (Pittsburgh, Youngstown, etc.) really slowed down our Harbor operation. Foreign ores have stymied the whole Great Lakes ore commerce. The State of Minnesota passed legislation lowering taxes on mined ores to help combat foreign ore competition. The American Steel Industry, through extensive and expensive research, de- veloped a process of pelletizing low grade Ores into higher iron-content ores. These new pelletizing plants in the Upper Great Lakes area are just getting into full operation. Now I note that a new, similar ~50 million plant is being constructed j~ ~ so our foreign ore competition is still there. The Conneaut Harbor ore unloading business is making a comeback with Upper Lakes pelletized ores and Canadian ores via St. Lawrence Seaway. The Canadian ores from Labrador ore fields, shipped via the Seaway, are a welcome stabilizer leading to our port's more steady operation. Note the total Seaway percentage (%) on Exhibit A. This ore trade is in constant jeopardy due to unfair Seaway tolls. The Great Lakes basin, as a whole, is handicapped in world commerce generally, due to Seaway tolls-the only American waterway with tolls. Unit trainloads of ore, new self-unloading (1970) bulk cargo vessels (40,000 tonners in comparison with today's 18,000 to 20,000 tonners) and keener com- petition between ports is a constant challenge to the workers and labor leaders in retaining the present employment. Continue uncontrolled and unfair foreign ore imports, and one can foresee trouble ahead. The Nation's Steel Industry-the industry that has been the barometer of our Nation's economics, and stock market investors, will be in trouble. As goes Steel, so goes the country-was once a factual statement. What is happening to this once proud industry? I believe nothing more than what has happened to many industries, and still others will face. Competition within the industry, sub- stitutes like plastics, aluminum, etc., longer-lived corrosion resisting steels, and other improved lighter, yet stronger steel alloys, are all part of the picture. The Steel Industry is meeting these competitive factors through technological im- provements, automation, and overall plant modernization, which has substantially improved production. Loss of jobs through mergers, automation, improved plant facilities, etc., is an ever-increasing, serious problem to the men affected, and officers of labor unions. Severence pay, right to transfer within the industry, higher pensions to en- courage earlier retirement, assistance in seeking new jobs, are constantly being bargained for by the companies and unions. In the Steel Industry alone, 100,000 jobs have been lost since 1952, even though production has increased. Steel im- ports are currently costing the American Steel Industry about 12% of its domes- tic market. If this steel were produced in United States, at least 85,000 addi- tional job opportunities would be available, plus thousands of others in sup- porting industries. In 1957, the United States imported 1.2 million tons; in 1967, 11.5 million tons, and the current rate is estimated at 16 million tons on a yearly basis. Foreign steel imports, left uncontrolled, will cause irreparable damage to the industry, workers and the American economy. It seems ironic that our Na- tion is the world's largest steel producer and yet the world's largest steel im- porter, with unused capacity which could fill all demands. The costly prepara- tions the industry has made for expansion and growth, the hope of steelworkers PAGENO="0464" 2250 for advancement and new openings, is being siphoned off by foreign imports. (Mill operators' statement. Wall Street Journal, May 28, 1968.) Mr. Chairman, I recognize that foreign imports are a complex problem. I feel sure that Labor and Industry prefer free and fair trade, with little or no Government intervention, but the foreign competition we have encouraged and helped develop, with our tax dollars, is taking unfair advantage of us and is disrupting our industry and economy at the expense of our workers. This was well-stated by Senator Russell B. Long of Louisiana (Sunday-May 26, 1968, New York Times) quote: "I do not believe that all industries which have sought to preserve their rights to existence should be callously called `protectionist'. There are some equities which we ought to consider with regard to these indus- tries and their employes. If not, we will find ourselves `upholding our interna- tional commitments' and standing on our own principles, while other countries, without the same commitments or principles, steal the horse from our barn by taking the American markets from American industry". Some industries for years have unsuccessfully sought foreign import protec- tion quotas through their Representatives and Senators. Now, more industries and unions are becoming seriously concerned about uncontrolled foreign iiii- ports, and with good reason. Manufacturers throughout the world, whether they make computers, steel, T.V. sets compact cars, look at the U.S. market as a lucrative dumping ground for their products. Japanese electronic companies are poised to launch a new assault on the U.S. market. They aim to export a variety of products, using integrated circuits, in- cluding electronic calculators and television sets. But they also aim to limit or delay foreign investment (U.S. companies) until Japanese companies are strong enough to hold their own against imported capital and know-bow (May 4, 1968, Business Week). The Japanese do "smart business", develop their own country and industries on American capital and know-how. No foreign country can have major control of any of their industries. American-made cars are practically non-existent in Japan. United States, a few years back, exported more steel than it imported. Ameri- can tax dollars and know-how helped rebuild and modernize our foreign friend's industries and now they outbid us in our own country. Francis Cameron, Chairman of St. Joseph Lead Company, stated he didn't like to see quotas imposed but it would be "stupid" not to supply U.S. domestic customers from domestic sources at a time when concern is being expressed over the balance-of-payments situation and when there is a problem of oversupply. (Wall Street Journal May 14, 1968). United States steel mills surely can fnlflui America's needs. James Roche, General Motors' Chairman, states: "We believe that vehicles produced in the United States should have the same unrestricted access to over- seas markets that imports into the United States enjoy today". (New York Times. May 24, 1968) As I understand it. many American-made products cannot be exported directly to various foreign countries. American industry is compelled to build subsidiary plants, as market-sharing licensees in foreign countries. Only an American sub- sidiary in France, for instance, has the right to supply markets in French-speak- ing African countries, this-in effect-cuts out exports from America. This definitely is not fair-trade. Money goes to any part of this world; wherever it gets the best return. The Federal Government is concerned about this monetary outflow. Definitely there should be serious concern about the tax-paying American worker so that he does not get short-changed through this "shuffle" of dollars. I disagree with Transportation Secretary Alan Boyd in his major "reforms" on the nation's maritime program, especially proposing building ships in foreign countries. Why talk about balance-of-payments? With Mr. Boyd's stand, the Great Lakes shippers will have difficulties getting Federal assistance for rebuild- ing their much-needed bulk cargo fleet. (Journal, May 21, 1968). I'm happy to read that the House Appropriation Committee voted $245 million for next year's construction of the Merchant Marine units; will some pass on to the Great Lakes? Mr. Chairman, sometimes one wonders if the Federal Government is more concerned about foreign growth and economic problems than our own. I believe we bend over backwards to uphold our image and be helpful to all countries. But, let's not turn our back on American citizens and workers. Today's labor market is tight; every able-bodied person can find employment. This can change. PAGENO="0465" 2251 Picture the thousands of American workers who lost their jobs or were set back in the labor pool because of automation and mergers. Reluctantly, they had to accept the fact that automation and/or mergers are a must in today's highly- competitive business world, hoping that, with anticipated company growth they would be hired back and work up the ladder again. Once they fully realize that foreign exports are siphoning off this growth and their jobs, then be prepared to watch the fur fly. The United Steelworkers, AFL-CIO Labor Leaders see this picture, and encourage support of the two pending pieces of legislation for the good of all American labor. All the American worker seeks is opportunity to work and advance. He will provide for his family, build his own home, fight for his country, pay his taxes, and spend his money here in enjoying the fruits of his labor. American Industry and American Labor have always been willing to work together to enjoy the good things of life; together they can compete with any and every country on equal terms for the world market. In today's wOrld, each country seeks to protect their own. We are not ready for one world society or Government. In fact, the fear of America's greatness by our foreign friends is an obstacle. They want our money, pick our best brains, and call the shots. The Theatrical Stage Employees Union, worried about members' unemployment caused by more film-making abroad, earmarks $100,000 to plug American-made movies. This we must add to "Buy American". The Wall Street Journal, Wednesday-May 29, 1968, carried the article en- titled: "Johnson's Trade Message Urges Rejection of Proposed Legislation on Import Quotas". I want to comment on this as I understand it. I fully under- stand that I am not as well versed as some members of the Administration, so please correct me where I am wrong. First, I believe that we are bargaining in reverse. I believe that we have al- lowed The European Common Market Countries the whip hand. They are offer- ing to speed tariff cuts substantially if the United States won't impose new protectionist measures and wins repeal by Congress of the "American Sell- ing Price". Then, the President called on other nations to join us to reduce major non-tariff barriers that impede international commerce and block U.S. products from competing for world markets. "We will step up our efforts to prompt removals of these trade restrictions" he said. The ifs and Congressional repeal are held over our heads. My studies show that the Common Market coun- tries and Japan have non-tariff barriers, market-sharing, limitations on foreign investors, etc. much more than our country's limitations on imports. They can give a little and yet have an open road to dump more of their products here. Our country's trust ill other countries' promises always seems to backfire. Let's not kid ourselves; they need us. We should bargain and bargain hard and not sacrifice our labor. Our history shows that we win on the battlefield and lose at the bargaining table. The President criticizes the import-quota proposals. He said they wouldn't protect the jobs of U.S. workers or the markets of American businessmen, but would force higher prices and prompt othernations to retaliate with new restric- tions. Here, again, we show weakness. Does this mean that only by foreign imports can we keep our prices down at the expense of our labor? The President further asks Congress to amend the 1962 Trade Expansion Act, stating it is too complicated and rigid. In this Act it seen's to imply that imports do away with jobs (this should never happen), and only if there is "substantial" injury will one be retrained-bow many job losses is substantial? (estimated 100,000 jobs in Steel Industry alone, and how many more in Auto Industry with only 120,000 cars exported to foreign countries, excluding Canada?) How do measure jobs from Company's expected growth when this growth is taken up by exports, as in Steel? Mr. Chairman, when the Steel Industry, one of the largest industrial employers and taxpayers in our Nation, says their growth is siphoned off by unrestricted, unfair foreign steel imports and when the Steelworkers of America, AFL-CIO say that foreign imports of steel and ores is eliminating jobs and they both join hands in common cause on eve of wage negotiations-they, I will believe. I want to thank Chairman Wilbur Mills arid members of the House Ways and Means for making it possible for us to appear here and give our viewpoints on Foreign Imports. I tried to make as strong a statement as possible in pointing out that job opportunities to the American workers should receive top consideration in pass- ing legislation on Foreign Imports. 95-159-68-pt. 5-30 PAGENO="0466" 2252 Conneaut Harbor is affected by Foreign Imports of Ore and Steel which, in turn, affects our city's economy. During the peak years, there were 320 hourly employees; now we have 185 with 23 laid off. These seem like small figures, but it is one too many to the individual worker that is effected. STTPPLEMEyT A. Our Federal Government is our country's largest employer with the largest payroll and largest buyer in the American market. It is the barometer of our nation. Our government leaders-with their beliefs, faith and powers to legislate-are continually seeking to improve our way of life, and have molded our present society. The nations' leaders have promoted, encouraged and lauded our high standard of living, and stated there is more to come. Our Federal employees, elected and appointed government officials, ihdustrial supervisors and workers, receive the best monetary returns of any country in the world. We are all as one. seeking in our own way, the fullest benefits from the fruits of our labor. Desire to work, promotions, seniority advancements with pay increases-which add to improved pensions, is our normal pattern in life. The proposed legislation House Resolution i~o. 14120 and its counterpart in the Senate are sound bills. They help assure growth in the American Steel Industries and allow generous quotas for foreign steel imports. With industrial growth. many senior workers will have better opportunities to regain their status, more new job opportunities for returning veterans and youth coming into the labor market, and in turn, will support our Federal Government's hard core program. We seek your Committee's support on this I-louse Resolution. B. European automakers are increasingly turning their attention toward the "third market" of underdeve~oned nations in mid and far East. Its potentials, they believe, are enormous. About 44% (3.9 million) autos will be shipped out by European nations this year of their estimated total production of 8.8 million ears: 44% export to our country's 120,000 autos. (Wall Street Journal-Tuesday, May 21, 1968). How can anyone defend the unjust export regulations that our nation's auto industries are saddled with? EXHIBIT A ORE TRADE AT CONNEAUT HARBOR, OHIO Total tonnage Number of Year (gross tons) vessels From Lake Via Seaway Superior (gross tans) (gross tons) 1953 13,282,414 1.013 1957 12,699,685 1,042 1961 629,833 46 1962 1,601,178 113 1953 1,504,083 84 1964 3, 522. 998 212 1965 4,342,799 293 1966 6,699,463 423 1967 5,899,648 354 13,282,414 12,699,685 629,833 1,601.178 485,994 1,018,089 2. 479, 399 1,043,599 3,376,986 965,813 3,847,317 2,852,146 3,019,758 2,879,890 Exnmrr B COAL TRADE AT CONNEAUT HARBOR, OHIO Total tonnage Year (net tans) Number of Percent Canadion vessals ships carried 1961 645,484 1962 890,742 1963 1,155,616 1964 1,202,120 1965 3,466,385 1966 5, 104.419 1967 6,482, 105 83 23.48 99 26.77 137 43.58 136 75.92 269 76.24 478 84.55 427 69.80 Via Welland Cans!. PAGENO="0467" 2253 STATEMENT OF C. WILLIAM VERITY, JR., PRESIDENT, ARMCO STEEL Cong. Mr. Chairman and members of the Committee, my name is William Verity. I am president of Armco Steel Corporation, a fully integrated producer of steel mill products with headquarters in Middletown, Ohio. This statement is sub- mitted on behalf of the 40,000 men and women employed by Armco throughout the United States as well as approximately 75,000 persons who have invested in the common stock of the company. We appreciate this opportunity to request your favorable consideration of legislation for immediate limitations on the import of foreign steel. Very frankly, our concern about excessive foreign steel imports stem from our desire to maintain Armco as a company with a future-a future that can create new jobs for today's young people, offer greater advancement opportunity and other rewards for performance to present employees, and provide a reason- able return on investment to our shareholders. By January 1, 1970-about 18 months from now-Armco will have completed almost all of a six-year, 800-million-dollar program of capital improvements to steelmaking and manufacturing facilities in California, Kentucky, Maryland, Missouri, Ohio, Oklahoma, Pennsylvania and Texas, and to our coal mines in West Virginia. This represents the greatest capital improvements program in our history. By 1970, Armco will have nearly doubled-within just six years-its total in- vestment in property, plant, and equipment (and will have become a commen- surately higher contributor to Federal and local tax revenues). At the same time, our company's long-term debt load and lease obligations will be more than three times as heavy as they were in 1964. When Armco management made the decision early in 1964 to commit this enormous amount of capital to more productive and more versatile facilities, it represented the culmination of many exhaustive studies of market conditions and steelmaking technology. But it also was based in part on these two assump- tions: First, that the total consumption of steel in the United States would continue to keep pace with general economic growth, i.e. a growth rate of about 4% annually. Second, that with these advanced and more productive facilities, Armco could at least maintain its current share of the market. It is now painfully apparent that our 1963 projections should have given greater weight to the fantastic growth of steel imports. Otherwise, current figures indicate that our assumptions were on the conservative side-tl~e growth in apparent domestic consumption has been at an average rate of 5.2% since 1962, and Armco has slightly improved its relative position as a domestic steel producer. But too much of this growth in consumption went to foreign producers, during the period 1962-67, when steel imports grew at an average rate of 22.8% annually. We developed our projections during a period when foreign steel im- ports represented only 1 ton in 16 of apparent domestic consumption; today, that ratio is 1 ton in 8, and growing. We at Arrnco still have faith in the strength and potential of the U.S. economy, but we no longer have assurance that the domestic steel producers, including our company, will be allowed to share proportiOnately in this growth. As I see it at this time, Armco can realize the benefits of its capital improve- ments-and the additional jobs and revenues such improvements can bring- only if some equitable method can be wOrked out whereby our company can share in the growth of domestic consumption. The Iron and Steel Orderly Trade Act, in my opinion, will provide all steel producers, both United States and foreign, an opportunity to participate in the anticipated growth of our domestic steel markets. If no action is taken to restrain imports, I am convinced that foreign steel will take an even greater share of the domestic market. Under such circumstances, the debt burden Armco has already assumed for this capital improvements pro- gram could very well sap our financial resources to the point where it will be difficult to maintain a satisfactory rate of growth. Armco management has already reached the point at which we are reluctant to commit ourselves to further capital investment for steelmaking operations. As an example, we intended to ask our Board of Directors last Friday to au- thorize funds for two major additions at, our steelmaking plants. But after reviewing the current situation, our Executive Committee decided to defer both recommendations. While I would prefer not to identify the facilities or the plants PAGENO="0468" 2254 involved, I will say that the total capital expenditure involved was in excess of $100,000,000. In conclusion, Mr. Chairman and members of the Committee, we at Armco feel that our company is at a crossroads. Your decisions and actions will to a great degree influence our future direction. I strongly endorse the remarks submitted by Mr. Tom Patton on behalf of the domestic steel industry, and hope that this frank presentation of our company's concern will illustrate the dilemma facing our industry today. STATEMENT OF NIcHoLAs P. VEEDER, CHAIRMAN OF THE BOARD AND PRESIDENT OF GRANITE CITY STEEL Co. The steady increase in imports of foreign steel is a matter of local as well as national concern. My comments will be about the local aspects of this problem and, specifically, about the impact of steel imports on our company and the Midwest community where our plant and offices are located. I hope to give the Committee on Ways and Means a fresh perspective on the extent to which unem- ployment and economic hardship could ultimately develop in industrial com- munities such as Granite City, Illinois. Certainly, the outlook for the future is bleak as long as our government continues to allow the steel industries of Europe and Japan to ship unlimited tonnages of their excess steel to American markets. Let me make one point clear at the outset. The size of my company has not increased our vulnerability to import competition. Granite City Steel is a small company in comparison with most of the other integrated U.S. producers of fiat rolled steel products. However, all our production facilities are concentrated in a single large plant. We are able to realize the operating efficiences w-hich come with size in the steel industry. Our profits have been above average for our industry in most past years. Our plant is modern throughout and we are able to take care of ourselves as far as normal competitive pressures are concerned. Import competition is another matter, even for Granite City Steel which has an unusually heavy investment in large, highly automated facilities. The average capital invested per each employee at our company amounts to $52,447. This is substantial even by the standards of the flat rolled steel industry which is ac- customed to using some of the largest and most costly production facilities to be found in modern industry. We have invested more than $350,000,000 in plant expansion and modernization since 1950 to transform a once marginal and semi- integrated producer into a modern, efficient steel company integrated all the way back to the iron ore mine. It is occasionally stated that American steel companies have been afraid to go into debt heavily enough to finance the investment required for them to take full advantage of new technologies. Our company would not exist today if several generations of management had not been willing to go into debt very heavily indeed when there was an opportunity for profitable growth. Our heaviest capital investment has been made during the last 31/2 years. Granite City Steel's net worth when we began this program was $113,027,000. We have since then invested well over that amount-a total of $l35,000000-in expansion and modernization of our Granite City plant and the development, jointly with Hanna Mining Company, of an iron ore mine and pellet plant only 85 miles from Granite City. Today our company is stronger competitively than at any time in its history. However, depreciation and interest charges have increased tremendously and our long-term debt is at an all-time high of $148,189,000. This is the price of growth and we knew what to expect when we began to plan this program. Our decision to go ahead was based on the increasing demand for steel jn our 25- state regional market. There was every reason to expect that we would be operat- ing at much higher levels after our new facilities were completed. We would not have embarked on this program if we had not counted on higher volume, con- sistent with the growth in our market, to pay for it. The current demand for steel is artificially heavy as a result of strike hedge purchasing. Leaving that aside, we have found that the growth in demand for steel in our market area has taken place as expected but that the additional volume is being siphoned off by imported steel. Total imports of flat rolled steel in 1964, the year we arranged financing and committed ourselves to our latest expansion and modernization program. amounted to only 1.700000 tons. Now, with more than three years of construction and breaking in behind us. w~e see imports of fiat rolled steel at a level which is expected to bring the total for 1968 to almost 10,000,000 tons. The consequences are obvious. PAGENO="0469" 2255 Even the 5,500,000 tons of flat rolled steel which arrived in the United States in 1067 had a severe impact on our company and on that part of the bi-state St. Louis area consisting of the industrial district where our plant is located. We have made several calculations based on the assumption that Granite City Steel's share of the American market lost to foreign flat rolled steel last year would have been the same as our share of the total American market for flat rolled. On that basis, we can report as follows: 1. Our company employed an average of 5,133 men and women in 1067. We would have employed better than 10% more people except for imports. As it was, those jobs went to steelmakers in Europe and Japan. 2. Our company paid $48,107,000 in wages, salaries and employee benefits in 1067 and most of it went to residents of Granite City and other nearby com- munities where we are the leading single, employer. We would have paid almost $6,000,000 more into the local economy except for imports. The additional pay- rolls would have meant a lot to a community the size of Granite City, Illinois, which has a population of about 40,000. We would also, of course, have paid more state and local taxes except for the business lost to foreign steel companies. In summary, we were damaged by steel imports even at their 1067 level. Granite City Steel lost important orders last year and provided fewer jobs. The economy of Granite City, Illinois, was less active last year and retail sales and other local business activities suffered to the extent that we pumped less money into the economy as a result of imports. The 1068 import problem promises to be much worse and especially for flat rolled producers. The biggest growth in imports during the first four months this year compared with the same months in 1007 was in our products. Imports of all steel products were up 51% for the four months this year. Imports of flat rolled products were up 76%. If flat rolled imports continue at the present rate the rest of 1968, we will see 16% of the U.S. market for flat rolled taken over by imports. In some flat rolled products, imports will account for over 20%. If present trends continue, imports will ultimately capture so big a share of the market for some steel products that it will no longer be profitable to make them in the United States. We ask you, what can we do.~ about this that we have not already done? We have a very modern steel plant. We compare favorably with the most technologically-advanced foreign flat rolled steel plants. However, we cannot compete with their low wage costs which enable them to undersell American steel producers at price differentials that exceed our total profit margins. We are running out of time. What is needed is action now, action in the form of quotas limiting the volume of steel imports. Any delay would only encourage the foreign steel producers, particularly the Japanese, to continue their tre- mendous expansion of steelmaking facilities on the assumption that they can use the United States as a market for their surplus steel. Tile real and present danger here is that we will see permanent damage done to a basic and vital part of our modern industrial economy, the American steel industry, before anything is done about the import problem. Should that happen, it may well be that we have exported steelworker jobs and imported not only steel but a lower standard of living for us all. STATEMENT OF PAUL B~ AKIN, PRESIDENT, LACLEDE STEEL Co. Chairman Mills and Distinguished Members of the Committee, my name is Paul B. Akin. I am President of Laclede Steel Company, one of the smaller com- panies in the basic steel industry. Laclede headquarters are in St. Louis, Mis- souri, with steel mills in Alton and Madison, Illinois, in the St. Louis district and with warehouse fabricating plants in Texas, Louisiana, Tennessee, and Florida. Laclede Steel Company has about 4,500 employees. I appreciate the opportunity to offer a statement for the record in connection w-ith hearings of the Ways & Means Committee on the subject of steel imports. Laclede's product line consists to a large extent of reinforcing bars, rods, and wire products. Our earnings started feeling the adverse effects of foreign steel imports as early as 1956. Enclosed is a chart that illustrates graphically this decline of earnings in the years that followed. In 1964 earnings fell to a level of 1 percent on net sales. We have undertaken a heavy modernization program since 1964, and we expect debt ratio to reach 40 percent this year. Although we have been able to improve our earnings on net sales to 3.2 percent last year, iiuich of the improvement is a result of the investment credit earned on our construction program. Our new equipment is extremely modern, and we are PAGENO="0470" 2256 justly proud of it; but the discouraging aspect of this program is the knowledge that the Europeans and Japanese are building just as fast and just as modern at a much lower cost. Forty-one cents of our sales dollar goes into labor. If we had the Japanese wage rate, only 8½ cents would go into labor; and there would be lots of room for lower prices and profit. Obviously, they can and will continue to take more and more of the U.S. market as fast as their new equipment comes on line. I am proud of the fact that the United States has a high standard of living, but I see no way that Laclede will be able to compete for long with the Japanese and the European steel industry against such an economic inequity. It is my ardent hope that you will place a limit on the amount of steel that can be imported into the United States. LACLEDE STEEL COMPANY SAINT Louis, MissouRi Lila EARNINGS IN NILLIONS OF DOLLARS 6 ------- ---~------------*--*----*--.----**-. *-*--- * 5 -~-~ ...~. - J1 `1: 55 ~6 -~;~ `~--~-6*6~-6-~, ~ * S~tee1 Industry on strike. Laciede had a contract extension. ** Continued effect of 1959. Investment Credit. PAGENO="0471" 2257 LUKENS STEEL Co., Coatesville, Pa., June 24, 1968. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, U.~$. House of Representatives, Washington, D.C. DEAR CHAIRMAN MILLS: Lukens Steel Company is a manufacturer of plate steels which are used in petroleum, chemical and food processing; electrical and atomic power equipment; industrial machinery and machine tools; construction; missiles and ordnance; transportation; shipbuilding; boiler manufacturing mining and quarrying equipment, and bridge and dam construction. It has annual sales of approximately $130,000,000 and employment of 5,500. Since its inception in 1810, the company has played an important role in the economy of Coatesville, Pennsylvania, and Chester County, where it is the major manufacturing enterprise. Even so, its sales represent only 3.1 percent of the largest firm in the steel industry. The company has been a reliable employer of Chester County people over the more than a century and half of its existence so that today among its employees are men and women whose parents, grandparents and great grandparents worked here. Lukens competes vigorously and successfully in the plate steel market.. In the past 10 years it has invested $86 million in a continuing plant modernization and improvement program, and it plans to spend an additional $50 million in the next five years. This is indicative of its firm resolve to strengthen further its competitive ability both presently and in the future. There is cause for alarm, however, in the unfair advantage enjoyed by foreign competitors in our domestic market and the barriers other countries raise against the sale of our products there. You and other members of the Ways and Means Committee heard Thomas F. Patton, chairman, Republic Steel Corporation, and I. W. Abel, president, United Steelworkers of America, testify on June 18. The joint appearance of those two men emhasized their concern over the impact of the growing increase in steel imports. We at Lukens share that concern. For a company of our size to compete suc- cessfully with the major producers in the U.S.A., an extra measure of energy and ingenuity is required constantly. The problem is enlarged when the company also has to compete domestically with foreign steel producers which have advan- tages of home market protection, subsidies in prices and taxes and which are instruments of national policy. It is our intense desire as individuals and corporate citizens to promote free and equitable world trade, but it is increasingly difficult to compete in an inter- national environment which legislates against free market competition. Therefore, we earnestly request your committee's favorable consideration of our views and ask Congress to enact the Iron and Steel Orderly Trade Act. Sincerely, CHARLES LUKENS HU5TON, Jr., President. CONGRESS OF TIlE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., June 28, 1968. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: Enclosed is a statement prepared by Mr. Martin N. Ornitz, President of the Roblin Steel Company of North Tonawanda, New York, in my congressional district, in support of my bill H. R. 13277. 1 understand this bill is being considered along with other tariff and trade proposals in the hear- ings now being held by your Committee. In order to save the time of the Committee, we are submitting this written statement and did not submit a request to be heard in person. I respectfully re- quest that this statement be made a part of the hearing record and that it be given full consideration at the appropriate time. Thank you for your attention to this matter. Sincerely yours, HENRY P. Smsn'mi III, Member of Congress. PAGENO="0472" 2258 R0BLIN STEEL Co. North Tonawanda, N.Y., June 24, 1968. Chairman WILBUR D. MILLS. Committee on Ways and Means, U.S. House of Representatives, Longworth House Office Building, Washington, D.C. Mv DEAR CONGRESSMAN MILLS: Your Committee at present is making a study of tariff and trade proposals. We wish to bring to your attention a discrepancy in the tariff regulations in which the tariff on billets is higher than the tariff on rod, a finished product made from billets. In this case, the tariff on a semi-manu- factured product is nearly twice as high as that on the final product made from the semi-manufactured material. It would seem desirable that a proper spread be maintained between the tariff on imported billets and that on rod to permit domestic producers to roll foreign billets into rod and be competitive with im- ported rod material and provide jobs for U. S. workers. Under these circum- stances, the tariff on billets should be lowered or the tariff on rods should be raised. We further wish to point out the fact that the amount of rod presently being imported is growing at a very fast rate and will be even a bigger factor in the future to those producers in this field. We at Roblin Steel Company, although only a small steel producer of rod and bar, have seen some of our major cus- tomers increase their consumption of imported rod from 5 or 10% to as high as 75% of their present usage. Further, we have been advised by many of our cus- tomers that to remain competitive, particularly in the industrial and automotive fastener trac1e, that they will be forced to purchase larger tonnages of foreign rod for their applications. It is interesting and alarming to note that the price structure on foreign rod and bar is as great as 20 to 40% under current domestic prices. We have also found that in the wire drawing industry the amount of foreign steel coming to our customers has been increasing at a rapidly accelerated rate, again, at price structures considerably under that currently listed by U.S. pro- ducers. We at Roblin Steel Company find it very difficult to compete with imported steel. We have utilized the latest innovations in producing steel, striving con- tinuously to low-er our costs through increased capital expenditures, efficiencies in operation, and still, at the same time, see that our employees maintain a high standard of living commensurate w-ith the American way of life wi'thout lowering the benefits we give them and the quality of product that we produce. Additional studies are presently under way for expansion of Roblin Steel Company facilities with a subsequent increase in employment in this area. The present import situation is causing us great concern as to the feasibility of this expansion in view of the encroachment by foreign steel in our domestic market. We trust `that your Committee will seriously consider the factors involved and its effect upon our industry and the large number of employees who will be affected. Very truly yours, MARTIN N. ORNITZ, President. UNION STEEL CHEST CORP.. LeRoy, N.Y., June 4, 1968. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, house of Representatives, Washington, D.C. DEAR CONGRESSMAN MILLS: At long last it would appear that Congress is in a mood to consider some sensible legislation with regard to imports. The need for legislation not to bar imports but to land them at a competitive price has been a crying need for many years. If we are to continue to have the highest standard of living in the world with the labor costs that this produces, we cer- tainly cannot expect to compete with foreign merchandise produced at 1/4 to ~ of our labor costs. We wish to go on record in behalf of Union Steel Chest Corporation and its employees as respectfully urging that you bring before your Committee H.R. 16936 introduced by Congressman A. S. Herlong, Jr. and that you would see fit to vigorously work for its passage. Our product (steel tool boxes and fishing tackle boxes and injection molded plastic fishing tackle boxes) is a bit out of PAGENO="0473" 2259 the ordinary and yet we have been adversely affected by both Japanese and West Germany imporls. Your strong and immediate support of this proposed legislation will certainly be appreciated by our entire organization. Yours very truly, 0. J. MITCHELL, JR., Vice President. AMERICAN PIPE FITTINGS ASSOCIATION, New York, N.Y., June 20, 1908. Hon. WII~muR D. MILLS, Chairman, Committee on Ways and Means of the House of Representatives, U.s. house of Representatives, Longwortlb house Office Building, Washington D.C. DEAR MR. CI-TAIRMAN: This letter and Brief are submitted on behalf of the producer-members of Malleable Iron Pipe Fittings of the American Pipe Fittings Association who respectfully urged that action presently be taken which would have the result of reducing imports of malleable iron pipe fittings (items USTS 610.7400 and 610.7000). The industry's position and facts supporting it are given in detail in the body of the Brief, however, special emphasis is given to the facts by this summation. (a) Fittings produced on the European Continent do not meet U.S. specifica- tions, and vice versa. England uses castings to the same dimensions as the United States but the finished fitting has a different thread. Hence, there is virtually no trade between Continental Europe and the United States. However, Japan pro- duces a malleable iron pipe fitting identical with the one produced in the United States. The American industry is being adversely affected seriously by imports from Japan. (b) Nine domestic manufacturers, have discontinued manufacture, liquidated their facilities, and laid off employees since 1952. This included two of the largest firms in the industry each of whom had produced malleable iron fittings for over 100 years. The industry's production workers are mainly from a limited educa- tional level and these layoffs add to that hard core segment of unemployment which today constitutes one of our Nation's major problems. (c) The January 1, 1948 tariff rate on this product was reduced from 45% to 221/2% ad valorem. At the "Kennedy Round" of GATT negotiations this was further reduced to 11% ad valorem. (d) Since 1948 there has been a substantial increase in imports to the serious injury of the industry and its workers. More recently rough malleable iron pipe fittings castings are being offered by English foundries emphasizing that since devaluatson of the English pound they are in position to quote very competitive prices. (e) Since 1956 more than 95% of all imports have been from Japan, where the hourly labor rates are only 63~* compared with $2.83* in the United States. In this industry 50% of the cost content of the product is labor. (f) Japanese imports have been taking an increasing amount of the American market and in July of 1967 the percentage was 13.66% (U.S. Bureau of Census Report). (g) An assured timely domestic source for malleable iron pipe fittings is vital to National Security. Each 1,000 square feet of construction put in place requires 20.2 pounds of malleable iron pipe fittings. During World War II this require- ment increased to 78.7 pounds. Without a dependable source construction for shelter, sanitation, welfare and defense would be jeopardized. (it) Present domestic capacity is fully adequate to meet existing and future demands for this product. WILLIAM C. S~IITH, President. Subject: Brief supporting recommendation on item 610.7400 and 610.7000 mal- leable iron pipe fittings on behalf of producer members of the American Pipe Fittings Association. *Average hourly earnings in manufacturing. International Labour Office, Geneva. Japanese figure includes salaried employees, family allowances, mid- and end-of-year bonuses. In addition to TJ.S. figure fringe benefits paid by the pipe fittings industry amount to approximately 70 cents per hour. PAGENO="0474" 2260 PRESENTER OF BRIEF This Brief is submitted by the American Pipe Fittings Association on behalf of its members who produce Malleable Iron Pipe Fittings for 150 lb. pressures. These Manufacturers produce all of this type of pipe fitting made in the United States. The producers are: ASSOCIATION MEMBERS Grabler Manufacturing Co., Cleveland, Ohio. Grinnell Corporation, Providence, RI. Stanley G. Flagg & Co., Inc., Philadelphia, Penna. Stockham Valves & Fittings, Inc., Birmingham, Ala. Union Malleable Mfg. Co., Ashland, Ohio. S. P. Ward Foundries, Inc., Blossburg, Penna. Warwick Co., Lincoln Park, R.I. Wheeling-Pacific Division, Wheeling Machine Products Co., Woodlake, California. NONMEMBER COMPANY Interlakes Machine & Iron Co., Grand Haven, Michigan. TUE INDUSTRY AND ITS PRODUCT The Malleable Iron Pipe Fittings industry is a small industry, with the major- ity of companies located in small communities and thus provide jobs for an im- portant percentage of the town's w'orkers. Of equal importance is the fact that they pay a sizeable percentage of the tax requirements of their respective com- munities and support local civic organizations financially and in many other ways. That the companies have operated, and have been an essential part of their communities for many years, is clearly shown by the following tabulation: Manufacturers Years in Plant location business Grabler Manufacturing Co., The Grinnell Corp Stanley G. Flagg & Co., Inc Stockham Valves & Fittings, Inc Union Malleable Manufacturing Co., The J. P. Ward Foundries, Inc Warwick Co., The Wheeling-Pacific division, Wheeling Machine Products Co 114 121 114 68 56 47 33 43 Tiffin, Ohio. Columbia, Pa. Stowe, Pa. Birmingham, Ala. Ashland, Ohio. Blossburg, Pa. Lincoln Park, RI. Woodlake, Calif. The manufacturing facilities of the industry at current replacement cost are comprised of over $50 million of capital investment and are made up largely of specially designed single-purpose machines. These cannot be, except in minor part, economically converted to other production uses. Therefore, these would be needless waste of these tax producing facilities and millions of dollars in taxes paid at local and the National levels would be lost if the industry were to decline further. Industry employees have long years of service with their respective companies and possess the necessary skills and production know-how required. Over 50% of the employees have a service record of 10 years or more. The bulk of the industry's workers are drawn from that hard core segment of unemployment which today constitutes one of our nation's major problems. They come from a limited educational level and the skills required are more physical than educational. Most plants have a high percentage of Negro workers: over 50% of the workers in two plants are Negroes and all other plants employ sizable percentages. Due not only to the limited educational level, but also to the type of their skills, costly retraining program would have little to offer these employees, their facilities or the companies. Although plants are operated efficiently and equipment is highly mechanized, profit margins have been small and frequently losses have been incurred. Com- paratively small increases in foreign imports have a major impact on both the cost of production and sales realization. Such negative impact is wholly out of proportion to volume imported for the reason that said imports are confined to PAGENO="0475" 2261 the popular sizes leaving the low volume high unit cost items to be produced by the U.S. manufacturers. Pipe fittings are purchased only when there is a specific construction or com- ponent need. Increased volume is not created by lower prices or other promo- tional methods as in the case with consumer goods. Thus the sale of imported fittings reduces the potential need for domestic fittings in direct proportion to the quantities imported. However, for reasons already noted, the impact of imports on the production costs and sales realization of domestic manufacturers is grossly disproportionate to the share of the domestic market pre-enipted by imports. All domestic mallealde iron pipe fittings for 150 pound pressures are produced to standards promulgated by the American Standards Association and the Amer- ican Society for Testing Materials. These standards stipulate required dimen- sions, materials and identifying markings. Hence, malleable iron fittings to these common specifications are fully interchangeable. MAJORITY OF FOREIGN-PRODUCED FITTINGS DO NOT MEET U.S. SPECIFICATIONS Although common specifications exist for domestically-produced pipe fittings, most pipe fittings produced in foreign countries do not meet these United States specifications. And are not imported. Likewise there is no foreign market of any consequence for the American manufacturer. These variations may include type of metal (for example, in Europe its "white heart" malleable versus domestic "black heart") general design, dimensions, weight, wall thickness, number of threads per inch, type of threads, or a combina- tion of these and others. Japan, however, produces the same fitting as the United States and as our labor costs are 41/2 times greater than theirs, they are able to capture a serious percentage of the United States market while U.S. manufacturers cannot possibly offer their fittings in Japan. Illustrations of malleable iron pipe fittings are shown in Exihibit 1. IMPORTANCE OF INDUSTRY PRODUCT Domestic malleable iron pipe fittings are a standardized product and form an integral part of the requirements of the construction industry. This includes such building types as farm, residential, industrial, commercial, religious, educational, hospital, social and recreational. It would include repair and maintenance of such buildings as well. Significant quantities of these fittings are required in shipbuilding and military facilities and are also required in oil and gas produc- tion and distribution. In addition, many machine tools and hydraulic actuators of all kinds require malleable iron pipe fittings as components. The inseparable essentiality of malleable iron pipe fittings to the $50 billion annual construction industry, and likewise~ to National Security, will be readily apparent from the fact that for each 1,000 square feet of construction put in place 20.2 pounds of malleable iron fittings are needed. During World War II when competitive materials became essential to the direct war effort, the con- sumption of malleable iron pipe fittings per 1,000 square feet of construction increased to 78.7 pounds. Under like circumstances, no amount of "adjustment assistance" can meet the urgent necessity for pipe fittings. Such pipe fittings provide construction for shelter, health, sanitation and defense. Malleable iron pipe fittings are critical to National Security as proven in World War II when the industry was called upon to support our industrial expansion and vital security programs. As previously shown, the malleable iron pipe fitting used in the U.S. is entirely different from the one used on the European Continent and is produced in substantial quantity by only one other country, Japan. Further injury to the U.S. malleable iron pipe fittings indus- try can only result in further diminishing its ability to serve the Nation. And in the event of a national emergency Japan might not be willing or able to supply our needs. It is, therefore, imperative that the U.S. maintain adequate production of malleable iron fittings within its own borders, as well as trained workers. Perhaps the best proof of the industry's essentiality is the following letter received September 6, 1945 from the War Production Board at the close of World War II. PAGENO="0476" 2262 WAR PRoDUcTIoN BOARD, Washington, D.C., September 5, 1945. Mr. Rox L. STEWART, President, Pipe Fittings Manufacturers Association.,5 New York, N.Y. DEAR MR. STEWART: The Shipbuilding Division of the War Production Board, according to present plans, will cease to exist as a Division on 1 October 1945, or shortly thereafter. The present Director will return to inactive duty as of approximately that date. Before leaving the War Production Board. I should like to acknowledge to you, and through you to the manufacturers of the pipe fittings industry, the splendid cooperation and immediate response which the industry has given the Shipbuilding Division in the last 4 years in meeting the greatly increasing re- quirements in pipe fittings for the war programs, at times in face of almost insurmountable handicaps such as competing demands for machine tools and changing demands necessary to the fulfillment of the strategic plans as the war progressed. These programs were tremendous in their volume and range of types and sizes. The components produced by the industry were critical almost con- tinuously. They were essential to our greatly expanded Navy and Merchant Marine and to the construction of a vast number of plants producing end prod- ucts ranging from aviation gasoline to atomic bombs. The accomplishment of this task so vital to the war effort is one of which the industry can well be proud. I wish you all a full measure of success in the peacetime years that lie ahead. Sincerely yours, J. 0. GAWNE, Captain., U.S. Navy (Retired). Director, Shipbuilding Division.. PRESENT PLIGHT OF INDUSTRY Today the Malleable Iron Pipe Fittings industry is plagued by declining mar- kets both in prices and tonnage-domestic and export. This diminishing share of the U.S. market is due in large measure to competition from low labor cost countries, primarily Japan and has resulted in over capacity of production facilities in the U.S. industry. Japanese produced fittings are equal in quality to those produced in the United States as proved by inspection and tests in our ow-n laboratories. In addition. Japan employs modern capital eqmpment of the most advanced design as a result of installation made following World War II. The first malleable iron pipe fittings manufactured in Japan was in 1910. They w-ere manufactured by Hitachi, w-ho manufacture the gourd brand of pipe fittings. There are now twelve manufacturers of malleable iron pipe fittings in Japan with an industry capacity of 160 million pounds a year. The Japanese have taken almost all of the export market formerly enjoyed by the United States malleable iron pipe fitting manufacturers. In addition the Japanese are increas- ing their shipments of malleable iron pipe fittings to the United States. The industry's normal capacity to produce 150 lb. pressure malleable iron fit- tings is approximately 150 million pounds per year. That such available capacity is beyond that required is evidenced by the fact that for the five years ending December 31, 1967 the annual average U.S. consumption w-as only 125 million pounds as represented by the combined total of domestic and imported ship- ments. Obviously imports are not necessary to meet existing or foreseeable tie- mands. On the basis of pounds, imports of malleable iron pipe fittings have steadily increased from 1.23% of American market in 1954 to an average of 8.23% for the year 1967. In July of 1967 imports took 13.66% of the United States market. The year 1968 started with January imports taking 10.21% of the American market. In addition unknown quantities of unfinished malleable iron fittings castings (USTS 610.7000 not advanced) have been imported. More recently rough malle- able iron pipe fittings castings are being offered by English foundries who em- l)hasize that since the devaluation of the English Pound they are in position to quote very low- prices. *No'~y presently American Pipe Fittings Association. PAGENO="0477" 2263 While available data shows that imports have reached 13.66% of the domestic market, such imports are composed mostly of the high production item 2" and smaller. If the percentage of imports were calculated on the basis of this cate- gory of sizes the percentage would be even higher. Foreign producers concentrate on the size range of fittings which are mass produced. They do not adequately supply the user with odd sizes and patterns w-hich because of lesser demand are made in small quantities. These service items builders must have and consequently the U.S. manufacturer must carry the burden of supplying them, often at disproportionately high cost. Since U.S. producers cannot compete successfully in our domestic market with the labor cost advantages held by foreign producers, it is obvious that export niarkets have been far beyond our reach. CAUSE OF INDUSTRY PLIGHT Pursuant to provisions of the 1948 GATT Agreement, the tariff rate on malle- able iron pipe fittings was reduced as of January 1, 1948 to 22½ % from a previ- ous 45% ad valorem. As a result imports rose from insignificant quantities to a percentage detrimental to the American market. At the Kennedy Round of GATT negotiations the tariff was again reduced to 11% ad valorem. This foreshadowing further injury to the American industry. In spite of the industry's constant improvements in equipment and extensive use of mechanization, not less than 50% of the total cost content of malleable iron pipe fittings is labor or labor related costs. The high labor content is due to the inherent production processes required in manufacturing this product. Notwithstanding domestic production efficiency it will be evident that the dis- parity in labor costs between domestic and foreign producers cannot be overcome. The basic rate paid by U.S. domestic producers of malleable iron pipe fittings average approximately $2.90 per hour, plus fringe benefits which amount to over an additional 70 cents per hour. SOURCE OF IMPORTS AND PRICES Due to more modern facilities and to employee training, productivity in Japan compares favorably with that in the United States. Since 1956 over 95% of foreign imports came from Japan, according to figures compiled by the bureau of the Census. The Fittings are well distributed throughout the United States markets as they are imported through over twenty ports of entry surrounding the entire country; East Coast, West Coast, St. Lawrence and Great Lakes, Gulf Coast, Puerto Rico and Hawaii. The average value per pound declared by importer at port of entry (C.I.F. prices) for Japanese malleable iron pipe fittings as taken from data available through the U.S. Customs Offices have been as follows: Japanese Japanese value value Period: per pound Period: per pound 1957 19. 4 1963 19. 1 1958 18. 5 1964 18. 5 1959 19. 2 1965 19. 3 1960 19. 6 1966 19. 5 1961 19. 4 1967 20. 1 1962 19. 2 After importers add distribution costs and profit margins these imported fit- tings can still be sold in the domestic market at prices far below prices realized by domestic producers. Imports from the European Continent have not been significant as the so- called malleable iron pipe fitting produced there is to an entirely different speci- fication from the U.S. fittings. On the other hand, as noted above, the Japanese fittings are the same as U.S. fittings. REQUEST FOR ORDERLY FOREIGN TEADE LEGISLATION It is respectfully urged that action presently be taken which would result in a healthy American market for malleable iron pipe fittings (USTS 610.7400 and 610.7000). PAGENO="0478" 2264 This request is based on the facts set forth in this Brief, whieh include the following: (a) Fittings produced in Europe do not meet U.S. specifications, and U.S. fittings do not meet European specifications. Hence, any regulatory legislation would not create any disharmony between Europe and the United States. (5) Nine domestic manufacturers have discontinued manufacture, liquidated their facilities, and laid off employees since 1952. (c) The January 1, 1948 tariff rate on this product was reduced from 45% to 221/2 % ad valorem. It was further reduced to 11% ad valorem at the "Kennedy Round" of GATT negotiations. (d) Since 1948 there has been a substantial increase in imports to the serious injury of the industry and its workers. These workers are the unskilled and semi-skilled who form the hard core unemployed. (e) Since 1950 more than 95% of all imports have been from Japan, where the hourly labor rates are only 630 compared with ~2.83 in the United States. In this industry 50% of the cost content is labor. (f) An assured timely domestic source for malleable iron pipe fittings is vital to National Security. Each 1,000 square feet of construction put in place re- quires 20.2 pounds of malleable iron pipe fittings. During World War II this requirement increased to 78.7 pounds. Without a dependable source construction for shelter, sanitation, welfare and defense would be jeopardized. (g) Present domestic capacity is fully adequate to meet existing and future demands for this product. (it) Foreign trade must be mutually beneficial to the countries involved. Orderly marketing legislation will enable the United States to maintain a healthy malleable iron pipe fittings industry and at the same time allow others a share of our market which will not deprive American workmen of their jobs in favor of maintaining the jobs of foreign workers. MALLEABLE CAST IRON PIPE FITTINGS Malleable Malleable Malleable M~ll bI Elbow 90° Elbow 45° Street Elbow Tee e ~ (~ ~ III ~L ~I~:~' ~ Malleable Bushing Plug M~i1ca~l~ Cap Coup!in~ PAGENO="0479" 2265 PITTSBURGH, PA., June 18, 1968. Hon. WunuR D. MILLS, Longworth House Office Building, Washington, D.C. DEAR MR. MILLS: The purpose of this letter is to ask you to support legislation limiting the amount of foreign steel which can come into the United States. I am a director, a Vice President, andthe General Counsel of Jones & Laugh- lin Steel Corporation. It has become very clear over the past few years that Jones & Laughlin and other American steel companies are being seriously hurt by the greatly increased tonnages of foreign steel entering the United States. If some restrictions are not soon enacted, serious economic and national security problems will result. While I, personally, tend to favor free trade, there are three factors in the steel situation which lead me to a contrary conclusion. The first is that a sub- stantial part of the foreign steel coming into the United States is from facilities which have been built with money provided by American taxpayers. The second factor is that our Government has chosen to do little or nothing about the non-tariff barriers against American steel erected by countries like Japan which are exporting steel to the United States. The third factor is that the govern- ments of some of the countries from which steel is being exported to the United States are subsidizing such exports. I believe that it is in the best interests of all concerned in this country if S. 2537 or similar legislation is passed by The Congress. I ask your help to this end. Respectfully, W. PARKER SHARP. UNIvERsITY OF PITTSBURGH, DIvISION OF THE SocL&L ScIENcEs, Pittsburgh, Pa., June 25, 1968. Hon. WILBUR MILLS, lion/se Ways and Means Committee, House of Representatives, Washington, D.C. DEAR SIR: I am sending you the enclosed reprint which I thought might be included in your hearings on Steel. Thank you. Sincerely, REUBEN E. SLESINGER, Associate Dean, Professor of Economics. [From American Economic Review, March 1966, Journal of the American Economic Association] STEEL IMPORTS AND VERTICAL OLIGOPOLY POWER: COMMENT In the American Economic Review of September 1964 [1, pp. 626-55], Walter Adams and Joel Dirlam criticize the domestic steel industry on a number of counts-particularly regarding technology, production, pricing practices, vertical integration, and imports. This communication will be limited to an examination of the authors' contentions about steel industry technology. Although several other assertions of the authors justify a re-examination, space limitations are such that this communication will not be able to examine these in the detail necessary. The authors contend that U.S. steel producers have lagged behind foreign producers in investing in technologically improved facilities and, further, that they have invested in obsolete equipment and that improvements have been adopted only when the industry has been forced to do so by the increasing pressure of foreign competition [1, pp. 626, 646]. To support their charges, the authors cite the examples of the oxygen furnace and the continuous-casting process. Specifically, the authors state that during the 1950's, the U.S. steel industry bought 40 million tons of the wrong kind of capacity, namely the open-hearth furnace. They state that "Much of the U.S. industry's current investment in plant and equipment is calculated not to add to capacity, but to correct the embarrassing investment errors of the last decade" [1, p. 627]. PAGENO="0480" 2266 Increases in open-hearth capacity in the steel industry are shown in Table 1.1 Although there was a net increase in open-hearth capacity of nearly 40 mil- lion tons, only about 16~ million tons were accounted for by the construction of new facilities during this period. Further, the steel companies built only 5.6 millions tons of new open heartlis-not 40 million tons-during the portion of this period following 1953, when information about the oxygen furnace first became generally available to the industry. The remainder of the increase in capacity represented the results of improved utilization of ewisting facilities- an approach which the steel companies found to be economically more desir- able than construction of completely new facilities. The authors surely do not mean to imply that a fully integrated steel mill has complete control over the fluidity of its capital use. On the contrary, most of the capital becomes sunken and fixed once it is brought into being. The best that can be done in connection with technological changes is to attempt to keep the existing physical plant from becoming uneconomical to operate by making steady improvements and modernizations as these become technologi- cally and financially feasible. It is only in the construction of new facilities that a firm has the option of using existing technology or new methods, even if the latter were operationally suitable at the time.2 TABLE 1-INCREASE IN OPEN-HEARTH STEELMAKING CAPACITY BETWEEN 1950 AND 1960 Net tonnage Increases Decreases change in United States Revision of ratings of existing furnaces ` 31, 569, 060 2, 561, 600 29, 007, 460 New furnaces 16.250,760 16,250,760 47,819,820 2,561,000 45,258,220 Less: Old furnaces abandoned 5,621,080 5,621,080 Net incrnase 39,637,140 Primarily due to the use of oxygen in existing furnaces, introduction of labor-saving equipment, and better refractories. The authors assert that while the U.S. steel industry was emphasizing open hearths, the European and Japanese firms were instead installing oxygen fur- naces at a "breakneck pace" [1, p. 627]. The record shows, however, that from 1953 to 1960 the U.S. producers increased their open-hearth capacity by only about 23 percent in contrast with an increase of about 79 percent for members of the European Coal and Steel Community and of approximately 169 percent for Japan. The authors criticize the U.S. industry for being slow to adopt the oxygen process in spite of its alleged widespread use in Europe more than ten years ago [1, p. 647]. The oxygen process was first used commercially in Austria in 1952 on two 35-ton furnaces with an annual capacity of about 400,000 tons. In Europe, another shop was started in 1953, still another in 1956, one more in 1956, two more in 1957, four more in 1958, and two more in 1959. The total capacity of all these operations approximated 4,000,000 net tons. An additional five shops were started up in 1960, bringing the total oxygen-furnace capacity in Europe by 1960 to about 5.3 million net tons. These data obviously cannot be interpreted to mean that oxygen-furnace-produced steel was widespread in Eu- rope ten years ago. In fact. as late as 1963, only about - percent of the steel produced in Europe was made by oxygen furnaces, this compares with about 71/n percent in the United States by 1963. By this measurement, U.S. producers were technologically ahead of-not behind-European producers. To understand the rate of introduction of the oxygen furnace in the United States, it is necessary to examine both economic and engineering factors. The early oxygen furnaces used in Europe had insufficient capacity to meet the re- quirements of the large, integrated steel mills of the United States, where many of the open hearths were producing heats (i.e., "batches") of 300 to 500 tons. 1 Based on American Iron and Steel Institute data. 2 Subsequent discussion will indicate why such a choice was not present for much of the period. PAGENO="0481" 2267 Although it would have been possible, for large, integrated U.S. mills to have constructed a number of small oxygen fUrnaces, there are two apparent reasons why it was not economically desirable for U.S. producers to do this. First, large producers undoubtedly determined that their large open-hearth furnaces were more efficient in producing large tonnagés than a large number of small-capacity oxygen furnaces would be. This, of course, would not have precluded the very small U.S. producers from constructing small oxygen furnaces, since these pro- ducers did not have the same need for volume; generally, however, these very small steel producers do not have blast furnaces, which are a prerequisite to an oxygen steelmaking operation. A second reason by U.S. producers deferred mak- ing investments in oxygen furnaces is undoubtedly that they felt they could develop higher-capacity oxygen furnaces in the not-too-distant future and that such furnaces would be much more efficient than small-capacity furnaces, which were the only type that could have been built during this earlier time period. To make the oxygen furnace feasible for widespread use in the United States, a great deal of research and development first had to be undertaken; this was to come at a future date. At present, some 300-ton oxygen furnaces are already in operation in the United States and others are being built, but the average-size oxygen furnace now in operation in the United States is about 140 tons. Until the large oxygen furnaces were developed, a number of companies adapted their large, modern 01)011-hearth furnaces with oxygen lances and have operated them as efficient production units. In light of these facts, it seems quite apparent that there would have been little or no advantage to the major U.S. companies from oxygen furnaces, rather than continued use and improvement of the existing open hearths, during the years before the large oxygen furnaces were perfected. The process of the introduction of the Oxygen furnace is neither hit-or-miss nor one of massive replacement. Companies tend to replace the oldest and highest-cost open hearths first, and only replace those where capital could not he utilized more efficiently elsewhere. Now that 150- and 200-ton furnaces have been engineered, one company after another is building this type of capacity. So long as steel produced by conventional methods can compete with that produced by newer technology, it would not be a wise economic decision to scrap the existing facilities and to destroy vast investments in fixed capital. It can he expected that new-er technology will become more general as 01(1 facilities wear out and are scrapped. This is why it is unlikely that there will be any future purchase of new open-hearth capacity, but there will continue to be modifications, adaptations, and modernizations of such facilities so long as they are cost-competitive. Any decision that involves the contemplated scrap- ping of open hearths and their replacement by oxygen furnaces is carefully w-eighed against the alternative uses of funds. Another aspect of technology that the authors discuss involves the use of continuous casting, a process made economically practical as a result of the oxygen furnace. Continuous casting at the present time involves an uninter- iupted ijrocess of steelmaking and steel-forming of in-process shapes for future conversion. The authors again claim that the U.S. industry adopted the con- tinuous-casting method slowly and only with great reluctance. But, once again, it is necessary to point out that the structure of steelmaking operations in the United States is very different from that in Europe, and that the size of the economical producing unit in the United States is much larger. Even in the United States, the mills that found it economical to adopt continuous-casting techniques at first were the smaller plants. Although the authors do indicate that continuous casting abroad "began to move into high gear about eight years ago," they do not add that most of the 40 machines installed from 1955 to 1902 had very small capacities. Only 10 of the 40 had annual capacities in excess of 100,000 tons, and the largest was rated at about only 350,000 tons. This contrasts with modern blooming and slabbing mills (which they replace) in the United States that have annual capacities in excess of 3,000,000 tons. Although it would have been possible for large, integrated U.S. producers to construct small continuous-casting units at an earlier date, such an approach w-ould undoubtedly have resulted in higher unit costs. For the small producer, how-ever, who could not produce the volume of steel necessary to make the operation of large-volume blooming, slabbing, and billet mills feasible, small capacity continuous-casting units were economrncal. Continuous casting was not installed by any large producers until a large-scale process was developed which 95-150-68-pt. 5-31 PAGENO="0482" 2268 would be more efficient than what the producer had at the moment, and until the return on such an investment was anticipated to be higher than any alter- native use of funds. In summary, with reference to technological advances, it is imperative to rec- ognize that the introduction of new methods is not dictated solely by the avail- ability of a new process. The very technological nature of the industry itself affects the wide use of newer methods, since early applications may be restricted to smaller producing units. It also is important to recognize that a basic factor affecting decisions about investments is consideration of alternative uses of money. There are many ways that a firm can spend funds for investment in plant and equipment. The key decision is to spend the monies where they will earn the best returns. With different rates of growth in demand in the United States, Europe, and Japan, the facility decisions necessarily must be different. With rapidly expanding demand, it is financially possible for a firm to install new capacity; without such growing demand, alteration of existing facilities fre- quently is a more economical move. REUBEN E. SLESINGER.5 REFERENCE 1. Walter Adams and Joel B. Dirlarn, "Steel Imports and Vertical Oligopoly Power" Am. Econ. Rev., Sept. 1964, 54, 626-55. AMERIcAN Koxo CORP., Cleveland, Ohio, July 9, 1968. Hon. WILBUR D. MILLs, Chairman. House Ways and Means Corn in ittee, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: In the light of recent efforts by domestic manufacturers to impress upon the Congress the so-called dangers inherent in U.S. purchases abroad, we as importers of ball and roller bearings, wish to point out a couple of the pluses that accrue to the United States from our small operation alone. 1. We employ 57 people full time and provide part-time employment for half a dozen more. 2. In addition to paying Federal income tax, we pay the Bureau of Customs over $1 million annually in duties. The credits we send to Japan for bearings are returned to the United States in the form of export business enjoyed by some of the same manufacturers who are concerned about imports. It seems quite reasonable to expect that if the current protectionist outcry is allowed to dominate the deliberations of the Com- mittee, the United States will suffer economically and politically at hoimie and abroad. We urge you to try to sort out the emotional and the purely protective aspects of the proponents of trade restriction and to give full credit to the positive bene- fits acquired in dealing more freely with friendly countries around the world. Very truly yours, J. B. GRAY, Corporate Services Manager. BLACK & DECKER MANUFACTURING Co.. Tomvson, Md.. June 20, 1968. Hon. WILBUR D. MILLS. Coinniittce on lTTayc cind Means. House of Representatives, Was1~ in gto a., D.C. DEAR CONGREssMAN MILLS: We are w-riting in reference to HR. 17551, "Trade Expansion Act of 1968" and to the hearings on tariff and trade proposals now before the House Ways and Means Committee. The Black & Decker Manufacturing Company is a multi-national company competing throughout the free world. Black & Decker's origins are firmly grounded in the free, competitive, risk enterprise society. We believe that given a proper economic climate in w-hich to work and grow, there is no need for the *The author is professor of economics at the University of Pittsburgh. PAGENO="0483" 2269 type of impediments to free trade that are implicit in import quotas and other trade restrictions. Despite the gap between wage rates in the United States and other countries, we think that American productive know-how and entrepreneur- ial skill should continue to enable us to compete favorably without inviting the type of retaliation against a wide variety of United States exports, that would certainly issue from friendly countries with whom we trade. The American steel industry, among others, has requested protection in the form of import quotas. Our experience with domestic steel sources has been good in the areas of service and R&D support. Considering the introduction of so niany new and varied materials from the world's research laboratories, the steel indus- try needs to keep constantly on the alert for new applications. This is quite un- portant, for despite the unsettled conditions of the world, we need to have trade flexibility and yet maintain a viable domestic steel industry. We believe that government imposed import restrictions would not produce results favorable to Black & Decker; however, to subsidize exports to those na- tioris who subsidize their trade with the United `States might `be a more effective approach. A more suitable depreciation' policy to encourage new investment along with investment tax credit improvements may also be a more effective form of government support than restraint of trade. In conclusion, we agree that government needs to consider this very real prob- lem but their response should not be in restraint of trade. Sincerely, ALoNzo G. DECKER, Jr., Chairman of the Board and President. DAvIs Wnm Coup., Los Angeles, Calif., July 9, 1968. Hon. Wunuim D. MilLs, UJg. House of RepreseKtatives, house Office Building, Washington~, D.C. DEAR CONGRESSMAN MuLs: We are opposed to any steel import quota or duty. The question of duties and quotas on steel' products is a very complex problem and will have an effect on many firms such as ours in this country. It is, of course, extremely alarming to see the number of imports coming into this country and also the condition of our' balance of payments. A blanket in- crease on duties or quotas on all steel products is certainly not the answer in the world market that exists today. We must live in a world market and we must do business in the world market. In order to do business we must be competitive, we must be efficient and must produce a quality product. Th basic steel industry in this country is behind in quality and efficiency com- pared to mills in Germany, France, Japan, and Belgium. This, of course, is of great concern to us as a large user of steel' in this country. The condition that our mills are in today has been basically brought about by three reasons: 1. Most of the management of our steel industry has been extremely lethargic until the last few years when they began to realize what was happening in the market place and are now beginning to makes sales and technological changes. 2. The unions, almost being sanctioned by our government, were able to obtain practically any demands they requested in their negotiations. The steel industry would do little to fight this situation because they felt they could immediately pass along any wage increases to the consumer, and, therefore, there was little thought given to the excessive demands that' were asked by the unions five and six years ago. By granting these demands, it helped put this country in a non- competitive position in the steel industry. But, again, I must add that through better marketing philosophy and technological advances, we could have over- come this problem. 3. Instead of our steel industry and the government working together as is the case in most other countries, they have been diametrically opposed to each other and there has been no help as far as encouraging exports or working out the l)roblems of imports. We are the largest manufacturer of wire a'nd wire products in the West and probably in the United States that is not a basic producer of steel. By basic producer I mean a company that melts their own steel. We are a converter who purchases hot rolled wire rod, which is a semi-finished steel product. We cold draw wire rod into many different sizes of wire which are made into other types of finished wire products. Most of the basic steel producers in our marketing PAGENO="0484" 2270 area compete with us on the finished product. If we were to depend solely on domestic steel, the probabilities are that we would be forced to curtail our opera- tion considerably or, even worse, be forced out of business because: 1. The domestic steel producers would raise the price of our raw material to the point that we would no longer be competitive or we would have to curtail our operation considerably in order to stay in the market, which was the case prior to 1935. 2. In our area there are not enough wire rods produced by the basic steel producers to supply the market. 3. Operating costs would increase due to the fact that the domestic rods avail- able to us at the present time are not as high in quality as we can obtain from overseas. I have enclosed a brief description of our operation. We were faced w-ith serious import competition five years ago. We did not run to the government and ask for protection. We sat down and used the term I like to think of as "Yankee Ingenuity.' We became more efficient and produced a better quality product and w-ere able to compete with foreign competition. I might conclude by saying that the steel industry, the labor unions, along with the government, should take a positive approach to this problem rather than the negative approach that has been taken. We should look at possible ways such as tax advantages and lower interest rates which would help us to compete with foreign imports domestically and also encourage exports. There are many other w-ays that this problem can be solved constructively, I am sure, rather than frantically trying to restrict imports through high tariffs or quotas-which the basic steel industry would like for us to do to protect their own selfish interest. If, in this country, we are going to survive economically and continue to be leaders in the world, we must be competitive in the world market. `We cannot build a fence around this nation by quotas and duties and expect to survive econoniically now or in the future. Sincerely yours, JAMES L. `WALKER, President. I. Description of our operation A. Our firm uses hot rolled wire rods produced by integrated steel mills and cold draws these w-ire rods into various sizes, grades and qualities of finished steel wire. B. We use approximately 25 different types and grades of wire rods which are based on the diameter and chemical composition depending upon the end use requirement of the wire or wire product. C. There are approximately 38 different types of wire and wire products that we manufacture. These are broken dow-n into seven different catagories: 1. Industrial and manufacturers wire. 2. Concrete reinforcing w-ire products. 3. Chain link fencing. 4. Building material products. 5. Merchant wire products. 6. Farm and agricultural products. 7. Florist and fine wire products. D. Manufacturing locations Total number of employees Los Angeles. Calif. (headquarters) 324 I'Iayward. Calif 52 Seattle, Wash 24 Total 400 E. Geographic area of sales. California, Arizona, Nevada, Utah, Idaho, Oregon, Washington, Alaska, Hawaii, Montana, and Wyoming. PAGENO="0485" 2271 II. Importers who compete Company: Country represcntcd Kurt Orban Europe and Japan. Franco Steel Europe. Tricon Europe. Indussa Trading Europe. Amerlux Europe. Mitsui & Co Japan. Mitsubishi Japan. Ataka, Ltd Japan. Marubeni Japan. Kanematsu Japan. Nissho Pacific Japan. Sumitomo Shoji Japan. Mohns Commercial Japan. Toymenka Trading Co Japan. Overseas Trading Co Japan. C. Itoh & Co Japan. Balfour Guthrie Europe and Japan. Michael Chance & Associates Japan. Common Market Trading Co Japan. Pacific Products Japan. Winter Wolff & Co Japan and Europe. Joseph Grisay Japan. Rutt Steel Japan. Iwai Trading Co Japan. Standard International Japan and Europe. Gosho Trading Co Japan. Continental Steel Japan and Europe. Van Waters & Rogers Japan and Europe. Commercial Steel & Supply Japan and Europe. III. Domestic competitors General Steel - Not integrated. Edwards Wire Rope - Not integrated. Southwest Wire Not integrated. Manufacturers Wire - Not integrated. Industrial Wire Products - Not integrated. North American Wire -~ Not integrated. U.S. Steel - Integrated-.Basic Steel Producer. C.F. & I - Integrated-Basic Steel Producer. Keystone Steel and Wire - Integrated-Basic Steel Producer. Etiwanda Steel Producers - Integrated-Basic Steel Producer. Bethlehem Steel - Integrated-Basic Steel Producer. North Western Steel & Wire - Integrated-Basic Steel Producer. IV. SOURCES OF RAW MATERIAL BY COUNTRY Mill Country Quality Mill Country Quality Yawata Steel Co Japan Excellent. Lorraine.Escaut France Average. Sumitomo do Do. Normandie do Poor. Fuji do Average. Cockerill Ougres Belgium.. Excellent. Kobe do Poor. Arbed Lirxem- Do. Broken Hills Proprietary Australia... Excellent. bourg. Acindar Argentina. - Average. Krupp Germany... Average. Germandi do Poor. Klockner do Excellent. Iscor South Do. Niederheim do Average. Africa. us. Steel United Do. Sidelor France Average. States. De Wendeil do Excellent. CF. & I do Do. La Chiero do Poor. BethleheniSteel do Poor. PAGENO="0486" 2272 V. Price comparisons 1. Rods-U.S.A. published price. A. Industrial quality ~ and over, approximately $513.OO/T over foreign. B. Common Quality, 14, ~/32, ~/io, C-1008 only, approximately $lO.OO/T over foreign. C. High Carbon, approximately $30.OO/T over foreign. VI. Wire and wire products prices Foreign price Competitive per ton domestic price per ton 1. Bright basic wire is coils $130.00 $146.00 2. Galvanized wire' 148.00 178.00 3. Welded fabric (6 by 610/10) 138.00 140.20 4. Baling v/ire 158.60 174.00 5. Vineyard wire 138.00 185.00 6. Spring wire 170.00 176.00 7. Bale ties 212.20 217.40 8. Florist wire 342.00 358.60 9. Black annealed wire 132. 00-140.00 186.00 `9 to 12 gage. VII. Tlte greatest problem lacing vs today 1. If restrictions or levies were to be imposed on hot rolled wire rods it would make it possible for the integrated steel producers who produce hot rolled wire rods, as well as wire and wire products, to effectively squeeze ourselves and other independent wire producers. The market price of wire rods could be in- creased substantially w-hile finished w-ire and wire products would remain the same or, in some cases, be decreased to a point which might possibly force the non-integrated wire producers out of business. 2. The quality of the domestic rod available to us would have an effect on our overall cost of operation due to the fact that some foreign sources produce a higher quality of rod which results in a lower operating cost to us. VIII. One solution to ti/c impact that ~oreigm steel has had oa our economy might be as bibles 1. To impose a levy or allocate imports on only finished steel products and maintain the same duty which now exists on semi-finished steel products which would require further processing and manufacturing in the United States to become a finished steel product. 2. If other countries continue to discriminate by charging higher duties and tariffs for our goods shipped into their country than we charge for their goods coming into this country and we cannot reach an agreeable settlement with that nation on tariffs, then we would have possibly two alternatives: (1) Increase the tariffs to the same level that they have on our goods (2) Through tax conces- sions or other means provide ways and means for American industry to offset these duties in order to compete in their market. FIRTH CLEVELAND STEELS, INC., New Yoik, N.Y., May 23, 1968. Hon. WILBUR D. MILLS, Cii airman, Committee on. Ways and Means, Lon.gworth House Office Building, Wa.shiingtofl~ D.C. DEAR CHAIRMAN MILLS: I am informed that time House Coonniittee on Ways and Means will open hearings on June 4th in regard to import quotas. I would like to go on record that we are opposed to any quota and or other restrictions which would obviously result in retaliation by our trading partners abroad. Our country has for many years enjoyed a favorable trade balance and I am very much concerned that the result of any import quota would be to bring about drastic measures from abroad to reduce the current U.S.A. export business. PAGENO="0487" 2273 I am very much chagrined that both the business community and members of Congress fail to make a distinction between our foreign payment deficit and our foreign trade position. The foreign payment deficit is, of course, due to our heavy military commitments all over the world and the most recent figures I have seen show that at least one billion dollars of foreign currency is being "lost" because of our involvement in South Vietnam. It, therefore, follows that nothing would be achieved in bringing about a balance of foreign payments by imposing import quotas but more likely there would be a deterioration in the current position. I should be glad if this letter will become part of the official record of your hearings. Respectfully yours, PETER H. GARFTJNKEL, Ewecutive Vice President. PRECIsIoN DRAWN STEEL Co., Pcnnsauken, N.J., June 4, 1968. Hon. WILBUR D. MILLS, House Office Building, Washington, D.C. DEAR CONGRESSMAN MILLS: I would like to express to you my opinions regarding imported steel. Inasmuch as I am President of one of the largest independent converters of steel bars, I feel that our experience should be of interest to you. We purchase I-lot Rolled Steel Bars and coilvert them into Cold Finished Steel Bars, as explained in the attached booklet. As recently as five years ago, we had no interest in importing steel; however, in the period 1957 through 1967, large domestic mills; such as, Republic Steel, Jones & Laughlin and United States Steel, who produce the Hot Rolled Steel Bars used for Cold Finished Bars, saw fit to keep he price spread which we operate at the same level in 1067 as it was in 1957. During this ten-year period, we were faced with annual rising cost of labor and supplies, so that it took 21/~ sales dollars last year to make the same profit that one sales dollar made six years ago. What the big steel companies did was raise the Hot Rolled Bar price several times, as an example, $5.00 a ton, and also raised the Cold Finished price by the same $5.00 a ton, so, in effect, converters like ourselves paid $5.00 more for the product and sold it for the same $5.00 more, getting no additional spread to cover our rising costs. In effect, they saw fit to squeeze independents and satisfied themselves with a substantial profit on the Hot Rolled Bars. A further example of the tactics used by big steel can be pointed out when last year we constructed a new plant in Biloxi, Mississippi, we attempted to get some freight rate help through the Southern Freight Association to give us competitive aid in the south, the above mentioned big steel companies protested the aid we asked for, put pressure upon the Southern Freight Association, and we were unable to get the freight relief we were seeking-this despite the fact that Congressman Colmer of Mississippi and Congressman Joe EvinS of Tennessee intervened in our behalf with the Southern Freight Association. Still another example-just now when the steel industry is booming and making more steel than ever, despite the so called imports, companies such as United States Steel have put allocations on certain products, restricting the tonnage we can buy from them. A recent article in the New York Times about one of our competitors will explain what United States Steel is capable of doing at times like this. When independents are left at the mercy of the big steel companies whose dual distribution efforts put us in a competitive disadvantage, we naturally are forced to seek relief wherever we can get it, and as a result we began to import steel. Definitely, in the past couple of years we have been importing more each year, since we still have not been given price relief from big steel. In conclusion, I personally, feel that big steel, through its pricing and mar- keting practices, have caused foreign steel to come to this country and the prob- 1cm could be rectified by big steel themselves, if they would see fit to provide independents like ourselves a reasonable price spread to work upon. I hope you will consider my comments here when your committee considers restrictions on imported steel. Very truly yours, L. G. BROWN, President. PAGENO="0488" 2274 WIRE MANUFACTURER DEFENDS FREE FLOW OF IMPORTED STEEL (By Robert A. Wright) Without foreign steel. smaller United States manufacturers would not have been able to maintain full operations this year, according to one independent steel executive. Norman M. Geller. vice president of the Republic Wire Corporation of Carteret. N.J., challenged in an interview the position of the American steel industry on imports. Mr. Gefler said the imposition of quotas on foreign steel such as is sought by the United States producers would be "quite injurious" to small manufacturers. About two years ago, Mr. Geller said, his company, which fabricates wire from roiled steel rod, was told by the United States Steel Corporation that it would supply Republic Wire With rods at prices competitive with imports. Mr. Geller said United States Steel agreed to supply Republic with 700 to 800 tons of steel rod a month. ALLOCATIONS NOTED But, Mr. Geller said, when demand for steel soared this year, U.S. Steel began allocating its shipments to Republic Wire and steadily cut back the size of the shipment. "We were cut this month to 500 tons and are cut to 90 tons July 1," Mr. Geller said. `They didn't treat us like customers. They looked to us as if we were enemies. When United States producers tell us they don't have supplies, there is very little we can do but turn to imports." The sharp increase in steel demand so far this year was caused by a rush by steel users to build up inventories to assure themn~elves adequate supplies in the event of a steel strike later this year. Labor contracts for the major American steel producers expire August 1. The flow of imported steel jumped dramatically to meet the clamor for sup- plies, rising 40 per cent from the 1067 level in the first three months of this year. A similar import pattern has been established in each prestrike period since 1950 w-hen the United States industry w-as struck for 119 days and imports made their first big dent in the American market. From less than 2 per cent of this nation's steel consumption in 1959, foreign steel rose last year to, 12 per cent. Foreign steel producers held their new American market after each labor settlement. Imports are expected to take up to 15 per cent of the nation's market this year, a level that the United States industry asserts threatens its future growth and the national security. The American steel-producing industry contends that the import competition is unfair because foreign producers have sharply lower wage rates, are sub- sidized by their governments to export and are protected by tariffs and non- tariff trade barriers. CHICAGO, ILL., Jnly 8, 1968. Hon. WILBUR D. MILLS, Ways and Means Committee, House of Representatives, Washington, D.C. DEAR MR. MILLS: I write as a concerned executive in the steel industry who recognizes, based on 23 years experience in dealing with steel imports and exports, that the imposition of a quota system or for that matter even an increase in tariff would do irreparable harm and injury to the economy of our country. Clearly it would induce reciprocal restrictions by friendly countries w-ith whom we engage in trade which can only lead to a diminution of our exports. Since our exports exceed our imports, and since it is in our national interest to accelerate rather than reduce the volume of our foreign trade, it is incredible to me that serious consideration is being given to restrictive legislation. We must learn from history. We cannot ignore our past experience in which legisla- tion of a comparable restrictive nature contributed in large measure to a major financial crisis of world-wide proportions. A quota system or an increase in tariffs would clearly negate progress made in the Kennedy-Round; it would assist in undoing price stability contributed to by the competition provided by imports; it would diminish rather than stimulate PAGENO="0489" 2275 the need for scientific and technological progress in industry and commerce; it would-despite the current decline in employment in the steel industry and some other affected industries allegedly resulting from our present liberal policy- create a condition that would witness a much higher rate of unemployment in the United States that would affect all branches of industry and commerce; it would alienate our friends abroad and in the process give comfort to our enemies. For all these reasons, I urge that you vote against any resolution that is designed to place restrictions on foreign trade. Respectfully, SOLBERT J. BARSY. CHICAGO, ILL., May 19, 1968. HONORABLE MEMBERS OF THE HOUSE WAYS AND MEANS COMMITTEE, Ho use of Eepresen tatives, TVashington, D.C. DEAR CONGRESSMEN: If you would permit me, I would like to present my views on the proposed Iron and Steel Orderly Trading Act. There has always been a tendency for domestic producers to seek relief from competing imports. If this relief is put into law, a structure is established that is not easily modified when times change. It may seem like a queer sort of comparison to mention cheese when steel is the question, but about 15 years ago Americans started buying more cheese from Denmark than ever before. Cheese imports, rose to a whopping three per- cent of American consumption, if I remember the figures correctly. Wisconsin farmers protested to Congress and after a while cheese imports were limited to a base period before Americans started liking so much cheese in their diet. What is happening now? Prices of cheese are so high some chain stores are dropping certain lines. There has been more than a 25% increase in some cheese prices in a year. Both American and Danish farmers could be making a happy living supplying this market, but the limit on imports still stands on our books. Who suffers most in this situation? The American Consumer? Perhaps also the very Wisconsin farmer who asked for the controls in the first place. Amer- ican consumers become used to other foods in their diet as they stop buying high priced cheese. Might not the steel producers take this example seriously? There are substi- tutes for steel (and incentives to find new ones) if too much interference in the supply sends the price too high. Yours sincerely, MARGARET B. DRAY, Economist. STATEMENT OF J. A. MOGLE, CHAIRMAN, FOREIGN TRADE COMMITTEE, FINE AND SPECIALTY WIRE MANUFACTURERS' ASSOCIATION This statement is filed on behalf of the domestic producers of fine and specialty carbon steel wire through their trade association, the Fine and Specialty Wire Manufacturers' Association. This Association is composed of 17 member compa- nies who account for more than 75% of the fine and specialty wire produced in the United States. Manufacturing facilities of these member companies are located in 16 states: Alabama, California, Colorado, Connecticut, Florida, liii- nois, Indiana, Kentucky, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, and Texas. Our group should not be confused with "The Independent Wiredrawers Association," an entirely different trade associ- ation, whose problems and views do not necessarily coincide with ours. We have requested the opportunity to address you during this hearing on "Foreign Trade and Tariffs" because of our concern about the effects on our industry of past U.S. Foreign Trade Policy. Despite a growing domestic market for our wire, we find ourselves producing an even smaller percentage of it. Best estimates are that in the last ten years our share of the American market has decreased from 98% to approximately 80%. Wire mills have been closed and almost all of our members have dropped certain items from their list of products because they could no longer compete in a market place where foreign competi- tors have unfair advantages. I say "unfair advantages" because they would be so considered under present American laws applying to domestic transactions. PAGENO="0490" 25 ~ 20 15 c 10 5 2276 FOREIGN TRADE TRENDS - ~ SIe~t Wi,e Let us look at a graphic picture of what has happened to steel wire during the past quarter century. It has been necessary to use statistics covering the broad category of "drawn steel wire" since no data are available covering solely the fine and specialty wire field. These graphs were plotted using data from the pub- lication "Foreign Trade Trends" by the American Iron and Steel Institute. Of necessiay, this graph was plotted without 1967 figures which were not available at the time it was drawn. The dotted bars show what has happened to the volume of American exports of this product. The solid bars show the very dramatic growth of imported wire. Also plotted on this same graph is the United States tariff or rate of duty on w-ire valued at over 6~ per lb. There are several tariff categories for steel wire, but this one would most fairly represent the bulk of fine and specialty wires about which we are concerned. Under the Tariff Act of 1930 the statutory rate was 25%. On April 30, 1950 the first General Agreement on Tariffs and Trade (GATT) reduced the rate to 10%. Three reductions of 1/2% each became effective later with the current 81/2% rate starting June 30, 1958. No further reduction resulted from the recent Kennedy Round of negotiations, since the rate was already ab- normally low. In the year 1950, when the major drop in rate of duty first went into effect- even if only for 8 months-the tonnage of imported wire increased nearly six fold to a new all time high of nearly 26,000 tons. Interestingly enough, in that same year exports of wire decreased from 252,000 to 60,000 tons a drop of better than 4 to 1. It can hardly be coincidence that the decrease in duty, the decline in exports, and the jump in imports occurred simultaneously. Not only was the domestic American market being invaded, but what bad been a thriving export business w-as being eroded by these same foreign producers who were not hobbled by high wages nor bound by antitrust laws, Fair Labor Standards Act, etc., which are an accepted part of doing business in the United States. Now please direct your attention to the very startling developments during the last ten years. Exports of steel wire have remained practically stagnant since 1956 and in fact, w-ere trending ever downward until some small spark was in- jected by A.I.D. programs in 1962-1963. However, even that small spark has apparently been extinguished as the last three years have been at the 1956 level. The import line, however, shows a very dramatic and steady climb toward the top of the chart. The 1966 imports of steel wire were 750% of those in 1956-or specifically 458,000 tons compared with 61,000 tons a very substantial 40,000 ton per year increase. For 1967 we have just been given an estimate of 575,000 tons II'~ ~ii PAGENO="0491" 2277 of steel wire-an increase of 117,000 tons of 25%. This represents nearly two- thirds of the total wire production of the members of our Association. It seems quite apparent from these figures that the so-called "free trade" policy which has been our government's official policy, does not result in recipro- cal trade in the steel wire industry. A once thriving American export business has in a quarter century been replaced by an ever increasing invasion of the American market by foreign producers. Why is this so? How could imported wire make such an invasion of the domestic market? Fine and specialty wire is one of the highest labor content items produced from steel. It is estimated that 10 to 12 man-hours are required to produce one ton of the average steel hot rolled mill product. In contrast, a survey by our Association disclosed an average of 35 man-hours required to produce a wide range of fine and specialty wires. A very special item such as 0.006" coated rope wire (which is used in aircraft control cables) has a labor content of 131 man-hours. It is a well known fact that wage costs-including fringe benefits-are much lower in other countries than in the U. S They run from something in the range of 1/3 of ours in West Germany to 1A of ours in Japan. Thus, the very nature of our product with its relatively high labor content makes it an attractive target for those nations seeking to increase their trade dollar with the U. S. It must be remembered that these lower wages affect other costs as well as the labor directly involved in producing a piece of wire. Indirect labor, such as supervision and other management functions, is also much less costly in overseas nations. Capital costs such as buildings and macfinery are also lower because they are in the long run made up largely of labor costs. For instance, foreign made wide- drawing machines of good quality are available in the United States for about i,,'2 of the price of American made machines. If we buy this equipment to produce our wire we reduce our capital costs but then take away jobs from American machinery builders. In our industry it is not uncommon for overhead costs to be equal to, or higher than, direct labor costs, so that this aspect of the cost ad- vantages of lower foreign wages cannot be overlooked. There was a time, years ago, when our technological advancement kept us ahead of our lower-waged competitors. However, this advantage largely disap- peared as post-war technological assistance pacts were put into effect and our more advanced machinery and techniques were dispersed to the entire world. We are today competing in the world market place-including that portion which is in America-with labor costs far above those of our competitors and with no compensating advantages. You might expect then that perhaps we would have higher tariffs in the U. S. to at least partially equalize this difference in standards of living. As mentioned earlier our current rate is 81/2%, while in England it is 25%; in France it is 12.4%; in Japan it is 15%. Only Germany, with 8%, and the Bene-Lux countries with 6.4% are lower than ours. However, both these have a turnover tax which is added to the tariff. Obviously then, fine wire producers in America-and their highly paid workers- are not given even as much tariff protection in their home market as are their competitors overseas. It has been urged on all American business that they expand their export efforts. As has been shown, our industry has had rather the opposite result. In fact, those of our members now doing any volume of business in foreign countries do so by producing the wire in those countries. These foreign subsidiaries do, of course, hopefully contribute something to the profits of the U.S. Corporation but they certainly do not give jobs to those American workmen thus displaced-nor to new workers who might otherwise have been employed. Let us quickly examine a few of the reasons for the decline in exports of fine wire. First and foremost, of course, is our previously discussed cost disadvantage. Even considering that we make the finest wire in the world and are more service minded than most foreign mills, our costs necessarily result in prices which are almost laughable in overseas markets. Then, we must add to this the higher tariffs in most other countries as well as the non-tariff trade barriers, such as turnover taxes, total value added taxes, quotas, and outright forbiddance of any imports. In this latter category many of the developing or growing nations, forbid any imports once the local industry is capable of producing the product. This barrier is maintained even though the price ~f the product produced locally may PAGENO="0492" 2278 be much higher than the former price paid for imported wire-even from the U.S. Some of the Latin American countries engage in these practices. We have yet another problem when we try to export wire. For some reason, the ocean freight rates on steel wire leaving the U.S. are higher than those on the same product coming into the U.S. For example, to ship one ton of tire bead wire from New York to London the rate is $39.00 per ton; from London to New York it is $29.T5 per ton; from San Francisco to Tokyo the rate is $35.00 per ton; from Tokyo to San Francisco it is $25.T5 per ton; from Philadelphia to Antwerp the rate is S31.50 per ton; and from Antwerp to Philadelphia it is $26.50 per ton. It is difficult to believe that these rate differences can be related to actual cost differences. Yet they do exist and are just one more "unfair trade practice" that we must face. Among yet other unfair advantages enjoyed by our overseas competitors is their lack of restriction under such American laws as the Fair Labor Standards Act, and various antitrust cad anti-monopoly laws. Not only are they not bound by these, but those of our laws which do affect them, such as our anti-dumping regulations are inadequate and the intent of these laws is consistently violated by selling in America at prices lower than their own country. Since American industry is unable to satisfy the "damage" requirements of our law, dumping is not an unknown practice when it suits the foreign producers purpose. Before closing, I should like to present some illustrative data on one particular fine and specialty wire item. Inasmuch as these figures will come from my own company's records-both here and abroad-I will not identify the item other than to say it is a fine wire item used in considerable volume and one for which estimated imports account for more than 15% of the total usage. The imported price on this u-ire is $20.00 per ton under our price-a position it has main- tained through several price reductions which we have initiated in an effort to u-in back our customers. Our price reductions were made as we could improve our costs to make a lower price possible, but our foreign competitor, with gen- erous assistance from his government, has always matched our efforts-keeping the differential the same. It so happens that we also produce and sell this wire through a foreign subsidiary in one of the countries exporting to the U.S. We thus know the local selling price in that country and could prove that a foreign producer (not our subsithary) is dumping. How-ever, we have not taken any anti- dumping action because of the "injury" portion of current anti-dumping laws. We cannot prove injury since our company is successful. (We are making every effort ot keep it that way so we can protect the jobs of our workers aI1d the in- vestments of our stockholders.) We would hope that it is not the intent of the Congress that a company or an industry must be unsuccessful before the unfair practice of dumping is to be considered illegal and stopped. Yet that is hour the present law is w-orking under current interpretations. We in the Fine and Specialty Wire Manufacturers' Association can only foresee that a continuation of past American foreign trade policies will further widen the gap between im- ports and exports in future years and will result in an ever weaker industry- an industry without which our nation cannot exist in the modern world. `We strongly urge that your Committee ignore the vnproven threats of "massive retaliation" by other nations and take the leadership in providing the American worker and American industry with the opportunity for lair trade in the Ameri- can market place. This can be accomplished by some means such as that suggested in a letter dated March 20, 1908 addressed to your committee by Mr. E. U. L~ ug. Chief Engineer of National-Standard Company. We understand that Mr. Lang is submitting a written statement to this hearing further detailing his "graduated tariff" idea. This may require more study and we therefore respect- fully surgest the enactment of interim quotas or surcharges to existing tariffs. Legislation has already been introduced covering quotas on all steel products and these would include those made by members of this Association. Such a step can go a long way toward making possible the job opportunities so badly needed in many areas of this nation. The CIiAn~rAN. We now come to the category of lead and zinc. We have about 50 minutes of testimony. Our first. witness is Mr. ,Johnson. Mr. .Johnson, if you will identify yourself for our record, we will be glad to recognize you. PAGENO="0493" 2279 STATEMENT OP LII~DSAY P. JOHNSON, LEAD-ZINC PRODUCERS COMMITTEE Mr. JohNsoN. I am Lindsay Johnson, president of the New Jersey Zinc Co. The CHAIRMAN. Where is that located? Mr. JOHNSON. New York City. The CHAIRMAN. If you have to omit any part of your statement, Mr. Johnson, in order to accommodate the committee, do so with the knowledge that the entire statement will appear in the record. Mr. JOHNSON. Thank you, sir. Mr. Chairman and members of the committee, I appear today on behalf of the Lead-Zinc Producers Committee. My statement shows the percentage of production 1n this country represented by members of this committee, and they are identified in an attachment to the statement. The membership of this committeis comprised of all of the major producers of lead and zinc in the United States, in both the mining and smelting segments of the industry. A list of these major producers is appended to this statement. In total they account for approximately the following percentages of current U.S. production: Pcrccnt Zinc mine production 91 Lead mine production 87 Zinc metal production 85 Lead metal production 100 I submit, therefore, that in speaking for the Lead-Zinc Producers Committce, I speak for virtually the en~ ire industry. LEAD AND ZINC IMPORTS ARE ~ LONGSTANDING PROBLEM I think it is important to remind the committee that the problem of this industry arising from uncontrolled imports is not a new one. It is not one that has recently and suddenly come upon us. It has been with us for the past 15 years, and during that time the basic facts underlying the problem have not changed, nor has the position of the industry changed. The industry has been diligent, persistent, and consistent in efforts to achieve recognition by the executive branch and the Congress that the problem is one of insidious reality and that a solution in the form of reasonable and fair import controls must be found if an erosion of an important natural resource industry within our borders is to be avoided. Since the early 1950s, representa- tives of the industry have appeared before the U.S. Tariff Commission on 12 occasions and before committees of the House of Representa- tives and of the Senate on some 20 occasions. I submit that this shows a sincere belief that in the national interest an enduring solution is needed, and that palliatives will not suffice. POSITION ON PENDING LEGISLATION My appearance accordingly is: First, to urge and support legislation to provide a standby flexi- ble quota program for lead and zinc, and PAGENO="0494" 2~80 Second, to oppose the enactment of legislation that fails to recog- nize that reasonable import controls are necessary in the case of lead and zinc, and to reject proposals that carry the implication that no harm to the national interest will result from erosion and eventual disappearance of an industry dedicated to development of the na- tion's natural resources. THE NEED FOR RESTRAINT OF IMPORTS The United States is the world's largest. single consuming market for lead and zinc. How-ever, as far as U.S. producers are concerned, it is a one-w-ay market, not only because the U.S. under any circum- stance must be a substantial importer of lead and zinc, but also be- cause mounting costs of production in the U.S. rule out any possibility of competitive exports. Foreign producers have access to and ability to sell in almost any consuming market in the free world, including the prime consuming U.S. market. U.S. producers are confined to the U.S. market. The U.S. smelters of lead and zinc need to import substantial quanti- ties of lead and zinc ores to meet their requirements beyond those available from mining in the United States. There is also room in the U.S. market for some quantity of imported lead and zinc metal. In the case of lead, required imports will run 30 to 35 percent of new lead required by U.S. consumption. In the case of zinc, required imports w-ill run 45 to 50 percent of U.S. consumption. tinder any conditions, this is very substantial participation in our markets by foreign producers. The U.S. industry does not seek to reduce this degree of participation. It seeks only to limit it to about that level. Foreign producers, however, sometimes want more, and, without restraints, invade the U.S. market at will by cutting prices. When the invasion is in excess of the already substantial needs, it forces prices below viable levels for U.S. producers, who are compelled to close down mines while foreign producers continue operations. An invasion of this order occurred during the middle 1~50's. Imports steadily increased, reaching an astounding and completely unjustified and intolerable 84 percent of U.S. consumption of both zinc and lead in the year 1958. The consequences to U.S. industry were grave. Prices declined, many U.S. mines were abandoned or idled, producers were compelled to build up unmanageable stocks triple those of normal working requirements, exploration and development programs were stopped or severely curtailed, and foreign producers were very much in control of the market. During this period, the U.S. industry forecast. the dire results of failure to take action that would stem the tide and preserve stability in the U.S. industry, and tried to prevail on the Government to take such action, but without success, until a near-calamitous situation had been reached .and the damage had been done. Then, and only then, did the Government respond by the proclamation of quotas, which became effective October 1, 1958. The quotas were fixed at approximately the level of our normal import needs, 520,960 tons of zinc, and 354,72Q tons of lead annually. They were effective, but due to the conditions that prevailed when PAGENO="0495" 2281 they were imposed, were slow to ôorrect the situation. Normal condi- tions and stability in the U.S. industry were not achieved until 1964-65. When that point was reached, the Government decided to terminate the quotas, effective October 22, 1965. In the face of known facts about rapidly increasing production in foreign countries, the industry made strong representations that the quotas be suspended, rather than finally terminated, but to no avail. The Government thus invited another invasion cycle, which actually commenced fairly promptly. rIl1~e evidence is found in the import statistics. In 1964, when quotas were in effect, imports of zinc metal for consumption were 134,100 tons. In 1966, following termination of the quotas in October, 1965, the imports of zinc metal rose to 278,300 tons, an increase of over 100 percent. Likewise, imports of lead metal rose from 218,000 tons under quotas in 1964 to 364,000 tons in 1966, an increase of 67 percent. EXPERIENCE WITH THE PREVIOUS QUOTAS The experience of operating under the. quotas, in effect from Octo- ber 1, 1958, to October 22, 1965, has much to offer as a guide to the future. ~Despite initial apprehensions of both domestic producers and coun- tries exporting to the United States, it soon became evident that the quota plan was a workable instrument, and all concerned accommo- dated themselves to it, and there were no apparent disadvantages or hardships in any quarter to outweigh the advantage~, actually to the free world industry as a whole, of accomplishing stability in the U.S. industry. Albeit slowly, the quota plan did accomplish its purpose. Experience did reveal, however, certain deficiencies which prevented it being as fully effective and acceptable as it might otherwise have been, and as effective. For example, the quota.s were fixed quantitative ones, not only with respect to total, but with respect to specific country allocations. They were, therefore, inflexible, and could not readily be accoinmodate.d to changing circumstances, such as growth in consumption in the United States, and significant developments of expansion or contraction of available supplies in free world countries exporting to the United States. Also, the quotas were confined to basic ores and metals, and this generated the so-called end run practice of circumventing the quotas by shifting exports to the United States to other zinc and lead deriva- tives and products not covered by the, quotas. Zinc oxide, rolled zinc, and litharge are examples of products that should be included in any quota program, to prevent circumvention of the purpose for which quotas are established. The proposals of the industry for a standby flexible quota program would cureS these defects and provide an enduring solution with flexi- bility to meet changing circumstances. PROPOSAL 013' A STANDBY FLEXIBLE QUOTA It is not my intention to discuss in detail the standby flexible quota program now proposed by the industry, but rather to state only the principles involved. In brief, these are as follows: PAGENO="0496" 2282 1. "Standby" means a quota that will be imposed only when it is needed, and oniy for so long as it is needed to maintain stability in the U.S. industry. 2. "Flexible" means a quota that will change quantitatively from time to time to meet changing circumstances within the United States with respect to consumption and outside the United States with respect to sources of supply. 3. Quotas will be "triggered on" when certain indicators of market conditions reach peril points which presage unreasonable impact unless imports are restricted until conditions change. 4. Quotas will be "triggered off" when there has been sufficient recession from those peril points. 5. There will be a reasonable minimum time that quotas will re- main in effect, once imposed, and likewise a reasonable minimum inter- val between suspension of a quota and re-imposition at a later date. 6. Basic minimum quotas will be established initially related to cur- rent U.S. consumption, with provision for proportionate increase of the minima as U.S. consumption increases. 7. Initial allocation of quotas to major exporting countries will be made on experience during a suitable base period, and provision will be made for a periodic adj nstment of country allocations by a suitable Government agency. 8. The intitial quotas quantitatively will be of approximately the same order as those under t.he original quota that was terminated in 1965, with due regard to current conditions. Were such a quota. program to be adopted in the near future, there would be no imposition of quotas forthwith, because the indicators of market conditions that will be proposed are not yet close to the peril points. However, the inauguration of the program would have the immedi- ate effect of a more pious look at the U.S. market scene by exporters to this country. An approach toward peril points is quite easily predictable, and it is believed that a standby quota will generate considerable voluntary restraint to avoid the imposition of quotas. Were such not the case, the imposition of quotas eventually would be the means of necessary restraint. In any case, imports would be reduced from current levels. There is now pending before this committee a bill, H.R. 51. This bill, introduced by your esteemed colleague, the Honorable Wayne Aspina.ll, with appropriate amendment, will establish a standby flex- ible quota program such as I have described in principle. This program can be of such balanced detail that by reason of the stability that will result., it will be of ultimate long-range benefit to all concerned, the U.S. industry, the exporters to the United States, and the U.S. con- sumers. It will also promote the national interest by reason of strength- ening and encouraging continued development of important natural resources in the United States. We respectfully urge the committee to dedicate itself to a searching examination of our proposals at an early and more appropriate occasion, when time for detail will be more available than it is now, a circumstance we understand and respect. PAGENO="0497" 2283 BALANCE OF PAYMENTS Not insignificant in current considerations is the probable effect of the proposed program on the U.S. balance-of-payments problem. Under the proposed standby flexible quota program, imports mevit- ably would be reduced voluntarily or under quota. It is not possible to project the full degree of voluntary restraint on imports that would be generated by a standby quota, but it is certain that imports would have to trend downward toward quota levels or reach them. A summary appended to this statement shows the approximate re- duction in imports and the degree to which major exporting countries would be uffected, on the assumption that imports of zinc and lead would be at the proposed quota levels. The balance-of-payments gain culd eventually be in the order of some $83 million annually. It is significant that the impact does not fall heavily on any major exporting country, but is fairly evenly spread. CONSEQUENCES OF FAILURE TO PROVIDE FOR RESTRAINT OF IMPORTS The U.S. zinc and lead industries are approaching another crisis similar to the one encountered in 1957-58, when the last big influx of foreign material broke our market and forced the closure of many mines, and operation of others on an unprofitable basis. At this time the situation is more serious, because the industry is now beset with burgeoning expansion of mining and smelting facili- ties in foreign countries, with much of it avowedly aimed at capital- izing on the U.S. market, which, without restraints, is increasingly at their disposal. They have shown their hand since quotas were terminated. Unless there is action to arrest the trend, which is history repeating itself, the following consequences must be forecast. Imports will continue to increase. Expansion of mining and smelting facilities abroad, either in being or projected, presage surpluses over the next several years, a forecast that is universally accepted. As in the past, the target for moving surplus production in foreign countries will be the U.S. market. Foreign producers will invade this market by lowering prices, as they have done before, and are now doing, to levels that are not economic for U.S. mines. Many U.S. mines will be forced to close down or curtail operations to make room for foreign material, and U.S. smelters will be faced with the choice of accumulating unmanageable stocks or severe cut- back in production. The last time all this occurred, the result was knocking down U.S. mine production of zinc to 412,000 tons in 1958 from a level of 600,000 tons attained in earlier years. Lead mine production was cut down to below 250,000 tons from previous levels of about 400,000 tons. Pro- ducers were forced to accumulate stocks greatly in excess of normal working stocks. Complete calamity was avoided only by the imposition of quotas in 1958. All of this could happen again, and probably with more impact, be- cause U.S. mines, in an industry where labor costs run as high as 60 95-159-68-pt. 5-32 PAGENO="0498" 2284 percent of total costs, have since had to assume tremendous increases in labor costs, a.nd there seems to be no end to them. Lack of stabilization will discourage exploration for and develop- ment of new reserves in the United States, and the Nation will be well down the. road t.o further dependence on foreign sources for materials that are important to its economy. Loss of employment will occur. We will be exporting jobs. There will be no prospect of orderly and easy liquidation of Govern- inent stockpiles. As imports increase, there will be an increasingly negative effect on our balance of payments. Failure to control imports at this time will amount to notice to for- eign producers that our markets are wide open to them, even at the ex- pense of erosion of our own mining industry. The Lead-Zinc Producers Committee respectfully urges this com- mittee. (a) Not to support legislative provisions that will preclude con- sideration and enactment of specific legislation of the type we are pro- posing. to deal with specific and unique problems; (b) Not to support any assertion that such specific problems can be dealt with effectively by the "adjustment assistance" or "escape clause" procedures, routes that have proven to be but palliatives on paper in the pa.st; and (e) To schedule hearings at the earliest date convenient to the com- mittee to afford the lead-zinc industry an opportunity to support in detail a searching examination of a standby flexible quota for lead and zinc. Thank you. The CHAIRMAN. Thank you, Mr. Johnson. Without objection, the material appended to your statement will ap- pear at this point in the record. (The material referred to follows:) APPENDIX I MAJOR PRODUCERS REPRESENTED BY THE LEAD-ZINC PRODUCERS COMMITTEE American Smelting and Refining Company. American Zinc Company. Anaconda Company, The Bunker Hill Company, The Eagle-Picher Industries, Inc. National Zinc Company. New Jersey Zinc Company. St. Joseph Lead Company. TIT.S. Smelting Refining and Mining Company. ASSOCIATIONS Arizona Small Mines Operators Association. Citizens Committee for Stabilization-Lead-Zinc Industry. Colorado Mining Association. Idaho Mining Association. Montana Mining Association. Nevada Mining Association. PAGENO="0499" 2285 New Mexico Mining Association. Northwest Mining Association. Southwestern Montana Mining Association. Utah Mining Association. Wisconsin, Illinois & Iowa Lead and Zinc Producers Association. APPENDIX II PROBABLE REDUCTION OF IMPORTS FROM 1967 LEVELS 1967 imports for Probable imports under Decrease in Country consumption quota import value Tons Dollars 1 Tons Dollars 1 Dollars! Zinc: Canada 354, 400 $54, 200, 000 279, 500 $40, 800, 000 $13, 400, 000 Mexico 102, 400 15, 100, 000 81, 000 10, 000, 000 5, 100, 000 Peru 78,900 14,200,000 60,000 9,500,000 4,700,000 Japan 41,600 10,600,000 16,000 4,000,000 6,600,000 All Other 74,600 15,500,000 53,500 12,300,000 3,200,000 Subtotal, zinc 651, 900 109, 600, 000 490, 000 76, 600, 000 33, 000, 000 Total reduction in zinc im- parts $33,000,033 Lead: Canada 70,700 18,300.000 66,000 17,100,000 1,200,000 Mexico 57,700 14,900,000 25,000 6,500,000 8,400,000 Peru 110,700 28,600,000 70,000 18,100,000 10,500,000 Australia 87, 100 22,600, 000 68, 000 17, 500, 000 5,100,000 West Germany 49, 000 12, 700, 000 12, 000 3,100,000 9.600,000 All other 120,200 31,100,000 59,000 15,300,000 15,800,000 Subtotal, lead 495,500 128,200,000 300,000 77,600,000 50,600,000 Total reduction in lead im- ports 50,600,000 Total benefit to balance of payments, zinc and lead 83,600,000 Summary of Reduction of Imports by Countires, Zinc and Lead Probable reduction of imports, dollars' Canada $14,600,000 Mexico 13, 500, 000 Peru 15,200,000 Japan 6,600,000 Australia 5,100,000 West Germany 9,600,000 All other 2 19,000,000 Total 83,600,000 1 Estimated value before custom duties at present price levels of 13.5 cents for zinc 14.0 cents for lead. 2 Countries in this category are principally: Algeria, Belgium, Bolivia, France, Honduras, Poland, Republic of South Africa, United Kingdom, and Yugoslavia. The CHAIRMAN. Are there any questions of Mr. Johnson? Mr. Curtis. Mr. CuRTIs. Has the industry in the past ever gone the national security route, through OEP? Mr. JOHNSON. Mr. Curtis, we have not gone that route, as such, `for this reason: that I would think on at least `a dozen occasions in the past 3 or 4 years, the OEP and Defense Department have all declared lead and zin'c non-essential to nationa.l security, in connection with other legislation. Mr. Curcns. And yet, aren't our stockpiles based on the assumption that it is essential for military reasons to have lead and zinc? PAGENO="0500" 2286 Mr. JOHNSON. Mr. Curtis, you are hitting a very tender spot with me, now. Mr. CURTIs. All right. Mr. JOHNSON. As of now, there are in the stockpiles about 1,200,000 tons of bot.h lead and zinc in the form of metal. At one time there was as much as one and a half million tons. That was there for the reason that. some years ago the quantity we required in the stockpiles to meet objectives was set at one and a half million tons. Toda.y the objective is zero. The whole 1,200,000 tons of each of these metals is declared surplus. Mr. CURI'Is. Was t.hat done by Executive order? Mr. JOHNSON. This was done by whatever committee it is that de- cides from time to time that the stockpile objectives should be changed, and as a matter of record, if we go back over the history of stockpile objectives for those two metals, they changed some 38 times over a period of several yea.rs, up, down, but finally they got to nothing. That was about 2 years ago. Mr. CunTIs. I won't explore `it here, but I want to get more informa- tion on this situation because in fact stockpiles, as I understood `it, were set up by la.w for defense reasons, for security rea.sons. If stock- pile policies are improperly used, they could actually have an economic impact on any industry. I remember a couple of year ago I felt, that the use of the copper stockpile was a misuse: that is, it was done not for military reasons but for economic reasons. The economic reasons, in my opinion, are sound, but I thought we had prohibited the Executive from using stockpiles for that purpose. Am I in error in thinking that the lead and zinc stockpiles were originally for strategic military reasons? Mr. J0ITNs0N. They were so created, and they are under the control of the Congress. There is something they talk about over there, called methodology, which is something they use for determining whether we need any lead or any zinc, or we need a. lot, or we don't need any. I don't understand this methodology, because it is difficult -for me to understand in the case of products which are used extensively in ma- terial that is now being used in Vietnam, for example, how we don't need any of this in the event, of an emergency. Of course, the industry doesn't agree with this determination of a zero objective. Mr. CuRTIs. This makes it a little complicated, or could make it complicated, in respect to these quotas, too, because stockpiles are a third source of where the metal could be coining from onto the market. Mr. JOHNSON. This is very true, sir. This does create a complication. There are further complications throughout the stock pile, particu- la.rly of zinc, for example. There have been a lot of changes in the re- quirements for quality since this material was put in the stockpile, and much of t.he material in the case of zinc in the stockpile is not suitable for normal commercial uses, these days, and something will have to be done to it.. If something is done to it to make it commercially usable, the indus- try is going to have to do it, because they are the only people who have the equipment. PAGENO="0501" 2287 The industry has told GSA and the executive branch that under proper circumstances, they certainly would be willing to cooperate in so doing, but you can easily see, sir, that if the industry gets into a situation in which it obligates its~lf, let us say, to help liquidate the stockpile over an extended period of time, it certainly would have to have some form of protection to enable it to do this. So that it is a dual problem. It is a problem of the Government, and it is a problem of industry. Mr. CURTIS. Just briefly. I have one other question. Does the industry run into a. problem of unfair competition in the sense that foreign governments subsidize their mining in this area for export? Mr. Jol-INS0N. There are some such things, but I don't think that we take the view, Mr. Curtis, that this is a serious thing. Mr. CmlTIs. Is it essentially wage differential? Mr. JohNsoN. Essentially, it is a fact that perhaps outside the United States we may find slightly better ore deposits. The main thing, though, is `the cost of producing it. Mr. CuRTIs. Which is mainly wages, is it? Mr. JohNsoN. Mainly wages. You can see many mines here, as I pointed out, where the wages run as high as 60 percent of cost. It depends on the method of mining that one uses, but this is a very important factor, and when you have that much going into direct wages, you have got a problem. That is where the big difference is. Mr. CURTIS. I certainly appreciate your testimony very much. Mr. J0ITNSON. Thank you, sir. Mr. SCHNEEBELI. Mr. Chairman. The CHAIRMAN. Mr. Schneebeli. Mr. SCHNEEBELI. Mr. Johnson, you said the Government established a quota effective October 1958. Under what authority was that done? Mr. JOHNSON. This was an executive proclamation. Mr. SCHNEEBELI. Under what authority? Do you know? Mr. JOHNSON. I have the number here, somewhere. 1958. Mr. SCHNEEBELI. Basically, my question is, if the U.S. Government can establish a quota for lead and zine like this, why can't they do the same for steel and a lot of other commodities, and is this not in con- travention of the GATT? Mr. JOHNSON. I would think it was at the time. I am trying to find this executive order number. It was 10,000- something. Does anybody back here know the number? Mr. SCHNEEBELI. If you could furnish that information, we don't want to hold you up. I am wondering how, suddenly, `they can establish a quota without specific congressional action. Mr. JOhNsON. I will send you a copy of the executive order. (The following material was received by the committee : FACTORS PRECEDING PRESIDENTIAL PROCLAMATION No. 3257-SEPTEMBER 22, 1058 Following World War II, metal prices were at or above present levels, but in early 1950 dropped to uneconomic levels. At that time, the lead induStry filed an escape clause action with the Tariff Commission requesting that the 1939 PAGENO="0502" 2288 duty reduction of 50% 011 lead imports be canceled and the statutory rates of 1930 be restablished. This application coincided with the cancellation of a Mexican Trade Treaty, containing the escape clause provision. Following abroga- tion of the Treaty, 1930 duty rates on lead were restored. Five months later, June 1951, tariffs on both lead and zinc were reduced 50% and 60%, respectively, at the Torquay trade negotiations and have remained at these levels. The Korean War changed the economic situation but only for a short period. As market prices dropped following Korea, the lead-zinc industry filed its first escape clause action under provisions of Section 7 of the Trade Agreements Extension Act of 1951 on September 14, 1953. Hearings were held during November of 1953. On May 21, 1954, tl1e Commission made a unanimous finding (Escape Clause Investigation No. 27) that serious injury was resulting from excessive imports and five Commissioners recommended maximum permissible increase in duties (Pig Lead-2.55Ø per pound: Slab Zinc-2.1OØ per pound). Concurrent with this 1953-1954 "escape clause" action, by resolution of the Senate Finance Com- mittee (July 27, 1953) and the House Ways and Means Committee (July 29, 1953), the Commission also conducted a "general investigation" in accordance with the provisions of Section 332 of the Tariff Act of 1930. This w-as transmitted to the Committees concerned on April 19. 1954 and is a 256 page volume with a detailed analysis of the economic conditions and pertinent statistics concerning the lead-zinc industry of the Tjnited States. On August 20, 1954 President Eisenhower advised the Committee on Ways and Means and the Committee on Finance that he w-ould not implement the unamimous recommendations of the Tariff Commission in their May 1954 report. The President cited as one of the reasons for not implementing the Commission's findings, that the maximum permissible increase in duty was insufficient to "reopen closed mines" and w-ould have only a minor effect on U.S. prices. In lieu of accepting the Commission's recommendations the President instituted increased defense stockpile purchases of these two metals and subse- quently initiated barter. The President further stated that he w-as directing the Secretary of State to seek recognition by foreign countries, who were principal importers, that they would not take any "unfair advantage" of his alternative programs. However, the record now shows that imports for consumption did not decline and, in fact, increased following the President's letter: S/tort tons 1950-54 average yearly imports of lead ore and metal 455, 916 1958 total of lead ore and metal imports 589, 800 1950-54 average yearly imports of zinc ore and metal 530. 548 1958 total of zinc ore and metal imports 723, 392 In a series of regulations issued May 28. 1957, the Department of Agriculture essentially stopped all bartering in lead and zinc, which w-as the major alternate stabilization program instituted by the President. The Office of Defense Mobiliza- tion announced that April 1958 was the last month it would purchase zinc, and lead buying was scheduled to be stopped at the end of June of 1958. Prices for both metals decreased 3d per pound in 1957. The President had stated that if stockpile action in lieu of accepting the Tariff Commission's proposal did not accomplish the objectives he sought. he w-ould be prepared "to consider even more far-reaching measures." In June 1957 the Executive Department proposed legislation for suspension of duties and substitution of excise taxes whenever the market for the two metals was below "peril point" levels (lead-17ç~ per pound; zinc-14.5~ per pound). Following a hearing on this legislation in the House of Representatives, the President was advised by the Chairman of the Ways and Means Committee that Congressional action was not appropriate since the President had authority to act under pro- visions of the escape clause and National Security amendment. The President then indicated that: "It is my understanding the industry will file an escape clause action if the Congress does not pass the requested legislation." On September 27. 1957 the industry filed a second escape clause petition with the Tariff Commission requesting increased duties and import quotas. On April 24, 1958 the Tariff Commission again unanimously found (Escape Clause Investigation No. 65) that the domestic lead-zinc industry was suffering serious import injury. Three Commissioners recommended the maximum increase in duty (50% above the 1945 rates: Pig Lead-2.55~ per pound: Slab Zinc 2.lOd nor pound) and also recommended the impsition of absolute quotas, based on 50% of imports during the period 1953-1957. The other three Commissioners recoin- mended a return to the 1930 duty rates (Pig Lead-2.125~ per pound; Slab Zinc- PAGENO="0503" 2289 1.75~ per pound). At the conclusion of the GO-day period, as provided in the Trade Agreements Act, the President advised the Chairman of the Senate Finance Committee that he was `suspending consideration" of the Commission's recom- mendations. The President further stated that a final decision would be appro- priate after the Congress had completed its consideration of a "minerals stabiliza- tion plan" submitted by the Executive Department and introduced in the Senate as S.4036. This legislation passed the Senate but failed to pass in the House as Congress adjourned in August 1958. The President was faced with a final decision and issued Proclamation No. 3257 on September 22, 1958 establishing absolute quota restrictions on imports for consumption or unmanufactured lead and zinc, effective October 1, 1958. Howrever, the quota amounts were set at 80%, rather than the recommended 50%, of the average annual commercial imports for the base period, much more generous to the importer than recommended by the Tariff Commission. There was no change in basic tariff rates and no provision for quota control of manu- factured items. The annual quotas established limits for imports of ore and metal combined as follows: lead-354,720 tons and zinc-52O,960 tons. By the time the President took this action, the damage had been done. The quotas were too little and too late. In 1957 the industry had been flooded with unneeded imports. Producers' stocks were at all time highs and market prices were at low, uneconomic levels; domestic mines closed and employment and production dropped and there was no sizeable increase in consumption of these two metals to offset the effects of the impOrts. The quotas did not equate metal supply with demand. EVENTS DURING THE PERIOD OF PROCLAMATION NO. 3257 Despite the quotas, imposed as a temporary palliative, the industry did not consider it good business to reopen some domestic mines, particularly in the Western States. l~Ietal prices had improved slightly following the quota proclamation but dropped again in early 1959. U.S. mine production of lead and zinc has not, to date, been fully restored to the level prevailing before the enforced drastic curtailment in 1957 In 1963 domestic consumption of lead and zinc began to increase. Since that time, consumption of lead and zinc has increased 12 and 27 percent, respectively. There has been a similar increase in foreign consumption. This gradual increase in consumption brought about a similar decrease in domestic producers' metal stocks. As stocks approached normal levels, market prices strengthened providing profitable operations and ei~couraged exploration for and development of new sources of supply. By mid-1964, demand was exceeding supply. Mines that had been closed were reopening and interest was renewed in finding new orebodies, but this process was too slow to meet immediate requirements. In addition, some countries reduced their imports below quota levels as their own consumption requirements increased. Other countries with supplies available were limited to a maximum import tonnage by the absolute quota system. A combination of the necessary "lead-time" to activate domestic mining and smelting operations and the limitations of an inflexible, absolute, quota proclamation, produced a metal shortage for both lead and zinc in the United States. Immediate action was required to increase metal supplies. In mid-1964, the domestic lead-zinc producers joined with the consumers in sponsoring legislation for release of 50,000 short tons of lead and 75,000 short tons of zinc from the National Stock- pile. These quantities were easily assimilated in our expanding markets. A second release of 150.000 short tons of lead and 150,000 short tons of zinc was authorized in April 1965. A third zinc release of 200,000 short tons was authorized in November 1965; however, at this time the General Services Administration, as the representative of the Executive Department, was advised by the domestic producers that the domestic and world supply~ for zinc metal was improving and urged caution in authorizing stockpile releases that might cause market dis- ruption. Stockpile sales were a necessary part of the domestic metal supply in 1964 and 1965, as rising consumption moved ahead of the "lead-time" required to get new production on stream and the inflexible nature of the Quota Procla mation did not allow for increased imports to help meet increased demands. The absolute quotas were not an effecti7e instrument to meet the problems of the mining and smelting industries or of the consumers of lead and zinc in fit' PAGENO="0504" 2290 United States. They were set too high to effectively and expeditiously correct the situation that called for their imposition in 1958, at a time when metal stocks were at extraordinarily high levels and metal prices were too low for profitable mine operation. Being of fixed quantity, they guaranteed to foreign producers a fixed quantitative particiaption in the United States market, regardless of the level of consumption, thus putting the entire burden of adjustment during low cycles of domestic consumption on the U.S. mines. Further, being of fixed quantity, they had no flexibility to meet changing levels of consumption, and under some conditions such as those prevailing in 1964 and 1905 they approached the point of being too low. The underlying conditions that caused the 1950-1957 debacle have not changed and in the absence of adequate and effective import controls will continue as a threat to the stability of the United States mining and smelting industry. The strong trend to treatment of ores in countries of origin, with a view to selling the metal products in the United States, has widened the threat to the stability of the lead-zinc smelting industry in the United States, and even to the continued existence of some segments of it. Mines are not a spigot that can be turned on and off at will as supplies are required. Some assurance of a portion of the domestic market is needed to stimulate time consuming exploration and development. From experience under the Presidential Quota Proclamation, the domestic lead-zinc industry has stressed that any quota limitations on lead and zinc be of a flexible nature. EVENTS LEADING TO TERMINATION OF THE PRESIDENTIAL QUOTA P000LAMATION Section 351(d) of the Trade Expansion Act of 1902 requires an annual review of any industry operating under imL'ort restrictions pursuant to action authorized by an escape clause finding of the Trade Agreements Extension Act of 1951. This type of action was the basis for the lead-zinc import quota plan. A report under this authorization was sent to the President on October 1. 1903 and referred to the Office of the Special Representative for Trade Negotiations. The Trade Expansion Act provides further that the President may ask for Tariff Commission advice of probable economic effects to an industry by the reduction or termination of an import restriction. Apparently, in view of improving conditions with the industry the Office of the Special Representative for Trade Negotiations recoin- mended a full scale review of the industry. The President ordered such a hearing in March 1964. This was held in June 1964, and the report issued in June 1905. The Commission reported to the President that termination of quotas on unmanu- faetured lead and zinc "would not likely have a detrimental effect on domestic lead and zinc producers unless world demand for these metals should subside substantially in relation to world suaplies." The report to the President was referred back to the Office of the Special Representative for Trade Negotiations for study and recommendations. This study was made through an interagency committee, principally representatives from Departments of Interior (Chair- man). Commerce, State, Labor and Treasury. Representatives of the domestic industry stated their position to these Departments and the Counsel to the Presi- dent as follows: 1. No precipitous action should be taken to change the present quota system until the effect of stockpile releases and the effects of the worldwide build-up of production, on domestic and world markets could be evaluated. 2. The logical adjustment to solve inequities of the absolute quota proclama- tion was substitution of provisions of a flexible quota bill. Friends of the industry in Congress agreed w-ith this position and so advised the President. However, effective October 22, 1965. the President terminated the Quota Proclamation on entry of lead and zinc ores and concentrates and 30 days later on the entry of lead and zinc metal. The President terminated the quota with no provision for a continuing lead- zinc minerals policy. He did refer the industry to the Tariff Commission for any needed future relief and urged the Commission to expedite its procedures and proceedings. This avenue of "help" has been thoroughly explored in 20 cases, including one from the lead-zinc industry, all with negative results. The pro- visions of the Trade Expansion Act of 1962 eliminate any practical possibility of the Commission being able to come up with a finding of injury to the industry due to excessive imports. PAGENO="0505" 2291 [Release From James C. Eiagerty, Press Secretary to the President, Sept. 22, 1958] U.S. NAVAL BASE NEWPOET, RI. The President today agreed with the unanimous finding of the United States Tariff Commission that escape clause relief is warranted in the cn~e of lead and zinc. To provide an appropriate and immediate remedy, the President issued a Proclamation limiting imports by an annual quota equivalent in amount to eighty percent of average annual commercial imports during the five-year period, 1953-57. The quota is allocated among exporting countries and subdivided by calendar quarters and by tariff schedule classifications. In identical letters to the chairman of the Senate Finance and House Ways and Means Committees, the President recognized that the imposition of quotas is an unusual step, but it is better suited than a tariff increase to the unique circumstances of the case and more likely to lead to enduring solutions beneficial to the entire lead and zinc industry. He agreed with the Tariff C'ommission with respect to the distressed condition of domestic producers and pointed out that the proclaimed import limitation, which represented an equitable approach to a world-wide problem, should be of real benefit to the lead and zinc industry. As our economy moves upward, he pointed out, that benefit should increase. The President's letter also emphasized the importance to friendly countries of their exports to us, the world-wide nature of the present condition of lead and zinc overproduction, and the need for sharing the burdens of this problem. The United States has been discussing this problem with other countries and the President is hopeful that mutually acceptable solutions can be found. Meanwhile, today's Proclamation provides immediate relief for this problem which the President has several times set before the Congress. In 1957 the Administration presented a long-range minerals program, but it was siot enacted. During the past legislative session, the Administration proposed a Domestic Minerals Stabilization Plan w'hich would have assisted not only the lead and zinc industry, but also domestic producers of copper, acid-grade fluorspar, and tungsten. In suspending action on the Tariff Commission report last June, the President stressed the problems and urgent needs of domestic minerals producers. Today's letter noted that the Congress did not enact that plan for promoting a healthy and vigorous mining industry. The Proclamation of today was issued pursuant to Section 7 of the Trade Agreements Extension Act of 1951, as amended. That provision authorizes import restrictions to remedy serious `injury or the threat of serious injury as determined by the United States Tariff Commission. The Commission reported its unanimous finding of injury on April 24, 1958. The report contained alternative remedial recommendations. Three Commissioners proposed a restoration of the `tariff rates provided in the Tariff Act of 1930. The remaining `three Commissioners favored a larger tariff increase together vith quantitative limitations. Copies of that report are available at the Commission. The Texts of the President's letter to the Congressional chairmen and of today's Proclamation are as follows: The Honorable HARRY FLOOD BYRD, Chairman, Committee on Finance, U.S. Senate, Washington, D. U. The Honorable WILBUR D. MILLS, Chairman, House Ways and Means Committee, house of Representatives, Washington, D.C. DE~im MR. CHAIRMAN: In my letter to you" of June 19, 1958, I stated that I was suspending consideration of the recommendations of the United Stutes Tariff Commission in Escape-Clause Investigation No. 65 on lead and zinc. I pointed out that a final decision would be `appropriate after the Congress ha'd completed its consideration of the proposed Minerals Stabilization Plan. T'he Congress did not, as you know, enact `this Plan. After full consultation with the Trade Policy `Committee and other interested agencies of the Executive Branch, I have decided to accept the unanimous findings of the Tariff Commission respecting injury. There is no doubt that the domestic producers are in genuine distress. T'hey have substantially curtailed their produc- PAGENO="0506" 2292 tion, and large commercial stocks have accumulated within this country. At the same time, the prices of both lead and zinc have declined and, despite decreased demand, import levels have remained high. In seeking a solution which will afford adequate relief to the domestic indus- try. I am also conscious of the importance to the economies of friendly countries of exports of lead and zinc to the United States. There is no doubt that in the long terni the United States will continue to be an important market for lead and zinc producers abroad. With these considerations in mind, and with the aim of finding a way to share with exporting countries the burdens caused by the present condition of world over-production, representatives of this Gov- ernment have recently participated in discussions of this problem with other nations. I am hopeful that, with the good will and cooperation of all major ex- porting and importing countries, mutually acceptable solutions can be found. Meanwhile, the condition of the domestic producers admits of no further de- lay in taking remedial measures. After a careful examination of the Commis- sion's report, including its alternative proposals for meeting the problem, I have decided to establish a quota limiting imports to eighty percent of average annual commercial imports during the five years 1953-57, as set forth in the attached copy of my Proclamation of today. This quota is allocated by countries and rep- resents an equitable approach to a difficult problem affecting many sources of supply. I recognize that the imposition of quotas is an unusual step, but it is better suited than a tariff increase to the unique circumstances of the case and more likely to lead to enduring solutions beneficial to the entire lead and zinc industry. These limitations represent a twenty percent reduction from the level of average annual imports during the last five years. This action should be of real benefit to the lead and zinc industry, and that benefit should increase as our economy moves upward. Sincerely, DWIGHT P. EISENHOWER. MODU'ICATION OF TRADE AGREEMENT CoNcEssIoNs AND IMPOSITION OF QUOTAS ON UNMANUFACTURED LEAD AND ZINC: By THE PRESIDENT OF THE UNITED STATES OF AMERICA-A PROCLAMATION 1. Whereas, pursuant to the authority vested in him by the Constitution and the statutes, including section 350 of the Tariff Act of 1930, as amended (19 U.S.C. 1351, the President, on October 30, 1947, entered into a trade agreement with foreign countries, which consists of the General Agreement on Tariffs and Trade and the related Protocol of Provisional Application thereof, together with the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment (61 Stat. (Parts 5 and 6) A 7, A 11, and A 2051), and, by Proclamation No. 2761A of December 16, 1947 (61 Stat. (Part 2) 1103), proclaimed such modifications of existing duties and other import restrictions of the United States and such con- tinuance of existing customs or excise treatment of articles imported into the United States as were then found to be required or appropriate to carry out that agreement on and after January 1, 1948; 2. Whereas, pursuant to the said authority, the President, on April 21, 1951, entered into a trade agreement consisting of the Torquay Protocol to the Gen- eral Agreement on Tariffs and Trade, including the annexes thereto (3 UST (Part 1) 588), and, by Proclamation No. 2929 of June 2, 1951 (3 CFR, 1951 Supp., p. 27), proclaimed such modification of existing duties and other import re- strictions of the United States and such continuance of existing customs or excise treatment of articles imported into the United States as were then found to be required or appropriate to carry out that agreement on and after June 6, 1951. which proclamation has been supplemented by several notifications of the President to the Secretary of the Treasury, including a notification dated June 2, 1951 (3 CFR, 1951 Supp., p. 530) 3. Whereas the second item 394 in Part I of Schedule XX annexed to the agreement referred to in the first recital of this proclamation (61 Stat. (Part 5) A 1219) reads as follows: PAGENO="0507" 2293 Tariff Act of 1930, paragraph Description of products ~ Rate of duty 394 Old and worn-out skimmings. zinc, fit only to be remanufactured, zinc dross, and zinc 3%t~ per lb. 4. Whereas item 391, the first item 392, item 393, and item 394 in Part I of Schedule XX annexed to the trade agreement referred to in the second recital of this proclamation (3 UST (Part 1) 1167), read, respectively, as follows: Tariff Act of 1930, Description of products Rate of duty paragraph 391 Lead-bearing ores, flue dust, and matters of all kinds 3% ~ per lb. on lead content. 392 Lead bullion or base bullion, lead in pigs and bars, lead dross, reclaimed l3'Ie~ per la. on lead content. lead, scrap lead, antirnonial lead, antimonial scrap lead, type metal, Babbitt metal, solder, all alloys or combinations of lead not specially provided for. 393 Zinc-bearing ores of all kinds, except pyrites containing not over 3% of 0.6~ per lb. on zinc content. zinc. 394 Zinc in blocks, pigs, or slabs, and zinc dust 0.3% per lb. 5. Whereas, in `accordance with Articles II and XI of the said General Agree- ment on Tariffs and Trade, the United States customs treatment reflecting the concessions granted in the said trade agreements with respect to the articles described in the items reproduced in the third and fourth recitals of th'is procla- nnation has been the application of the respective rates of duty specified in such items-, without quantitative limitation: 6. Whereas the United States Tariff Commission has submitted to me a report of its Investigation No. 65 under section 7 of the Tra'de Agreements Extension Act of 1951, as amended (19 U.S.C. 1364), as `a result of which the Commission has found that the articles described in the said items (except Babbitt metal, solder, and zinc dus't) `are, as a result in part of the customs treatment specified in the fifth recital of this proclamation, `being imported into the United States in such in'creased quaoftities, both `actual and relative, as to cause serious injury to the domestic industries producing like or directly competitive products; 7. Whereas I find that the modifications of the concessions granted in the s'aid agreements with respect to such articles to' permit the application to such articles of the customs treatment hereinafter proclaimed necessary to remedy the serious injury to the domestic industries producing like or directly competitive products; 8. Whereas the said section 350 of the Tariff Act of 1930, as amended author- izes the President to proclaim such modifications of existing duties and such ad- ditional import restrictions as are required or appropriate to carry out any foreign trade agreement that the President h'as entered into under the said sec- tion 350; and 9. Whereas, upon modification of the said concessions as hereinafter pro- claimed, it will be appropriate, to carry out the General Agreement on Tariffs and Trade, to apply to the said articles the customs treatment hereinafter proclaimed: Now, therefore, I, Dwight D. Eisenhower, President of the United States of America, acting under the authority vested in me by section 350 of the Tariff Act of 1930, as amended, and by section `7(c) of the Trade Agreements Extension Act of 1951, as amended, and in accordance with the provisions of Article XIX of the said General Agreement on Tariffs and Trade, do proclaim as follows: (a) Item 391, the first item 392, item 393, and item 394, referred to in the fourth recital of this proclamation, shall, each be modified, effective October 1, 1958, so as to read, respectively, as follows: PAGENO="0508" 2294 Tariff Act of 1930, Description of products Rate of duty paragraph 391 Lead-bearing ores, flue dust, and mattes of all kinds 3A~ per lb. on lead content. Whenever, in any 3-month period beginning Oct. 1 in 1958, and Jan. 1, Apr. 1, July 1, and Oct. 1 in any subsequent year- (1) the dutiable lead content (as shown on the entry in accord- ance with the applicable customs regulations) of lead-bearing ores, flue dust, and mattes the product of a country specified below, entered, or withdrawn from warehouse, for consumption, and (2)the dutiable lead content (on shown on the warehouse with- drowal for consumption in accordance with the applicable customs regulations) of lead-bearing ores, flue dust, or mattes the product of such country, with respect t3 which duty was col- lected under section 312 of the Tariff Act of 1930 upon withdrawal for consumption from customs bonded warehouse of' metal pro- ducible" within the meaning of the said section 312, are determined by the Secretary of the Treasury of the United States to hove reached the aggregate quantity specified beiow for sach country, no lead-bearing ores, flue dust, or mattes the product of such country may be entered, or withdrawn from warehouse, for consump- tion during the remainder of such period; and no article may be with- drawn for censumptiss from any customs bonded warehouse during the remainder of such period ii by reason of such withdrawal duty would become collectible under section 312 of the Tariff Act of 1930 in cancellation of a bend charge covering any lead-bearing ore, flue dust, or matte the product of such country: Peru 8,080 shorttoos. Union ef South Africa 7,440 short tons. Canada 6,720 shorttons. Australia 5,040 short toss. Bolivia 2,520 shorttons. All other foreign countries (total) 3,280 short tons. The foregoing quantitative restrictiess shall not apply to any ore, flue dust, or matte the lead content of which is not subject to duty or which contains less than two per centum of lead (whether or not the lead contest thereof is subject to duty); to any articlo imported by or for the account of the Government of the United States; or to any im- ported article which is under contractfor delivery in the United States for the account of a corporation wholly owned by the Government of the United States. 392 Lead bullion or base bullion, lead in pigs and bars, lead dross; reclaimed 1~'Iv~ per lb. on lead content. lead, scrap lead, antimonial lead, antimonial scrap lead, type metal, Babbit metal, solder, all alloys or combinations of lead not specially provided for. Whenever, in any three-month period beginning October 1 in 1958, and January 1, April 1, July 1, and October 1 in any subsequent year, the dutiable lead content (as shown on the entry in accordance with the applicable customs regulations) of the articles described above in this item (except Babbitt metal and solder) the product of a country specified below, entered, or withdrawn from warehouse, for consump- tion, is determined by the Secretary of the Treasury of the United States to have reached the aggregote quantity specified below for such country, no such arthles the product of such country may be entered, or withdrawn from warehouse, for consumption during the remainder of such period: Mexico 18,440 short tons Australia 11,840 short tons Canada 7,960 shorttons Yogoslavia 7,880 short tons Peru 6,440 short tons All other foreign countries (total) 3,040 short tons The foregoing quantitative restrictions shall not apply to any article described in this item which is not subject to duty; to any such article imported by or for the account of the Government of the United States; or to any imported article which is under contract for delivery in the United States for the account of a corporation wholly owned by the Government of the United States. PAGENO="0509" 2295 Tariff Act of 1930, Description of products Rate of duty paragraph 393 Zinc-bearing ores of all kinds, except pyrites containing not over 3% of zinc. Whenever, in any three-month period beginning October 1 in 1958, and January 1, April 1, July 1, and October 1 in any subsequent year (1) the dutiable zinc content (as shown on the entry in ac- cordsnce with the applicable customs regulations) of zinc-bearing ores the product of a country specified below, entered, or with- drawn from warehouse, for consumption, and (2) the dutiable zinc content (as shown on the warehouse with- drawal for consumption in accordance with thu applicable customs regulations) of zinc-bearing ores the product of such country, with respect to which duty was collected under section 312 of the Tariff Act of 1930 upon withdrawal for consumption from customs bonded warehouse of "metal prnducible" within the meaning of the said section 312, are determined by the Secretary of the Treasury of the United States to have reached the aggregate quantity specified below for such coun- try, no zinc-bearing ores the product ef such country may be entered, or withdrawn from warehouse, for consumption during the remainder of such period; and no article may be withdrawnfor consumption from any customs bondod warehouse during the remainder of such period if by reason of such withdrawal duty would become collectible undor section 312 of the Tariff Act of 1930 in cancellation of a bond charge covering any zinc-bearing ore the product of such country: Mexico 35,240 short tons Canada 33,240shorttons Peru 17,560 shorttons All other foreign couotries (total) 8,920 short tons The foregoing quantitative restrictions shall not apply to any ore the zinc content of which is not subject to duty or which contains less than one per centum of zinc (whether or not the zinc content thereof is subject to duty); to any article imported by or for the account of the Government of the United States; or to any imported article which is under contract for delivery in the United States for the account of a corporation wholly owned by the Government of the United States. 394 Zinc in blocks, pigs, or slabs, and zinc dust O.7ç.~ per lb. Whenever, in any three-month period beginning October 1 in 1958, and January 1, April 1, July 1, and October 1 in any subsequent year, the total aggregate quantity of the articles described above in this item (except zinc dust) and in the second item 394 in Part I of Sched- ule XX annexed to the General Agreement on Tariffs and Trade as authenticated on October 30, 1947 (old and worn-out zinc, fit only to be remanufactured, zinc dross, and zinc skimmings), the product of a country specified below, entered, or withdrawn from warehouse, for consumption, is determined by the Secretary of the Treasury of the United States to have reached the aggregate quantity specified below for such country, no such articles the product of such country may be entered, or withdrawn from warehouse, for consumption during the remainder of such period: Canada 18,920 shorttons Belgium and Luxembourg (total) 3, 760 short tons Mexico 3, 160 short tons Belgium Congo 2, 720 short tons Peru 1,880 shorttonn Italy 1,800 shorttons All other foreign countries (total) 3, 040 short tons The foregoing quantitative restrictions shall not apply to any article described in this item which is not subject to duty; to any such article imported by or for tile account of the Government of the United States; or to any imported article which is under contract for delivery in the United States for the account of a corporation wholly owned by the Government of the United States. 0.60 per lb. on zinc content. PAGENO="0510" 2296 (b) The articles described in the said items entered or withdrawn from ware- house, for consumption on or after October 1, 19~8, and until the President other- wise proclaims, shall be subject to the quantitative limitations specified in the said items, as modified by paragraph (a) above, except that no such quantita- tive limitation shall be applied to any article described in item 392 or iteni 394 or in clause numbered (1) of item 391 or clause numbered (1) of item 393 which was exported to the United States prior to the date of this proclamation. In w-itness where of. I have hereunto set my hand and caused the Seal of the United States of America to he affixed. Done at the City of Washington this tw-enty-second day of September in the year of our Lord nineteen hundred and fifty-eight, and of the Inde- [SEAL] pendence of the United States of America the one hundred and eighty- third. DwIGHT D. EISENHOWER. By the President: JOHN FOSTER DTJLLES, Secretary of State. QUOTA LIMITATIONS, BY COUNTRY OF PRODUCTION, APPLICABLE UNDER ITEMS 391, 392, 393, AND 394, PART I, SCHEDULE XX, GEN ERAL AGREEMENT ON TARIFFS AND TRADE, AS SUPPLEMENTED, FOR THE QUARTERLY PERIOD BEGINNING OCT. 1,1958, AND FOR EACH SUBSEQUENT QUARTERLY PERIOD BEGINNING JAN. 1, APR. 1, JULY 1, AND OCT. 1 Presidential Proclamation No. 3257, dated Sept. 22, 19581 [In pounds~ Item 391.-Lead- Item 392.-Lead bullion Item 393.-Zinc- all Item 394.-Zinc in blocks, pigs or slabs; Country of production 2 bearing ores, flue dust, and mattes . or base bullion, in pigs and bars, lead dross, reclaimed lead, scrap lead, antimonial lead, antimonial scrap lead, type metal, all aGoys or combinations of lead n.s.p.f. -- bearing ores kinds, except py- rites containing not over 3 percent of zinc old and worn-out zinc, fit only to be remanu- factured, zinc dross and zinc skimmings Quarterly quota- By weight Quarterly quota- Dutiable lead Quarterly quota- Dutiable lead Quarterly quota- Dutiable zinc Australia 10,080,000 23,680,000 Belgium Congo 5,440,000 Belgium and Lux- emburg(total) 7,520,000 Bolivia 5,040,000 Caoada 13, 440, 000 15, 920, 000 66, 420, 000 37, 840, 000 Italy 3,600,000 Mexico 36,880,000 70,480,000 6,320,000 Peru 16,160,000 12,880,000 35,120,000 3,760,000 Union of South Africa 14,880,000 Yugoslavia 15,760,000 All other foreign countries (totol)__ 6, 560, 000 6, 010, 000 17, 840, 000 6, 080, 000 1 The proclamation specifically exempts the following from the quota restrictions imposed therein: (1) any article imported by or for the account of the Unites' States Government; or any imported article which is under contract for delivery in the United States for the account of a corporation wholly owned by the United States Government; (2)a any article described in item 392, above, or in item 394, above, exported to the United States before September 22, 1958; lead-bearing ores, flue dust, and mattes of oil kinds (item 391, above,) and zinc-bearing ores of all kinds (item 393, above,) exported to the United States before September 22, 1958. This exemption does not apply to withdrawals for consumption of "metal praduciblo" from bonded smelters under section 312, Tariff Act of 1930; (3) any article described is item 392, above, or in item 394, above which is not subject to duty; (4) any ora, flee dust, or motto (item 391, above,) the lead content of which is not subject to duty or which contains less than two per centum of load (whether or not the lead content thereof is subject to duty); (5) any ore (item 393, above,) the zinc content of which is not subject to duty or which contains less than one per centum of zinc (whether or not the zinc content thereof is subject to duty); (6) Babbitt metal and solder (item 392, above,) and zinc dust (item 394, above). a Articlss producod in any coantry not named in the proclamation, or in any country other than those to which allocations have been made, are subject to the allocation to "all otiisr foreign countrivo." PAGENO="0511" 2297 TREASURy DEPARTMENT, BUREAU OF CUSTOMS, Washington, D.C., &~pternber 26, 1958. Bureau of Customs Circular Letter No. 3054. Subject: Absolute import quotas on unmanufactured lead and zinc; Presidential Proclamation No. 3257 dated September 22, 1958. Presidential Proclamation No. 3257 of September 22, 1958 (copy attached), modifies, effective October 1, 1958, item 391, the first item 392, item 393, and item 394, Part I, Schedule XX, of the General Agreement on Tariffs and Trade, as supplemented (T. Ds. 51802 and 52739), by establishing, with certain excep- tions, absolute quota restrictions on imports for consumption under each of these items for the 3-month period beginning October 1, 1958, and for each quarterly period thereafter beginning January 1, April 1, July 1, and October 1. Articles described in item 392 or item 394 or in clause numbered (1) of item 391 or clause numbered (1) of item 393 which were exported to the United States before September 22, 1958, are not subject to the quota restrictions provided in the proclamation. However, metals producible withdrawn from bonded smelting and refining warehouses established under section 312, Tariff Act of 1930, are not exempted from quota limitations by reasons of `the ores or crude metals designated in the withdrawal covering the metals producible having been exported before the date of the proclamation. The quota limitations apply on a country of production basis to- (a) the amount of the dutiable lead contained in the articles described in item 391; (b) the amount of the dutiable lead contained in the articles described in `the first item 392, except Babbit metal and solder; (c) the amount of the dutiable zinc contained in zinc-bearing ores of all kinds, except pyrites containing over 3% of zinc, under item 393; and (d) the total weight of certain articles described in item 394; namely: zinc in blocks, pigs, or slabs, (except zinc dust), old and wornout zinc fit only to be remanufactured, zinc dross, and zinc skimmings. The attached table shows the quantities, by country of production, which may be entered, or withdrawn from warehouse, for consumption under the re- spective quotas during each quarterly period, and sets forth the exemptions from the quota limitations provided in the President's proclamation. In the case of withdrawal for consumption of metals producible from bonded smelting and refining warehouses established under section 312, Tariff Act of 1930, the country chargeable is the country of origin of th'e ores or crude metals designed in the withdrawal `to receive the credit for the withdrawal for consump- tion under section 312. The quota restrictions do not apply to any ore, flue dust, or matte the lead content of which is not subject to duty or which contains less than 2 per centum of lead by the wet assay before deduction of the 1.5 units. Such quota limitations under item 393 do ilot apply to any ore the zinc content of which is not subject to duty or which contains less than 1 per centum of zinc (whether or not the zinc content thereof is subject to duty). Entries or withdrawals for consumption under any item for quota-class articles produced in a country not named in the proclamation, or in any country other than those to which allocations have been made, will be charged to the allocation to "all other foreign countries" under the particular item. For quota control purposes, charges against item 391 quotas and against item 393 quotas will be based on the dutiable lead content or th'e dutiable zinc content, respectively, as shown on the consumption entries or warehouse withdrawals (clause numbered (1) of each item as shown in the proclamation) ; charges against the item 392 quotas will also be based on the dutiable lead content as shown in the consumption entries or warehouse withdrawals. For quota control purposes, charges against the item 394 quotas will be based on the weights as shown on the consumption entries or warehouse withdrawals. In the case of the items subject to the second clause of item 31 and item 393 rela'ting to the withdrawal of merchandise from a bonded smelting and refining warehouse established under section 312, Tariff Act of 1930, the dutiable lead and dutiable zinc content chargeable to the respective quota by reason of the ware- house withdrawal for consumption shall be the full lead or zinc content of the ores, shown on the withdrawal, required to produce the finished product. PAGENO="0512" 2298 To illustrate, assume warehouse withdrawals for consumption were filed, with credits to be applied to warehouse entries filed covering ores, concentrates, and mattes, the dutiable lead or zinc in the imported material would be determined for quota purposes as follows: [In poundsi Lead Zinc Lead ores or concentrates: Full metal contest atter deduction of 1.5 units for lead 1 266, 000 22, 800 Less approved wastages 8,273 3,648 Producible metals withdraws 257, 727 `19, 152 Copper ores or concentrates: Full motol contest after deduction of 1.5 aeOn for lead 20,200 5, 800 Less approved wastages 6,060 870 Preducible metals withdrawn 114, 140 1 4.930 Matte: Full metal coolest after deduction of 1.5 units for lead 100, 000 (2) Lens approved wantages 15, 000 Producible metals withdrawn 1 85, 000 Zinc ores or concentrates: Full metal content alter deduction of 1.5 units for lead 11, 100 1 55, 100 Less approved wastages 100 2, 755 Producible metals withdrawn 1, 000 52, 345 I Paunds of metal to be charged against quota of country of origin of the ores, concentrates, flue dust, or mattes of all kinds. Zinc in matte not subject to duty. This procedure shall also apply where a constructive transfer (section 19.24, Customs Regulations) is filed at one port without physical shipment of metal producible and the warehouse withdrawal for the metal producible is filed at a second port. All warehouse entries covering the imported material designated in items 391 and 393 show the country of origin of the material involved. Therefore, the country designated by the smelter on the warehouse withdrawal of "metal Producible" for credit `against its smelter bond, should be reported to the Bureau so that the proper quota can be charged with the dutiable content of the ore or crude metal required to produce the finished product. The warehouse withdrawal for consumption designating a given warehouse entry covering specific ores or crude metals may not be filed unless there is metal producible on hand at least equal to the recoverable lead or zinc, i.e., duti- able contents of the lead or zinc desired to be withdrawn. The filing of the ware- house withdraw~al need not be withheld until the related warehouse entry has been liquidated. In view of the possibility that some of the quotas may be filled at or shortly after the opening of the quota period on October 1, 1958, no quota-class articles shall be released from customs custody without Bureau authorization. To afford all importers an equal opportunity for the simultaneous presentation of entries and withdrawals for consumption under the quota. arrangements shall be made for the official opening of the quota on Otcober 1, 1958, as of noon, e.s.t., or its equivalent in other time zones. No importer shall be permitted to file an entry or withdrawal for consumption under any item for an amount in excess of the quota allocation involved (section 12.50(d), Oustoms Regulations). You shall report the following detailed information to the Bureau by telegram with respect to the entries and w-ithdrawals presented as of noon, e.s.t., on October 1: (1) the respective total amounts, in pounds, of quota-class lead, by country of production, subject to the item 391 quotas; (2) the respective total amounts, in pounds, of quota-class dutiable lead, by country of production, subject to the item 392 quotas; (3) the respective total amounts, in pounds, of quota-class zinc, by coun- try of production, subject to the item 393 quotas; (4) the respective total weights, in pounds, by country of production, of the zinc articles subject to the item 394 quotas. PAGENO="0513" 2299 The same detailed information shall be reported by telegram with respect to each subsequent entry and withdrawal. The exact time of presentation of each entry and withdrawal shall be stated. Articles which come within the quota exemptions provided in the proclamation (see attached table) should not be reported to the Bureau. All transactions shall be reported in detail on customs Form 3161. Since the quotas are to be administered on a pound basis, that unit of quantity should be stated in the "Unit of Quantity" column Of customs Form 3161. To assure proper identification of the quota, or quotas, to which each transaction is chargeable, the item number, or numbers should be stated in connection with the description of the commodity involved. Since the quotas are absolute, it is essential that all information reported to the Bureau on the `bases outlined in paragraphs 6 through 12 of `this letter be as accurate as possible. Nothing in the above shall be construed as providing a change of existing prac- tice in the method of determining duitable quantities of these products in the liquidation of the entries. In order to avoid demurrage charges and to facilitate the movement of the imported merchandise, the collector may permit goods arriving in railroad cars to proceed under a special manifest to a bonded warehouse or other place desig- nated by the collector after the consumption entry has been filed and before their quota status has been determined in the condition that the goods shall not be removed from the place of unlading until proper disposition has been deter- mined. An appropriate entry, immediate transportation or warehouse, shall be substituted promptly for any of goods excluded from release under the consump- tion entry. All collections tendered as payment of duties on entries presented under the quotas specified by Presidential Proclamation No. 3257 of September 22, 1958, shall be deposited to the deposit fund account 20X6864. Unapplied Customs Receipts. You will be notified' by the Bureau of the entries or portions of entries accepted under these quotas at which time you shall immediately refund to the parties in interest the collections tendered in payment of duties on the unaccepted entries or portions of entries and deposit the duties on the accepted entries in the regular way to revenue account 200310 Duties on Imports. D. B. STRUBINGER, Acting Commissioner of Unstoms. Mr. SCHNEEBELI. It is not under OEP? That is the only authority that I am aware of at the present time. Mr. JOHNSON. No, this was an Executive order, and I will send you a copy. Mr. SOHNEEBELI. I have another short question. On the matter of manufactured zinc and lead, I understand there is still a tariff duty in connection with these products. Mr. JOHNSON. There is also a tariff on the ores and metals. Mr. SOHNEEBELI. Which was not disturbed by the Kennedy round? Mr. JOHNSON. On the ores and metals, it was not disturbed. Mr. SOHNEEBELI. On the unmanufactured, it was not disturbed. Why can't we control our problem with regard to the jeopardy of our domestic industry through a higher tariff, rather than through the quota system? Mr. JOHNSON. I suppose you could, if you made it high enough. The only problem we find with this, and we think one of the advan- tages of what we are suggesting, is there we do not want controls at times when they are not needed, and that will be most of the time, in my judgment. In fact, I have said right along, if we passed legislation like this, I don't believe a quota would ever come into effect; and, if you use the method of tariffs, they would have to be pretty high in order to control this thing. Mr. SCHNEEBELI. Th.ly would be? 95-159-----G8--pt. 5-33 PAGENO="0514" 2300 Mr. JOHNSON. They would be. They are not high, now. They are quite insignificant, in relation to the total cost of the products, 0.6 or 0.7 cents a pound. It is not a very high ad valorem base. So, homehow, I just sort of feel you would have to have a tariff of four or five or six times as high as that, to be effective. Again, if you put on a tariff, people have spoken in the past of a tariff quota, where the amount of the tariff varies from time to time, and this might be a solution. I don't know. It seems more complicated than this. Mr. SOHNEEBELI. If the Government had authority to establish quotas in 1958, why wouldn't it have that same authority at the present time? Mr. JOHNSON. This is a good question. I would like to know, myself. Mr. OuRTIs. I think it was an escape clause proceeding. If the Tariff Commission recommends it, and the President has the authority to do that. Mr. SOHNEEBELI. Just for the record, would you supply us the prices at which unmanufactured zinc and lead were sold in the United States before and after quotas during this period of time? I would like to see the effect that quotas have on prices before the establishment of quotas and lifting of quotas. Mr. Jorn~soN. I have it with me now, but I will give you a statement. The CHAni~rAN. Are there any further questions? Again, Mr. Johnson, we thank you, sir. (The following information was received by the committee:) AVERAGE E. & Mi. PRICE PER POUND (IN CENTS) Lead Zinc Lead Zinc Lead Zinc 1950 13.3 13.9 1956 16.0 13.5 1962 9.6 11.6 1951 17.5 18.0 1957 14.7 11.4 1963 11.1 12.0 1952 16.5 16.2 1958 12.1 10.3 1964 13.6 13.6 1953 13. 5 10. 9 1959 12. 2 11. 4 1965 16. 0 14. 5 1954 14.1 10.7 1960 11.9 12.9 1966 15.1 14.5 1955 15.1 12.3 1961 10.9 11.5 1967 14.0 13.8 COMMENTS ON LEAD-ZINC PRICES 1. Varying United States market prices since 1950 have bad very minor, if any, effect on changes in United States industrial consumption of lead and zinc. Con- versely, the changes in lead-zinc consumption (directly reflecting the variations in the general economy) together with the surplus of metal stocks, caused by ex- cessive imports, depressed lead-zinc metal prices to unprofitable levels for the domestic miner from 1957 to early 1964. 2. During Korea, United States prices of lead and zinc were frozen by the Gov- ernment at levels several cents below world prices. Import duties were suspended from February to June 1952 to "attract", back to our markets, the normal flow of imports from exporting nations, needed at this time, to support the Korean war effort. The duties were subject to reinstatement when the United States price fell below 18c for each metal. 3. United States prices improved in 1955 and 1956 under the alternative pro- grams initiated by the President, such as purchase and barter of lead and zinc for the stockpile program in lieu of higher duties or quotas. 4. Prices improved slightly following the Quota Proclamation but dropped again in early 1959. In 1962 market prices for lead and zinc remained low. High lead stocks resulted in a price drop to 9.5c per pound-the lowest since price controls were relaxed following World War II. The zinc price of 11.6c per pound also re- flected excessive zinc stocks. PAGENO="0515" 2301 5. During 1963 prices for both lead and zinc increased, reaching 13c per pound and approached reasonable minimum prices for the first time since 1956. This rise resulted from decreased producers stocks and increased consumption, reflecting increased usage by the automobile and steel industries. 6. The increase in consumption of both lead and zinc continued into 1964, and tinited States primary producers metal stocks at the close of 1963 and again in 1964 were at the `lowest levels since the pre-quota period. The lead price in- creased from 10.5c per pound on January 15, 1963 to 13.0c per pound on January 2, 1964 `and zinc increased from 12.Oc per pound on July 2, 1963 to 13.Oc on December 3, 1963. The U.S. zinc price was 14.5c per pound at the end of 1964 and the price of lead was 16.Oc per pound at the close of the year. 7. The domestic lead price held constant through 1965 at 16.Oc per pound, but on May 5, 1966 this was reduced to 15.0c per pound and again to 14.Oc on Octo- ber 10, 1966, closing the year at that level. Both price reductions were made "to restore the world balance" in pricing the metal, reflecting the decrease in quotes on the London Metal Exchange. The domestic price for zinc remained at 14.5c per pound during 1966. 8. During May and June of 1967 `the price of zinc dropped ic per pound to 13.5c per pound, and on May 2, 1968 the price of lead dropped lc per pound to 13.Oc per `pound. The two metals currently remain at these price levels. The CHAIRMAN. Our next witness is Mr. Wilke, of the Domestic Litharge Producers. (No response.) The CHAIRMAN. Mr. iRichard J. Bauer, president, Independent Zinc Alloyers Association. Mr. Bauer? (No response.) The CHAIRMAN. Without objection, those whose names' have been called who are not here in person may, if they desire to do so, extend the remarks they would have delivered had they been present in the record at this point. (The following stutement of the Domestic Litharge Industry was received for the record:) STATEMENT OF THE DOMESTIC LITHARGE INDUSTRY BACKGROUND Litharge, which is one of the primary constitutents in present day automobile batteries, contains ninety-three (93) percent virgin lead metal and is generally manufactured by the simple process of furnacing. Litharge contains so great a proportion of the virgin base metal that in major tonnage the cost of such lead is nearly ninety (90) percent of the sales price of the finished and packaged products. DELETERIOUS EFFECT UPON DOMESTIC LITHARGE INDUSTRY RESULTING FROM IMPORTATIONS FROM MEXICO Prior to 1955, the importation of litharge from Mexico was not a significant part of the domestic market. In fact, total litharge imports from Mexico never exceeded a few hundred tons up to the year 1955. Mexico, for many years, has produced large quantities of lead. It has been able to produce its lead below the price of the London Metal Exchange (LME). As a result, the Mexican Government has been able to receive revenues from the mining of lead by taxing such producers to bring about a price equal to the LME. The situation with respect to this tax has been in effect for many years and is still presently in existence. In 1955 (the Mexican Goveimment initiated `a system whereby the Mexican litharge producers could purchase the primary metal in Mexico less the amount of tax on refined metal. The resulting ramifications of this procedure are that Mexican producers of primary metal pay an export tax of approximately twenty- eight (28) percent, equalizing the cost of the metal to that of the LME; and, PAGENO="0516" 2302 in contrast, the Mexican producers of litharge, a simple manufactured product consisting of ninety-three (93) percent primary lead metal, are exporting said product without payment of tax, amounting to very nearly three-cents per pound, allowing litharge. to compete unfairly with domestic production. This action by the Mexican Government brought about the obvious1y desired results. Litharge imports from Mexico leaped from 750 tons in 1955 to 5,370 tons in 1056. This fantastic increase in Mexican imports has continued to the present. Over 11,000 tons of Mexican litharge was imported into the United States in 1959, over 15,000 tons in 1962, and over 24,000 tons in 1966 and again in 1907. During the period of 1960-1967, domestic litharge shipments averaged only around 102,000 tons. Thus Mexican imports of litharge amount to well over twenty (20) percent of domestic shipments. Furthermore, since Mexico exports nearly ninety (90) percent of its output, and, since the Mexican litharge indus- try possesses the capacity to produce approximately fifty-thousand tons of litharge, the future of the American litharge industry is very much in doubt. The brief foregoing summary evidences that Mexican litharge can invade the United States market almost at will and with such certitude as to be able to determine the amount of the domestic market to be taken over at any given time. For the past ten years, the price of delivered Mexican litharge in the United States has been less than the cost to the domestic producers of pig lead. While the domestic litharge industry does not condemn foreign competition, it must condemn any form of unfair competition that invades, and threatens fur- ther invasion, of the United States market. The domestic litharge industry states, and not in the sense of exaggeration, that if the exportation of this material continues at its present rate of increase, the domestic industry might just as well go out of business. AVAILABLE REMEDIES UNDER ExIsTING LAW Since importation of Mexican litharge quite clearly is having a destructive effect upon the domestic industry, we have given considerable study to means of alleviating the problem under existing laws. Two statutes appear germane to our situation: The Antidumping Act, 1921, as amended, 19 U.S.C.A. §~ 160-173 and the Countervailing Duty Section of the Tariff Act of 1930, 19 U.S.C.A. § 1303. Prosecution of a claim under either statute requires an inordinate amount of time and expense. The real drawback to these remedial provisions, however, lies in the fact that their relief is predicated upon a finding of "fault" in the im- porter, with the commensurate burden of proving such "fault" deposited in the American manufacturer or producer. Under the Antidumping Act, 1021, as amended, a special dumping duty is assessed when "a class or kind of foreign merchandise is being, or is likely to be, sold in the United States at less than its fair value" and "an industry in the United States is being or is likely to be injured, or is prevented from being established, by reason of the importation of such merchandise into the United States." Procedurely, the Act provides that the Secretary of the Treasury shall determine whether the first quoted condition exists. If the Secretary makes an affirmative determination, he informs the Tariff Commission which then acquires jurisdiction to determine whether one or more of the second quoted conditions exist. Affirmative determinations by both agencies, taken together, constitute a "finding" of dumping within the meaning of the Act. The special dumping duty to be assessed is an amount equal to the difference between the purchase price and the foreign market value. The utility of the Antidumping Act by domestic concerns is more prevalent in the abstract than in reality. The domestic producer or manufacturer must hurdle two substantial burdens. Initially, he must establish sales at less than fair value. Secondly, he must demonstrate an injury (which is required to be material by the Commission) resulting from such importations. The mere influx of imports and their necessary pernicious effect upon American industry is meaningless, unless the domestic concern can collect the evidence necessary to establish sales at less than fair value and resulting injury, proximately caused by such sales. The Countervailing Duty Provision of the 1930 Tariff Act requires the Secre- tary of the Treasury to impose a countervailing duty whenever a foreign country pays or bestows any bounty or grant upon the manufacture or production or export of any article manufactured or produced in such country, and such article or merchandise is dutiable under the provisions of the Tariff Act. The counter- PAGENO="0517" 2303 vailing duty is an additional duty equal to the net amount of such bounty or grant. Like the Antidumping Act, relief under this provision depends upon a finding of culpability in the exporting country. The task of revealing a bounty or grant from the intricacies of foreign law is, at best, burdensome. Often the existence of the bounty or grant is not revealed by foreign statute, and is sub rosa in nature. Once again, the inflow of imports and their noxious effect upon domestic industry is irrelevant, and only a finding of a bounty or grant will trigger this remedial statute. The domestic litharge industry, during the past five years, has sought self- protection through both of these statutes. To date, our efforts have been abortive. The reason for our inability to safeguard this industry through the aforemen- tioned statutes is that both provisions are criminalistic, in the economic and international trade sense, and, consequently, narrowly drafted and stringently interpreted. The circumstances behind the importation of litharge from Mexico is replete with unique facts and characteristics, and creates a tenuous argument to incorporate this situation into the narrow confines of existing statutes. The frustration of our industry incidental to attempts to invoke existing law is the best evidence available to manifest the inherent weakness of our statutory scheme. During the past decade the domestic litharge industry has suffered from the fantastic influx of Mexican imports. Since 1955 such imports have increased from less than one percent of domestic consumption to over twenty percent. The only possible explanation for this phenomenon is the price differential between Mexican and domestic litharge. The injurious effects upon the domestic industry are self-evident. Yet, these facts, in themselves, afford no bases for relief, since existing law demands proof of "fault" in the exporting country. PROPOSED LEGISLATION The underlying policy behind H.R. 51, "Lead and Zinc Act of 1967", and the "Import Regulation Act of 1908" is the type of legislation needed to remedy the problem of our industry. Both proposed statutes attempt to eliminate the destructive effects of imports upon domestic industry by stabilizing their influx. The operative facts necessary to initiate their applicability are merely an in- crease in imports, and the automatic correlative of a declining market for the domestic industry. Thus injury to the domestic industry resulting from an in- crease in the flow of imports is sufficient to execute remedial legislation, without the American manufacturer or producer being burdened by the necessity to establish "fault" in the exporting country. But while the general policy of the proposed legislation is what is required to preserve the domestic litharge industry, the substantive provisions appear only to have a peripheral effect upon our dilemma. HR. 51, "Lead and Zinc Act of 1967", is concerned primarily with the domestic lead and zinc industries, and the proposed statute has only an ancillary effect upon a "manufactured lead article", which would include litharge. The statute would impose a quota on manufactured lead articles only if a lead quota had previously been instituted. Title III, thus, would establish a manufactured lead quota only for the purpose of preserving the market created by the lead ore and lead metal quota, and not for the purpose of preserving a market for the manufactured lead producers. This statute is not responsive to the plight of the domestic litharge industry. The "Import Regulation Act of 1968" is more applicable to the needs of our industry. In fact, Section 2, which states the purpose of the Act "to stabilize iniports and to eliminate their destructive effects", appears to have been drafted with the litharge industry in mind. Section 5 sets forth various conditions which if found to exist would automatically be deemed to place the domestic industry "at a serious competitive disadvantage in relation to imports." At least two of these conditions exist with regard to the relationship of domestic litharge and the Mexican imports. But while this proposed statute would clearly apply to the litharge situation, the remedy afforded would only provide partial relief to our woes. Section 5(e) (1) limits the ceiling on imports to the share of domeStic consumption supplied by the imports during the most recent calendar year. Thus, complete relief under the proposed legislation would still leave a situation whereby Mexi- can imports consume over twenty (20) percent of domestic consumption. We do not mean to discount the fact that future invasion of our markets, which appears more than probable, would be thwarted, but only that the remedy should be less PAGENO="0518" 2304 artificial, and more flexible to meet the particular conditions of the various industries. For example, if the exporting country was already exporting its commodity into our markets at its maximum capacity of production, then the relief afforded under Section 5(e) (1) would be nil. We do not underestimate the difficulty of establishing a criteria for a quota in one piece of legislation to cover all industries, but we do feel that more flexibility is possible and capable of achievement. The "Import Regulation Act of 1968" recognizes that substantial inroads in domestic consumption by imports have ruinous effect upon the industries of the United States. What is required is that the import ceiling be created at the point when the imports began to have dele- terious effects upon the domestic industry. As the Act now reads, it is purely speculative whether its application will impede the destructive effects caused by the influx of imports, partially remedy the situation (as is the case with litharge), or provide no relief at all. More flexibility is mandatory. In any event, the "Import Regulation Act of 1968" will insure the prevention of the future invaSion of Mexican imports into the domestic litharge market. To this end, the proposed statute, in its present form, is superior to a lack of any further remedial legislation, and if the choice resolves itself between this Act, in its present form, and no Act, the domestic litharge industry would support and favor the enactment of the "Import Regulation Act of 1968." (The following statement of Mr. Bauer was received for the record:) STATEMENT OF RICHARD J. BAIJER, PRESIDENT, INDEPENDENT ZINC ALLOYERS AssocIATIoN Mr. Chairman and members of the Ways and Means Committee of the House of Representatives. My name is Richard J. Bauer, I am president of the Independent Zinc Alioyers Association and also president of my own company, Eastern Alloys, Inc., of May- brook, New York. I appreciate this opportunity to testify for the Association on House Bills 51, 6126, 7010, 7537 and 9038 on reinstating a quota upon the impor- tation into the United States of zinc ore and zinc metal. We are grateful to this Committee for airing discussion on this nation's role and responsibility in inter- national trade at this critical time. In this country there are approximately 35 major independent zinc alloy pro- ducers who manufacture and sell zinc alloys to die casters and other consumers. The independent zinc alloyers purchase special high grade slab zinc from domes- tic producers and from foreign sources. There are seven producers of primary zinc in the United States supplying spe- cial high grade slab zinc. At least five of these companies also produce zinc alloys or 0W11 subsidiary companies engaged in producing zinc alloys or have a financial or stock position in companies producing zinc alloys. In summary, independent zinc alloyers are companies that must purchase slab zinc for use in making zinc alloys. Zinc production companies, primary zinc companies, if you will, use their own slab zinc or sell slab zinc to themselves, for production of zinc alloy. In market terms, independent zinc alloyers compete amongst themselves for customers and they also compete with the primary producers of zinc in the market for zinc alloys. Of the major independent zinc alloyers in this country, thirteen are members of the Independent Zinc Alloyers Association and these thirteen sell approxi- mately 50% of all zinc alloys marketed in this country. `Members of the association are located in Illinois, New York, Michigan and Tennessee. While each falls within the category of small business, together they employ many hundreds of persons and their plants represent capital in- vestments ranging from hundreds of thousands to millions of dollars. In October of last year, our association went on record in opposition to Senate bill 289 before the Senate Finance Committee. At that time, we ad- vised the Honorable Russell B. Long, chairman of the committee, of our sup- port for the statement to the committee on October 18 of the Honorable Stewart L. TMall. Secretary of the Interior. We cited specifically our agreement with Mr. IJdall's point that under S. 289 "the control of imports would be deter- mined by industry actions rather than by competitive actions in the market- place." The bills now before this committee on reinstatement of zinc quotas mirror S. 289 and so we are opposed to each and all of them. PAGENO="0519" 2305 Our industry is unlike some other basic metal industries. This country might be said to be self-sufficient in steel, for example, in that all the processes from ore to metal are abundantly contained within the United States. Zinc, how- ever, is an international metal and all users of zinc ore and metal in this coun- try must rely to one extent or another upOn foreign sources. Mr. Simon D. Straus, vice president of American Smelting and Refining Com- pany, and Mr. Richard A. Young, chairman of the board of American Zinc Company, officials of primary zinc production and supply companies in this nation, and both highly respected persons in our industry, attested to the in- ternational nature of the zinc industry earlier this year. In very informative papers on the free world supply and demand of zinc, pre- sented before industry trade meetings in Montreal on April 4, they discussed data that clearly demonstrated the interrelation of U.S. and free world zinc supplies. Much of this data was developed by the International Lead and Zinc Study Group. Mr. Young's talk related strikes in our U.S. copper industry and the release of zinc from the U.S. stockpile to foreign zinc production nnd to U.S. imports. Prior to 1963 the great bulk of special high grade zinc used by independent alloyers in the U.S. came from domestic~ sources. Today more than 50% comes to us from foreign sources, we look to imported slab zinc not because of price considerations but because it is more dependable as a supply source of our basic material. You must remember, we, as independent alloyers, compete with the primary zinc producers for alloy customers. And, incidentally, most of our customers are die casters producing largely for the automotive industry. We respect com- petition from these producers as well as competition amongst ourselves. Since we rely upon foreign sources for approximately half of our supply of slab zinc and upon u.S. primary producers, who are in competition with us, for the other half of our supply of raw materials, the proposed quota legislation could on one hand reduce our source of supply from overseas and on the other hand, allow major competitors an unfettered supply of slab zinc. A supply condition such as this would be very disruptive and extremely harmful to the independent zinc alloyers. No one anticipates manipulation of domestic supplies of slab zinc solely for the purpose of causing application of quotas on imports. However, inherent in the legislation, if it should become law, is the possibility that its application could be to the competitive disadvantage of all the independent zinc alloyers. We are certain it is never `the intention of this Government to create a tool of competitive advantage for one segment of an industry to the disadvantage of another segment of the same industry. The bills before you provide that u-hen slab zinc owned by U.S. producers at the close of three consecutive months exceeds 175% of average monthly domestic shipments during the same three months, a quota shall be applied. It was estimated, during the Senate Finance Committee hearings last October, by Mr. Clark L. Wilson, Chairman of the Lead-Zinc Producers Committee, that a 38 million dollar inventory would be required to trigger zinc quotas. At the time of his testimony, published figures indicated a U.S. inventory of approxi- mately 25 million dollars. Under normal market conditions in this country, a 38 million dollar zinc metal inventory, including metal in bonded warehouses, would not be abnormal. If these bills had been law in October of last year, an addition of only 13 million dollars to the then current metal inventory could have been the signal for the start of the pre-quota determining period. In our present day economy this is not a great deal of metal; it would not have indicated an oversupply of slab zinc in this country; and hardly would have been reason for thinking about curtailing zinc metal imports. If the three-month period required by the present quota bills had started to run, there is no doubt in my mind that our customers, fully aware that our import supplies might be reduced by an impending quota, would begin to look around for other suppliers in order to be sure of sources of zinc alloy once the quota was applied and our production because adversely affected. Since the beginning of these hearings, arguments have been made against quota legislation on grounds of danger to our national economy and danger to our international trade arrangements. Insofar as zinc is concerned, and particu- larly zinc alloys, of which over 60% go into die cast parts for the U.S. automotive PAGENO="0520" 2306 industry, this quota legislation could be destructive of normal competitive forces in our industry. We respectfully request that this legislation not be enacted. Thank you. The CHAIRMAN. Mr. Donehower, chairman of the executive com- mittee of the Rolled Zinc Manufacturers Association. We are glad to have you with us. If you will identify yourself for the record, we will then recognize you. STATEMENT OF WILLIA]\T L. DONEHOWER, 1R., ROLLED ZINC MA~UFACTURERS ASSOCIATION Mr. DONEHOWER. Mr. Chairman, my name is William L. Done- hower. I am vice president of the Matthiessen & Hegeler Zinc Co. of La Salle, Ill., and appear in behalf of the Rolled Zinc Manufac- turer Association, which is the national trade association of the six companies in the United States which manufacture 100 percent of the zinc rolling mill products produced in this country for sale. Rolled zinc consists of zinc in sheets, zinc strip, zinc wire and rod, and zinc engraver plates. ROLLED ZINC INDUSTRY SERIOUSLY INJURED FROM UNFAIR IMPORT COMPETITION The U.S. rolled zinc industry has been injured seriously from un- fair import competition. In the case of zinc in sheets, the U.S. industry has been almost completely ruined. In 1952 imports of zinc in sheets accounted for a quantity of less than 1 percent of domestic industry production. Imports increased both in quantity and as a percentage of domestic industry production until in 1963 imports were equivalent to 56 percent of domestic industry production. By that time the United States manufacturers of zinc in sheets had been reduced to two in number. With only two companies in the business, it has not been possible since 1963 to assemble domestic industry statistics without revealing individual company data. Therefore, we are unable to say precisely what is the current percentage of imports in relation to domestic production. Imports of zinc wire have been very substantial, and the threat of increased zinc wire imports is serious. We have not been seriously injured by imports of strip zinc or zinc engraver plates, but we do not want to be seriously injured from this unfair foreign competition. GRANTING OF TARIFF CUTTING AUTHORITY TO ADMINISTRATIVE OFFICIALS Unfair import competition problems developed for the rolled zinc and other industries even before the Trade Expansion Act of 1962, and they have been compounded since that time. Particularly, we feel that the 50 percent tariff cutting authority of the 1962 Trade Expan- sion Act was a mistake. The rolled zinc industry is a small industry but the probleius we have encountered with unfair import competition seem to be com- PAGENO="0521" 2307 parable to those of the steel industry, the textile industry, the shoe industry, and others. Proba[bly, our industry, the textile industry the shoe industry, and others. Probably, our industry has felt more sharply the consequences of this unfair import competition. Had broadtariff cutting authority been dropped [before the 1962 Trade Expansion Act, instead of authorizing much greater power in the 1962 act, we believe that the United States today would be much better off in our national economy, in our balance of trade, and in our balance of payments. Whatever our mistakes may have been in the past and whatever else needs to be done at this time to correct our international trade problems, the first step is not to authorize any further tariff cutting authority. While it is recognized that H.IR. 17551 would only provide permission to exercise unused authority granted under the 1962 act, one mistake does not justify another. Please understand this continued authority if granted would have no direct meaningful significance to the U.S. rolled zinc manufacturing industry because the tariffs on all of our rolled zinc products were cut the maximum of 50 percent under the Kennedy rOund, notwithstanding the ruinous import competition with which our industry has been encountering for some years. We believe that the administrative authorities under the Kennedy round acted without sufficient regard for the interest of efficient U.S. manufacturers. We believe they shOuld have no further authority to cut duties. ANTIDUMPING LAW SHOULD BE STRENGTHENED We consider the U.S. antidumping law to be responsible for some of our `prdblems. One of our members had occasion to make a sale in Canada. Shortly after the merchandise was delivered, the company received a communication from Canadian authorities inquiring if the goods in question had been sold in Canada at a price which was lower than the price for which the product was sold in the United States. The communication notified the U.S. producer that additional duty would be levied in Canada unless the Canadian Government could be supplied with copies of invoices showing the sale of the item on comparable terms in the United States. The company did provide the invoices which closed the matter. We have no criticism of this Canadian procedure but instead agree with it, and believe the policy of our Government should be the same as the Canadian policy rather that that which is the U.S. policy of requiring proof of injury even after dumping has been shown. Another experience involved an offer from a foreign source to sell to one of our companies zinc metal over a long contract period with the sale price to be a specific amount `below whatever might be the current U.S. price for zinc metal. When asked about this offer in relation to it.s application to antidumping regulations, the foreign source indicated it did not take seriously the posthbility of antidump- ing action by the U.S. Government. We realize that at the Kennedy round new international dumping arrangements were negotiated, and we understand that it is contended that administrative author- ities do not need congressional permission for the United States to accept the international arrangements because they would not require PAGENO="0522" 2308 a change in the law of the United States. We think the law should be changed and patterned after the Canadian law which imposes upon foreign sellers the burden of proving that the sales do not constitute dumping. IMPORT QUOTAS AND ORDERLY MARKETING Aside from improving the antidumping law, long range we be- lieve that the solution must be an orderly marketing approach. Be- cause of the Kennedy round, reasonable import duties have been abandoned, and the only alternate approach seems to be to determine what constitutes a fair share of the market for foreign suppliers of any given item and then to develop a formula which will permit foreign suppliers to expand or contract their sales in the U.S. market in relation to the total U.S. market. Specifically, we endorse legisla- tion which would authorize the establishment of import quotas on various items, including rolled zinc items, which are sensitive to unfair import competition. The import quota of any item should increase or decrease in relation to the historical share this item has had as a percentage of the U.S. market. H.R. 16936 by Representative Sydney Herlong of this committee would accomplish this objective, and we support it. The foregoing statement of support for the Her- long bill represents the thinking of five of our six member companies. The sixth company takes the position that before quota legislation is resorted to, such as the Herlong bill, the United States first should levy a border tax, adopt the Canadian policy regarding dumping, and overall develop a sounder U.S. fiscal policy. EAST-WEST TRADE The subject of East-West trade is not a new one, and we continue to hear recommendations to expand East-West trade. While we question the wisdom of the application of the most-favored-nation rule to countries which are not a member of GATT, particularly we are op- posed to the application of the most-favored-nation rule to Corn- munist countries. It is the application of most-favored-nation treatment to Com- munist Yugoslavia which has caused ruin to the U.S. zinc in sheets industry and is causing great concern regarding injury to other rolled zinc items. Aside from the moral issue of the United States offering the same favorable trade terms to Communist countries as it does to genuinely friendly nations, such action is unusually harsh on U.S. manufactur- ing industries which must operate on a sound economic basis and sell at prices based upon costs. Sales from Communist countries do not have to be based upon costs but may be sales at prices determined by the Communist country government concerned considering only the relative importance and need of foreign exchange. Our industry has been particularly aware of this situation. For some years the bulk of zinc-in-sheets imports has come from Yugoslavia. Total zinc-in-sheets imports in 1952 were less than 100,- 000 pounds. Then, zinc-in-sheets imports increased every year except one year through 1963 when they exceeded 2,800,000 pounds. By this PAGENO="0523" 2309 time U.S. manufacturers of zinc in sheets had been reduced to two in number and then imports oddly enough tended to ease slightly in volume until 1967 when suddenly imports were reduced by more than half from 1966. This is a very interesting situation. Total imports for 1966 of zinc-in-sheets were 2,236,852 pounds of which 1,995,027 pounds were of Communist Yugoslavian origin, with Belgium, the Netherlands, West Germany, and the United Kingdom accounting for the remainder totaling 241,825~ pounds. For 1967, however, im- ports of zinc-in-sheets from Yugoslavia were reduced by more than two-thirds or from 1,995,027 pounds to only 635,009 pounds. Mean- while, the imports from the other four countries; namely, Belgium, the Netherlands, West Germany, and the United Kingdom, all in- creased significantly; and in addition, Italy entered the picture ship- ping a significant quantity of zinc-in-sheets to the United States. The increased shipments from the four countries and the entering of the market by Italy in 1967 clearly indicate the continued attractiveness of the U.S. market to foreign suppliers, but apparently the Commu- nist Government of Yugoslavia decided there were other items even more attractive; and, therefore, shipped to the United States less than one-third of the zinc-in-sheets in 1967 as it shipped in 1966. For the long pull, however, it is now apparent that Communist Yugoslavia has an interest in taking over the rolled zinc market in the United States. Recently, other officials of my own company were contacted through the U.S. State Department in behalf of Yugo- slavian interests. They requested permission to visit our zinc rolling mill manufacturing facilities in LaSalle, Ill. We granted them this per- mission on a reciprocal basis, and we already have been visited by Yugoslavian officials. They have stated that Yugoslavia not only is interested in increasing its sales of rolled zinc in the United States from its current manufacturing facilities, but is interested in con- structing a new strip mill and in shipping zinc strip and zinc wire to the United States. The unfairness of the United States extending most-favored-nation treatment to Communist countries is apparent because we have on one hand U.S. manufacturers who must base their prices on their costs and then compete with goods from a foreign country not neces- sarily priced on an economic basis but at a price which the particular Communist Government concerned deci4es is the price at which it will sell to best effect its overall balance-of-trade situation. In conclusion, our recommendations are as follows: First that the United States should~ wise up to the fact that its policy of some years of widespread duty cutting has been unsound iii the interest of the United States and that further duty cutting an- `thority should not be granted. Secondly, the U.S. antidumping policy should be changed so as to be patterned after the Canadian policy which places upon the foreign shipper the burden of proof that a given shipment does not constitute clump~ng. Thirdly, there should not be encouragement to expand East-West trade but to the contrary most-favored-nation treatment should be withdrawn from Communist Yugoslavia and Poland and extension of most-favored-nation treatment to any Communist country should be prohibited. PAGENO="0524" 2310 Lastly, there should be enactment of orderly marketing legislation, such as H.R. 16936 by Representative Herlong, to authorize the es- tablishment of import quotas in the case of products threatened with unfair import competition. The CHAIRMAN. We thank you, Mr. Donehower, for bringing to the committee the views that you have expressed. \~Te appreciate your cooperating with the committee. Are there any questions? Mr. CURTIS. Yes. The CHAIRMAN. Mr. Curtis. Mr. Cunrls. I think there is a*n obvious answer to this question, but I want to be sure. Yugoslavia's zinc industry is, I presume, owned by the Govern- ment, isn't it? Mr. D0NEI0wER. Yes, sir. We assume that at least the Government has control of the Yugoslavian zinc industry. Mr. CURTIS. It would almost be axiomatic that the Government could subsidize exports, if it wanted to; wouldn't it? Mr. DONEHOWER. We believe that they have the power to dictate the selling price of rolled zinc commodities that are exported to the United States. Mr. Cuims. It would be interesting to see whether the counter- vailing duties Irovisions could be brought about almost in a prima facie case, where it involves an industry run or owned by a foreign government. Has your industry looked into this at all? Mr. DONEHOWER. Sir, it is our opinion that countervailing duties would be cumbersome to impose, or to have imposed. WTe really favor a solution such as the Canadian antidumping law, which we feel is simple.. It imposes upon the seller the burden of fur- nishing their invoices to the tariff authorities in order to justify any sales made in that country. Mr. CURTIS. Well, what you are really saying is that the Canadians have gone the opposite direction from your advice, because Canada has a tentative agreement to adopt the other procedure, and start imposing damages. But the countervailing duty doesn't require the proof of damages. That is why I asked if your industry, or your company, had thought in these terms. You sa it is cumbersome. It is being employed now. I don't thmk it is so cumbersome. It looks like our administrators have not been utiliz- ing it, but it does depend upon companies registering complaint. The Government doesn't act without a complaint being registered. Mr. DONEHOWER. Yes, sir. Mr. CURTIS. Well, I just wanted to explore it. Thank you, Mr. Chairman. Mr. D0NEII0wER. Thank you, sir. Thank you~ members of the committee. The CHAIRMAN. Is Mr. Fletcher present? Mr. Fletcher. Mr. Fletc.her~ to you we really do apologize. We wanted to let you have an example, here. an experience of iust how long a Member of Congress works each day. PAGENO="0525" 2311 STATEMENT OF AUBREY FLETCHER, EXECUTIVE VICE PRESL DENT, C. TENNANT SONS & CO., OP NEW YORK Mr. FLETCHER. I appreciate your staying this late to hear me, sir. The CHAIRMAN. If you will identify yourself for the record, we will be glad to recognize you. Mr. FLETCHER. I have a full statement, which I would like put in the record. The CHAIRMAN. Without objection, so ordered. Mr. FLETCHER. I will read excerpts from it, and try to remain within the 5 minutes which were allotted to me, which will reassure you gentlemen. My name is Aubrey Fletcher. I am executive vice president of C. Tennant Sons & Co., of New York, and I am pleased to have this opportunity to appear before you to present my company's general views on the matter of lead and zinc import quotas, and our specific views on H.R. 51. C. Tennant `Sons & Co., of New York, is an American corporation with headquarters in New York City. As merchants engaged in foreign commerce for over 100 years, and in the trade of nonferrous metals and ores for nearly 50 years, we wish to si~bmit this statement registering our opposition to lead and zinc import quotas. 1. Record of Tariff Commission's opposition to lead and zinc quotas: Over the past 15 years or so, a great number of hearings have been held, some before the Tariff Commission, and others before committees of Congress, in order to study various proposals designed to provide added protection for the domestic lead-zinc industry. As a result, in 1958, a system of import quotas was imposed by the administration, in the hope that they would provide the domestic industry with the protection they were seeking; but after 7 years, they were removed, having failed in their objective. The Tariff Commission, which has studied the lead-zinc situation exhaustively, and on many occasions over the past 15 years, has expres- sed itself fully on the unsuitability of import quotas as a means of protecting the domestic lead-zinc industry. The Commission first expressed an adverse opinion on lead and zinc quotas 14 years ago, in its report to the President of May, 1954, page 30. Subsequently, Commissioners Sutton, Jones, and Dowling devoted 31 pages in the Commission's report of April 1958 to a thorough and explicit statement of their findings, which constitute an excellent sum- mation of the reasons why quotas would be undesirable and harmful to the U.S. lead-zinc industry. In their report to the Congress, dated March 1960, page 159, and made pursuant to Senate Resolution 162 of the 86th Congress, the Tariff Commission again expressed their objections to quotas and com- mented that: Import Quotas are prejudicial to the establishment of domestic lead and zinc mining operations on a sound and, more particularly, stable basis. In a later report to Congress, in May 1962, page 48, and made pur- suant to Senate Resolution 206 of the 87th Congress, after some 31/2 years operation under the then existing quotas, the Tariff Commission PAGENO="0526" 2312 concluded: "that import quotas had not proved to be a satisfactory means of curtailing imports of lead and zinc." The record shows that the weight of all the evidence over the years has been consistently and overwhelmingly against import quotas as a means of protection for lead and zinc. 2. Widespread consumer opposition to lead and zinc quotas: There is a considerable degree of opposition to lead and zinc import quotas in the ddmestic consuming industries. The Independent Zinc Alloyers Association and the American Die- Casters Association, who together speak for a major segment of the zinc consuming industry, have repeatedly expressed their objections to such measures to various Government agencies. The Association of American Battery Manufacturers and also a group of tetraethyl manufacturers, who all together represent 54 per- cent of the lead consumption in this country, also filed statements with the Senate Committee on Finance, and with the Senate Committee on Interior and Insular Affairs, expressing their objections to the lead and zinc quota bills. Their opposition is on the public record, so we will not attempt to speak for them here. I have a paragraph here on national security, which I think was covered by Mr. Johnson's testimony earlier, so that I won't repeat it. I don't intend to read all of our objections to the specifics of H.R. 51. I will just read one objection, since it pertains in part to a question Mr. Schneebeli asked. There is no reason to believe that, in practice, H.R. 51 would work any better than the import quotas established in 1958, and we object to it for the following reasons: As the earlier quotas conclusively proved, it is simply not possible to insulate the U.S. market from the outside world market, because the United States inevitably depends on imports for part of its lead and zinc requirements. In fact, the ineffectiveness of quotas is demonstrated by the fact that in 1962, 3 years after the previous quota system was imposed, the lead price in the United States sank to 9.50 cents, its lowest level in 16 years. 3. Fundamental objections to lead and zinc import quotas: Lead and zinc are international commodities in which prices are gov- erned by a worldwide law of supply and demand, and unless a country is virtually independent of outside markets, it cannot permanently insulate itself from outside influences by quotas, duties, or by any other artificial means. Since the United States depends on imports as a matter of necessity for a substantial portion of its needs of lead and zinc, it follows that prices in this country are bound to be affected by outside world prices. To try to legislate against the law of supply and demand or to at- tempt to support the domestic mining industry by governmental re- strictions on a long-term basis is futile, and the record of the past 20 years clearly demonstrates this. One of the main reasons for this is that lead and zinc are not manu- factured items. They are basic raw materials for industry. Lead and zinc mines cannot be artificially created or artificially located. The ore can only be mined where it is found, regardless of geographical bound- aries. PAGENO="0527" 2313 The basic fact is that the United States is not now, and does not ex- pect to be in the foreseeable future, self-sufficient in lead and zinc mine production. Quotas will not put ore in the, ground where it does not already exist. Furthermore, as findings of the Tariff Commission have already de- termined, lead and zinc imports are not a matter of cheap labor or low manufacturing costs abroad. The governing factor in the economics of mining is the grade of ore in the ground and the nature of the ore body. I will stop there, if I may, sir. I wckuld just like to add one comment, which is not part of my printed testimony. There have been certain suggestions, and I believe something like the }Ierlong bill is one, which I would call blanket type suggestions, which might cover all commodities under certain circumstances. I would very much wish to go on record as expressing our opposi- tion to this type of blanket protection for any industry. We believe that the problems confronting each industry, and we have heard quite a lot, or I have, today, of the nature of steel and other products, are so very different that I think it is most important that each industry be dealt with on its own merits, and not lumped together under any blanket bill. I think that would be a catastrophe. Thank you very much, gentlemen. I appreciate you having stayed in late inthe day to hear me. (Mr. Fletcher's prepared statement follows:) STATEMENT OF AUBREY FLETCHER, C. TENNANT, SONS & Co., OF NEW YORK My name is Aubrey Fletcher. I am Executive Vice President of C. Tennant, Sons & Co., of New York, and I am pleased to have this opportunity to appear before you to present my Company's general views on the matter of lead and zinc import quotas and our specific views on HR. 51. C. Tennant, Sons & Co., of New York is an American corporation with headquarters in New York City. As merchants engaged in foreign commerce for over 100 years, and in the trade of non-ferrous metals and ores for nearly 50 years, we wish to submit this statement registering our opposition to lead and zinc import quotas. 1. Record of Tariff Commission's Opposition to Lead and Zinc Quotas Over the past 15 years or so a great number of hearings have been held, some before the Tariff Commission and others before Committees of Congress, in order to study various proposals designed to provide added protection for the domestic lead/zinc industry. As a result, in 1958 a system of import quotas were imposed by the Administration in the hope that they would provide the domestic industry with the protection they were seeking, but after 7 years they were removed having failed in their objective. The Tariff Commission, which has studied the lead-zinc situation exhaustively, and on many occasions over the past 15 years, has expressed itself fully on the unsuitability of import quotas as a means of protecting the domestic lead/zinc industry. The Commission first expressed an adverse opinion on lead and zinc quotas 14 years ago in its report to the President of May 1954 (Page 30). Subsequently, Commissioners Sutton, Jones and Dowling devoted 31 pages in the Commission's report of April 1958 to a thorough and explicit statement of their findings, which constitute an excellent summation of the reasons why quotas would be undesir- able and harmful to the U.S. lead-zinc industry. At that time the Commissioners stated (Page 85 of their Report) "we reject quotas as a feasible remedy in this instance" and in the next paragraph they go on to state that in their opinion "the imposition of quotas would be definitely harmful to the best interests of domestic lead and zinc producers." PAGENO="0528" 2314 In their report to the Congress dated March 1960 (Page 159), and made pursuant to Senate Resolution 162 of the 86th Congress, the Tariff Commis- sion again expressed their objections to quotas and commented that "Import Quotas are prejudicial to the establishment of domestic lead and zinc mining operations on a sound and, more particularly, stable basis." In a later report to Congress in May 1962 (Page 48) and made pursuant to Senate Resolution 206 of the 87th Congress, after some 31/2 years of operation under the then existing quotas, the Tariff Commission concluded "that import quotas bad not proved to be a satisfactory means of curtailing imports of lead and zinc." A substantial portion of the domestic lead-zinc industry has supported the Tariff Commission in these views. In a petition dated November 24, 1959, six domestic lead and zinc smelters requested a review of the Escape Clause action on lead and zinc. They generally took the position that import quotas were not a suitable means of protection for the industry and that "the maintenance of quotas which arbitrarily limit supplies may prove a dangerous course to fol- low" (Page 4 of the Petition). The record shows that the weight of all the evidence over the years has been consistently and overwhelmingly against import quotas as a means of protec- tion for lead and zinc. 2. Widespread Consumer Opposition to Lead and Zinc Quotas There is a considerable degree of opposition to lead and zinc import quotas in the domestic consuming industries. The Independent Zinc Alloyers Associa- tion and the American Die-Casters Association, who together speak for a major segment of the zinc consuming industry have repeatedly expressed their objec- tions to such measures to various Government agencies. The Association of American Battery Manufacturers and also a group of Tetra-Ethyl manufac- turers (who all together represent 54% of the lead consumption in this country) also filed statements with the Senate Committee on Finance and with the Senate Committee on Interior and Insular Affairs expressing their objections to the lead and zinc quota Bills. Their opposition is on the public record so we will not attempt to speak for them here. 3. National Security Is Not Involved The preamble to HR. 51 states that one of its objectives is "to assist in the National Defense". There are, however, well over one million tons each of lead and zinc in the National Stockpiles and the O.E.P. has declared all this tonnage as surplus, having fixed the National Defense requirement on both metals as zero for stockpile purposes. Furthermore, two of the world's major producers, Canada and Mexico, are our neighbor countries with rail supply lines in this country. We do not see therefore that import quotas for lead and zinc can be justified on the grounds of National Defense. 4. Specific Objections to H..!?. 51 There is no reason to believe that, In practice, HR. 51 would work any better than the import quotas established in 1958 and we object to it for the following reasons: (a) As the earlier quotas conclusively proved, it is simply not possible to insulate the U.S. market from the outside world market because the U.S. inevita- bly depends on imports for part of its lead and zinc requirements. In fact, the ineffectiveness of quotas is demonstrated by the fact that in 1962, three years after the previous quota system was imposed, the lead price in the U.S. sank to 9.50 cents, its lowest level in 16 years. (b) The quotas under this Bill would be imposed or removed, not at the decision of the Government, or some impartial agency, but by the domestic smelters themselves, who alone can control the disposition and levels of their stocks. This means the domestic smelters, whose stocks only represent part of total market stocks, themselves would have the power to decide when the metal quotas should come on and when they should come off, as well as having the power to control the concentrate quotas. This seems to us a new and dangerous precedent to establish in international trade matters and we consider it to be one of the most objectionable aspects of this Bill. (c) This form of quota discriminates against those overseas suppliers who are geographically located farthest away. Tonnage which is eligible for entry at the time a steamer booking is made may be excluded by the time it arrives at the U.S. port, if a long sea voyage is involved, whereas other shippers located close to the U.S. would suffer no such disadvantage. PAGENO="0529" 2315 (d) The allocation of the lead quota 50% to ore and 50% to metal is a new and arbitrary division for which there is no historical basis in recent years, and such a 50/50 division would operate with unusual severity against the exporters of metal. (e) The proposed quotas would involve extremely severe reductions for both lead and zinc metal imports. Although the Bill appears to indicate a cuThack to an arbitrary 80% of previous levels under the formulas proposed we estimate that in practice lead metal imports could be reduced to less than 50% of the 1066 levels and zinc metal imports could be reduced to less than 45% of the 1966 levels. In fact, the level of the metal quotas under HR. 51 would probably be much less than the metals quotas which extisted from 1958-1965 (which were themeselves a reduction from the 1953-1958 level of imports), although U.S. consumption has greatly increased since that time. We see no justification for such a severe cut- back on quotas which are supposedly designed as a stand-by measure. Furthermore, very few countries would have their own quotas under this Bill. In the case of zinc metal, for example, only one country would be likely to have its own quota, and in the case of zinc concentrates, only two countries presently appear eligible for a quota of their own. In the case of lead concentrates, only three countries may be eligible. This denial of individual country quotas is also more restrictive than the 1958-1965 quotas and would probably generate even* greater difficulties. To enact such restrictive and reduced quotas would be, in our view-, a back- ward and most punitive step, for the U.S. consumers as well as overseas shippers. (f) An acute problem would arise in trying to implement long term contracts under such a restrictive quota scheme. A domestic consumer buying foreign metal would never know in advance how much material they could count on receiving from their foreign suppliers. Since the United States domestic `mines cannot supply this country's total requirements, many of our domestic consumers must depend to a large extent on imports whih they frequently purchase under long~term contracts. The uncertainty such quotas would cause with respect to their future import supplies would make it very difficult for them to run their business in an efficient manner. We can think of nothing more likely to discourage consumers from using lead and zinc. 5. Fundamental Objections to Lead and Zinc Import Quotas (a) Lead and zinc are international commodities in which prices are governed by a world-wide law of supply and demand and unless a country is virtually independent of outside markets it cannot permanently insulate itself from outside influences by quotas, duties, or by any other artificial means. Since the United States depends on imports as a matter of necessity for a substantial portion of its, needs of lead and zinc, it follows that prices in this country are bound to be affected by outside world prices. To try to legislate against the law of supply and demand or to attempt to support the domestic mining industry by Governmental restrictions on a long-term basis is futile and the record of the past 20 years clearly demonstrates this. One of the main reasons for this is that lead and zinc are not manufactured items. They are basic raw materials for industry. Lead and zinc mines cannot be artificially created or artificially located. The ore can only be mined where it is found, regardless of geographical boundaries. The basic fact is that the U.S.A. is not now and `does not expect to be in the foreseeable future, self-sufficient in lead and zinc mine production. Quotas will not put ore in the ground where it does not already exist. (b) Furthermore, as findings of the Tariff Commission have already determined. lead and zinc imports are not a matter of cheap labor or low manufacturing costs abroad. The governing factor in the economics of mining is the grade of ore in the ground and the nature of the ore-body. (c) Three of the countries which have traditionally supplied a major part of U.S. lead and zinc import requirements are Australia, Canada and Mexico, and these three countries already suffer from generally unfavorable balances of trade with the U.S. In other words, they are already buying from us more than we are buying from them, and they have been doing so for several years now. Over the four years 1964-1967 inclusive- Australia's trade deficit with the U.S. has been approximately $400 Million per year and was $483 Million in 1967. Canada's trade deficit was approximately $800 Million per year, although it dropped to about $80 Million in 1967. Mexico's trade deficit has been approximately $400 Million per year, and was $474 Million in 1967. 95-159-68--pt. 5-34 PAGENO="0530" 2316 Trade between friendly nations cannot be a one-way street and if we reduce the ability of our friends and allies to sell to us, it follows that we correspond- ingly reduce their ability to buy from us. The CHAIRMAN. You have completed your statement? Mr. FLETCHER. Yes, I have. Thank you, sir. Mr. SCHNEEBELI. I have a question. The CHAIRMAN. Mr. Schneebeli. Mr. SCHNEEBELI. Mr. Fletcher, what percentage of our imports come from Mexico and Canada? You are implying that they are maj or suppliers? Mr. FLETCHER. Yes, they are quite major suppliers. In the case of lead and zinc, they are different. I don't remember the figures. Mr. SCHNEEBELI. Could you supply them for the record? Mr. FLETCHER. I would be glad to supply them for the record. I would guess that in each case they must be between 10 and 20 percent apiece. Mr. SCHNEEBELI. But combined, they are not as much as 50? Mr. FLETCHER. In the case of zinc, they may be. Canada and Mexico together certainly will supply 50, I think possibly more, of our total zinc imports. In lead, I don't remember the numbers in my head. I will be glad to supply them. (See pp. 2319 and 2320.) Mr. SCHNEEBELI. Do most of the rest of the imports come from the Western Hemisphere? Mr. FLETCHER. The four main suppliers are Canada, Mexico, Peru, and Australia. Mr. SCHNEEBELI. Thank you. The CHAIRMAN. Here is some material on that. In 1967, just using 1 year, the amount from Canada was 277,847 short. tons. Does that sound about right? Mr. FLETCHER. It could be. It depends, Mr. Mills, whether you `are putting ores and concentrates together with metal. We import in both forms. The CHAIRMAN. This is zinc ore, and zinc-bearing materials. Mr. FLETCHER. Not just zinc metal, itself. I don't remember, I am afraid. The CHAIRMAN. That would presumably be the total of zinc. It probably would include zinc oxides. Mr. SCHNEEBELI. He said `he would supply it for the record. The CHAIRMAN. On the same basis, in 1967, Mexico supposedly shipped `about 105,279 short tons; Peru, about 45,274. This shows a total of 457,430 short tons from all countries in 1967. Is that about. right? This shows a total. Mr. FLETCHER. 457.000? The CHAIRMAN. 457,430 short tons. Mr. FLETCHER. Yes, I would say that sounds about right, to me. It might well be in the range of 400,000 to 500,000 tons, I would think. Mr. SCHNEEBELI. The reason for my question is obvious, because I think it has a bearing on the strategic stockpile, and thereby `accessi- bility to the raw material, and secondly, the reason for my question is, if we get into any `further difficulty internationally, whether any of our PAGENO="0531" 2317 imports come from nations with whom we are unfriendly. That is the main reason for my question. Mr. FLETCHER. We do get some lead, and I think some zinc, from Yugoslavia, but not a lot. Most of them come from those areas. Mr. `SCHNEEBELI. Mostly from friendly countries. The CHAIRMAN. It says lead ores and other materials, total from all countries in 1967, 144,642 short tons. Canada, 41,794 short tons. Mr. FLETCHER. You are on lead, now? The CHAIRMAN. And lead, Peru, 40,321 short tons. This is all in 1967. Australia, 37,879 short tons. We get some from Bolivia, Honduras, the Republic of South Africa. Mr. FLETCHER. I wonder whether you would like to take this sheet. As far as lead goes, the figures are right, here. The CHAIRMAN. If you have a copy of it. Mr. FLETCHER. You can take this. I am sure I have others. These are published by the ABMS. The CHAIRMAN. I will give you the figures on lead, lead ore, lead dross, lead-bearing lead bullions, lead pigs and bar, lead waste, and scrap. It is the total, I guess, `of all lead and lead material, and the same thing on zinc. Let me `complete this. Zinc ore, zinc-bearing materials, `zinc dross, and skimming mater- ials, materials containing by weight over 5 dry ounces per short ton, over 100 troy ounces of precious metal. That is noit it. Mr. FLETCHER. I think the slight difference may be because you appear to be using the Bureau of Mines figures, or Government figures, and I am using the ABMS. The CHAIRMAN. Both were Bureau of Mines. Mr. FLETCHER. There might be slight differences. They won't be great, though. Mr. Cuwns. Mr. Chairman, we ought to have the figures. The CHAIRMAN. If you have that, leave it with us. Mr. FLETCHER. I have this one on the lead, and I am very happy to give it to you. The CHAIRMAN. You don't have `one on zinc? Mr. FLETCHER. I will take a look fOr it after we are through. If not, I will mail it to you. The CHAIRMAN. If you will submit it to us later. Mr. FLETCHER. I will be glad to. (See p. 2318.) Mr. Onirns. For the record, I hope, you get the lead and zinc scrap figure. The CHAIRMAN. That was included, the figure I was given. It says lead, lead waste, and scrap. Mr. FLETCHER. Scrap is not a material consideration in this con- text. There is virtually none in the international trade of zinc, and very little in lead, as far as the United States is concerned. They are not really factors, as far as imports and exports are concerned. The CHAIRMAN. Do your figures also give us information on the domestic consumption of lead in 1967, as well as the domestic pro- duction of lead? PAGENO="0532" 2318 Mr. FI~rdHi~. Well, the domestic consumption in each case is approximately 1.3 million tons. The CHAIRMAN. Maybe we should have asked Mr. Johnson. If you don't have that information to include in the record at this point, I would ask Mr. Johnson to include it in connection with his statement, if he would: 1965, 1966, and 1967, total production of lead and zinc, total consumption of it, and the total imports according to the figures that you gentlemen have. Both of you put it in. (The following letter and attachment were received by the com- mittee:) C. TENNANT, SONS & Co., OF NEW YORK, New York, N.Y., June 21, 1968. Hon. WILBUR D. MILLS. Chairman, Committee on Ways and Means. House of Representatives, Washington, D.C. DEAR MR. MILLS: In accordance With the request you made of me at the time I spoke before your Committee on June 18th, I am pleased to enclose herewith sta- tistics on lead and zinc for the years 1965 through 1967 covering- U.S. mine production. U.S. smelter production. U.S. imports U.S. consumption The foregoing data have been extracted from the U.S. Bureau of Mines public reports. Also, enclosed are photostatic copies of the A.B.M.S. figures showing a de- tailed breakdown as to the origin of U.S. imports of lead and zinc ore and metals over the same three years. I trust this information meets your requirements, but if there is anything further I can do to be of assistance, please do not hesitate to let me know. ~lay I again express my appreciation and thanks for the opportunity to appear before your Committee in what was clearly a very crowded schedule. Sincerely yours, AUBREY FLETCHER, Executive Vice President. ZINC [In short tons] 1965 1966 1967 Mine production Smeterproduction 611, 153 1,078,021 572, 558 1,108,329 546, 420 1,010,736 Imports: Ores and concentrates (zinc content) Slab zinc Consumption: Slab zinc Ores (mostly for zinc oxide) 428, 040 152, 990 1,354,092 122, 892 521, 320 278, 175 1,410, 197 126, 696 534, 091 221, 363 1,217, 829 106, 100 Source: U.S. Bureau of Mines Statistics. LEAD [In short tons] 1965 1966 1967 Mine production Smelter production: Primary Antimonial (lead content) Secondary 301,147 431,389 25, 911 528,358 327,368 449,739 21,940 528,506 311,135 383,912 9, 969 521,397 Imports: Ores and concentrates-Lead metal Consumption 220, 672 1, 241, 482 285, 411 1, 323, 877 363, 597 11, 240, 000 1 Estimate. Source: U.S. Bureau of Mines Statistics. PAGENO="0533" 2319 ZINC IMPORTS OF THE UNITED STATES Bureau of the Census un tons of 2,000 poundsl Janaury- December, 1965 Zinc ore (content) 425,957 Canada 201, 352 Mexico 115,284 Guatemala 3 Honduras 6,786 Bolivia 4,093 Peru 73,720 Germany, West 1, 341 Netherlands Sweden Philippines 9 ~geria 4,408 Morocco 5,037 Republic of South Africa 11, 267 Australia 2,667 Zinc blocks, pigs, etc 152, 867 Canada 88,431 Mexico 12,787 Peru 10,322 Austria 672 Belgium 8,888 France Germany, West 230 Italy 2,128 Norway Spain 1,769 United Kingdom Yugoslavia 887 Japan 12,996 Congo 12,615 Australia 1, 120 U.S.S.R 22 Poland Total imports: Zinc ore, block, pigs 578, 834 Dross and skimmings 2, 521 Old and worn out 1,477 January- December 1966 Zinc ore (content) 521, 319 Canada 272,949 Mexico 114,678 Guatemala 318 Honduras 10,775 Argentina Bolivia 5,788 Peru 78,254 Germany, West 9,685 Netherlands 3, 198 Sweden 410 Iran Philippines 25 Algeria 164 Morocco 7,407 Republic of South Africa 12, 566 Australia 4, 334 Yugoslavia 768 Other countries Zinc blocks, pigs, etc 277, 389 Canada 116,253 Mexico 22,701 Peru 30,807 Austria 3,260 January- December, 1966 Zinc blocks, pigs, etc-Continued Belgium 27,468 France 2,148 Germany, West 5,952 Netherlands 276 Norway 4,032 Spain 926 United Kingdom 140 Yugoslavia 551 Japan 19,775 Congo 12,812 Mozambique Republic of South Africa Australia 24,867 Poland 5,421 Zambia otal imports: Zinc ore, blocks, pigs 798, 708 Dross and skimmings 4,648 Old and worn out 2, 181 January- December 1967 Zinc ore (content) 534, 090 Canada. 289,387 Mexico 119.135 Guatemala 1,458 Honduras 8,268 Bolivia 9,576 Peru 69,355 Germany, West 6,248 Netherlands Sweden 410 Iran 1,203 Philippines Algeria 9,264 Morocco 7,600 Republic of South Africa 7, 336 Australia 4,837 Yugoslavia Other countries 13 Zinc blocks, pigs, etc 221, 363 Canada 79,930 Mexico 18,673 Peru 33,567 Austria Belgium 16,100 France 1,308 Germany, West 939 Netherlands Norway 3,753 Spain 2,095 United Kingdom 1,053 Yugoslavia Japan 41,621 Congo 2,921 Mozambique 1,394 Republic of South Africa 56 Zambia 505 Australia 7,105 Poland 9,869 Other countries Total imports: Zinc ore, blocks, pigs 755,453 Dross and skimmings 2,704 Old and worn out 1,465 Note: The above figures are as officially reported, however, it is possible that receipts from some of the above countrie may have originated elsewhere and have been transshipped. Source: American Bureau of Metal Statistics. PAGENO="0534" January- December, 1965 Ore, matte, etc. (contant) 122, 622 Canada 43.621 Mexico 760 Guatemala 18 Honduras 8,714 Bolivia 097 Colombia 678 Peru 2,419 Sweden Philippines 104 Morocco 23 Republic of South Africa 570 Australia 26,658 Base bullion (contest) 542 Canada 50 Mexico Bolivia 44 Peru Germany, West Australia 448 Pigsand bars 220.673 Cansda 31,647 Mexico 73,594 Austria Peru 26, 133 Belgium 197 Denmark 514 France 307 Germany, West 1.653 Netherlands 224 Spain 242 United Kingdom 515 Yugoslavia 28,641 Burma Japan 4.638 Republic of South Africa 1,000 Australia 51, 104 Zambia Other countries 264 Total imports: Ore, base bullion, refined 343. 872 Lead scrap, dross, etc. (content) 4,796 January- Decem her 1966 Ore, matte, etc. (content) 145,458 Canada 54,173 Mexico 625 Guatemala 35 Honduras 11, 132 Argentina Bolivia 11, 135 Chile 7 Colombia 444 Peru 41,612 Germany, West Ireland Sweden 2, 111 Philippines 163 Morocco 13 Republic of South Africa 1. 394 Australia 22, 61 4 Base bullion (content) 1, 905 Canada 61 Mexico 449 Peru 67 Germany, West 56 Australia 1, 272 Other countries January- December, 1966 Pigsand bars 285,389 Canada 34,283 riexico 75,294 Austria 774 Peru 51,593 Belgium 2, 535 Denmark 672 France 224 Germany, West 15,498 Netherlands 5, 138 Sn/eden United Kingdom 3,102 Yugoslavia 31,322 Burma 5,532 Japan 1,719 Morocco Repeblic of South Africa 11, 986 Zambia 1,148 Australia 44,187 Other countries 382 Total imports: Ore, base bullion, refined 432,752 Lead scrap, dross, etc. (contest) 7,697 January- December 1967 Ore, matte, etc. (content) 124,01 Canada 33,424 Mexico 315 Guatemala 197 Honduras 6,513 Argentina Bolivia 13,764 Chile 159 Colombia 561 Peru 36,735 Germany, West 4, 371 Ireland 1,995 Sn/eden Philippines 38 Morocco 27 Republic of South Africa 358 Australia 25,551 Base bullion (content) 752 Canada 24 Mexico Belgium Other countries Pigs and bars 363,598 Canada 37,237 Mexico 57,270 Austria Peru 70,377 Belgium 23,281 Denmark 423 France 8,201 Germany, Went 49, 079 Netherlands 878 Sweden 3, 307 United Kingdom 17,682 Yugoslavia 30, 479 Burma 2,548 Japan Morocco 2,413 Republic of South Africa 6,989 Zambia Australia 53,157 Othercountries 277 Total imports: Ore, base bullion, refined 488,367 Lead scrap, dross, etc. (content) 10, 290 2320 LEAD IMPORTS OF THE UNITED STATES Bureau of the Census Fin tons of 2,000 pounds~ Note: The above figures are as officially reported, however, it is possible that receipts from some of the above countries may have originated elsewhere and have been transshipped. Source: American Bureau of Metal Statistics, New York, N.Y., May 29, 1968. PAGENO="0535" 2321 Mr. CuRTIs. And, Mr. Johnson, as I understand, the lead scrap is important. I realize it doesn't move much internationally, but isn't it pretty important domestically? Mr. JoHNsoN. You are right, sir. About half of the lead that goes into consumption is generated from scrap. In the case of zinc, it is much smaller, 8 or 9 percent. Mr. FLETCHER. I think I made this clear, that there was not much movement internationally. I `completely `agree with Mr. Johnson's comment about lead scrap. Mr. CuRTIs. You are quite consistent. I just wanted to clarify this for my own purposes. The CHAIRMAN. Your point was that we do not import or export much of it? Mr. FLETCHER. That is right. I would have to say that if you were going to `impose controls on the base metals themselves, I would have to say logically you must do something about the scrap, because you would generate a movement that might not otherwise take place. I hope to see no such quotas imposed, but if you do, you would have to do so to make sense. Mr. CuRTIs. I have one other item. The CHAIRMAN. Mr. Curtis. Mr. CuRTIs. Maybe you can clear up something the previous witness, Mr. Donehower, said. He said total imports for 1966, of the zinc, in sheets, and there we are talking about fabricated zinc, were 2,200,00 pounds, of which almost 2 million pounds were of Yugoslavian origin. Now, Yugoslavia must produce. Where do they get their raw zinc? Mr. FLETCHER. They mine it and smelt it themselves. Mr. CURTIS. That is what I thought, but apparently, at least in some form, this is a pretty sizable amount of import coining from one country. What we don't have here is what is that in relation to total domestic consumption? It is a relatively small amount, isn't it, 2 million pounds? Mr. FLETCHER. You mean consumption of zinc metal, or zinc sheet? Mr. CURTIS. Zin'c in sheets. Mr. FLETCHER. I can't answer that. Mr. Donehower may be able to. Mr. DONEHOWER. Sir, are you refer'ring here to the relationship of the total? Mr. CURTIs. I am reading from your page 5: Total imports for 1966 of zinc in sheet's were 2,236,852 pounds, of which 1,995,027 pounds were of Communist Yugoslavian origin. I am trying to get this in context of what our domestic consumption is of zinc in sheets. Mr. DONEHOWER. As a percentage of the zinc in sheet industry, the percentage of sheets? I am sorry. I missed this last comment that you made, sir. Mr. CURTIS. I am simply trying to find out what the imports are of zinc in sheets in relation to the U.S. domestic consumption of zinc in sheets. Mr. DONEHOWER. Approximately 56', percent here, sir, in that par- ticular year. PAGENO="0536" 2322 We do not know at the present time what it is, because past the year that we pointed out, 1963, we have only two domestic producers of zinc in sheets, and we no longer report, so it is a question of exchange of information. Mr. CURTIS. It is a very sizable portion of the domestic consumption? Mr. DOXEHOWER. Of zinc in sheets, that is right. Mr. CURTIS. Could I pursue it just a little further? Has zinc in sheets declined in usage, and isn't used as much by our fabricators? Is tha.t one reason, or what is the reason? Mr. DONEHOWER. Well, I would say that it is still a substantial item, but it has declined in recent years, due largely, I think, to the fact that most domestic producers have not found it possible to compete with this type competition. Mr. CURTIs. I see. Thank you very much. The CIIAnv~rAx. Are there any further questions? If not, we thank you again, Mr. Fletcher, and all of you who have stayed with us so long, representing this discussion ~f lead and zinc. Mr. FLETCHER. Thank you very much. The CHAIR~rAx. We apologize for keeping you so long. \~Tithout objection, the committee a.dj ourns until 10 o'clock in the morning. (The following letters and statements were received, for the record,, by the committee:) DEPARTMENT OF STATE, Washington, D.C., July 2, 7968. Hon. Wu~BtTr. D. MII~LS, Cliairm an. Committee on Ways and I/cans, House of Representatives, Was/i ington, D. C. DEAR MR. CHAIRMAN: The Department of State has received from the Aus- tralian Embassy a statement of the views of the Australian Mining Industry Council concerning the United States market for lead and zinc. The Embassy has requested that the statement be transmitted to the Committee on Ways and Means for its consideration for possible inclusion in the record of the current hearings on tariff and trade proposals. I am, therefore, pleased to forward three copies of the enclosed statement for your consideration. Sincerely yours, WILLIAM B. MACOMBER, Jr., Assistant Secretary for Congressional Relations. SUBMISSION BY THE AUSTRALIAN MINING INDUSTRY COUNCIL U.S. MARKET FOR LEAD AND ZINC The Australian Mining Industry Council has been informed that the United States Congressional Committee on Ways and Means was scheduled to com- mence public hearings on June 4 on the general subject of the balance of trade between the United States and foreign nations. The Council was concerned to note in the press release on the subject that the hearings would cover inter alia: "(2) proposals relative to imposition of quotas either on an across-the-board basis or on named items or commodities". Since the press release gives a separate listing to "measures directed at main- taining our favourable balance of trade in the context of our balance of payments problems", we can only assume that the hearings under (2) will be concerned wit.h the possible introduction of quotas for protective purposes. It is the Council's understanding that the rules of procedures of the Commit- tee preclude the Council from submitting evidence to the Committee directly, or from briefing a representative to appear on its behalf. It is therefore taking this opportunity of requesting the Australian Government to put the Council's views to the relevant Departments in the United States Administration. PAGENO="0537" 2323 The Council's comments will be confined to lead and zinc in view of our past experience of quota restrictions in the United States market on these commod- ities and of the moves which were made towards the end of 1967 to introduce new quota legislation. In making these representations the Australian Mining Industry Council speaks for over 140 companies engaged in prospecting, mining or mineral processing activities, including all the Australian producers of lead and zinc. Australia is one of tIie world's largest producers and exporters of lead and zinc, and the Australian lead and zinc mining and primary smelting industry has a most real interest, either directly or indirectly, in the large U.S. economy as a market for a proportion of their normal output of lead and zinc. The following table sets out the Australian production and export figures for 1963-67, in Thousands of Short Tons. From these figures the importance of the export trade to the Australian industry is readily apparent. 1963 1964 1965 1966 1967 Mine production of lead 1 447 1 413. 3 397. 8 399. 4 407. 7 Total exports of lead 2 377. 0 339. 5 338. 8 358. 7 380. 0 Mine production of zinc 1 - 354. 2 351. 1 359. 8 377. 1 412. 5 Total exports of zinc3 - 257.2 220.5 213.5 264.2 274.0 1 The mine production figures relate to metal in concentrates. 2 Lead content of concentrates, lead bullion and refined lead. 3 Zinc content of concentrates and refined zinc metal. Source: Monthly Bulletin, International Lead and Zinc Study Group, 1968, vol. VIII, Ns. 4." Converted from metric tons. In subsequent paragraphs we make the following points in regard to the use of import quotas: They would be inconsistent with the objectives of GATT. They would result in a widening of the substantial deficit in trade with the United States. They would seriously affect normal world trading and the world prices of lead and zinc. Such devices unnecessarily and harmfully distort trading in these metals. IMPORTS QUOTAS AND THE OBJECTIVES OF GATT One of the Stated objectives of GATT is to facilitate an expansion in the flow of international trade through a reduction in trade `barriers. It outlaws the use of quantitative restrictions except under carefully prescribed `conditions. While tariffs are recognized as the normal method of `protecting a domestic industry, import quotas have been accepted in some quarters `as a permissible device to afford temporary protection in an emergency situation. T'he other main excep- tion, which is subject to the concurrence o'f the `International Monetary Fund, is the use of temporary i'mport quotas as part of a complex of measures designed to redress a critical balance of payments situation. Under no circumstances could we envisage the International Monetary Fund agreeing to the imposition of import quotas' on a selective and restricted list of commodities on balance of payments grounds., It is known that some new lead/zinc fields are being brought into production in the United States, but there can be no justification under the GATT for the use of import quotas to bolster increased production which a priori could not otherwise be undertaken on an economic basis. Moreover, it is difficult to envis- age that investment decisions associated with these ventures would be taken on the basis that import quotas would be imposed. In the light of these considerations and, the welcome initiative which the United States has taken in sponsoring and progressing the Kennedy Round of trade negotiations, it is hoped that the United States would not take a step backwards by imposing quota restrictions. AUSTRALIA'S DEFICIT IN TRADE WITH THE UNITED STATES Australia has over the years been buying substantially more from the United States than the U.S. buys from Australia. In fact, Australia is currently buying 2~% of all her imports from the U.S. and selling only 12% of her exports to the PAGENO="0538" 2324 U.S. Our poor selling performance in the United States is due in large part to the high wool tariff, severe quota restrictions on dairy products and the uncertainty surrounding access for meat due to the threat of quarantine and other restrictions. In absolute terms the deficit against Australia in its trade with the U.S. has increased over recent years, as the following table shows: [In thousands of Australian dollars[ 1963 1964 1965 1966 1967 Australian imports from United States___ Australian expDrts to United States 473. 182 284, 880 647, 970 255. 678 700, P16 290, 768 733, 767 366, 682 803, 159 370, 201 Australian deficit 188, 302 392, 292 409, 578 367, 085 432, 958 Source: Commonwealth Bureau of Cens us and Statistics. The dramatic increase in our adverse balance of trade with the United States in recent years is due in the main to stepped up defence procurement since Aus- tralia's involvement with the U.S. in Vietnam. The effect on our bilateral balance of payments has not been so marked due to a substantial increase in capital inflow. However, this is now tending to taper off following the measures which the United States has found it necessary to take in defence of her overall balance of payments position. Australia subscribes to the multilateral approach to international trade and payments and appreciates that any attempt to achieve a bilateral balance with each trading partner would in itself inhibit trade expansion. This Council also realizes that Australia can expect to run an adverse balance of trade with the United States for many years to come, given the current access to the United States' market. However, it would be difficult for the Australian mining industry to accept a situation in which the adverse balance was artificially increased by unilateral action which reduced its access to a major market for lead and zinc. EFFECT ON THE WORLD LEAD AND ZINC SITUATION The United States has historically relied upon overseas suppliers for a sub- stantial proportion of its lead and zinc requirements. In recent years, some 30% of United States' consumption of lead and 40% of zinc have been supplied from overseas sources. Any administrative measures which diverted some of this tonnage away from the United States could be expected to have an immediate and dispropor- tionate effect on prices outside the U.S. and lead to a chaotic marketing situa- tion, which would have wide repercussions in major producing countries such as Australia, Mexico and Peru. It could also lead to retaliatory quotas in other markets on these or other commodities. Although the objective of any restrictive measures would be presumably to isolate the United States market and sell the total domestic tonnage, past ex- perience under a quota regime has demonstrated that it is impossible to insulate the U.S. market in this way. QUOTA RESTRICTIONS DISTORT TRADE PATTERNS Apart from the effect of artificial barriers to trade on the overall world supply/ demand situation and on the level and stability of world prices, quota restric- tions inevitably lead to a distortion in the pattern of trade with the country applying the restrictions. The u~e of country quotas related to an historical base period tends to "freeze" an existing Supply pattern irrespective of changes in competitive ability. More- over, the selection of a particular base period for the administration of the quota regime can in itself operate to the detriment of certain suppliers. Under a free market system, there is no year, or period of years, which can be regarded as "normal". In the absence of country quotas, but w-ith a restricted quota access to the market. some suppliers can be squeezed out altogether for non-commercial rea- sons. In other cases. importers will find no incentive to "take a punt" and try a new source of supply. PAGENO="0539" 2325 Under the previous quota arrangements Australian zinc suffered severely. Australian zinc was not given a quota of its own, with the result that U.S. im- ports of Australian zinc were unpredictably and drastically curtailed. The United States Tariff Commission summed up the position very succinctly in its report to Congress in May 1962 (Page 48) by stating "that the quotas were discriminatory in their effects, favouring some concerns while creating unusual difficulties for others and that they seriously interfered with normal trade re- lations". Not only do quotas ~fl themselves lead to discrimination between suppliers, but modifications to the quota regime can place the more distant suppliers in a dis- advantageous position. This was the experience of Australian exporters under the previous quota arrangements. CONCLUSION The Australian Mining Industry Council has decided to put these views for- ward at this time because of its concern at the wide ranging nature of the House Ways and Means Committee hearings. The `Council is completely opposed to the use of quota restrictions in world trade in lead and zinc. Its opposition to a quota control `system is based on its belief that a free flow of trade in these com- modities will maximise consumption and increase the welfare of the industry in all producing and consuming countries. Furthermore, the Council speaks in the light of `the practical experience which member companies have had of the earlier United States quota system. CANBERRA, June 14, 1968. COPPER & BRASS FABRICATORS COUNCIL, INC., New York, N.Y., June 19, 1968. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR Mn. MILLs: I am sending you herewith a statement on behalf of the domestic brass mill industry in connection with the public hearings which your Committee `is now holding on the general subject of the balance of trade between the United States and foreign nations. Additional copies are being sent to the Committee for distribution as indicated in the announcement of the hearings. Because of the short time remaining for action, we urge the immediate con- sideration of H. Con. Res. 447 by your Committee, to prevent the International Antidumping Code, which is in conflict with the Antidumping Act of 1921 and which was agreed to on behalf of the United State's without the authority of the Congress, from going into effect on `~July 1, 1968 without Congressional approval. Yours sincerely, P. E. VBLTFORT, Managing Director. STATEMENT OF T. E. VELTFORT, MANAGING DIRECTOR, COPPER & BRASS FABRICATORS COTJNCIL, INC. Purpose of staternent.-The statement is being made on behalf of the domestic brass mill industry, to review its experience under the United States Foreign Trade Policy since 1934, and to offer its recommendations. The domestic brass mill industry-The brass mill industry is described and its importance in `the national economy and national defense emphasized. The brass mill industry is ewperienced in' United States foreign trade policy.- The industry has been directly involved in important aspects of this policy since enactment of the Reciprocal Trade Agreenmnts Act in 1934. TVhy tariffs on brass mill products should not have been reduced-A comparison of pertinent facts applicable to foreign trade invo'lving brass mill products is presented, which emphasizes the inequity of the tariff reductions in the Kennedy Round. Changes are needed in our foreign trade policy-The statistics used by the Government in support of its trade policy are incomplete and when correct data are employed, the unqualified support for the policy fails and the need for changes is indicated. PAGENO="0540" 2326 Definitive action against dumping is imperative.-The ineffective enforcement of the Antidumping Act of 1921 must be remedied by appropriate amendment. In the meantime, immediate action should be taken on El. Con. Res. 447 (S. Con. Res. 38) to prevent the International Antidumping Code, which is in conflict with the Antidumping Act of 1921 and which was agreed to on behalf of the United States without the authority of the Congress, from going into effect on July 1, 1968 without congressional approval. Recornmendations.-In view of its experience with the United States Foreign Trade Policy, the industry offers seven recommendations with the objective of effecting changes in that policy which the industry believes are necessary. PURPOSE OF STATEMENT This statement is being made to the Committee on Ways and Means on behalf of the domestic brass mill industry, in response to the announcement on May 19 by its Chairman, that public hearings would be held beginning on June 4, 1968 on the general subject of the balance of trade between the United States and foreign nations. Our statement will address itself to a number of the sub- jects which the hearings are to encompass, but not necessarily in the order or detail as described in the announcement. The industry is gratified with the proposal of the Committee on Ways and Means to make such an exhaustive study of the foreign trade policy of the United States. We have for a long time firmly believed and recommended that there be a complete and objective review of this policy by the Congress, to establish what the actual benefits, and also the inequities, of this policy have been and to what extent the results, past and projected, warrant its continuance or modification. Your hearings should provide the opportunity for such a realistic appraisal. THE DOMESTIC BRASS MILL INDUSTRY The brass mill industry uses copper in its unwrought form together with quantities of zinc, tin, nickel and other metals, to roll, draw, extrude and other- wise form such basic products as plates, sheets, rod, wire, tube and pipe of copper and its various alloys. It is distinct in its operations and markets from the copper mining and refining segments of the copper industry as a whole, as well as from the electrical wire and cable, foundry and other particular components of the overall industry. Its problems involving foreign trade are apt to be basically different from those of these other segments. The products of the brass mills are quite essential in the national economy, constituting the raw materials in such vital industries as building, automotive, air conditioning, and electrical and mechanical parts, as well as being indispen- sible in the national defense. From three percent to thirty percent of its produc- tive capacity for various of its products have been set aside for defense orders. In 1967 about fifteen percent of its shipments, or 370 million pounds, were for military purposes. During World War II, essentially all of its production was preempted for military and related purposes. To serve effectively in this case it had to increase its production 200 percent over the prewar volume. Again, during the Korean episode, up to a quarter of its output was required for military pur- poses and production had to `be increased fifty percent. The present production capacity of the domestic brass mill's is quite ample for both commercial and defense requirements. The Department of Commerce re- ports that the total shipments of the industry in 1967 w-ere estimated at 2.60 billion pounds, with a value estimated at 82.2 billion, reduced because of the slowdown in the economy and the copper strike that year from 3.33 billion pounds valued at $2.6 billion in 1966. The mills employ about 40,000 in plants located in 20 states. Through substan- tial investments in new plants and equipment and the application of the most modern methods, the industry has steadily increased in efficiency, average out- put per manhour having increased from 30 pounds to 45 pounds in the last decade. Its workers are highly trained and well paid. The average hourly earnings early in 1967 were $3.29 not including 78 cents per hour in supplementary compensation (fringe benefits). A list of the brass mills that are members of the Copper & Brass Fabricators Council, Inc., is attached (Exhibit A). These companies account for 85 percent of domestic brass mill production. More than two-thirds of them could be classified as small business, their number of employees being 500 or less. PAGENO="0541" 2327 The domestic brass mills stand in the same position in their field as steel and aluminum mills stand in theirs. The products are in direct competition with sim- ilar products of these industries as well as with plastics. The industry is under constant challenge in its production and marketing procedures to meet this com- petition. We can have no healthy economy in the United States without full pro- duction in the brass mill industry. Besides its severe domestic competition, the industry has had to meet aggres- sive competition from abroad. To be marketable, brass mill products must con- form with widely accepted standards of physical and chemical characteristics and performance. They must, therefore, be essentially identical whatever the source. There are, of course, no variatiOns of style and appearance on which a competitive choice may be based. Price is a dominant factor. Under these circum- stances, the much lower labor and related costs abroad give imports a substan- tial price advantage. This advantage is enhanced by the availability in this coun- try of large markets for certain widely used brass mill products, established as a result of comprehensive research and promotion by the domestic industry. THE BRASS MILL INDUSTRY IS EXPERIENCED IN U.S. FOREIGN TRADE POLICY The brass mill industry has been directly involved in important aspects of our foreign trade policy since the enactment of the Reciprocal Trade Agreements Act in 1934. It has repeatedly informed the appropriate government agencies of the adverse effects of certain features of this policy on the domestic industry, begin- ning with the British Trade Agreement in 1938. In the course of the multilateral agreements made under the General Agreement on Tariffs and Trade (GATT), the Council has continued to amplify and update its statements. When the Presi- dent announced the commodities which would be subject to reduction in tariffs in the negotiations in Geneva under the Trade Expansion Act of 1962, brass mill products were included. On that occasion the industry once again pointed out to the government agencies concerned how seriously imports were jeopardizing the integrity of the brass mill industry and that no further reduction in duties was warranted. WHY TARWFS ON BRASS MILL PRODUCTS SHOULD NOT HAVE BERN REDUCED In connection with the Kennedy Round proposals, our statements to the Tariff Commission (January 30 and March 11, 1964) clearly set forth, with sup- porting data, the adverse effects which the growing imports were having on the brass mill `industry. They emphasized the threat to the industry from these imports if tariffs were further reduced. Similar statements were made `to the Trade Information Committee (February 20 and March 11, 1964). In accordance with the request of the Office of the Special Representative for Trade Negotia- tions, a special technical representative for the brass mill industry was appointed and he was prepared to furnish such further `information as might be required during the negotiations. The industry, therefore, cannot be held remiss in keeping theSe agencies adequately informed. How unfair the full `reduction in the tariffs on brass mill products actually was i's clearly indicated in the following exhibits which are attached: EXHIBIT B COMPARATIVE WAGES IN MANUFACTURING INDUSTRIES IN THE U.S. AND IN PRINCIPAL FOREIGN COUNTRIES SHIPPING BRASS MILL PRODUCTS TO THE UNITED STATES This shows that, whereas the United States ha's had the least percentage in- crease in wage rates between 1955 and 1967, its increase in cents per hour, which is the true determinant of labor costs, has been greater than that of any other country, except Sweden. The rates of all of the countries covered continue to be only a fraction of `that in the United States. EXHIBIT 0 IMPORTS AND EXPORTS OF COPPER AND BRASS MILL PRODUCTS This shows how imports have `substantially increased over the years since 1949 (the effective beginning `of the multilateral agreements), while bxports have remained at a much lower volume. PAGENO="0542" 2328 The impact of imports on the industry can be indicated succinctly as follows: In 1966 the imports totaled 248 million pounds. The shipments of the domestic industry for defense purposes, however, totaled 325 million pounds; and again in 1967, with imports totaling 202 million pounds, the estimated shipments of the industry for military purposes were of the order of 400 million pounds. If the large shipments required from the industry for military purposes because of Vietnam had not greatly exceeded the imports, these obviously would have had a disastrous effect on the domestic industry. During 1966 and 1967 imports constituted between seven and seven and a half percent of the overall domestic market for brass mill products, with much higher percentages for products in common use, such as copper and copper alloy tubes and certain types of flat products. For example, the market for thin wall brass tube for plumbers brass goods has been taken over almost completely by imports. In the case of copper and copper alloy foil which is needed in the manufacture of automotive radiators and other heat exchanger equipment, imports are now 28 percent of the domestic market. In the first four months of 1968, imports rose further and constituted about twelve percent of the overall market. With the great advantage which the exporting countries have in labor and related costs, these growing imports present the industry with a very real threat of serious injury. ExHIBIT D SOME SIGNIFICANT c0MPARIs0N5, 1960-66 This tabulation demonstrates the unfairness of the reduction of 50 percent in the import tariffs on brass mill products, as against the smaller reductions in the import tariffs in countries from which about 90 percent of our imports of brass mill products come. The labor rates in these countries are still only a fraction of those in this country. It also shows how absurdly small our exports to these countries have been in comparison to our imports, mainly because their labor and related costs are so much less than ours, not to mention their higher tariffs and other direct and indirect restrictions. Even this small volume of exports consists substantially of particular products which the mills in these countries choose not to make and products which American managed plants abroad re- quire made to American standards. The reductions which were made in the import tariffs of these countries are of no benefit whatsoever to the brass mill industry and have been made apparently as a trading point. All this information was available to the Trade Information Committee either in the form of statements submitted to it when the Kennedy Round began or from the special technical representative appointed at the request of the Office of the Special Representative for Trade Negotiations. Our special technical representa- tive, however, was at no time consulted. EXHThIT E COMPUTATION OF TARIFFS, TSUSA 612.31-COPPER BARS, SHEETS, AND STRIP IN COILS This indicates the absurd limit to which the negotiations in the Kennedy Round have been carried in order to reduce the tariffs on brass mill products to the absolute limit legally permissible by the Trade Expansion Act of 1932. the exam- ple being the reductions in tariffs as calculated for copper bars, sheets, and strip in coils (TSLTSA 012.31). The tabulation shows, in Column 4, how the tariffs in cents per pound would ordinarily have been lowered by a ten percent reduction each year, by rounding out to one decimal point. But, by taking advantage of Section 254 of the Trade Expansion Act which gives rounding authority when such action is desirable to simplify the computation, a relatively involved com- putation made it possible to reduce the tariffs, as indicated in Column 6, further then contemplated in the staged 50 percent reduction. This excess reduction in the tariffs of one or two tenths of a cent a pound in a duty already too low to ad- versely affect imports, and lower than the duties in competing nations, certainly comes close to being ridiculous as well as under the circumstances, extremely unfair. PAGENO="0543" 2329 The unfortunate treatment given to brass mill products in the Kennedy Round, indicates an absence of any serious consideration of the foreign trade impact on the `brass mill industry. It is hard to believe that if consultation had been had by our negotiators with experienced men in our industry, or with our special techni- cal representative, f'amilar with the practical factors involved, such an inequita- ble treatment of our industry would evenhave been considered. Apparently the overriding consideration of our negotiators was to accumulate the maximum dollar total on which tariffs were reduced, without much serious attention to individual industries like ours, even though they had `already been adversely affected `by imports. CHANGES ARE NEEDED IN OUR FOREIGN TRADE POLICY Our own experience and what we have learned from the experience of other industries under our foreign trade policy7 indicate that a reappraisal of what that policy has `accomplished is very much in order. Without any intent to argue the importance of foreign trade as such, there seems good reason to question the inordinate emphasis on expanding our exports without much thought being given to the possible cost to domestic industry from the accompanying increase in un- needed imports. Apparently the unqualified supposition is that without a substan- tia;l increase in our exports, our `whole economy will go down the drain. Basic in this concept `which has governed our foreign trade policy for the last 30 years, are a number of widely publicized `but inherently questionable allegations. There is first the insinuation that those' w'ho object to any aspect of our foreign trade policy are opposed to foreign trade as such. This, of course, is absurd. No sensible businessman opposes the indefinite expansion of our foreign trade by any fair means which will not impose an unwarranted burden on domestic industry. He h'as no desire wh'atsoever to `limit the gains that accrue to financial concerns, exporters and importers in the course of expanding foreign trade. His objections are related only and specifically to the implacable attitude of those particularly concerned with expanded exports against limiting unneeded im- ports in any way, and their failure to pay `adequate attention to the importance of preserving our domestic in'dustry while seeking the expansion of our foreign trade. A study of the ratio of our foreign trade to our gross national product back to 1921, raises some serious questions as to some broad claims of progress which have been made to support our foreign trade policy. Exhibits F and G, in tab- ular and graph form respectively, present the essential data. These exhibits show merchandise imports and exports and their total (on an enlarged scale in Exhibit G to show fluctuations), the gross national product, ratios of nler- chandise imports and exports and their total to the gross national product, and the average percent duty calculated on the value of merchandise imports. No adjustment has been made in the publis'hed data to exclude exports under foreign aid and grants paid for directly or indirectly by our taxpayers, or to add the cost of freight anti insurance to our imports to disclose their cost landed in the United States; in other words, no `adjustments have been made to indicate our true commercial competitive position in our foreign trade. Even so, this study indicates that our foreign trade `has never been so great compared with our gross national product (graphically indicated in Exhibit G), that reasonable adjustments resulting from fair treatment of the import prob- lems of domestic industry would critically, affect the integrity of our economy. Since 1948, when our foreign tr~ade policy', went into effect (the occurrence of World War II prevents any inferences previous to that time), our foreign trade has varied irregularly between 6.6 percent and 7.8 percent in relation to our gross national product, with no indication `of any consistent increase related to the passing of time. In our percentage of free world trade we have also slipped, as shown on Exhibit H. How much more foreign trade now really means to our trading partners, on the other hand, is indicated by the percentages of their foreign trade as related to their gross national products in 196G: Canada 35 per- cent, EEC 33 percent, EFTA 35 percent, and Japan 20 percent. It is no wonder that they bargain so astutely for concessions. It is interesting to note that in the 20's when this `country as well as a `sub- stanti'al part of the `world enjoyed general prosperity, our foreign trade as re- PAGENO="0544" 2330 lated to our gross national product was greater (from 9.2 percent to 9.9 percent) than it has been under our present foreign trade policy, notwithstanding our generous foreign aid following World War II in the form of exports paid for by the tax~ayers. During the 20's, moreover, we enjoyed a trade surplus even though our tariffs were considerably higher than in the 50's and 60's. The data also cast doubt on the claim that the Smoot-Hawley tariffs during the early 30's caused a worldwide immobilization of trade and the great depression. In view of the comparative consistency of the relatively small ratio of our foreign trade to our gross national product, it seems a good deal more reasonable to con- clude that what happened to our foreign trade than was due primarily not to our high tariffs at the time but to a worldwide collapse due to financial `and credit overexpansion. As a matter of fact, it is quite likely, at least for some of our industries, *that the high tariffs prevented disaster from the impact of dumped `imports during those criti~al years. Unfortunately certain government statistics as presented to support our foreign trade policy, are of doubtful validity. The purported subStantial surpluses in our international trade since our trade agreements have been in effect, have been offered as an important reason for the extended development of our trade agreements program, including the further reduction of our tariffs. These large surpluses, it has been claimed, contribute favorably and substantially to our international balance of payments. But if the statistics are correctly used, there are no large surpluses. What is really important in an evaluation of the economic results of our foreign trade are statistics which show whether our foreign trade has been favorable on a business-like basis and whether it shows a tenable competitive position for us. Here we should know to what extent the landed cost of our imports has balanced the payment which our industries received for their ex- ports. But `the cost of imports as given in the commonly published government statistics, probably because of the simplicity of determination, is not the landed cost on our shores but the value in the principal markets abroad. Thus it does not include the cost of freight and insurance and whatever additional cost may be involved in bringing the imports from the markets in which the prices have been derived, to our ports of entry. Further overstatement of our merchandise trade surplus results from the fact that our export figures, as given in the ordinary public press releases, include exports resulting from government grants. These, of course, are financed by the taxpayers. They are not correctly included in our commercial transactions. The significance of this should be clear if we realize that under our present system of publicizing our export volume, we could readily increase our ostensible mer- chandise trade surplus by raising another billion dollars or two in taxes and using the proceeds to buy goods to be exported to our friends abroad as gifts. Exhibit I adjusts the commonly publicized United States exports to allow for those financed under the Foreign Assistance Act ar~d Public Law 480 and adjusts imports to a C.I.F. basis. This tabulation, based on figures published by the De- partment of Commerce for the years 1955 to 1967, inclusive, shows that the balance of our commercial trade properly adjusted gives surpluses much lower than those commonly reported and in fact indicates a deficit in the last two years. This table indicates that we do not have the competitive superiority which is implied in the large surpluses commonly publicized and that our foreign com- mercial trade as such does not furnish the purported large surpluses to help in our international balance of payments. Furthermore, the contribution of our foreign trade to our gross national product, which consists merely of the balance between our exports and imports, even as reported over the same period has amounted to only from one-half of one percent to one and three-fourths percent of the gross national product. If the balance of merchandise trade is adjusted to a commercial basis, this surplus is reduced by about three-fourths, and its contribution to our gross national product becomes insignificant and in the last two years actually negative. There are further aspects of our foreign trade which warrant consideration. Exhibit G shows merchandise imports and exports and total trade on a large scale. It indicates the relatively steady growth in imports, as against the irregular growth of exports due certainly in part to our foreign aid and grants. The de- clining trend in the apparent surplus of imports over exports in the last decade PAGENO="0545" 2331 also becomes quite evident. During the last ten years imports have increased by 106 percent, exports by only 51 percent. Itis also worth noting that during the last twenty years imports have increased steadily even though the proportion of dutiable goods during the second half of this period increased to sixty percent from the forty percent in the first half. This accounts for the increase in average duty on the value of imports in the second ten years period to about seven percent, from the five and three-quarters percent in the earlier period, in spite of tariff reductions under the trade agreements. The cost advantage which our foreign competitors have had was in many cases obviously sufficient to offset the rela- tively high duties on the goods which they sent us. The reduction in duties under the trade agreements during the period merely increased their advantage, an ominous portent of what we can expect as the Kennedy Round reductions become effective. Even more important, however, is the composition of our exports and imports since our trade agreements under GATT became effective in 1948. Since that time our exports of crude materials and foodstuffs have about doubled and our exports of semi- and finished manufactures, of which our much sought after sophisticated equipment has been an important component, have increased about two and oneS half times. In the meanwhile, however, our imports of crude materials and food- stuffs, which involve relatively little labor, have also doubled, but our imports of semi- and finished manufactures which do involve considerable labor, have increased sevenfold. In other words, the big advantage of lower labor and related costs in many industries abroad has clearly been exploited by foreign countries under the reductions in our tariffs granted in the trade agreements. These facts are not offered to disparage foreign trade. International trade is necessary and inevitable as exchange of goods takes place between countries which produce goods that others need but do not themselves produce or do not produce as economically. As production and resultant affluence increase in the various countries, this international exchange of goods naturally tends to in- crease. If there were free exchange of labor, money, and other economic factors among the nations, free international trade would be as natural as it has become among the states of this country. But that is now far from being the situation, and adjustments must be made in our international trade economically and realistically to reflect this fact. If the nations engaged in international trade do not accept this practical necessity and make these adjustments with a reason- able degree of understanding and willingness, then indeed serious strains will develop and "retaliation" will become the name of the game. As the President affirms in his message to the Congress on i\Iay 28 on the proposed Trade Agree- ments Act of 1968, "Reciprocity and fair play are the essential standards for international trade." It is about time for us really to insist on these standards. The essential point of all this is that, on the whole, the beneficial impact of our foreign trade on our overall economy and the success of our foreign trade policy have not been so overwhelming as to warrant the expansion of our exports to the point where the accompanying increase in unneeded imports endanger Important segments of our economy. Stubborn adherence to some of the faulty principles of our foreign trade policy have resulted in inequities which have hurt, in some cases badly hurt, a number of domestic industries such as the brass mill industry, not only by a decline in business, but just as importantly by restricting vital growth. it has led to indifference and inertia on the part of government agencies in recognizing the serious inroads of imports even in vital domestic industries, and has resulted in unduly prolonged studies and investigations without definite results. The general assumption appears to be that any industry seeking relief from imports somehow has an ulterior motive not in the public interest. DEFINITIVE ACTION AGAINST DUMPING IS IMPERATIVE The Antidumping Act of 1921 recognized dumping for what it really is; a discriminatory and therefore unfair trade practice involving sales by foreign vendors to buyers in this country at prices lower than they charge at home. This interpretation of dumping is quite consistent with the structure of our domestic laws and regulations against discriminatory pricing as being repugnant to fair competition. But an idea that claims of `dumping might and would `be used as a non-tariff barrier against imports has gradually developed. It has in recent years apparently become one of the principal aspects of the dumping problem as our latter-day foreign policy steadily edged toward international free trade. 9~-l59----6S-pt. 5-35 PAGENO="0546" 2332 Over the years the enforcement of the Act has become quite ineffective and the efforts to establish a finding of dumping under regulations implementing the Act, a frustrating and futile experience. The available record of dumping cases (1934-196T) illustrates this discouraging situation: Total cases disposed of 496 Imports negligible or ceased 117 Complaint withdrawn 6 No sales at less than fair value 295 No injury Total Finding of dumping 19 Either a law against dumping is not needed because this unfair practice is really rare (which many injured industries will certainly dispute!) or the law as administered has been ineffective. The brass mill industry has bad two painful instances of how ineffective the antidumping procedures can be, even when the Treasury Department has es- tablished presumptive evidence of the price discrimthation involved. In one case, for example, copper tube was being sold in this country by a Canadian company at a special discount not available to its Canadian customers. After several years of investigation based on extensive evidence furnished by the domestic industry, during which time, of course, the dumping continued, the Treasury Department confirmed that dumping had occurred. It dismissed the complaint, however, on the company's assurance that dumping had ceased and relied on its promise that it would not be resumed. There is evidence that dumping ha~ since recurred, although somewhat more subtlety managed. But no further action appears practicable under present interpretation of the law and regulations. A second case involved sheet copper from Yugoslavia, sold in this country at a price offered regularly at ten percent below the competition. Its result was a disastrous price demoralization in the concentrated markets in this country where the Yugoslavian product was sold. As far as the domestic mills were con- cerned, the prices which they had to lower drastically in a vain attempt to meet this local competition, however, had to be generally offered in a far wider market to avoid alleged price discrimination under our domestic laws. The Treasury again made a preliminary finding of dumping, but ultimately dismissed the case because it could not satisfy itself as to the price in Yugoslavia and had to de- pend on prices in certain free countries abroad. Also, it reasoned that the quantity involved was relatively small; related to the national market this was true, but the Treasury disregarded the chain effect of the dumping on the entire. domestic market. It was because of experiences of this kind that the brass mill industry strong- ly supported the efforts of Senator Hartke and Congressman Herlong and more than 100 fellow senators and congressmen in bills successively introduced in thq Congress since 1965, to make government action against dumping reasonably ef- fective without opening the door to its possible misuse as a non-tariff barrier. When in 1964 the Treasury did issue new regulations in apparent recognition of the ineffectiveness of the antidumping procedure, these fell considerably short of requirements. The conclusion still remains that remedial legislation is needed. We must, therefore, repeat our urgent request that S. 1726 and the companion bills in the House be passed and so make the Antidumping Act what it should be, an effective weapon against an exceedingly unfair trade practice. Despite the fact that the Trade Expansion Act of 1962 gave our Kennedy Round negotiation team no authority to deal with dumping, and notwithstanding the adoption in 1966 of S. Con. Res. 100, stating it was the sense of the Congress that no agreement or other arrangements applicable under the laws of the United States should be entered into under the Trade Expansion Act of 1902 except in ac- cordance with prior legislative authority delegated by the Congress, the so-called International Antidumping Code was agreed to in the Kennedy Round, with an effective date of July 1, 1968. In view of a general complaint that the Inter- PAGENO="0547" 2333 national Antidumping Code was in serious conflict with the Antidumping Act of 1921 and would tend even further to vitiate the effectiveness of our anti- dumping procedure, S. Con. Res. 38 was introduced, stating it to be the sense of Congress that the provisions of the International Antidumping Code are inconsistent with, and in conflict with, the provisions of the Antidumping Act of 1921; that the President should send the International Antidumping Code to the Senate for its advice and consent; and that the provisions of the Interna- tional Antidumping Code should become effective in the United States only at the time specified in legislation enacted by the Congress to implement the Code. An identical resolution, H. Con. Res. 447, has been referred to your Committee. In a report requested by the Senate Finance Committee in connection with S. Con. Res. 38, the Tariff Commission onMarch 13, 1968 gave as its three to two majority opinion a confirmation of the fact that the International Aiitidumping Code was inconsistent with, and in conflict with, the Antidumping Act of 1921 and could not be put into effect without appropriate legislation. Logically the Commission would find it impossible to enforce the Code if it is allowed to go into effect on July 1, 1968. Even the Tariff Commission minority, while disagree- ing with the overall approach of the majority and recommending a case by case determination, nevertheless agreed that where inconsistencies between the Code and the Act occurred under this circumstances, the provisions of the Act should prevail. Obviously without Congressional action, which the minority fails to mention, its recommendation would be an invitation to further chaos. In the meanwhile the Treasury published proposed extensive amendments to its Antidumping Regulations to conform them to the International Antidumping Code, and invited the written opinions of those interested. No report has been made on the opinions received, but the Treasury has now issued amended Anti- dumping Regulations (T. D. 66-148) which after purportedly giving due con- sideration to these opinions, put the conforming regulations in effect on July 1, 1968. This date is only a short time ahead. Immediate Congressional action is imperative to prevent the International Antidumping Code and the Treasury's new conforming regulations from going into effect as planned. Without such action, the preemption by the Kennedy Round negotiators of the legislative power to amend the Antidumping Act of 1921 without Congressional delegation, would go unchallenged. The resultant legal complications as disputes over the control of our antidumping procedure arose, together with the impracticability of the required simultaneous consideration Of the complaints by both the Treasury and the Tariff Commission and the far more restricted interpretation of injury, domestic industry, the market and other pertinent factors, would reduce even further the already slim chance of effective remedial action in bonafide dumping cases. RECOMMENDATIONS The experience of the brass mill industry with our foreign trade policy under the circumstances and conditions related above, leads to its firm conviction that a number of changes in this policy are imperative. Accordingly, we urge that the following recommendations be given favorable consideration by the Committee. 1. Some Congressional directive is in order, requiring that our foreign mer- chandise trade statistics be presented in such a way as to show accurately what we have actually received for our commercial exports and what we have paid for our imports landed in this country,, on a businesslike basis. If the statis- tical data issued by government are adjusted to reflect good commercial practice, the alleged large surpluses in our merchandise foreign trade dramatically fade away; a far more rOallstic attitude toward our foreign trade policy would ensue than is encouraged by the government's foreign trade statistics as they are now gene~aliy publicized. 2. All tariff and non-tariff restrictions of all the countries which are members of GATT should be catalogued `and made available for review and adjustment on a fair equivalent basis. A generally accepted international standard classification of commodities would appear imperative to permit this to be done fairly and effectively. 3. Whether by direct amendment of the Trade Expansion Act of 1962 or by appropriate provisions in the proposed Trade Expansion Act of 1968, it should be made more readily possible for industries suffering `actual injury from imports, or `threatened with such injury, to obtain prompt remedial action by the govern- PAGENO="0548" 2334 ment. The availability of adjustment assistance offered in the Trade Expansion Act of 1968 to companies and workers injured by imports is, of course, important and desirable. It does not apply, however, to situations where the integrity of whole industries or substantial parts thereof is threatened, and where these in- dustries are too important in the domestic economy to be liquidated by transfer of their management and workers to other fields. To provide for such situations, it is recommended that the Trade Expansion Act of 1962 be amended in the following respects: (A) Sec. 201(b) (2) and Sec. 351(b)(1) should be augmented by adding: "provided that a specific rate of duty existing on July 1, 1934 may be converted to its ad valorem equivalent based on the value of imports of the article con- cerned during the calendar year 1934, and the equivalent ad valorein rate of duty thus determined may be increased by not more than 50 percent." This is quite essential to provide reasonable relief if this Section needs to be invoked on behalf of an industry like the brass mill industry whose products are largely on a specific duty basis. Taking as an example copper sheet and strip, in 1934 the average price of imports was 33 cents a pound and the duty 6.5 cents a pound. The ad valorern equivalent would be 19.7 percent. In 1967, because of inflation as well as reduction in duty, the average price of imports was 60 cents a pound and the duty 2.95 cents a pound, or an ad valorem equivalent of 4.9 percent. If the maximum 50 percent permissible increase in tariff provided by Sec. 201(b) (2) and Sec. 351(b) (1) as presently worded had to be invoked, the allowable increase in the tariff would be 3.25 cents, and the revised tariff would be 9.75 cents, which would be only 16.2 percent on an ad valorem basis, or less than in 1934. How discriminatory this would be if this same measure of relief were granted a product on an ad valorem basis to begin with is indicated by the fact that a 50 percent increase for that product would raise the tariff to 29.55 percent as against 19.7 percent in 1934, whereas for the brass mill product in this example, the ad valorem equivalent duty would actually be lowered from the same 19.7 percent in 1934 to 16.2 percent! (B) In Sec. 301(b) (1) the words "as a result in major part of concessions granted under trade agreements" should be deleted for the same reason that it is in Sec. 301(c) (1) and Sec. 301 (c) (2) in the proposed Trade Expansion Act of 1968. (C) To Sec. 301(b) (2) should be added, as one of the economic factors to be taken into consideration by the Tariff Commission as relevant to injury or threatened injury to a domestic industry from increased imports, the wordS: "decline in normal or prospective growth." 4. For certain industries, as appears to be the accepted fact for some of our agricultural products, quotas may be the only practical approach to prevent injury from unneeded imports. Provision should therefore be made for such relief, with certain criteria stated as presumptive evidence of actual or potential injury. Such criteria might include the percentage that imports have taken of the domestic market which the industry has the capacity to serve, and a ceiling for imports which if exceeded would be economically untenable. Such criteria might be incorporated in Sec. 352 (Orderly Marketing Agreements) by appro- priate amendment, or by separate legislation. 5. In any further trade negotiations carried on under the Trade Expansion Act, appropriately selected representatives from industry should be consulted while the negotiations are in progress. They should preferably participate in some manner in these negotiations. Industry representatives cannot be of any practical service if they are not kept informed of the give and take during the negotiations. Our attitude in this respect should be as realistic and business-like as that of our foreign trading partners. 6. Prompt favorable action is needed in the amendment of the Antidumping Act of 1921, such as is proposed in H.R. 408 (Mr. Conte) and a number of iden- tical bills which have been introduced in the House (similar to S. 1726 by Mr. Hartke and co-sponsors in the Senate). Such action is quite necessary to provide effective relief from the unfair trade practice of dumping, within the spirit and intent of the Antiduinping Act of 1921. 7. Finally and most important, immediate action needs to be taken on H. Con. Res. 447 (companion resolution to S. Con. Res. 38) which states in effect that it is the sense of the Congress that the International Antidumping Code be sub- PAGENO="0549" 2335 mitted to Senate for advice and consent and that its provisions become effective in the United States only at the time specified by appropriate legislation. As July 1, 1968 is the date set for the International Antidumping Code to go into effect, there is only a very short time left to avoid the confusion bordering on chaos which would result from the conflict between the Antidumping Act of 1921 and the International Antidumping Code. MEMBER COMPANIES, CoPPER & BRASS FABRICATORS COuNCIL, INC. Anaconda American Brass Company, 414 Meadow Street, Waterbury, Connecticut 06702. Bohn Aluminum & Brass Company, 1400 Lafayette Building, Detroit, Michigan 48226. Bridgeport Brass Company, 30 Grant Street, Bridgeport, Connecticut 06602. Bridgeport Rolling Mills Company, Bridgeport, Connecticut 06602. The Bristol Brass Corporation, 580 Broad Street, Bristol, Connecticut 06010. Cerro Copper & Brass Company, Division of Cerro Corporation, 16600 St. Clair Avenue, Cleveland, Ohio 44110. Chase Brass & Copper Co., Incorporated, Tower East Building, 20600 Chagrin Boulevard, Cleveland, Ohio 44122. Chicago Extruded Metals Company, 1821 South 54th Street, Cicero, Illinois 60650. Ilussey Metals Division, Copper Range Company, Leetsdale, Pennsylvania 15056. The Miller Company, 99 Center Street, Meriden, Connecticut 0~450. Murdock Manufacturing Co., Inc., Scotch Plains, `New Jersey 07076. The National Copper & Smelting Co., 6075 Cochran Road, Solon, Ohio 44139. New England Brass Company, Park Street, Taunton, Massachusetts 02780. The New Haven Copper Company, Seymour, Connecticut 06483. Olin Mathieson Chemical Corporation, Brass Division, East Alton, Illinois 62024. Penn Brass & Copper Co., 3837 West 20th Street, Erie, Pennsylvania 16505. Phelps Dodge Copper Products Corporation, 300 Park Avenue, New York New York 10022. Precision Tube Company, Inc., Norfh Wales, Pennsylvania 19454. Reading Tube Co., 350 Fifth Avenue, Empire State Building, New York, New York 10001. Revere Copper and Brass Incorporated, 230 Park Avenue, New York, New York 10017. Scovill Manufacturing Company, 99 Mill Street, Waterbury, Connecticut 06720. Triangle Conduit & Cable Co., Inc., New Brunswick, New Jersey 08903. Tubing Division, Robintech Incorporated, Mount Kisco, New York 10549. Volco Brass & Copper Company Kenllwbrth, New Jersey 07033. Waterbury Rolling Mills, Inc., East Aurora Street, Waterbury, Connecticut 06720. ` PAGENO="0550" EXHIBIT B COMPARATIVE WAGES IN MANUFACTURING INDUSTRIES IN THE UNITED STATES AND IN PRINCIPAL FOREIGN COUNTRIES SHIPPING BRASS MILL PRODUCTS TO THE UNITED STATES 001 Country Sex* 1955 1956 1957 1958 1959 1960 lars per hour Percent increase - 1955-67 1961 1962 1963 1964 1965 1966 1967 Perce United 1955 nt of States 1967 Increase cents per hour 1955-67 United States ME 1. 86 1.95 2. 05 2. 11 2. 19 2. 26 2. 32 2. 39 2. 46 2. 53 2. 61 2. 71 2. 83 52 100 100 97 Canada ME 1. 45 1. 58 1. 63 1. 72 1. 80 1. 79 1. 75 1. 74 1. 81 1. 88 1. 97 2. 08 2. 22 53 78 78 77 United Kingdom Ml .66 .71 .76 .78 .82 .90 .95 .99 1.03 1.11 1.23 1.29 21.16 76 36 41 50 European Common Market: WestGermany ME .41 .45 .50 .53 .57 .63 .73 .81 .87 .94 1.03 1.11 1.15 180 22 41 74 France MF' .41 .43 .39 .38 .40 .43 .46 .50 .54 .58 .61 .64 .69 68 22 24 28 Netherlands MEl .32 .35 .39 .39 .40 .44 .48 .53 .58 .66 .72 .81 .87 172 17 31 55 Belgium M . 51 . 54 . 57 . 59 . 61 .63 . 65 .69 . 74 . 83 . 90 . 97 (10) 3 90 27 4 36 3 46 .~ Italy ME .30 .32 .33 .35 .36 .37 .40 .46 .54 .59 .62 .64 (10) 3113 16 `24 334 ~ Sweden ME .82 .89 .95 1.01 1.05 1.11 1.20 1.31 1.40 1.54 1.69 1.85 ~1.80 120 44 64 98 c.~ Switzerland Mi .65 .67 .72 .75 .77 .81 .85 .91 .98 1.06 1.14 1.22 (10) 388 35 445 357 ~ Yugoslavia MEG (10) .09 .10 .11 .12 .15 .15 .15 .19 .24 7.20 7.27 7.30 8233 95 11 821 Japan MFO .23 .24 .26 .27 .27 .31 .34 .38 .42 .46 .50 .56 .63 174 12 22 40 *M_MaIe only; ME-Male and female. 7 The dinars per U.S. dollar were changed July 26, 1965 from 750 to 1,250; and on Jan. 1, 1966 a I Adults only. new dinar replaced the old dinar at the rate of 100 old dinars per new dinar; based on the old rate 2 The pound in terms of U.S. dollar was devalued from $2.80 to $2.40 Nov. 18, 1967; based on the of 750 dinars per U.S. dollar the 1965, 1966, and 1967 figure would be 33 cents, 46 cents, and 50 old rate of $2.80 per pound the 1967 figure would be $1.35. cents, respectively. 8 1955-66. 8 1956-67. 4 1966. ° 1956. a Excluding payments in kind and holidays and sick leave payments; this apparently amounted 10 Not availablo. to 21 cents in 1966. . . . . . Based on 200 hours worked per month. Source: International Labor Office, United Nations Monthly Bulletin of Statistics. PAGENO="0551" 2337 N- N- N- ~O ~N4 C) C') ~ ~ U) N- ~UN- U) U) N-C) ~ U) (0(0(0 C')U)U) C) U) ~C (0 N- U) (DC) C')U) C')C4 CCC) ~~C')C'-a N-N- - C,, (0 ~ . C-, ~<0(~ ~ 0 -~ ~ C-, ~ N-~ N- (DC'J ~ C)N- CO ~ - - N- N- ~-o N- : PAGENO="0552" -- co~ ~D C,- 2338 ~ C~4 - ~ ~ N. CC.-~'J C,, C,, I C,, = 0 S 0 0 C,, 0 0 2 0 0 C-, 0 0 2 C) c~ C') r- CCN.~) C- C-, Ui ~ :~ C., ~d-~ :~ ~ C,) C,) >~ PAGENO="0553" 2339 C-, C,, C-, - ~ N- - N~ N- ~ ~oO C~ ~O ~ ~ C,~ 0000 N- ~CL ~ - - C,) CC ~ E ~ -~ ~ ~ = CO ~C) CO COO N- C~) COO COO COO N- N- N- N- N- CC) - o C-) ~ -~ ~ CO ~ ~ COON- N- ~ N- - - - - - - - C,'= ~ 0~ 0 0~ >< C~ CO 95-159-68-pt. 5-36 E .-~u~- PAGENO="0554" EXHIBIT D SOME SIGNIFICANT COMPA RISONS,' 1960 AND 1966 United States United Kingdom Japan European Common Market (EEC) Sweden Canada 1960 1966 Increase 1960 1966 Increaso 1960 1966 Increase 1960 1966 Increase 1960 1966 Increase 1960 1966 Increase Average labor rates in manufacturing (dollars per hour) 2.26 2.71 0.45 0.90 1.29 0.39 0.31 0.56 0.25 0.50 0.80 0.30 1.11 1.64 0.53 1.79 2.08 0.29 Percent of U.S. rates 40 48 14 21 22 30 49 61 79 77 Foreign trade, brass mill products (mil- lions of pounds): U.S. exports to 0. 18 0. 39 . 21 0. 14 0. 79 0. 65 0. 88 1. 62 0. 74 0. 09 0. 02 -. 07 2 5 3 Ci~ U.S. imports from 34 26 -8 6 30 24 63 109 46 14 17 3 16 46 30 i~"- ___ - Percent Tariffs: Present tariffs (percent) 6. 1 2 10, 15, 20 20, 25 8, 10 3, 5 10, 15 Reduction in Kennedy round in percent: Sheet and strip 50 47 25 None None 50 Fo1 50 50 25 20 40 Rod, bar, and shapes 50 20 25 20 None 50 Wire 50 20 25 20 None None Pipe and tube 50 50 20-25 20 None 50 I Applicable to countries from whom about 90 percent of U.S. imports of brass mill products come. Equivalent of average duty applied on dutiable value of brass mill products imported during 1966. PAGENO="0555" 2341 EXHIBIT E COMPUTATION OF TARIFFS, TSUSA NO. 612.31, COPPER BARS AND SHEETS, AND STRIPS IN COILS (1) (2) (3) (4) 5) (6) (7) * Staging reductions Tariff by actual Rounded to 1 As actually rounded Year authorized (Sec. 253)1 (in percent) computation (cent/pound) decimaI~ (cent/pound) In percent (Kennedy Round)3 (cent/pound) In percent 1967 100 2.95 100 2.95 100 1968 90 2. 655 2. 7 90 2. 5 85 1969 80 2.360 2.4 80 2.3 78 1970 70 2.065 2.1 70 2.0 68 1971 1972 60 50 1,770 1.475 1.8 1.5 60 50 1.7 1.4 58 47 1 Trade Expansion Act of 1962. 2 Normal method of rounding (See USASI Standard Z25.1). 3 Advantage was here taken of Sec. 254 of the Trade Expansion Act of 1962. SEC. 254 ROUNDING AUTHORITY (Italic supplied) - If the President determines that such action will simplify the computation of the amount of duty imposed with respect to an article, he may exceed the limitation provided by Section 201(b) (1) or 253 by not more than whichever of the following is lesser: (1) the difference between the limitation and the next lower whole number, or (2) one-half of 1 percent ad valorem or an amount the ad valorem equivalent of w-hich is one-half of 1 percent. Column (4) is obviously the simplest way to reduce the modified tariffs to two-digit values. But the supposed simplification allowed by SEC. 254 and actually used, Columns (6) and (7) required the following procedure: Imports in 1965: Quantity (pounds) 21, 894, 891 Value $io, 0Th, 094 Value per pound (cents) 46. 016 1/2% ad valorem equals (cents) 0.23008 Rounded to (cents) 0. 230 90 percent of 2.95 cents (prior rate) equals 2.655 cents. Permissible reduction computed as above, 0.230 cents. Reduced rate, 2.425 cents. For two-digit limitation this would be 2.4 cents. But 2.4 is less than the one-half percent ad valorem limitation on reduction, so the amount had to be raised again to 2.5 cents. (This is a simplification?) Apparently for the tariffs following 1968, the amounts as computed in Column (3) were used, taking only the first two digits. PAGENO="0556" 2342 ,~ `Vt F- ~ ~ ~ ~ C F- ! PAGENO="0557" 2343 (I) = PAGENO="0558" PAGENO="0559" 2345 EXHIBIT H `FREE WORLD" FOREIGN TRADEL IDollar amounts in millionsj 1958-60 average - Foreign Percentof traie free world trade 1966 . Foreign Percentof trade free world trade Percentof 1958-60 Increase in percentage United States Canada Latin America European Common Market European free trade area Japan Balance of "free world" trade Total "free world" trade $33, 756 15. 6 10,857 5.1 16, 590 7.8 52, 123 24. 5 37, 660 17. 7 7,171 3.4 54, 843 25. 9 $55, 458 14. 9 18,867 5.1 22, 280 6.0 106, 260 28. 5 61, 370 16. 5 19, 301 5.1 89, 264 23. 9 167. 3 173.8 134.3 203. 9 163. 0 269.2 162. 8 -0. 7 .1 -1.8 4. 0 -1. 2 1.7 -2. 0 212, 400 100. 0 372,800 100. 0 175. 5 "Free world" does not include Albania, Bulgaria, China (mainland), Czechoslavia, East Germany, Hungary, Poland, Mongolia, North Korea, North Vietnam, Rumania, and U.S.S.R., but it does include Yugoslavia. Sources: Year Book of International Trade Statistics, United Nations Monthly Bulletin of Statistics, United Nations. PAGENO="0560" 2346 C-, = C-, C-, C,, = = = - = ~ ~ ~ = C C = C,, C C/) C = C-, C C C = C~) C,) C C C C) ~ ~EC~ -)~ E ~ I I C')~ = .~I - C-, E E C-) E C E = C,) PAGENO="0561" 2347 CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., July 12, 1968. Hon. WILBUR D. MILLS, Chairman, House Ways and Means Committee, Washington, D.C. DEAR CHAIRMAN MILLS: I would greatly appreciate your making the attached telegraphed message a part of the written testimony dealing with tariffs. My constituent, Rudolph S. Wood, Vice Président, Sales, M. & R. Refractory Metals, Inc., supports, specifically, my legislation, H.R. 522, regarding duty free im- portation of molybdenum. I would appreciate your consideration of this testimony. Very sincerely, FLORENCE P. DWYER, Member of Congress. SPRINGFIELD, N.J., July 11, 1968. Hon. FLORENCE P. DWYER, Rayburn House Office Building, Washington, D.C. DEAR MADAM: Thank you for your letter of July 3 and for your efforts on our behalf. WTe appreciate this opportunity to present our written testimony to the Ways and Means Committee. With regard to your bill No. H.R. 522, we offer the following comments in support of the removal of the duty on, molybdenum concentrate: 1. The molybdenum industry is no longer the vulnerable infant that it was in 1030 and the tariff has outlived its usefulness. 2. The present tariffs on molybdenum serve only to insulate mining interests from domestic as well as foreign competition. Thus, it further indirectly sub- sidizes an industry which is already enjOying substantial benefits from depletion allowances and stockpile purchases. There are two producers of prime molybdenum concentrate in the United States-the Climax Molybdenum Company and the Molybdenum Corporation of America. Climax produces abuot 57,000,000 pounds of molybdenum annually and the Molybdenum Corporation about 10,000,000 pounds. The United States consumes about 52,000,000 pounds per~ year. In general, neither Climax nor Molybdenum Corporation will sell concentrate to converters or, indeed, to any- one else in the United States. Climax does sell such concentrate to processors abroad. 3. Molybdenum is also produced as a by-product of copper mining. There are two fairly substantial sources of such by-product concentrate which is suitable for some metallurgical applications-the Kennecott Corporation and the Duval Corporation. Neither of these sells concentrates to converters. This refusal to sell concentrates to processors or converters on the part of the above-mentioned corporations permits them to reserve the market for the most important molyb- denum material, technical grade molybdie oxide, to themselves. Incidentally, the price for technical grade oxide from all sources, by-product and otherwise, is exactly the same. There are other productions of by-product molybdenum concentrate. However, that which is offered for sale is highly contaminated with copper and other impurities and requires additional processing in order to make it suitable for most metallurgical applications. As a direct result of the inability of processors to purchase suitable concentrate, the mining companies are insulated from coin- petition. For instance, such strategically important commodities as purified molybdic oxide and purified molybdenite concentrate are produced only by Climax. So long as the restrictive practices of the mining industry, with respect to the sale of molybdenum concentrate, are permitted to continue, and so long as the tariff protects them from potentially aggressive competition, both with respect to price and technology, the industry must depend upon these interests for any improvements in either technology or pricing. No technological break- throughs can ever be exploited to the advantage of the Nation as a whole. The GSA is the only other domestic source of prime molybdenum concentrate, and it can hardly be considered a permanent source. Moreover, the GSA imposes export restrictions which make it impossible for converters like ourselves to take advantage of export opportunities. The restrictions against the export of such PAGENO="0562" 2348 products as ferroinolybdenum, molybdenum trioxide, molybdenum pellets and powder, when made from stockpile concentrate, seem to serve only the interests of a few mining companies. So, too, does the tariff on imported concentrate. M. & R. REFRACTORY METALS, INc. R. S. WOOD, TTiee President, TEXAS GULF SULPHUR Co., New York, N.Y., July 9, 1968. Congressman WILBUR P. MILLs, Chairman of the Ways and Means Coinniittee, House of Representatives, Washington, D.C. DEan CONGRESSMAN MILLS: We understand that the Ways and Means Com- mittee, of which you are Chairman, are holding hearings in connection with import quotas on lead and zinc. As a U.S. corporation operating a large zinc, lead and copper mine in Canada we would like to join with The Mining Asso- ciation of Canada in expressing our concern over the establishment of quotas. We are attaching a copy of a statement prepared by The Mining Association of Canada which expresses our views exactly on the subject. As one of the larger producers of elemental sulphur in the U.S. and Canada, the elemental basic materials which moves freely from one country to another without restrictive tariffs or quotas, we cannot help but feel that lead and zinc and other basic raw materials should fall into the same category. Your careful consideration of the attached is respectively requested.' Yours sincerely, A. NELSON MYERS, Vice President, Marketing. (Whereupon, at 6 :25 p.m., the committee adjourned, to reconvene at 10 a.m.,Wednesday, June 19, 1968.) 1 NOTE: The statement of the Mining Association of Canada Is retained In the files of tile Committee but has not been included in the hearing because of the Committee's rule concerning tile receipt of testimony from foreign associations. 0