PAGENO="0001" FOREIGN TRADE AND TARIFF PROPOSALS ~ h 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 8 Contains June 25, 1968 Printed for the use of the Committee on Ways and Means 11.5. GOVERNMENT PRINTING OFFICE 95-159 WASHINGTON 1968 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 - Price $1.50 PAGENO="0002" CECIL R. KING, California HALE BOGGS, Louisiana FRANK M. KARSTEN, Missouri A. S. HERLONG, Ja., Florida JOHN C. WATTS, Kentucky AL ULLMAN, Oregon JAMES A. BURKE, Massachusetts MARTHA W. GRIFFITHS, Michigan GEORGE hi. 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, Je., New York GEORGE BUSH, Texas WILLIAM H. QUEALY, Minority Counsel (II) COMMITTEE ON WAYS AND MEANS WILBUR D. MILLS, Arkansas, Chairman JOHN hI. 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 Monday, June 10 649 Part3 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, June24 3173 Part 8 Tuesday, June 25 3479 Part 9 Wednesday, June 26 3865 Thursday, June 27 4201 Part 10 Friday, June 28 4483 Monday, July 1 4669 Tuesday, July 2 4909 Part 11 Summaries 5601 (UI) 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 Government witnesses 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. Page 2 5 8 13 19 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 (H.R. 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 loanes, Raymond A., Administrator, Foreign Agriculture Service__ 439, 649 Labor, Department of: Wirtz, Hon. W. Willard, Secretary 28, 37 Blackman, Herbert N., Administrator, Bu~reau of International Labor Affairs 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: Petty, Hon. John, Deputy Assistant Secretary, Office of International Affairs 439 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 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 1091 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 Beekeeping Federation, Glenn Gibson, executive secretary 3453 American Cvanamid 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 Ilemmendinger, counsel, imported footwear grOul) 4109 Organic chemicals group: Graubard, Seymour, counsel 4673 Homes, 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 Imnorted Steel, Inc., Kurt Orhan, 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-Type Cheeses 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 Ranaolph, Chet, executive vice president 950 American Textile Manufacturers Institute: Dent, Frederick B., president 2360 Jackson, Robert C., executive vice president 2360 American `W atch 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 England~ 1572, 1573 Association on Japanese Textile Imports, Inc., Mike M. Masaoka, Washing- ton representative 2490 Athletic Goods Manufacturers Association, William P. Holmes 30.71 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 Bea.rd, 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 Beicher, 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. V., 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, Wi]liam M. Hannon, chairman, Wash- ington affairs committee 4902 Biemiller, Andrew J., director, 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, J)resident 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 & Shoemakers Union, John E. Mara, president, and George 0. Fecteau, general president, United Shoeworkers of America, AFL-C10 - 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 M., 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 cornmittee_ - - - 1225 Committee of Producers of Ferroalloys & Related Products, Ronald L. Cunningham 2170 Conneaut Port Authority, Mayor EdwardJ. 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 Corn 4640 Cox, J. Ahney, 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 greup, counsel 2415, 2417 Danish-American Trade Council, Inc.: Hessel, B. H 1626 Wedell, Gustav, chairman, business practices committee 1626 Darman Morton 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 Manufacturers 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 Diouhy, 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, B.. J 4437 Golden, David A., counsel 4437 Dorn, I-Ion. 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 i\'leat 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 divisions: Stewart, Eugene L., counsel 3518 EMBA Mink Breeders Association, Richard Westwood, president 4012 Emergency Committee for American Trade: 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 Fect*eau, 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 Florida Fruit & 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 Gerstacker, Carl, chairman of the board, Manufacturing Chemists Association 44S3, 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. 1-larry P., dean, School of Business Administration, George- Page town University 1662 Ilagan, 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, I-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 Hannon, 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, Aerospace Industries Association of America 1391 Harris, Ilerhert 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 Ilartke, 1-Ion. Vance, a U.S. Senator from the State of Indiana 1931 1-larvey, 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 1-lejiderson, David W., executive secretary, National Board of Fur Farm Organizations 4012, 4019 I-Ierkner, George W., executive vice president, Warner & Swasey Co_ 2845, 2971 Herzstein, Robert E., counsel, floor covering group, American Import Association, and Wilton and \Telvet Carpet & Rug Importers 2599 Hessel, B. H., 1)anish-Amnerican Trade Council, Inc 1637 Hicks, W. B., Jr., executive secretary, Liberty Lobby 1256 Ilillman, Jimmye S., head, Department of Agricultural Economics, Uni- versity of Arizona 1039 Hobbs, Claude E., chairman, foreign trade committee, National Electrical Manufacturers Association 3507 ilochschwender, Karl, organic chemicals group, American Importers Asso- ciation 4673, 4704 Hodgson, Richard, vice chairman, board of directors, Fairchild Camera & Instrument Corp 3644 I-Ioffman, Charles N., chairman, Consumer Products Division, Electronic Industries Association 3479 Hohenherg, Bernard L., chairman, textile and apparel group, American Importers Association 2415 I-Iolmes, 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 cI~airman 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. Harry, executive director 1572 International Engineering & Construction Industries Council, Charles E. Golson 80o 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 Tnternational Longshoremen's & Warehousemen's Union, Albert Lannon, Jr., Washington representative 864 International Trade Development Board: Parker, Joseph 0., chairman 960 Pringle, Vic 960 Investors League, Inc., Robert A. Gilbert, vice president 1031 Italy-American Chamber of Commerce: Bonomo, Ralph 1619, 1622 De 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 Minneapolis Chamber of Commerce 1290 Kleppe, 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 Kvros, Hon. Peter N., a Representative 4in Congress from the State of ~aine 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 for 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, lIon. 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 Barharee, 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 MeVay, 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. Fccteau, 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 Al., 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 4616 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 Melt~er, Y ale, manager, commercial development and market research, patents and trademarks, H. Kohristamm & 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 directors - 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., 1)reSident, 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 903 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 1009 National Coal Policy Conference, Inc., Joseph E. Moody, president 4810 National Committee on International Trade Documentation, Charles 1-1. Beard, chairman of the board 1Q15 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 Shoehoard 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 Comnierce in the United States, Inc., Henry J. Clay 1389 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, 1-loward W., chairman-coordinator, Massachusetts Committee for the Preservation of the Groundfish Industry 3420 Norris, Robert M., president, National Foreign Trade Council, Inc 1493 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 cf the Commonwealth of Kentucky, state- ment read into the record by Hon. M. Gene Snyder, a Representative in Congress from the State of Kentucky 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 Califoriiia 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 Dlouhy, executive vice president 3136 Palmby, 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 Boaid~. 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, 4231 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&Ve~etable Association 4931, -4966 Petersen, Howard ~., 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 comrnerce - - 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 Q uillen, 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 Assoeiation 950 Rnuth, Louis F., Flavor Piet 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 W., 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., M.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 5001 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, Md 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 directors, 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 Richman, 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 95-159-68-pt. 8-2 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 Texa.s 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 Thorn, Prof. Richard S., Department of Economics, University of Pitts- burgh 691 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. Intemanu, 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 Umon - 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. W. 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 Palmby, 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 WTard, Robert E., Northwest Canners & Freezers Association, Oregon Strawberry Council, and Calif ornia 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 WTatkins, Hon. G. Robert, a Representative in Congress from the State of Pennsylvania 1829 Watson, Arthur K., chairman, Emergency Committee for American Trade 1343 WTatson, Don, president, Panhandle Producers & Royalty Owners Asso- ciation 4212, 4248 Wedell, Gustav, chairman, business practices 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, H. 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 Wyatt, 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 2353 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, ~\Iiss 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 William M.-Continued Justification for adjustment assistance program related to increased Page imports Nonrubberfootwear 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 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, 1960-67 575 U.S. imports and exports by major industries 100 Rush, 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 Fl. 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 ITS. 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 Wirtz, 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 I\'iills 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" ~II 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-196768 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. McMillan, executive vice president, letter dated July 9, 1968, to Chairman Mills, re explana- tion of the proposed amendments to the 1\'Ieat Import Act of 1964 3211 American Newspaper Publishers Association, Stanford Smith, general manager, statement 446~ 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, ~\`Iargaret 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, and L. 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" XXIII Angevine, Erma, executive director, Consumer Federation of America, Page letter dated July 12, 1968, to Chairman Mills 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 of 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 Ba.ttin, 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., staternent~~ 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 Mills 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, Geor~e P., Jr., secretary and legal counsel: Service fools 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, Mrs. 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 June20, 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. F., president, R. E. Lambert, chairman, Committee on Govern- ment relations, and L. E. Stybr, executive director, American Sprocket Chain i\'Ianufacturers 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. F. Veltfort, 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 Kalb 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., statemeat - - 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, Kolb-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 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, statement 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, Inc., 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, 1-larley, 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 Fin cher, 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~ 17~5 Finney, Wray, president, Oklahoma Cattlemen's Association, letter dated May 28, 1968, to Chairman Mills 332~ 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 IXIartin, 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" XXVIII 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 Gafco, Inc., L. Edelman, vice president, letter dated July 15, 1968, to Chairman Mills 4062 Galvanized Electrical Transmission Tower Fabricators. (See Ad Hoc Com- 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. Gehl, statement 4894 General Dynamics Corp., John J. Graham, group vice president, telegram dated July 11, 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 Engineeiing & 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 Mills 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 i\'Ianufacturers, letter dated 1\'Iay 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 Palmouth (Mass.), letter dated July 1, 1968, to Chair- man Mills 994 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. Lucht, 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. Sc~1t, executive secretary, American-International Charolais Association, letter dated June 5, 1968, to Chairman Mills 3332 Hester, Clinton ]\I., 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 i\'I. 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 "~Senor, qué es una `U.S. Firm' segdn 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 Tepcr, director of research, and Amalgamated Clothing Woikers of America, AFI~-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-CJO--CLC, statement 1740 Johansen, George, secretary-treasurer, Alaska Fishermen's Union, state- ment 3444 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. Beeghly, 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 Chaiiman Nulls, 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 i\1. 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 - - - 99~ 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.), ~\1rs. 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 Dc 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. Richey, president, letter dated July 1, 1968, to Chairman Mills 993 Long Beach (Calif.), Mrs. Marvin Tincher, 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 Chairman 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 Mills 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 al., 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, Tue., 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 counse, 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-Booiie County (Mo.), letter dated June 24, 1968, to Chairman Mills 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 Oii-l59-O8-pt. 8-3 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 1\'Iaine, 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, Mayrne 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, Pattenfeid 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 plesi- dent-Government, re exports of textiles and textile products 80o Mink, I-Ton. 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 dathd June 5, 1968, to Chairman Mills 3320 Mission Creek Angus Ranch, George L. Hays, statement, with covering letter from 1-Ton. 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 ChairmanMilis 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 Miils - - 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. (~ee 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 i\'Iaryland, Jay ID. Kline, president, letter dated July 5, 1968, to Chairman Mills 4420 Nast, Thomas ID., 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 economic 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 Mills 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 from the State Department 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 1-I., counsel, National Restaurant Association, statement 3337 Nyanza, Inc., Roland E. Derby, Jr., president, letter dated June 17, 1968, to Chairman Mills 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., 1-larold J. Wendt, vice president, production, letter dated May31, 1968, toChairman 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 1\Iills, 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- iolitan 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" XXXVIII 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, Fiank L., Jr., president, Amperex Electronic Corp., statement_ - 3505 Rapaport, Arthur, Jardox Fur Co., letter dated July 10, 1968, to Chairman Mills 4063 Raytheon Co., Charles F. Adams, chairman of the hoard, 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 Mills, with at- tacliment 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 Mills, 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 Santaniaria, 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, 1\'Irs. 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 M~nu- 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 3133 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 l~,Tilliamsto~vn (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 2239 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 Mills~ 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 I\1. Kerr, attorney, statement 5049 Sporting Arms & Ammunition Manufacturers' Institute, Robert C. Zimmer, counsel, statement 3081 PAGENO="0040" XL Starr, Wayne H., 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 iii 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. (&e 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. Tatern, 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 Mills 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 Mills 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 332~ 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, Beiridge 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 Veltfort, 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, Armco Steel Corp., statement 2253 Vinyl i\'Iaid, 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, Charis F., 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 iVlills, with attaehments 2269 Warehousemen'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 I-I., 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 \\Tashington Cattle Feeders Association, C. A. Courtright, president, letter dated June 5, 1968, to Chairman Mills 3329 Washington Cattlemen's i~ssociation, 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 (Ind.), 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 & Refining Co., staternent 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. McColly, president, and Jefferson B. 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 Mills 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 \Von 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 B. Merrell, secretary, letter dated June 26, 1968, to Committee on Ways and Means, with position paper attached 1789 Work Glove Manufacturers Association, Inc., Deane E. 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 25, 1968 HousE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS. Washington, D.C. The committee met at 10 a.m., pursuant to notice, in the committee room, Longworth House Office Bu1lding, Hon. `Wilbur D. Mills (chair- man of the committee) presiding. The CHAIRMAN. The committee will please be in order. Our first witnesses this morning represent the Electronic Industries Association, Consumer Products Division, Mr. Hoffman, Mr. Fezell, Mr. Allen and Mr. McCauley. STATEMENT OF GEORGE H. FFIZELL, VICE PRESIDENT, CONSUMER PRODUGTS DIVISION, ELECTRONIC INDUSTRIES ASSOCIATION; ACCOMPANIED BY CHARLES N. HOFFMAN, CHAIRMAN; AND ALFRED R. McCAULEY, SPECIAL COUNSEL, DIVISION ON INTER- NATIONAL TRADE MATTERS Mr. FEZELL. Good morning, Mr. Chairman and members of the com- mittee; my name is George H. Fezell. I am president, Magnavox Con- sumer Electronics Co., 270 Park Avenue in New York City. I am also vice-president of the Consumer Products Division of the Electronic Industries Association, better known as ETA, whose offices are at 2001 Eye Street, NW., Washington, D.C. With me today are Mr. Charles N. Hoffman, assistant vice president, `Warwick Electronics, Inc., and chairman of the Consumer Products Division of ETA, Mr. Armin E. Allen, who is vice president and general manager, Consumer Elec- tronics Division of the Philco-Ford Corp. and also chairman of the International Trade Committee of the Consumer Products Division planned to be with us but, unfortunately, he is ill. Also with me is Mr. Alfred R. McCauley who is special counsel to our Division on Tnter- national Trade Matters. We are here today in behalf of the Consumer Products Division of ETA and Mr. Hoffman and Mr. McCauley will assist me in answering any questions which the committee members may have about the matter at hand. The CHAIRMAN. We appreciate having all of you with us this morn- ing and are glad to recognize you. If you have to omit any parts of your statement in order to comply with our time situation your entire statement will appear in the record. Mr. FEZELL. Thank you very much, sir. The Consumer Products Division numbers among its member com- panies the majority of the U.S. manufacturers of consumer electronic (3479) PAGENO="0044" 3480 products-a class of articles which includes color and black and white television receivers, radios, radio-phonographs, phonographs, tape recorders and players, and many other home entertainment articles which serve the needs and desires of the people of this country. The bulk of the products made and sold by the companies in our division and the bulk of the components we use in production are wholly of U.S. origin. However, some of the finished products we sell and some of the components we use in making products here in the United States are imported from foreign sources. It is to these electronic articles-the finished products and components-that our statement relates. We appear here today in opposition to H.R. 14597, H.R. 17674 and similar bills which would specifically impose quotas on imports of electronic articles and H.R. 16936 and similar bills which would em- brace these articles in so-called omnibus quota provisions. The Consumer Products Division opposes qoutas on imports of electronic articles because they are not needed, they will disrupt the U.S. market for consumer electronic products, and they may- most likely they will-result in retaliatory action which will not only hurt the extremely favorable U.S. balance of trade in electronic products but also hurt the industries concerned and their workers. QTJOTAS ON IMPORTS OF ELECTRONIC ARTICLES ARE NOT NEEDED Quotas are a severe form of protection against imports since im- ports in excess of a given quantity are embargoed. I submit that only in exceptional circumstances, where the objective data pertaining to domestic production and sales, exports, and imports show that an industry is being seriously injured by imports, should any thought he given to quotas on imports. Where such data do not show such injury, quotas are not in order. 1965 1966 1967 Electronic industries: Sales $17,507,000,000 $20606000000 $22,132,000,000 Exports 1,155,432,000 1,446,736,000 1,775,626,000 Imports 506,770,000 744,767,000 830,231,000 Balance of trade +648, 662, 000 +701,969,000 +045,395,000 ExportsaspercentsaleS 6.6 7.0 8.0 Imports as percent sales 2.8 3.6 3.7 Electronic components: Sales 4,695,000.000 5,709,000,000 5,486,000,000 Exports 328,550,000 440,436,000 486,801,000 Imports 111,380,000 174,106,000 174,990,000 Balance of trade +217,170,000 +266,330,000 +311,811,000 Exports as percentsales 7.0 7.7 8.8 Imports as percent sales 2.3 3.0 3.1 Consumer electronic products: Sales 3,641,000,000 4,493,000,000 4,324,000,000 Exports 40, 257, 000 46, 256, 000 46, 609, 000 Imports 287,919,000 385,004,000 449,927,000 Balance of trade -247,662, 000 -338,748, 000 -403, 318, 000 Exports as percent sales 1.1 1.0 1.0 Imports as percent sales 7. 9 8. 5 10. 3 The table was prepared from data contained in the "Electronic Industries Yearbook, 1968," prepared by the marketing services department of EIA. Mr. Chairman, the vital signs of this industry refute serious injury. Sales have risen steadily-from $17.5 billion in 1965, to $20.6 billion in 1966, to $22.1 billion last year. Sales of over $23 billion are forecast PAGENO="0045" 3481 for this year. Exports have risen from $1.15 billion in 1965 to $1.44 billion in 1966 and to $1.77 billion last year. Finally, this industry's favorable trade balance grew from $648 million in 1965 to $702 mil- lion in 1966 to $945 million last year. (a) The electronic component industry does not need quota protection The pending quota proposals are supported by companies which are members of the Parts Division of the ETA. It is in order, therefore, to look at the relevant data to see if the overall prosperity of the elec- tronic industries has been enjoyed by those companies which produce, sell and export electronic components. Factory sales of electronic components last year totaled $5.48 bil- lion, down somewhat from the record 1966 level of $5.70 billion but up almost 18 percent from 1965 sales of $4.69 billion. Industry estimates point to a rise in component sales in 1968. Exports of components climbed steadily from $328 million in 1965 to $440 million in 1966 to a high of $486 million last year. The U.S. parts producers enjoyed a favorable balance of trade of $217 million in 1965, $266 million in 1966, and a record $312 million in 1967. The component segment of the U.S. electronic industries includes such dynamic companies as Texas Instruments, Fairchild Camera, General Instrument, Sprague Electric and others. Texas Instruments' sales in 1966 of $580 million were almost double 1963 sales. Fairchild in 1966 sold $225 million in products, twice as much business as it did in 1962. General Instrument also doubled its 1962 output in 1966. Sprague Electric's 1966 sales of $141,500,000 established a new record for that company. `While each of these companies may have experi- enced some letdown in sales and earnings in 1967, reflecting some soft- ness in the economy experienced by all of us, their course continued upward. We respectfully submit, Mr. Chairman, that the components seg- ment of the electronic industries is not depressed. It is aggressive and prosperous, in need of no protection from imports. Employment data also attest to the sound economic status of the electronic industries and the component segment. In 1967, some 1.2 million persons were employed in electronics manufacturing and re- lated activities. This was almost double the number so employed in 1958 and about 200,000 higher than the employment level of 1964. The components industry employed some 434,000 workers in 1967, more than double the 205,000 workers on the job in 1958 and up 130,- 000 over the 1964 level. The Bureau of Labor Statistics reports that in 1965 exports of electronic components accounted for some 23,000 jobs, up from the 16,000 export-supported jobs in 1960. Given that exports of compo- nents have increased over 48 percent from 1965 to 1967-$328 million to $486 million-one must conclude that the number of jobs attributa- ble to exports of electronic components presently exceeds 30,000. (14 The consumer electronic products industry does not need quota protection Thus far I have discussed the facts relevant to domestic sales, em- ployment, exports and imports of all electronic articles, with partic- ular emphasis on electronic components. But as I previously indicated, PAGENO="0046" 3482 the quota proposals pending before this committee would also em- brace imports of consumer electronic products, and for obvious rea- sons I would like to turn to this aspect of these proposals. Basic to the evaluation of any proposal for quotas on imports of consumer electronic products is the judgment on the U.S. producers of products which are similar to those being imported as to the need for such quotas. Thus, at the outset, it is quite germane today that a majority of U.S. producers of consumer electronic products, speaking Through the Consumer Products Division of ETA, are opposed to quotas on consumer electronic product imports. I will be happy to supply for the record the names of the member companies which sub- scribe to the views I state here today. These producers-who are ob- viously in the best position of all concerned to determine their needs *for protection against import competition-submit that their con- sidered views must be given a greater weight than those of others, such as the U.S. component manufacturers, who are not primarily involved so far as imports of consumer electronic products are con- cerned. Sales of consumer electronic products increased some 25 percent in 1966 over 1965-from $3.7 to $4.5 billion. 1967 sales were $4.3 bil- lion, almost equal to the sales level attained in the record year 1966. We confidently expect to repeat and most likely to exceed 1966's per- formance this year. Employment in consumer products production has trended upward. At~ the end of 1966, some 144,000 persons were employed in the produc- tion of consumer electronic products. Just 5 years previously only 89,- 000 persons were so employed while in 1958, 73,000 workers were in this industry. Last year's 138.000 employees reflected some soft spots in the economy as a whole in 1967. but the upward trend was not disturbed. While exports have not been a very significant factor in the consumer electronic products market, never in recent years accounting for as much as 2 percent of sales, nevertheless, the export market for con- sumer products is growing. In 1965, some $40 million in export sales were made, while in 1966, $46.2 million worth of U.S.-produced con- sumer products went abroad. Last year exports totaled $46.6 million. It is important to note that the U.S. component industry benefits from this growing export market since it supplies most of the components which go into these products. Imports of consumer products in 1966 amounted to $385 million, up from 1965 totals of $288 million. In 1967, imports were at $449 million. While imports are presently 10 percent of consumer product factor sales, a much greater ratio than the 3.1 percent comparable component- imports~to-componentsa1es ratio, nevertheless, U.S. producers of con- sumer electronic products oppose quotas on consumer product imports. This stand is demonstrably sound and is in the best interests of the American consumer, the consumer products producers and the compo- nents producers. PAGENO="0047" 3483 IMPORTS SERVE A USEFUL FUNCTION Given a number and variety of consumer electronic products which the American consumer desires and the many combination products which he demands, it is unlikely that any U.S. manufacturer will make all of these products. Thus, if a full line of consumer electronic prod- ucts is to be offered to the American consumer by a U.S. producer, he must obtain from other sources products which he does not produce. He will concentrate his efforts in producing those products which he can make efficiently in volume, thus enabling him to offer to the con- sumer products whose quality and price reflect these economic advan- tages. In some instances the only outside source for him for products which he does not make may be a foreign source. The products he ac- quires from such source generally will be manufactured to his stand- ards for sale under his brand name. Besides expecting a wide variety of consumer electronic products, the American consumer is very price conscious. Thus, imported pocket- size transistor radios sell like proverbial "hot cakes" because they are priced below $10; they would not sell in any such quantities at prices of $15 or $20. The same is true of small-size black-and-white television receivers and low-priced tape recorders. If all of these products were made in the United States, their prices would be significantly higher than present levels and such higher prices would result in lower sales. We have prepared two tables which tell the story about prices and their relevance to the size of the U.S. market for consumer electronic products. TABLE I-U.S. FACTORY SALES, ALL CONSUMER ELECTRONIC PRODUCTS AND MOST POPULAR PRODUCTS (INCLUDING AVERAGE UNIT FACTORY PRICE) [Quantity (1,000 units); value ($1,000)J Class of product 1963 1964 1965 1966 All products Radios: $2,661,469 $2,842,608 $3,620,129 `$3,714,195 Value Quantity Average unitvalue $520, 034 18,155 $28 $554, 956 18,888 $29 $673, 807 23,400 $29 $728, 127 24,537 $30 TV receivers: Value Quantity Average unit value Other: $1,067,061 7,734 $138 $1,271,206 8,713 $146 $1,685,479 9,889 $170 $2,278,884 11,174 $204 Phonographs and record players: Value Quantity Average unit value $174,089 3,818 $45 $146,371 2,832 $52 $201,286 4, 177 $48 $217,508 4,827 $45 Tape recorders: Value Quantity Average unit value Other: Value $103, 924 2,291 $45 $8,819 $88, 382 1,329 $66 $8,351 $106, 580 1,787 $59 $8,889 $123, 344 1,953 $63 $12,740 `1966 "All products" total does not include miscellaneous products of approximately $150,000,000. Data not available. Source: Current Industrial Reports, 1964, 1965, and 1966, Bureau of the Census, U.S. Department of Commerce. PAGENO="0048" 3484 TABLE I I-IMPORTS, CONSUMER ELECTRONIC PRODUCTS AND~MOST~POPULAR PRODUCTS, INCLUDING AVERAGE UNIT VALUE (Quantity (1,000 units);value ($1,000)( Class of product 1964 1965 1966 1967 Radios: Value Units Average unit value TV receivers: $92,965 13, 600 6. 85 $125,017 19, 351 6. 45 $144,107 25, 129 5. 75 $172,135 24, 200 7. 11 Value Units Average unit value Phonographs: Value Units Average unitvalue Tape recorders: Value Units Average unit value 39, 225 715 54. 86 20,549 2,357 8.71 46, 335 3, 266 14. 18 59, 586 1,048 56. 85 31,129 3,022 10.30 49, 689 2, 847 17. 45 115, 733 1,524 75. 94 47,050 4,090 11.50 (1) (1) (`) 125, 581 1,613 77. 85 30,700 2,819 10.89 (1) (1) (1) 1 Not available. Source: "U.S. Imports of MerchandisefoçConsumption," reports FT 125 and 135,~Bureau of Census, Department of Commerce. Table I reflects U.S. factor sales of all consumer electronic products and of the most popular products embraced by this class. Table II reflects imports of all consumer electronic products and of the most popular products included in this class. The committee will note that in each table in addition to total units and total value, we have given an average unit value for each of the named consumer products. Thus, the average unit value of U.S.- produced radios in 1966 was $30. On the other hand, the average unit value of imported radios that year was $6.60. The comparable figures on color and black-and-white television receivers are $204 for U.S.- produced products and $78.39 for imported products. Phonographs of U.S.-make average $45 per unit, of foreign-make $10.61. I submit, Mr. Chairman, that these figures show that what we con- sumer product manufacturers make and sell in the United States and what we buy abroad and sell here are really different products. The availability of the lower priced foreign products complements what we make here. There is no displacement. Imports, therefore, are primarily responsible for the large volume sales in these basic consumer electronic articles. It is also true that such volume sales of these products bearing the U.S. manufacturer's trade name materially assist the manufacturer in promoting sales of his domestically produced articles. These imports permit many persons in the United States to pur- chase entertainment, educational, and informational pieces of elec- tronic equipment which, in the absence of lower priced imports they would be unable to buy. If these imports were curtailed, no one would gain and these consumers would lose. RETALIATION AGAINST U.S. ELECTRONICS EXPORTS MAY RESULT Annual U.S. exports of electronics articles are presently near the $2 billion mark. If the United States takes restrictive action against im- ports of electronic components and products this extremely important PAGENO="0049" 3485 outlet for U.S.-made products and components will be in jeopardy. For example, while Japan and Hong Kong supply substantial per- centages of the electronics products sold to the United States, they are also important customers for exports of electronic products, in- cluding electronic components, from the United States. Japan's im- portance as a buyer of U.S.-produced electronic articles is shown by the data in the following table. Total imports into Japan originating in the United ~States Article Percent Digital computers 91. 9 Jukeboxes -. 94. 5 Integrated circuits 99. 6 Thermionic valves and tubes 76. 4 Silicon transistors 72. 4 Parts of radio-navigational aid, radar, or radio remote control apparatus_ 83. 9 insulated flexible cord 69. 7 Oscilloscopes 85. 7 VHF transmission and reception apparatus 90. 0 Recording tape and wire 77. 7 Electrical analysis apparatus 80. 9 Source: Japan Ministry of Finance; data are for 1966. Hong Kong, the principal supplier of transistors and other semi- conductor devices to the United States in 1966, was also the chief im- porter of U.S.-produced semiconductor parts, having purchased ~13,1O0,OO0 or 43 percent of total U.S. exports. In sum, U.S. international trade in electronic products is a true two- way street and the United States enjoys a bigger share of this ex- change, as these statistics and total favorable balance of trade in electronic articles-$945 million-will show. Any action which would reduce or eliminate this advantage would be adverse to the interest of all concerned. Thank you, Mr. Chairman, for giving us this opportunity to appear here today. The CHAIRMAN. We thank you, Mr. Fezell and Mr. Hoffman and Mr. McCauley, for coming to the committee this morning. Are there any questions of these gentlemen? Mr. BYRNES. Just one, Mr. Chairman. The CHAIRMAN. Mr. Byrnes. Mr. BYRNES. On page 12, Mr. Fezell, you provide a table of the per- centage of imports of certain articles into Japan originating in the United States. Would you submit for the record at your convenience the dollar amount that is involved here? Percentages don't always mean very much. If you are only export- ing one item the percentage may be 100 percent. Mr. FEZELL. Sir, we will be happy to do so. (The following information was received by the committee:) The dollar amount of the exports in question is approximately $43 million. Mr. SCI-INEEBELI. Mr. Chairman. The CIIAIRMAN. Yes, Mr. Schneebeli. Mr. SOHNEEBELI. Mr. Fezell, on page 4 you list some of the com- panies in the electronics industry and I don't notice any such well known names as GE, and Westinghouse, and RCA and Sylvania. Aren't they in your group? 95-159----6S-pt. 8-4 PAGENO="0050" 3486 Mr. FEZELL. The people that we mentioned here were the com- ponents manufacturers. Yes; they are. Others are in the components industry. GE I am sure is involved. They are also in the consumer electronics business. Mr. SCHNEEBELI. They are the four leading companies in the public's mind, aren't they? I was wondering why you omitted the names of them. Mr. FEZELL. Here is the list. Would you like me to read the list of the ones that support our action? Mr. SCHNEEBELI. Yes. Mr. FEZELL. Admiral Corp.; Ampex Corp.; Arvin Industries, Inc.; Bulova Watch Co., Inc.; General Electric Co.; Harmon Kardon, Inc.; Hoffman Electronics; KLH Research & Development Corp.; Singer; the Magnavox Co.; Motorola, Inc.; Minnesota Mining & Manufactur- ing Co.; Olympic Radio & Television (Division of Lear Siegler, Inc.); Packard Bell; Philco-Ford Corp.; Pilot Radio-Television Corp.; Symphonic Electronic Corp.; Warwich Electronics, Inc.; Waters Conley Co.; and Westinghouse Electric Corp. And the nonmembers of the ETA-Consumer Products Division, people that do not belong to our association but who support us here are Curtiss Mathis Television, Emerson Radio & Phonograph Corp., Television Manufacturing of America, Inc. (Muntz TV), and that's it. Mr. SOHNEEBELI. How about RCA and Sylvania? Mr. FEZELL. RCA abstained. They did not take a side either way. Mr. SCHNEEBELI. Sylvania? Mr. FEZELL. Sylvania is for quotas. Mr. SGHNEEBELI. For what? Mr. FEZELL. They are for quotas. They are against our stand. They are not with us on this. Mr. SCHNEEBELI. Thank you very much. The CHAIRMAN. Mr. Collier. Mr. COLLIER. Mr. Fezell, the table on page 12 shows the percentage of total imports into Japan originating in the United States. Permit me to say in all kindness that table doesn't mean too much unless it were translated into actual dollars of imports from the United States. Percentage of the total imports into Japan is rather insignificant when we speak in terms of the impact upon our economy. Hence what does this really amount to in dollars? Mr. FEZELL. Sir, we have been requested to make available to the committee the information on dollars. I do not have those here. Mr. COLLIER. Isn't it true that Japan today has absolute prohibi- tions on certain types of U.S. electronic equipment? Mr. FEZELL. Sir, I cannot answer that. I do not know that that is not so, but to my knowledge I know of no such restrictions. Mr. COLLIER. It was a leading question because the answer is "Yes," and not only that; in the area of electronic components, Japan today is importing electronic components because it is temporarily economi- cally expedient to do so. If this were not a fact and we accordingly look into the future to see what is involved, let's look at the Texas Instruments-Sony pro- posal wherein a stipulation provides for Texa.s Instruments to turn over to the Japanese technical information and their wherewithall in electronic component production; isn't that true ~ PAGENO="0051" 3487 Mr. FEZELL. I believe that is correct, sir. Mr. COLLIER. Isn't it obvious then that if this is the situation at some given time in the very near future those components which the Japanese are currently importing will no longer have to be imported? rllhe reason for their importation is an obvious one. Mr. FEZELL. I am sure that that is a possibility. I can't say that it will happen. There is always the possibility. I don't know the nature of the manufacturing type of equipment that Texas Instruments in- tends to build over there. That happens to be a little out of my area. Mr. COLLIER. Do you have figures on what percentage of the world market the United States 20 years ago supplied in table model and transistor radios and what percentage to which it has shrunk in 1967? Mr. FEZELL. What percentage we had 20 years ago and what it has shrunk to? Mr. COLLIER. A 20-year period. Mr. HOFFMAN. Congressman, 20 years ago we accounted for almost the total production; you are speaking about radios as a category only? Mr. COLLIER. Table model and transistors, the small type. Mr. HOFFMAN. Right. The U.S. production today would be about 25, 27 percent. Mr. COLLIER. It was 70 percent at that time; was it not? Mr. HOFFMAN. It was even higher than that, Congressman. You re- ferred to 20 years ago. Mr. COLLIER. I am talking about the completed article. Mr. HOFFMAN. Yes; 20 years ago it would have been in excess of that. Mr. COLLIER. What percentage of that market does Japan now have, the world market? Mr. HOFFMAN. It would be broken down between Japan and Hong Kong. They now have a production figure of I think in the mid 20 millions. Mr. COLLIER. What part of the U.S. domestic market did we have 20 years ago? What part of it have we retained, and what part of that domestic market does Japan have now? I believe these are totally realistic questions because the figures spell out the situation. Mr. FEZELL. Sir, let us double check to make sure we give you the right numbers. Mr. COLLIER. OK. I think we ought to have it. Mr. HOFFMAN. Congressman, I can read it to you right now: The 1967 factory sales of TJ.S.-produced home radios, 8,105,000 units; im- ports carrying a domestic label 4,463,000; imports foreign labels 19,- 116,000; total imports 23,579,000. The total U.S. home radio market 31,684,000. On the other question you asked me of the 19 million, I would think a substantial part of that 19 million would be Hong Kong. Then the balance would be Japanese. On the very inexpensive pocket size "cigarette pack" radios, they have the substantial part. Now, in Japan they have the higher end of the market. They have more of the better quality AM and AM-FM radios in this category. PAGENO="0052" 3488 Mr. COLLIER. Just one further question. Do you think it would be proper for the U.S. electronic industries to propose exactly the same nontariff barriers that are presently imposed by the Japanese? Do you see anything wrong with this type of reciprocity? Mr. FEZELL. Sir, would you repeat that. I am sorry. I didn't get the first part. Mr. COLLIER. I say do you see anything wrong with the United States imposing the same type of nontariff barriers on imports into this country of electronic equipment that are presently imposed on the imports of electronic equipment into Japan? Is there anything wrong with this type of reciprocity? In other words, if we are going to have trade we merely establish the same barriers, tariff and otherwise. Mr. MCCAULEY. Sir, I would like to answer that if I may. That is one way of course of doing it. But I think that the better way would be to try to get the Japanese to relax their barriers. Mr. COLLIER. Yes, but what happens in the interim? We talk about reprisals. It seems to me that reprisals for whatever reason are al- ready existent. Mr. MCCAULEY. The Japanese may have the wrong reasons for put- ting on artificial restrictions on U.S. trade, that is true. It is true that that may be so, but right now the industry we are talking about today is an industry that enjoys a favorable trade balance of $945 million, with total exports of $1.8 billion. It seems to me, in a give and take proposition, if we were to respond to the Japanese and they in turn responded and you had a charge and countercharge or a stroke and counterstroke development, then we, having the greatest share of the trade, would suffer. Mr. COLLIER. Well, of course share of the trade, does it not develop from your equipment that cannot be- Mr. MCCAULEY. Yes, sir; these are U.S.-rnade products that are made by the electronic industries. They support jobs. They generate profits and these companies are doing business around the world. It is well, I think, to point out here that the industry you have before you this morning differs in marked respect from the several other indus- tries that have appeared before you prior to today and probably after today. Mr. COLLIER. Of course you are mixing apples with oranges because you are talking about the broad figures. The figures dealing just with the import and export of electronic equipment between the United States and Japan would be quite significant. Mr. MCCAULEY. That is true. Mr. COLLIER. So stay with the division before us. Mr. MCCAULEY. That is very true, but I would say that in the GATT complex of nations, where we are dealing with a set of trade rules that apply across the board, if one were to try to operate against Japanese products only this would be a significant departure, it would seem to me, from the historic MFN approach and we would probably get in a lot of trouble with other people. I would just guess that. Mr. COLLIER. Let's generalize. In 1967, going across the whole spec- trum, we imported more than $3 billion in goods and commodities from Japan while exporting slightly more than $2.5 billion. PAGENO="0053" 3489 That to me doesn't represent a very favorable trade balance. Mr. MCCAULEY. No, I agree with you; it does not. Mr. COLLIER. We have had the same experience in the last 2 years with West Germany, as you are well aware. On the one hand we are told, "Don't break this down by nations because we are negotiating on a wide scale." Then in the next instant we are told, "Well, now, we can't afford to do this. 1Ne have to deal with this one industry, or this one commodity, or class of commodities and we have to deal with this within the country." As of right now I get the impression that we are supposed to deal just singularly with certain nations and certain commodities on the one hand, forgetting the rest, and yet the most ardent proponents of extending the trade negotiations in the 1962 act say we can't look at it in this vein. We have to look at the whole spectrum. That is all I have, Mr. Chairman. The CHAIRMAN. Any further questions? Mr. Conable. Mr. CONABLE. Mr. Fezell, do you have any figures on what the average hourly wage in the electronics industry is in Japan or in Hong Kong? Mr. MCCAULEY. We don't have those figures right now, sir. Mr. CONABLE. Do you know what the average hourly wage in the electronics industry is in this country? Mr. FEZELL. I believe, sir, it will be somewhere around $2.28. It varies in various parts of the country obviously, but it will be from around $2.28 to around $2.68, somewhere in that area. Mr. CONABLE. Is the consumer electronics industry unique in its trade relationships or are there other industries that have the same sort of pattern? Mr. FEZELL. Al, I think maybe you better answer that. I am not too familiar with that area. Mr. MCCAULEY. I think the basic thrust of what Mr. Fezell said was this; that a good part of the imports that come into the United States of the consumer electronics product variety are not products that displace articles that are made in the United States. They com- plement the line of products that are made by the several manu- facturers in the United States. Now, I wouldn't be a bit surprised if this were not true in some other industries. For example, I could assume that if we have a perfume industry in the United States or a toilet water industry in the United States it may very well be that imports of those products find their own mar- ket. They find their own level in this country. They do not displace U.S. production. They complement it. One of the important complementary factors in this particular industry is the fact that where a manufacturer brings in under his own brand name a low-priced transistor radio he has the benefit of a prod- uct that bears his name. He has the benefit of a product that he cannot make here and sell at that price. He gets an extremely broad market base and he hopes to capture a number of customers who at one point, as they develop in their economic status, will be buying the more sophisticated, more expensive products that that manufacturer makes. PAGENO="0054" 3490 Mr. CONABLE. Well, I take it that you don't intend to extend the impact of your testimony beyond your own particular industry. Is that correct? Mr. MCCAULEY. We really can't, except, as I say, I wouldn't be a bit surprised that in other industries you have pretty much the same kind of situation and that is where imports per se, if you take the totality of imports, that the imports do not head on, in the market- place, displace a domestic made product. I would assume there are other cases. Mr. CONABLE. Has your industry taken any position on the overall administration bill? Mr. MCCAULEY. We have not, sir. Mr. C0NABLE. Do you have any intention of doing so? Mr. MCCAULEY. We have not really taken a position on it. Mr. CONABLE. Thank you, Mr. Chairman. The CHAIRMAN. Any further questions? Mr. BYRNES. Mr. Chairman, just one. The CHAIRMAN. Mr. Byrnes. Mr. BYRNES. Referring to the table that appears on page 3, you have a breakdown of the main items that constitute the exports and the imports of the electronic industries. Your table is broken down into electronic industries, electronic components, and consumer elec- tronic products. I am particularly interested in the main items encompassed in the exports and the imports of this total. Mr. MCCAULEY. `We have a table here that runs rather lengthily. I could insert this in the record and read a few excerpts from it if that is all right with you. Mr. BYRNES. `What would these figures look like if we pulled out computers. I assume that is under electronic industries. Mr. MCCAULEY. Yes; it is, sir. I can give you that. Mr. BYRNES. `We do export a considerable amount of our computers to Western Europe; don't we? Mr. MCCAULEY. Yes, sir; we do. Mr. BYRNES. And there is none of that going to Japan as such that is significant; is there'? Mr. MCCAULEY. I don't know that, Mr. Byrnes. I do have the totals on computers. Mr. BYRNES. I was under the impression that Japan restricted im- ports of computers because they are attempting to get their own in- dustry established. They were also placing obstacles in the way of American computer producers who wanted to establish plants in Japan in order to have access to at least part of the market. Mr. MCCAULEY. There were press reports about the Sony-Texas Instruments arrangement. Mr. BYRNES. Yes. As I understand it, they have been negotiating to try to put a plant into Japan as a method of getting their know- how into Japan, using Japanese labor. Mr. MCCAULEY. But I believe that will be pursuant to a license agreement if I am not mistaken. Mr. BYRNES. That is what I am saying. It is a complete restriction. They decide whether or not you can establish a plant to say nothing of whether you can export something to Japan. PAGENO="0055" 3491 Mr. MCCAULEY. I agree. Mr. BYRNES. I was really interested in what the pictures would look like if you took out this large item of computer exports. It is a big export industry. Mr. MCCAULEY. I have the computer figure here. For 1967 our U.S. exports of computers, which would include digital colliputers, components for computers, and parts and accessories, were $432,518,- 000, a little less than a fourth of total exports. It may help the record if I read these major companies. Mr. BYliNES. All right, go ahead. As far as I am concerned it is sufficient for me if the totals are in the record, b~~t go ahead. Mr. MCCAULEY. On broadcast radio and television transmitters and that type of equipment our exports were $77.8 million. Coinmumca- tions equipment, which is the telephone variety, radio communica- tions systems, and whatnot, our exports were $163.9 million. Computers I gave you, $432.5 million. Mr. BYliNES. Does that include the input and output type? Mr. MCCAULEY. On the receiving? Mr. BYliNES. Yes. That is all right. Go ahead. I'm sorry for interrupting. Mr. MCCAULEY. Detection and navigation equipment, our exports were $144.7 million. Testing and measuring instruments, oscilloscopes and articles such as that, our exports were $339 million and under miscellaneous other we had $83.2 million. Then in components, which break down into tubes, semiconductors, pa.rts, and miscellaneous, our exports were $486.8 million as we stated in the statement. Mr. BYliNES. Would the generalization be correct that the greater portion of these go to Western Europe? Mr. MCCAULEY. I think so. I think that would be true. Mr. BYRNES. Very little goes to Japan or any area such as that? Mr MCCAULEY. I would think so. Mr. BYliNES. Thank you very much. The CHAIRMAN. Thank you, gentlemen, very much for coming to the committee and bringing to us your testimony. Mr. FEZELL. Thank you, sir. (The following supplemental statement was received by the committee:) SUPPLEMENTAL STATEMENT OF CONSUMER PRODUCTS DIvIsIoN OF THE ELECTRONIC INDUSTRIES ASSOCIATION A CASE FOR QUOTAS ON IMPORTS OF CONSUMER ELECTRONIC ARTICLES HAS NOT BEEN MADE Speaking to the Committee on Ways and Means in behalf of some U.S. manu- facturers of electronic parts and components, the Parts Division of the Electronic Industries Association (ETA) urged legislation imposing quotas on imports of consumer electronic products and parts.1 The Consumer Products Division of ETA, which testified on June 25 before the Ways and Means Committee in 1 Those P:~ electronic parts and components manufacturers who do not agree with the Parts Division's request for quota legislation have notified the Committee on `Ways and Means of this fact. The Distributor Products Division of EIA and the American Loudspeaker Manufacturers Association are joined in tile Parts Division statement. PAGENO="0056" 3492 opposition to import quotas on electronic articles, has analyzed the presen- tation of the Parts Division and concludes that a case for quotas on imports of consumer electronic products and parts has not been made. QUOTAS SHOULD NOT BE IMPOSED WHERE THERE IS NO IMPORT-CAUSED SERIOUS INJURY TO THE DOMESTIC INDUSTRY CONCERNED The accepted standard to determine whether quotas on imports should be considered is- where the objective data pertaining to domestic production and sales, exports and imports show that an industry is being seriously injured by im- ports . . ." (Consumer Products Division's Statement.) When data are "selected", "computed" or otherwise "tailored", they are not objective. And not one iota of objectivity is added to such data by clothing them in travelogue rhetoric. In our statement to the Committee on Ways and Means we presented the objec- tive data relevant here. For convenient reference we restate these data here: 1965 1966 1967 Electronic industries: Sales Exports Imports Balance of trade Exports as percent of sales Imports as percent of sales Electronic components: Sales - Exports Imports Balance of trade Exports as percent of soles Imports as percent of sales Consumer electronic products: Sales Exports Imports Balance of trade Exports as percent of sales Imports as percent of sales $17, 507, 000, 000 $1, 155, 432, 000 $506, 770, 000 +1648, 662, 000 6. 6 2. 8 $4, 695, 000, 000 $328,550,000 $111,380,000 +1217, 170, 000 7. 0 2. 3 $3, 641, 000, 000 $40, 257, 000 $287,919,000 -$247, 662, 000 1. 1 7.9 $20, 606, 000, 000 $1, 446,736, 000 $744, 767, 000 +1701,969, 000 7. 0 3. 6 $5, 709, 000, 000 $440,436,000 $174,106,000 +1266,330,000 7. 7 3. 0 $4, 493, 000, 000 $46,256, 000 $305,004,000 -1338, 748, 000 1.0 8.5 $22, 132, 000, 000 $1, 775, 626, 000 $830, 231, 000 +$945, 395, 000 8. 0 3. 7 $5, 486, 000, 000 $486,801,000 $174,990, 000 -f-$311, 811, 000 8. 8 3. 1 $4, 324, 000, 000 $46, 609, 000 $449,927,000 -$403, 318, 000 1. 0 10.3 Source: The table was prepared from data contained in the Electronic Industries Yearbook, 1968, prepared by the Marketing Services Department of EIA. These data are taken unadorned, unmodified, and unqualified from the official Electronic Industries Association source. We have not refined them. We have not selected some data and omitted others. We have not otherwise offered an incomplete picture. We have presented all of the relevant data in a "let-the-chips- fall-where-they-may" approach. With this as prologue, we turn now to an analysis of the Parts Division's ar- gument, and the data they proffer in support thereof, that quotas are needed on imports of consumer electronic products and parts in order to protect U.S. manu- facturers of electronic parts from series injury due to imports. THE ARGUMENT OF THE PARTS DIVISION IS BASICALLY ERRONEOUS The Parts Division argues that since the only imported articles which it wants regulated are consumer electronic products and components thereof, analysis of the merits of this request must be restricted to domestic sales, exports and imports of this narrow class of articles. They insist that those charged with analyzing their claim of import-caused serious injury must not take into ac- count U.S.-produced parts and components which are sold domestically or which are exported for use in making non-consumer electronic products. Thus, the Parts Division opens its argument by stating that there is no single `industry' known as the electronic industry. Instead, a group of distinct industries is referred to as the `electronic industries' because the articles they manufacture have one thing in common-the utilization of an elec- tronic circuit." PAGENO="0057" 3493 We agree that there are a number of separate industries embraced by the term "electronic industries". Thus, there is a consumer electronic products in- dustry, a defense electronics products industry, and so forth, and to a large ex- tent the products produced by one such electronic industry are commercially different from the products produced by the other electronic industries. But all of the electronic industries have one thing in common: in producing the products they make they need electronic parts and components. And they obtain these needed parts and components from the U.S. producers of such parts and components. The Parts Division does not disagree with the fundamental fact that the market served by U.S. producers of electronic parts and components embraces the entire output of all of the electronic industries. As they so succinctly state it- "Electronic parts and components are the building blocks from which finished electronic products.. . are assembled." Since electronic parts and components are indeed the building blocks from which all finished electronic products are assembled, then the economic state of the U.S. electronic parts and components industry can only be assessed by analyzing the overall condition of the total electronic industries of the United States. Just as the Parts Division bases its claim for quota relief on its interest in the fortunes of the consumer electronic industry, it has an equally important interest in the defense, space, and industrial electronic industries. It is some- what disingenuous for the Parts Division to argue that only their interest in consumer products and components is relevant here. We submit that their entire interest-the totality of electronic industries-is the focal point for the economic analysis needed in assessing their claim of serious injury. The steel industry analog used by the Parts Division is quite apt here, though their use of it is erroneous. Thus, they argue that when one analyzes import impact on the steel industry, he does not sweep: ". . . into the data every type of article made in this country which contains steel." But this is precisely what is done. Any economic assessment of the impact of imports on the U.S. steel industry starts with an analysis of the output of U.S. steel mills in toto. Whether such steel is sold by the U.S. steel mills to the auto industry, to the ship-building industry, to one or more of the electronic industries or to a foreign buyer is beside the point. The pertinent consideration is the production of steel-and all steel production is taken into account at the threshold of the economic analytical process. Thus, we accept the steel industry analog offered by the Parts Division. And just as total U.S. steel mill output is counted in any assessment of the impact of imports on the U.S. producers of steel, so also must the total output of the U.S. electronic parts and components industry be counted in any assessment of the impact of imports on that industry. The relevant U.S. industry here, therefore, is the U.S. industry producing electronic parts and components. It is the economic status of this industry- measured by its total market, domestic and foreign-which is in issue. THE RELEVANT OBJECTIVE DATA SHOW THAT THE U.S. ELECTRONIC PARTS AND COMPONENTS INDUSTRY NEEDS NO IMPORT QUOTA PROTECTION The electronic industries of the United States, the users of the parts and com- ponents made by the U.S. manufacturers of such articles, sold some $22.1 billion in goods last year and industry forecasts point to sales of over $23 billion this year. The 1967 record level topped 1966's performance by some $1.5 billion and was almost $5 billion above 1965 sales. These industries did equally well on the export side. Exports of $1.15 billion in 1965 increased in 1966 to $1.44 billion. Last year a record $1.77 billion of U.S-produced electronic articles were sold to foreign buyers. The U.S. producers of parts and components participated fully in these ever- increasing domestic and foreign sales of electronic products. Thus, factory sales of electronic parts and components totalled $5.48 billion in 1967, up 18 percent over 1965 sales of $4.69 billion. The industry forecasts a rise in sales in 1968. Exports of components climbed steadily from $328 million in 1965 to $440 million in 1966 to a high of $486 million last year. U.S. electronic parts and components producers enjoyed a favorable balance of trade in parts and components alone of $217 million in 1965, $266 million in 1966, and a record $312 million last year. These data do not show any injury whatsoever, much less the serious injury which must precede consideration of import quota protection. The electronic PAGENO="0058" 3494 industries as a whole, and the parts and components industry in particular, are viable, prosperous industries in need of no protection from imports. Notwithstanding this, the Parts Division asserts a claim of import-caused injury and offers its own data to show such injury. We turn now to an analysis of their data. (a) Units versus value As previously indicated, the Parts Division asserts that the only relevant data are those relating to domestic sales, exports and imports of consumer electronic products and parts and components for such products. We have al- ready demonstrated the unrealistic nature of such assertidn. But even in the narrow statistical vein in which they choose to force this discussion, the Parts Division finds it is expedient and necessary to concoct new rules for presenting what they consider are the relevant statistics. They argue that import data, to be really meaningful, cannot be expressed in value figures; one must look at imports in terms of units. Moreover, they say, each consumer product imported must be counted twice: (1) As a product, (2) as a composite of component parts. Thus, you first count an imported radio as one radio unit, then you count the same radio as an import of so many receiving tubes, so many capacitors, so many diodes, etc. The objective of computing import data in terms of units rather than value is quite transparent. A presentation in units is more impressive than one in value. 2,377,600,000 units is more frightening than $24 million. Counting finished products twice-as products and as composites of com- ponents--is equally sticky. The resulting `inflation of the figures serves to permit more flowery narrative than wouldotherwise be the case. The Parts Division knows that in a hearing dealing with trade policy, the relevant consideration is the balance of trade. They also know that trade balances are always expressed in values, not in units. It is somewhat amateurish to go against this accepted practice of discussing trade questions and to resort to un- orthodox statistical plays in order to arrive at exaggerated results.2 While we have difficulty in corroborating some of the un:it figures used by the Parts Division, especially those which purport to be conversion of imported products into their components, the use of unit figures in analyzing imports of consumer electronic products is particularly misleading. In stating imports in terms of units, the Parts Division forcefully implies that each imported unit displaces a U.S-produced unit. This is not so-and they know it We demonstrated in our principal statement to the Committee that the bulk of the consumer electronic products imported into the United States complement what can be, and is, made in the United States. We showed that whereas the average unit value of U.S-produced radios in 1966 was $30, the average unit value of imported radios was $5.75. Similarly, a U.S.-produced television re- ceiver in 1966 was valued at $204 per unit; imported receivers were valued at $78.39 per unit. Phonographs of U.S. make averaged $45.00 per unit; of foreign make $10.61. We respectfully submit that these value spreads of 300, 400, or 500 percent are conclusive evidence that the products in question are commercially different. The imported radio or television receiver or phonograph does not displace a ITS-made product. The import find their own market and serve thut market. If the imports were not available, these markets would dry-up. U.S. products would not fill the resulting void. The premise for the unit-statistical approach is, therefore, wrong. The drama of numbers running into the hundreds of millions and billions is dissipated. Thus, even in the self-serving, narrow frame of reference which the Parts Division has created here, their unit statistics prove nothing. They should be relegated to the "useless" information file where they belong. (b) Employment data. The Parts Division points to the fact that whi1e the electronic comnonents industry employed 396.300 workers in October 1966. employment in April of 1968 was 350,400. This they say represents a loss of 45,900 jobs.2 2 ~1oreover. the Parts Division's "unit" trade balance approach is glaringly deficient. Nowher~ du they exnress TTS. exourts in terms of unit. The Bureau of Labor Statistics employment figure for April 1005 is 375.100 (see tnl)le on following page). This figure reduces time alleged "job loss" to 21.200. PAGENO="0059" 3495 While Mr. Curtis in his colloquy with the spokesman for the Parts Division set the record straight and demonstrated the error in this claim of a loss of jobs, we are constrained to add just a few thoughts. It is patently disingenuous for the Parts Division to take two average monthly employment figures-one the highest average monthly employment in the history of the parts industry and the other a lower monthly figure taken from a slack Period-and compare the two and then conclude that some 45,900 workers lost their jobs. It would have been equally wrong for us to have taken the employ- ment figures for April of 1964 and April of 1966 to show a gain in jobs of 102,900. The only relevant employment data here are all of the data, not data selected by the Parts Division or by us. Here are those data: EMPLOYMENT STATISTI Cs: ELECTRON IC COMPON ENTS INDUSTRY 1964 1965 1966 1967 1968 Annual average January February March 264. 8 307. 1 381. 5 360. 6 (1) 259.8 258.3 258.8 280.5 283.3 286.1 351.9 360.9 367.9 393.2 385.8 378.0 352.4 352.7 374.4 April May June 258. 3 259.4 260. 1 290. 7 294.6 301.7 374. 3 378.3 387.3 365. 3 354.9 344.4 2 375. 1 2376.0 July 257.9 303.9 384.1 342.4 August 264.4 311.5 392.2 351.5 September 270.2 319.1 392.3 351.8 October 274. 2 330. 1 396. 3 353. 3 November 277.6 338.3 395.9 352.6 December 279.0 344.8 395.9 354.2 Not available. 2 Preliminary. Sources: Bulletin No. 1312-4 and `Employment and Earnings and Monthly Reports on Labor Force," Bureau of Labor Statistics, Department of Labor. While these data, as all such figures, show some peaks and valleys, it cannot be disputed that employment in the electronic components industry is trending upwards. Employment this year is picking up at a good pace and no doubt 1968 will at least equal and may even top, record 1966 employment. We submit that these objective employment data in full are the only relevant figures. As with so many other statistical series, selectivity distorts the picture and can be very misleading. The employment data also attest to the sound economic status of the U.S. electronic parts and components industry. Like the sales figures given previously, they negate any claim of serious injury and support the rejection of a plea for quota relief from imports. IMPORT QUOTAS WILL HURT THE U.S. PRODUCERS OF CONSUMER ELECTRONIC PRODUCTS In our main presentation to the Committee on Ways and Means we demon- strated the role imports play in the marketing of all consumer electronic prod- ucts. We showed how the availability of imports materially assists in the mar- keting of U.S.-produced articles by permitting the U.S. manufacturer of con- sumer electronic products to offer a full line of products to the consumer. The Parts Division attempts to lower our standing before the Committee on Ways and Means by characterizing the members of Consumer Products Division of ETA for whom we speak as "importers and some manufacturers of products such as radios, televisions, tape recorders, and phonographs." Of course any one who imports a product, even an American tourist who brings back a box of Dutch chocolates, is an importer. To the extent that companies w-hich are members of the Consumer Products Division import some of the products they sell and some of the components they use, they are in that sense "importers". But to say that because these companies do import some of their products- "They are the importers; we are the domestic producers" is an irresponsible appeal to emotionalism. The companies the Parts Division classifies as "im- porters" in its attempts to capitalize on the prejudically-oriented dichotomy PAGENO="0060" 3496 between "importers" and "domestic producers", include such American com- panies as Admiral, General Electric, Motorola, Magnavox, and Westinghouse, to name just a few. That these companies are just as much American producers as any of the companies for which the Parts Division speaks is patently obvious. Collectively they employ hundreds of thousands of workers in the United States in the production of billions of dollars worth of U.S.-made products. They need no defense from any one as to their overwhelming standing as U.S. producers of electronic articles. The Parts Division accuses these "importers" of wanting "to protect their investment in foreign plants" while the Parts Division "U.S. producers" want "to protect [their] investment in American plants, and . . . the employment which [their] U.S. investment has created." The weakness of the merits of their case is thus sharply outlined by resort to this type of shocking invective. Of course it is true that some of the member companies in the Consumer Products Division have investments in foreign plants and obviously they desire to protect these investments. Their interest in protecting their foreign investments no doubt is matched by the interest of some of the member companies of the Parts Division who also have extensive investments abroad. We do not find it strange that these member companies of the Parts Division should take this attitude toward their foreign holdings and we are not prepared to label such an approach as "un-American". But the member companies of the Consumer Products Division-some of whom are named above-have far greater investments in the United States which call for a greater protective attitude. This is so obvious as not to require any listing of the billions of dollars of investment which our companies have in United States plants and facilities. We know that the Committee on Ways and Means fully appreciates that the companies who oppose the Parts Division's request for quota restrictions on electronic articles are acting out of a reasoned concern for their own U.S. interests and the interests of their U.S. workers. CONCLUSION We respectfully submit that there is no case for the imposition of quotas on imports of consumer electronic products and parts and components. ALFRED R. MCCAULEY, Special Counsel. (The fo11owin~ letter and attachment were subsequently received by the committee:) GRAUBARD, MosKovITz & MCCAULEY, Washington, D.C., June 27, 1968. JOHN M. MARTIN, Esq., Chief Counsel, Committee on Ways and Means, Longworth House Office Building, Washington, D.C. DEAR MR. MARTIN: I am enclosing a memorandum of the Magnavox Company, dated September 17, 1967, which opposes any move to remove the present tempo- rary partial suspension of duty on imported color television picture tubes. Because of developments at the hearing on June 25, 1968, we respectfully request that the memorandum be inserted at the conclusion of Mr. George B. Fezell's testimony on that date. For the record, the Consumer Products Division of the Electronic Industries Association supports the Magnavox position as re- flected in this memorandum. Very truly yours, ALFRED R. MCCAULEY, Special Counsel to Consumer Products Division, Electronic Industries Association. MEMORANDUM OF THE MAGNAVOX Co. ON COLOR TELEVISION PICTURE TUBES I. INTRODUCTION The Tube Division of the Electronic Industries Association (ETA)1 and the Imports Committee of that Division, under date of July 11, 1967, filed a joint 1 The Electronic Industries Association (EIA) is the national Industrial organization of electronic manufacturers in the United States ETA is composed of a number of divisions, one of which is the Tube Division. Another division of EIA is the Consumer Products Divi- sion of which the Magnavox Company is a member. It is important here to note that the Tube Division does not, Indeed caanot, speak for the Electronic Industries Association; it speaks only for its own division. PAGENO="0061" 3497 petition with the Committee on Ways and Means (hereinafter "Coniinittee") which requests the Committee to- "favorably consider and report a bill rescinding the unexpired portion of the moratorium extended to August 31, 1969, on payment of the full import duties applicable to imports of color television picture tubes previously granted in Section 54(b) of the Tariff Schedules Technical Amendments Act of 1965." (Petition, p. 1). Simply stated, the petition asks Congress to repeal prematurely the present temporary rate of duty on imports of color television picture tubes of 12 percent ad valorem and to increase that rate to 30 percent ad valorem immediately. In support of this requested immediate 150 percent increase in the current duty on color t.v. picture tubes, petitioners allege that: 1. The reasons for the establishment by Congress of the present temporary lower rate of duty on color t.c. picture tubes, if they ever existed, no longer exist; 2. The U.S. producers of color television picture tubes and the producers of glass bulbs for such tubes are experiencing economic distress which is manifested by the "idling of capacity" and by the necessary "laying off of large numbers of workers"; 3. Sales of color television receiving sets have failed to increase as expected and, accordingly, existing domestic productive capacity is not being used and there is "widespread reduction in production, reductions in hours worked by em- ployees in tube plants, and job layoffs"; 4. Imports of color television sets and of color television picture tubes "have increased strongly". There has been an "upsurge" of imports of color television sets early this year. Imports of color television picture tubes are on a "steep rise" and are contributing to the market disruption which is "plaguing the industry". On July 28, 1967, The Magnavox Company advised2 the Committee on Ways and Means that it opposes the action sought by his petition because of the serious consequences such action would have on Magnavox' operations in the United States. At that time Magnavox indicated that it had not had an opportunity to analyze all of the assertions made in support of this petition but that it believed that a review of all of the pertinent facts and their analysis would show that- "the requested action is unwarranted and if taken will have a serious adverse impact on this company and many others who are similarly situated." Now that Magnavox has reviewed this matter in depth it can unqualifiedly state that its preliminary conclusion concerning the merits of this petition is sound and correct. It is abundantly clear, as will be demonstrated herein, that- 1. The reasons which led the Congress to provide a temporary rate of duty on color t.v. picture tubes of 12 percent ad valorem are as valid today as they were in 1965; 2. U.S. producers of color t.v. picture tubes and of glass bulbs for such tubes are not experiencing any economic distress whatever; 3. While sales of color t.v. receiving sets thus far in 1967 have not increased at the overly-optimistic rate expected by domestic television set makers such sales are at very satisfactory levels now and all indications are that they will be at new record levels in the months to come; and 4. Imports of color t. v. picture tubes (the only imported product involved in this petition) have been, and will continue to be, at such small levels, abso- lutely and relative to domestic production and sales (including sales for export) as to constitute no significant factor in the U.S. market for color t. v. picture tubes so far as U.S. producers of such tubes are concerned. ir. THE IMPORTS IN QUESTION AND THE RELEVANT U.S. INDUSTRY At the outset, the dialogue concerning this petition and the action it requests must be brought into focus. The petitioners seek a recision of the present temporary 12 percent ad valorem rate of duty on color t. v. picture tubes so that imports of such tubes will immediately be assessed with a duty of 30 percent ad valorem-i.e., they seek an increase in the present tariff of 150 percent. While the Committee appreciates that the only facts relevant to this requested action are those concerning imports and U.S. production and sales (including sales for export) of color t. v. picture tubes, petitioners either do not under- stand this primer consideration or they choose to ignore it in their zeal to 2 Letter to Hon. Wilbur D. Mills, Chairman, Committee on Ways and Means, from George H. Fezell, vice president-sales manager of The Magnavox Co. 270 Park Ave. New York, N.Y. PAGENO="0062" 3498 "make a case" where none exists. Thus, they complain not only about imports of color t. v. picture tubes, but also about imports of color television receiving sets. In support of their requested 150 percent increase in the current duty on color t. v. picture tubes, they cite instances of unfortunate worker lay-off actions by U.S. companies which the public record shows, and which petitioners know-, were based in large part either upon market conditions involving black-and- white television sets or on considerations other than imports of color t. v. picture tubes. They recite statistics which serve their purpose while they minimize or fail to mention others w-hich bear more closely on the truth of the issue at hand. Petitioners' submission is also confusing-apples and oranges" are indis- criminately mixed or compared as suits the desired end-which the Committee will appreciate makes analysis difficult. But at the outset, this mark of con- fusion is itself significant. As is so with all "shot-gun" type approaches, peti- tioners acknowledge by this tact that their case is weak and show their aware- ness that success here depends largely upon diverting attention from the relevant factors. Since, as is previously indicated, the issue here is whether Congress should increase the present duty on color t. v. picture tubes, attention must be paid at the outlet to data concerning U.S. production, sales and imports of such tubes. Also very relevant are the data pertaining to U.S. exports of color t. v. picture tubes. In 1906, U.S. factory sales of color t.v. tubes amounted to 5.6 million units valued at $620 million while imports of such tubes in that year amounted to 79,657 units valued at $6,480,174.~ Thus, imports amounted to slightly more than 1 percent of U.S. factory sales-a classic (le minirnus situation. Data for the January-May, 1967, period do not alter this picture. U.S. factory sales in this period were 2,547,000 units valued at $267,435,000 while imports were 62,000 units valued at $4,703,000.~ The slight increase in imports in this period does not disturb the de minirnus character of imports-imports are still entering at a rate of less than 2 percent of U.S. factory sales. Thus, these basic relevant data militate against petitioners' claim for an im- mediate 150 percent increase in the tariff on color t.v. picture tubes. Neither the absolute figures on imports nor any upward trend one might read into them are cause for concern by U.S. producers of color tv. picture tubes, much less a basis of a claim of injury or threat thereof to the U.S. industry concerned. These basic data show that the petitioners' fears are completely unfounded and their claim for higher tariff protection is baseless. Other very pertinent data-relating to U.S. exports of color t.v. picture tubes- omitted by petitioners, not only buttress the conclusion one must draw from the basic data, supra, but also demonstrate the incredible nature of petitioners move to shut off the small number of color t.v. picture tubes being imported into the United States. In 1966, total U.S. exports of television picture tubes (both color and black- and-white) amounted to 808,204 units valued at $15,978,402.~ While the official U.S. statistics do not break this total down into its color and black-and-white picture tube components, the U.S. industry reports that its black-and-w-hite t.v. picture tube sales for export in 1966 amounted to 251,400 units.0 Thus, U.S. color t.v. ~1cture tube exports in 1966 amounted to 556,804 units, or 68.8 percent of total U.S. t.v. picture tube exports.7 8 Figures on factory sales from Electronic Industries Yearbook, 1967, p. 53 and import figures from Import-Export Bulletin, December, 1966, p. 32, both prepared by Marketing Services Department of ETA. Electronic Trends, May 1967, prepared by Marketing Services Department, ETA, pp. 21 an~5~ Exports, Report FT-~1O, U.S. Department of Commerce, Schedule B Commodity Number 7293010, December, 1966. 6 Electronic Industries Yearbook, 1967, Table 41, p. 51. 7 Committee will no doubt be surprised, and perhaps even disturbed, as is Magnavox, by the implications reflected in the extremely low value-$15,978,402-reported by the Department of Commerce on 1966 total t.v. picture tube exports of 808,204 units. Given that of these exports some 69 percent, or 556,804 units, were color t.v. picture tubes, the resulting average unit value per exported color t.v. picture tube is about $20.00 per tube. Magnavox is offered color t.v. picture tubes by U.S. tube makers at the following prices: Tube size Price 19-inch 21-inch 98 22-inch __ 118 25-inch 130 The simple arithmetic average of Magnavox' unit prices is $108.25 per color tv. picture tube, or about S1/m times the average unit value of U.S. color t.v. picture tube 1966 exports. PAGENO="0063" 3499 In the first seven months of 1967, total U.S. exports of t.v. picture tubes (both color and black-and-white) amounted to 259,200 units valued at $8,530,492.8 No industry figures on either color or black-and-white export sales are available, so the components of this total figure cannot be identified with certainty. However, if the 1966 ratio of color and black-and-white exports prevailed during January- July, 1967, then some 178,840 color t.v. picture tubes have been exported thus far this year. It is to be regretted that an industry which enjoys such a healthy export market, in absolute terms, as does the petitioners' industry here should request that Congress shut-off imports of color t.v. picture tubes which cannot be more than a mere annoyance to the petitioners. The petitioners' 1966 exports, as the figures above show, were almost 7 times the volume of imports and 1967 figures to date indicate that an equally high multiplier will prevail this year. In these circumstances one can only imagine what the retort of this industry would be if the host countries receiving American color t.v. picture tubes were to impose tariffs which in effect prohibited such exports. As the Committee knows, a funda- mental factor in trade analysis is the impact on U.S. exports which tariff action on the part of the U.S. might have. What would it profit the domestic industry producing color t.v. picture tubes if it were to gain the elimination from the U.S. market of the small number of imports of foreign-produced color t.i-. picture tubes and at the same time lose the lucrative markets it presently enjoys for its tubes abroad? The answer is obvious. The present petition is short-sighted. Indeed, if it is granted, it might provoke a "cure" much more painful to all con- cerned than the alleged "illness". In sum, the basic data show that the U.S. industry producing color tv. picture tubes is not being, and indeed can not conceivably be, adversely affected by the minimal quantities of color t.v. picture tubes being imported into the United States. Imports are but a tiny fraction of U.S. sales. Equally important, they are a small fraction of U.S. exports of color t.v. picture tubes. Thus, if the domestic industry producing color t.v. picture tubes is in poor straits, its condition cannot be laid, in whole or in part, at the door imports. But the fact of the matter is that this industry is not in any economic distress; it is a healthy industry, healthier than many other U.S. industries are today. III. THE DOMESTIC INDTJSTRY CONcERNED-THE PRODUCERS OF COLOR TX. PICTURE TUBES-IS NOT IN A DISTRESSED CONDITION As previously indicated, petitioners have liberally sprinkled their submission to the Committee with some of Webster's choicest adjectives and adverbs aimed at convincing the Committee that the domestic producers of color t.v. tubes are in dire circumstances due in substantial measure to imports of such tithes. The industry is said to be experiencing economic "distress". It is alleged that production and employment in the industry is "suffering" and that the domestic market is in a state of "disruption". While the all-important basic data concerning domestic sales, sales for export, and imports, cited in the previous Section of this memorandum, belie this claim of import-oriented distress, the facts are that this industry is not in any dis- tressed circumstances whatsoever. Its component companies are doing very well indeed, much better in fact than many other U.S. companies. The U.S. producers of color tubes include such outstanding companies as General Electric, the Radio Corporation of America (RCA), General Telephone and Electronic's Sylvania Division and others who are equally prominent in their own right. The three named producers account for the majority of U.S. production of color tv. picture tubes. Each of these producers is also a producer of color tv. sets, i.e., each of them is an integrated color set manufacturer which consumes a large part of its own tube production in the production of color sets. While admittedly the recent earnings of the U.S. companies producing color tv. picture tubes have fallen below 1966 record levels (a rather widespread condition among U.S. companies as the tax-writing Committee on Ways and Means well realizes) none of these companies can be classed as being in a state of economic "distress". That this is true is attested to not only by objective data such as those previously discussed but also by statements of these pro- ducers concerning the state of their economic health. 8 Supplied by Department of Commerce from preliminary figures in part not as yet published. PAGENO="0064" 3500 Thus, General Electric told its shareholders recently that its "Consumer Electronics Division realized the year's [1966] fastest growth among the Com- pany's consumer goods businesses." It elaborated on this as follows: Porta-Color TV, other portable TV sets . . . [and other consumer electronic products] led the way. "Sales of large color TV receivers were limited for the major part of the year by a shortage of color tubes * * ~" RCA recently told its shareholders that- "The year 1966 was one of vigorous performance for the Radio Corpora- tion of America . . . Sales and profits surpassed all previous records for the fifth successive time and by a greater amount for a single year than ever before. * * * * * * * Our sales and profit momentum is continuing strongly in the first quarter of 1967." 10 Neither the contribution of color television set sales to RCA's 1966 perform- ance nor the expectations regarding this market in 1967 were overlooked: "The vastly increased manufacturing capacity of the color television in- dustry is responsive to the mounting public demand for color... "A $51-million expansion program was initiated in 1966 by the RCA Vic- tor Home Instruments Division, most of it related to color. In addition, con- struction was started on a new color television picture tube manufacturing plant in Scranton, Pa., and a new plant in Puerto Rico to make electron guns for color picture tubes. With our increased facilities in color and other consumer products we expect to achieve a $1-billion level in total sales of all home instruments in 1967. We are confident that the long-range result will be a vigorous com- puter business that may well contribute as substantially to RCA sales and earnings in the 1970's as color television and other home instruments do today." ~ General Telephone and Electronics told its shareholders that 1966 was "an excellent year" and that there is evrey indication that in 1967 the "electronics" industry "will continue to grow at a substantially faster rate than the economy as a whole." 12 General Telephone and Electronics advised its shareholders that- "Record sales were also achieved in color television sets [and] picture tubes . . ." n and reported that its Sylvania Division set "new records" in sales and earnings: "Sales of Sylvania . . . Color Bright 85 picture tubes reached record levels in 1966, and further expansion of manufacturing operations was undertaken to meet heavy demand." 14 Without belaboring the point, the record shows that the U.S. companies which produce color t.v. picture tubes are not faring badly at all. Certainly none of them are in a depressed condition. Thus, not only do the basic data preclude any finding of import-caused injury to the U.S. industry producing color t.v. picture tubes but the facts also show that this industry is not in any injured or depressed state. It is a healthy indus- try, prospering at every turn. Certainly the imports here in question have no effect on-indeed they cannot affect-this industry's economic well-being. For these reasons, the petitioner's claim for an immediate, substantial tariff increase on imports of color t.v. picture tubes must be rejected. Petitioners have failed to show any reason why they need any tariff relief whatever, much less the extraordinary relief they press for in their petition. IV. THE COLOR TELEVISION RECEIVER INDUSTRY IS NOT A DEPRESSED INDUSTRY Petitioners plead that the industry to which they must look to sell their color t.v. picture tubes-the color t.v. receiver industry-is also depressed. Here again, ° 1966 Annual Report of the General Electric Company, p. 15. As an integrated color tv. set producer, General Electric's color tv. picture tube production and sales would closely parallel its color t.v. set production and sales. Thus, its bullish expressions about its color tv. set market apply equally to its color t.v. picture tube market. 10 1966 Annual Report of the Radio Corporation of America, p. 3. 11 Ibid., pp. 4-5. RCA is also an integrated color t.v. set maker. See note 9, supra. 22 General Telephone and Electronics 1966 Annual Report, p. 3. 11Ibid.,p.5. 1'Ibid., p. 18. Sylvania is also an integrated color t.v. set maker. See Note 9, 8upra. PAGENO="0065" 3501 a picture of "gloom and doom" is projected and the Committee is told that the future of this industry is dark indeed. At the outset, the petitioners claim that both the color t.v. picture tube industry and the color t.v. receiving set industry have increased their respective productive capacities far in excess of their requirements. They blame this development on the fact that "sales of color television receiving sets have failed to increase at the rate which the industry in 1965 expected would be the case." `~ Petitioners view the claimed excess capacity with alarm and use this as their principal basis for requesting the tariff increase on color t.v. picture tubes. It is certainly true that to date in 1967 sales of color t.v. receiving sets have not kept pace with the expectations of most observers as these hopes were ex- pressed in mid-1966. At that time, the industry was witnessing an unprecedented consumer demand for color receivers. Many set makers were unable to meet this demand and, because they believed that this demand would continue unabated, even increase, they took steps to increase their capacity to turn out color sets so as not to be caught short in 1967 and subsequent years. But the failure of 1967 color t.v. set sales thus far to keep pace with the hopes of the industry is a far cry from proving that the industry is in a depressed state. Indeed, color t.v. receiver sales in Jan.-May, 1967 reached 1.7 million units valued at $707,531,000 16 a mathematical annual rate which matches 1966 sales of 4.7 million units.'7 But this first -part 1967 performance was reached in a period when the U.S. economy as a whole was sluggish and when consumer spending was at a critical low-point. The second-half of 1967 promises to see some sigificant reversal of the first-half for U.S. industry in general and U.S. color set producers in particular. Thus, a report in the Weekly Television Digest of July 24, 1967 reflects this turn-around: "There's been some sales lift, fairly good pace of dealer ordering, but mid- summer color sales picture looks pretty much as you'd expect for any high- ticket home entertainment product. Manufacturers are still confident of good consumer buying beginning in Aug. or Sept.-but it hasn't started yet. "Dealers are expressing confidence by beginning to stock for fall, but in relatively conservative manner. Good news came last week in distributor- to-dealer sales figures for holiday week ended July 7-up 26% from last year's same week (see State of the Industry). It was first increase over 1966 in.6 weeks. "`Business is pretty good but is isn't showing up in the numbers.' We've heard this again & again in last few weeks. Probable explanation is that Industry sales figures for last 4 weeks have included fewer than normal RCA sets as result of strike which choked off production through July's first week. "RCA is now in production, although it's officially in vacation period. Company encouraged employes to work through vacation, and quite a few chose to, according to RCA Sales Corp. Pres. B. S. Durant. He told us RCA has `shortage of merchandise right now.' He reiterated forecast of good fall, saw 1967 sets being cleaned up in short order with `68-model prices holding firm. He even mentioned possibility of price increases later in model year if `significant cost premures' can't be designed out of sets. "There were individual company reports of improved sales. Philco-Pord reported June was best single sales month in its history, for all consumer products, with color TV sales 238% ahead of June 1966, console phonos up 7%. Magnavox, too, said its June orders showed sharp upsurge, resulting in significantly higher mid-year backlog than in 1966 . . . "(Page 9). In sum, this is far from a depressed industry. Its present performance is keep- ing pace with an unprecedented 1966 record (a development which no doubt is the envy of other industries producing consumer goods) and signs indicate that 1967 will be another record year. Notwithstanding the facts to the contrary, the petitioners insist that the color t. v. set producing industry is in a poor state. To prove their point, the petitioners have chosen a number of news reports which they have paraphrased and which they offer to the Committee to support their claim. Thus, they submit the following capsulized comment on a news report concerning Owens-Illinois: "Owens-Illinois. a major supplier of glass bulbs for color television pic- ture tubes, reported on April 19, 1967, a 36.6% drop in earnings, and said 15PetftIon, p. 6. 16Electronjc TrendR, May, 1967, p. 6. 17 Industriea Yearbook, 1967, p. 11. 95-15e 0-68-pt. 8--5 PAGENO="0066" 3502 that one major factor causing this was the `failure of color television to live up to expectations.' (The Evening Star, April 20, 1967) ." (Petition, p. 6). The body of the news item referred to reads as follows: "Failure of color television to live up to expectations in the first quarter of 1967 was one of the factors leading to a decrease in earnings for Owens- Illinois, Inc., compared with the first three months of 1966, shareholders were told. "`Not only was the TV bulb market soft, but the attrition was particularly severe on the items in which our company had established itself as the prin- cipal supplier,' chairman J. P. Lenis said." (The Evening Star, Washington, D.C., April 20, 1967, p. A22.) At the outset, the failure of color television to live up to expectations is not cited as a "major" factor in the depressed earnings of Owens-Illinois for the first quarter of 1967 ; it is "one of the factors". Moreover, whatever problems this company is having with sales of glass tubes for color t.v. picture tubes, they are not import-caused: "* * * Costly problems in the manufacture of color TV tube envelopes, a temporary imbalance in bottle inventories, and start-up costs related to new plastic and paper facilities, are the principal factors accounting for tne decline. By far the most significant of these difficulties is the TV tube envelope situation. Production problems now seem to be resolved, however, and Owens-Illinois expects to regain quickly its position in this field, which is second to Corning Glass works * * ~ 18 In its 1966 Annual Report to its shareholders Owens-Illinois discussed the 4th quarter 1966 decline in earnings, a situation which no doubt continued into the 1st guarter of 1967 : "While total sales for 1966 were 10% ahead of 1965, net earnings increased only moderately over last year and did not fully reflect the increased sales volume. Earnings for the first three quarters exceeded those of last year, but fourth quarter earnings were lower than the comparable period of 1965. This was due to reduced efficiencies and higher labor costs at several key locations caused by efforts to operate at maximum capacity in areas of extremely tight labor availability, to preoperating and start-up costs on new facilities, and to interest expense in financing the expansion program." `~° A number of news reports in the Wall Street Journal are summarized as follows: "General Electric laid off 1,350 workers in December 1966 and 1,075 work- ers in February 1967 at its Syracuse, New York, television and electronic components plants, and shut the entire television plant down for a week in February. GE furloughed an additional 300 workers at its Portsmouth, Virginia, television plant in January 1967. (The Wall Street Journal, Janu- ary 26, 1967; January 12, 1967; February 24, 1967)" 20 The cited news items contain these additional points which, while omitted from the summary set forth in the petition, are quite relevant to the matter at hand and must be included if the record is to be complete and accurate: "* * * A GE spokesman at Portsmouth added that the layoffs there were due to a `slump' in black-and-white TV sales. . . ." (The Wall Street Jowr- nal, January 12, 1967, p. 2). "The February closedown will affect production of color and monochrome TV sets in screen sizes 18 inches and larger.... *** "In Syracuse, Gilbert Dwyer, GE manager of relations and utilities, said, `The unusually high levels of business activity in the first three quarters of 1906 led to employment levels far exceeding what GE believes to be optimum for Syracuse. *** "`Broad seasonal fluctuations are a way of life in TV manufacturing, `Mr. Dwyer said. `Notwithstanding the annual adjustments, GE's TV employ- ment has shown a steady increase in recent years.'" (The Wall Street Journal, January 26, 1967, p. 5). Manifestly, the bare reference to "lay offs" is meaningless without these sig- nificant qualifying comments. Moreover, it is somewhat disingenuous to use 18 Opinion Letter, Johnston, Leman & Co., July 21, 1967, dealing with Owens- Illinois. 19 Annual Report 1966 Owens-Illinois, p. 2. 20Petition, pp. 6-7. PAGENO="0067" 3503 figures which relate to company actions based on market factors concerning black-and-white television sets in a petition seeking an increase in the tariff on color t.v. picture tubes. Again, petitioners give their version of another news report as follows: "Westinghouse furloughed 600 workers at its TV-radio plant in Edison, New Jersey, and also cut back on production of color television sets in Janu- ary 1967. (The Wall Street Journal, January 12, 1967)." ~ But the news story aiso inciucted this comment: "Despite the layoffs at Edison, Westinghouse said its labor force there remains 30% above the year-ago level and 100% above the number employed in January 1965." (The Wall Street Journal, January 12, 1967, p. 2). Before this Committee can assess the real impact of the reported Westinghouse action, it obviously must have all of the facts. A news report of a lay-off at General Electric's Syracuse, New York plant is summarized as follows: "General Electric laid off an additional 1,500 production workers at its Syracuse, New York, television and electronic components plants in March 1967, in the third major round of furloughs at those plants. Dwindling sales of color television sets was cited as a primary factor in the cutback. GE also shut down its Syracuse plants for a week in March in a fourth effort to cut inventories in face of the decline in television set sales." (The Wall Street Journal, March 1, 1967).~ The news story contained the following significant statement: "Company spokesman said the major TV department work suspensions and employe cut-backs stem from a `decline' in black-and-white set sales and a `slower than anticipated' growth in color set sales. . . . (The Wall Street Jo'urnal, March 1,1967, p. 7). Again, completeness and accuracy demand not only including the role of black- and-white set sales decline in the lay-off picture but refraining from converting "slower than anticipated growth" into "dwindling sales". Another lay-off action news report is paraphrased as follows: "Standard Kollsman laid off about 1,200 workers at its Meirose Park, Illinois; Oshkosh, Wisconsin; and Ottumwa, Iowa, television-tuner plants in April 1967." (The Wall Street Journal, May 2, 1967).~' Omitted is this very significant fact included in the same news item: "A Standard Kollsman spokesman noted that some of the layoffs lasted only a few days." (The Wall Street Journal, May 2, 1967, p. 2). A news report of Admiral Corporation's first quarter 1967 loss in earnings is digested by petitioners as follows: "Admiral Corporation suffered a loss of $275,843 in the first quarter of 1967 in comparison with earnings of $3,667,115 in the first quarter of 1966, as a result of the softening in demand for color television sets. Admiral's television and component plants at Harvard and McHenry, Illinois, and Sun Prairie, Wisconsin, were closed in April `for considerable periods of time.'" (The Wall Street Journal, May 5, 1967) .~ But this same news story contained facts which showed that Admiral's officers were not overly concerned: "* * * At the meeting, Mr. Siragusa said management felt the dividend should be paid because the slackening in color-television demand was only `temporary'. * * * "Admiral is rapidly getting into the production of 18-inch and 20-inch rectangular color tubes, the executive said The company's tube facilities, which previously produced only 23-inch tubes, operated at a `substantial profit' last year, he said.* * ~" (The Wall Street Journal, May 5, 1967, p. 6). It is abundantly clear that the domestic industry producing color t.v. receiv- ing sets is not in any depressed state. While it is true that this industry set its sights rather high and its sales thus far in 1967 have been short of this mark, nevertheless the industry is doing well and is on its way to another record year in 1967. It is equally apparent from the full record that no case of import-caused in- jury or threat of injury is present here. Petitioners know this, else they would not have found it necessary to be so selective as to the facts they presented to 21 Petition, p. 7. ~ Petition, p. 7. ~ Petition, p.8. ~ Petition, p. 8. PAGENO="0068" 3504 the Committee nor would they have found it expedient to omit relevant facts so clearly known to them. In these circumstances, the Committee should reject this petition forthwith. V. THE ROLE OF IMPORTS OF COLOR TELEVI5ION PICTURE TUBE5 The Magnavox Company accounted for a large percentage of U.S. color t.v. picture tube imports in 1966 and in the first half of 1967. Another large importer of such tubes is a U.S. company which is a member of the Tube Division of ETA, one of the petitioners herein. While Magnavox' color picture tube imports are large in relation to total im- ports of such tubes, they are relatively small in relation to Magnavox' total purchases of picture tubes. Indeed, Magnavox buys in excess of 90 percent of its color t.v. picture tube requirements from U.S. companies who are among the petitioners herein. As the Committee knows, Magnavox is not an integrated color television set manufacturer. Several of the components needed for building a color t.v. set Magnavox must purchase from outside sources, either domestic or foreign. In many cases-such as the case with color t.v. picture tubes-the outside domestic sources available to Magnavox are also producers of color t.v. receiver sets which are sold in competition with sets made by Magnavox. In other words, Magnavox purchases color t.v. picture tubes from its competitors in the color t.v. receiving set industry. In its report on H.R. 7969, 89th Congress, the bill which became the Tariff Schedules Technical Amendments Act of 1965 and which established the present temporary 12-percent duty on color t.v. picture tubes, the Senate Committee on Finance described Magnavox' posture as a color t.v. set producer which does not produce color t.v. picture tubes as follows: "While many television set mani~facturers in this country also produce picture tubes, there are other set manufacturers who are not equipped to manufacture tubes but must rely on their integrated competitors or other sources for picture tubes they need for their sets. Without access to a reason- ably priced source of picture tubes for their color sets these manufacturers would be unable to compete in the expanding market for color television pic- ture sets in this country." ~ In all respects, this statement remains true today. "Without access to a reason- ably priced source of picture tubes" for its color television sets, Magnavox "would be unable to compete in the expanding market for color television picture sets in this country." Following this fundamental economic mandate, Magnavox has sought out "rea- sonably priced" sources for its color t.v. picture tube needs. It has made a decision to purchase the lion's share of its color tube requirements from domestic color t.v. tube sources; at the same time, it has been forced by the economics of the situ- ation to purchase a small part of its needs abroad. The ironic feature of this present move to raise the duty on Magnavox' color t.v. tube imports by 150 percent is that it originates with those U.S. companies which enjoy in excess of 90 percent of Magnavox' color t.v. tube business. These companies are well acquainted, therefore, with the whole spectrum of Magnavox' color t.v. tube needs. They know also that the domestic prices of color picture tubes similar to those purchased from abroad by Magnavox are not compatible with this economic imperative. In these circumstances, Magnavox can only conclude that the petitioners are seeking to preclude Magnavox from purchasing its limited foreign color t.v. pic- ture tube requirements at a reasonable price and are seeking to force Magnavox to purchase 100 percent of its color t.v. picture tube requirements from U.S. producers of such tubes-the petitioners herein. Since a tariff increase on color t.v. picture tubes is not needed to remedy or prevent any injury because there is no such injury or threat involved, Magnavox has no choice but to reach this conclusion. Removing Magnavox' area of choice as to where it can buy certain of its color t.v. picture tubes at reasonable prices can only hurt Magnavox and its workers. ~ Senate Report No. 530, 89th Congress, p. 9. PAGENO="0069" 3505 For if Magnavox' competitive potential is impaired, its operations will be hurt and those who depend on a viable production program will suffer. Even under the most compelling circumstances the government should be extremely reluctant to take any action having such dire consequences. But here, where there is no reason, much less a compelling reason, to take the action proposed by the peti- tioners, fair play and common sense dictate that no such action should be taken. We respectfully submit that the small quantities of color t.v. tubes which Mag- navox purchases from abroad are important to Magnavox. Reason and logic re- quire that Magnavox be permitted to continue to have access to these needed color t.v. set components without any additional tariff burden. VI. CONCLUSION We have demonstrated in the preceding sections of this memorandum that there is no basis for the petitioners' request for a 150 percent increase in the present duty on color t.v. picture tubes. We have shown, moreover, that such an increase in this tariff will materially affect Magnavox and its workers. The present temporary rate of duty of 12 percent ad valorem was established by Congress in 1965 to run for approximately four years. On the basis of this action by Congress, Magnavox (and no doubt others similarly situated) has made plans and commitments which are intricately concerned with the preservation of this 12 percent rate of duty at least until 1969. These plans and commitments involved the expenditure by Magnavox of a good deal of time, effort and money. These corporate actions were taken in good faith and reliance on the continuance of the status quo as regards the tariff on color t.v. picture tubes. It is inconceivable that Congress would now consider increasing this duty, unless, as we acknowledged previously, overwhelming and compelling reasons mandated such action. Since there are no such reasons extant, we respectfully submit that justice and equity require that the present 12 percent duty on color t.v. tubes not be increased. For the reasons given herein, we urge the Committee to reject the petition in question. Respectfully submitted, THE MAGNAVOX Co., ALFRED R. MCCAULEY, JOHN E.. BAKER, Attor,meys for the Majjnavoa~ Co. Of Counsel: Graubard, Moskovitz & McCauley. September 13, 1967. (The following statement and letters were received by the committee:) STATEMENT OF FRANK L. RANDALL, JR., PRESIDENT, AMPEREX ELECTRONIC CORPORATION I am Frank L. Randall, Jr., President of the Amperex Electronic Corporation. Amperex welcomes this opportunity of expressing its views on trade and tariff proposals before this Committee, as they affect the electronics industry. Amperex Electronic Corporation is a manufacturer of electronic tubes, semi- conductors, integrated circuits, passive components and electronic circuit mod- ules. It has seven factories in three states and investments in two companies with factories in two other states. Total employment is 1500. Manufacturing locations are: (1) Hicksville, New York (electronic tubes) (2) Hauppague, New York (passive components) (3) Patchogue, New York (electronic circuit modules) (4) Slatersville, Rhode Island (semiconductors) (5) Slatersville, Rhode Island (electro-optical devices) (6) Cranston, Rhode Island (integrated circuits) (7) Hoboken, New Jersey (warehouse, packing and branding) Investments include: (1) Reeve Electronics, Inc., Chicago, Illinois (2) Science Accessories Corp., Southport, Connecticut PAGENO="0070" 3506 Amperex Electronic Corporation is opposed to any legislation which would hamper international trade, for the following reasons: 1. International trade creates industry for the United States. Amperex in the early 1950's embarked on a program of importing European components, creating a market and establishing manufacturing facilities for these products to serve this market place. Its growth from a small factory in Brooklyn to its present seven locations is concrete evidence of imported products creating jobs and opportunities for local citizens as well as serving industry as a component supplier. 2. International trade makes available to the United States the research and development from abroad which assists our domestic industry in staying at the forefront of industrial progress. Amperex has introduced products from the research laboratories of Free Europe which have assisted our customers in main- taining their leadership in their particular field and has served industry by mak- ing available the most advanced technologies. Two outstanding examples are now being manufactured in our electro-optical device factory in Slatersville, Rhode Island. These are the Plumbicon Camera Pickup Tube now used by all manu- facturers of Studio Quality Color T.V. Cameras. Another is the Image Intensi- fier X-Ray Tube which is used by all manufacturers of radiological instruments. 3. The balance of trade is outstandingly favorable to the Electronics Indus- try. Statistics have already been presented to this Committee showing the favor- able balance of trade in the total Electronics Industry, Industrial and Military Equipment and Components. Only in the consumer products area do imports exceed exports. 4. Low priced consumer electronics products serve a market place which can- not be served by domestic industry because of our higher costs of manufacture. Millions of low income citizens of our country are exposed to entertainment and educational opportunities that would be unavailable to them because of price if they were not supplied from overseas production. 5. Domestic industry is stimulated and afforded the opportunity to expand in local markets which were developed initially by low priced imported products. 6. The export market provides a fertile field for expansion of our domestic economy by supplying foreign market places. Restrictive action on our part would most certainly provide retaliatory measures by nations in our important overseas markets. 7. The robust health and growth of the United States Electronic Industry cer- tainly attests to the fact that we can thrive in restriction free world trade. We strongly recommend that the Ways and Means Committee not taken any action which would endanger the position of the United States Electronic In- dustry and its position in the World Market Place. * * * Resolution passed at the General Membership Meeting of the Tube Division, Electronic Industries Association, June 5, 1968, at Chicago, Illinois, inserted in this record by Frank L. Randall, Jr., President, Amperex Electronic Corporation. "Whereas: It is an unassailable economic fact that free and equal Interna- tional Trade is desirable and; "Whereas: Import quotas, dumping and other non-tariff barriers are restrictive and tend to stifle International Trade, "Therefore, be it resolved: The Tube Division of the Electronic Industries Association is opposed to dumping, non-tariff barriers, and the establishment of import quotas or any restrictive devices and supports all effort to eliminate im- port quotas and other measures which restrict imports, as presently imposed by other nations and; "Be it further resolved: The Tube Division of the Electronic Industries Asso- ciation reserves judgment on the use of restrictive devices as a defensive measure against nations who employ import quotas or other restrictive devices as a deter- rent to International Trade and; "Be it further resolved: The Tube Division of the Electronic Industries Asso- ciation supports equity in foreign trade and that it is the proper function of this organization, all Member Firms and the Federal Government to actively promote and work to assure the establishment and maintenance of such equity in foreign trade." PAGENO="0071" 3507 ELECTRONIC INDUSTRIES ASSOCIATION, Washington, D.C., July 12, 1968. Hon. WILBUR D. MILLS, Chairman, House of Representatives, Committee on Ways and Means, Washington, D.C. DEAR. MR. CHAIRMAN: The Government Products Division of the Electronic Industries Association represents United States manufacturers of special elec- tronic systems and equipment required by the Government. I have been directed to inform you that this Division, at its recent annual meeting, voted to associate itself with ETA's Consumer Products Division in opposing any import quotas on electronic articles. Sincerely, WM. H. MOORE, Staff Vice President, Government Products Division. ELECTRONIC INDUSTRIES ASSoCIATIoN, Washington, D.C., July 10, 1968. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, U.S. House of Representatives, Washington, D.C. DEAR Mn. MILLS: The Semi-Conductor Division of the Electronic Industries Association, representing the United States manufacturers of semi-conductor devices supports the position of the Consumer Products Division of the Elec- tronic Industries Association, as stated before your Committee on June 25, 1968, as opposing the imosition of import quotas on all electronic articles. Sincerely, F. E. JAUMOT, Jr., Chairman, Semi-Conductor Division. The CHAIRMAN. Mr. Hobbs, we are glad to have you with us this morning and if you will identify yourself for our record we will be glad to recognize you, sir. STATEMENT OP CLAUDE E. HOBBS, CHAIRMAN, FOREIGN TRADE COMMITTEE, NATIONAL ELECTRICAL MANTJTACTU1tEI~S ASSO- CIATION; ACCOMPANIED BY BERNARD PALK, VICE PRESIDENT Mr. HOBBS. Mr. Chairman, thank you. My name is Claude E. Hobbs. With me is Mr. Bernard Falk, vice president of the National Electri- cal Manufacturers Association. I am director of government relations, Westinghouse Electric Corp. I am here today as chairman of the Foreign Trade Committee of the National Electrical Manufacturers Association, which we abbreviate as NEMA. Westinghouse is a member of that association. NEMA's membership consists of approximately 475 manufacturing firms, the principal U.S. manufacturers of electrical and allied pro4ucts. Prod- ucts covered by the association are used in the generation, transmission, distribution, and utilization of electrical energy. A list of our member- ship and the product sections has been supplied to the committee staff. The CHAIRMAN. Mr. Hobbs, if you omit any part of your statement do so with the knowledge that the entire statement will appear in the record. Mr. HOBBS. We have culled the statement down to where it will be just about as brief to read it, Mr. Chairman, without inserting any voluminous material in the record. PAGENO="0072" 3508 The CHAIRMAN. All right. Go right ahead. Mr. HOBBS. NEMA suports the international trade policies of the United States as set forth in section 102 of the Trade Expansion Act of 1962, as follows: "The purposes of this act are, through trade agreements affording mutual trade benefits-(1) to stimulate the economic growth of the United States and maintain and enlarge foreign markets for the products of U.S. agriculture, industry, mining, and commerce; and (2) to strengthen economic relations with foreign countries through the development of open and nondiscriminatory trading in the free world . . ." Our views on the conduct of U.S. foreign trade policy are essentially the same as they were prior to the Kennedy round. In preparation for that round of tariff negotiations in 1964, NEMA. testified before the trade information committee that, in general, we were basically a free-trade industry, that we supported the Government's efforts to reduce virtually all barriers to world trade in electrical products and that, with rare exceptions, we would not request that the products of our industry be reserved from negotiations. We pointed out that there were a limited number of electrical products which were deserving of special consideration in the nego- tiations. One group of products we felt then and still believe to be particu- larly deserving of separate attention is what we call heavy electrical equipment-the large, high-technology turbine generators, power transformers and power circuit breakers used by electric utilities for the generation and transmission of electric energy. This is because there is not free and open international trade in this equipment. Foreign manufacturers can and do sell it in the United States. But we cannot sell such equipment in their markets because it is excluded by nationalistic buying policies. Simply stated, here is one-way trade in a large industry in which the United States has always excelled. Therefore, in 1964, we requested that U.S. tariffs on these products not be reduced unless the nontariff barriers of other countries were also reduced in a manner which would provide U.S. manufacturers access to foreign markets for such products equal to the access of similar foreign equipment to U.S. markets. Nevertheless, U.S. duties on this equipment were cut the full 50 percent in the Kennedy round, without any foreign country concessions to open up their protected home markets to U.S. competition. We are confident that a more favorable trade balance can be achieved if U.S. manufacturers of electrical equipment used by electric utilities* are given a fair opportunity to compete in Europe and Japan, which could also improve certain competitive conditions in the U.S. market. American purchasers of utility equipment from foreign manufac- turers reached new levels in 1967, when orders placed with foreign supplies by U.S. utilities exceeded the cumulative total of all such purchases during the preceding 75 years. Nearly $250 million of such equipment was ordered from abroad last year by both Government- owned and investor-owned utilities. In determining proper future trade policy of the United States, ci~itical questions for American manufacturers of large electrical equipment are whether they are to be given a genuine opportunity to PAGENO="0073" 3~~O9 compete abroad on fair terms, and what appropriate steps our Govern- ment should take to bring this about. To understand this problem it is necessary to know some of the facts about electric utilities in the principal countries of the free world which have industry capable of manufacturing large generating and transmission equipment used in electric utility systems. These nations, other than the United States and Canada, are principally the coun- tries which are members of the European Common Market, the Eu- ropean Free Trade Association, and Japan. In varying extent the electric utility systems in most of these coun- tries are owned, operated, or controlled by government agencies. Their purchases of large electrical equipment are either controlled by, or are fully responsive to the policies of their governments. None of them will buy large electrical equipment from American manufac- turers, with the limited exception of equipment of advanced design which their home manufacturers cannot yet make. In the unusual case where a utility in one of these countries buys an advanced, larger and more efficient steam turbine generator or a nuclear plant from a U.S. manufacturer, they are usually buying a prototype with a tie-in licens- ing arrangement making the designs and detailed manufacturing in- structions available to one of their home manufacturers. Many of these countries have plants and personnel capable of manu- facturing large electric generating and transmission equipment. Usu- ally they have the capacity to make more equipment than their home country utilities need year after year. For example, while all, or most, of the capacity of British manufacturers of large power transformers is used for supplying the British home market in some years, in other years they have excess capacity available for export sales. This is true with respect to manufacturers of a whole range of other electrical equipment in Britain and also in other industrialized countries. They often seek export sales in the United States at prices lower than they obtain in their home country markets. Realizing high profits in their protected home markets, they thus obtain the wherewithal to capture sales in the United States at greatly reduced prices. During the past 10 or 15 years, the principal U.S. purchasers of large electrical equipment from foreign suppliers have been agencies of the U.S. Government-TVA, Bonneville Power Administration, Bureau of Reclamation, and the Corps of Engineers. Many of these purchasers were at prices considerably below those then being received by the foreign manufacturers for similar equipment in their home markets. U.S. Government policies of long standing have encouraged this one-way trade in electrical equipment despite recommendations for reciprocity in Government purchasing. In 1954, the report of the Randall Commission on Foreign Eco- nomic Policy stated as follows (p. 45) The Buy American Act and legislative provisions of other acts containing the Buy American principle should be amended to give authority to the President to exempt from the provisions of such legislation the bidders from other nations that treat our bidders on an equal basis with their own nationals. Pending such amendment, the President by Executive Order should direct procurement agen- cies in the public interest to consider foreign bids which satisfy all other con- siderations on substantially the same price basis as domestic bids. PAGENO="0074" 3510 That same year, an Executive order put part of this recommenda- tion into effect, but not all. It established the principle that American bids to Government agencies which exceeded foreign bids by more than 6 percent were to be deemed unreasonable, and that foreign bids should be accepted in such cases. But the Executive order did not re- quire that this policy relate only to the bidders from other nations that treat American bidders on an equal basis with their own nationals. While U.S. Government procurement policy is not the responsibility of this committee, we believe it should be of interest to this committee when Government procurement has a significant impact on our bal- ance of foreign trade and our balance of payments. The dramatic increase in orders for electrical equipment placed abroad last year, especially in the light of the one-sided results of the Kennedy round with respect to the heavy electrical equipment indus- try, lead us to some observations concerning future trade policy. Ambassador Roth and other important officials have said that from now on tariffs will become relatively unimportant as a deterrent to international trade. We believe this is correct, and that nontariff bar- riers which now and in the future obstruct the flow of trade are the most significant matters for the attention of Congress and our trade policy officials. We believe that linear, or across-the-board reduction of tariffs or other trade barriers will not be appropriate for the future. The volume of trade in given product lines or industries should no longer be the principal criterion for swapping concessions respecting other, unre- lated products. From now on, in our judgment, more specific and in- formed attention must be given to the economics of any industry whose trade is affected by concessions, and to the impact of such concessions on the affected industry. The industry we are discussing is a good example. Electricity is electricity wherever it is used. There are substantial similarities in the machinery that generates it and transmits it to locations where it does its work. While there are differences in designs and efficiencies, British generators can produce electricity in the United States or in France, and American equipment could serve British or Italian needs. Techni- cal reciprocity in electrical equipment can be universal. But the eco- nomics are far from universal unless trade barriers or lack of barriers are at least reciprocal. Electrical generation and transmission equipment is fundamental to maintenance and improvement of living standards throughout the world. The markets for these products in the United States and other industrialized countries are of substantial magnitude. Because of the importance of this equipment, both in terms of foreign trade and human comfort and convenience, and in view of the unusual govern- mental character of potential foreign buyers of these products, we be- lieve it is essential that the U.S. (xovernment utilize every available tool to eliminate promptly those discriminatory procurement practices which close major foreign markets to our electrical equipment manu- facturers. An adjustment of U.S. Government procurement policies could well be part of such an effort. If this committee and the Congress decide to enact a renewal of the trade policies and provisions set forth in the Trade Expansion Act of PAGENO="0075" 3511 1962, we hope you will emphasize the essentiality of obtaining mutual trade benefits for the products of this industry which are sold to utilities, as well as for industrial products in general. Such a congres- sional mandate should apply to any future round of negotiations to reduce trade barriers, and also to any less significant negotiations prior to a new large-scale effort. We appreciate the opportunity of presenting these views to you. The CHAIRMAN. We thank you, Mr. Hobbs, for bringing to us your views. Are there any questions? Mr. Curtis. Mr. CunTIs. Mr. Chairman, I think in this paper, which I think is excellent, we have what I would say is a classic example of the disman- tling of tariffs and then the emergence of the importance of these non- tariff trade barriers. It also points up this very difficult problem of state ownership and as you point out, the difficulty of American enterprise which is not state-owned in competing with it. The state-owned enterprises fre- quently don't even have good cost accounting so they don't even know themselves what it costs to produce a unit. You have built in therefore just by its very nature tremendous government subsidies. I am leading up to this following question. Do you think that the countervailing duty laws that we presently have might be utilized to dig into this subsidy aspect, which I think you implied is part of the difficulty you have? Mr. HOBBS. I think so, Mr. Curtis, although this has to be a matter of judgment because you have to fit the facts to the statute. The statute says whenever any foreign country or business organization, "shall pay or bestow directly or indirectly any bounty or grant" on the ex- port of any article produced within the foreign country then the Sec- retary of the Treasury can assess countervailing duties. Well, in the British case, for example, the principal buyer of elec- trical equipment in Great Britain is the entirely government-owned Central Electricity Generating Board which is like our TVA, except it is much larger and covers a much greater proportion of the United Kingdom. It covers most of it. The CEGB has written agreements with British manufacturers of electrical equipment whereby they guarantee the manufacturers a profit rate of approximately 15 per- cent or greater on their domestic business, and the agreements permit loading into the prices of domestic business the research and develop- ment expenses for all business, including exports, and for overseas selling expenses. That is a subsidy. Whether you want to call it government directly or indirectly, or a bounty, it is certainly calculated to help and does help British manufacturers of electrical equipment to sell it abroad, into the United States specifically, at prices which are much lower than those at which they sell in their home country. It seems to me that this ought to be a classic case for the imposition of countervailing duties. Another section would be, section 252 of the Trade Expansion Act of 1962. I think it clearly ought to fit this situation. Mr. CuRTIS. I agree with you and I think it is most important that we start moving in this area. There is an argument beyond the very valid argument you are making. If we want reciprocity, then if we PAGENO="0076" 3512 do not apply a rigid buy-American rule they should not be applying their buy-national acts. In fact they don't even have to do this buying by law. It is the structure that permits them in effect to buy national. That is about the only way they could do it. Well, one other detail, because this has been a problem before this committee ever since I have been on the committee. You relate it back to 1954. At one time you were pointing out that you felt our own governmental agencies, such as TVA, were not purchasing on the basis of procuring the most efficient product and that they were only looking-if I am in error in stating this I want to be corrected-at the sale price of, say, a big generating unit and were not counting the downtime of that particular unit. One of the competitive advantages for American production of generators is that the instance of down- time is considerably less. Is this still a factor in this area? Mr. HOBBS. Well, Mr. Curtis, I think the TVA certainly counts all factors in the cost of operating the equipment, including the capital cost and depreciation, and the fuel cost. Mr. CURTIS. You say they do now. Mr. HOBBS. I think they always have. Mr. CURTIS. The argument was that they didn't. That is why I raised it. Mr. HOBBS. I think rather than characterize what TVA does, let me state certainly what Westinghouse Electric believes. We believe that our equipment has a better record of downtime than most of the foreign equipment. I think we can prove that by carefully kept records which have been made available to us by utilities that have both types of equipment, and that is a significant consideration in the value of the equipment that they are using. Mr. CURTIS. You are not commenting on whether my statement was correct or not, but at least now TVA, to use an example, does consider downtime in purchasing formulas? Mr. HOBBS. They certainly say that they do, and I have to assume that they are correct, Mr. Chairman. Mr. CURTIS. OK. Thank you. The CHAIRMAN. Mr. Schneebeli. Mr. SCHNEEBELI. Mr. Hobbs, you say that none of our trading partners buy any large electrical equipment from us. You mention the instance of the United Kingdom where the Government agency more or less precludes anybody else. What form of restriction do some of these other nations have? Is it usually decided by the government body or are there other forms of restrictions which they use in not buying from us? Mr. HOBBS. They are very subtle. I think you have to take each country separately. Mr. SCHNEEBELI. There isn't any general pattern? Mr. HOBBS. In France, for example, the whole electric system is owned by the government. They simply won't buy from you, period. We send salesmen to talk to them. They say, "That is very nice but we only buy from French manufacturers." As far as I know there is no law or specific regulation that they point to. They just say "That is the way we do business in France." PAGENO="0077" 3513 Mr. SOHNEEBELI. This seems to be the general pattern then, doesn't it? Mr. HOBBS. It is true in Italy where the system is government-owned. In Switzerland the system is owned I believe by the cantons, which are regional governmental bodies. They would not think of buying any- thing except; of Swiss manufacture. The Italians occasionally have bought turbines and large equipment, but Italian purchases are good examples of what I referred to as pro- totype purchases. I know that at least on one occasion the Italians bought a steam turbine generator from Westinghouse and one of their manufacturing companies received from us a license to copy that ma- chine in the future. In effect, they bought the first one of that size and efficiency but no more. This is a general pattern. It applies to the countries of northern Europe. The Japanese systems I believe are investor-owned, but they are very responsive to tight government controls on where they buy their equipment. Mr. SCHNEEBELI. This restriction not only applies to the United States; it; applies to importing from any other nation? Mr. HOBBS. That is right. The French won't buy a British machine, and the British will not buy a French machine. Mr. SCHNEEBELI. So it is not applied to us particularly. Mr. HOBBS. The only reason it particularly applies to us is while they can't sell in any other developed country markets, they can sell in our market, but we can't sell in theirs. Mr. SCHNEEBEUI. In that connection my next question is have you gone the route of the antidumping provisions in trying to protect yourselves against; this? Mr. Hoims. We are now intensively making studies to see if we can present an antidumping action. The trouble is that none of the pur- chasing data in the foreign countries is published. It is all done by private negotiations. The bids are not opened publicly, and you prac- tically have to get a detective to find out the prices at which they sell this equipment in their own countries. We are accumulating some of that information. We have had people over there for the past year or so trying to do just what you are saying. We think we have evidence of dumping at least from one of the coun- tries, but this will present us a problem because our industry in the last; couple of years has been at the peak of a buying cycle. Our plants are well loaded so we may have difficulty this year, last year, maybe next year, in establishing that we were injured by this dumping. It will depend on the legal standard of what constitutes injury in our case. Mr. SCHNEEBELI. I notice that Farranti in England has been getting a lot of our business. Is the United Kingdom responsible for most of the purchases of that company in 1967? Mr. HOBBS. I won't say most of them. They were responsible for a large share of these purchases. Mr. SCHNEEBELI. What percentage of our market in 1967 was for- eign purchases? Mr. HOBBS. It varies by type of equipment. We are only talking here specifically about three basic types-large turbine generators, large power transformers, and the large power circuit breakers. American PAGENO="0078" 3514 manufacturers lost approximately-this is on the basis of orders placed in 1967 by U.S. utilities, both investor-owned and Government- owned-16 to 17 percent of the turbine generator business to foreign suppliers last year. The power transformer orders placed abroad were a smaller percent- age, 7 percent perhaps, and the power circuit breakers maybe 5 percent. You see, this is not published information as yet and these articles require long leadtime so that some of them are shipped in different years than when the orders are placed. Mr. SOHNEEBELI. So it would show up more the next couple of years. Mr. HOBBS. In later years, when the import shipments are received in this country. Mr. SCHNEEBELI. And you imply that the buy American provisions are very ineffectual? Mr. HOBBS. They have been almost totally ineffectual, and, remem- ber, they apply only to Government agencies. Mr. SCHNEEBELI. Yes, I realize that, but even so TVA is buying lots of large generating equipment. Mr. HOBBS. The foreign prices on power transformers during some of the past 7 oi~ 8 years have averaged as much as 40 percent below the level in the exporting countries, so a 6 percent differential applied here, plus import duty, has not been enough to stop them. Mr. SCHNEEBELI. That is all, Mr. Chairman. The CHAIRMAN. Mr. Betts. Mr. BETTS. Mr. Hobbs, on page 3 you mention this request that your company made that there be no reduction in tariffs unless the nontariff barriers on the part of other countries were also reduced and appar- ently you didn't win on that score and in the Kennedy round the tariffs on these particular products were reduced 50 percent. Do you know whether or not these nontariff barriers that you asked to be removed are in the agreement to be removed if we removed the American selling price? Mr. HOBBS. No, they are not part of that arrangement, Mr. Betts. Mr~ Bm'rs. So if we remove the American selling price these barriers will still exist? Mr. HOBBS. That would have no bearing on this problem. As a matter of fact, we are dealing principally with Government procurement here, at least procurement by publicly owned bodies, and under the GATT I believe Government procurement is not part of the negoti- ating procedure. Nonetheless, is is trade, but, in any case, the answer to your question is "No," nothing that is pending before Congress in the present legis- lation would specifically affect these nontariff barriers. Mr. BETTS. I just wanted to make sure whether there was anything in the offing that could help remove these barriers if we did something here, but apparently there is not. Is that correct? Mr. HOBBS. There is nothing in the bill before you now that would specifically affect them. Mr. BErrS. Now, then, also from your statement on page 3 at the bottom of the page, I would assume that you feel that the 50-percent reduction in tariffs is causing most of your trouble here. Is that correct? PAGENO="0079" 3515 Mr. HOBBS. These imports were coming in before the 50 percent went into effect, but this is a matter of opinion. Really we have no direct evidence, but many of the orders which were placed last year will not be delivered until 2 or 3 years from now when at least several of the five stages of reduction will have come into effect. I don't think those reductions alone are of sufficient magnitude to make a major difference, but it all adds up to a difference in the cost of entry in bringing these items into this country. Mr. BETTS. Thank you. The CHAIRMAN. Mr. Collier. Mr. COLLIER. The previous witness suggested that it would be preferable to prevail upon our foreign trade partners to remove their nontariff barriers rather than for us to impose reciprocal policies of this nature in our trade relations. Now you said to us, Mr. Hobbs, in answer to a question that there is nothing in this legislation that would deal directly with the removal of these nontariff barriers. Mr. HOBBS. Nothing specific, Mr. Collier. Mr. COLLIER. Well, I would simply submit that there is, and I might say, being realistic, that we are not going to impose nontariff barriers similar to those that have been imposed by foreign countries, would it not make good sense then to adopt a flexible quota ceiling type of pro- posal that would at least give us a wedge from which we could nego- tiate a removal of nontariff barriers? Otherwise we have no wedge with which to deal with nontariff bar- riers and certainly the quota provisions in the bill which I introduced would place us in a far more favorable position to put pressure, if you please, upon our foreign trade partners to remove nontariff barriers. Mr. HOBBS. I am speaking for a group which has not endorsed a quota principle, Mr. Collier, but we as a group have recommended to the Treasury Department and to an interagency group that the U.S. Government at least put itself in the best possible negotiating position in trying to remove these barriers. We think in our particular case that at least we could say "We are going to review U.S. Government purchasing policy and we would like to talk to you about yours." Now, at what stage we ought to impose restrictions against pur- chasing foreign equipment, I don't think we are quite ready to say. But we would certainly like to see the U.S. Government take a firm stand in insisting that foreigners either open up their markets to this equipment or that possibly in the future the U.S. Government agen- cies are going to stop buying foreign equipment. But this industry has not yet, and I don't think they will advocate the quota route unless conditions change a great deal for us. Mr. COLLIER. I am not suggesting, Mr. Hobbs, that they do and I am not suggesting that this is in and of itself a solution to the prob- lem of nontariff barriers. But I think we all recognize that in order to negotiate and if it is our intent to eliminate some of these prac- tices we have to have a wedge ourselves in order to provide the pres- sure necessary to remove these nontariff barriers, and it just seems to me that one of the things we can do is to establish a flexible quota PAGENO="0080" 3516 ceiling if for no other reason than to, for instance, during this interim period have some lever in our negotiations. That is all I have, Mr. Chairman. The CHAIRMAN. Mr. Burke. Mr. BURKE. Mr. Hobbs, I was wondering if you could inform the committee what percentage of increase in exports for heavy electrical equipment took place between the years of 1961 and 1967? In other words, how do the figures on exports compare for the year 1967 with the year of 1961? Has it increased, or decreased, or what? Mr. HOBBS. On imports into the United States? Mr. BURKE. No, exports. Mr. HOBBS. Exports from the United States? Mr. BURKE. From the United States. Mr. HOBBS. They have gone up slightly, Mr. Burke. We do not have the precise figures. We can supply those for the record if that would be helpful. Mr. BURKE. What I am trying to find out is if your figures on ex- ports compare favorably to the figures on imports coming in? Mr. HOBBS. The figures on exports of this particular type of equip- ments have over the years, including the years up through last year, ex- ceeded the import figures, I believe, but the exports are at least 70 per- cent financed by U.S. dollar assistance, either AID funds, or Export- Import Bank loans. In other words, the exports are related to dollar financing and are predominantly to the underdeveloped areas. Without U.S. Govern- ment dollar assistance in making those exports they would be cut by at least 75 percent, in my judgment. We are complaining prin- cipally about the countries that have the money to buy but won't buy from us. Mr. BURKE. In other words, the developed countries that manu- facture their own heavy equipment are not buying from us. Mr. HOBBS. They are not. They refuse to buy from us; that is correct. Mr. BURKE. Thank you. The CHAIRMAN. Mr. Curtis. Mr. CURTIS. Mr. Chairman, this discussion is moving into a very important area. Itis true in the Kennedy round that practically noth- ing was done about these nontariff barriers and the "buy National" provisions of all the countries. In my judgment this is certainly an area in which there needs to be some work done. I would like for the record to point out article III, section 8(a) of GATT: The provisions of this article- This provides for, in effect, fair trade- shall not apply to laws, regulations, or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale. In other words, all of our Buy American Acts, as well as buy British, and buy French, and so forth, are exempted from the GATT pro- visions. There are two ways we could go. PAGENO="0081" 3517 One, we could just put up more of these nontariff trade barriers our- selves and, indeed, this is what is going on. Our States now are engaged in putting into effect Buy American Acts. Whether it is constitutional or not is another question, but that is an internal matter. Or we could go the way that I think you are recom- mending of knocking down other countries' barriers, and I certainly am in accord. We can try to persuade these foreign countries to cut back on their barriers. We have plenty of buy American provisions ourselves. I pointed out one when the textile people were here the other day. We put in the defense appropriation bill a few years ago at their request that our military can only buy American textiles. That is a complete buy American. I would observe, and I hope our committee staff will study this and possibly witnesses will bring us material in this area, that the Buy American Acts of this variety nowhere compare to the buy French, buy British restrictions, and so forth, imposed by our trading partners. So again, to add to Mr. Byrnes' observation, let's not get our own sins out here in the open without at the same time pointing up that in con- text of what other nations do in this area, our barriers aren't as ex- cessive as theirs. And then this added factor that I pointed out. In nations that are more socialistic, more and more industry is owned by the government, and Buy National Acts are much more effective because there are more governmental agencies involved. I just wanted to put that in the record. The CHAIRMAN. Mr. Schneebeli. Mr. SCHNEEBELI. Has your industry ever considered going the route of the OEP? Would you qualify as a strategic industry under the Office of Emergency Planning? Mr. HOBBS. We submitted a petition under section 8 of the Trade Agreements Act, I believe it was the act of 1958 which had the pro- vision in it that you are referring to, Mr. Schneebeli, and were turned down. Mr. SCHNEEBELI. For what reason? Mr. HOBBS. Well, our basis was that the electrical equipment, the large steam turbine generators, and large power transformers, the key elements in the generation and transmission systems, were essential to national security, that the difficulty of repairs to foreign equipment if they were sabotaged or broke down in effect, was such that only Ameri- can equipment should be bought for the key elements of the U.S. sys- tem, and this was rejected. Mr. SOHNEEBEIJ. You didn't qualify. Mr. HOBBS. Our petition was turned down. They said they would continue to look at it. This was about 1959 or 1960 as I recall. Mr. SCHNEEBELI. Thank you. The CHAIRMAN. Again we thank you, Mr. Hobbs, for bringing to the committee your views. Mr. HOBBS. Thank you, Mr. Chairman. The CHAIRMAN. Mr. Stewart. Mr. Stewart, again we ask you to identify yourself for the record and those at the table with you. 95-159 O-68-pt. 8-6 PAGENO="0082" 3518 STATEMENT OP EUGENE L. STEWART, COUNSEL, PARTS AND DIS- TRIBUTOR PRODUCTS DIVISIONS, ELECTRONIC INDUSTRIES ASSO- CIATION, AND AMERICAN LOUDSPEAKER MANIJTACTURERS ASSOCIATION; ACCOMPANIED BY W. L. LARSON, VICE CHAIRMAN, PARTS DIVISION; R. W. WOODBURY, VICE CHAIRMAN, DISTRIB- UTOR PRODUCTS DIVISION; TYLER NOURSE, STAPP VICE PRESI- DENT, PARTS AND DISTRIBUTOR PRODUCTS DIVISIONS; AND HERBERT ROWE, MEMBER, WORLD TRADE COMMIT1~EE, PARTS DIVISION, AND VICE PRESIDENT, AMERICAN LOUDSPEAKER MANUFACTURERS ASSOCIATION Mr. STEWART. Mr. Chairman, I am Eugene L. Stewart. I appear here as special counsel for the Parts Division of the Electronic Indus- tries Association, the Distributor Products Division of that associa- tion, and the American Loudspeaker Manufacturers Association. With me at the table are Mr. Herbert Rowe, president of the Muter Co., who is a member, who is vice president of the American Loudspeaker Manufacturers Association; Mr. W. L. Larson, president of Switchcraft, who is vice chairman of the ETA Parts Division: Mr. R. W. Woodbury, who is vice chairman of the ETA Distributor Prod- ucts Division; and Mr. Tyler Nourse, who is the staff vice president of the Parts and Distributor Products Divisions. There is listed on the cover of my testimony the names of other industry representatives who are here. Each of them represents an im- portant segment of the components industry, and they will assist if needed in answering questions. The CHAIRMAN. Mr. Stewart, you will want your entire statement made a part of the record. Without objection, it will be made a part of the record and you are recognized, sir. Mr. STEWART. Thank you, Mr. `Chairman. In the interest of time I shall summarize our testimony; I hope concisely. The CHAIRMAN. You may be seated if you desire or stand, either way. Mr. STEWART. Thank you, Mr. Chairman. Let me say at the outset that there is no single industry known as the electronics industry. There are 25 industries in the standard industrial classification at the four-digit level which manufacture articles which have an electronic circuit. It is impossible, due to the great range of these products to classify them from a marketing or production point of view into a single industry. Electronic products cover an enormously wide spectrum of hard- ware in consumer, and industrial, defense and space areas, from tran- sistor radios to airborne computers, from electronic organs to measur- ing instruments for assembly lines. Let us make one thing clear on this record. The position that we support is opposed by the Consumer Products Division of the Elec- tronic Industries Association. But let us understand their position. That position is based upon the vote of companies which account for less than a majority of the IlLS, production of such products and that vote was heavily weighted by companies that are primarily im- porters of either consumer electronic products or electronic compo- nents. PAGENO="0083" 3519 There is nothing wrong with this, but so that the positions may be clear they are the importers. We are the domestic industry, the domes- tic producers. They want to be unrestricted in the importation of their products. We want to see some part of the American market enjoyed by American producers with American workingmen. Our economic interests are opposed, ours and theirs. They want to protect their investment in foreign plants. We want to protect our investment in American plants. They are protectionists just as we, but they wrap their protectionism in the semantics of free trade. To show the relative stake of each of these two industries, consumer products and components, in employment in the United States, please look at the following table: TABLE 1.-Employment in selected electronic industries, April1968 [In thousands] Consumer electronic products (Standard Industrial Classification 365)____ 133. 8 Electronic components and accessories (Standard Industrial Classification 367) 350.4 Source: U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, May 1968. Here we find for the month of April 1968 the employment in each industry. You will note that we have nearly three times the number of employees as the consumer electronic products division. Further, take note of this fact. Since November of 1966 the consumer electronic products industry suffered an absolute loss of 45,000 jobs and since October of 1966 our industry, the electronic components in- dustry, suffered an absolute loss of 46,000 jobs. Together we lost 91,000 jobs for our American workingmen in the last 18 months. Now, imports are not the sole cause of this but they are one of the contributing causes. Let us look first at consumer electronic products, and by this term I mean, and if you will look at the following table concerning television sets, radios, phonographs, and tape recorders. TABLE 2.-U.S. IMPORTS OF CONSUMER ELECTRONIC PRODUCTS (In thousands of unitsi 1964 1966 1967 Percent of change 1st quarter, 1967 1st quarter, 1968 Percent of 1964-67 TV Radios Phonographs Tape recorders Value of above (dollars in millions) 715 13,739 2,363 3,075 $212. 6 1,524 24, 950 4,223 2, 807 $390. 2 1,614 24,201 4,134 3, 780 $458. 8 +125.7 +76. 1 +74.9 +22. 9 +115. 8 369 4,865 503 `1,043 . $92.3 308 5,454 407 1,282 $104. 6 -16.5 +12. 1 -19.1 +22. 9 +13.3 1 Estimated at the ratio of change in value, based on units published for 1st quarter, 1968 (not available in 1967). Source: Marketing Services Department, Electronic Industries Association; U.S. Department of Commerce, Bureau of the Census. You will note from this table that from 1964 to 1967 there was a very large increase in imports in units in each one of these product areas. Later I shall show you the balance of trade in dollars on these and the other products I talk about. Look at table 3, and note the share of the domestic market aëcounted for by imports. In TV sets it doubled from 7 percent to 14 percent in 1967, is a little bit off in the first quarter of this year. PAGENO="0084" 3520 TABLE 3.-IMPORTS OF CONSUMER ELECTRONIC PRODUCTS AS SHARE OF U.S. MARKET [In percent) 1964 1966 1967 1st quarter, 1968 TV 7.3 12.0 14.0 11.0 Radios (home) 58. 3 71. 7 74. 4 77. 8 Phonographs 31.4 40.1 43.3 30.0 Tape recorders 86. 4 76. 4 82. 5 85. 3 Source: Derived from import and market data compiled by marketing services department, Electronic Industries Association. Radios, 74 percent of the market was supplied by foreign produced radios in 1967 and you see the ratio for the other products. Why are we interested in the imports of consumer electronic products since we do not manufacture them? Because they consist merely of an assembly of components, of tubes and transistors, and resistors and capacitors and inductors, and loudspeakers. The importation of sets is a very major part of the importation of the components. One of the gentlemen asked the first witness today what has happened to the production of radios in the last 20 years? Gentlemen, in 1947 the American market consisted of 20 million sets, all of which were made in America; in 1967, 20 years later, 40 million sets, only 8 million of which were made in America. The components industry 20 years ago supplied all of the components for 20 million sets. Twenty years later we supplied part of the components for 8 million sets. All of the growth in the radio market has gone to imports and most of the market that was held in 1947 has gone to imports. Look please if you would at table 4. In textiles you are familiar with the fact that the ratio of imports to domestic consumption is calculated by determining the square yard equivalent of fabric that comes in in the form of shirts and garments as well as the fabric imported as fabric. TABLE 4.-TOTAL U.S. IMPORTS (DIRECT AND INDIRECT) OF ELECTRONIC COMPONENTS, 1964-67 [in million s of units) Class of component 1964 1966 1967 Percent of change 1964-67 Active components: Receiving tubes TV picture tubes Transistors Rectifiers and diodes Passive components: Capacitors, electrolytic Capacitors, fixed Resistors, fixed Inductors and transformers Other components: Controls Loudspeakers Record changers 67.7 0. 8 149. 9 105. 6 199. 8 785. 6 1,019.3 259.7 55.6 25. 3 2.3 111.8 1. 6 681. 6 383. 8 617. 3 1,616. 1 2,377.6 551.7 169.9 55. 5 4.6 85.0 2. 0 532. 8 484. 6 473. 8 1,692. 6 2,238.8 506.1 90.3 48.0 4.1 +25. 5 +147. 2 +255. 4 +358. 8 +137. 1 +115. 4 +119.6 +94.9 +62.5 +89. 5 +79.3 Source: Appendix table 1. In similar fashion the marketing services department of ETA, which is a division that serves all the other divisions statistically, has calcu- PAGENO="0085" 3521 lated the quantity of components imported as part of sets and from the Commerce Department the quantity imported as components. The total U.S. imports of components, direct and indirect, is shown in table 4. Note, and this is in millions of units, the astounding rate of increase since 1964. Now, let your glance fall on table 5, where we show what the ratio of these imports to U.S. commercial sales of components in units is for the same years. Notice the very astounding import penetration ratio. In some cases imports account for twice or greater the volume of commercial sales of domestically produced components. TABLE 5.-RATIO OF IMPORTS TO U.S. COMMERCIAL SALES OF SELECTED ELECTRONIC COMPONENTS, 1964-67 Class of component Percent 1964 1966 1967 Active components: Receiving tubes TV picture tubes Transistors Rectifiers and diodes 20. 1 8. 5 102.7 17. 6 27.6 12. 1 227.3 31. 9 29.2 18. 7 242.3 43. 0 Passive components: Capacitors, electrolytic Capacitors, fixed Resistors, fixed Inductors and transformers 92. 6 45.6 35.2 479.6 171. 4 62.5 52.2 581. 0 169. 9 92.7 112.7 532.6 Other components: Controls Loudspeakers Record changers (1) 50.0 (1) 66.4 82.4 51.7 (1) 109.1 (1) 1 Not available. Source: Appendix table II. This rate of import penetration vastly exceeds that which exists in textiles, petroleum, meat products, any other industry that has been before you with a serious import problem. Now let us look at table 6. Here we are setting forth the balance of trade in both consumer electronic products and components. A more specific breakout of each of the products is shown in an appendix table where the detailed statistics are offered. * TABLE 6.-U.S. BALANCE OF TRADE IN CONSUMER ELECTRONIC PRODUCTS AND COMPONENTS, 1964-67 [In millions of dollarsj 1964 1966 1967 Exports: Consumer electronic products 64. 2 Active components 72.2 Passive and other components 1 39. 2 Total 1175.6 Imports: Consumer electronic products 212. 6 Active components 21. 5 Passive and other components 58. 4 Total 292.5 Balance of trade: Consumer electronic products -148. 4 Active components +50. 7 P~ssive and other components 1 -37~ 8 Total 1-116.9 76. 8 87. 0 1131. 3 76.6 79. 1 1145. 0 1 295. 1 404.3 68.9 181.0 1 300. 7 469. 8 64. 4 159. 0 654.2 -327. 5 +18. 1 1 -63. 1 693.2 -393. 2 +14. 7 1 -19. 9 1 -359.1 1_392.5 1 Exportdara for narphones and headsets notavailable, 1964-67; 1964 export data notavailable for microphones and, for parts for radio and TV appacatus, phonographs, active and passive components, ~nd other components. Source: Appendix table III. PAGENO="0086" 3522 It is sufficient to notice here that we do export these products, and the exports increased from $175 million in 1964 to $300 million in 1967, a decent performance, but note that imports increased from $292 mil- lion in 1964 to nearly $700 million in 1967. Our balance-of-trade deficit went from a little over $100 million to nearly $400 million in the space of these 3 years. In the long-term cotton textile arrangement the GATT countries by agreement without retaliation adopted the principle that because tex- tiles are highly labor-intensive products that were being manufactured predominantly in low-wage countries for export to the developed coun- tries, a system of negotiated import rates for the developed countries was n~cessary to avoid market disruption and to contribute to the economic betterment of both the exporters and importers. Please look at table 7 where I show you the labor-intensive ratio of electronic components manufacture compared with cotton broadwoven fabrics, and the average of all manufacturing and apparel. TABLE 7.-COMPARATIVE LABOR INTENSIVENESS OF ELECTRONIC COMPONENTS MANUFACTURE IN THE UNITED STATES Payroll as a percent of- Value of Value added shipments by manufacture All manufacturing establishments Cotton broadwoven fabrics, SIC 2211 Apparel and related products, SIC 23 Electronic components, SIC 367 Receiving tubes, SIC 3671 Semiconductors,1 SIC 3674 Capacitors,1 SIC 36792 Resistors,1 SIC 36793 Coils, transformers, reactors, and chokes, SIC 36794 22.2 24.8 25.9 39.6 42.6 ~ ~ 38.5 40. 5 39.0 48.7 61.4 56.3 62. 0 54.6 ~` 0 56.5 54.4 70. 1 1 Establishments with 90 percent or more specialization. Source: U.S. Department of Commerce, "1963 Census of Manufactures." You will notice that whereas cotton textiles have a ratio of total payroll cost to value of shipments of 24.8 percent and apparel 25.9 per- cent, all components on the average had a ratio of labor intensiveness of nearly 40 percent and some of the individual components exceed 40 percent. We are nearly twice as labor intensive as the average of all manu- facturing and vastly more labor intensive than textiles, but notice the difference in the policy of our Government in regard to our in- dustry, which I should remind you does employ nearly 400,000 workers. For textiles there is a long-term arrangement that provides a sys- tem of quotas, and very properly there is widespread interest in the Congress in extending those to other textile articles. The textile mill products and apparel industries were spared deep cuts in the Ken- nedy round. Now, gentlemen, every one of our products in the consumer elec- tronic product line and the component line but two were reduced by 50 percent in the Kennedy round, and we are in a situation where the level of our duties is lower for most products than every other nation, including Japan. PAGENO="0087" 3523 First, to show you that this is primarily an Asian problem turn to table 8. Here I have shown the origin of U.S. imports of these consumer electronic products and components by country and area of origin, showing what the situation is in dollars for each product. If you look at the column on the far right, the percent which each area is of the total, you will notice that Japan supplied 66 percent of the imports in 1966 of these products and "other Asia," which is pri- marily Hong Kong, 9.3 percent. TABLE 8.-ORIGIN OF U.S. IMPORTS OF CONSUMER ELECTRONIC PRODUCTS AND SELECTED COMPONENTS, 1966 lIn t housands of dollarsj Tele- vision Country of origin receiving sets Phono- Radio graphs, receiving sound sets recorders, and parts Active compo- nents Passive compo- nents Total Percent which each area is of total Canada $9,543 Latin America Total, Western Europe 160 $11,111 $371 210 11, 390 51, 790 $5,077 345 41,696 $1,990 127 10, 055 $28,092 682 115, 091 4.8 . 1 19.9 EEC 135 EFTA Other Western Europe 8,451 17, 128 898 33, 807 2,042 855 24,651 8,860 8, 186 6,967 2,444 644 57,332 46, 009 11,727 9.9 7.9 2. 0 Japan 106,754 Other Asia Other Countries, NES 135,239 78,947 32, 779 374 322 35,712 19,474 229 24,503 1,499 425 380,615 53,752 1, 340 65.7 9. 3 0.2 Total of above 116,457 191,103 131,430 101,983 38,599 579,572 100.0 Source: United Nations, "Commodity Trade Statistic," Statistical papers series D, vols. XII, XIV, and XVI; U.S. Depart. ment of Commerce, Bureau of the Census, FT 246. Together these two Asian countries account for 75 percent of the imports of these products. Thus, it is labor intensive. It is low wage Asian in its nature. Now, let us turn to what transpired in the Kennedy round. Mem- bers of this committee have asked other witnesses what kind of a job was done in regard to your industry in the Kennedy round. In my prepared statement I have set forth three paragraphs from a statement submitted by the president of the entire Electronic Indus- tries Association, not just a spokesman for one division, the spokesman for the entire organization, to the Trade Information Committee. The full text of that statement is attached as exhibit 1 to my state- ment. Let me just read the last paragraph. In the Kennedy Round the U.S. electronics industry entered the negotiations with generally the lowest tariffs, and after, in most instances a 50 percent cut of U.S. tariffs we made the greatest concessions and emerged with an even more unbalanced tariff rate structure than we had before. If the electronic industries were viewed by the Government as an industry with export potential why didn't they secure reciprocal con- cessions from other countries to help our exports? Now, I have submitted as an exhibit the full text, exhibit 2, of an ex- tremely important analysis by the Marketing Services Division of Electronic Industries Association in detail of the tariff concessions granted on electronic products by every major country in the Kennedy round, followed by a very precise analysis of the impact of the border tax on electronic exports going into these countries. PAGENO="0088" 3524 You gentlemen want chapter and verse. Here it is in electronic products. In my prepared testimony I summarize from that rather massive study these important points: The first point set out is that the Com- mon Market granted no tariff reductions in five product categories- computers, semiconductors, TV picture tubes, electronic test and meas- uring instruments and parts. These are areas where we had export potential and we got no reductions. Second, starting at lower base rates than the common external tariff of the Common Market, the United States reduced duties up to 50 percent on products that ac- counted for 95.7 percent of imports from the Common Market. Vir- tually everything they ship here they got a concession on. Point 3, the product categories in which the Common Market granted less than 50 percent reductions equaled 34 percent of our ex- ports; and point 4, the Common Market made 50 percent reductions on categories accounting for only 17 percent. Look at table 9. Here is the discouraging record laid out for you to see. This table takes each of the products we are talking about, shows you what the tariff rate is for the United States after the Ken- nedy round, what it is for Japan, what it is for the Common Market and United Kingdom. TABLE 9.-IMPORT DUTY RATES OF THE UNITED STATES, JAPAN, AND EUROPEAN PRODUCERS OF CONSUMER ELECTRONIC PRODUCTS AND COMPONENTS (POST-KENNEDY ROUND) (PERCENT) United States Japan EEC United Kingdom Television receiving sets 5. 0 10 14. 0 15. 0 215 Radio receiving sets 6.0 9. 0 14. 0 15. 0 `10.4 117.5 Radio-phonographs 6. 5 17. 5 14. 0 15. 0 Phonographs, sound recorders, and parts 5. 5 15. 0 9. 5 10. 0 Receiving tubes 6. 0 10. 0 8. 0 20. 0 Transistors 6. 0 15. 0 17. 0 20. U 37.5 Capacitors 10. 0 7. 5 7. 0 12. 5 Resistors 6.0 7.5 8.0 17.0 Inductors 7.5 7.5 5.5,7.0 10.0 Other radio parts 6. 0 10. 0 9, 13, 17. 0 15. 0 Other TV parts 5. 0 10. 0 9, 13, 17. 0 15. 0 1 Transistor. 2 Not over 10 in. screen. 3 Germanium. Source: Office of the special representative for trade negotiations, "Re~port on U.S. Negotiations, General Agreement on Tariffs and Trade, 1964-67 trade conference," Geneva, Switzerland; GATT, "Legal Instruments Embodying the Results of he 1964-67 Trade Conference." You will notice in virtually every instance we are lower than all of the rest, and notice that most of our duties are now at the level of 5 or 6 percent, and none of them exceeds 10 percent. One final thing. The AFL-CIO in testimony here endorsed negotia- tion of import restrictions similar to the long-term cotton textile arrangement, and I am quoting from its testimony: "Affecting trade in industries that are sensitive to disruption by rapidly rising imports and unfair competition." In my prepared statement I have also set out two excerpts from the testimony of the president of the International Union of Electrical Workers submitted to the Trade Information Committee. PAGENO="0089" 3525 I will not read it, but the first quoted paragraph describes the im- port problem in a manner entirely consistent with the way we have identified it. The second quoted paragraph says that this problem has been aggra- vated by American companies that have transferred their plants abroad, closed out their jobs in the United States, and created jobs in low-wage nations. Gentlemen, it is such companies who are represented by the Con- sumer Products Division in their testimony here today. They have caused and contributed to this import problem and they are here now defending that position by resisting import quotas. Now, I say finally that the Collier bill which we advocate is designed to do exactly what the president of the International Union of Electri- cal Workers wants to have done to create a negotiating climate so that a harmonious solution can be achieved by the President through negotiations. Finally, I will merely refer to my final exhibit, exhibit 3, which is a very extensive treatment of the ills of our Antidumping Act and its administration. This industry has filed antidumping complaints on virtually every electronic product that we are talking about, and they have been filed over a period extending from July of 1967 to March of 1968. Investigations have been started on a few of these products. We already know enough from working with the Treasury Department on these products that the result seems to us to be foreordained. The problems inherent in the way the Antidumping Act is administered are set out in detail in exhibit 3, but I can summarize it, I think, in two sentences. The amendments that were made in the Antidumping Act in 1958 and in the antidumping regulations together accomplished this im- proper result. They allowed other countries to export to the United States on the basis of incremental pricing, prices that recover only their direct costs, and do not recover overhead and profit, and allow the for- eigners to explain away the difference between those prices and their home market prices on the basis of uncorroborated, unsworn testimony by saying that "The conditions of sale in our home country are different from those in the export trade, and we assign a certain monetary value to those differences," and this explains away the dumping. Under the present Antidumping Act and regulations it will never be possible for any American industry victimized by incremental price dumping to secure anything significant, really, by way of relief. So we are an industry which, if we are to survive, must have some method of import regulation apart from the duties, because now our duties have been destroyed. We want the solution to our import problem to be negotiated, a har- monious solution, and we say that you must create a negotiating situa- tion by legislation that confronts the foreign producers and their gov- ernments with the situation that "either you take the statutory quotas or benchmarks, or you negotiate a more favorable but still reasonable position." As to the administration's trade bill, this group recommends that the reform that would be carried out by amendment of the adjustment as- PAGENO="0090" 3526 sistance provisions by supplying a more liberal test, an easier test to meet, also be carried out in regard to escape clause applications by do- mestic industries seeking tariff relief. There is absolutely no justification for a double standard of economic morality in the relief provisions of the Trade Expansion Act. Gentleman, thank you and Mr. Chairman, thank you for your suf- ferance in allowing me to go overtime. (Mr. Stewart's prepared statement and exhibits follow:) STATEMENT OF EUGENE L. STEWART, COUNSEL, PARTS DIvIsION, AND DISTRIBUTOR PRODUCTS DIvISION, ELECTRONIC INDUSTRIES ASSOCIATION; AND AMERICAN LOUDSPEAKER MANUFACTURERS ASSOCIATION Mr. Chairman and Members of the Co~nmittee, I am Eugene L. Stewart, Special Counsel for the Parts Division, Electronic Industries Association. I have with me today: W. L. Larson, President, Switchcraft, Inc., and Vice Chairman, EIA Parts Division; R. W. Woodbury, President, Sprague Products Company, and Vice Ohair~ man, EIA Distributor Products Division; Herbert Rowe, President, The Muter Company; Vice President, American, Loudspeaker Manufacturers Association; and Member, World Trade Com- mittee, MA Parts Division; Tyler Nourse, Staff Vice President, EIA Parts Division and Distributor Products Division; Noel Baird, Executive Vice President, Heppner Manufacturing Company; Barry Brennan, President, Fiber Form Corporation; C. G. Kilen, Vice President, Marketing and Sales, Sprague Electric Company; Walter Peek, Vice President, Customer Relations, Centralab, Electronics Division of Globe-Union, Inc.; W. L. Rollins, President, Oaktron Industries, Inc.; and H. A. Williams, Vice President and General Manager, Electronic Com- ponents Division, Stackpole Carbon Company, and Member, World Trade Committee, EIA Parts Division. PAGENO="0091" 3527 INTRODUCTION This testimony is on behalf of U. S. manufacturers of electronic parts and components, which are members of the Parts Division, and on behalf of the members of the Distributor Products Division of the Electronic Industries Association, and the American Loudspeaker Manufacturers Association. Electronic parts and components are the building blocks from which finished electronic products, such as radios and televisions, are assembled. There is no single "industry" known as the electronics industry. Instead, a group of distinct industries is referred to as the "electronic industries" because the articles they manufacture have one thing in common - the utilization of an electronic circuit. Thus electronic products are scattered among an enormous spectrum of consumer, industrial, defense, and space hardware: from transistor radios to airborne computers; from electronic organs to measuring instruments on an assembly line. Neither the production nor the marketing of these, widely differing products lends itself to PAGENO="0092" 3528 the grouping of establishments which use electronic circuits in the products they make into a homogeneous industry. There are more than 25 classifications of the Standard Industrial Classification at the 1+-digit level which embrace electronic products within their product definition. You need to know this in order to evaluate some of the statistics which our opponents like to use in their efforts to defeat the imposition of any regulation on imports of electronic articles. II. THE IMPACT OF ADVERSE FOREIGN TRADE BALANCES AND TRENDS ON THE IMPORT-SENSITIVE MANUFACTURE OF CONSLR~IER ELECTRONIC PRODUCTS AND COMPONENTS SHOULD BE CONSIDERED ON ITS fr'ERITS WIThOUT BEING CONFUSED WITH ]1-IE MORE FAVORABLE FOREIGN TRADE POSITION OF LESS IMPORT-SENSITIVE SECTORS OF THE "ELECTRONIC" INDUSTRIES. The group I represent is concerned solely with the damaging imports of consumer electronic products and the classes of electronic components used in the manufacture of such products. In other words, we are centering our attention solely on radios, televisions, phonographs, and tape recorders, and components such as capacitors, resistors, inductors, loudspeakers, record changers, fractional horsepower motors, and other parts used in the assembly of such consumer products. We definitely are not now seeking your attention to the regulation of imports of nonconsumer electronic products such as computers; instruments; or commercial, industrial, or governmental commun i cat ions systems. PAGENO="0093" 3529 Perhaps an analogy to other industries would help you under- stand this point. The steel industry is commonly understood to consist of those establishments engaged in making basic steel mill products. No one suggests that it can be studied only by sweeping into the data every type of article made in this country which contains steel. Auto- mobiles, for example, are not included in the statistics of the steel industry. Nor should computers or missile guidance systems be included in the data of the electronic industries whose problems we are asking you to consider in these hearings. So much for terminology. Before summarizing the pertinent facts concerning the import problem in consumer electronic products and the types of electronic components used in such products, wish to clear up another possible matter of confusion. I speak only for the Parts Division of the Electronic Industries Association, which represents components manufacturers, the Distributor Products Division of EtA which represents American manufacturers of components and equipment sold through electronic parts distributors, and the American Loudspeaker Manufacturers Association which represents domestic manufacturers of loudspeakers and their suppliilrs. The position we advocate is opposed by the Consumer Products Division of the Electronic Industries Association, which represents importers and some manufacturers of products such as radios, televisions, tape recorders, and phonographs. That Division's position is based on the vote of companies which account for less than a majority of the U. S. production of such products, and is heavily weighted by companies PAGENO="0094" 3530 which are primarily importers of either consumer electronic products or the electronic components used in their assembly. They are the importers; we are the domestic producers. They want to be unrestricted in the importation of components - and of the finished radio and television sets. We want to see some participa- tion of domestic manufacturers in supplying the U. S. market. Our economic interests appear to be opposed. They want to protect their investment in foreign plants; we want to protect our investment in American plants, and in the employment which our U. S. investment has created. We are both `protectionists" in this sense; but they wrap their protectionism in the appealing semantics of free trade. If opposition meant that you should not consider the merits of the problem, we are finished before we start. We doubt that this great Committee will refuse to consider our problem merely because spokesmen for consumer products manufacturers, importers, and distributors are opposed to our position. III. DUE IN PART TO RISING IMPORTS, THE CONSUMER ELECTRONIC PRODUCTS AND COMPONENTS INDUSTRIES HAVE SUFFERED A 16% LOSS OF EMPLOYMENT SINCE Ti-IE FALL OF 1966; THE STAKE OF THE COMPONENTS INDUSTRY IN EMPLOYMENT AND THE THREAT OF JOB LOSS FROM IMPORTS ARE 2½ TIMES THAT OF THE CONSUMER PRODUCTS INDUSTRY. It is essential that you understand that the interest of our country in investment in plants in the United States, and in the jobs such plants generate, lies in a fair consideration of the problem of the components manufacturers. Let me illustrate this by citing the PAGENO="0095" 3531 relative employment figures for consumer electronic product manufacture versus electronic component manufacture in the United States. TABLE 1 EMPL0Yt~ENT IN SELECTED ELECTRONIC INDUSTRIES, APRIL 1968 (in thousands) Consumer electronic products 133.8 (Standard Industrial Classification 365) Electronic components and accessories 350.4 (Standard Industrial Classification 367) SOURCE: U. S. Department of Labor, Bureau of Labor Statistics, Enrployrnent and Earnings, May 1968. Obviously, the United States has nearly three times the stake in jobs in the electronic components industry as it does in consumer electronic products. Both groups have reason to be concerned with the sharp loss of jobs in U. S. plants. From its peak employment in November 1966 of 178.8 thousand workers, the consumer electronic products industry lost 45 thousand jobs by April 1968. From its peak in October 1966 of 396.3 thousand employees, the electronic components industry lost 45.9 thousand jobs by April 1968. Together these two interdependent industries lost 91 thousand jobs in the space of 18 months - and the loss shows every indication of continuing. One of the reasons for this loss, though not the sole reason, is the swift rise in imports of both consumer electronic products and of electronic components. PAGENO="0096" 3532 IV. RISING IMPORTS OF CONSU~IER ELECTRONIC PRODUCTS AND OF COMPONENTS USED IN THE MANUFACTURE OF SUCH PRODUCTS HAVE CAPTURED A MAJOR AND STILL-RISING SHARE OF THE DOMESTIC MARKET, FAR BEYOND THE MARKET-DISRUPTIVE LEVELS AT WriICH POSITIVE IMPORT-REGULATING MEASURES HAVE BEEN RECOGNIZED AS A NECESSITY IN SUCH FIELDS AS TEXTILES, PETROLELZ~I PRODUCTS, MEAT PRODUCTS, AND DAIRY PRODUCTS. Imports of consumer products have a double effect: they displace radios, televisions, and phonographs produced here at home; they also cut down the U. S. market for components by the amount of set manufacture which they displace. Let's look at the facts. TABLE 2 U. S. IMPORTS OF CONSUMER ELECTRONIC PRODUCTS (in thousands of units) 1st 1st Quarter Quarter % _______ _______ _________ 1967 1968 ~g~g4 TV 715 369 308 -l6.5°/~ Radios 13,739 L~,865 5,~514 +l2.l~ Phonographs 2,363 503 1i07 -l9.l~ Tape Recorders 3,075 l,o~+3e 1,282 +22.9~ Value of above $212.6 % Change 1966 1967 1964-67 l,52~+ 1,6l~~ +l25.75~ 21+,950 2~,20l +76.1i~ 1+,223 i+,131i +714.9°/C 2,807 3,780 +22.9°~ (in millions of dollars) $390.2 $1i58.8 ÷ll5.8?~ $92.3 $1014.6 +13.3°/a e - estimated at the ratio of change in value, based on units published for 1st Quarter 1968 (n.a. in 1967). SOURCE: Marketing Services Department, Electronic Industries Association; U. S. Department of Commerce, Bureau of the Census. - PAGENO="0097" 3533 These swiftly rising imports have taken a very large share of the U. S. market for consumer electronic products. When you look at the following table, bear in mind that imports of textiles are now about lO~ of the domestic market. TABLE 3 IMPORTS OF CONSUIVER ELECTRONIC PRODUCTS AS SHARE OF U. S. MARKET (in per cent) let Quarter 1964 1966 1967 1968 TV 7.3~ l2.O~ l14.O9~ ll.O~ Radios (Home) 58.3°~ 7l.7?~ 71~.1~2~ 77.8~ Phonographs 31.k2 1iO.l5~ 143.3~ 3O.O~ Tape Recorders 86.Li~ 76.4~ 82.55~ 85.3~ SOURCE: Derived from import and market data compiled by Marketing Services Department, Electronic Industries Association. These consumer electronic products are assemblies composed of electronic components such as tubes, transistors, capacitors, resistors, inductors, loudspeakers, etc. The quantity of components imported in the form of sets is very great. These must be counted in any definitive determination of total import penetration of the U. S. components market, just as thesquare yard equivalent of fabric contained in imported apparel is counted in the efforts directed to restraint of cotton textile imports. The combined direct (as components) and indirect (as consumer products) imports of electronic components are shown in the following table. 95-159 0-68-pt. 8-7 PAGENO="0098" SOURCE: Appendix Table The rate of increase in imports of theseelectronic products is obviously so high that they cannot be received into the American market without causing severe dislocation to American production. The volume of imports of these components represents a major penetration of the U. S. market. The extent of this capture of our domestic market by foreign production is shown in the following table. 3534 TABLE 1~ TOTAL U. S. IMPORTS (DIRECT AND INDIRECT) OF ELECTRONIC COMPONENTS~ 196'+-1967 (in mil,iions of units) CLASS OF COMPONENI l96~+ 1966 1967 CHANGE l96ft~7~ ACTIVE C0t4'ONENTS - Receiving Tubes TV Picture Tubes Transistors Rectifiers and Diodes 67.7 0.8 149.9 105.6 111.8 1.6 681.6 383.8 85.0 2.0 532.8 `+84.6 +25.5°~~ +lk7.2~ +255.14°/b +358.82~ PASSIVE COMPONENTS - Capacitors, Electrolytic Capacitors, Fixed Resistors, Fixed Inductors and Transformers 199.8 785.6 1,019.3 259.7 617.3 1,616.1 2,377.6 551.7 473.8 1,692.6 2,238.8 506.1 +137.1°/b +ll5.4°/~ +119.6~ +9L+.9~ OThER COMPONENTS - Controls Loudspeakers Record Changers 55.6 25.3 2.3 169.9 55.5 4.6 90.3 48.0 4.1 ÷62.5~ +89.5i~ +79.3i~ PAGENO="0099" 3535 TABLE 5 RATIO OF IMPORTS TO U. S. C0frT~1ERCIAL SALES OF SELECTED ELECTRONIC COMPONENTS, lY6Lf_1967 CLASS OF COMPONENT _______ _______ _______ ACTIVE COMPONENTS - Receiving Tubes TV Picture Tubes Transistors Rectifiers and Diodes PASSIVE COMPONENTS - Capacitors, Electrolytic Capacitors, Fixed Resistors, Fixed Inductors and Transformers OTHER COMPONENTS - Con trols Loudspeakers Record Changers SOURCE: Appendix Table II From the data in this table it is obvious that imported electronic components have achieved a major and steadily rising penetration of the U. S. market. It is this very high volume, rapid increase in imports and the very large and rising share of the U. S. market accounted for by foreign-produced components which are contributing to the absolute loss of employment in this once dynamic industry to which referred a moment ago. l96~i ~j366 ~967 2O.l~ 27.6~ 29.2~ 8.5~«= l2.l~ l8.7?~ lO2.7°~ 227.3?~ 2L+2.3?~ l7.6~ 3l.9?~ ~i3.O?~ 92.6?«= l7l.L~ l69.9~ 45.6~c 62.5~«= 92.7~ 35.21~«= 52.2~ ll2.7~ 479 .6~«= 58l.O~c 532.6~ n.a. 66.4~ n.a. 5O.O~ 82.4~ lO9.l0~ n.a. 5l.7~ n.a. PAGENO="0100" 3536 We ask this Committee to report legislation which will bring this very destructive import situation under some measure of reasonable control. We are not asking for a substantial rollback in imports. Instead, we ask that the future growth of imports be brought into some reasonable relationship to the total growth of the U. S. market. Neither the electronic components industry nor any other American industry should be subjected to such uncontrolled and massive attacks upon its domestic market in so short a space of time as is indicated by the data which have presented. Obviously, the electronic components industry is much more severely affected by imports than those few industries which have been the recipient of some means of positive import control, such as textiles and petroleum products. V. THE U. S. BALANCE OF PAYfrENTS HAS BEEN SERIOUSLY AFFECTED BY A SEVERE IMBALANCE IN U. S. FOREIGN TRADE IN CONSU~1ER ELECTRONIC PRODUCTS AND COMPONENTS. Aside from the welfare of the domestic industry producing electronic components and of its employees, there is also an urgent need for the Congress to provide positive control over the foreign trade in consumer electronic products and components for balance of payments reasons. The size and growth of our Nation's balance of trade deficit in these import-sensitive electronic products are shown in the following table. PAGENO="0101" 3537 TABLE 6 U. S. BALANCE OF TRADE IN CONSUMER ELECTRONIC PRODUCTS AND CCMPONENTSJ 196~+_1967 (in millions of dollars) 1961+ 1966 1967 EXPORTS Consumer Electronic Products $ 614.2 $ 76.8 $ 76.6 Active Components 72.2 87.0 79.1 Passive and Other' Components 39.2;~ 131.3~ 1L+5.O~ Total r175.6~ j295.1~ $ 300.7" IMPORTS Consumer Electronic Products $ 212.6 $1,01+.3 $ 1+69.8 Active Components 21.5 68.9 61+.14 Passive and "Other" Components 58.1+ 181.0 159.0 Total $ 292.5 $654.2 $ 693.2 BALANCE OF TRADE Consumer Electronic Products -$l1+8.1+ -$327.5 -$393.2 Active Components +50.7 +18.1 +114.7 Passive and "Other" Components -37.8~' -63.l;~ -19.9" Total -$116.9" -$359.1" -$392.5" Export data for Earphones and Head Sets not available, 19614-1967; 1961+ export data not available for Microphones and for Parts for radio and TV apparatus, phonographs, active and passive components, and other components. SOURCE: Appendix Table III PAGENO="0102" 3538 The balance of trade deficit in these import-sensitive categories of consumer electronic products and electronic components of nearly $1i00 million is a serious matter. The fact that this deficit more than trebled in three years' time is a serious matter. Thus, the severe impact of these swiftly rising imports of consumer electronic products and components is harmful not only to the private sector (that is, to employment in electronic plants around the country), but also to the public sector by making worse our Nation's difficult balance of payments situation. VI. THE MANUFACTURE OF ELECTRONIC COMPONENTS IS HIGHLY LABOR INTENSIVE - MORE SO THAN MOST MANUFACTURING INDUSTRIES AND, HENCE, CORRESPONDINGLY MORE VULNERABLE TO LOW-WAGE IMDORT INJURY. It is now recognized by the U. S. Government and by other governments who are signatories to the Long-Term Cotton Textile Arrangement that the manufacture of cotton textiles is so labor intensive that the concentration of production for export in row-wage Asian countries results in market disruption in developed countries. This calls for import regulation by agreement backed up by quotas, as provided in the Long-Term Cotton Textile Arrangement, in order to provide for an orderly expansion of trade that is in the interests of both supplying and recipient countries. The same principles apply, but with even greater emphasis, to foreign trade in electronic components. This is shown by. the data in the following table. PAGENO="0103" 3539 TABLE 7 COt'FARATIVE LABOR INTENSIVENESS OF ELECTRONIC COMPONENTS MANUFACTURE IN THE UNITED STATES PAYROLL AS A % OF - Value of Value Added Shi~prnentc by Ma,i~facture 22.22~ 48.fl 21~.8~ 61.1i~ 25.92~ 56.3°~ 39.6~ 62.O~ 42.62~ 5l4.6~ 66.O~ 38.5~ 56.5?~ 14O.5?~ ~ 39.O~ 7O.l?~ The above data show that the manufacture of electronic components is nearly twice as labor intensive as that of the average of all manufacturing in the United States when judged by the ratio of payroll costs to the value of shipments. The production of electronic components is also clearly far more labor intensive than the manufacture of cotton broadwoven fabrics or of apparel, the central areas of concern in the import regulation system established in the Long-Term Cotton Textile Arrangement. All Manufacturing Establishments Cotton Broadwoven Fabrics, SIC 2211 Apparel and Related Products, SIC 23 Electronic Components, SIC 367 - Receiving tubes, SIC 3671 - Semiconductors,;'~ SIC 367~~ - Capacitors,* SIC 36792 - Resistors,* SIC 36793 - Coils, transformers, reactors, and chokes, SIC 3679k * Establishments with 9O~ or more specialization. SOURCE: U. S. Department of Commerce, 1963 Census of Monufactures PAGENO="0104" 3540 The current ratio of imports of electronic components to domestic sales (previously shown in Table 5 as ranging from l8.7~ to 532 .6°/b for the broad range of electronic components) vastly exceeds the similar ratio of lO?~ applicable to cotton textiles. On a market penetration basis, therefore, imports of electronic components, because of the greater labor intensiveness of their manufacture, have been more seriously affected than cotton textiles. Unlike the special concern shown by the Government for the cotton textile industry (as evidenced by the negotiation of the Long-Term Cotton Textile Arrange- ment and the restraint shown in duty reductions in the Kennedy Round), the electronic components industry has received no assistance in the form of import regulation from the Government and all but one of its products was reduced by 5O~ in the Kennedy Round. As in the case of cotton textiles, the principal source of U. S. imports of consumer electronic products and components is Japan and the other low-wage Asian countries. This is shown by the data in the following table. PAGENO="0105" CANADA LATIN AMERICA TOTAL WESTERN EUROPE EEC EFTA Other Western Europe JAPAN OTHER ASIA Radio Rece i vi ng ____________ Sets _______________ $ 11,111 $ 371 210 - 11,390 51,790 8,451 17,128 898 33,807 2,042 855 135,239 78,947 32,779 - _________ 374 322 $116,457 $191,103 $131,430 Passive ___________ Components $ 1,990 345 127 41,696 10,055 24,651 6,967 8,860 2,444 8,186 644 35,172 24,503 19,474 1,499 229 425 °~ Which Each Area Is of Total 1+. 8°'~ O.l~ 19. 9°~ 9.9% 7.9% 2.0% 65.7?~ 9.3°'~ 0. 22~ TABLE 8 ORIGIN OF U. S._IMPORTS OF CONSWER ELECTRONIC PRODUCTS AND SELECTED CONPONENTS, 1966 (In thousands of dollars) Country of Oriain Phonographs, Sound Recorders, Active and Parts Compppents Televi 5 ion Receiving Sets $ 9,543 160 135 106,754 $ 5,077 OTHER COUNTRIES, NES TOTAL OF ABOVE TOTAL $ 28,092 682 115,091 57,332 46,009 11,727 380,615 53,752 1 ,340 CJ~ :~ $101,983 $ 38,599 * $579,572 lOO.O~ SOURCE: United Nations, Conrinodity Trade Statistics, Statistical Papers Series 0, Volumes XII , XIV, and XVI; U. S. Department of Commerce, Bureau of the Census, FT 246. PAGENO="0106" 3542 Japan and the other nations of Asia together account for 75°/b of the total U. S. imports of the products covered by the above table. The electronic products import problem is an Asian problem. It is compounded by the highly labor-intensive nature of electronic component manufacturing in the United States, on the one hand, and the low wages prevailing in the electronic manufacturing industries of Japan, Hong Kong, and Taiwan, on the other han.d. The remaining factor of significance which contributes to the dimensions of the problem is the very low level of duties which remain after repeated reductions in U. S. duties, and the further virtually 5O2~ reduction in duties which the United States has agreed to in the Kennedy Round. VII. U. S. IMPORT DUTIES HAVE BEEN DESTROYED BY SEVERE TARIFF REDUCTIONS AS AN IMPORT-REGULATING MEANS; OThER MEASURES ARE REQUIRED IF U. S. MANUFACTURE AND EMPLOYMENT IN THESE. ELECTRONIC INDUSTRIES ARE TO BE PRESERVED. As a result of repeated tariff reductions in the past, which were carried forward in virtually all cases by a 5O~ reduction in the Kennedy Round, the present and post-Kennedy Round level of U. S. import duties on consumer electronic products and the import- sensitive classes of components identified in this testimony are below the level of duties applicable to the other principal markets for such products. PAGENO="0107" 3543 The results of the tariff bargaining in the electronics sector in the Kennedy Round were so unfair to the U. S. producers of electronic articles that the following assessment was made on behalf of all of the U. S. electronic industries in a statement filed on behalf of the Electronic Industries Association by its President with the Trade Information Committee:1 "While it may be too early to determine the full effects of the Kennedy Round it appears, on the basis of information available, that the Uni.ted States delegation gave more than it received so far as tariffs on electronic products are concerned, especially to the European Economic Community. Continuing nontariff barriers, added to higher tariffs in both the Common Market and Japan, aggravate the problem of U. S. exporters who strive to increase their exports. It does seem to us that American trade representa- tives may not have recognized the opportunities for further expansion of U. S. exports of electronic products and the consequent beneficial effect on our balance of payment. Had the tariff reductions agreed to in Geneva been fully reciprocal, both our industry and our nation would have benefi tted. "In the Kennedy Round the U. S. electronics industry entered the negotiations with generally the lowest tariffs, and after, in most instances, a 50 per cent cut of U. S. tariffs we made the greatest concessions and emerged with an even more unbalanced tariff rate structure than we had before." (p. 2) The unfairness implicit in the comparative level of import duties on electronic products, the United States versus Japan and the EEC, is aggravated by the border taxes and export rebates practiced by the EEC 1 Full text of the statement is attached as Exhibit 1. PAGENO="0108" 3544 nations. Members of the Ways and Means Committee have manifested a keen interest in these hearings in receiving specific information concerning the quality of the Kennedy Round negotiations affecting U. S. industries. Fortunately, an incisive analysis of the Kennedy Round tariff concessions on electronic products has been prepared and published by the Marketing Services Department, Electronic Industries Association, in its authoritative publication Electronic Trends Inter- national (issue of May 1968). This analysis is set forth in full text in Exhibit 2 to this statement. The following points are based upon that analysis: 1. The E. E. C. granted no tariff reductions in five product categories: Computers, Semiconductors, TV Picture Tubes, Electronic Test and Measuring Instru- ments, and Parts for Instruments. These categories accounted for 48.6~ of U. S. electronic exports to the E. E. C. in 1967. 2. Starting at lower base rates than the l3.O?~ Common External Tariff of the E. E. C., the U. S. reduced duties up to 5O2~ on products which accounted for 95.7~ of imports from the E. E. C. 3. The product categories in which the E. E. c. granted less than 5O.O~ reductions equaled 31.5~ of total U. S. electronic exports to the E. E. C. in 1967. 14* The E. E. C. made 5O.O~ reductions on categories accounting for only l6.9~ of total U. S. electronic exports to the E. E. C. in 1967. The effect of the EEC border taxes on the total landed cost of U. S. exports to EEC countries in comparison with the much lower PAGENO="0109" 3545 landed costs of comparably factory-priced goods entering the United States is shown at pages 21+a-25b of Exhibit 2. To illustrate the burden of these border taxes, that analysis shows that the landed cost of U. S.-produced television receiving sets exported to EEC countries with factory invoice prices identical to those produced in the EEC ranged from ll5~ to l42?~ of the landed cost of EEC-produced television sets imported into the United States. For semiconductors, the comparison shown by the same analysis is a range for the landed cost of U. S. exports to EEC from ll2~ to l28~ of the landed cost of EEC-produced semiconductors imported into the United States. For capacitors, the similar comparison is a landed cost for U. S.-produced articles exported to Europe ranging from lO5°/~ to l2O2~ of the landed cost of similar products produced in Europe imported into the United States. Because of the labor-intensive character of electronic components manufacture and the higher wage levels which prevail in the United States in comparison with other producers, our costs of production exceed those in other countries. This is not a new or surprising fact, but it needs to be taken into account in considering the relative level to which U. S. duties on our products have been reduced in trade agreement negotiations. It is especially noteworthy that other countries, including Japan, have resisted such extravagant reductions in their duties. The situation is summarized in the following table. PAGENO="0110" TABLE 9 IMPORT DUTY RATES OF THE U. S., JAPAN, AND EUROPEAN PRODUCERS OF CONSUMER ELECTRONIC PRODUCTS AND COMPONENTS (POST-KENNEDY ROUND) UN lIED UNITED STATES JAPAN EEC KINGDOM Television Receiving Sets 5% 10% 1L% 15% 15% (not over 10" screen) Radio Receiving Sets 6% 9% 15% 10.4% (transistor) 17.5% (transistor) Radio-Phonographs 6.5% 17.5% 1L,% 15% Phonographs, Sound Recorders, and Parts 5.5% 15% 9.5% 10% Receiving Tubes 6% , 10% 8% 20% Transistors 6% 15% 17% 20% 7.5% (germanium) Capacitors 10% 7.5% 7% 12.5% Resistors 6% 7.5% 8% 17% Inductors 7.5% 7.5% 5.5% and 7% 10% Other Radio Parts 6% 10% 9%, 13%, 17% 15% Other TV Parts 5% 10% 9%, 13%, 17% 15% SOURCE: Office of the Special Representative for Trade Negotiations, Report on United States Negotiations~ GENERAL AGREEMENT ON TARIFFS AND TRADE 1964-67 TRADE CONFEREINCE, Geneva, Switzerland; GAIT, Legal Instruments Embodying the Results of the 1964-67 Trade Conference. PAGENO="0111" 3547 In view of the high rate of increase of imports already established under the pre-Kennedy Round rates of duty, as shown by the data for l961,-l967, previously discussed, both the 5O~ reductions in duty in the Kennedy Round and the resulting level of U. S. duties - generally below those of the other nations producing electronic products - hold ominous implications for the electronic components industry. The Kennedy Round reductions can only serve to stimulate further the rapid increase of imports; the comparative lack of success in exporting in the past will not be changed by the situation left in the aftermath of the unequal tariff bargaining in the Kennedy Round in which the U. S. electronic industries confront higher levels of duties abroad than their foreign competitors will enjoy in the U. S. market. In these circumstances, the Parts Division of the Electronic Industries -Association, on behalf of its own members and those of the Distributor Products Division, EtA, and the American Loudspeaker Manu- facturers Association, urges the Committee to give favorable consideration to the electronic products import quota bills (H. R. 11f597 and similar bills). The electronic products bill has been described by a free- trade organization, the Canadian-American Committee, National Planning Association (U. S. A.), in its analysis of the pending quota proposals as a type which would bring no immediate cut in imports and cause the least impairment thereafter."2 2 Canadian-American Committee, National Planning Association (U. S. A.), Constructive Alternatives to Proposals for U. S. Import Quotas, p. 26 (February 1968). - PAGENO="0112" 3548 We also support the Collier bill, H. R. 17671,, which provides for similar liberal treatment and flexible administration of rising import quotas in the future for the basic steel, footwear, flat glass, meat products, and electronic products industries, with a general procedure under which other industries which become similarly over- burdened by excessive and market-disruptive imports in the future could seek similar relief through a Tariff Commission investigation. The electronic products import quota bill, like the Collier bill, is constructive in its delegation of plenary trade agreement authority to the President to adjust the statutory quotas through nego- tiation with affected countries to seek amicable solutions to the import problem, much in the way that the Long-Term Cotton Textile Arrangement was negotiated amicably and without retaliation by the United States and many other nations under the auspices of GATT. We believe it of major importance that the AFL-CIO in its testimony before this Committee reversed its prior position of unqualified opposition to trade restrictions and urged that international agreements similar to the Long-Term Cotton Textile Arrangement be concluded "affecting trade in industries that are sensitive to disruption by rapidly rising imports and unfair competition." The AFL-CIO recognized in its testimony that labor-intensive operations in electronics manufacture have become the object of runaway shops in foreign-based plants which lead to the loss of actual and potential jobs for U. S. workers. PAGENO="0113" 3549 The International Union of Electrical Workers, which repre- sents workers in some electronic plants, also recently recognized in its testimony before the Trade Information Committee that,3 "The major problem area [in foreign trade in electronic productsj is the large growth of imports, chiefly from Japan in the fields of small radio receivers, small TV receivers, cheap tape recorders and a number of components. In addition, imports of these products are growing in some of the low wage areas of the Far East, such as Hong Kong, Formosa, Korea, etc." (p. 21) The IUE also correctly identified runaway American plants as one cause of this major problem. It stated - "Unfortunately, what has been happening is that many American companies have been moving from country to country in search of places where they can get the cheapest wage rates. As a matter of fact, a great many of the products that come into this country sold under the names of our large corporations are made abroad and the consumer does not know that." (p. 22) Nevertheless, the IUE opposed enactment of the electronic products import quota bill. Instead, it proposed that "our government initiate a conference of nations principally involved in trade in electronics to work out harmonious solutions." The President of the UE stated that he will be going to Japan this month where he intends to discuss these problems. Unfortunately, the IUE executive appears not to have had called to his attention the fact that the principal purpose of the ~ Statement of Paul Jennings, President, before the Trade Information Committee, Office of Special Representative, April 11, 1968, pp. 21, 22. 95-159 0 - 66 - pt. 8- 8 PAGENO="0114" 3550 electronic products import quota bill is to achieve "harmonious solu- tions" to the import problem through governmental action. It is for this reason that the bill, and the Collier bill, would grant plenary authority to the President to enter into trade agreements with countries supplying electronic products to the United States to achieve mutually agreeable solutions to the problem. Harmonious solutions depend upon negoti ations. Negoti at ions require for their success that each of the parties possess a negotiating position. The electronic products import quota bills, and the Collier bill, are designed to create a negotiating position for the President by setting up a system of statutory quotas - liberal in themselves - which can be liberalized through negotiations. We cite this Union testimony to you because of its importance in recognizing specifically the dimensions of the electronic products import problem as we recognize it, and in calling upon the Government to utilize negotiations in the manner of the Cotton Textile Arrangement to achieve a solution to the problem. Negotiations cannot take place simply by virtue of the wish of one side. Some definite act must set the stage for the negotiations. The bills are designed upon their enact- ment to set the stage and to move the forces into action which can bring about negotiations. PAGENO="0115" 3551 VIII. THE ELECTRONIC COMPONENTS INDUSTRY IS BEING HARMED BY WIDESPREAD DUV1PING OF ELECTRONIC PRODUCTS /~ND IMPROPER ADMINISTRATION OF ThE ANTIDU4PING ACT BY THE TREASURY DEPARTMENT. U. S. producers of electronic components are alarmed by the widespread dumping of a wide range of electronic components and by consumer electronic products incorporating these components. Anti- dumping complaints have been filed in regard to the following electronic products: black and white and color television receiving sets, color television picture tubes, electron receiving tubes, resistors, capacitors, inductors (transformers), loudspeakers, deflection yokes, tuners, and ferrite cores. These complaints have been filed over a period of time extending from July 1, 1967, through March22, 1968. Thus far formal antidumping investigations have been announced by the Treasury Department in the case of black and white and color television receiving sets, electron receiving tubes, and resistors. An announcement by'Treasury of the formal initiation of antidumping investigations in the other cases is hopefully and anxiously awaited. Experience thus far in the recent administration of the Antidumping Act offers little encouragement for prompt or effective action by the Treasury in checking the widespread, unfair trade practices which characterize the import trade in consumer electronic products and components. In these hearings, members of the Committee have expressed a çLefinite interest in receiving specific information concerning problems PAGENO="0116" 3552 encountered by domestic industry in the administration of the Antidumping Act. As a service to the Committee and in the hope that discussion of these problems will lead to some administrative reform if not positive legislation, we offer as Exhibit 3 to this statement a detailed d~iscussion of the many problems which currently exist in the administration of the Anti dumping Act. The help of the Committee in achieving a correction of these problems is earnestly solicited. IX. CONCLUSION AND RECO11VIENDATIONS. The manufacture of consumer electronic products and of electronic components is carried on in 1f2 of the 50 States of the Union. (See Appendix Table IV ranking the States in order of importance by size of employment in the manufacture of these electronic products.) The loss of employment in these electronic industries has a widespread effect on workers and their communities throughout the United States. The degree of market penetration by imports and the rate of increase of imports are so great that prompt remedial action is required.by direction of the Congress. We urge that this action be in the form of the enactment of equitable import controls affording fair access to both domestic and foreign-produced electronic products commensurate with the future growth of the American market, in the manner set forth in H. R. 14597 and similar bills, or, the Collier bill, H. R~ 17674. In addition, the widespread dumping of electronic products in the United States market calls for prompt reform of ineffective PAGENO="0117" 3553 and improper administration of the Antidumping Act by the Treasury Department. The enactment of H. R. 16332 and similar bills, and legis- lative oversight of the administration of the Antidumping Act by this Committee are needed in order to accomplish this reform. We urge that these legislative actions be taken by way of amendment to the Administration's trade bill, and that in addition the following amendment be made to the present language of that bill: Amendment of Section 301 (b) (1) and (3) of the Trade Expansion Act of 1962 in accordance with the substance of the amendments proposed by the Administration to Section 30l(c)(l), (2), and (3). This would complete a reform of the so-called "escape clause" [tariff adjustment] procedure of the Trade Expansion Act by extending to petitions filed by domestic industries for tariff relief the same reform in procedure which the Administration now proposes for the consideration of petitions by firms and groups of workers for nontariff relief. This concludes our statement. Thank you. PAGENO="0118" 3554 EXHIBIT 1 STATEMENT OF THE ELECTRONIC INDUSTRIES ASSOCIATION TO THE TRADE INFORMATION COMMITTEE WASHINGTON, D. C. PRESENTED BY ROBERT W. GALVIN, PRESIDENT ELECTRONIC INDUSTRIES ASSOCIATION 2001 EYE STREET, .N. W., WASHINGTON, D. C. This statement is submitted on behalf of members of the Electronic Industries Association (ETA) which is the national organization of electronic manufacturers representing all major product categories. Our membership of more than 300 companies includes large, medium, and small manufacturers. It includes manufacturers who export and/or import as well as others who do neither. Understandingly, there are different opinions among our members as to what the United States foreign policy with respect to imports should be. But there is no difference of opinion with respect to our national policy on exports. We are unanimous in the belief that our Government should do everything possible to improve our export opportunities and the United States balance of payments. The electronics industry is a relatively new industry, and consequently it may be that its importance to the American economy has not been fully recognized in past international trade negotiations. It appears this may have been true in the recent Kennedy Round of the GATT conferences in Geneva. EIA was established 44 years ago as the Radio Manufacturers Association. The industry was still small when the first tariff reductions were effected in the 1930's. Employment probably did not exceed 5,000 or sales $150 million in 1924. This year electronic factory sales are expected to exceed $23 billion and employ- ment is well over 1,000,000. U.S. electronic manufacturers now produce an estimated two-thirds of the world's electronic equipment, based on dollar volume, ,outside the Communist nations. Our industry ranks fifth among U.S. manufacturing industries. PAGENO="0119" 3555 EXHIBIT 1 Our electronic exports have grown in recent years to reach $1.75 billion in 1967, according tq EIA's Marketing Services Department, but the increase has been largely in the military-industrial area. Imports have increased even more rapidly to reach $806 million in 1967, and these have been heavily in the consumer or home entertainment market. They have been in both consumer equipment and in components. American investments abroad in electronic manufacturing facilities az~e rising and already amount to several billion dollars. EIA has cooperated with Government agencies over the years in promoting international trade among Free World nations. In 1964 we were awarded an certificate by the Secretary of Commerce for our efforts in this field. While it may be too early to determine the full effects of the Kennedy Round it appears, on the basis of information available, that the United States delegation gave more than it received so far as tariffs on electronic products are concerned, especially to the European Economic Community. Continuing non- tariff barriers, added to higher tariffs in both the Common Market and Japan, aggravate the problem of U.S. exporters who strive to increase their exports. It does seem to us that American trade representatives may not have recognized the opportunities for further expansion of U.S. exports of electronic products and the consequent beneficial effect on our balance of payment. Had the tariff reductions agreed to in Geneva been fully reciprocal, both our industry and our nation would have benefitted. In the Kennedy Round the U.S. electronics industry entered the negotiations with generally the lowest tariffs, and after, in most instances, a 50 per cent cut of U.S. tariffs we made the greatest concessions and emerged with an even more unbalanced tariff rate structure than we had before. The following examples are illustrative: PAGENO="0120" 3556 EXHIBIT 1 Electronic products in which the United States is preeminent were granted little or no concessions by the European Economic Community. The United States reduced its tariff on computers from 11.5 to 5.5 per cent, while no concessions were made by the Common Market which has a rate of 14 per cent. The U.S. cut its tariffs on all electronic and measuring equipment 50 per cent as did Japan. The Common Market made a general reduction of 50 per cent but omitted electronic test and measuring equipment. The tariffs on transistor radios, on the other hand, were cut sub- stantially by both Europe and Japan, while the U.S. rate was reduced only from 12.5 to 10.4 per cent. Yet this country imports such radios heavily, chiefly from Japan, and does little exporting. U.S. tariffs on electron tubes were cut from 12.5 to 6 per cent; and, while corresponding reductions were made byEurope and Japan, the American rate remains less than half that of Japan and under the rates of the Common Market. Perhaps more striking examples of imbalance in Genevf agreements on electronic products were tariffs on transistors and semiconductors which American industry developed and produces in the largest volume. While the U.S. rate was reduced from 12.5 to 6 per cent, no concessions were made by the Common Market. Japan limited its reduction to germanium transistors, cutting the rate from 15 to 7~ per cent. These changes do not appear logical to our industry; they have seriously impeded our potential to export and increased the U.S. trend to import. A number of American businessmen, including members of our Association, are concerned that not enough was done in the Kennedy Round to strike down artificia: non-tariff barriers to trade. There are extant throughout the world uncalled for restraints on trade which shackle the flow of goods between nations. This is a prime area for consideration in the development of U.S. trade policy. Mutual removal of these barriers to trade will put trade on a fair basis and eliminate discriminatory, unfair advantages which these barriers create. PAGENO="0121" 3557 EXHIBIT 1 The U.S. electronics industry as a whole is prosperous today and its annual sales continue to rise, but more than half of our sales are to Government agencies and the military services. If and when a Vietnam peace is negotiated - which we strongly support - a sharp reduction in military requirements may occur. The need for greater exports then will be accentuated. Meanwhile, our world competitors, often with direct Government support, are growing stronger. The United States has helped rebuild their wartorn industries. We welcome competition in the world market, but we ask that the rules be the same for all participants and that the American electronics industry not be handicapped by higher tariffs and non-tariff barriers and licensing limitations in our rivalry for foreign business. The U.S electronics industry in some instances has been able to counter higher tariffs and non-tariff barriers by rapid technological advances. Much of this research has been an outgrowth of our military programs and has been heaviest in military and industrial products. But this advantage is likely to diminish when our defense expenditures are reduced. Meanwhile, our international competitors are rapidly catching up, often with American licenses. A good deal of attention should be paid to the emergence of new taxing systems abroad which will, when in full swing, disadvantage U.S. exports and simultaneously give an advantage to foreign producers. The rules of the GATT which set up a dichotomy between direct and indirect taxes should be changed so as to permit countries such as ours to remedy these disadvantages and to off- set these advantages. While recognizing the U.S. Government's concern with its unfavorable balance of payments position, and the necessity for action to adjust the situation, we believe that stringent restrictions on foreign investments by U.S. companies is self-defeating of these objectives. Although curtailment of foreign invest- ments would decrease the outflow of capital for the short-term, the long-term impairment of overseas trade would more than outweigh any advantage gained. PAGENO="0122" 3558 EXHIBIT 1 The expansion of U.S. industry in overseas areas during the past ten years has been one of the dynamic factors in the growth of the Gross National Product, and the dollars returned to the United States from overseas operations of manufacturers have more than compensated for the original investments. Apart from the purely financial considerations the psychological effect of stringent restrictions would be immeasurable. We feel that effective alternatives should be the subject of highest priority to the U.S. Government. We point out also that the restrictions place an unfair burden on newer manufacturers while causing few problems to large international companies that have been manufacturing overseas for many years. Moreover, they are unfair to companies that participated in the voluntary programs. These companies, as a consequence of their cooperation, have a smaller base on which to calculate the amounts which they may reinvest abroad. These are just a few of the substantive areas which we believe need close attention during this Committee's current study. Turning now to the administrative or procedural side of this question, we believe that all the diversified elements of the U.S. Government concerned with foreign trade should be centralized in a single agency of cabinet level. This recommendation is based on the experience and advice of manufacturers who form our International Department. At present, in addition to the Office of the Special Representative for Trade Negotiations, there are elements of the Department of Commerce, Depart- ment of State, Department of Defense, and many other agencies directly concerned with aspects of foreign trade. For a company to obtain a major decision it is often necessary to deal with all these agencies, and frequently several offices in each, with a consequent loss of time and money. We believe that a single agency, comparable to the Ministry of Foreign Trade in many other countries, would go far toward eliminating present confusion and duplication of effort. PAGENO="0123" 3559 EXHIBIT 1 The Electronic Industries Association would strongly support and give full cooperation to any governmental effort aimed at simplifying procedures involved in exporting. As an example, a normal export shipment now requires completion and presentation to Government agencies of a minimum of eight documents. We believe that a reduction in this quantity of documentation could be accomplished at great saving in time and money to both exporters and the Government. In view of the recognized importance of international trade we believe the U.S. Government should undertake an aggressive program of trade development comparable to that of other countries. In this connection, we support the efforts of the U.S. Department of Commerce and other agencies to encourage exports by making information on overseas markets readily available to the business conssunity, and in the program of trade fairs, trade centers, and trade missions. We submit the following specific suggestions for your consideration: (a) It is recommended that the Government place greater emphasis on assembling information on non-tariff barriers and making it available to industry, as well as provide leadership in initiating negotiations for their removal. (b) We recommend greater participation on the part of the U.S. Government in international standards. deliberations. In this we concur with the testimony presented by the U.S. Standards Institute. Restrictive practices in standards are notable examples of non-tariff barriers used by other countries to bar U.S. exports. (c) We recommend that the Government intensify efforts to provide business-trained personnel in U.S. embassies as commercial attaches with the capability and desire to assist U.S businessmen abroad. PAGENO="0124" 3560 EXHIBIT 1 The Electronic Industries Association appreciates this opportunity to present its views on this important matter and stands ready to assist the efforts of this office in any way proper to achieve the national goal of a sound U.S. foreign trade policy. PAGENO="0125" 3561 EXHIBIT 2 ANALYSIS OF THE KENNEDY ROUND TARIFF CONCESSIONS ON ELECTRONIC PRODUCTS (Reproduced from ELECTRONIC TRENDS INTERNATIONAL, May 1968, pages ?-25b~ prepared and published bp Marketinq Services Department, Electronic Industries Associ.ats.on) PART I 1967 E.E.C. - U.S. Trade Flow and Comparative Tariff Structures The following narrative and data are not intended as a general commentary on the results of the Kennedy Round negotiations. This economic report limits itself to one industrial sector of the U.S. economy, more precisely defined as the sector which manufactures or distributes the products and product categories featured as "Selected Electronic Products and Related Items" in the monthly studies of the International. Part I discusses the U.S. and E.E.C. trade and tariff structure. To present a factual and composite picture of total import costs, Part II then relates the tariff rates to other import charges. This is a ~ duct oriented marketing study limited to present and future tariff structures and trade patterns between the U.S. and the E.E.C. References to tariff rates in the context of this study concern actual reductions, increases or no concessions --- after the individual member countries of the E.E.C. had established a common base rate fer negotiations. The rather liberal interpretation of a tariff concession' as defined by the General Agreements on Tariff and Trade (G.A.T.T.) has been purposefully Us- regarded. "Concession - A commitment undertaken by a participant in the Kennedy Round, usually with respect to the tariff treatment of imports of a given product. In such a case, a concession may be either: (1) a commitment to make a specified reduction in the rate of duty on a product, or (2) a commitment that the rate of duty will not be increased or, if the product is duty- free, that a duty will not be imposed on it. A concession of the types described in (2) is termed a binding." By the quoted definition, a frozen tariff rate of 17% applicable through 1972 on semiconductor imports into the E.E.C. is considered a concession. (a) Report on U.S. Negotiations, Volume I, page 181. PAGENO="0126" 3562 EXHIBIT 2 A marketing analyst must, however, make a realistic appraisal of the situation. He is obligated to correlate the `frozen" E.E.C. rate with a further, economic reality. During a comparable period of time, the tariff rate on semi- conductor imports into the U.S. will be reduced from 12.5% to 6.0%. The present analysis further acknowledges and comments on another basic international marketing principle. The analyst, acting as an agent for a supplier or one seeking a source of supply, must relate the tariff rate on his' product category interest to the sum of the intra-industry tariff structure. This is particularly true of the electronics industry, which is characterized by rapid technological developments. During 1967, U. S. exports of "Selected Electronic Products and Related Items" to the E.E.C. totaled $502.3 million, while counterpart imports from the E.E.C. ran $128.5 million. The E.E.C. granted no tariff reductions in five product categories; Computers, Semiconductors, TV. Picture Tubes, Electronic Test and Measuring Instruments and Parts for Instruments. These categories are defined as critical, because they totaled $2141~.l million or L~8.6% of U.S. electronic exports to the E.E.C. in 1967. (See Table I, pages l0a - lob). In two categories, Computers and Semiconductors, the U.S. started at an overall lower tariff rate and granted 50% reductions. The pre Kennedy Round tariff rate on Computers ran 11.5% and will be reduced to 5,5% by 1972. Semi- conductors rates were cut from 12.5% to 6.0% over the same period of time. The E.E.C.'s Common External Tariff (C.X.T.) for Computers was set at 110.0%; for Semiconductors at 17.0% and no reductions were made. These no reduction rates will be applied against two product categories, which at $155.0 million accounted for 310.5% of total 1967 U.S. electronic exports to the E.E.C. ~. In TV. Picture Tubes, the trade balance stood slightly in favor of the E.E.C. The C.X.T. was set and held at 15.0%; while the U.S with a higher pre Kennedy-Round rate on Monochrome and lower on Color Tubes will equal out at the set E.E.C. level of 15.0% by 1972. 1967 U.S. exports of Electronic Test and Measuring Instruments to the E.E.C. totaled $72.2 million. The C.X.T. rate was frozen at 13.0%. During the same year imports from the E.E.C. ran $11.6 million. * As of July 1, 1968, the six member countries of the European Economic Community (E.E.C.) will put into effect.a Common External Tariff (C.X.T.); that is a product imported into any of the E.E.C. countries will be dutiable at the same tariff rate applicable to that particular product. PAGENO="0127" 3563 EXHIBIT 2 Starting at lower base rates than the 13.0% C.X.T. and running up to 50.0% in reductions, the U.S. liberalized rates are applicable to products which comprised $11.1 million of the $11.6 imported from the E.E.C. (See detailed U.S. Tariff Structure, Table I, pages lOa - lOb). As with the finished products, the C.X.T. for Paris of Electronic Test and Measuring Instruments was set and held at 13.0%. The U.S. reductions equalled those of the finished products, since the same tariff rates apply to parts. The product categories in which the E.E.C. granted less than 50.0% reductions equalled 34.5% of total U.S. electronic exports to the E.E.C. in 1967. On January 1, 1972, the date when the final Kennedy Round rates are in effect, the U.S. tariff rates will be lower than the C.X.T. in 14 of the 16 listed gq~ggories; those in which the E.E.C. reduced less than 50.0%. (See Table II, pages ha - 12b). The total extent of the U.S. concessions in this area becomes more evident when placed in a ratio of reduction perspective. In 11 of the 16 categories the U.S. started at lower rates than the E.E.C. and made reductions of The sixteen categories under discussion have been "basketed' for facility of presentation. In fact, they include thousands of separate products, Viewed in the individual product context, disproportionate decreases in several product categories become extremely significant. The pre Kennedy Round U.S. tariff rate on all Parts for Electronic O~ta Processing Machines was 11.0%. The 1972 rate will be 5.5%, a 50.0% reduction. The E.E.C. will decrease from 11.0% to 10.5% during the same period of time, A comparable situation is applicable to any product in the Telecommuni- cations Equipment categories. The U.S. reduced from 12.5% to 6.0%, while the 1.X.T. cut went from 16.0% to 11.0%. The E.E.C made 50.0% reductions on categories amounting to $84.9 million or 16.9% of total U.S. electronic exports to the E.E.C. in 1967. (See Table III, pages 13a - l4b) As in the E.E.C. no reduction and less than 50% reduction groupings, there was no change in pattern, In 15 of the 19 categories, the U.S. also made 50% reduc- tions, with one important qualification; the pre Kennedy Round base rates of these 15 categories were lower than those of the pre Kennedy Round C.X.T. PAGENO="0128" U.S. EXPORT CLASSIFICATIONS Electronic Computers Television Picture Tubes U.S. IMPORT CLASSIFICATIONT 01 cr5 -1 "5 Accounting, Computing, & other 2,78k Dais Processing Machines 19k B.& W.Television Picture Tubes 7,612 Color Television Picture Tubes 12,5 6 3,270 Semiconductors Measuring, Checking, Pre? ~sing or Automatically Controlling Instruments & Apparatus, ~( ~ 11,618 °~ Electronic & Electrical Parts for Measuring, Checking, Analyzing, or Automatically Controlling Instruments & Apparatus: (3) Parts of Ship's Logs & Depth-Sounding Instru- ments A Apparatus Parts of Anemometers The U.S.Tariff Rates A Import for products in this category are broken out as follows: TABLE I NO E.E.C. REDUCTION GRANTED (Add 000) E.E.C. U.S. TARIFF RATES TARIFF RATES U.S. EXPORTS PRE FINAL PRE FINAL U.S. IMPORTS TO E.E.C. KENNEDY RATE KENNEDY RATE FROM E.E.C. __ ROUND 7~ ROUND ~ 1967 1l8,2k1 1k 1k 11.5 5.5 30 15 6,977 15 15 ( 12 15 Semiconductors 36,737 17 17 Measuring, Checking, Analysing or Automatically Controlling Instruments & Apparatus, Electronic 72,163 (2) 13 13 Parts for Measuring, Checking, Analyzing, or Automatically Controlling Instruments & Apparatus, Electronic (2) 13 13 50 25 k5 22.5 PAGENO="0129" Automatic Voltage & Voltage Current Regulators, with or without Cut-out Relays, designed for use in a 6-volt, 12-volt, or 8,5 4 1,379 24-volt system, and Parts Automatic Voltage & Voltage- Current Regulators, with or without cut-out relays 15 7.5 101 & Parts thereof, N.E.C. Optical Instruments or Appa- 50 25 62 ratus & Pai'ts thereof Ship's Logs & Depth-sounding 92% ea, 46% ea, Instruments & Apparatus +14% +7% 89 Instruments & Apparatus for Measuring or Detecting Alpha, Beta, Gamma, X-Ray, Cosmic or similar Radiations 14 7 217 & Parts 15.5 7.5 2 Seismographs & Parts $2.25 ea, $1.12 ea, 2 Anemometers + 35% + 17.5% Automatic Flight Control Instruments & Apparatus designed for use in Aircraft 12 6 ( and Parts thereof Electrical Measuring, Checkini 9,761 ( Analyzing or Automatically Controlling Instruments & 12 10 C Parts, N.E.C. (1) Under a special provision the Tariff Rate for color picture tubes will remain at 12% through August 31, 1969. After that time, they will come in under the duty for B & N Television picture tubes, (2) Electronic instruments, apparatus, & parts were estimated at 75% of total measuring, checking, analyzing or automatically controlling instruments & parts. (3) Check U.S. Tariff Rates of parts classified with finished (conmiete) product. PAGENO="0130" U.S. EXPORT CLASSIFICATIONS Parts for Electronic Data Processing Machines Television Receivers, including Combinations(2) Radios, including Combinations (2) Transceivers Television & Radio Broadcast Audio Equipment Television Broadcast Studio Equipment, Other than VTR's Radio Communication Systems, except Mobile & Microwave Microwave Communication Systems & Eiuipment Mobile Communication Equipment, N.E.C. TABLE II ni >( LESS THAN 50% E.E.C. REDUCTION GRANTED (Add 000) E.E.C. U.S. TARIFF RATES TARIFF RATES U.S. EXPORTS PRE FINAL PRE FINAL U.S. IMPORTS TO E.E.C. KENNEDY RATE KENNEDY RATE FROM E.E.C. 1967 ROUND ~ ROUND ~ 1967 U.S. IMPORT CLA2SlFICATIC~!. (Included iri a basket cat ~ 676.5200 - Parts ti 1iice Machines, excludirg 57,581 11 10.5 11 5.5 NA. Typewritrr Partu) 10 5 90 Television fluceivert (2) 3815 22 115 13 7.5 7 Television - Ralia - Phono.Comb. 12.5 10.15 3,501 Solid State Radios (2) 1,370 22 115 ) 12.5 6 1,716 Radios, N.E.C. (2) 13.75 6.5 3,166 Combination Radio - Phonograph 1,229 16 11 12.5 6 13 Transceivers (md. 685,20150 - TV. Apparatus 10 5 NA. & Parts, N.E.C.) 211 16 11 ) (mci. in 685.2060 - Radio Appa- 12.5 6 NA. ratus & Parts, N.E.C.) (md. in 685.20L10 - TV. 849 (l) 10 5 N.A. Apparatus & Parts, N.E.C.) 1,827 16 11 1,01515 16 11 15,426 16 11 C) C) PAGENO="0131" Communication Equipment & Parts, N.E.C. Inter-communication Equipment (other than wire telephone & telegraph) Transmitters & Radio Frequency Power Amplifiers, other than broadcast * Transmitters Other Electronic Telecommunications Equipment, N E.C. Parts & Accessories for Telecommunications Equipment, N.E.C. Meteorological & Navigation Instruments, Electric or Electronic Electronic Navigational Aids Electronic Search & Detection Apparatus, Including Radar (3) 21,248 (1) See page 8,975 i6 11 Radio Navigational Aid Appa- ratus, Radar Apparatus & Radio Remote Control 15 7.5 596 Apparatus, & Parts (2) Complete Kits are classified with finished product; incomplete Kits are classified under their respective parts - (i.e. a receiving tube in an incomplete Kit would be classified under receiver tubes). (3) Meteorological Instruments & Sonar Apparatus (including echo-sounding) would fall into BTN heading 90.28; Measuring, Checking, Analyzing or Automatically Controlling Instruments & Apparatus. 12.5 6 1,520 Radio Apparatus & Parts, N.E.C. 327 16 11 ) 3,955 * * 14 7 ) (1) 841 7,385 i8 13 7,442 13 10 19,382 13 10 13 10 rn >( I -4 PAGENO="0132" TABLE II Communication Wire & Cable, Insulated Insulatdd Appliance Wire & Cord & Flexible Cord Sets, other than Ignition Harnesses and Cable Sets Power Wire & Cable, Insulated, under 601 Volts Power Wire & Cable, Insulated, 601 Volts & over Magnetic Wire Insulated Insulated Electrical Cable, Cord, & Wire, N.E.C. * Lead-sheathed cables Other Resistors & Parts Parts & Accessories, N.E.C. for Electron Pubes Parts & Accessories, for Diodes, Rectifiers, Transistors, & Semiconductor Devices, N.E.C. l4or ) 859 17 * 11 ) i4or 528 17 * 11 l4or 505 17 * 11 l4or 31 17 * 11 l4or 282 17 * 11 l4or 1,191 17 * 11 17 14 8,275 13 8 17 15 17 rn cX3 Insulated Electrical Conductors, without fittings, (Included in basket category with Photocells, & Piezo- Electric Crystals) Tees IWAN c0~ EEC. REDUCTION GRANTED - (Cont.)' U.S. EXPORTS TO E.E.C. U.S. EXPORT CLASSIFICATIONS 1967 (Add coo) E.E.C. U.S. TARIFF RATES TARIFF RATES PRE FINAL PEE FINAL U.S. IMPORTS KENNEDY RATE KENNEDY RATE FROM E.E.C. ROUND ~9J~j ~Q)(((~, ~7j l967~ U.S. IMPORT CLASSIFICATICOS Insulated Electrical Conductors, without fittings, containing (exclusive of insulation u sheating) over 10% by the 8.5 4,054 weight of metal copper 7.5 32 N.E.C. Insulated Electrical Conductors, with fitting, 8.5 451 N.E.C. 2,594 Resistors & Parts 12.5 6 2,886 12 9 6,639 12 9 12.5 6 NA. PAGENO="0133" Microscopes & Diffraction Apparatus, Electron & Proton Electro-Medical & Electro-Therapeut ic Apparatus, other than X-Ray Apparatus 6,!~98 Video Tape Recorders Recorders, Tape, Wire & Disc, except office Recording Machines & Recording Mechanisms (i) Dictation Transcribing Machines (1) Combination Dictation Machines (1) ** Estimated Phonographs, Coin-operated, New Phonographs, except Coin- operated, New Phonograph & Record Players, Used Electro-Surgical Apparatus 203 & Parts Electro-medical Apparatus 1,035 & Parts (Included grouped together in a basket category with all Tape Recorders & Dictation Machines & Parts) (Included in basket category 6,610 15 9.5 17 8.5 NA, with Musical Instrumerits,N.E.C. Record Players, Record Changers & Phonographs, with or without Speakers (1) See page >( -1 Electron, Proton & Similar Microscopes & Diffraction 150 12 9 22 11 785 Apparatus 36 12 13 8 2,80k 10 8 5,7L~9 13 8,5) 160 ** 15 9.5) 1,100 ** 13 8,5) 11.5 5.5 NA. 2~9 297 15 9.5 ) 15 9,5 ) C;' 11.5 5.5 3,391 PAGENO="0134" U.S. EXPORTS TO E.E.C. US. EXPORT CLASSIFICATIONS 1967 Telephone Switchboards Telephone Switching Devices Telephone Carrier Equipment Telephone Instruments Telephone Repeater Equipment Telephone Apparatus & Equipment, NEC. & Parts, N.E.C Teleprinter Units (Wire) Telegraph (Wire) Apparatus & Equipment, N.E.C. U.S. TARIFF RATES PRE FINAL U.S. IMPORTS KENNEDY RATE FROME.E.C. ROUND i2:Li~. 1967 Telephonic Apparatus. & Instruments and Ports thereof' Telegraph Apparatus & Instruments & Parts, N.E.C. Measuring, Checking, Analyzing or Automatically Controlling Instruments & Apparatus, Electrical Parts C or Measuring, Checking, Analyzing, or Automatically Controlling Instruments & Apparatus, Electrical rn Us -1 TABLE III 50% E.E.C. REDUCTION GRANTED (Add 000) E.E.C. TARIFF RATES PEE FINAL KENNEDY RATE ROUND 12E _ 15 7.5 ) 15 7.5 ) 36 13 6.5 ) 115 15 7.5 56 15 7.5 ) 910 15 7.5 626 15 7.5 14 1,403 15 7.5 14 US, IMPORT CLASSIFICATIOU~ 17.5 8.~ 4,271 Cl' Teleprinting & Teletypewriter 974 Machines & Parts 18,040(2) 13 6,896 6.5 (3) 3,332 (2) 13 6.5 (3) PAGENO="0135" Radio Broadcast Transmitters T.V. Broadcast Transmitters Railway Signals & Attachments Electric Traffic Control Equipment & Parts, N,E.C, Electric Lighting Sign~l Apparatus, Marine Markers, Beacons, & Similar Lighting Signal Equipment, N.E.C. Electric & Electronic Alarm & Signal Systems Electric Gongs, Buzzers, Bells, & similar Sound Signal Equipment Bells, Sirens, Indicator Panels, Burglar & Fire Alarms, & other Sound or Visual Signalling Apparatus 924 & Parts Loudspeakers & Parts Microphones & Parts, N.E.C. Audio-Frequency Amplifiers & Parts, N.E.C. Public Address Systems 1,404 478 2,292 171 14 7 14 7 ) 14 7)~ )) 14 7)) 15 7.5 636 Loudspeakers 15 7.5 912 Microphones Audio-Frequency Electric 15 7.5 380' Amplifiers Headphones, Electric Sound 15 7.5 236 Amplifier Sets Parts f or Loudspeakers, 15 7.5 321 Microphones, Amplifiers,etc. Included in Radio Apparatus & 12.5 6 N.A. Parts, N.E.C. Included in T.V. Apparatus & 10 5 N.A. Parts. N.E.C. 115 14 7 1 14 7 1.144 12 6 581 12 6 ) 130 12 6 ) 688 12 6 ) 8.5 4 32 12 6 (2) Electrical Instruments and Apparatus were estimated at 25% of total category: Measuring. Checking, Analyzing or Automatically Controlling Instruments & Apparatus. (3) Check "No Reduction Granted" section for U.S. Tariff Rates and U.S. Imports from E.E.C. PAGENO="0136" TABLE III 50~ E.E.C. REDUCTION GRANTED - (Cont.) (Add 000) E.E.C. u.s. -I TARIFF RATES TARIFF RATES U.S. ED(PORTS PRE FINAL PRE FINAL U.S. IMPORTS TO E.E.C. KENNEDY RATE KENNEDY RATE FROM E.E.C. U.S. ~CPORT CLASSIFICATIONS 1967 ROUND (.21?.._ ROUND ~ 1967 U.S. IMPORT CLASSIiflATI Capacitors 7,669 14 7 12.5 10 4,494 Capacitors Electrical Apparatus for Naking, Switches, N.E.C. 9,944 13 6.5 ( Breaking, or for protection of Electrical Circuits; Current Carrying Wiring ( Switchboards (except Telephone Devices, N.E.C. 10,551 13 6.5 ( Switchboards) and Control 30 15 14,347 Panels & Pas'ts Electronic Type Receiving Electronic Receiving Tubes Tubes 2,152 15 7.5 12.5 6 4,929 (excl, Cathode Ray) Cathode Ray TV, Camera Tubes 268 14 7 12.5 6 51 Cathode Ray Tubes, N.E.C. Cathode Ray Tubes, N.E.C. (excl. TV, Picture Tubes) 162 15 7.5 Electron Tubes, N.E.C., Transmitting, Industrial & Special Purpose 6.020 * * 12.5 6 5,705 Electronic Tubes, N.E.C. Gas & Vapor Electron Tubes 755 * * * If a Rectifying Tube . 16 8 ) Other 15 7.5 X-Ray Tubes, Valves, & Parts, X-Ray Tubes N.E.C. Medical & Industrial 410 13 6,5 6.5 3 1,108 & Parts PAGENO="0137" Medical & Dental X-Ray & Gamma Ray Equipment & Parts, N.E.C. Industrial & Scientific X-Ray Equipment, & Parts, N.E.C. Electronic & Electric Organs Dictation Recording Machines (1) X-Ray Apparatus & Parts, 5.5 2.5 10,878 N.E.C. Apparatus based on the use of Radiation from Radioactive 6 50 Substances & Parts 34 17 4,792 Electronic Organs (Included in a basket category with all Tape Recorders & NA. Dictation Machines & Parts) Phonograph Records, Record Blanks, & Pre-Recorded Tapes ~ Blank Records Recorded Records Pre-Recorded Tape (not for film) Recording Magnetic Tape & Wire (1) See page 1,979 *** 14 7 17 8.~ 15 7.5 ) 10,414 15 7.5 10 5 2~ l~ ~~** Sq. ft. of recording surface 12 6 1,230 Phonograph Records Recorded Magnetic Tape & 231 Media other than Wire Blank Magnetic Recording Media ni -1 660 13 6.~ ) ( 627 13 6.~ ) ( 12 1,317 19 9.5 ** Estimated 440 ** 15 7.5 11.5 5.5 PAGENO="0138" P1 as (i) Note: Parts for 85.15, Radiotelegraphic & Racliotelephonic Transmission and Reception Apparatus; Radio-Broadcasting I T.V. Transmission & Reception Apparatus, and T.V. Cameras, Radio Navigational Aid Apparatus, Radar Apparatus & Radio Remote Control Apparatus are classified in following manner by E.E.C. countries: PRE FINAL KENNEDY RATE ._~- i~__ Cases & Cabinets of Wood 13 6.5 Cases & Cabinets, N.E.C. 16 8 Microstructures 18 17 01 Parts cut from the bar, of base metal, the greatest diameter of which does not exceed 25mm 18 9 Parts, N.E.C. 18 13 Parts for Sound Recorders & Reproducers are classified in the following manner: Sound-heads and pick-ups; including parts 16 10.5 Needles 10 5 Other Parts cut from the bar, of base metal, the greatest diameter of which does not exceed 25mm 14 7 Parts, N.E.C. 14 9 PAGENO="0139" 3575 EXHIBIT 2 PART II TOTAL E.E.C. IMPORT CHARGES PAGENO="0140" 3576 EXHIBIT 2 Tariffs are one form of cash charges levied against imports into the member countries of the E.E.C. Among other charges are non-cumulative and neutral turnover taxes and a variety of excise duties. These indirect taxes are operated on the "country of destination principle;" that is, the taxes are refunded on exports but imports are subject to payment. As explained by Mr. Johannes Jansen, head of the Indirect Taxation Division, Commission of the European Communities: "Turnover taxes are taxes on consumption: they are added to the price of taxable products. They are levied according to the "country of destination principle." This means that exported goods are exempted from turnover tax and the tax already paid is reimbursed. On the other hand, imported commodities have to be taxed in the same way as similar domestic products." * "Because the "country-of-destination principle" also appli4s to excise duties, there is, as with turnover taxes, a duty refund on exports and a duty on imports." ** In addition to the taxes, there are a variety of fees, varying from country to country, which are applicable against U.S. imports. Among these fees are statistical charges, stamp taxes, administrative payments and import taxes. Table IV, page 23, illustrates the taxes and other fees levied against U.S. imports by the individual countries comprising the E.E.C. A study of Table IV shows the wide range and disparity of these cash charges within and between the different ccuntries. Readers are particularly urged to note that with the exception of Luxembourg's 3.0% import tax, all other "frontier" taxes are levied against the Cost, Insurance, Freight (C.I.F.) duty paid total of an imported product. In the case of imports into the U.S., there is only one cash charge; the duty on the F.O.B. value. * (1) Johannes Jansen, Tax Harmonization in the Community in European Community, January, 1968. **(2) Johannes Jansen, Introducing a Uniform A.V.T. Rate, in European Community, March, 1968. PAGENO="0141" 3577 EXHIBIT 2 Table V relates the total disparity between the lower U.S. and the higher landed costs in the member countries of the E.E.C. Five random products representing different sectors of the electronics industry are presented. The point in time for the landed costs in the E.E.C. is July 1, 1968. the date the Cormson External Tariff goes into effect. The presented cost of imports into the U.S. has been effective as of January 1, 1968, the date the U.S. made the first of the Kennedy Round 5 stage - 5 year reductions. (See Table V. pages 2'~-25.) * The differentials shown in Table V between the landed costs in the U.S. and the E.E.C. are, of course, substantial and significant. There are a variety of reasons for these landed cost differentials which favor the E.E.C. 1. In the "Selective Electronic Products and Related Items" area, present individual country tariff rates and the future C.X.T. are and will continue for a five year period to be generally higher than those of the U.S. 2. The U.S. duty is levied against the cost of the product (F.O.Bj; the E.E.C. against the product, insurance, freight (C.I.Fj. - 3. Each of the member countries of the E.E.C. applies its turnover taxes against the C.I.F. duty paid total. L~. With the exception of Germany and Luxembourg the incidence of the "turnover" taxes varies according to the nature of the product. The pattern followed is almost constant, The incidence of the "turnover" rises on consumer type and those products subject to rapid technological innovation and development, Turnover in the above statement was put in gratis to qualify Italy's approach for adhering to the mentioned pattern, Italy holds the turnover tax at `~.O% and then "adjusts" with a varied rate structure of an additional compensatory import tax and in the case of consumer products with additional taxes levied against the C,I.F., Duty, Thrnover Tax and Compensatory Import Tax p5j4~talJ 5. Luxembourg, France and Italy impose further taxes or other charges. (Table IV). * See Marketing Guide Sheets, pages 28 through 111 for detailed country by country tariff and taxes for individual products. PAGENO="0142" 3578 EXHIBIT 2 The question immediately occurs as to whether the various indirect taxes are used as discriminatory measures against foreign competition. Mr. Johannes Jansen, a spokesman for the Community answers the question for U.S. exporters in the context of intra-E.E.C. trade: "Accordingly, when the customs union in the Oommunity is achieved on July 1, 1968, trade between the member countries will be free of customs duties, but will nevertheless still come up against tax frontiers at which indirect taxes will be levied and be reim- bursed, and physical controls carried out. It is not surprising therefore that the Treaty gives prime consideration to the compensatory measures for indirect taxes applied at the frontier to intra-Community trade in goods. For export-drawbacks and import-equalization taxes can easily be used for purposes incompatible with one of the main objectives of the Common Market, namely free, undistorted competition. For instance, if the compensatory tax levied on imports is higher than the tax on comparable home-produced goods, the difference has the same protective effect as the customs duties that are being abolished. On the other hand, if the drawback on exports is too high, then the difference is tantamount to an export subsidy, which is prohibited. In order to guard against these forbidden forms of discrimination, Articles 95 and 96 stipulate that the indirect tax on imports must not be higher than that which would be charged on similar domestic goods, and that the drawback on exports must not exceed the amount of tax actually paid. This sounds very simple. But experience has shown that these prohibitions are very difficult to enforce properly in the Common Market, at least as far as turnover taxes are concerned." * The E.E.C. turnover taxes, which afford a wide variety of discriminatory practices in foreign trade, are presently in a transitional stage. On February 9, 1967, the E.E.C. Council of Ministers adopted a unified turnover tax called the value added tax (T.V.A.). * ibid (1) page Articles 95-96, reference to Rome Treaty. PAGENO="0143" 3579 EXHIBIT 2 The value added tax cay be described as an overall and nonrecurrent tax on consumption, the levy of which is made by partial payments in each state of production and distribution on the basis of the value which is added to the product in each stage. The T.V.A. will replace the cumulative turnover tax system previously used by the E.E.C. member countries, T.V.A. will be applied by all member countries of the E.E.C. not later than January 1, 1970. Germany and France (modified form) are presently operat;~g under this new tax system, The Netherlands and Belgium will introduce the change on January 1, 1969; Italy and Luxembourg probably not before January. 1970. Will the T.V.A. offer some relief from the discriminatory practices against imports possible under the old turnover tax systems? In the opinion of the M.S.D. International Data staff, the possibility of such relief is remote. The "why" of this opinion may be adjudged by an exam- ination of a written commentary by the previously quoted Mr. Jansen. "T.V.A., the European Community's common turnover tax system, will be in force throughout the six member countries by January 1, 1970; but tax harmonization will not be finished, because the common system still leaves many choices in the hands of the individual governments. The first two Community T.V.A. directives require the member governments to apply T.V A. to only a small part of the service sector. Depending on each country's own possibilities for col- lectirig `T.V.A.. it may work out its own provisions for small business and may decide for itself whether or not to apply the tax to retail trade and to the many services not connected with production and distribution of goods, such as banking, physicians' fees, and other services normally supplied to private individuals. Only a few services that have a direct bearing on production and distribution must become subject to the common T.V.A., among them, the transfer of patents and trade marks, advertising and the transport and storage of goods. Of all the choices left to the member governments, however, the selection of tax rates and the granting of exemptions give the most room for disparities in the first phase of turnover tax harmonization. Even after January 1, 1970, considerable differences will persist between the six countries in both the standard rates and the higher or lower rates levied on specific goods or services. It is too early to make precise forecasts of what the normal rate will be in any of the Six on January 1, 1970, but I would guess they would be roughly 20 per cent in France and Belgium, between 10 per cent and 12 per cent in the Netherlands, Italy, and the Federal Republic of Germany, and 9 per cent in Luxembourg. PAGENO="0144" 3580 EXHIBIT 2 In areas where harmonization need not yet be applied, the member countries are entitled to provide their own national regulations. After consulting the Commission and the other five countries, one member country may decide, for instance, to disallow some or all tax deductions for expenditures on capital goods or to allow deductions on this equipment by annual installments only, when economic considerations warrant such action. During a transitional period after the introduction of T.V.A., even without prior consultations, member countries may restrict deductions for capital goods. Germany has already done so in its new T.V.A. law that came into force on January 1 this year, on budgetary grounds. The German restrictions were also intended to prevent a temporary halt of investments prior to the introduction of the T.V.A." * The special rates, exemptions and options, which still leave room for disparities are more than adequately stated. "Under the new T.V.A. system, as long as each Community member applies a different rate, set at a level that main- tains the total incidence of the preceding cumulative turn- over tax, U.S. exports to these countries will be taxed at exactly the same amount as similar goods produced in those countries. In cascade system countries where com- pensatory taxes on imports were too low imports will lose their unwarranted competitive advantage upon the introduction of T.V.A. Conversely, exports from those E.E.C. countries to the United States and other non- member countries will lose the competitive disadvantage from which they may have suffered because the cascade system gave them an inadequate rebate. Competitive con- ditions will also be equalized in trade between the E.E.C. countries themselves." * The idea of U.S. exports being taxed a exactly the same amount as similar goods produced in the E.E.C. under the old turnover tax system or under the new T.V.A. has been and remains an economic myth consistently perpetuated by the E.E.C. As an example: If the T.V.A. rate is 15.0%, the total tax paid on a domestically produced goods worth $1,000 is $150. If the same 15.0% T.V.A. is applied against an import worth $1,000 - shipped and insured at $60 - and enters at a 15.0% duty rate, the T.V.A. is $182.50. * Johannes Janzen, T.V.A. 1970 and Beyond, in European Community, April, 1968. PAGENO="0145" 3581 E)Q-IIBIT 2 Sometime after January 1, 1970 - at a date as yet unannounced - the E.E.C. will harmonize at a common rate. Mr. Jansen makes this comment: "Nothing yet is definite, of course, on the level of the common rate, but it could conceivably be fixed at around 15.0%." * This conceivable rate of 15.0% warrants an examination. By averaging out the total imports -osts of the E.E.C. countries as of July 1, 1968 and theoretically exporting to the Six at a common rate, the total landed cost on a $1,000 worth of semiconductors would be $1,369.61. If the same shipment were made after January 1, 1972 against a common 15.0% T.V.A., the total landed cost would be $1,426.23. * Johanries Janse, T,V.A. 1970 and Beyond, in ~7ppean Community, April, 1968. 95-159 0 - e8 - pt. 8 - 10 PAGENO="0146" TABLE IV COMPARATIVE E.E.C. IMPORT TAXES BELGIUM Transmission Tax of from 7 - 30% on C,I,F. duty paid value, LUXEMBOURG 3% Import Tax on all 1% Statistical products on FOB, Charge on all Luxembourg value, products on C.I.P, value. 2% Stamp Tax on all products on the amount of duty paid. T.V.A. Tax of from 16.66 to 20% on C.I,P. duty & tax- paid value. Administrative Fee of 0.5% on all products on C.I.F. value. 4% Turnover Tax on all products(1) on C,I,F, duty & Administrative Pee paid. Compensatory Import Tax, of from L~.8 - 7.8% on CI.?, Duty Administrative Pee paid. Additional taxes of 5% on CI,?. Duty Tax paid total on Radios, TV's & Combinations. And 10% C,I.P. Duty- tax Paid Total on Phonograph Records and other Sound Recording Media. GERMANY 11% T.V.A, Tax on all products on CI.?, duty paid. 3% Turnover Tax on all products on the duty & tax..paid value. NETHERLANDS Turnover Tax of from 9.t4 - 28.14%on ci.?. Duty paid value. (1) The Turnover Tax on items under 85.01 which are used for Agricultural purposes is 3,3%. PAGENO="0147" EXHIBIT 2 3583 T A B L E V - C 0 M P A B A T I V t (EFFECTIVE AS (including combinations) FOB. $1,000.00 Duty 90.00 C.I.F. Duty $1,060.00 199.28 C.I.F. Duty $1,060.00 199.29 Insurance & Freight 60.00 Total Tax Total 377.78 Taxes Total 68.68 Landed Cost $1,150.00 Landed Cost $1,637.06 Landed Cost $1,327.96 Tape Recorders F.0.B. $1,000.00 Duty 100.00 Insurance & Freight 60.00 Total Landed Cost $1,160.00 C,I.F. $1,060.00 Duty 118.72 Taxes 66.26 Total Landed Cost $1,244.98 Home: C.I.F. $1,060.00 Duty 118.72 Tax 341.83 Total Landed Cost $1,520.55 Industrial (including Dictation Machines): C.I.F. $1,060.00 Duty 118.72 Tax 153.23 Total Landed Cost $1,331.95 Radio Remote F.0.B. $1,000.00 C.I.F. $1,060.00 C.I.F. $1,060.00 Control Duty 130.00 Duty 125.08 Duty 125.08 Apparatus; Insurance Radio & Freight 60.00 Tax 82.96 Taxes 66.45 Navigational Total Total Total Aid Apparatus: Landed Landed Landed & Radar Cost $1,190.00 Coot $1,268.04 (1) See following page. PAGENO="0148" Non-electrical: C.I.F. $1,060.00 Duty 118.72 Tax iio.8o Total Landed Coot $1,289.52 3584 IMPORT c,osTs(1) OF JULY 1, ~ FRANCE GERMANY ITALY C.I.F. $1,060.00 Duty 199.28 C.I.F. $1,060.00 Duty 199.28 C.I.F. Duty $1,060.00 199.28 Taxes 257.92 Total Landed Cost $1,517.20 Tax 138.52 Total Landed Cost $1,397.80 Taxes 209.27 Total Landed Cost $1,468.55 EXHIBIT 2 NETHERLANDS C.I.F. $1,060.00 Duty 199.28 Tax 357.64 Total Landed Cost $1,616.92 Industrial: C.I.F. $1,060.00 Duty 199.28 Tax 118.37 Total Landed Cost $1,377.65 C.I.F. Duty $1,060.00 118.72 . C.I.F. $1,060.00 Duty 118.72 C.I.F. Duty $1,060.00 118.72 Electrical: C.I.F. $1,060.00 Duty 118.72 Taxes Total Landed Cost 239.86 $1,418.58 Tax Total Landed Cost 129.66 $1,308.38 Taxes Total Landed Cost 130,81 $1,309.53 Tax Total Landed Cost 252.25 $1,430.97 C.I.F. Duty $1,060.00 125.08 C.I.F. Duty $1,060.00 125.08 C.I.F. Duty $1,060.00 125.08 C.I.F. Duty $1,060.00 125.08 Taxes Total Landed Cost 201.59 $1,386.67 Taxes Total Landed Cost 130.36 $1,315.44 Taxes Total Landed Cost 131.49 $1,316.57 Tax Total Landed 111,40 $1,296.48 PAGENO="0149" EXNIBIT 2 3585 TABLE V-COMPARATIVE (EFFECTIVE AS Semiconductors FOB. $1,000.00 Duty 110.00 Insurance & Freight. 60.00 Total Landed Coat $1,170.00 C.I.F. $1,060.00 Duty 180.20 Tax 86.8i Total Landed Cost $1,327.01 C.I.F. $1,060.00 Duty 180,20 Taxes 68.11 Total Landed Cost $1,308.31 (1) `Costs are figured on a shipment value of $1,000.00, on which insurance and freight amount to $60.00. The combined freight and insurance cost was calculated at 6% of value as estimated in a report by the Tariff Commission on "C.I.F. Value of U.S. Imports." Fixed Capacitors UNITED STATES BELGIUM LUXEMBOURG F.O.B. $1,000.00 C,I.F, $1,060.00 Duty 120.00 Duty 118.72 $i,o6o,oo Insurance Duty 118.72 & Freight 60,00 Tax l65~~ Taxes 66.26 Total Total Landed Landed Total Cost $1,180.00 Landed PAGENO="0150" C.I.F. $1,060.00 Duty 180.20 Taxes 253.63 Total Landed Cost $11493.83 C.I.F. $1,060.00 Duty 180.20 Tax 136.142 Total Landed Cost $1,376.62 C.I.F. $1,060.00 Duty 180.20 Taxes 1114,90 Total Landed Cost $1,355.10 C.I.F. $1,060.00 Duty 180.20 Tax 116.58 Total Landed Cost $1,356.78 3586 EXHIBIT 2 INFO R T C 0 S T S (i)_ (Con~j OF JULY 1, 1968) FRANCE GERMANY ITALY NETHERLANDS C.I.F. $1,060.00 C.I.F. $1,060.00 C.I.F. $1,060.00 C.I.F. $1,060.00 Duty 118.72 Duty 118.72 Duty 118.72 Duty 118.72 Taxes 239.86 Taxes 129.66 Taxes 130.81 Tax 1214~93 Total Total Total Total Landed Landed Landed Landed Cost $l,14l8.58 Cost $1,308.38 Cost $1,309.53 Cost $1,303.65 PAGENO="0151" 3587 EXHIBIT 3 THE NEED FOR REFORM IN THE ANTIDUMPING ACT TO PREVENT UNFAIR PRACTICES IN THE IMPORT TRADE The Antidumping Act, in its administration, has been substantially ineffective in checking unfair practices in the pricing of foreign merchandise for export to the United States. The Congress has, we believe, in the enactment of the Antidumping Act, granted sufficient authority to the Bureau of Custons to enforce the rules for fair trade practices in our import trade. Due, in part, however, to the pervasive influence of the concept of a total foreign economic policy fostered within the Executive Branch of the Government, our antidumping laws have suf- fered in their administration to a degree that has made them inefficient instruments for suppressing the development of unfair trade practices in the import trade of the United States. The principal problem areas requiring attention are as hereinafter described. Disclosure of information filed by foreign exporters in antidum-ping investigations i~s now being significantly iimnunized from disclosure through the arbitrary use by foreign exporters of the "confidential" classification. The Customs Regulations provide at Sec. 14.6a(a) that in general all information obtained by the Bureau of Customs in an anti- dumping proceeding will be available for inspection or copying by any PAGENO="0152" 3588 EXHIBIT 3 interested person. Sec. 14.6a(b) permits persons submitting information to request that it, or part of it, be kept confidential. But Sec. 14a(c) of the Regulations states at paragraph (2) that information relating to price information, allowances for quantity purchases, and to claimed differences in circumstances of sale `will ordinarily be regarded as appropriate for disclosure." In practice, however, the foreign manufacturers of imported merchandise subject to investigation under the Antidumping Act label all information submitted to the Bureau of Customs in an antidumping proceeding as "confidential.' The Bureau, in administering this provision of the Act, then "negotiates" with the foreign manufacturers to obtain their compliance with this provision of our laws. Such a practice is hardly conducive to a fair and effective administration of the Act which Congress intended as an instrument for the removal of unfair practices in our import trade. Failure of the Treasury Department to base its "fair value" determinations in antidunrping proceedings upon the "foreign value" of the imported merchandise as defined in the Tariff Act of 1930 is contrary to the intent of Congress. The Antidumping Act [Sec. 160(a)] specifies that the basic finding to be made by the Secretary of the Treasury (based on information submitted to him by the Bureau of Customs) is whether the imported merchandise "is being, or is likely to be, sold in the United States PAGENO="0153" 3589 EXHIBIT 3 or elsewhere, at less than its fair value." The term "fair value" itself is not defined in the Antidumping Act. Prior to the 1958 amendment of the Antidumping Act, and the resulting amendment of the Customs Regulations for antidumping investigations, the Secretary of the Treasury, with subsequent court approval, had by regulation defined "fair value" as equivalent to."foreign market value." Kleberg & Co. Inc. v. United States, 21 C.C.P.A. 110 (Court of Customs and Patent Appeals, 1933). Legislative actions related to the Antidumping Act and the above-mentioned definition of fair value strongly indicate that Congress understood that "fair value" and "foreign value" in the Tariff Act and "foreign market value" as defined in the Antidumping Act for purposes of measuring the amount of dumping duties to be imposed after other precedent determinations were made, were to all intents and purposes identical. The first evidence of this is offered by the report of the Senate Finance Committee on the Customs Simplification Act of 1954. It quoted a letter from the Assistant Secretary of the Treasury stating, among other things, that "There is great difficulty, under the existing statute and decisions construing it, in giving proper effect to the law in cases where the home market of the country in which the dumping originates is to any extent restricted in the way in which the commodity is offered for sale." (S. Rep. 2326, 83d Cong., p. 4) PAGENO="0154" 3590 EXHIBIT 3 Restrictions on sale refer to foreign value for customs purposes, which cannot be based upon other than prices which are freely offered to all purchasers at wholesale. This comment by the Treasury Department, reported by the Committee, ties "fair value" to "foreign value" for customs purposes. Next, the report of the Ways and Means Committee of the House of Representatives on the Customs Simplification Act of 1955 directs attention to fears expressed that the repeal of foreign value as a primary customs valuation base would, by eliminating up-to-date information as to foreign values, weaken the enforcement of the Antiduinping Act. The significance of these expressed fears, referred to by the Committee, lies in the identification of foreign value for customs purposes as the measure of fair value. The Committee stated: "Your committee considered carefully the effect of the adoption of this bill on the enforcement of the Antidunping Act, 1921. The committee has been assured by the Treasury Department that there will be no weakening in the enforce- ment of that act. The Secretary of the Treasury has written to the committee stating the intention of the Bureau of Customs and the Department of the Treasury to continue to obtain the information on customs invoices necessary for such enforcement." (H. Rep. 858, 84th Cong., p. 5) PAGENO="0155" 3591 EXHIBIT 3 The Committee quoted the Secretary's letter, which included the statement: "it is the firm intention of the Bureau of Customs and the Treasury Departnent to continue to require foreign value information as part of the information contained in customs invoices. Consequently, the Treasury Depart- ment will continue to have available to it foreign value information upon which to initiate investigation of possible sales at a dumping price wherever the discrepancy between invoice price and foreign value appears to warrant it." (Emphasis added) (H. Rep. 858, 84th Cong., p. 5) The Senate Finance Committee in subsequently reporting the Customs Simplification Act of 1956 took up the same topic, and stated in its report: "The Secretary of the Treasury has indicated that foreign value information would continue to be required on customs invoices made out by exporters. The Treasury would thereby continue to have available the information needed to initiate full-scale investigations whenever dumping was indicated." (S. Rep. 2560, 84th Cong., p. 4) At this point, there could be little doubt that both Treasury and the cognizant committees of Congress understood that "foreign value" as defined for customs valuation purposes was the touchstone of fair value. At that time, i.e., prior to the 1958 amendments to the Antidumping Act, both "foreign market value" as defined in the Antidunping Act and "foreign value" as defined in the Tariff Act of 1930 included the requirement that the prices used to establish value in the home market be those prices at which the merchandise was "sold or freely offered for sale to all purchasers" in wholesale quantities. PAGENO="0156" 3592 EXHIBIT 3 The courts had held that prices on transactions which restricted the use or territory in which the merchandise could be resold, or resale of the merchandise, were not `freely offered to all purchasers" and, hence, could not be used as a basis for home market value dtermination. Further, a price that was available to some purchasers, but not to all purchasers (as, e.g., a price restricted to manufacturers who used the merchandise in their manufacturing operations but who did not resell it), was not "freely offered to all purchasers." Under the Antidumping Act, if freely offered home market prices were not available, freely offered prices in sales to third country purchasers were required to be used. These might have been lower than the restricted home market sales. Foreign producers could thus immunize their home market prices from use for dumping comparisons, and set their third market prices at the same level as sales to the United States. Congress had dealt with a similar problem in regard to "foreign value" for customs purposes in the Customs Simplification Act of 1956. It eliminated the use of "foreign vaaue" as the primary customs valuation base for all articles except those named on the Final List (articles where the Secretary of the Treasury found that change of the value rules would have the effect of reducing duties by 5% or more). It also defined the phrase "freely sold or, in the absence PAGENO="0157" 3593 EXHIBIT 3 of sales, offered for sale' as either the price at which the merchandise was sold to all purchasers at wholesale, or "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 restrictions as to the disposition or use of the merchandise by the purchaser" except such restrictions as do not `substantially affect the value of the merchandise to usual purchasers at wholesale." (Emphasis added.) In 1958, Congress amended the Antidumping Act by redefining "foreign market value" to substitute the words "sold or, in the absence of sales, offered for sale" for "sold or freely offered for sale to all purchasers." It also defined the phrase "sold or, in the absence of sales, offered for sale in virtually the identical words it had used in defining "freely sold, or, in the absence of sales, offered for sale" in the Customs Simplification Act of 1956. The definition in the Antidumping Act emphasized, however, that if the price used for home market value was accompanied by restrictions which affected the value of the merchandise, the Secretary was to make an adjustment in value to eliminate the-effect of the restriction. Thus, the definition states: "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, PAGENO="0158" 3594 EXHIBIT 3 without regard to restrictions as to the disposition or `~ use of the merchandise by the purchaser except that, where such restrictions are found to affect the market value of the merchandise, adjustment shall be made there for in calculating the price at which the merchandise is sold or offered for sale." (19 U.S.C. 170a(l)) (Emphasis added.) It is important to remember that the 1958 amendments to the Antidumping Act were submitted to congress by the Secretary of the Treasury in obedience to a directive contained in the customs simplifica- tion Act of 1956 to recommend any amendments "which he considers desir- able or necessary to provide for greater certainty, speed, and efficiency in the enforcement of such Antidumping Act." (Sec. 5, P.L. 927, 83d Congress) One must recall also that Congress placed that directive in the 1956 Act to allay the fears that had been expressed that the elimination of "foreign value" as the primary customs valuation base would weaken the enforcement of the Antidumping Act because "foreign value" was essentially the same as "fair value" which would stillbe the base of comparison of home market and export prices to determine if a margin of dumping exists. The purpose of the 1958 amendments to the Antidumping Act was, as stated by the Assistant Secretary of the Treasury in explaining them to the Senate Finance Committee, to materially strengthen the power of Treasury to move against dumping (Hearings on H. R. 6006, March 1958, PAGENO="0159" 3595 EXHIBIT 3 p. 37) by, among other things, putting an end to the situation where the inability to use home market sales prices because of restrictions prevented findings of dumping and the imposition of dumping duties. (Thid., pp. 23, 24.) It certainly would be contrary to the origin and purpose of the 1958 amendments to administer the Antidumping Act in a way which eliminated higher "foreign value" prices, in fact available for use under the meaning of that term in customs law, and to use in their stead selected lower home market prices not available to all purchasers without making adjustments in the price which would fairly reflect the market value of the merchandise without the restrictions, and so eliminate dumping margins. This interpretation of the 1958 amendments is borne out by the following remark included in the testimony of the Assistant Secretary of the Treasury before the Senate Finance Committee: "Going back to the 1921 law, we have said that the standard for calculating dumping duties was typically the exporter's home price. If that price was higher than the price to the United States, the difference was the dumping duty. Now, the effect of a restriction such as limiting resale to a geographic area is, if anything, to reduce the value of the article in the purchaser's hands. Does it make sense to say that when such a restriction is placed on home sales, the standard for dumping duty should instead be an even lower third country price? We do not think it does. We do not think that such would have been the intention of Congress when it enacted the 1921 legisla- tion." (Ibid., p. 23) PAGENO="0160" 3596 EXHIBIT 3 The Congress took the Treasury Department at its word in approving the Antidumping Act amendments. In reporting the bill which became law, the Senate Finance Committee stated: "A principal change in the Antidumping Act of 1921 as amended which would be made by H. R. 6006 involves amendment of the definition of `foreign market value' in section 205 of the act so as to permit the use of prices in `restricted' sales in the determination of foreign market value. This amendment would bring the definition of `foreign market value' into conformity with the defini- tion of `fair value' in the Treasury regulations. The amendment would be advantageous to the administration of the act because, with the disparity in the definitions of `foreign market value' and `fair value' that now exists, imported merchandise may be found to be sold below fair value to the injury of domestic industries but no anti- dumping duties may be chargeable. Such a situation can arise, for example, where the exclusion of a higher home market price as a basis for foreign market value requires reference to third country prices and where such prices are the sane as or lower than the prices at which such or. similar merchandise is sold to the United States." (S. Rep. 1619, 85th Cong., May 21, 1958) (Emphasis added.) There is no basis in the legislative history for believing that Congress understood or intended that the 1958 amendments would be used as a basis for ignoring freely offered home market prices, acceptable as a basis for customs valuation under the definition of foreign value, which are higher than the export prices to the United States, and selecting restricted prices which are lower, and which eliminate the margin of dumping. Congress understood that the amendments were protective. The Senate Finance Committee stated: PAGENO="0161" 3597 EXHIBIT 3 `The antidumping feature of our Tariff Act is of considerable importance in protecting domestic industries from inroads of foreign goods or offered for sale at less than fair value. Not only will the improvements made by this bill assist in speeding up the operating procedure, they will strengthen the deterrent effect of the law and in that respect help to prevent dumping." (Ibid.) (Emphasis added.) The practice of the Treasury Department in adjusting the horns market price used as a basis for "fair value" by differences in circumstances of sale is of questionable validity. There appears to be no authority in the Antidumping Act for the Bureau of Customs to make adjustments in the home market price for differences in the circumstances of sale. The Act, at Sec. 202(a) [19 U.S.C. 161(a)], authorizes adjustments in price for differences in quantity or other differences in circumstances of sale only in the calculation of the amount of dumping duties to be imposed in respect to each importation after there has been a determination of dumping by the Secretary of the Treasury (and of injury by the Tariff Commission). It seems significant that this authority is not incorporated specifically or by reference in the definition of foreign market value, purchase price, or exporter's sales price. The Treasury Department has assumed the power to transfer the authority to make such adjustments from the final stage of calculating dumping duties on imports to the first stage of the investigation, where it serves principally as a means of explaining awaymargins of dumping which are otherwise shown by the data to exist. Thus the provision 95-159 0 - 68 - pt. 8 - 11 PAGENO="0162" 3598 EXHIBIT 3 in the Customs Regulations [Sec. 14.7(b)] specifying that in comparing the prices on which a determination of sales below fair value is being considered, "reasonable allowances will be made for bona fide differences in circumstances of sale," has no basis in the Antidumping Act itself. Congress certainly did not understand that the Secretary's authority to make adjustments for differences in quantity or in circum- stances of sale applied to anything but the calculation of dumping duties. The Senate Finance Committee conveyed its understanding by stating in its report on the bill which was enacted into law that: "Another amendment in the definitions relating to assessment of dumping duties is designed to make appro- priate comparisons between the price at which imported merchandise is sold to American purchasers and the price at which such or similar merchandise is sold by the foreign producers or exporters elsewhere despite minor dissimilarities between the merchandise and the differ- ences in the terms or circumstances of the sale." (S. Rep. 1619, 85th Cong., May 21, 1958) (Emphasis added) Accordingly, it is submitted that the Bureau of Customs is proceeding improperly if it fails or refuses to make a determination of dumping on the basis that differences in the circumstances of sale call for adjustments which eliminate the margin of dumping disclosed by a comparison of the home market and export prices. PAGENO="0163" 3599 EXHIBIT 3 The Treasury Department Should At Least Limit These Questionable Adjustments In The Home Market Price Used As A Basis For "Fair Value" To Those Established By Credible Evidence To Be Due To Differences in Circumstances Of Sale. The Bureau of Customs, in its administration of the questionable provisions of the Customs Regulations permitting allow- ances for differences in circumstances of sale, has made adjustments in the home market price in its antidumping investigations for a number of alleged differences in circumstances of sale. Typical of these are (1) costs of warranty on home market sales; (2) differences in credit costs; (3) differences in the cost of technical services; (4) differences in branding costs; and (5) selling commiss~ons on home market sales. An examination of the manner in which these adjustments have been made discloses a real need for reform in the procedures followed by the Bureau in making these determinations if the intent of Congress expressed in the Antidumping Act to prevent unfair practices in our import trade is to be carried out. Adjustments To Reflect Cost of Warranty on Home Market Sales In making adjustments to the home market price to reflect the cost of warranty on home market sales, the Bureau of Customs, we have been informed, relies primarily upon information supplied by the foreign manufacturers of the merchandise in question as to the PAGENO="0164" 3600 EXHIBIT 3 existence of a warranty on home market sales, the cost of such warranty and the nonexistence of a comparable warranty on export sales to the United States. Furthermore, we understand that Customs takes no steps to inquire of the U. S. importers of the merchandise (whose identity is, of course, known to the Bureau of Customs and whose response must be truthful under pain of criminal liability) whether their purchases were on terms, written or implied, which include the right to make returns for credit of defective merchandise or to be given credit for defective merchandise whether or not returns are made. Apparently, the only "independent" investigation made is that of the Treasury agents in the field, which consists simply of the Treasury representatives' asking questions and recording the answers of the foreign manufacturers which, of course, are not under oath. Such an investigation is not an investigation at all, but merely a mechanism to formalize the self-serving statements of foreign producers who are under absolutely no penal inhibitions in explaining away dumping margins by using a variety of fictional or incompletely stated responses to questions put to them by a few Treasury representa- tives whose duties permit only limited attention to their preparation for and conduct of the field interviews. PAGENO="0165" 3601 EXHIBIT 3 There is still another aspect of the handling of this type of adjustment by Customs which seems contrary to the intention of Congress. We are informed that, after calculating an average cost per unit of the warranty in the home market, Customs automatically deducts that amount from the home market price for purposes of comparison with the export price. This is done under a claim of authority in the regulations to do so, where, under Sec. 14.7(b) (2), "warranties' are mentioned as an example of differences in circumstances of sale for which "such allowances" will be made in calculating the "fair value" of merchandise. The "such" in "such allowances" refers, however, to the lead sentence of the subsection, which states that "reasonable allowances will be made for bona 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." (Emphasis added.) The words in italics impose two requirements before an adjustment in price may be made: the adjustment must be reasonable, which certainly implies that an allowance is not automatically or necessarily to be made by the full arithmetical difference of the so-called warranty (the volume of returns in the home market on which the allowance was calculated might have been due to defective manu- facturing procedures on certain lots which were not involved in the PAGENO="0166" 3602 EXHIBIT 3 production for export, for example); and, more importantly, an adjustment is to be made only if the Secretary determines that the amount of price differential was due, at least in part, to the difference in warranty policy on home market sales versus those for export. Customs personnel have no right to assume the existence of any fact, the proof of which is required as a condition precedent to the making of an allowance which would excuse or explain away the margin of dumping revealed by a comparisoA of the actual prices themselves. We believe that the practice of making adjustments in the hone market price because of a claimed difference in warranty at the stage where the Commissioner of Customs is making his initial determination of whether reasonable grounds exist to believe or suspect that the merchandise is being, or likely to be, sold at less than its foreign market value, is contrary to the Antidumping Act which authorizes such adjustments only at the time dumping duties are being assessed, after the findings of dumping and injury have b~en made. But even if authority to make such adjustments is deemed to exist at the stage of the determination that reasonable grounds exist to believe or suspect that the merchandise is being dumped, the words of the statute control the nature and extent of such authority. PAGENO="0167" 3603 EXHIBIT 3 They clearly limit the adjustments to those where it is established to the satisfaction of the Secretary or his delegate that the amount of any difference between the export price and the home market price is wholly or partly due to differences in circumstances of sale, at which point, as stated in the statute, due allowance shall be made therefor. Sec. 202, Antidumping Act, 19 U.S.C. 161. There is simply no basis whatever for Customs to assume what the statute requires to be proven to the satisfaction of the Secretary or his delegate, nor for adjustments to be made which exceed a `due allowance" under the circumstances. Adjus~nents To Reflect Differences in Credit Costs We have been informed that the Bureau of Customs makes adjustments to reflect differences in credit costs when sales for export to the United States are on a cash (letter of credit prior to shipment) basis and home market sales are on credit terms. Apparently, a calculation is made of the credit cost per day to the foreign manu- facturer and an adjustment is made in the home market price by applying this factor to the full amount of the invoice price on the volume of merchandise sold in the home market. It is well known that most foreign manufacturing economies operate to a large degree on credit; not only is the manufacturer extending credit to his customers in the form of extended payment terms, PAGENO="0168" 3604 EXHIBIT 3 but also he is receiving credit from his suppliers in equal degree. He certainly incurs no credit costs on the materials purchases. The ¼ selling price also includes an element for profit, and there can obviously be no cost to the manufacturer in respect of the delayed receipt of the profit increment of the selling price. At most, the cost of the credit extended to the home market would be the wage increment of manufacturing costs included in the price. Customs has no data establishing what this portion is, nor that the manufacturer incurs an interest cost equal to the going rate of interest applied to the full selling price of the home market sales. Once again, Customs appears to have assumed the existence of proof which the law and regulations contemplate the foreign producer is required to supply. The procedure being followed on this adjustment is subject to all the vices of that discussed above for warranties. No proof has been developed to support a determination by Customs that the difference in price is due in whole or part to differences in credit terms. No proof has been developed upon which a determination could be based as to the amount of a "due allowance" in price comparison in respect of credit differences, even assuming such an allowance in some amount is proper. The making of such an allowance, in any event, at this stage of the investigation is improper, since the Antidumping Act provides for such an allowance only at the time dumping duties are being assessed. PAGENO="0169" 3605 EXHIBIT 3 Adjustments To Reflect Differences in Branding Costs Apparently, the Bureau of Customs makes adjustments in the hone market price for the difference in cost represented by branding of merchandise sold in the home market where the foreign manufacturer claims that its merchandise sold in the home market is branded, whereas its merchandise for export is unbranded. The making of an allowance for branding is subject to all of the vices discussed in the preceding sections: the Bureau has no evidence that the difference in price between home market and export sales is due in any degree to the alleged difference in branding; nor does it possess information to support a determination of what a `due allowance" (as distinguished from the automatic full credit given for the claimed difference in cost) would be for such difference. The allowance is made improperly at a stage not authorized by the statute. There is a further defect in the Bureau's procedure on this allowance, and that is that the Bureau's own regulations do not permit or contemplate such an allowance. Sec. 14.7(b) (2) (ii) states that "allowances generally will not be made for differences in * * * production costs" and the cost of branding would seem clearly to be a production cost. PAGENO="0170" 3606 EXHIBIT 3 It might be claimed that the branding cost is not a differ- ence in the "circumstances of sale" (to which the cited subsection pertains), but rather refers to differences in the merchandise which make the imported merchandise "similar" rather than "such" merchandise as that sold in the home market. The same section of the Antidumping Act, as amended in 1958, which permits "due allowance" for differences in circumstances of sale in the assessment of dumping duties (after the findings of dumping and of injury have been made) found by the Secretary or his delegate to be wholly or partly the cause of the difference in price in home market versus export sales, also permits "due allowance" for the fact that the merchandise exported is "similar" rather than "such" merchandise as that sold in the home market if the Secretary or his delegate have proof which establishes to his satisfaction that the difference in price is wholly or partly due to the difference in the merchandise. The Customs Regulations at Sec. 14.7(b) (3) are quite specific that in making "due allowance" for differences in the merchan- dise, the Secretary "will be guided primarily by the effect of such differences upon the market value of the merchandise but, when appro- priate, he may also consider differences 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." PAGENO="0171" 3607 EXHIBIT 3 Here the Bureau's people assume that the existence of differences in cost of branding ipso facto resulted in a difference in market value, or that the difference in price between home market and export sales of the merchandise is due cent for cent to the alleged difference in branding cost. The procedure being followed in this respect is not only opposed to the applicable provision of the law; it is also contrary to the letter and spirit of the regulations which purportedly guide Customs personnel in their investigation of dumping. Furthermore, no effort is being made to require the submis- sion of information from the importer as to the manner in which, and the considerations relating to which the price was set for unbranded merchandise, or if such were indeed imported on a regular basis. Adjustments To Reflect Differences in The Cost of Technical Services Here, again, we understand that the Bureau of Customs makes an adjustment in the home market price to reflect differences in the cost of technical services in reliance upon a claim by the foreign manufacturer that he renders technical services in connection with his sales of merchandise in the home market which he does not extend to purchasers of exported merchandise. Even though such an uncorroborated claim were found to be valid, it would still be necessary for the Bureau to be in possession of evidence which establishes that the difference in price PAGENO="0172" 3608 EXHIBIT 3 is due at least in part to the cost of technical service in the home market, and which would support a determination of the particular amount proper as a "due allowance" for such difference. Information of this type, we understand, is not obtained and once again it appears that the Bureau assumes the existence of a fact which the exporter is supposed to prove. Adjustments for Selling Commissions We are informed that Customs, in making adjustments to the home market price for selling commission, does so in reliance upon a claim by the foreign manufacturer that he sells through a commission agent in the home market. Further, although selling commissions may be incurred by the foreign manufacturer in his export sales, the Bureau does not seem to regard such selling expenses as "other circumstances of sale" for which allowances may be given. An allowance cannot be made upon the basis of an assumption that the difference in price is due to the difference in commission paid in one market versus the other; proof establishing that the price difference was due at least in part to the absence of a commission paid on export sales is required. Further, the allowance is not automatically equal to the amount of the commission; rather, proof establishing what a "due allowance" is under the circumstances is required. PAGENO="0173" 3609 EXHIBIT 3 Apart from these fundamental deficiencies, it is not enough merely to take note of the selling commission. The Customs Regulations at Sec. 14.7(b) (2) (ii) state that - "reasonable allowances for selling expenses generally will be made in cases where a reasonable allowance is made for commissions in one of the markets under con- sideration and no commission is paid in the other market under consideration, the amount of such allowance being limited to the actual selling expense incurred in the one market or the total amount of the commission allowed in such other market, whichever is less." These words mean that if the selling commission is deducted from home market price, the amount of the selling expense or commission, whichever is less, must be deducted from the export price. This, we understand, is not done by the Bureau. The Practice of the Bureau of Customs in Averaging Prices Over an Extended Period of Time in Such a Manner as to Lower the Home Market Price in Effect at or About the Time the Merchandise Under Investigation was Exported to the United States so as to Eliminate or Reduce the Margin of Dumping is Clearly Improper. The Bureau of Customs appears to have adopted a practice of averaging prices over an extended period of time in such a manner as to lower the home market price in effect at or about the time the merchandise under investigation was exported to the United States so as to eliminate or reduce the margin of dumping which may be found to exist after all of the adjustments to the home market price described above have been made. PAGENO="0174" 3610 EXHIBIT 3 There is absolutely no justification for averaging all of the prices of foreign manufacturers over extended tine periods as we understand is done. The Antidumping Act requires a finding by the Secretary (or his delegate) of whether imported merchandise is being, or is likely to be, sold in the United States at less than its fair value. The averaging of prices over an extended past period seems obviously contrary to a consideration of prices at which the merchandise is being, or is likely to be, sold. The Customs Regulations also require the focus to be on sales at the time the merchandise complained about was exported to the United States. Thus Sec. 14.7(a) (1) states, "Merchandise imported into the United States will ordin- ~ arily 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 * * * is, or is likely to be, less than the price * * * at which such or similar merchandise * * * is sold for consumption in the country of exporta- tion 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." (Emphasis added) A footnote to this section of the regulations adds stress to the require- ment that the price comparison be made in regard to sales made at the time of exportation, as follows: "Fair value is computed on the basis of sales for con- sumption in the country of exportation * * * at or about the date of the purchase or agreement to purchase of the merchandise to be imported into the United States, or the date of exportation." PAGENO="0175" 3611 EXHIBIT 3 This footnote refers to a further, limited purpose, examination of prices over a longer span, but in terms which provide no permission for the averaging of prices, as follows: However, in cases where it may be important to determine either the stability of the market or its trend, as well as to determine whether there has been a fictitious sale * * *, it will be helpful to the Secretary to have information as to sales made for consumption in the country of exportation * * * over a significant period of time immediately preceding the date of purchase or agreement to purchase, or exportation." Reporting price information for a time span to the Secretary as a basis for him to consider the presence or absence of "stability of the market or its trend" is quite a different matter than the averaging of these prices to eliminate a margin of dumping plainly established. Once a margin of dumping is found to exist, the Secretary's duty is to make a determination of dumping. Price fluctuations may result in a zero assessment of dumping duties on particular importa- tions, but cannot properly be used as a basis for explaining away the fact of dumping. We submit that the procedure being followed in this respect is improper and unlawful. CONCLUS ION The chief difficulty with the administration of the Antidumping Act is the evident willingness on the part of the Secretary of the Treausry and his delegates to accept at face value the self-serving PAGENO="0176" 3612 EXHIBIT 3 explanations of foreign exporters of the apparent margin of dumping in their export sales to the United States. Current procedure seemingly involves little or no objective corroboration of unsworn statements of foreign producers. Amendments to the Antidumping Act and a reform of its administration somewhat along the lines contemplated by H. R. 16332, and similar bills, which have been referred to your Committee, or the exercise of the legislative oversight functions of your Committee to this end will be required if the dumping aspect of unfair trade practices in our foreign trade is to be effectively brought under control. PAGENO="0177" CLASS OF COMPONENT ACTIVE COMPONENTS - RECEIVING TUBES As end items As tubes Total TV PICTURE TUBES As end items As tubes Total TRLESISTORS As end items As transistors Total RECTIFIERS AND DIODES As end items As rectifiers and diodes Total 19,162 30,218 32,278 +68.'il 1,8,553 81,572 52,730 +8.6?~ 67,715 111,790 85,008 +25.5% 715 1,524 1,614 +125.72~ 95 103 388 +308.41 810 1,627 2,002 +147.2% 108,004 419,693 236,160 ÷118.61 _41,918 261,945 296,658 ÷607.71 149,922 681 38 532,818 +255.4% 70,685 124,098 126,856 +79.5?~ 34,91~3 259,658 357,750 +924.01 105,628 383,756 484,606 +358.8% PASSIVE COMPONENTS - CAPACITORS, ELECTROLYTIC As end items As capacitors Total CAPACITORS, FIRED As end items As capacitors Total RESISTORS, FIXED As end items As resistors Total 169,810 352,271 317,974 +87.21 30,000 265,000 155,837 +419.01 199,~dTO 617,271 473,811 +137.1% 538,148 1,081,756 1,018,554 ÷89.31 247,484 534,341 674,090 +172.41 3 2,616,097 1,692,644 +115.4% 713,430 1,475,525 1,361,893 +90.91 305,884 902,073 876,953 +186.71 1,019,314 2,377,598 2,238,846 +119.6% (continued) 3613 EXHIBIT L~ APPENDIX TABLE I U. S. DIRECT AND INDIRECT IMPORTS OF ELECTRONIC COMPONENTS, 196N-1967 (in thousands of units) 1964 1966 I CHANGE 1967 1964-67 95-159 0 - 68 - pt. 8 - 12 PAGENO="0178" 3614 EXHIBIT L1 APPENDIX TABLE I - page 2 (in thousands of units) CLASS OF COMPONENT 19611 1966 PASSIVE COMPONENTS (continued) - INDUCTORS As end items 213,2118 1i37,811 As inductors n.a. n.a. TR4NSFOPMERS As end items 28,0311 57,922 As transformers J~~j 56,013 Total 46,501 113,935 ?~ CHANGE 1967 - 1961i-67 1,03,855 +89.1,?~ n.a. 55,152 +96.7?~ ~7~jO7 +155.1~ 102,259 19.9% OTHER COMPONENTS - CONTROLS As end i tems As controls Total LOUDSPEAKERS As end items As loudspeakers Total RECORD CHANGERS As end items As record changers Total 32,538 68,823 611,008 +96.7?~ 23,023 101,027 26,300 +11i.2~ 55,561 169,850 90,308 +62.5% 17,169 35,907 32,1i29 +88.9% 8,161, 19,593 15,586 +90.9% 25,333 55,500 48,015 +89.5% 1,61, 1,523 1,9611 +323.3% 1,8112 ~ ~.~J2! +17.9% 2,306 4,578 4,135 +79.3% SOURCE: Marketing Services Department, Electronic Industries Association. PAGENO="0179" CLASS OF COMPONENT ACTIVE COMPONENTS - Receiving Tubes: 1964 1966 1967 TV Picture Tubes: 1964 1966 1967 Transistors: 1964 1966 1967 Rectifiers & Diodes 1964 1966 1967 PASSIVE COMPONENTS - Capacitors, Electrolytic: 1964 1966 1967 Capacitors, Fixed: 1964 1966 1967 5.6% 14.5% 20.1% 7.4% 20.2% 27.6% 11.0% 18.2% 29.2% 7.5% 1.0% 8.5% 11.3% 0.8% 12.1% 15.1% 3.6% 18.7% 74.0% 28.8% 102.7% 140.0% 87.3% 227.3% 107.3% 135.0% 242.3% 11.8% 5.8% 17.6% 10.3% 21.6% 31.9% 11.3% 31.7% 43.0% 3615 EXHIBIT L~ APPENDIX TABLE II RATIO OF IMPORTS TO U. S. CONfrERCIAL SALES OF SELECTED ELECTRONIC COMPONENTS, 1g6'4-1967 (Sales cmd Import Data in Millions of Units) IMPORTS RATIQ, IMPORTS/SALES As the As the As End Compo- As End Compo- SALES Items nent Total Items nent Total 3371 4O6~ 29l~ 9,513 13,450 10,682 1462 3002 2202 604 I ,204 1,128 19 49 68 30 82 112 32 53 85 715 95 810 1,524 103 1,627 1,614 388 2,002 108 42 150 420 262 682 236 297 533 71 35 106 124 260 384 127 358 485 216 360 279 1,723 2,584 1 ,826 170 30 200 352 265 617 318 156 474 538 248 786 1,082 534 1,616 1,019 674 1,693 78.7% 13.9% 92.6% 97.8% 73.6% 171.4% 114.0% 55.9% 169.9% 31.2% 14.4% 45.6% 41.9% 20.7% 62.5% 55.8% 36.9% 92.7% (continued) PAGENO="0180" 3616 EXHIBIT Lf APPENDIX TABLE II - page 2 (Sales and Inrport Data in Millions of Units) IMPORTS RATIO, IMPORTS/SALES As the As the As End Compo- As End Compo- CLASS OF COMPONENT SALES Items nent Total Items nent Total PASSIVE COMPONENTS (cont'd) Resistors, Fixed: 1964 2,894 713 306 1,019 24.6% 10.6% 35.2% 1966 4,555 1,476 902 2,378 32.4% 19.8% 52.2% 1967 1,986 1,362 877 2,239 68.6% 44.2% 112.7% Inductors & Transformers: 1964 54 241 18 259 446.3% 33.3% 479.6% 1966 95 496 56 552 522.1% 58.9% 581.0% 1967 95 459 47 506 483.2% 49.5% 532.6% OThER COMPONENTS - Controls: 1964 1966 1967 n.a. 256~ n.a. 33 69 64 23 101 26 56 170 90 n.a. 27.0% n.a. n.a. 39.5% n.a. n.a. 66.4% n.a. Loudspeakers: 1964 1966 1967 50 68 443 17 36 32 8 20 16 25 56 48 34.0% 52.9% 72.7% 16.0% 29.4% 36.4% 50.0% 82.4% 109.1% Record Changers: 1964 1966 1967 n.a. 8.9 n.a. 0.5 1.5 2.0 1.8 3.1 2.2 2.3 4.6 4.2 n.a. 16.9% n.a. n.a. 34.8% n.a. n.a. 51.7% n.a. Sales in OEM and renewal markets. 2 Sales (consumer OEM). Production. SOURCE: Marketing Services Division, Electronic Industries Association; U. S. Department of Commerce, BDSA, "Estimated Shipments of Selected Electronic Components," annual series (1967 annualized on the basis of first 3 quarters); Bureau of the Census and BDSA, "Selected Electronic and Associated Products," annual series; BDSA, "United States Imports of Selected Electronic Products"; Bureau of the Census, official foreign trade statistics. PAGENO="0181" APPENDIX TABLE III* C1~ss of Comonn~nt U. S. BALANCE OF TRADE IN CONSUMER ELECTRONIC PRODUCTS AND C(}IPONENTS, 1964-1967 (In millions of dollars) CONSUfrER ELECTRONIC PRODUCTS 1964 1966 1967 % Change 1964-67 EXPORTS TV $ 29.5 $ 35.5 $ 31.8 +7.8% Radio 8.1 10.3 12.0 +48.1% * Phonographs (new)1 Tape Recorders 2.1 24.5 2.6 21.4 2.8 21.7 +33.3% -11.4% Other n.a. 7.0 8.3 n.a. Total $ 64.2 $ 76.8 76.6 +19.3% IMPORTS TV $ 36.3 $ 115.7 $ 125.5 +245.7% Radio 101.1 160.9 197.9 +95.7% Phonographs 20.5 38.8 30.7 +49.8% Tape Recorders 54.7 74.8 104.7 +91.4% Other n.a. 14.1 11.0 Total 212.6 ~44O4.3 $ 46~J~ n.a. +121.0% BALANCE OF TRADE TV -6.8 -80.2 -93.7 -1277.9% Radio -93.0 -150.6 -185.9 -99.9% Phonographs -18.4 -36.2 -27.9 -51.6% Tape Recorders -30.2 -53.4 -83.0 -174.8% Other n.a. -7.1 -2.7 n.a. Total $ -148.4 $ -327.5 ~~-393.2 -1 65.0% 1st Quarter 1967 $ 7.5 2.6 0.6 5.2 1.8 17.7 $ 30.4 34.6 2.8 24.6 2.8 $~ 95.2 -22.9 -32.0 -2.2 -19.4 -1.0 ~ -77.5 1st Quarter 1968 $ 7.4 2.8 0.6 5.7 1.7 $ 18.2 $ 24.6 47.6 2.1 27.9 1 .9 $ 104.1 -17.2 -44.8 -1.5 -22.2 -0.2 $ -85.9 % Change 1st Qtr. 1967-68 -1 .3% +7.7% m +9.6% ~ +2.8% ~ -19.1% +37.6% -25.0% +13.4% -32.1% +9. 3% +24.9% -40.0% +31.8% -14.4% +80.0% -10.8% (continued) PAGENO="0182" 3618 EXHIBIT 4 a) L. 03 U-U ~`Q ~U 8-U C 4-~ `.0 c-4 0 ~3i LA 0'i ~`I0) (`4 0 -~ 0) `tiC'' * * * *L. ~c N- N-, r('i C 0~ - o~T0~ ((`tO 0~ N L) 4-~ `.0 `.0 I C~ C') 0~ IU\IN -~ LA r~\ U) 0~ I + + I + N 8-U-'- a) -4. coI~o LA LA1-i .- 0 r'tlco `I' `I. * .1. U) I- `.0 (`\ c~ (`-413-) LA N-0) IN C'~ ~ (0 0t - IN IN I + I I 4-/U- - r-~ c'.jlo o~ N- `-lao N-C ~-l'U 4-'4-'N- . *1. * `I. .1. U) 1.. `.0 -3- LA `(`~I~() N- C('t'.0 IC- C~U ~) N-ItO -IN I-i 3'- C' -- a) 6-U 6-U 8-U U't a-U 6-U 8-U N 8-U 6-U 8-U N D) N- LA ri C') to 0'03 tO 0-30 0 C'.0 * * O N- N 0 0) 0 C') `~0 0) 0 (`4 (`4 N C -3- N- I -1- -3- -o- N- 0) 0 N- LA t'~ L) `~0 + + C') (`t N C') I c~+4 8-U-- ÷ I N LA C~t r(')IN C~' -3- N-LU) ~ `.~ a) -~ N- C('t3-t'.0IO) -`.o'.oki N.c'J0±l1 (:a~ U) `.0 - -3-IC'. C') C'4I~0 + `IN U) U, 0~ I 1 +14 - 4/U- 4/U- 4/U- (U) N c-, a-to ~-fo c~-~ 0) N-~0) -1~ - -3-h' 0 `.o'.o.o-IC-- e~t~.ocoIco t40)LAl3-) .J Co `.0 LAIto I~t C'.41tO + ("uN I I `~I~ U-- `c~ I I 1 0 ~ tC'~ 4-/U- r-~ x N E `.0 C~4 -~-I~ (`4 N-'.0~t0 `.0 LA ~ 3--'.0Ic.4 LAOLAkI ~cck - -3-IC'. IN I -1~ItO +8-4 .0 .0 .0 3 3 3 4-' 1- U-- F- C C) C) C) C) C C C C o `-U) `-U) `-U) 0. >0.) >0 >0 E `-.0 *-.0 ~U)'-.0 0 (1) 03 03 C..) 1- 0 1- t'-1 0 I-C-I `)~ 0 I- ~4 Z a) U) (3) U) ~Q) U) 4- CLI t~ a) I~ 0 (3) i- 0.-i ~ a) I~ 0 Z LO 1-0 1-0 0 C 3 4. C 3 -` - C'. c 3 U) ü. 0 4-' U) 0 4- U) 0 0 -` U) ~ ~ ~ Lu.- LU.- (0 0 Cl) 4-j.- U) C--) Cl) 4.I*- fl C') E~) 4-' U) C'-) U E-jUci.CU) U0..CU) L)UC3.CU) C-) CC~ 0.) 0 +~ (3) 0 -4) ~ ~) 0 -4~) Lii 0->-'-O 0'->LO ~,.>L-0 > PwF-I-E ~wI-I-E-, ~LtiI-I--E C,) U--I PAGENO="0183" APPENDIX TABLE III - page 3 PASSIVE CC1~1P0NENTS (In millions of dollars) Class of Component 1964 1966 1967 1964-67 EXPORTS Capacitors Resistors $ 16.3 $ 21.1 $ 20.2 15.7 29.5~ 3l.l~ +23.9% +98.1% Inductors and Transformers 5.1 12.2k 1l.7~ +129.4% Total j 37.1 $ 62.8 $ .63.0 IMPORTS Capacitors Resistors $ 8.3 $ 24.4 $ 23.3 4*35 12.9~ 12.4~ +180.7% +188.4% Inductors and Transformers 5.9 12.1 21.4 +262.7% Total $ 18.5 $ 49.4 $ 57.1 +208.6% BALARCE OF TRADE Capacitors $ +8.0 $ -3.3 $ -3.1 -78.2% Resistors +11.4 +16.6 +18.7 +64.0% Inductors and Transformers -0.8 +0.1 -9.7 -1112.5% Total +18.6 $ +13.4 $ +5.9 -68.3% Quarter Quarter 1st Qtr. 1967 1968 1967-68 $ 5.6 8.i~ $ 5.2 8.1~ -7.1% - $ 3.0k 16.7 2.9+ $ 16.2 -3.3% ~T7~ $ 6.8 $ 6.3 -7.4% 3.6 3.6 - 2.0 1.8 -10.0% $ 12.4 $ 11.7 -5.6% $ -1.2 $ -1.1 -8.3% +4.5 +4.5 - +1.0 +1.1 +10.0% $ +4.3 $ +4.5 +4.7% >( :i: w (continued) PAGENO="0184" APPENDIX TABLE III - page 4 OThER COMPONENTS (In millions of doilca's) 1st Quarter 1967 1st Quarter 1968 % Change 1st Qtr. 1967-68 EXPORTS Loudspeakers Earphones and Head Sets Microphones Parts for Consumer Electronic Products and for Components Total IMPORTS Loudspeakers Earphones and Head Sets Microphones Parts for Consumer Electronic Products and for Components Total BALANCE OF TRADE Loudspeakers Earphones and Head Sets Microphones Parts for Consumer Electronic Products and for Components $ 2.1 $ 4.4 $ 5.3 +152.4~4 n.a. n.a. n.a. n.a. n.a. 2.3 2.6 n.a. n.a. 61.8 74.1 n.a. ~ $ 82.0 $ 4.7 $ 10.4 $ 10.6 +125.5% 2.7 3.5 3.3 +22.2% 2.1 4.1 4.1 +95.2°4 16.2 21.4 +32.1% ~ $ 23.4 +29.3% 19.4 23.5 $ 23.8 ~28.1 -1.3 $ -1.6 n.a. n.a. -0.4 -0.2 -3.2 -2.1 -34.4% Class of Component % Change 1964 1966 1967 1964-67 $ 1.2 $ 1.3 n.a. n.a. 0.7 0.7 +8.3% n.a. ni I I -~ 30.4 113.6 83.9 +176.0% ~ $ 131.6 ~1O9 +155.4% $ 2.5 $ 2.9 +16.0% 0.8 0.8 - 1.1 0.9 -18.2% $ -2.6 $ -6.0 $ -5.3 n.a. n.a. n.a. n.a. -1.8 -1.5 -103.8% n .a. n.a. +21 . 1% +18.1% -23.1% n.a. -50.0% n.a. -51.8 -9.8 n.e. 1 Excluding coin-operated. 2 Import data for rectifiers and diodes are not separately stated in U. S. foreign trade statistics. The classification "other semiconductors" in the import statistics includes, in addition to rectifiers and diodes, other types of semiconductors which are not primarily used in consumer electronic products. Hence, (continued) PAGENO="0185" APPENDIX TABLE III - page 5 NOTES (continued) 2 (continued) the only directly comparable foreign trade data for the type of semiconductor used in consumer electronic products is limited to transistors. Effective January 1, 1966, data for electronic parts, n.e.c." are included with exports of resistors and parts thereof, making the data not comparable to import data for resistors. ~ Classification changed effective January 1, 1965, from inductors (including transformers and coils) to include coils, transformers, reactors, chokes, and parts. Includes potentiometers and parts of resistors. SOURCE: Marketing Services Department, Electronic Industries Association; U. S. Department of Commerce, -~ BDSA, "United States Imports and Domestic Exports of Selected Electronic Products," annual data; Bureau of the Census, official foreign trade statistics. PAGENO="0186" 3622 EXHIBIT 4 APPENDIX TABLE IV EMPLOYMENT AND ESTABLISHMENTS IN THE U. S. CONSOMER ELECTRONIC PRODUCTS AND ELECTRONIC COMPONENTS INDUSTRIES, 1967 (MID MARCH) CONSUMER ELECTRONIC ELECTRONIC COMPONENTS PRODUCTS (SIC 3651 (SIC 367) TOTAL No. of No. of No. of Employ- Establish- Employ- Establish- Employ- Establish- ment cents cent cents cent ments~_ 43,504 79 39,690 204 83,194 283 9,440 113 57,981 459 67,421 572 18,920 153 47,295 263 66,215 416 31,108 16 18,061 63 49,169 79 4,885 27 41,747 147 46,632 174 9,436 50 28,675 245 38,111 295 2,625 19 31,917 182 314,51+2 201 297 13 13,975 80 14,272 93 1,222 21 12,931 64 14,153 85 116* 5 10,761 18 10,877 23 8,223 23 1,729 15 9,952 38 7,860 9 7,860 9 2,360 7 5,336 17 7,696 24 1,535 2 5,470 23 7,005 25 6,834 19 6,834 19 837* 7 5,971 39 6,808 46 1,537* 3 5,237 21 6,774 24 1,883* 4 3,872* 10 5,755 14 925 22 4,638* 56 5,563 78 1,876 20 2,932 45 4,808 65 807 8 3,421 34 4,228 42 4,032 56 4,032 56 1,504* 3 1,881* 3 3,385 6 3,348* 9 3,348 9 3,000* 2 3,000 2 6 2,784 6 3 2,300 5 2,264 6 30 2,027 33 12 1,710 12 Illinois California New York Indiana Pennsyl van i a New Jersey Mas sachusetts Connecti cut Oh i o Arizona Tennessee South Carolina Iowa North Carolina New Hampshire Minnesota Virginia Kentucky Texas Michigan Wisconsin Florida Alabama Nebraska Vermont Maine Mississippi Arkansas Ma ryland Rhode Island 350* 2 2,264 6 83 3 2,784 1,950* 1 ,944 1,710 (continued) PAGENO="0187" 3623 EXHIBIT L~ APPENDIX TABLE IV - pcige 2 CONSUMER PRODUCTS ELECTRONIC (sic 365) No. of ELECTRONIC (sic COMPONENTS 367) TOTAL No. of - No. of Empl-oy- Establish- Employ- Establish- Employ- Establish- ment - men ts men t men ts ment men ts Kansas . . 1,598 15 1,598 15 Hawaii . . 1,500* 1 1,500 1 West Virginia . . 1,205 7 1,205 7 Missouri 98* 5 1,077 19 1,175 24 Colorado 815* 7 313 10 1,128 17 South Dakota 927* 4 927 4 Utah 556* 3 556 3 Oklahoma 229 6 229 6 New Mexico 198 9 198 9 Idaho 181* 2 181 2 Washington . . 117 13 117 13 Delaware . . 111+ 5 111+ 5 TOTAL, 42 STATES 11+6,650 618 384,997 2,228 531,61+7 2,846 UNITED STATES TOTAL 144,998 656 401,916 2,247 546,914 2,903 * Estimated. NOTE: The difference between the numerical total shown at the foot of each column and the "United States Total" shown below it is accounted for by the necessity of estimating employment in those States in which employment data are marked with an asterisk. To avoid disclosure in certain instances, the source of the data omits reporting actual employment figures. SOURCE: U. 5. Department *of Commerce, Bureau of the Census, 1967 County Business Patterns. PAGENO="0188" 3624 The CHAIRMAN. We thank you, Mr. Stewart, for your very fine presentation of your po~nt of view and that of your clients. Any ques- tions? Mr. Curtis. Mr. CURTIS. I want to again commend Mr. Stewart for the fine research he has done in presenting his material. It certainly does move forward the dialog. Let me ask you, because you have testified in others areas too-here I begin to see possibly a glimmering of guidelines for qoutas-if you would argue that you apply quotas in those areas which prove to be labor int.ensive, am I correct? Is that where you might distinguish between those industries to which Congress would apply quotas and those that we wouldn't ? Mr. STEWART. Mr. Curtis, it is certainly true that in the industries that are highly labor intensive you find problems of this comparable magnitude though I must say that it is very extreme in the electronic case, more advanced than any I have seen. Mr. CURTIS. What I am seeking is some guidance. You very properly are representing the proponents of American industry, and agriculture, and services, but in your zeal to represent the proponents I know you recognize the need to put that in the context of the whole. Let me ask it this way. Would you advocate our going over com- pletely to the quota license system for regulating international trade in all areas? Mr. STEWART. This group that I represent does not advocate a total embracing of quotas for the regulation of all imports. We say this industry certainly requires that assistance and we support a bill introduced by Mr. Collier- Mr. CURTIS. Yes, I understand all that. Mr. STEWART (continuing). That includes other industries that are labor-intensive that appear to us to be similarly affected Mr. CURTIS. That is why I asked the question. Is one of your guide- lines that you are suggesting the Congress consider in determining whether to apply the quota approach th~s labor-intensive factor? Mr. STEWART. Yes, I would concede that that should be a guideline. Mr. CURTIS. Are there any other guidelines, and there need not be necessarily-that is a pretty important one. I am just wondering if there are any other guidelines that you would suggest. Mr. STEWART. The guidelines such as those set forth in the Collier bill contemplate a relatively high level of market penetration by imports. In the case of the electronic industries you would abstract the guideline of a very much higher rate of imports than of exports and an absolute deficit in the affected products in our balance of trade.. If you combine labor-intensiveness, high rate of increase of imports in relation to exports, and absolute trade deficit you are describing a situation in which there are significant losses of jobs in the American economy and an industry whose further growth is stunted by market disruption. In those instance identified by those criteria there should be import relief. Mr. CURTIS. And is the quota in the Collier bill a flexible one, as we have in the meat bill and others? Is it triggered at a certain level of imports? PAGENO="0189" 3625 Mr. STEWART. It is not on the basis of a trigger point but it is flexible in that a recent period is selected as a base period, for the statutory quotas and their annual adjustment in the level of the quotas as the market grows. The President, however, Mr. Curtis, and this is most important in the Collier bill, is given plenary power to enter into negotiations with the affected countries under gmdelines to work out amicable solutions, and this is the crux of the matter. If it can be done in cotton textiles amicably, as it was, it can be done in other major sectors of American industry that are labor intensive and are similarly affected such as electronic components. Mr. Cuirns. But, Mr. Stewart, the cotton textile people have been in here saying that this approach hasn't worked and that they are still in trouble. The rest of the textile industry, especially the man- made fiber area, with I think considerable justification, is pointing out that while this has been done in cotton textiles it doesn't apply to them. So the question arises, if the cotton textile approach, the quota approach, was good why hasn't it worked? I don't want you to have the wrong remedy. Mr. STEWART. As I learned from listening to the testimony of the domestic textile industry witnesses, one of the problems with the cotton textile arrangement was that it did not include a proper scope of articles, so that it could be avoided by transferring from one area to another. Secondly, it did not seem to them that it was being administered as much in the spirit of what was intended, though they are not willing to give it up and this means that the quality of administration is bet- ter than what the situation would be otherwise. Now, in the case of electronic components if you were to draw the bill so as to include some of these affected components and not others or to leave out the summation of the components as assemblies, the consumer products, then you would have problems similar to the cot- ton textile arrangement in which quotas could be evaded, but if you include, as the Collier bill does, both the consumer electronic products and components used therein you would not have those problems. Mr. Cuirns. Except for one thing. Thank goodness for the great innovation in our society, but in textiles, as well as certainly in elec- tronic components what is the pattern today is not the pattern tomor- row. This is one of the reasons I worry about this kind of approach where you are dealing with past markets. What we are really seeking to solve is problems of anticipation and what future markets are going to be. Maybe this can be done within the context of quotas, but I suggest that the difficulties that the cotton textile people have experienced are almost intrinsically the result of the quota system and I think what- ever you do you are going to run into this same trouble in other indus- tries. You always have problems of circumvention of the quota and you always have the question of how you administer the laws. The only way I know to operate is to abide by the laws we have, rather than subvert them by administrative action. Change laws when they become outmoded but once you go to this business, which I think we have today, of the administration picking and choosing what laws it wants to enforce and not paying any attention to the laws it doesn't PAGENO="0190" 3626 want to enforce, that is a destruction of orderly society per se. Your criticism of the antidumping administration was very instructive in this regard. I think I share a lot of that criticism with you which leads me to this question. Why not develop the antidumping laws, rewrite those, to try to hit at these problems? I think you are making excellent points. Cost accounting now has advanced to the point where we can start looking into the real practices of these countries abroad and particularly in the area of Government subsidy. We need cost accounting to find out where there has been subsidization. Why isn't this a channel that your industry might pursue here? Mr. STEWART. For this reason, and it is an important reason. We offered our comments on the Antidumping Act in an effort to be of service to the committee which had expressed an interest in the subject. In industries that are affected by imports that are launched against this country on the basis of incremental pricing and where that is the margin of advantage, effective enforcement of the Antidumping Act would help but in industries such as electronics where the full home market price in Japan and in Hong Kong is so far below the domestic price that we cannot compete without some import regulation the Antidumping Act itself does not redress that problem so you need to have an array of trade regulating mechanisms, some which prevent unfair trade, which is what dumping is, and others which recognize the difference in the cost of living abroad and in the United States and the impact of that difference on labor-intensive industries. Mr. Ctrwns. We have talked about this before. There is no disagree- ment between you and me on this score. Back in 1957, as you know, I sought to identify as an unfair trade practice which I wanted to see us move to correct wage differentials related to productivity. This is a difficult thing to try to measure, but very few people showed any in- terest in it. I still have an interest in trying to do it. I would do it frankly through the tariff approach just as the countervailing duty seeks to use the tariff approach in correcting government subsidies. We could use this approach to correct other practices. Well, I just worry about whether the quota is the correct approach. Do you view this quota approach as something that would be perma- nent? Is this something that you think is to meet immediate need, or iS this something that we would have from now on? Would there be a terminus to this approach? Mr. STEWART. The same process of legislative review that this com- mittee has performed on the many extensions of the Trade Agree- ments Act over time and a refinement of the provisions of that act would be carried out in connection with any type of legislation that involved the use of quotas as an additional trade regulating means. The fact that you adopted quota machinery here and now as a suf- ficient solution for the present type of problems that we have doesn't mean that you are committing future Congresses forevermore to that approach. Mr. Cuirns. That is true. In some legislation we try to adont a base and set a fundamental theory that hopefully might last 20 or 30 years. The cotton textile agreement quota was put on as if it were temporary. PAGENO="0191" 3627 In fact, it was only said to be, but it of course turns out~ not to be temporary. Let me ask a couple of more questions on this job situation. What was the employment in 1948 in this particular segment of industry you are representing? Mr. STEWART. I would have to submit that for the record. Mr. CURTIS. Do you have any figures? The reason I picked 1948 was because in your testimony you referred to the industry 20 years ago, but any figure, for instance 1950, would be adequate. Mr. STEWART. I can go back to 1959, Mr. Curtis. Mr. Cumns. At least give me that. That will give me something. Mr. STEWART. The electronic components industry, standard indus- trial classification 367, in the year 1959 had 213,300 employees. Mr. CtmTIs. You just gave us a figure in your other testimony that they are now employing 500,000 in 1968. Mr. STEWART. I believe that that was a combined total for that in- dustry and consumer electronic products. Mr. CURTIS. Can you give me the comparable figure which relates to the same industry for 1968? Mr. STEWART. I can give it to you for April of 1968, Mr. Curtis. That figure is 350,400. Mr. CURTIS. I am going to quarrel with you a little bit, as I have with other witnesses when you put so much emphasis on loss of jobs. Of course what you are really talking about isn't real jobs where peo- ple are or were employed. You are talking about potentials. Here your industry has gone in 1959 from a 213,000 employment figure to 350,000 in 1968, not a loss of jobs at all. That doesn't mean you haven't got problems though. I have been misquoted so often on the issue of jobs that I am sick of it. I am concerned about jobs, but here we are trying to look at jobs in the context of a very dynamic society. We have an unemployment rate right now which is well below 4 percent. We have more jobs going begging than there are unem- ployed. We have a very serious problem of utilizing these unemployed in jobs or hopefully in this economic system which we could do with adequate training and retraining. We just haven't been doing that, but we have, as we always have had in the United States, a shortage of labor. This is one reason these labor-intensive industries become less labor-intensive as we automate by necessity for lack of workers. Some workers are displaced from a particular job by automation but it doesn't mean that human beings are not being employed. It may mean they are not being employed in your particular industry and that the labor unions that are in that industry are not getting dues, but this doesn't mean these men and women aren't being gain- fully employed. If in fact it is a labor-intensive industry the workers are now probably being employed in an industry that is not so labor intensive and therefore their wages are higher. I just want this issue of jobs in context. If anyone can complain about loss of jobs look at American agriculture where employment now is about 6 percent of our society from a much higher level, and coal, which was three times the employment which it is, and yet our coal industry has in effect driven out the coal industry of Western Europe by its efficiency. PAGENO="0192" 3628 Incidentally, in this instance I think we did a miserable job-by "we" I mean our labor leaders, and our coal industry-in the manner in which the coal miners lost their jobs. There were no programs for training and retraining, but there is no question about what the net result has been. The telephone people say, "If we were to provide the telephone services that are provided in our society today, which is possible through the dial system, if we were doing that through the old switch- board system we would be employing every woman in the United States". So I hope that the testimony of the various industries that are pointing out their problems, and I know they have some real ones, will direct their attention to this employment factor in a little different way. Yours is an emotional appeal and it is proper appeal if it is soundly based, but it certainly isn't in light of your own figures you gave me. Mr. STEWART. Mr. Curtis, I respectfully suggest that to look at the total increase in employment of any industry from 1959 to 1968, and to note that there was an increase and t.hen to draw the conclusion there therefore can be no problems- Mr. CURTIS. I didn't draw that conclusion. Did I draw that conclu- sion? I said there are problems. Mr. STEWART. That is the inference that I got. Mr. CURTIS. Well, I said they are not of the nature that you describe as being lost jobs. Mr. STEWART. Well, merely allow me to complete my statement. Mr. CURTIS. I just want you to quote me accurately. Mr. STEWART. I apologize if I appeared to misquote you, sir. We have not in this testimony complained about the increase in imports from 1959. We have come before you at a moment of time when the rate of increase in imports from 1964 to 1967 has risen so exceptionally and the market penetration has risen to such levels that now companies in the industry are experiencing a loss of jobs due to imports, and it seems to us that it is always appropriate for the Congress to consider the present situation and the composition of forces that influence this. Mr. CURTIS. There is no question that we will consider the present situation but, Mr. Stewart, the reason I asked you for figures for 20 years ago was that you were pointing out the impact of imports of 20 years ago. That was the point, so I wanted to see the figures for 20 years ago and you didn't have them. I wasn't the one that picked 1959 out. You couldn't give me the fig- ures for 1948 and I said, well, give me whatever you can. You had directed your complaint to this committee with respect to imports by going back 20 years. Mr. STEWART. Not so, Mr. Curtis. Mr. CURTIS. I think my cross examination was very much in context with what you are saying. Mr. STEWART. I had no objection to it. I was attempting to respond to a question that had been asked by Mr. Collier or one of your other colleagues of the prior witness that was not answered. Mr. CURTIS. I am trying to look at these issues in the proper light and I know you are, and I want to close my interrogation again on a note of compliment. If only others would do as well as you do in dig- ging into the details and the facts we would have this dialog moving PAGENO="0193" 3629 along so much better. I hope we are all interested in getting at the problems and my criticism here, and I will repeat it, is this quoting of jobs that have disappeared. You are talking about potential jobs. I had the same argument from the steel people. They were talking about 80,000 jobs lost and actually there was an increase in employment in the steel industry at the time they said 80,000 jobs were lost. That doesn't mean there isn't any problem. There is, but there is still a different kind of prob- lem than those kinds of statements would indicate to the public. Thank you, Mr. Chairman. The CHAIRMAN. Did you have anything further? Mr. STEWART. Merely to call to Mr. Curtis' attention and that of the other members of the committee exhibit 4, appendix table 4 of our testimony, which shows the employment by State in each of the 42 States that have these industries present and to make the point which my colleagues here have emphasized to me just by looking at those States you will recognize that a great deal of the employment in this industry, and this table is the last table in the document, is located away from metropolitan areas where it provides employment for people who live in rural and suburban communities, which is espe- cially important in view of our social problems at this particular time. Thank you again, Mr. Chairman. The CHAIRMAN. There is one weakness in this table, Mr. Stewart. Mr. STEWART. What is that, Mr. Chairman? The CHAIRMAN. I don't see the State represented by the chairman on this with very many people employed. Mr. STEWART. That is true, but it is like Dartmouth College. It is small but there are those of us who love it. The CHAIRMAN. I knew there was an explanation. Mr. Betts. Mr. BETTS. Mr. Stewart, I was of course interested in your tables on imports of component parts where you referred to TV picture tubes. I think we were pretty deep in that subject once before in this committee, and somewhere along the line the color tubes got separated from the black and white. I was wondering what the status is on that. I think that was a real problem in the industry, wasn't it, at that time? Mr. STEWART. It still is a problem. It is a problem, however, which is the province of another division of the Electronic Industries As- sociation and I am not an authorized spokesman of that division. Essentially what occurred was that first this committee and the Congress very properly corrected an error that had been made by the Tariff Commission in the rate of duty on picture tubes from 121/2. to 30 percent and in the Tariff Schedules Technical Amendment Act as it passed this committee that error was corrected. It was then represented to the Finance Committee that there was a shortage of color television picture tubes on the American market and this would penalize American companies. On the basis of those representations this committee and the Finance Committee imposed a moratorium on the collection of the proper duty until September 1, 1969. The fact of the matter is that there was then no shortage and there is now a considerable amount of excess capacity in this country for producing color TV picture tubes. 95-159-68-pt. 8-13 PAGENO="0194" 3630 In 1967, as an example, the capacity for production of tubes was 10.4 million. The actual production was only 8.4. This was a capacity of 2 million out of 10 million or 20 percent of the capacity was un- used, and this is contributing to the distress that has been experienced in the tube industry and there are bills pending before this commit- tee, cosponsored by Members on both sides of the aisle, to cancel out that moratorium so that the proper duty may now be collected, and I respectfully submit that, as this committee has done in the past when it legislated on the basis of a mistake in fact, it ought promptly now to correct that mistake and to repeal the moratorium on the proper duty on color television picture tubes. Mr. BETTS. Then that is the overall picture even though it might not be on this particular subject? ~ Mr. STEWART. Correct. Mr. BETTS. I think this question was asked before. But I will ask it again. I am not sure whether you got into it or not in your presenta- tion but do you have a comparison between Japanese wage scales, and American wage scales? Mr. STEWART. Is there a difference? Mr. BETTS. Yes. Mr. STEWART. Not in our statement. I would be glad to submit that for the record. Mr. BETTS. I would like it. Do you recall offhand what it is? Mr. STEWART. Yes; I do generally. It is difficult to generalize it about Japan because people begin entering the work force in Japan, young girls in their teens, who live in company dormitories and who receive lower wage rates than adults, for example, but the general level of wages in Japan in the electronic industries as I understand it is in the approximate order of 50 to 60 cents an hour, in Hong Kong in the approximate order of 16 cents an hour, in South Korea in the ap- proximate order of 14 cents an hour, and in Taiwan, about 12 cents an hour. In the United States in the electronic components industry for 196T the average hourly earnings were $2.40 an hour, on the average for the whole industry in components, and our leaders have made the point frequently we can be very efficient, we can be more efficient even than the Japanese, let us say, but we can't be that much more efficient in producing products in a labor-intensive industry to overcome that amount of. wage difference. Mr. BETTS. Were you going to submit it? Mr. STEWART. I will submit the actual statistics that I can develop on that subject, Mr. Betts. (The following letter was received by the committee:) LINCOLN & STEWART, ATTORNEYS AT LAW, Washington, D.C., July 3, 1968. Hon. JACKSON E. Barrs, House of Representatives, Washington, D.C. DEAR Mn. Bnrrs: During my appearance before the Committee on Ways and Means on June 25, 1968, on behalf of the Parts and Distributor Products Divisions of the Electronic Industries Association and the American Loud- speakers Manufactures Association, you asked if I could submit for the record information pertaining to wage rates in electronic manufacturing in Japan and other Asian nations which are supplying electronic imports to the United States~ PAGENO="0195" 3631 We have been able to secure such information, and supply it in the form of the attached table. The table sets forth the wages being paid by typical elec- tronic manufacturers in Hong Kong, Taiwan, Korea, and Japan. All of them are engaged in high labor content light electronic assembly work. The wage figures are given in dollars per hour and include all fringes and benefits such as holidays, vacations, annual bonuses, and other fringes. They are applicable to the average payroll at the time indicated for each of the companies inter- viewed and, therefore, include the average of new workers and workers with considerable seniority. For comparison purposes, the average hourly earnings of workers in the U.S. electronic components and accessories industry (Standard Industrial Classification 367) in the spring of 1968 was $2.51 per hour, in the fall of 1967, $2.45, and in the summer of 1967, $2.41, as reported by the U.S. Department of Labor, Bureau of Labor Statistics, in Employment and Earnings Statistics for the United States. These average hourly earnings exclude such "fringe benefits" as irregular bonuses, retroactive items, payments of various welfare benefits, and payroll taxes paid by employers. We thank you for your interest in this matter. Sincerely yours, EUGENE L. STEWART. FAR EAST COMPARATIVE WAGES Dollar per hour Time period Hong Kongl 0.165 Spring 1968. Koreas 0.l2OtoO.140 Fall1967. Taiwans 0.122 Fall 1967. Japan4 0.60 Summer 1967. 1 Based on actual experience of our specific company. 2 Based on interviews with selected American manufacturers engaged in high labor content, light assembly operations (3 companies). 3 Based on interviews with selected American manufacturers engaged in high labor content, light assembly operations. 4 Based on report of interviews with selected Japanese manufacturers engaged in light assembly operations. Mr. BETTS. I want a copy of it and I want to compliment you for your presentation today. Mr. STEWART. Thank you, Mr. Betts. The CHAIRMAN. Mr. Schneebeli. Mr. SOHNEEBELI. Mr. Stewart, I also want to congratulate you on a very comprehensive and factual statement. I think it is excellent. I plan to study it with great interest. I think you have so many facts in here that we should all study it further. In the interest of time I have no questions to ask you but I do agree with your statement on Dartmouth College. I think it was an appro- priate statement. Thank you. The CHAIRMAN. Mr. Broyhill. Mr. BROYHILL. I should like to associate myself with the remarks of my colleagues in commending you. It was a very effective presentation, Mr. Stewart. I can see why you appear before the committee on several occasions representing several different clients. You make a most clear and persuasive presentation. I regret that you aren't sitting at the con- ference table when we negotiate some of these trade agreements. What was the amount of the average wage rate that you gave to Mr. Betts a moment ago in the United States in 1967? Mr. STEWART. In the components industry, $2.40. Mr. BROYHILL. That is 1967? Mr. STEWART. Yes, sir. Mr. BROYHILL. And it has gone up some since then, hasn't it? Mr. STEWART. Yes, sir. PAGENO="0196" 3632 Mr. BROYIIILL. In one of your tables here you point out the differ- ence in the tariff rates between the United States, Japan and the Euro- pean market. Are we exporting any of these goods to Japan? You showed on one of these charts we got about 65 percent of the imports from Japan. Here Japan has an average of about 100 percent more tariff rate than we have. Are any of these places that have high tariff rates, the Common Market and United Kingdom, to which we have sent about $300 million in exports as of 1967? Mr. STEWART. Let us take a few categories. On television receivers, in 1966 we exported television receivers to Japan of the value of $264,000 and imported television receivers from Japan of a value of $106,754,000. Let us take radio broadcast receivers. In 1966 the official statistics of the United Nations, which is the source of these answers, shows zero exports from the United States to Japan and imports of $135,239,000. On sound recorders, phonographs, and parts in 1966 the United States exported $5,331,000 worth of those products to Japan while im- porting $78,947,000. Does that give you the kind of information you want? Mr. BR0YHILL. Yes. In fact these duty rates imposed by Japan are somewhat meaningless even though they are three or four times as high as the duty we impose. If Japan reduced her duties we could not increase our trade with Japan, or could we? Mr. STEWART. The fact of the matter is that apart from the rate of duty there are structural reasons why it is impossible to export a com- petitive electronic product to Japan. Business there is done on the basis of trading companies. The trading companies are already locked in contractually with the Japanese manufacturers. It is difficult for an American manufacturer to get the attention of a trading company because if he has any substantial business or dis- tribution in electronic products based on his Japanese business he will lose it. Also if you could find an importer who wants to brave all of those difficulties he cannot get an allocation of foreign exchange from his bank for products that are directly competitive with Japanese indus- try. This is a matter of practice, not formal Government regulation. Mr. BROYHILL. Thank you. The CHAIRMAN. We thank you, Mr. Stewart, and those at the table with you for your testimony. Mr. STEWART. Thank you, Mr. Chairman. (The following telegrams were received, for the record, by the com- mittee:) NEW YORK, N.Y. JnZy 12, 1968. Hon. WILBUR P. MILLS, Chairman, House Committee on Ways and Means, Washington, D.C. As a member company of the parts division of the Electronics Industries As- sociation, we hereby disassociate, repeat disassociate, ourselves from the state- ment of Eugene F. Stewart in behalf of the parts division of EIA in support of quotas on imports of electronic articles made to your committee on June 25, 1068, during the hearings on HR. 17551. Please insert this telegram in the record of these hearings immediately following Mr. Stewart's statement. MICHAEL BLUMENTHAL, President, Bendico Internationa~, T1~e Bendico Corp. PAGENO="0197" 3633 ERIE, PA., July 11, 196g. Hon. WILBUR D. MILLS, Chairman, House Comnvtttee on Ways and Means, Washington, D.C. As a member company of the parts division of the Electronic Industries Assoc. we hereby disassociate, repeat disassociate, ourselves from the statement of Eu- gene F. Stewart in behalf of the parts division of EIA in support of quotas on imports of electronic articles made to your committee on June 25, 1968, during the hearings on H.R. 17551. Please insert this telegram in the record of these hear- ings immediately following Mr. Stewart's statement. GEORGE P. FBYLING, President, Erie Technical Products, Inc., Erie, Pac July 11, 1968. Hon. WILBUR D. MILLS, Chairman House Committee on Ways and Means, Washington, D.C. As a member company of the parts division of the Electronic Industries As- sociation, we hereby diassociate, repeat disassociate, ourselves from the state- ment of Eugene F. Stewart in Behalf of the parts division of EIA in support of quotas on imports of electronic articles made to your committee on June 25, 1968, during the hearings on H.R. 17551. Please insert this telegram in the record of these hearings immediately following Mr. Stewart's statement. JOHN J. GRAHAM, Gi'oup Vice President, General Dynamics Corp. SANTA MONIC4, CALIF. July 12, 196& Hon. WILBUR D. MILLS, Chairman, Honse Committee on Ways and Means, Washington, D.C. As a member company of the parts division of the Electronic Industries As-- sociation we hereby disassociate, repeat disassociate, ourselves from the state- ment of Eugene F. Stewart in behalf of the parts division of EIA in support of quotas on imports of electronic articles made to your committee on June 25, 1968, during the hearings on H.R. 17551. Please insert this telegram in the~ Record of these hearings immediately following Mr. Stewart's statement. JOHN C. BROOK, ______ Chairman, Lear Siegler, Inc~. SUNNYVALE, CAliF., July 11, 1968. Hon. WILBUR D. MILLS, Chairman, Hoase Com'inittee on Ways and Means, Washington, D.C.: As a member company of the parts division as well as government products division of the Electronic Industries Association we hereby disassociate repeat disassociate ourselves from the statement of Eugene F. Stewart in behalf of the parts division of EIA in support of quantities on imports of electronic articles made to the committee on June 25, 1968, during the hearing on H.R. 17551. Please insert this telegram in the records immediately following Stewarts statement. D. J. HAUGHTON, Chairman of the Board, Lockheed Aircraft Corp. NEW YoRK, N.Y., July 10, 1968. Hon. WILBUR D. MilLs, Choirman, Committee on Ways and Means, Washington, D.C.: As a member company of the parts division of the Electronic Industries Association we hereby disassociate, repeat disassociate, ourselves from the state PAGENO="0198" 3634 ment of Eugene F. Stewart in behalf of the parts division of ETA in support of quotas on imports of electronic articles made to your committee on June 25, 1968 during the hearings on HR 17551. Please insert this telegram in the records of these hearings immediately following Mr. Stewart's statement. GEORGE H. FEZELL, President, Magnavox Consumer Electronics Co. FRANKLIN PARK, ILL., July 12, 1968. Hon. WILBUR D. MILLS, Chairman, House Committee on Ways and Means, Washington, D.C.: As a member company of the parts division of the Electronic Industries As- sociation, we hereby disassociate, repeat disassociate, ourselves from the state- ment of Eugene F. Stewart in behalf of the parts division of ETA in support of quotas on imports of electronic articles made to your committee on June 25, 1968, during the hearings on H.R. 17551. Please insert this telegram in the record of these hearings immediately following Mr. Stewart's statement. ROBERT W. GALvIN, Motorola, Inc. WALTHAM, MASS., July 12, 1968. Hon. WILBUR D. MILLS, Chairman, House Committee on Ways and Means, Washington, D.C.: Raytheon Company is a member company of the parts division of the Elec- tronic Industries Association, we hereby disassociate, repeat disassociate, our- selves from the statement of Eugene Stewart in behalf of the parts division of ETA in support of quotas on imports of electronic articles made to your com- mittee on June 25, 1968, during the hearings on H.R. 17551. Please insert this telegram in the record of these hearings immediately following Mr. Stewart's statement. CHARLES F. ADAMS, Chairman of the Board, Raytheon Co. DALLAS, TEX., July11, 1968. Hon. WILBUR D. MILLS, Chairman, House Committee on Ways and Means, Washington, D.C. Texas Tnstruments is already on record as opposing any form of import quotas or other restrictive import law. As a member company of the parts division of the electronics industries association we hereby disassociate, repeat disassociate ourselves from the statement of Eugene F. Stewart in behalf of the world trade committee of the parts division of ETA in support of quotas on imports of elec- tronic articles made to your committee on June 25, 1968 during the hearings on H.R. 17551. Please insert this telegram in the record of these hearings immediately follow- ing Mr. Stewart's statement. J. FRED BUOY. Group Vice President, Texas Instruments Inc. The CHAIRMAN. Mr. Tanaka. If you will identify yourself for our record we will be glad to recognize you, sir. STATE1VIENT OP H. WILLIAM TANAKA, ATTORNEY, IN BLHALP OP PAUL H. DAVIDSON, PRESIDENT, INTERNATIONAL IMPORTERS, INC. Mr. TANAKA. Mr. Chairman, for the record my name is H. William Tanaka. I am an attorney for International Importers, Inc. I received a call late last night that Mr. Davidson regrets that he won't be able PAGENO="0199" 3635 to appear. However, he asked that I read his short statement for the record and with your permission I would like to summarize his state- ment and then have the full statement incorporated in the record. The CHAIRMAN. Without objection the entire statement will be made a part of the record and you are recognized to proceed. Mr. TANAKA. Thank you, Mr. Chairman. "Mr. Chairman, members of the committee, my name is Paul M. Davidson. I am president of International Importers Inc., and im- porter and distributor of electronic products and components located in Chicago. I appreciate the opportunity to present the views of my company on the important legislation before your committee."~ Inasmuch as the trade issue relating to imports of electronic prod- ucts has been discussed at length here I will not deal with the trade policy issue but I would like to direct your attention to what I as an importer would experience in the event that any quota restrictions should be imposed on electronic imports. "Our company was established about 15 years ago in Chicago. We are a relatively small company specializing in the importation and sale. of finished electronic products and components." Some of our products include television receiving tubes, and other electronic subassemblies. Our total sales amount to about $6 million a year. Our exports amount to about 5 or 6 percent of that figure. "1 feel that companies like ours serve an important function for both the industry and the American consumer. We are an important supple- mentary source of electronic components for American subassembly set manufacturers. Imports have been vitally important in times of short supply and their availability at reasonable prices has helped many smaller manufacturers to compete with the larger integrated producers who have in-house capability to manufacture components. The importance of imported components to American producers of consumer electronic products is illustrated by their efforts to obtain reasonable rates of duty for products such as color TV picture tubes and receiving tubes." * The American manufacturers and importers and the American con- sumers have all benefited from the trade in electronics, but the quotas iiow being considered by the Congress threaten the continuation of these benefits. "As you know, import quotas are the most stringent and onerous i~orm of trade restriction. Unlike tariffs which are simply another ele- ment in the cost of doing business, quotas completely disrupt the normal factors of supply and demand, and make it nearly impossible to conduct business in an orderly manner. The electronic quota bill and the so-called omnibus quota proposals would place absolute limits on the volume of imports. "The advocates of this legislation state that they are only asking for a reasonable regulation of trade. They say that they are not seeking a rollback in imports and point to provisions which would permit im- ports to share in the market growth. While these proposals might seem *to be reasonable and even liberal when viewed in the abstract, I ask you gentlemen to step in my shoes and think about their impact on the businesses which are engaged in the importation and sale of elec- tronic products. In my view, the practical application of import quotas to businesses such as ours would totally disrupt normal operations and ivould jeopardize the existence of many small businessmen. PAGENO="0200" 3636 "To begin with, I cannot see how one can do business when supply of his stock in trade is totally uncertain due to arbitrary re- strictions. Once the annual quotas are filled, all additional imports would be totally barred from this country until the new quota opens. "Even if the overall quota is known in advance, no individual im- porter can be sure that his own shipment will be entered before the quota is ifiled. If the gates are closed while the shipment is on the way, the importer must bear warehousing costs until the quota re- opens. How can we make commitments to our customers and suppliers, and how can we obtain the necessary financing under such circum- stances? "Secondly, absolute limitations on imports imposed by the Ijnited States must necessarily result in controls on exports by the supplier nations. In the case of Japan, for example, the variously mandatory and so-called voluntary restrictions on other products have required the Japanese Government and industry to divide up the quotas among manufacturers, exporters, and importers to avoid a chaotic scramble among competitors for the largest possible share of the quota. Similar arrangements probably would have to be worked out if U.S. quotas were imposed on imports of electronic products. This could have a damaging effect on small business in the United States. "If the @xperience under other quotas is any guide, the foreign supplier nations would have to allocate the quotas among manufac- turers, exporters and importers according to their past historical share of the market. This would freeze the competitive position of individ- ual U.S. companies. The large importers would remain large and the small importers small, and there would be little if any opportunity for growth. Companies such as ours would have no chance to expand their business because their relative position in the industry would be frozen. "Aside from these serious impediments to the management and growth of individual businesses, quotas would create an administra- tive nightmare. To give you one example, it is proposed that the over- all quota on electronic products and components will be divided among supplying countries by category of product according to market shares during a base period. But electronics is a dynamic industry, and new products are constantly being introduced. The Government will certainly not want to discourage innovation by freezing the product mix according to the situation existing in the past. But how are we to open the market to new products to meet the needs of the consumer? The Government would have to maintain continuing sur- veillance over the import quotas to review the categories and sub- categories of products so as to maintain at least some room for innova- tion. Furthermore, some administrative means must be provided to relieve short supply situations. All of this means a proliferation of bureaucracy and regulation. I believe that even those who are clamor- ing today for quota `protection' would eventually discover that the price they would have to pay in terms of Government interference in normal business activity is simply not worth the benefits they receive. "In conclusion, I urgently request the members of this committee to give serious consideration to the practical effect of quotas on the everyday operation of business. I submit that there is no need for import quotas in any segment of the electronics industry, and that PAGENO="0201" 3637 there is no justification for the disruption of normal marketing, the restriction on competition, and the proliferation of Government inter- ference which would inevitably result from enactment of the quota legislation. Thank you." Mr. Chairman, I would like to point out that in the case of tran- sistor radios and small screen or micro TV sets these were essentially innovations which were developed abroad and which moved into the market in the interstices which existed at the time. A previous witness testified that in 1947 there were 20 million U.S. manufactured radios sold in that year. I daresaye that there was not a single transistorized set sold for the consumer market in 1947. They were all tube-type sets. Also, in 1947 Bell Lab came out with the invention known as tran- sistors which revolutionized the industry, and it was the application of this transistor technology to consumer goods that resulted in the tran- sistor radio which, in fact, revitalized the radio market which was stea.dily going downward from the impact of the introduction of a black and white TV set so that after the transistor radios were intro- duced the radio market climbed very sharply. Likewise with respect to the TV sets here again the imports came into a market interstice created as a result of the fault on the part of the U.S. manufacturer to go into the design and development of a personalized set. Heretofore both radio and television were con- sidered as a part of household furniture. This concept was revolu- tionized as a result of the application of transistor technology to diminish the size of these units, and these are some of the things which might have been withheld from the American consumer were quotas to have been in existence at the time. Thank you, Mr. Chairman. (The statement of Paul M. Davidson follows:) STATEMENT OF PAUL M. DAVIDSON, PRESIDENT, INTERNATIONAL IMPORTERS, INC. Mr. Chairman, members of the Committee, my name is Paul M. Davidson. I am President of International Importers Inc., an importer and distributor of electronic products and components located in Chicago. I appreciate the op- portunity to present the views of my company on the important legislation before your Committee. You have heard opinions from industry leaders on both sides of the question of quotas for electronics. You have heard statistics on exports, imports, em- ployment, and the balance of trade. The witnesses have discussed foreign rela- tions implications, the possibility of retaliation, and its impact on the world economy. I will not deal with the broad issues of international competition in electronics. Although I have my own opinions on these issues, I doubt there is much I could add to what you have already heard. But by speaking from my own experience I think that I can give you some idea of the impact which the quota legislation can have on the many small businessmen like myself who are engaged in the sale and distribution of elec- tronic products. Our company was established 15 years ago in Chicago. We are a relatively small company specializing in the importation and sale of finished electronic products and components. Sales to American manufacturers constitute a substan- tial part of our business. I feel that companies like ours serve an important function for both the Industry and the American consumer. We are an important supplementary source of electronic components for American sub-assembly set manufacturers. I know that these companies have a vital interest in a continued supply of products such as receiving tubes, semiconductors, and TV picture tubes from abroad. These Imports have been vitally important in times of short supply, and their avail- PAGENO="0202" 3638 ability at reasonable prices has helped many smaller manufacturers to compete with integrated producers. The importance of imported components to American producers of consumer electronic products is illustrated by their efforts to obtain reasonable rates of duty for products such as color TV picture tubes and receiving tubes. I know that some component manufacturers are claiming that imports threaten to destroy their business. These complaints are certainly difficult to understand in view of the published figures on the sales and profits of the major components producers. Certainly their substantial exports do not indicate their inability to compete in the world market. As for the claims of loss of employment due to imports, I was interested to note the press reports on the testimony presented to your committee last week by the Emergency Committee for American Trade. I understand that the ECAT presented an analysis of the statements by Trade Relations Council that employment in the electronic tube industry in 1964 was down 16.7% from the 1958-60 average. The ECAT analysis shows that auto- mation, not imports, was by far the biggest factor in this job loss. In fact, importa were only a 3% factor in job displacement in the electronic tube industry. Our company imports a number of finished products including TV sets, radios,. and tape recorders. My best source of information as to the impact of such imports on the domestic industry comes from the American producers themselves. They are certainly in the best position to determine their need for protection against import competition, and their views should definitely be given close attention. The Consumer Products Division of the Electronic Industries Asso- ciation has opposed import quotas and other forms of trade restrictions. They have emphasized the important role which imports play in the consumer market by providing home entertainment equipment which is priced within the reach of Americans who would otherwise be unable to buy these products. Further- more, from my experience in this business, I know that imports, particularly for Japan, have introduced innovations such as the pocket-sized transistor radio and the small screen portable TV set which have made an important contribu- tion toward expanding the entire U.S. market for electronic products. Thus American manufacturing importers and the American consumer have all benefited from the trade in electronics. But this trade is now threatened by the import quota bills pending before your committee. You have been told about the world-wide repercussions which are bound to come if the largest single trading nation retreats behind a wall of quota protection. But I would like to discuss the effect of quotas on the many small businesses in this country which derive their livelihood from foreign trade. As you know, import quotas are the most stringent and onerous form of trade restriction. Unlike tariffs which are simply another element in the cost of do- ing business, quotas completely disrupt the normal factors of supply and de- mand, and make it nearly impossible to conduct business in an orderly manner. The electronic quota bill and the so-called "omnibus" quota proposals would place absolute limits on the volume of imports. The advocates of this legislation state that they are only asking for a reason- able regulation of trade. They say that they are not seeking a rollback in im- ports, and point to provisions which would permit imports to share in the market growth. While these proposals might seem to be reasonable and even liberal when viewed in the abstract, I ask you gentlemen to step in my shoes and think about their impact on the businesses which are engaged in the impor- tation and sale of electronic products. In my view, the practical application of import quotas to businesses such as ours would totally disrupt normal opera- tions and would jeopardize the existence of many small businessmen. To begin with, I cannot see how one can do business when supply of his stock in trade is totally uncertain due to arbitrary restrictions. Once the annual quotas are filled, all additional imports would be totally barred from this country until the new quota opens. Even if the over-all quota is known in advance, no individual importer can be sure that his own shipment will be entered before the quota is filled. If the gates are closed while the shipment is on the way, the importer must bear warehousing costs until the quota reopens. How can we make commitments to our customers and suppliers, and how can we obtain the necessary financing under such circumstances? Secondly, absolute limitations on imports imposed by the United States must necessarily result in controls on exports by the supplier nations. In the case of Japan for example, the various mandatory and so-called "voluntary" restrictions on other products have required the Japanese Government and industry to divide PAGENO="0203" 3639 up the quotas among manufacturers, exporter, and importers to avoid a chaotic scramble among competitors for the largest possible share of the quota. Similar arrangements probably would have to be worked out if U.S. quotas were imposed on imports of electronic products. This could have a damaging effect on small business in the United States. If the experience under other quotas is any guide, the foreign supplier nations would have to allocate the quotas among manufacturers, exporters and importers according to their past historical share of the market. This would freeze the competitive position of individual U.S. companies. The large importers would remain large and the small importers small, and there would be little if any opportunity for growth. Companies such as ours would have no chance to expand their business because their relative position in the industry would be frozen. To say the least, such a situation is hardly compatible with our traditional philosophy of free competition. Aside from these serious impediments to the management and growth of indi- vidual businesses, quotas would create an administrative nightmare. To give you one example, it is proposed that the over-all quota on electronic products and components will be divided among supplying countries by category of product ac- cording to market shares during a base period. But electronics is a dynamic industry, and new products are constantly being introduced. The government will certainly not want to discourage innovation by freezing the product mix accord- ing to the situation existing in the past. But how are we to open the market to new products to meet the needs of the consumer? The government would have to maintain continuing surveillance over the import quotas to revise the categories and sub-categories of products so as to maintain at least some room for innova- tion. Furthermore, some administrative means must be provided to relieve short supply situations. All of this means a proliferation of bureaucracy and regula- tion. I believe that even those who are clamoring today for quota "protection" would eventually discover that the price they would have to pay in terms Of gov- ernment interference in normal business activity is simply not worth the benefits they receive. In conclusion, I urgently request the members of this Committee to give serious consideration to the practical effect of quotas on the every day operation of business. I submit that there is no need for import quotas in any segment of the electronics industry, and that there is no justification for the disruption of normal marketing, the restriction on competition, and the proliferation of government interference which would inevitably result from enactment of the quota legisla- tion. Thank you. The CHAIRMAN. We thank you for appearing for Mr. Davidson and presenting his statement to us. We appreciate it. Any questions? If not, the committee will recess until 2 o'clock this afternoon. Mr. Adams will be the first witness. (Whereupon, at 12:25 p.m., the committee recessed to reconvene at 2 p.m., the same day.) AFTER RECESS (The committee reconvened at 2 p.m., Hon. Al IJilman, presiding.) Mr. ULLMAN. The committee will be in order. Our next witness is Mr. Adams. I would like to recognize Mr. Burke. Mr. Biimwn. Mr. Chairman, it gives me a great deal of pleasure to present to the committee Mr. Charles F. Adams whose company has many divisions in my State. Mr. Adams with a proud family history has made a great contribution not only in an industrial way but his firm has recognized the great problems about the unemployed and the unemployable. We in Massachusetts are proud of his accomplishments. Mr. TJLLMAN. Mr. Adams, you come highly recommended by our distinguished member from Massachusetts. We are very happy to have you before the committee. With the understanding your testimony will appear in full in the record you may proceed as you see fit. PAGENO="0204" 3640 STATEMENT OP CHARLES P. ADAMS, CHAIRMAN OP THE BOARD, RAYTIrEON CO. Mr. ADAMS. Thank you, sir. Mr. Chairman and members of the committee, my name is Charles F. Adams. I am chairman of the board of Raytheon Co. We are a diversified, international, science-based company, employ- ing more than 50,000 persons. Our headquarters is in Lexington, Mass. We operate plants, laboratories and other facilities in that State and also in 12 others-New Hampshire, Indiana, Rhode Island, Okla- homa, Iowa, Pennsylvania, Connecticut, New Jersey, Tennessee, New Mexico, Virginia, and California. We have subsidiaries and affiliates in many countries abroad includ- ing England, Italy, Switzerland, Holland, Canada, West Germany, India, and Japan. Our sales volume for 1967 was $1.1 billion, reasonably well balanced between government and commercial marketing activity. At the core of this business volume is our electronics technology, providing for the development, engineering, and manufacturing of components, equip- ments, and systems. IMPOSITION OF QUOTAS ON NAMED COMMODITIES I wish to address myself to only one aspect of this hearing on the general subject of trade balance between the United States and foreign nations. I am concerned specifically with proposals relative to the imposition of quotas, either on an across-the-board basis or on named items or commodities. Where such proposals call for import quotas to be imposed on elec- tronic products and components, as is proposed, for example, in the electronic import bill 5. 2539, I wish to register our company's belief that the Congress should not pass such legislation. This belief, I might add, is shaped by many representatives of top management in the electronics mdustry. The United States is an exporting nation, not an importing nation. This is made clear in figures issued by the U.S. Department of Com- merce, showing that export sales in 1967 were more than $4 billion higher than imports-$31 billion in exports, $26.7 billion in imports. The introduction of import quotas in the United States on partic- ular products such as electronic commodities and against particular countries abroad, can only lead to retaliatory measures which, in the final analysis, will be more detrimental than helpful to our industry's overall business. BALANCE-OF-PAYMENTS DEFICITS The import protectionists who seek to establish such quotas are claiming that their action will protect American industry from for- eign competition and will so help to reduce the balance-of-payments deficit. That claim is certainly open to argument. The current deficit in the balance of payments did not result from an export-import relation- ship but was caused by other factors, such as the cost of military operations in Vietnam, a decrease in business activity in foreign coun- PAGENO="0205" 3641 tries, lending by United States banks to foreign outlets, and-to some degree-the currency devaluation abroad. It is scarcely logical, therefore, to seek a restriction of trade m the field of electronics, where the United States today enjoys a favorable balance of trade and where the steady trend is toward improvmg the balance of payments. DOMESTIC MARKET IN ELECTRONICS The electronics business in the United States has successfully met; foreign competition in many products during past years, and is quite capable of maintaining and even increasing its competitive edge with- out import restrictions. With our vast resources in research and devel- opment, we in this country hold a strong technological superiority' over our foreign competitors. With such leadership, we neither need nor seek the protection of a quota law. Such a law would harm us rather than help us. Today's electronic imports amount to less than 5 percent of the domestic market. They serve an advantageous purpose by helping to counter inflationary pressures in their field. In many instances, they provide American industry and consumers with an opportunity to take advantage of low prices. The electronics industry in this country is young, dynamic, healthy, and progressive. Factory sales of electronic products amount to sOme $23 billion annually, only a small percentage of which can be attri- buted to imports. The domestic industry is not experiencing today, nor does it expect to experience tomorrow, any economic difficulties traceable to foreign competition. HARMFUL EFFECTS OP RESTRICTIONS In short, there would be no justification for imposing a quota re- striction on this particular field of imports. Such an imposition, we believe would produce an inflationary impact by decreasing the forces of competition and would quickly produce a counteraction abroad which would have a harmful effect upon our trade relations with the~ rest of the world. We believe firmly that free trade between nations is desirable andl necessary, and that the United States cannot afford to take a position of economic isolation. Our economy cannot flourish without our mar- kets abroad; but to sell our goods and services among foreign nations, we must be willing to buy there on a mutually equitable basis. We must. remain competitive worldwide, or we won't be competitive at all. For these reasons, we respectively request that the 90th Congress: reject any proposal which would impose import quotas on any elec- tronic product or component. Mr. ULLMAN. Does that complete your testimony, Mr. Adams? Mr. ADAMS. Yes, sir. Mr. ULLMAN. Are there any questions? Mr. Burke. Mr. Buiuu~. Mr. Adams, do you believe that our export trade could be increased by many of our American industries if they would take a real good, hard look at the foreign markets that are open to their products? PAGENO="0206" 3642 Mr. ADAMS. I think that an increasingly hard look has been taken in recent years but I do feel that this could be carried further. The United States has an advantage in the more complex and more sophis- ticated aspects of electronics and of the systems kinds of approach and I think in fields like the educational system and things of this kind, even in the developing nations, there are all kinds of opportuni- ties that lie ahead for us and I do feel that we can expand our ac- tivities by a greater effort. Mr. BURKE. Do you agree with me that many times you visit some large cities in the foreign countries, and you are rather surprised not -to find many of our well-known products being sold in some of the niarkets, popular items over here that apparently have never reached the foreign markets? Mr. ADAMS. I am not sure that I quite heard that, sir. Mr. BURKE. I say are you surprised when you visit a foreign coun- try and you find many of the products that are sold in this country ~and are looked upon as everyday articles that are in great demand- to find a lack of these articles in these foreign markets. Mr. ADAMS. I think this is true. I think you have to look very carefully at the disposable income in some of these foreign coun- tries and see how far up the scale they can go. We regard color television here as a product wherein a large pro- portion of our homes in this country have television; but if you try to fit color television into the disposable income even in some of the more prosperous Western European countries, they are not ready for it yet. It won't fit their budget situation very well; so that I think there are things of this kind that we consider commonplace here that you don't see over there, but many of the things that we see in this country, my observation has been, we see in a somewhat cruder, simpler, less expensive form there. Many of the products that are tailored to our market are a little too rich for some of the markets abroad. Mr. BURKE. Thank you. Mr. TILLMAN. Mr. Schneebeli. Mr. SCHNEEBELI. Mr. Adams, what suggested approach would you give to this Congress relative to eliminating some of these artificial barriers or indirect restrictions that we meet in some of the foreign countries? We heard testimony this morning about government re- strictions in regard to the entry of power equipment. We heard dis- cussion about residual quotas. We heard discussion about some of these artificial barriers which some of our trading partners have created. What suggested approach would you give to this committee to meet this competition? Mr. ADAMS. Well, I think this is a question on which I haven't the familiarity that somebody would have who had been present at the Kennedy round negotiations and at various GATT meetings and so on; but I have the quite strong feeling that if we start imposing quotas we begin to get sort of an across-the-board escalation of this kind of thing. Mr. SOHNEEBELI. I will agree with you there, but disregarding quotas what other approaches have we? If we meet the same competition or if we have the same rules for international trade that they have, is this being unfair? PAGENO="0207" 3643 Mr. ADAMS. I don't think it is unfair, but in a sense we are a very rich nation in terms of the amount of exports we have versus imports. I think most of the foreign countries looking just at our export-im- port situation regard us with great envy, and their economies are weak- er, their trade balances are more difficult, and I think if we start asking for too much in the overall balance between nations that we may come off worse. Now, I think we have to continue to try to trade this out but I think we always have to, in viewing this, 190k at the economic posture of some, of these foreign countries, the problems that beset them, and therefore proceed with some patience. For example, if we attempt to set import quotas against the TJnited Kingdom, which is in severe economic difficulties- Mr. SCHNEEBELI. Let's take Japan. Mr. ArAM5. If you take Japan you are dealing with a very- Mr. SOHNEEBELI. Aggressive. Mr. ADAMS (continuing). Strong nation both in technology and pro- ductivity, its work force and all the rest of it, and I would hope that as relationships between Japan and the United States are developed that they will be more open. They have enormous markets in the Far East open to them. The U.S. market is very important to them of course, but they have other markets and other opportunities and I would hope that their situation would open up gradually to allow us to import more to Japan. Mr. SOHNEEBELI. Our conversations with them up to this point have been rather negative and when we asked them when they were going to eliminate some of these restrictions they told me personally possibly they might think about it in the next 5 years. Are we going to wait 5 years to be outtraded and do you think it is unfair for us to raise the same artificial barriers as they have against us during this 5-year interval? Mr. ADAMS. In the case of Japan I tend to agree with you to a greater extent. I am a firm advocator of the greatest amount of free trade pos- sible. I believe everybody gains by this and I think there are lots of exarnples to point it up, but in the case of Japan they have an extra- ordinarily effective economy in many areas outside of electronics and we don't have to have the same reservations that we may with respect to the English, or the French, or others who are having difficulty. Mr. SCHNEEBELI. Mr. Adams, some of the members of this committee believe that in being tolerant and liberal and cooperative with some of our trading partners we are being taken over and we want to know what we can do to equalize this situation. Mr. ADAMS. I am not really familiar enough with the give and take on the diplomatic battlefront to be able to make specific suggestions that I would like to be able to. In my own company we have had considerable experience with selling highly sophisticated pieces of equipment where the technology of this country was superior to that available in the other country and it was on that basis that we were able to make sales. These things were, if not in military areas, in areas such as airline operations, which are offshoots of the government in some of these countries, where they were open to accepting American equipment. PAGENO="0208" 3644 This has been true in Japan and in those circumstances we have had no difficulty, but they certainly do regulate what we can do there with great care and I think some possible threat in the case of Japan more than in any other place, not threat exactly, but some sort of a trading posture, might be useful. Mr. SOHNEEBELI. I am glad you agree with our dilemma. Mr. ADAMS. I am sure there is a dilemma. Mr. SOHNEEBELI. Thank you. Mr. BtTRKE (presiding). Are there any further questions? Thank you very much, Mr. Adams. Your testimony has been very helpful. Mr. BURKE. Our next witness is Mr. Richard Hodgson. Mr. FULTON (presiding). Mr. Hodgson, the committee is very glad to have you today and for the benefit of the record will you please identify yourself? STATEMENT OF RICHARD HODGSON, VICE CHAIRMAN, BOARD OF DIRECTORS, FAIRCflILD CAMERA & INSTRUMENT CORP. Mr. }IODGSON. Thank you, Mr. Chairman. I am Richard Hodgson, vice chairman of the board of directors of the Fairchild Camera & Instrument Corp. I appreciate the opportunity to be able to come and talk before this committee today because we feel very strongly on this subject. Fairchild is primarily a manufacturer of electronic products and it not only makes various types of electronic components but also pro- duces specialized instruments such as automatic test systems and digital voltmeters and graphic equipment such as electronic photo composition devices and color scanners, all of which we do a fine export business with. In my prepared statement which I will submit for the record I have dealt with the economic and political problems posed not only by import quotas and import ceilings but by import surcharges and rebates and by direct investment controls. The fact that this committee has acted favorably on the 10-percent tax surcharge and budget reductions I think has been a major step forward in meeting some of the basic problems which this hearing, as I understand, is being aimed toward. Because of the limited time I have to talk about some things we are basically interested in in Fair- child I would just like to offer my views on the effects which import quotas and ceilings would have on an American industry in general and particularly on the electronics industry. It is the judgment of Fairchild Camera & Instrument Corp. that these various import-restricting proposals run strongly counter to our best interests as the world's foremost trading Nation. Their thrust is inconsistent with the basic principle that expanded trade with a con- comitant increase in U.S. exports is not only a fundamental premise on which our international economic position must rest but an essen- tial foundation for the political and economic stability of our various trading partners. You have already heard a great deal about the electronics industry, its makeup and size, so I will not take up your time with a detailed description of it. I would like to add only a few comments in addition to those you have already received. PAGENO="0209" 3645 The electronics industry is certainly one of this country's most dynamic and growing industries. Between 1956 and 1967, electronic sales increased by more than $15 billion. Imports do not have any significant share of the U.S. electronics market. In 1963, imports com- prised 2 percent of our market by value-in 1967, they amounted to 3.5 percent of the market. During these same years, electronic exports have been growing. In a period of 4 years, they increased by almost $900 million. The result has been an increasingly favorable balance of trade, which amounted to $541 million in 1963 and climbed to $945 million in 1967. The primary reason for this growth in electronics exports has been that American manufacturers enjoy a substantial measure of tech- nological superiority over foreign competitors. Virtually all of the re- cent creative breakthroughs in electronics have been made by domestic firms. If any of you happened to read any of the trade journals in the electronics industry you will recall the fact that every week there probably are at least 150 new products introduced on the market, not only the domestic market but the world market, today because of the innovation and technological superiority of the American electronics industry. We hear something about the problems of the transistor radio and the impact it has had on our own domestic economy. I think this is a passing situation and the technological development in integrated circuits today is going to permit the American industry to produce a solid state integrated circuit pocket-size radio without this labor- intensive component which has been talked about and that will dilute materially the problems that are facing some of the industry and some of the companies today in this business. The growth of Fairchild is typical of the expansion of this country's electronics industry. Through extensive research and the application of new technological developments, Fairchild has more than doubled its size during the last 5 years. In 1962, this company had some $101 million worth of sales and employed 7,369 persons in the United States. By 1965, sales were over $181 million; and by 1967, they had grown to over $228 million. Domestic employment had in- creased to 11,552 in 1965 and to 14,678 by the end of 1967. Moreover, this same rapid domestic growth has marked Fairchild's activities in the production of semiconductors and integrated circuits. This fact should be of great interest to this committee for it is in the semiconductor field that Fairchild has also opened several assembly plants abroad. But these foreign plants have not meant fewer sales for or domestic operations or fewer jobs in the United States. Instead, the result of increased foreign assembly operations has been new foreign sales and the opening of untapped markets in the United States for Fairchild's goods. Inevitably, this has meant an upsurge in sales and the creation of new employment opportunities in this coun- try. Thus in 1962, employment semiconductor plants in the United States had less than $50 million in sales and employed some 2,900 workers. By the end of 1967, semiconductor sales had increased by over 200 percent and employment was up to 8,883 workers. At the same time, Fairchild's operations abroad were opening up new foreign markets and putting our sales force into contact with a 95-159-68-pt. 8-14 PAGENO="0210" 3646 broader range of customers for products that were made in this coun- try. As a consequence, the company's foreign sales from its domestic plants soared and this in turn was reflected in an increasingly favor- able balance of trade. In 1964, Fairchild's Semiconductor Division ex- ported $1.4 million worth of goods and had a favorabletrade balance of $550,000. By 1967, this division was exporting almost $28 million worth of goods and its favorable trade balance had risen to over $11 million. In fact, during that year, the exports of all the divisions of Fairchild had risen to $39 million and its favorable balance of trade was over $21 million. You might ask the question why has Fairchild been able to grow this rapidly. This point has been touched upon in some of the other testimony. It has been because of the superior position which the semi- conductor industry and other component manufacturers have had in technology. We have been able to open foreign plants while doubling employment at home. Why has it increased its favorable balance of trade by over $14 million in 3 years? In addition to having superior technology to the foreign competitor we have been a company which has integrated its domestic and for- eign questions. This is a lesson that I think a lot of companies that worry about the qoutas should learn. Its skilled jobs we have kept in this country; its most simple and tedious production functions are performed abroad. It freely exports and imports a variety of electronic parts and components. The end result of this integrated manufacturing process is a lower priced prod- uct which can compete more effectively both at home and abroad. New markets are opened and sales increase. More employment opportuni- ties are created both here and abroad, and, because the goods being exported are more sophisticated and expensive than those being im- ported, the favorable balance of trade constantly increases This process which I have just described is no pipedream. It is the way in which the manufacturing operations of Fairchild and many other American companies operate. Fairchild continues to grow be- cause its production processes and markets are both international. It takes pride in its domestic and foreign plants and in the opportunity to import and export goods freely precisely because these various inter- national operations are serving this Nation's best interests. Not only can Fairchild state that it is helping to increase the U.S. favorable balance of trade and thereby decrease this country's unfavorable bal- ance of payments, but it is also opening a growing number of export- import related jobs. We estimate that from 1964 to 1967, the increased international sales of just our semiconductor division created over 2,100 new jobs at that division's plants in the United States alone. This represents approximately 25 percent of the employment in these plants. With this background in mind, it is now possible to examine the problems which would arise for the electronics industry if quotas or import ceilings were to be adopted by this Congress. In short, I would like to put much of the general discussion about import quotas and ceilings which you have heard over the past few weeks into the context of the one industry with which I am famihar-electronics. First, quotas as well as import ceilings are both inflationary and discriminatory. They will normally cause sharp decreases in supply PAGENO="0211" 3647 and concurrent increases in prices-and thus impose hidden taxes on consumers while subsidizing favored domestic industries. In the elec- tronics field, quotas would raise the price of various electronic prod- ucts, thereby squeezing low-income purchasers out of the market. In the case of Fairchild, this process would come about in two stages. First, quotas on semiconductors or integrated circuits would drive up our price to end-use producers. The resulting increase in the price of such products as radio and TV sets would ultimately reduce end- use sales and then the sales of Fairchild to these consumer goods producers. Second, countries whose products are subject to our quotas will normally retaliate by raising their own trade barriers against goods from the quota-imposing nations. This result would be particularly true if quotas should be established for electronic products. Foreign countries will never understand why this country should impose quotas for an American industry which is healthy, growing, and maintaining a favorable balance of trade~ Tinder those circumstances, if this Nation should limit the import of variOus electronic commodities, our trading partners will be exceedingly tempted to limit our export of other electronic commodities. It is my impression that in the last Kennedy round one of the reasons why people have been concerned about the fact that the elec- tronics industry in this country was not well treated was the fact that in the negotiations, in the give-and-take which went on at those meet- ings of the industries which were involved, the electronics industry in this country perhaps was the strongest and needed less protection and aid was given to some of the less, you might say, technologically prominent industries in this country. Third, quotas would also produce great administrative difficulties and resist moderation or removal once enacted. In the electronics field, technology is changing so rapidly that it would be an administrative nightmare in my opinion, to determine which products should be sub- ject to quotas or ceilings and which should not. Finally, and most importantly, import quotas are simply not needed for the electronics industry. On the whole, our industry is prosperous and capable of meeting the challenge of foreign competition both at home and abroad. In fact, I think that a majority of the electronics industry realize this fact. At recent meetings of the Electronic In- dustries Association, some of whom you have heard from today, four divisions of that association-Consumer Products, Government Prod- ucts, Semiconductors and Tube-have gone on record as being em- phatically opposed to import quotas; while, to the best of my knowl- edge, only one division-Parts-has gone on record as favoring them. Mr. Chairman, it is the judgment of the Fairchild Camera & Instru- ment Corp. that this Nation's current balance-of-trade and balance- of-payments problems are solvable. But it is also the judgment of my corporation that these problems must be treated within a framework of multinational cooperation and through an international effort to reach agreements and common goals. For the United States will only exacerbate its difficulties if it should now embark upon a unilateral, trade-restricting program in which national boundaries are trans- formed into national barriers and the private enterprise quest for new markets is replaced by governmental regulation of the movement of goods and capital. PAGENO="0212" C) 0 Fairchild urges that the committee reject the various proposals in- volving quotas that are before you today. (Mr. Hodgson's prepared statement follows:) STATEMENT OF RICHARD HODGSON, VICE CHAIRMAN, BOARD OF DIRECTORS, FAIRCHILD CAMERA & INSTRUMENT CORP. Mr. Chairman and members of the committee, I am Richard Hodgson, Vice- Chairman of the Board of Directors of the Fairchild Camera and Instrument Corporation. During the past three and one-half `decades, this Nation has followed the prin- ciple that expanding international trade means more economic prosperity both for the United States and for the rest of the free world. We have been com- mitted to the concept that the breaking down of national barriers to the free movement of goods and capital is one of the keys to a more inter-related and peaceful world. Now we appear to be in danger of losing sight of these basic guidelines. The emphasis of too many people-both inside and outside of the Federal govern- ment-is to turn away from increased world trade and capital movement and to support instead the idea of an America whose industries are sheltered from foreign competition and whose private investments abroad are carefully regu- lated. Evidence of this trend is all too easy to find. The Kennedy Round of Trade Negotiations had barely been completed when literally hundreds of import quota bills were introduced in Congress. Since then, various proposals have been made that the United States unilaterally adopt various surcharges, or surcharges and rebates, to' compensate for the existence of foreign non-tariff barriers or, even more drastically, that this country impose a system of import ceilings for any products or articles which have penetrated our market beyond a specified level. These proposals have been coincident with the adoption of regulations by the Executive branch to impose direct controls on foreign investment. It is the judgment of the Fairchild Camera and Instrument Corporation that these various proposed and existing measures run strongly counter to our best interests as the world's foremost trading Nation. Their thrust is inconsistent with the basic principle that expanded trade, with a concomitant increase in U.S. exports, is not only a fundamental premise on which our international eco- nomic position must rest but an essential foundation for the political and eco- nomic stability of our various trading partners. To illustrate the potentially deleterious effects of these trade restricting pro- grams, I would like to turn briefly to an examination of the electronics industry in general and to the Fairchild Camera and Instrument Corporation in particular. I would then like to deal with the problems which would be caused by this country's utilization of import quotas as well as other trade and capital restrict- ing measures. Finally, I would like to offer a few suggestions as to the steps which this Nation might take in order to improve its balance of trade and thereby strengthen its balance of payments position. I. THE ELECTRONICS INDUSTRY AND THE FAIRCHILD CAMERA & INSTRUMENT CORP. Electronics is one of this country's most dynamic and growing industries. In 1956, factory sales of all electronic products amounted to $6.7 billion. Ten years later, sales had trebled to $20.2 billion. And this rising sales curve shows no signs of slackening, since the preliminary figures for 1967 reveal an increase to some $22.1 billion. Imports do not have any significant share of the U.S. electronics market. In 1963, they comprised 2 percent of the market by value-in 1967, they amounted to 3.5 percent of it. During these same years, exports of U.S. electronic products have been growing rapidly `and at a faster pace than overall U.S. exports. In 1963, electronic exports amounted to $846,000,000 ; by 1967 they had soared to over $1.7 billion. The result has been an increasingly favorable balance of trade in electronic products which more than `doubled between 1961 and 1967. The primary reason for this growth in electronic exports has been that Amer- ican manufacturers enjoy a substantial measure of technological superiority over foreign competitors. Virtually all of the recent creative breakthroughs in electronics have `been made by doni~estic firms. In all markets-whether in the United States or in foreign countries-American firms dominate the produc- tion and sale of sophisticated electronic products. PAGENO="0213" 3649 To a large extent, the chief beneficiary of this growth in domestic production and in international trade has been the American public. Employment in the electronics industry has grown from some 650,000 in 1958 to 1,163,000 in 1967. At the same time, consumer prices for electronic products have reflected the bene- fits of heavy and unrestrained competition and a willingness on the part of do- mestic manufacturers to leave the production of certain low-cost and unsophis- ticated electronic commodities to foreign manufacturers-a choice which has resulted in every American being able to enjoy the fruits of technological prog- ress in electronics. Thus, the Bureau of Labor `Statistics Consumer `Price Index~ for December 1967 shows all consumer items to be at 118.3 (1957-~59 *base of 100). Yet for electronic consumer products, `the same index shows that the con- `surner price is some 5 to 20 points below the base period figure. The growth of the Fairchild Camera and Instrument Corporation is typical of the expansion of this country's electronics industry. Fairchild is primarily an electronics company; it not only makes various types of electronic components but also produces specialized instruments such as automatic test systems and digital voltmeters and graphic equipment such as electronic photo composition devices and color scanners. Through extensive research and the application of new technological developments, Fairchild has more than doubled its size during the last five years. In 1962, this company had some $101 million worth of sales and employed 7,369 persons in the United States. By 1965, sales were over $181 million and by 1967, they had grown to over $228 million. Domestic employment had increased to 11,552 in 1965 and to 14,678 by the end of 1967. Moreover, this same rapid domestic growth has marked Fairchild's imaginative activities in the production of semiconductors and integrated circuits. This fact should be of great interest to this Committee for it is in the semiconductor field that Fairchild has also opened several assembly plants abroad. But these foreign plants have not meant fewer sales for our domestic operations or fewer jobs in the United States. On the contrary, the result of increased foreign assembly operations has been new foreign *sales and the opening of untapped `markets in the United States for Fairchild's goods. Inevitably, this has meant an upsurge in sales and the creation of new employment opportunities in this country. Thus in 1062, our semiconductor plants in the United States had less than $50 million in sales and employed some 2,900 workers. In that same year. Fairchild opened its first foreign assembly plant. By 1965, domestic sales had more than doubled and employment was up to 6,141 workers. By the end of 1967, semiconductor sales had more than trebled from 1962 and employ- ment was up to 8,883 workers-an increase in our labor force of over 200 percent from 1962. At the same time, Fairchild's operations abroad were opening up new foreign markets and putting our sales force into contact with `a broader range of customers. As a consequence, the company's foreign sales from its domestic plants soared and this in turn was reflected in an increasingly favorable balance of trade. In 1964, Fairchild's `Semiconductor Division exported $1.4 million worth of goods and had a favorable trade balance of $550,000. By 1967, this Division was exporting almost $28 million worth of goods and its favorable trade balance had risen to over $11 million. In fact, during that year, the exports of all the Divisions of Fairchild h'ad risen to $39 million-an increase of over 300 percent from 1964-and its favorable balance of trade was over $21 million. Why has Fairchild been able to grow `this rapidly? Why has it been able to open foreign plants while still doubling its employment at home? Why has It increased its favorable balance of `trade `by over $14 million in `a period of three years? The answer is simple. Fairchild is a company which integrates its domestic and foreign operations. Its skilled jobs are kept in this country; its most simple and tedious production functions are performed a'broad. It freely exports an'd imports a variety `of electronic parts and components. The end result of this in'tegrated manufacturing process is a lower priced product which can compete more effectively both at home and abroad. New markets are opened and sales increase. More employment opportunities are created `both `here and abroad, and because the goods being exported are more sophisticated and expensive than those being imported, the favorable balance of trade con- stantly increases. This process which I have just described is no pipe dream. It is the way in which the manufacturing operations of Fairchild and many other American companies operate. Fairchild continues to grow because its production processes an'd markets are both international. It takes pride in its domestic and foreign PAGENO="0214" 3650 plants and in the opportunity to import and export goods freely precisely be- cause these various international operations are serving this Nation's best iiiter- ests. Not only can Fairchild state that it is helping to increase the United States' favorable balance of trade and thereby decrease this country's unfavor- able `balance of payments, but it is also opening a growing number of export- import related jobs. We estimate that from. 1964 to 1967, the increased interna- tional sales of just our Semiconductor Division created over 2,100 new jobs at that Division's plants in the United States. With this background in mind, it is now possible to examine the problems which might arise for a variety of American industries, and for the electronics industry in particular, if quotas or various other types of import restrictions were to be ad'opted by this Congress and if the present controls on direct in- vestment were to be continue'd indefinitely. II. THE EFFECT OF UNILATERALLY-IMPOSED TRADE AND CAPITAL-RESTRICTING MEASURES A. Import Quotas In general, the imposition of import quotas for a wide variety of industrial products would have the following disadvantageous features for this country: First, quotas are both inflationary and discriminatory. They will normally cause sharp decreases in supply and concurrent increases in prices, and thus impose hidden taxes on consumers while subsidizng favored domestic industries. Second, quotas will not, in the long run, aid the industries for whose `benefit they are adopted. They will make technologically innovative companies lazy and will provide little incentive for backward companies to modernize rapidly. Third, quotas produce great administrative difficulties and resist moderation or removal `once enacted. Fourth, countries whose products are subject to new quotas will normally retaliate by raising their own trade barriers against goods from the quota- imposing nation. Since such retaliation could not be expected to be at a carefully measured level of reciprocity, a spiraling trade-restricting process would begin in which no country could emerge as the winner and the United States, with so much at stake, would be the biggest loser. Fifth, adopting import quotas places this country in the position of threatening the results of the Kennedy Round of tariff reductions. As the Canadian-American Committee has recently noted, such a step would be taken as' a "signal" of a `re- treat from leadership in world affairs into economic nationalism." T'he result would be an impairment of this country's bargaining position in its delicate nego- tiations to obtain international cooperation in dealing with its balance of pay- ment problem. All of these disadvantageous features are highlighted if we turn to the pro- posals which have been made in Congress to place quotas on electronic products. First, quotas would raise the price of various consumer electronic products thereby squeezing low-income purchasers out of the market. In the case of Fair- child, this process would come about in two stages. Quotas on semiconductors or integrated circuits would drive up our price to end use producers. The resultimig increase in the prices of such products as radio and TV sets would ultimately reduce end use sales and then the sales of Fairchild to these consumer goods producers. Second, the electronics industry-like many other industries for which im- port quotas have been proposed-is prosperous and capable of meeting the chal- lenge of foreign competition both at home and abroad. In general, the industry does not need protection since it is not being injured by imports which in fact hold a relatively insignificant share of the domestic market. Those companies which feel threatened by imports must undergo a process of improving their technology. Import quotas will not induce them to undertake this necessary mod- ernization process but will merely reward their past failures. Third, the changing technology of electronics leads to a constantly changing range of products. Under such circumstances, the administrative difficulties in determining specific quotas for individual items would be almost overwhelming. Fourth and fifth, import quotas for electronic pro'ducts could only have a damaging effect on our trade relations with the rest of the world-and inevitably on our balance of payments problem. For if the rest of the trading nations of the world should bear witness to this Congress' act of imposing quotas on elec- tronic products-and on other products similarly situated-they will be driven to retaliatory action. There will be no way of jus'tifying protectionist policies to PAGENO="0215" 3651 these countries when they can see that the industry affected is healthy, growing, and maintaining a favorable balance of trade, and when they know that a sub- stantial segment of that industry does not favor such quotas. In fact, I think it is fair to say that a majority of the electronics industry is opposed to import quotas. At recent meetings of the Electronic Industries Associa- tion, four Divisions of that Association-Consumer Products, Govermuent Prod- ucts, Semiconductors, and Tube-have gone on record as being emphatically opposed to import quotas, while, to the~ best of my knowledge, only one Di- vision-Parts--has gone on record as favoring them. B. Import ceilings It has also been suggested that in place of import quotas, this Nation should adopt a more flexible system of import ceilings with automatic trigger points for certain articles or products. This type of measure is subject to the same criticisms as are import quotas. Not only would it lead to a freezing of current patterns of trade-which is not in this country's best interests-but it would inevitably lead to enormous inequities. For example, let us turn to the electronics industry again. While this country's electronics firms maintain a large and increasingly favorable balance of trade, there are some electronic articles which are largely imported. Are we therefore to set ceilings for transistors or certain types of capacitors because imports have a substantial share of the domestic market? Are we to lose sight completely of overriding trade balances and foreign policy considerations in order to protect certain narrowly specified commodities? If we are, then I think this country should be prepared to see a worldwide reac- tion against the free movement of its favorite exports-of which electronic products is a prime example. For once this Nation begins to pick and choose those goods which it will protect from competition, then all nations will be entitled to decide that such a narrow and restrictive policy is justified. And in this reciprocal destruction of the open channels of trade, the United States, as both the world's leading trading Nation and the repository of the most advanced technology, must inevitably wind up the greatest loser. U. Other unilateral restrictions on trade with our allies In order to improve our balance of trade, other proposals have been put for- ward to impose high border taxes on foreign goods or to impose such surtaxes. with equivalent rebates on our exports. The most disturbing facet of those various proposals is that they imply unilateral action on the part of the United States. For this country to take any individual action outside of the GAPT would be a mistake. The effect would be to re-establish a precedent of unilateral action- and once this is done, the abilities of this Nation to oppose similar unilateral action by its trading partners would be significantly reduced. In the long run, the cause of multilateral decision-making to reduce trade barriers would have suffered a severe setback. For industries such as electronics--which consistently maintain a favorable balance of trade-the possibility that various foreign countries might begin tak- ing independent steps to redetermine their own trade barriers raises very trou- bling problems. It would be logical for these barriers to protect against highly sophisticated products in which advanced technology and production efficiency play a great part-and these are the very types of exports in which the electronic industry specializes. D. Limitations on direct investment On January 1, 1968, the President-through an executive order-imposed direct controls on foreign investments by U.S. corporations and citizens and established repatriation requirements on the foreign earnings of do- mestic companies. These were drastic and unprecedented steps to control the flow of capital abroad and force profits to be brought back to the United States. If, in the long run, one of the keys to a viable balance of payments picture for this country is a growing surplus of foreign earnings, and another key is an expansion of the direct investment in foreign corporations which is reportedly generating approximately one-fourth of all U.S. exports, then the recent invest- ment controls are indeed open to serious question concerning their wisdom. Should these controls be continued over a period of several years. companies such as Fairchild will simply not be able to expand those foreign facilities which are producing the favorable trade balances these companies now maintain. And if this should happen, the direct investment controls will have produced very few positive gains indeed for our balance of payments. PAGENO="0216" 3652 III. POSITIVE STEPS TOWARD IMPROVING THE 11.5. BAI~ANOE OF TRADE It is clear that for this Nation to maintain a favorable balance of payments picture, it must expand its favorable balance of trade. To do this, the Executive Branch as well as the Congress must be willing to take some new steps here at home. For example, we must begin to explore the possibility of expanding the guarantee and direct loan powers of the Export-Import Bank. We should also carefully examine the possibility of a lower tax treatment for export corporations and of a coordinated system of trade shows and fairs in this country to attract both foreign travelers and foreign purchases. During the past few years, increased foreign attendance and orders have marked the trade shows of the electronics industry. If the Federal Government can encourage more industries to undertake these types of shows, we will have taken a major step forward in our effort to increase our sales abroad. But over and above any internal change that this Nation may make to im- prove its trade position, it should also accept the proposition that multinational rather than unilateral action must be our touchstone in dealing with all inter- national trade problems and the fact that import quotas and ceilings and surcharges are totally inconsistent with this proposition. In the place of these unilateral acts, this Nation should continue its efforts to obtain cooperation from its allies-cooperation which hopefully will lead them to increase the pace of their Kennedy Round tariff reductions, to reduce their border taxes so as to reflect more accurately those indirect levies which are actually built into the price of their goods, and to adopt monetary and fiscal policies which may further increase the demand for our products. More- over, it is this same type of cooperation which can lead to a~ broad acceptance of rules for international competition and ultimately to the creation of minimum labor standards to be observed by all industrial nations. Finally, it is this same spirit of cooperation which could lead to a coordinated policy of trade with Eastern Europe and the Soviet Union-one in which United States in- dustries would be enabled to obtain a fair share of what will hopefully become a growing East-West trade in non-strategic goods. Mr. Chairman, it is the judgment of the Fairchild Camera and Instrument Corporation that this Nation's current balance of trade and balance of payments problems are solvable. But it is also the judgment of my corporation that these problems must be treated within a framework of multi-national cooperation and through an international effort to reach common goals. For the United States will only exacerbate its difficulties if it should now embark upon a unilateral, trade- and investment-restricting program in which national bound- aries are transformed into national barriers and the private enterprise quest for new markets is replaced by governmental regulation of the movement of goods and capital. Mr. FULTON. Thank you. Mr. Conable. Mr. GONABLE. Mr. Hodgson, I understand your point of v~iew about your industry. I am also somewhat concerned as a member of this com- mittee looking at the overall testimony that is coming before us and I wonder if it is necessary for this country to be either free trade or protectionist. Is it possible for us to strike a balance somewhere where we will be able to provide a degree of protection for the low skill, low tech- nology, industries that provide jobs for so many of our disadvantaged and comparatively unskilled people and still avoid this course of retaliation that seems to be such a bugaboo to people in high skill industries like yours. Is it possible to walk that narrow path do you think to find a compromise somehow? Mr. HODOSON. It isn't going to happen in a very short time. I think it is possible to walk this kind of a path. We have had extremely good luck and fortune in training low-skilled people into the difficulties of making semiconductors and instruments. We happen to be the largest PAGENO="0217" 3653 employer of American Indians in this country. We have a plant in the Navajo Reservation in New Mexico, with 500 girls working there who have never seen a transistor before. Their productivity equals the output we have from our factory in Portland, Maine, in Mountainview, or in Europe. I think they need the opportunity and the legislative acts that are going on in this country today to bring opportunity to unskilled people is certainly working in this direction. We are looking at a bit here and a bit there, but I don't think you are ever going to upgrade the working capacity of people by putting up an umbrella and protecting them and saying, look, we are going to keep you employed at $1.60 an hour doing the job which can be done much better either by automation or certainly by bringing in com-~ petitive products from abroad. Mr. CONABLE. Now let's look at this from a different angle. Isn't completely free trade going to end with total dependence on foreign supplier~s for some types of products? For instance, isn't it likely that some vital industries will be either moved abroad by our own producers or supplanted by foreign compe- tition? Mr. HoDosoN. I think this could happen, yes, and I think some of the statistics that were given earlier today don't necessarily mean a reduction in employment in these specific industries that one is talking about. We have moved abroad operations which were labor-intensive, low skilled. In many cases we weren't even able to man the plants, you might say, for this type of an operation. People were not interested in this work. We moved them abroad.. This is a period of time where certainly I agree our industry is perhaps special in that sense. It is highly technology oriented and new processes, new techniques, are going to bring a lot of that work back into this country but that doesn't mean that we are going to be laying off people abroad either. There are other opportunities for them now that have come out of our investments in plants abroad. I think it is a continual series of movements. I think one has to look at the trade business as being an international business and not look at it specifically by countries or boundaries or industries. Mr. CONABLE. Apparently one has to be an optimist in this field. Mr. HoDosoN. You have to be a believer, but I don't think you have to be an optimist. Mr. CONABLE. I have no other questions. Mr. FULTON. How many foreign countries does Fairchild have plants in? Mr. HODGSON. Well, I would roughly guess about 10. Mr. FULTON. Could you name those countries? Mr. HoDosoN. Yes; England, Sweden, France, Germany, Italy,. Holland, Hong Kong, Korea, Australia, Canada, and Mexico. Mr. FtrriroN. On behalf of the committee I want to thank you for your excellent presentation and contribution you have made to the committee in its deliberations. Mr. HoDosoN. Thank you. (The following statements were received, for the record, by the committee :`~ PAGENO="0218" 3654 STATEMENT OF H. WILLIAM TANAKA, COURSEL, ON BEHALF OF CERTAIN IMPORTERS OF ELECTRONIC PRODUCTS, A&A TRADING COMPANY, ET AL. This statement is submitted on behalf of 13 U.S. corporations which import and distribute electronic products~ We wish to register our opposition to the various bills now pending before the Committee which would impose quotas on imports of electronic products and components. We submit that there is no need for quota restrictions and that quotas would restrict the consumer's choice of products, would disrupt normal business operations, and would lead to an ex- pansion of Government controls. A description of the role which imports have played in the market might con- tribute to the Committee's understanding of the electronic industry. While it is true that imports have grown substantially, the bare statistics alone do not give an accurate picture of the actual extent of competition between imported and domestically produced electronic products. A substantial portion of the total imports represents products not produced in the United States. Innovations by foreign producers, particularly the Japanese, have served to fill the gaps in the product lines produced in this country, and have offered the consumer a full range of home entertainment products at reasonable prices. The tremendous post-war expansion of the consumer electronics industry has been spurred by development of new products. Many items which are in wide use today were not available twenty years ago. Innovations by Japanese producers have played an important role in this expansion. Much of the original technology in miniaturization of electronic components and parts was developed in the United States for use in the military, space and industrial fields. This tech- nology was licensed to Japanese producers who realized its vast potential in the consumer market. Their application of this technology in the production of new consumer products has made a substantial contribution towards expanding the range of items available to the American consumer today. The development of the small pocket-size transistor radio is a prime example. The transistor was an American invention, but no U.S. company considered transistors ready for use in consumer products in 1954 when Sony Corporation obtained a license from Western Electric to make transistors in Japan. A single transistor cost $6 at the time and there was no hope of competing with tube radios costing as little as $6.95. (Business Week, May 25, 1968, page 80). But Sony executives realized that transistor costs could be substantially reduced to the point where small transistor radios could be sold at competitive prices. Within one year after acquiring the technology, Sony produced its first pocket- size transistor radio. It was shortly followed by other Japanese producers, and the transistor radio was an immediate success in the market. The initial reaction of a major U.S. manufacturer was described in the report of an annual national business conference held at Harvard: "Engineers and marketing personnel in GE's radio receiver department had studied the market for compact portable radios as early as 1956. Marketers had favored the addition of small sets to the company's line but believed that per- formance standards in such sets should be good. Engineering personnel did not believe that it was possible to have good performance in small radios. Because of the tiny speakers and cabinets that would be used, good tone would be impos- sible to achieve. Furthermore, such sets would have to have small antennas and their receiving sensitivity would necessarily be limited. Finally, small batteries could last only fifteen to twenty hours as compared to seventy-five to one hundred hours for batteries in conventional portable radios. "The rapid acceptance of Japanese radios, however, had indicated the strong demand existing in the United States for subminiature sets, in spite of the fact that by GE standards these sets did not have good performance. It became ap- parent, then, to the management of the radio receiver department that GE should be represented in this new segment of the radio market." 1 The quality of transistor radios was substantially improved through Japanese developments in the field of miniature components. Mitsumi Electric invented the polyvaricon, a miniature tuning capacitor; while Toko invented the miniature intermediate frequency transformer. Many Japanese companies contributed to the development of improved speakers for transistor radios. Some American producers decided to compete by using foreign components in sets assembled in the United States. Other companies imported completed sets produced to their specifications and sold under their own brand names. l"Managing America's Economic Explosion", edited by Dan H. Fenn Jr. and published by McGraw Hill Book Company, Inc., New York, 1961, page 145. PAGENO="0219" 3655 Recently, the large Japanese companies have concentrated on the more expensive multi-band transistor radios while much of the production of 6-transistor AM radios has shifted to smaller Japanese companies as well as producers in Hong Kong and Taiwan. It is important to note that Japanese producers such as Sony, Matsushita, Toshiba and Hitachi were the first to exploit the vast potential of transistors in home entertainment products. These imports stimulated the growth of the entire consumer electronic market. The Japanese producers were also the leading innovators in developing tape recorders for home entertainment use. Before the advent of imports, the only tape recorders available in the United States were large expensive units be- yond the reach of the average consumer. Sony Corporation was the first to in- troduce battery operated portable tape recorders suitable for the mass market. Tape recorder sales were expanded through Japanese development of improved tape beads and motors. This product innovation created a new market dimen- sion which would not have come into being at the time were it not for im- ports. Japanese producers are now developing a new mass market for tape re- corders with the cassette tape cartridge system originated by Phillips of Hol- land. Another new dimension is being added by Japanese companies such as Crown which have coupled the cassette to telephone answering systems. The imported micro TV set is another example. At a time when major U.S. manufacturers were advertising their 19-inch sets weighing 30 or 40 pounds or more as "portable," merely by adding a luggage handle, the imports came into this market with a truly portable 8-inch and 5-inch television receiver. Matsushita has recently introduced a 1l/2-inch black and white set powered by flashlight batteries. These imports have opened an entirely new market. In addition to the large living room console, the average family can now afford a second or third television set for other rooms or for outdoor use. Japanese companies were also the leaders in small screen color TV sets. Toshiba was the first to offer a 14-inch color set. On the other hand, domestic producers have generally concentrated on the larger screen sizes. The latest development in this field is the new 7-inch color TV set recently introduced by Sony. The set is the first commercial application of the chromatron picture tube invented in 1951 by Dr. E. 0. Lawrence, a physicist at the Uni- versity of California. Next year, Sony will introduce a new small screen color TV set with the trinitron color tube-a new departure in picture tube design which provides substantial improvements in brightness and clarity. Japanese companies have also played a leading role in the development of home video tape recorders. Through new technological improvements the cOst is being steadily reduced and complete video tape recorder systems are now com- ing on the market at a price within the reach of the average consumer. They will undoubtedly open new marketing opportunities in the consumer electronic industry. These Japanese innovations have not displaced domestic production since, in general, comparable products are not produced in this country. Thus it is incor- rect to assume that every imported transistor radio, portable tape recorder, or small screen TV set, means one less item produced in the United States with a corresponding loss of employment. Were it not for imports, these products w-ould not have been available to the American consumer since U.S. companies have generally concentrated in the larger and higher profit items. In fact, the innovations of Japanese electronic producers have benefited the American economy. They have opened up new markets and generated demand for new products. The American ëonsumer has benefited through the variety and range of choice available today. And these innovations have provided employ- ment for thousands of Americans engaged in importing, distributing, merchan- dising and servicing of consumer electronic products from abroad. The vitality of this industry would be jeopardized by the quota legislation pending before your Committee. It is evident that the domestic electronic industry does not require special pro- tection from imports. The United States is the world leader in electronics. The industry has experienced a fantastic rate of growth since World War II. Total factory sales rose from $1.7 billion in 1947 to $22.1 billion in 1967. Between 1958 and 1967, total employment jumped from 650,000 to nearly 1.2 million workers. The United States has a substantially favorable balance of trade in electronic products. Total exports in 1967 amounted to nearly $1.8 billion with imports of about $830 million. Total exports increased by 22.7% between 1966 and 1967, PAGENO="0220" 3656 compared to an increase of imports of 11.5%. (Electronic Industries Association, Elect rowic Industries Year Book, 1968). The U.S. producers of consumer electronic products do not need quota pro- tection; in fact, they strongly oppose the electronics quota bills. Sales of con- sumer electronic products increased 25% in 1966 over 1965-from $3.7 billion to $4.5 billion. 1967 sales were ~4.3 billion, almost equal to the sales level attained in the record year of 1966. (Ibid). The consumer products producers have good reason to oppose import quotas. No manufacturer can efficiently and economically produce every one of the great variety of consumer electronic products on the market today. The American pro- ducers concentrate on those products which they can manufacture efficiently in volume, while relying on imports to round out their product lines. Major domestic manufacturers such as RCA, General Electric, Motorola, and Philco-Ford are going "international" by purchasing components and finished products wherever they can be produced at satisfactory quality and economical costs. Broadening the base for sourcing as well as marketing has served to improve the overall competitive posture of these companies. Moreover, many American producers of finished products who do not manufacture their own components have found that imported components help them to compete with integrated producers. The U.S. manufacturers of industrial and military electronic equipment have not sought protection from imports. Companies such as IBM, Ratheon, and Fair- child Camera `and Instrument Corporation are strong advocates of a liberal trade policy, and they have played an important role in the fight against quotas. The request for quotas comes from only one segment of the U.S. industry- the producers of components and parts. But the facts show that this segment of the industry is thriving, and is in no need of special protection. U.S. factory sales of electronic components totaled about $5.5 billion in 1967, off slightly from the record $5.7 billion in 1966, but higher than any other year. Industry estimates point to a rise in component sales in 1968. The ability of U.S. component manufacturers to compete in world markets is illustrated by their record exports in 1967 of $486 million, up 10.5% over the previous year. (Electronic Industries Association, Electronic Industries Year Book, 1968). The claim that imports have caused a loss of employment in the component segment of the industry is refuted by official Government statistics. Total em- ployment in 1967 exceeded 360,000 workers; down from the peak year of 1966, but higher than any other year on record. The latest information shows that employment this year has moved up sharply. Total employment in electronic components and accessories reached 376,000 workers in May 1968. (U.S. Depart- ment of Labor, Bureau of Labor Statistics, En~plo~jment and Earnings, June 1968). At this rate, employment for 1968 could reach an all-time high, exceeding even the record 1966 employment of 374,000 workers. Thus there is no need or justification for imposition of quotas on imports of electronic products and components. The economic and political repercussions of quota restrictions have been emphasized in the testimony of both Government and industry witnesses. All nations would suffer from the inevitable chain reaction of retaliation and counter- retaliation. In addition, quotas would totally disrupt normal business operations by placing arbitrary limitations on supply. Competition would be restricted, prices would rise, and Government control of business activities would increase. Finally, quotas would stifle the innovative efforts of foreign producers which have contributed so much to the growth, variety, and vitality of the consumer electronics market. The American consumer and industry as well, would suffer as a result. We therefore respectfully urge the Ways and Means Committee to reject the proposals for quotas on electronic products and components, and to reaffirm its support for a liberal trade policy. This statement made in behalf of the following: A & A Trading Company, 23-25 East 26th Street, New York, New York. Craig Panorama, Inc., 2302 Fast 15th Street, Los Angeles. Calif. 90021. Hitachi Sales Corporation, 48-50 34th Street, Long Island City, N.Y. 11101. Lloyd's Electronics rnternational, 6651 East 26th Street, Los Angeles, Calif. 90022. Matsushita Electric Corporation of America, 200 Park Avenue, New York, N.Y. 10017. Mitsumi Electronics Corporation, 11 Broadway, New York, N.Y. I 000f. Murata Corp. of America, 160 Broadway, New York, N.Y. 10038. PAGENO="0221" 3657 Pioneer Electronics USA Corp., 140 Smith Street, Farmingdale, Long Island, New York 11735. Sharp Electronics Corp., 178 Commerce Road, Carlstadt, New Jersey 07072. Sony Corp. of America, 47-47 Ban Dan Street, Long Island City, N.Y. 11101. TDK Electronics Corp., 82 Wall Street, New York, N.Y. 10005. Topp Import and Export, Inc., 4201 Northwest 77th Avenue, Miami, Fla. 33106. Toshiba America, Inc., 477 Madison Avenue, New York, N.Y. 10022. STATEMENT OF GENERAL ELECTRIC COMPANY General Electric Company, 570 Lexington Avenue, New York, New York 10022, submits this statement to the Committee on Ways and Means in support of certain provisions of H.R. 17551, the Trade Expansion Act of 19138. Specifically, General Electric supports the following two provisions of the pending legislation: 1. Extension through June 30, 1970 of the President's authority to nego- tiate tariff reductions; 2. Authorization of funds for the expenses of U.S. participation in the General Agreement on Tariffs and Trade (GATT). And, in overall terms, General Electric supports the principles and objectives set forth in the President's May 28 message to the Congress on U.S. trade policy, which the pending legislation seeks to implement. We agree with the President that "when trade barriers fall, the American people and the American economy benefit" and that "even as we consolidate our past gains, we must look to the future." Above all, General Electric endorses, and in this statement seeks to bring into particular commercial focus, two key sentences in the President's message: "Other nations must join with us to put an end to non-tariff barriers. Trade is a two-way street. A successful trade policy must be bailt on reciprocity. Our own trade initiatives will founder unless our trading partners join with us to put an end to non-tariff barrier." (Emphasis added.) There still exist today, 20 years after GATT was established and one year after the Kennedy Round was concluded, two major European non-tariff bar- riers which create one-way streets in international trade among the industrial nations of the free world: (1) nationalistic procurement policies and practices; and (2) the border tax system which permits remission of taxes for export and imposition of equalization charges on imports. Both these barriers are ingrained into the economic structure and commer- cial self-interest of the European trading nations, and both have a significant effect on U.S. ability to compete in world markets. They are, therefore, of great concern to General Electric as a multi-national company which already exports $500 million annually but must continue to seek widening markets for the export of its high-technology products. First, the nationalistic public procurement policies of foreign governments. The electric utility systems of Europe are substantially owned or controlled by their national governments. As a matter of national economic policy these utilities buy electrical equipment only from their domestic manufacturers. Where domestic capability exists, no outside competition is permitted on these procure- ments, regardless of whether it offers a low-er price or superior quality. Yet these same manufacturers, while enjoying the insulation of their protected home markets, can export to the United States and are doing so increasingly in sub- stantial volumes. What we are talking about here are hundreds of millions of dollars of trade in high-technology equipment among the industrial nations-the big turbine generators and power transformers and power circuit breakers that are the backbone of modern electric power systems. This is an industry in which the U.S. has always excelled-in innovation and technological advance, in engineer- ing excellence and in manufacturing productivity. It is an industry whose major markets are the 115.8. and industrialized Europe. Yet, U.S. manufacturers are foreclosed from the European markets, and their satellite markets as well, by procurement policies that give total preference to domestic manufacturers. Here is protectionism of the most radical sort, for it denies entirely the concept of reciprocity and a two-way street which the President laid down as a corner- stone of U.S. trade policy. PAGENO="0222" 3658 The commercial consequences of this one-way street in government procure- ment are set forth in detail in a technical brief and supplementary letter which General Electric recently submitted to the Trade Information Committee (TIC) in connection with the TIC's current study of U.S. trade policy. We are attach- ing the brief and supplementary letter to this statement for inclusion in the record of hearings on H.R. 17551, should the Committee consider it appropri- ate. * Suffice it here to summarize briefly the trade consequences of these ex- clusionary procurement practices of foreign governments in heavy electrical equipment: (a) U.S.-made equipment is denied access to large and potentially profitable markets, to the detriment of the U.S. industry, its employees and the national trade account. (b) Because their home markets are totally insulated from the discipline of outside competition, European manufacturers, in close cooperation with their customers, the nationalized power authorities, obtain all domestic orders at high profitable prices-prices which are generally higher than U.S. manu- facturers obtain from U.S. utilities. (c) With the assurance of steady home market orders at high prices, Euro- pean manufacturers sell into this country, to both public and private utilities, at prices substantially below what they charge at home-20 to 50 per cent lower. Sometimes the foreign price in the U.S. market is at or below cost, as shown in our brief to the TIC. This is more than sporadic "incremental" pricing to get rid of excess capacity. It is a calculated long-term strategy of dual-pricing to cap- ture, hold and enlarge the largest single market in the world for high-voltage electrical equipment which is at the very forefront of today's technology. (d) An artificial competitive imbalance has fastened itself on the interna- tional trade of this equipment to the point that such international trade is a one-way street. Let us continue the U.S. commitment to open markets in this country. Let us also realize that the competitive imbalance, inequitable on its face and commercially disadvantageous to U.S. trade, will continue as long as the one-way street is permitted. Second, the tax structures of most of the European trading nations, which impose equalization charges on imports (border taxes) and provide for remis- sion of internal taxes on exports, confer a major trade advantage on those nations. Their indirect border tax system is not trade-neutral in its effect on the U.S. competitor who is operating under a direct tax structure. The attached General Electric brief and supplementary letter to the Trade Information Committee, referred to earlier, also contain specific detail with re- spect to some of the trade consequences of the so-called border tax system. In this statement we would only emphasize our belief that the theory of tax shift- ing, direct taxes versus indirect taxes, which underlies the GATT rules with respect to imposition of equalization charges and remission of internal taxes for exports, should be re-examined and empirically tested for soundness, par- ticularly the relationship of tax shifting to elasticity of demand. Until this is. done, U.S. trade cannot be expected willingly to accept the trade disadvantages which flow from a theoretical rationale which has been allowed to stand untested. for too many years. Here, then, in bare outline, are the dimensions of two non-tariff barriers which have significant impact on U.S. trade and our competitive position in world markets. We suggest that U.S. trade policy, as enunciated by statute, regulation and administrative practice, can and should seek to eliminate or at least reduce these barriers in two ways: (1) by international negotiation, and (2) by review and amendment of those U.S. laws and regulations which are intended to protect against unfair foreign competition. First, continuing international negotiations to remove these barriers must be given priority. This is why we specifically support the provisions of H.R. 17551 which would extend the President's tariff negotiating authority and authorize funds for U.S. participation in the GATT. Such participation, on the strongest and most enduring basis possible, is an essential element of U.S. trade policy because it is in this international forum, as supplemented by *The General Electric brief submitted to the Trade Information Committee included, as a separate attachment, a number of confidential exhibits which set forth cost and price infor- mation about foreign-made equipment. Should the Committee or the Committee staff wish~ to examine these exhibits they can be made available on a confidential basis. PAGENO="0223" 3659 proceedings in the Organization for Economic Development (OECD), that long- term solutions to basic trade restrictions and imbalances will be worked out. Our underlying commitment to liberalized reciprocal trade depends for its suc- cess in large measure on multi-lateral negotiations under the procedural safe- guards of the GATT. The record of the past 20 years shows that GATT is the appropriate forum in which negotiations can be had to improve the basic rules of international trade and commerce that go far to bind the trading nations to fair trade and competitive equity. In fact, the two non-tariff barriers we have cited in this statement are under consideration in the GATT right now. We have been so advised by U.S. trade officials; and in his testimony of June 4 before the Ways and Means Committee, Ambassador Roth said: "We have also made a good start (in the GATT) toward reaching an agreed solution to the problem of the rules governing border taxes and are working in a special GATT group on the many problems that remain in other non tariff barriers." The momentum of the Kennedy Round should be exploited to proceed now to this next and more difficult stage of negotiations on the real barriers to trade. U.S. trade policy, and the legislative base on which it rests, must accept the U.S. commitment to international negotiations to accomplish these ends. Accordingly, General Electric urges the Congress to give the Executive the legislative support needed to go forward in the GATT. And beyond this, we believe that the Congress should make clear its legislative intent that U.S. trade policy, in the GATT and all related international proceedings, must be conducted in such a way as to create genuine two-way streets and insure competitive equity for American industry. Second, U.S. trade policy must have at hand and effectively employ an array of self-help remedies and legal recourse with which to discipline unfair com- petition in international trade. Our ability to negotiate successfully in the GATT and other international forums and to maintain a strong bargaining position depends in large part on the statutory authority of U.S. government and U.S. business to retaliate against trade discrimination and restrictive practices. This is particularly important with respect to short-term solutions for specific trade abuses, because international negotiations are necessarily long in their resolution and general in the agreements they reach. It is appropriate, we believe, in the course of the Committee's consideration of H.R. 17551 that existing statutory remedies be reviewed carefully to deter- mine if they are accomplishing the purpose intended and, if not, whether new legislation or new statements of Congressional intent are necessary. In his June testimony, Ambassador Roth said the following: "I agree that the practices of other countries are not always what we would like them to be. Where I do not agree is that we are helpless before them. Both under our international commitments and our domestic law, we have remedies for many of them. We have the power to impose antidumping duties and counter- vailing duties to offset unfair pricing practices and subsidies. And we have authority to protect domestic producers seriously injured by imports even where foreign practices are perfectly fair. This includes the authority to increase tariffs under the escape clause and to impose quotas to protect domestically supported farm prices." We suggest, however, that despite Ambassador Roth's statement, the existing array of apparently applicable self-help remedies now on the books is inadequate, either as written or as interpreted and implemented by Executive Departments and administrative regulations. We recommend that Congress review existing remedies in the light of unfair foreign competition; that is, those governmental and commercial policies and practices that give an artifical trade advantage to industries in competition with U.S. industry, whether in the U.S., their own home country or third country markets. In particular, we believe that the fol- lowing three U.S. laws as they have been interpreted and executed should be re- examined in terms of their reach to prevent unfair methods of competition: 1. The Antidumping Act of 1921 (19 USC 160) 2. Countervailing Duties-Tariff Act of 1930 (19 USC 303) 3. Trade Expansion Act of 1962, Section 252 (19 USC 1882) The Antidumping Act is not intended to reach unfair competition itself, but only the injurious consequences of such dumping. As such, it is not a relevant statutory remedy for an industry, or a company, which cannot meet the tests of material injury, as laid down by regulation and previous Tariff Commission PAGENO="0224" 3660 decisions. Unless the definition of "injury" under the Act were broadened to in- clude certain kinds of dump pricing-from protected home niarkets, for ex- ample-as injurious (per se or presumptively) by reason of their effect on do- mestic price levels and share of market, the dual pricing strategies of foreign exporters of heavy electrical equipment cannot be disciplined under the Act by a healthy or relatively still healthy U.S. industry. Countervailing duties provide an effective way to discipline export subsidies. Used sparingly in the past, they have recently been applied in a few instances involving both industrial and agricultural products. We suggest it is now time for an in-depth analysis of the more subtle forms of foreign government assist- ance to exporters to see if they are not in fact an improper bounty or grant under the statute. Thus, for example, restrictive government procurement prac- tices which exclude U.S. competition, assure protected home markets, and thereby permit dual pricing-high at home, low into the U.S.-could well be held to con- stitute an export subsidy. So, perhaps, could government-financed research and development for high technology equipment going into export. Absent legislative direction to this effect, the Treasury Department probably and understandably would be reluctant to extend the reach of their authority to cases such as these. Finally, Section 252 of the Trade Expansion Act, which appears to give the Executive broad authority to move against foreign protectionism and restrictive trade practices, has yet to be used. Admittedly, this is relatively new legislation. And, as a practical matter, it should be regarded and applied as a complementary part of overall trade policy, so as not to impair the outcome of int~rnational negotiations. But international negotiations should not replace Section 252 or render it inoperative. We would therefore urge that the Congress give more explicit legislative direction to the Executive in the purpose of Section 252 and specify the sorts of restrictive trade practices it was intended to protect against. In conclusion, we would suggest two other steps which the Congress might consider to bring international competition into closer balance: First, further study should be given to the idea that the U.S. adopt, in substi- tution for all or a part of the corporation income tax, a value-added tax which would have the trade effect of encouraging exports (by tax rebates) and impos- ing modest equalization charges on imports. The Committee for Economic Devel- oprnent has advanced this idea, and we believe it has sufficient merit to warrant serious consideration in the Congress. While it is preferable that there be inter- national agreement that border taxes are not trade-neutral in their effect, with consequent revision of the GATT rules as to their application, nevertheless it is realistic for the U.S. to consider the alternative of adopting for ourselves, at least on a limited basis, the European indirect tax system. Second, U.S. procurement policy could be changed to take into accouat the fact that certain foreign government markets are foreclosed from U.S. competi- tion. In our brief to the TIC we suggested that U.S. procurement agencies could require certification by foreign bidders that they are not bidding in the U.S. at prices lower than they bid equivalent equipment in their own home markets. This suggestion is the obverse of a recommendation of the 1954 Report of the Randall Commission on Foreign Economic Policy. The Randall Commission recommended that where other nations treat U.S. bidders "on an equal basis with their own nationals" on government procurements, the Buy American preference should not be applied against suppliers of those nations bidding in the U.S. market. Equally valid, it seems to us, would be a U.S. requirement that where other nations do not permit U.S. suppliers to bid in their government markets, then at least some approximately equivalent deterrent should be applied against the suppliers of those nations. Such requirement might well be the means for creating two-way streets. ATTACHMENT Bainr OF GENERAL ELECTRIC COMPANY, NEW YORK, N.Y., BEFORE THE OFFICE OF THE SPECIAL REPRESENTATIVE FOR TRADE NEGOTIATIONS, TRADE INFORMATION COMMITTEE, WASHINGTON, D.C., DOCKET No. 67-4 ~S'ome Non-Tariff Barriers to World Trade INTRODUCTION Present and future U.S. trade policy must be based on recognition of the fact that, in terms of expanding free world trade, the tariff-cutting phase of interna- tional trade relations has run its course, and a new phase has begun-the pains- PAGENO="0225" 3661 taking work of eliminating or reducing those nontariff trade restrictions and advantages which are rooted in national and regional economic policy. The series of post-war multilateral tariff negotiations confirmed the trading nations' general commitment to expanded trade and rejection of out-and-out protectionism. But, precisely as these obvious evidences of pre-war protection- ism have been stripped away, so the underlying imbalances and restrictions have emerged. These are the real inhibitors of expanded trade on a fair and competi- tive basis. The GATT is 20 years old; trade patterns and monetary flows reflect the deep changes that have occurred during this period; and protectionism has. new faces. U.S. trade policy must adjust to the realities of commercial competi- tion in the world today. The General Electric Company is particularly concerned with two of these underlying imbalances and restrictions: 1. Nationalistic procurement policies and practices of foreign government- owned or controlled electric utilities which (a) exclude U.S. electric utility equipment from competing in their markets; (b) allow and encourage high non- competitive prices from their domestic suppliers in these insulated markets; and thus (c) permit and encourage those same domestic suppliers to export to the United States and third countries at prices which, in a true commercial sense, are at less than fair value. The competitive disadvantage to the U.S. industry, thus, is two-fold: exclusion from potentially profitable European mar- kets; unfair pricing in the U.S. market. 2. The tax structures of most of the European trading nations, which impose equalization charges on imports (border taxes) and provide for remission of internal taxes on exports, confer a major trade advantage on those nations. Their indirect border tax system is not trade-neutral in its effect on the U.S. competitor who is operating under a direct tax structure. General Electric views the foregoing two imbalances and restrictions in the following context of international competition: First, General Electric has long been heavily engaged in international trade. It has manufacturing and distribution facilities in many parts of the world. It exports annually some $500 million from the U.S. and imports some $100 mil- lion. Accordingly, General Electric's overall objective in international markets is fair, freetrade with the fewest possible restrictions against the movement of goods across national borders so that customers everywhere have freedom of choice in making purchases anywhere in the world on a fair and equitable basis. General Electric does not believe in closed markets, whether they be achieved by high costs of entry or exclusionary public procurement policies. second, a substantial portion of General Electric's business is in high-tech- nology products. The Company contributes significantly to this nation's technolog- ical world leadership. But with respect to electric utility equipment a disturbing situation is developing. A significant amount of competence in certain high-tech- nology equipment is gained through sales in this country to the Federal power agencies. Sales to these Federal agencies are enormously important to the de- velopment of technology because they operate large systems that require high engineering sophistication. These agencies rank among the leaders in moving up to the larger sizes and voltage levels which require new advances in technology. Their influence on U.S. and world electric utility technology cannot be under- estimated. Thus, to the extent that U.S. public procurement policy permits foreign manufacturers virtually full access to the Federal market-at prices substan- tially below their home market prices-while U.S. technology is denied access to foreign markets, there is technological unilateralism. The question must be asked, how much does this unilateralism impede or discourage U.S. manufacturers from developing new technology? One possibly relevant answer may lie in the declining number of U.S. bidders to the Federal power agencies on high-technology equip- ment in recent years and the increasing number of foreign bidders. Third, the statistics of trade in heavy electrical equipment among the producer nations indicate a rapidly worsening competitive position for the U.S. industry: (a) In high-voltage power circuit breakers and transformers, where manu- facturing capability exists in seven European nations, for the period 1963- 1907 orders placed by U.S. utilities in these seven countries totaled $97,185,000. Orders of U.S. equipment by the seven countries totaled $59,000. (b) In large steam turbine generators, 10,000 KW and above, where manufacturing capability exists in seven European nations, orders placed by U.S. utilities in those seven countries totaled $146,000,000. Orders of U.S. equipment by the seven countries totaled $0. 95-159 0-68-pt. 8-15 PAGENO="0226" 3662 Fo'urth, while the emergence of regional trade blocs such as the European Economic Community and the European Free Trade Association are welcome developments, they pose trade questions which have disturbing implications. To the extent that national preferences, restrictions and advantages in tax struc- ture, and protective public procurement policy expand into regional arrange- ments, the U.S. and other outsiders will incur even greater competitive disadvan- tages. Moreover, General Electric can reasonably anticipate that the larger enterprises that emerge out of industrial realignment and rationalization within these regions will be strengthened by uniform and widened public procurement inside the sheltered markets, continuing high costs of import entry, and tax incentives to export. Pifth, it must be recognized that the procurement and tax policies of these European countries are nationalistic instruments to encourage their manufac- turers to help execute government policy designed (among other things) to protect their balance of payments and thus their currencies. I A. THE PUBLIC PROCUREMENT POLICIES AND PRACTICES OF THE EUROPEAN PRODUCER NATIONS OF HEAVY ELECTRICAL EQUIPMENT EXCLUDE U.S. COMPETITION IN EURO- PEAN MARKETS B. TOTALLY PROTECTED HOME MARKETS ENABLE EUROPEAN MANUFACTURERS TO PURSUE A STRATEGY OF "DUAL PRICING": HIGH HOME MARKET PRICEs; LOW EXPORT PRICES A. European Public Procurement Policies and Practices 1. Most electric utilities are government owned or controlled public au- tltorities.'-In the United Kingdom, France, Italy, Sweden and Austria electric utilities are almost entirely nationalized. The few regional public authorities, Scotland and Northern Ireland in the U.K., Electricité de Strasbourg and Compagnie Nationale du Rhone in France, adhere to the policies of their respec- tive national authorities, the Central Electricity Generating Board (CEGB) and Electricité de France (EDF). In West Germany there is a mix of regional public utilities and private utilities, but the Federal Government is a dominant par- ticipant and influence in procurement policy by reason of its financing of utility expansion. Thus the public procurement policies of all these countries, which implement underlying national economic planning, directly control purchases of utility equipment by public auhorities. 2. European electric utilities pursue strict buy-national policies.-Where a European nation has domestic capability in electrical equipment it buys from its domestic industry.~ This is a fiat rule almost without exception. Sometimes the authority of such policies is contained in law, administrative regulation or executive order; sometimes it is simply a tacit or informal practice deeply rooted in a modern day economic nationalism. The specific procedures by which these policies are carried out are: (a) Requests for bids are not formally advertised or otherwise given public notice. Instead, private discussions and negotiations are held between the utility and its potential suppliers whereby designs and specifications are spelled out and terms and conditions of sale agreed upon. Thus, there is scant opportunity for other qualified suppliers to respond to a bid or present their particular capabil- ities for consideration. lExhjbit 1. 2 See Organization for Economic Corporation and Development, Government Purchasing in Europe, North America, and Japan: Regulation, and Procedures (Paris, 1966); also Exhibit II. PAGENO="0227" 3663 (b) Sole sourcing is permitted even though there may be other qualified sup- pliers. The Utility can negotiate with a given supplier without notification to any other. This practice is frequently used when one supplier has established its competence in a particular rating or design. (c) The utility may make a bulk allocation whereby it commits itself to quantity requirements for the expected life of a particular design at a particular rating. Production schedules may be spread over a term of years and prices sub- ject to later agreement between buyer and seller. This arrangement has the advantages of completing a single, early procurement at which no firm orders are placed and no prices quoted; enabling the utility to distribute its purchases in a series of large commitments to a predetermined group of suppliers, or to only one; and, excluding potential competitors from bidding at a later date, even if they might offer superior designs or lower prices, because the selection decision will not be reopened at the time a firm order is placed. 3. Design competitions and development programs for new classes of equip- ment are restricted to domestic manufacturers.-The utility will disclose to selected suppliers its advanced plans and engineering requirements. Lead time in research and development is thereby assured, perhaps as much as ten years. Moreover, the public authority will frequently fund design competitions and development programs which are restricted to domestic manufacturers. Par- ticipating manufacturers are given extensive use of test facilities operated by the public authority, as well as use of the system itself. CEGB operates the U.K.'s biggest test facility in Leatherhead at its own cost, making results known only to specified manufacturers. EDF has a similar facility outside Paris. In Sweden, the development of high-voltage direct current techniques was conducted by a Swedish manufacturer, ASEA, on the State Power Board's transmission lines. Compare these publicly financed programs with the U.S. system of research and development on a risk-basis. General Electric, for example, developed, at its own expense and with no purchase commitment of any sort involved, a 500 KY- class power transformer in 1948 (no orders were placed for this equipment until 1962) and a 765 KV transformer in 1958 (no orders placed until 1966). 4. Utilities and domestic suppliers agree in advance on prices, quantities and contract terms.-There is no doubt that this practice exists in the United King- dom,3 and, General Electric believes, it exists also in France, Sweden, Switzer- land and Germany. If so, the purpose is obvious: to forego competition in favor of limitation to a single supplier or a closed association of manufacturers. 5. Outside solicitations or bids are deliberately discouraged or ignored.-U.S. manufacturers do not receive notice of or a request to bid on a European public authority requirement where domestic capability exists. Moreover, on the oc- casions that General Electric Company has, on its own motion, sought to bid on or initiate preliminary discussions, it has been ignored or discouraged from pursuing the matter. One critical point must be made here. General Electric cannot submit to the Trade Information Committee a comprehensive list of specific instances when it has unsuccessfully attempted to bid or be considered for an offering to a European public authority. Such a list would, of course, be helpful to the Com- mittee and to U.S. trade officials. The fact is, however, that the preparation of a bid on heavy electrical equipment-a large steam turbine generator or a power circuit breaker procurement, for example-costs many thousands of dollars, and 3Exhiblt III: G. B. Richardson~ "The Pricing of Heavy Electrical Equipment: Competi- tion or Agreement?", Bulletin of the Oxford University Institute of Economics and ytatis- tics (May, 1966), pp. 73-92; and Exhibit IV; Agreement between Central Electricity Gee- erating Board and the Grid Switchgear Manufacturers, 1967. See also, Model Conditions of Contract for TuCbo-Gener.ators and Associated Plant of CEGB/BEAMA for 1963, plus Extended Form and Supplementary Clauses and Formulae Governing Contract Price Ad- justments, and CEGB contract with English Electric Company, Ltd. General Electric has not reproduced these documents because of bulk but will make them available on request. PAGENO="0228" 3664 even preliminary discussions are expensive and time consuming. In view of past experience and some recent confirmatory efforts, General Electric believes that the time, expense, and frustration involved in a continuing course of bid submis- sions would be wasted; the Company is convinced that it will simply not be allowed to suply those markets. As specific substantiation of the U.S. industry's inability to compete in European producer nation markets reference is made to the following: Confidential Exhibits A-J: Correspondence with Central Electricity Gen- erating Board, 1965-1968; Exhibit II: Affidavit regarding visit of General Electric official to Elec tricite de France, 1967. Transcript of Private Conference with General Electric Company, Office of the Special Representative for Trade Negotiations, May 5, 1964. Testimony of Robert L. Jeans, Westinghouse Electric International Com- pany, before the Trade Information Committee, March 5, 1964. Testimony of G. C. Hurlbert, Westinghouse Electric Corporation, before the Trade Information Committee, March 5, 1964. B. European pricing strategies in the U.S. market 1. Dual pricing-In selecting terminology for discussing the disparity be- tween home market and export prices for European-made heavy electrical equipment, the lower export pricing might be variously described as "incre- mental," "dumped," or "predatory." For present purposes it is sufficient to use the term "dual pricing" to record that there are two distince ex-factory prices for essentially the same equipment and, further, that there is every indication that the lower prices offered to time U.S. are the result of a deliberate course of conduct made possible by the artificial conditions of world competition in this equipment. If U.S. electrical equipment of the type herein discussed cannot com- pete in Europe~n mirkets, then, obviously, the pricing options and market strategies are predominantly with the Europeans who are permitted to sell here. The disparity in price levels is composed of two elements: (1) remission of European taxes on electrical equipment going into export; and (2) cost or below- cost pricing on exports, which is made up for by profitable prices obtained in pro- tected honle markets. When quoted for U.S. delivery, European ex-factory prices range from 20% to 50% below home market prices for equivalent equipment. About 20% to 35% of this differential is attributable to absorption by the manufacturers of fixed costs; and about 5% to 20% represents tax rebates and waivers and/or export incentive payments. Normal profit, or indeed, any profit, is foregone in such export pricing. Such are the essentials in the establishment of a dual pricing system. 2. Price compa~risons.-Comparisons of European power transformers and power circuit breakers, home market price versus U.S. market price, show Euro- pean quotations in the U.S. to be at or near the lowest levels found in the world. Annexed hereto are confidential exhibits pertaining to market price disparities in power transformers made in the United Kingdom, France, Italy, and Sweden4 and power circuit breaks made in France and the United Kingdom.5 Inasmuch as these disparities cannot be explained by quantity discounts or other legitimate pricing justifications a clear presumption of sales at less than fair value is raised,° under either U.S. law or Article VI of GATT. What is more, See Confidential Exhibits K-N. ~ See Confidential Exhibits 0, P. 6 See Confidential Exhibits Q. PAGENO="0229" 3665 a course of regular conduct as opposed to sporadic incremental pricing in its commonly understood sense, must also be presumed. 3. European m~anufaotwrers selectively price in the U.s. at or below cost. Annexed hereto are exhibits pertaining to the full mainufacturing costs of power transformers manufactured in France, Italy, Sweden, and the United Kingdom.7 Protected home market sales in those countries are deliberately assigned higher fixed overhead costs than export sales, regardless of the capacity level at which a factory might operate-levels which today, incidentally, are significantly below optimum capacity. As the exhibits show, British export quotations are at or below incremental cost levels; Swedish export quotations are at levels that cannot recover commercial and administrative expense; and Italian exports must depend on export incentive payments to come close to or meet the break-even level. Detailed cost analysis of four large single-phase power transformers awarded to English Electric Co., Ltd. in 1966 by TVA (Exhibit V above) indicate a pre- tax loss to the manufacturer of $631,400, or failure to recover about 22% of real costs on the delivered equipment. By reference back to Exhibit R, above, it can be understood that such sacrificial export pricing is directly related to and dependent on the high, profitable margins the same manufacturer receives on sales to the CEGB in the protected British market. There is no indication that European manufacturers of such equipment enjoy cost advantages over U.S. manufacturers. Annexed is an analysis of compara- tive costs for a particular type of transformer made in Italy, the United King- dom and the U.S.8 This analysis, which uses index numbers (General Electric delivered cost in the U.S. equal to 100) shows General Eelectric costs below both Italian costs of 104.7 and British costs of 130.6. In short, General Electric is cost competitive-in materials, direct labor costs, and overhead. Finally, consider French power circuit breakers. The annexed exhibit ° com- pares costs, on an index basis, for a typical rating which a French manu- facturer sells in quantity in this country. Overall, on delivered costs into the U.S. the French are at a slight disadvantage, 110.4 to General Electric's 100. Yet, as shown by Exhibit V above, the French are selling this breaker in the U.S. at an outright loss. Nevertheless the French manufacturer can sustain this loss very well because the below-cost prices of three of these breakers in the U.S. are counterbalanced by the margins achieved in a single high profit sale in the protected French home market. General Electric must conclude, then, that it can, if permitted, deliver power transformers and power circuit breakers into European markets at lower cost than domestic manufacturers can deliver equivalent equipment into their home markets. And, what is more, the Company can do so without dual, or incre- mental, pricing below prevailing U.S. market prices. General Electric is confronted, then, by closed markets in the European pro- ducers countries and the consequent working of a dual pricing strategy. That strategy is, for the most part, pursued by companies which are among Europe's largest aggregations of economic power. In their hands, it places American heavy electrical manufacturers at a serious disadvantage right here in the United States. It is a strategy almost impossible to defend against, for it pre- cludes the disciplinary effects of fair and open competition in all the markets of the producer countries of the free world. ~ Confidential Exhibits R-V. 8 Confidential Exhibit W. 9Confidential Exhibit X. PAGENO="0230" ExHIBIT I EXTENT OF GOVERNMENT OWNERSHIP AND OPERATION OF ELECTRIC POWER SYSTEMS Country Percent of National Government' - Other Government Remarks Generation Transmission Distribution Generation Transmission Distribution Percent of system system United Kingdom 89 Yes Yes Yes 11 Yes Yes Yes Auto production equals 7 percent of total power supply. France 100 Yes Yes Yes Auto production equals 18 percent of total power supply. West Germany 6 Yes Yes 76 Yes Yes Yes Balance partly or wholly private ownership; auto production equals 33 percent of total power supply. Italy 80 Yes Yes Yes (2) Yes Yes Yes Auto production equals 19 percent of total power supply. Sweden 50 Yes Yes Yes Balance in private ownership; auto production equals 18 percent of total power supply. Switzerland (3) Yes Yes Yes Balance in private ownership; auto production equals 14 percent of total power supply. 1 Includes regional agencies. Greater than 90 percent. 2 Greater than 15 percent. PAGENO="0231" 3667 EXHIBIT II STATE OF NEW YOBK, Coui~ty of New York, ss: Afilant, being duly sworn, deposes and says as follows: On June 1, 1967, accompanied by Mr. I. M. Mourad, IGE, Paris, I visited the subject customer located in Clamart, France just outside of Paris. The subject customer is Electricite de France. The purpose of this visit was to present a description of our Power Circuit Breaker products for this customer's consideration and approval with the ob- jective of becoming acceptable suppliers for their breaker requirements. The customer was represented by: Mr. Michaca, Directuer de Eludes de Recherche, E.D.F. Mr. J. A. Duverny, Chief du Service Material, direction de l'Equipement du Riseau de Transport Mr. P. M. Jouclar, Service du Material Electrique, Direction des Etudes and Recherche (also Assistant to Mr. Michaca) Upon completion of my product descriptions, Mr. Michaca stated that there was no problem in applying our equipment to the E.D.F. system, in almost every voltage class, we have an excess of interrupting capability versus the breakers they were now buying. At this point, they asked about prices and I gave them prices for five ratings of power circuit breakers. The prices given were essentially at the same price levels quoted to domestic U.S.A. utilities for those ratings considering the prod- uct modifications which apply. To these prices we then added 17.6% tariff and then an additiopal 25% use tax. Mr. J. A. Duverny then said that all the prices with the exception of the 115 KY were competitive and "in the same range as domestic prices". At 115 KY, they buy a 2500 MYA unit which has a rather low price because it can be made as a single break device. I had no doubt that the prices given to E.D.F., except for the 115 KY, were lower than they now pay for this equipment supplied by French manufacturers. I then asked, "Can I be allowed to tender quotations for this breaker request?" He replied, "At this time, I am not in the market for any breakers, however, if I was, I could not buy from you because it is our policy to buy only domestic products." He further stated that this has been their policy for about ten years and he expected it would continue so with the Government that now exists in France. I asked if this policy to buy only domestic products was an E.D.F. or Government policy and he replied that since E.D.F. was a Goyernment owned utility, the policy he was speaking about was influenced by the same body. The meeting then concluded with a tour of their testing laboratory and a luncheon. Further deponent saith not. Subscribed and sworn before this 25 day of April, 1968. RIcHABD E. BEDNABEK, IRENE E. MORCHAND, Notary Public. PAGENO="0232" 3668 Exhibit III Bulletin of the Oxford University Institute of Economics and Statistics May 1966, pp. 73 ff. THE PRICING OF HEAVY ELECTRICAL EQUIPMENT: COMPETITION OR AGREE~1ENT? By G. B. RICHARDSON - 1. Inlroduclior.. This paper deals with three types of heavy electrical equipment, the markets for which have important features in common. The questions I try to answer are these. Should the prices at which the equipment is sold be determined by competitive tendering or by agreements? And, if agreements are judged appro- priate, what form should they take, who should be party to them and to what controls, if any, should they be subject?' Although our concern is with the way in which prices ought to be set, it is instructive to consider how they have in fact been set in the past. In the United Kingdom, the prices of the equipment that concerns us have been regulated, for the greater part of this century, by agreements between the manufacturers; although these agreements broke down from time to time, we can regard their operation as the normal state of affairs. In recent years, however, this tradition has been broken After an adverse decision, in 1961, by the Restrictive Practices Court, the agreements relating to one type of equipment -transformers-were abandoned. The others have been referred to the Court by the Registrar of Restrictive Trading Agreements but the hearings have been held up pending discussions between the manufacturers and their chief customer-the national- ised electricity authorities. It is difficult to determine, with confidence, the extent to which the tradition of agreed prices has held sway in countries other than the United Kingdom. Restrictive agreements have for long been illegal in the United States, but the Philadelphia Anti-Trust Cases of 1960 produced evidence of elaborate arrange- ments to fix prices and share markets that were in effect, covertly, for at least one period in the recent history of the electrical machinery industry. Accounts of this famous `conspiracy', and of other anti-trust cases involving the industry,2 leave one with the impression that violations, despite the shocked indignation which they provoke, have been by no means infrequent since the turn of the century. This is not to deny that price competition has been severe at some times, as during the so-called `white sales' of 1955;~ collusion, always illegal appears to have been intermittent and often ineffective. Whether the situation is better described as price competition tempered by collusion, or as collusion undermined by rivalries and the enforcement of the laws, I cannot judge. In Continental 1 This article is an expanded version of a paper which I submitted to the Economic Develop- ment Committee for the Electrical Engineering Industry. I am a member of this committee and have benefitted from its discussions. My education has also been advanced through talks with representatives of the industry, but neither the EDC nor the industry bears any responsi- biiity for the views I express. `For an account of these see Corwin D. Edwards, Big Business and the Policy of Competition, 1956, pp. 137-41 and 163-64. When price cutting is believed to have got out of hand it is termed `white sale'. In 1955 orders for equipment were being accepted at prices up to 50 per cent below normal levels. PAGENO="0233" 3669 Europe price agreements were generally legal, and often officially approved, until after the Second \Vorld War, hut there, as in Britain, public opinion and the statute books have recently undergone much change. Whether this has brought to an end the practice of agreeing prices, however, is another matter and one on which an outsider cannot easily form an opinion. It is safe to conclude, even on this most cursory review of past experience, that the circumstances of the heavy electrical industry must be such as put firms under pressures towards price agreements, pressures strong enough to overcome the reluctance of managers both to accept restrictions on their commercial freedom and (in the United States) to run the risk of criminal prosecution. One of our tasks must `be to enquire how these pressures are generated. We should also note, at this point, the great difficulty in arguing either for or against price competition merely by reference to the way in which it has in fact worked. Such an appraisal of price competition would need to examine its effects when sustained over a long period without the degree of mitigation that agreements, of varying legality and effectiveness, have always exercised in the past. In this respect the protagonists as well as the opponents of competitive pricing are in the same boat: they must endeavour to predict; with the help of theory and limited experience, what would happen in a hypothetical situation. The pricing of heavy electrical equipment, in this country, has already received the attention of the Monopolies Commission, the Restrictive Practices Court and the Select Committee on Nationalised Industries. The Monopolies Commission took the view that prices, in the markets we shall be considering, ought to be determined by competitive tendering.' It saw no merit whatever in agreements or arrangements between the manufacturers, who were urged `to refrain from any kind of collaboration in matters of price and tendering'. Nor were they prepared to give any support to the manufacturers' suggestion that agreements might be operated with safeguards designed to ensure that prices and profits were reasonable; free competition, they insisted, was the proper regulator for these markets. Price notification agreements, in so far as they would apply to the home market, were also condemned, on the ground that understandings on prices might follow them. The Restrictive Practices Court was called upon to declare whether a parti- cular price agreement, operated by the transformer manufacturers at the time of the hearing, was contrary to the public interest; it did not have to give an opinion on the wider issue of the appropriateness of competitive tendering for all three types of equipment. Nevertheless, the judgment of the Court may be regarded as in line with the views of the Commission,2 The Select Committee, reporting six years later than the Commission, does not show the same enthusiasm for competitive tendering.3 While maintaining that `competition is still realistic between firms making smaller equipment', it clearly h~s doubts as to its appropriateness for markets in which `both the Board and the (nanufacturers of larger equipment at higher `Report on the Supply and Exports of Electrical and Allied Machinery and Plant, 1957. 2 In re Associated Transformer Manufacturers' Agreement, LR, 2 RP, 295. Report from the Select Committee on Nationalised Industries; the Electricity Supply industry, Vol. 1 Report and Proceedings. Chapter 16. PAGENO="0234" 3670 voltages are becoming more and more prisoners to size'. It recommended that an independent arbitrator, acceptable to both the manufacturers and the Central Electricity Generating Board, be asked to inquire into the arrangements for placing contracts and fixing prices. It is not my purpose to review the arguments and the conclusions of the Commission, the Court and the Select Committee, but the reader will find in their reports a wealth of useful background material for which space could not be found in this article. My excuse for setting out, by myself, on this well-trodden ground is twofold. First, I wish to focus more narrowly on the relevant economic analysis than did these reports. Secondly, I find myself in disagreement with the con- clusions of the Monopolies Commission and with part of the Judgement of the Court. One hesitates to question the findings of these bodies, which, quite rightly, have great authority, but some comfort may perhaps be found in the fact that these are matters on which informed opinion has, in the past, suffered a good deal of fluctuation. I shall be dealing with three quite specific types of electrical equipment, these being turbo-alternators with ratings of 30 megawatts or above, Grid switchgear and Transmission and Generator transformers all for 132 kilovolts or above.1 I shall refer to these, for brevity, simply as `turbines', `switchgear' and `trans- formers', or, collectively as `heavy electrical equipment', but the readers will have to bear in mind that we are dealing with restricted types of equipment under these heads. (Roughly speaking, we are concerned only with the largest or `heaviest' categories of each of the three kinds of equipment). The justification for grouping them for discussion is the fact that they are sold under similar conditions. 2. The Structure of the Markets. Let us begin by listing the common features of the three markets that are relevant to pricing policy. (i) The first of these is the predominance, in the home trade, of the nationalised Electricity Supply Authorities. Turbines, switchgear and the larger transformers are bought, in England, only by the Central Electricity Board, and, in Scotland ~ind Northern Ireland, by corresponding bodies. On the manufacturing side, we find three firms in turbines, four in switchgear, and about a dozen in trans- formers.2 `Electricity is generated by boiling water to produce steam, which, when applied to a turbine, strikes metal blades fixed to wheels, thus causing the wheels and connecting ahaft to move at a high speed. This mechanical energy is then converted into electricity by a generator. The various bits of equipment other than the boiler necessary to do these things are referred to as a `turbo-alternator set' and are usually ordered together. It is efficient to distribute electri- city at a voltage higher than that at which it is generated and much higher than that at which it is ultimately used by consumers. The equipment which steps up the voltage when electrical energy leaves a generating station, or lowers it as the current passes to the consumer, is a trans- former. Switchgear is used at the points where electricity is stepped up to voltages suitable forthe main transmission lines and where it is stepped down. Its functions are to connect or disconnect a line as required or to act as a safety device cutting off a current when there has been a fault. Thus it acts like domestic switches or fuses, though the Hgh voltages with which it deals require it to be much more complicated. `The turbine makers are Associated Electrical Industries, the English Electric Company. and C. A. Parsons. Switchgear is made by the first two of these companies, by the General Electric Company and by Reyrolle. Of the dozen or so firms making larger transformeri~ none has a share of the total markets as large as twenty per cent. PAGENO="0235" 3671 (ii) Of key significance for our analysis is the fact that the total home demand for each category of equipment is in effect totally inelastic with respect to price. This is certainly the case in the short run, as it is unlikely that the electricity authorities would alter their construction programmes in response to fluctuations in the price of this equipment. In the longer run, the price of the equipment, by influencing the cost of these programmes, might affect their scale, but the circum- stance will have no bearing on the price that a manufacturer quotes for a particular order at a particular time. Although the total demand for each type of equipment is inelastic, however, the demand for that offered by any single seller will be highly sensitive to the level of his price compared to those of rivals. This very high cross-elasticity is the result of the fact that each item of equipment is produced by the different manufacturers to the same specifications, as laid down by the buyer. (iii) Of related significance is the size of individual orders. Either because of the scale of particular items of equipment (as with turbines) or because of the inclusion of several items in one order (as with transformers), success or failure in obtaining a particular contract nay have a very large effect on the total business obtained by a firm within a year. In the case of turbines, there are only about two orders, on average, per year, worth (in 1965) some £20 million each. A single order for transformers may represent a quarter of a firm's annual turnover in this equipment. The business in switchgear is in effect allocated in bulk by the Generating Board, rather than split up and put out to tender; but it is safe to say that were competitive tendering to be introduced, the size of an individual order could be very large. (iv) Excess capacity, from time to time, is inevitable in this industry~ There are several reasons for this. It is obvious, first, that if productive capacity is to be sufficient to meet the electricity authorities' demands when these are at their peak, then it will necessarily exceed them at other times. The demand for each type of equipment is on a steadily rising trend, but subject to fluctuation. The `stop-go' policies, so much discussed in recent years, have a clear enough impact on this industry, in that they give rise to sudden modifications in the electricity investment programme. A greater stahilisation of public investment would permit a better adjustment of capacity to demand, though imbalances would never be wholly prevented. Export orders may help to fill the gap left by the falling off of home demand for a particular category of equipment, but they cannot be depended upon to become available in sufficient quantity at remuner- ative prices. Excess capacity may also arise through technical advance. In the case of turbines, which form the heart of a generating plant, recent improvements have been very striking. Increases in the size of the turbine and devices that enable it to deal with higher steam temperatures and pressures have markedly reduced cost per kilowatt. The first 30 megawatts set was installed in 1930; by 1956 a 100-MW set had been commissioned and orders for 120-MW, 200-MW and 275-MW sets had been placed. The first 500-MW set was ordered in 1960. The cost per megawatt of turbine plant over these thirty years fell by more than half. (The rate of progress has been so rapid, in fact, that firms find themselves design- PAGENO="0236" 3672 ing plant with higher ratings before they have had operational experience of plant with lower ratings.) The fall in turbine cost per megawatt is associated with a reduction in the real resources required; excess capacity, in terms of skilled men as wcll as equipment, can be prevented only by a sufficiently great increase in the volume of orders. The fact that the investment plans of the independent manufacturers are not co-ordinated can also result in excess capacity. This has happened, notably, in transformer production, where the number of firms concerned is relatively large. Given fairly large numbers, there is nothing to ensure that each firm, in the hope of realising scale economies, does not count on enlarging its share of the market, with the inevitable result that total capacity becomes excessive. This tendency, I have argued elsewhere' is endemic in precisely those markets with large numbers of producers acting independently that often feature as the textbook ideal. (v) We have already noted, in the case of turbines, that the industry's product is subject to continuous change. The same may be said cf switchgear and trans formers, which have to be adapted to deal with higher voltages. As a result, the firms concerned deploy large resources in research, development and design. There is some inter-firm co-operation in this field, particularly in the development of certain kinds of switchgear, but the Generating Board took the view that there ought to be more of it.~ This is an important matter lying, for the most part, outside the scope of this article; its relevance to pricing will be discussed later. (vi) Finally, we must bear in mind the export trade, which represents a signifi- cant, but diminishing, proportion of the total sales of the equipment with which we are concerned. In 1965 exports of heavyelectrical equipment represented about 16.5 per cent of the value of home deliveries, which were some £100 million in value. In 1961, the value of exports was almost one-third of home deliveries. I am concerned in this paper with the pricing of equipment sold at home to the elec- tricity authorities, but it will be necessary to consider whether this has any hearing on the exports that firms are able to make. 3. The Criteria of an Efficient System of Pricing. How are we to assess the relative merits of the alternative ways in which the prices of heavy electrical equipment may be determined? Let me now endeavour to set out, very briefly, the criteria that I shall apply. First, and most obviously, the procedure adopted should be such as sets Pl~~ at levels that are appropriate relative to demand and cost conditions. Appropriate- ness, in this sense, has two aspects. It would be generally agreed the rate of profit in this line of production, taking one year with another, should neither exceed nor fall short of the rate in other industries subject to an equivalent degree of risk. Considerations of equity might be regarded as sufficient justification of this equality, hut the economist sees it as a condition for the proper allocation of resources in diffierent employments. We have to consider, that is to say, whether the prices set are likely to cause the right amount of productive capacity to be installed and to ensure that the right amount of output is being produced from this capacity. `Informalion and Investment, Oxford University Press, 1960. Report from the Select Committee, pp. 167-8. PAGENO="0237" 3673 The indirect effects of alternative pricing systems must also be taken into account. Would they permit the more efficient firms to grow at the expense of their higher. cost rivals? Would they put such pressure on producers as would induce them to exploit all available economies of scale? Would they be consistent with whatever forms of co-operation between firms in matters other than price, are held to be desirable? \Vould they be likely to facilitate, or to hamper, the forward planning of production? How, if at all, would they affect the ability and willingness of firms to export? These are some of the ways in which alternative methods of pricing might influence the efficiency and structure of the industries that adopted them. The simplest solution to the problem of determing prices is that recommended by the Monopolies Commission and, by implication, in the Judgment of the Restric- tive PracticesCourt. It consists in proscribing any inter-firm agreement or arrange- ment and leaving prices to be determined by free competition, each producer setting his own price in independence of his rivals. The genuine merits of this solution are readily apparent. The operation of price agreements, and their public control, requires an administrative machinery which, in terms of the services of lawyers, accountants, economists and the like, represents a genuine social cost. Price agreements, if not subject to public control, may be used to further the interests of those who make them, to the disadvantage of the community as a whole; but public control may itself be abused, either to protect vested interests or to court political popularity. By relying on free price competition, we can avoid these costs and difficulties. This is a substantial advantage to which I give full weight. I shall argue, nevertheless, that price competition is not appropriate to the special con- ditions of the markets with which we are concerned. 4. Transfori~sers. (i) Alternative Effects of Abrograting Agree~senis. Let us first consider transformers. First, we have to decide whether the pro- scription of agreements would be likely to lead firms to compete actively in terms of price. It will be recalled that the agreement between the manufacturers of trans- formers was held by the Restrictive Practices Court, in 1961, to be contrary to the public interest. The Report from the Select Committee, however, quotes the Generating Board to the effect that `while the manufacturers have observed the letter of this decision, they have flouted its spirit by adopting a system of price leadership'. Acting under this conviction the Board ordered two large transformers from Canada at prices appreciably below these ruling in this country. The manu- facturers objected strongly to this decision; they maintained that the transformer market in Canada was very depressed and saw the Boards' action as an attempt to bring British. prices down to similar levels. At the same time, they claimed that the system of price notification that finns had adopted was not equivalent to price agreement, in that it permitted firms to quote low prices if they believed themselves to be competitive. No fully adequate information is available to me about the present level of prices and profits in transformer production or about the extent of the changes that have taken place. since abrogation of the agreement. It is possible, nevertheless, to PAGENO="0238" 3674 sketch out the general picture. The prices of the smaller transformers have fallen markedly and continue to fall; all or almost all the manufacturers appear to sell these transformers at a loss.1 The prices of the large transformers-those which~ directly concern us-held up better, at least in the years immediately following abrogation. These developments are very much what one would expect. In the first place, there is excess capacity in transformer production. A reliable measure of a firm's capacity is difficult to make, chiefly because the maximum volume of output that can be put through the works depends on the `product-mix', this being the propor- tions of the total output formed by different sizes of transformers. Not all firms, moreover, make estimates of the capacity they have available. (All the members of the `Power Transformer Conference' make returns on capacity but not all trans- former manufacturers are members). Despite these difficulties it seems safe to say that the demands of the electricity authorities, together with any likely export demand, will leave a substantial margin of capacity unemployed. In these circumstances, firms are continuously subject to the risk of getting little or no work. The magnitude of this risk varies with the number of firms making each type of transformer, being great for those making the smallest types and less for those making the larger types with which we are primarily concerned. An excess of capacity over demand of even one per cent would make it possible, in principle, for some of the smallest firms making the smaller transformers to be left without work. A 10 percent excess would make it possible for even large firms to have no orders. Given the electricity supply authorities' system of tendering-which is such that a single order can make a great difference to a finn's annual tutnover-it is clear that each manufacturer is under strong~ pressure to quote a price low enough to obtain some business. It is also clear that firms have an incentive to resist this pressure, because they realise that the total business available to the industry as a whole will not be increased by price reductions. What we have, therefore, is a familiar oligopoly situation where the outcome depends on the relative strength of two opposing considerations. The larger the number of fIrms, the greater is the chance that one of them may he left without work; the more likely therefore is that prices will be driven down by the com- petitive struggle, a limit being set, in the last resort, about the level of variable costs. In the case of the smaller transformers, this is what has happened. With the larger transformers, which are made by fewer firms, prices are more likely to be sustained, if only precariously. Although the business available is insuffi~ dent to fill all ihe works, each producer may expect to get some of it. A sense of common interest may be sufficient to prevent price-cutting, especially if firms keep one another informed as to the terms on which contracts with them are actually placed. In appraising the effects of proscribing agreements, therefore, it is important to distinguish between two situations, the first in which excess capacity will 1 These smaller or `distribution' transformers are made by about fifty firms and sold to Area Electricity Boards. The characteristics of their market create special problems distinct from those associated with the pricing of large transformers and it seemed appropriate to exclude them from discussion here. B PAGENO="0239" 3675 result in competitive price-cutting, the second in which it may not. Very broadly, these alternative outcomes can be associated in this case with the markets for the smaller and for the larger transformers respectively, though it would be misleading to draw a sharp line. In the case of the so-called distribution transformers, which are sold by some fifty firms to a dozen Area Electricity Boards, conditions bear some resemblance to the text-book model of perfect competition, and prices have clearly fallen in response to the excess of capacity over demand. In the cas~ of the larger transformers, sold to the Generating Board by a smaller number of firms, there has been a more obvious reluctance to `spoil the market', but, given excess capacity and the practice of tendering for very large orders, more active price competition can readily develop. (ii) Prices Responsive to Excess Capacity. Let us take first the situation in which the abrogation of a price agreement does produce active competition in tendering. On the face of it, this may seem precisely what is required; the more efficient firms will be able to undercut their high cost rivals and the general level of profits will be kept low. Given excess capacity, it will be conceded, prices will fall to uneconomic levels, but, in doing so, they will help to bring about the contraction required and thus restore profits to a normal level. This, at any rate, is what the more elementary text book models would lead us to expect; a more careful examination of the situation points to conclusions less simple and less satisfactory. In the first place, excess capacity is likely to be chronic. Each firm may see its salvation in expansion, which will enable it to reap more of the economies of scale. The fact that the demand for transformers is on a rising trend may give further countenance to this policy, with the result that the industry's total capacity may become even more excessive. Lest the reader consider this situation too pervei~se, let him bear in mind that the excess capacity with which the industry is at present afflicted, and which so far has shown no tendency to disappear, did in fact develop over a period of steadily rising demand. Never- theless, it is reasonable to suppose that firms will not for ever persist in such unprofitable courses, that some will leave the industry and others cease to expand with the consequence that capacity will come to equal, or even fall short of demand. What chance is there that these developments would lead, in the long run, to a steady growth of capacity in balance with demand? To my mind, very little. Losses are indeed likely to check investment and thus bring capacity, for a time, into rough equality with demand; but, given the continuing presence of a large number of competing firms, there would seem to be every reason to expect further bouts of excessive investment. EconomistS with faith in some kind of tendency to equilibrium may envisage a fluctuating balance between demand and capacity, firms gaining on the swings of excess demand what they lost on the roundabouts of excess capacity. But, in the special circumstances of this market, these conditions need not result in normal profits. Firms would certainly lose, through price competition, in times of slack, but it seems to mc unlikely that they would be able to gain very high profits at other times. In the first place, supply conditions are likely to be fairly elastic, firms being able to take on extra work without much rise in marginal costs. But even PAGENO="0240" 3676 although there were bottlenecks, it is difficult to envisage the Generating Board or even the Area Boards deliberately bidding up prices against themselves. No one has yet seen a one-man auction. Normal profits would be compatible with the conditions we are postulating only if excess capacity could be avoided at all times. This is unlikely to be assured and it is undesirable that it should be; the public interest requires that the investment programmes of the electricity authorities are not held up through bottlenecks in the capacity to supply equip- ment. If peak requirements are to be met, excess capacity must develop at normal times and must be tolerable to the industry. There is a further circumstance that would make active price competition often incompatible with normal profits even in the absence of unused capacity. Part of the output of the larger transformers is exported and at prices below those ruling at home. It seems to be very generally the case that heavy electrical equipment is sold abroad by all the main manufacturing countries, at prices that approximate more to marginal than to full unit costs of production. The gap between home and export prices is of course evidence that price competition within the home markets of the manufacturing counties is somewhat attenuated. If producers were to fight for domestic contracts in the same way as they fight for foreign contracts, home prices would move down towards the export levels and the profitability of the total output would fail. Many see the differential between home and export prices as proof of our fallen state and would welcome its erosion under the stress of more active competition. But, as far as British manufacturers are concerned, the low level of the export prices of these capital goods is simply a fact of life which neither our industry nor our government has by itself the power to alter. Were our export quotations to move up to the level of home prices, we should fail to export; if our home prices were to move down to the level of export prices, the total business would not be remunerative. This is a conclusion that those most eager to promote price competition in the home market are rarely seen to draw; - Let us now return to the main course of our argument. Given fairly numerous independent manufacturers, faced with a totally inelastic home demand and in active price competition for orders, there will be chronic tendency to excess capacity and low returns. This tendency is unlikely, in the nature of things, to continue indefinitely, but an end to it could be brought, it seems to me, only as a result of change in the structure of the market. The logic of the situation is likely, sooner or later, to lead producers to concentrate production, in the hope that this will both limit the extent of excess capacity and reduce the likelihood that excess capacity will induce firms to cut prices. There is no telling how long this change would take to come about and no assurance that, once it had come about, it wOuld not subsequently be reversed.' `Of key importance in this connection is the magnitude of scale economies in the production of transformers. If these economies are insignificant then concentration within the industry might prove short lived; small firms would be attracted by the prospects of entering the business in the hope of prospering under the umbrella of the larger producers. Given, that is to say, the maintainence of relatively stable prices by the established firms, even in the face of some excess capacity, there would be a living to be made by the outsider willing to.charge a slightly lower price in order to get a full load on this works. Assuming free entry therefore, the viability of a regime of concentrated production and stable prices would depend on the existence of significant scale economies. PAGENO="0241" 3677 (iii) Prices Unresponsive to Excess Capacity. We have now, in effect, moved on to the second of the alternative situations that we proposed to analyse. We have been assuming that, in the absence of a price agreement, active competition would cause prices to be flexible and to fall in response to excess capacity. N~w we assume that the producers, chiefly because they are less numerous, succeed in maintaining stable prices in the face of a changing balance between demand and capacity. This of course is the situation in the generality of manufacturing industry. When the demand for cars suffers temporary decline, their prices do not fall to the level of variable costs; the total burden of adjustment is usually met by a fall in output. For adjustment to take this form, there is no need for manufacturers to make an * agreement; each of them takes it for granted that price 1-eductions would without delay be noted and matched by competitors with the result (given the prevailing * elasticity of demand for cars) that all would stand to lose. The circumstances~ of the markets for heavy electrical equipment, however, are vastly different. The size of individual orders relative to a firm's turnover puts management under very strong pressure to cut prices in order to be sure of getting work. Where the largest and most advanced types of equipment are concerned, to miss an order does not only produce unemployment of men and machines; it may also cause firms to fall out of the race in technical development. In order to be able to tender for the most advanced type of equipment, firms require experience to draw upon and this experience cannot be acquired if they fail to get orders. The willingness of firms to cut prices at the risk of `spoiling the market' would also he in.fluenced by the fact that competitive prices, instead of being `posted' as with cars, would be quoted in closed bids. Firms would not normally know what prices their rivals were quoting and might be tempted to reduce their quotations substantially in order to make sure that they were not undercut. It is of course open to firms to exchange information about prices at which contracts have actually been placed, so that it would be possible for them to know, after the event, whether rivals were in fact reducing their bids below some normal level. This arrangement might go some way in inhibiting firms, eager to increase their share of a fixed market, from starting a price war. These considerations suggest that price stability, based on the wish not to spoil the market, is possible b~it by no means assured in the circumstances we are considering. Let us now ask whether it would be in the public interest. If prices can be maintained, in the face of temporary falls in demand, then producers certainly enjoy a more stable prospect than they would have other- wise and will he more willing to create facilities large enough to meet their customer's peak requirements ip the knowledge that the associated excess capacity, in normal times, will not bring them heavy losses. Only very grudging recognition, if any, is usually given, in this context, to the benefits that society as a whole can derive from a more predictable business environment. If the context is economic planning, and the need for a more stable rate of investment, then most people are prepared to see virtue in arrangements that enable firms better to insulate their expansion plans from short-run fluctuations in the balance between demand and capacity. ~ut there is a strange reluctance to perceive 95-159 0 - 68 - pt. 8 - 16 PAGENO="0242" 3678 that arrangements or conventions leading to short-run price stability fulfil just this shock-absorbing function. But there is another side to this matter. Can one reasonably assume that price competition between firms, in these circumstances, will be suspended only in conditions of excess capacity? Is it not possible for mutual tolerance to be so developed that firms will refrain from use of the price weapon to compete for larger market shares even when demand rises above capacity? The force of rivalry might or might not be strong enough to ensure that abnormally high profits were rapidly removed by competition. In the case of large transformers, where there are a dozen producers, it may seem unlikely that a struggle for market shares could for long be in abeyance; but where there are only three or four companies-as with turbines and switchgear-mutual accommodation is less unlikely. Abnormally high profits might, in the long run, induce entry by new suppliers, but entry in these fields is not sufficiently easy for this to be an adequate discipline. My own view is that neither theory nor experience enables us to say, with certainty, whether the producers of heavy electrical equipment would or would not, in the absence of agreements between them, have the power consistently to maintain prices such as yielded abnormally high profits. What one can say is that the proscription of agreements cannot be relied upon always to give either the electricity authorities or the public at large the assurance of reasonable prices. Here then we have a dilemma that those who advocate merely the abolition of agreements have to face. Either the abandonment of the agreements results in active price competition and flexibility of prices in response to the changing balance of demand and capacity, or it does not do so. In the former eventuality, prices are likely to be chronically depressed, thus leading to an undesirable shrinkage of capacity or to a movement towards further concentration. In the latter case, the purchasers and the public lack sufficient assurance that profits will not be unduly high. These are the considerations that lead me to conclude that the mere abolition of inter-firm agreements, whether or not it results in prices flexible in response to supply and demand, does not ensure suitable regulation of the markets for transformers. But before examining the available alternatives, let us turn to consider the working, in the absence of price agree- ments, of the markets for turbines and switchgear. 5. Turbines. (i) Special features of the market. Those features of the transformer market that made price competition unsuitable are to be found also in the market for turbines and in a much more marked degree.' The manufacture of turbines has of necessity to be on a very large scale. Very large investments are required in terms of research, design an~ training as well as 1At the time of writing, there were three producers of turbines, each with ~ts own design. But there has been talk of a desire, on behalf of the Generating Board, to have only two designs. This desire could achieve fulfilment only through structural change in the industry, but I lack the information required to discuss this matter. Whatever changes might be promoted seem likely to weaken the case for price competition yet further. PAGENO="0243" 3679 fixed equipment. The rate of technical advance in the industry has, as remarked earlier, been particularly rapid and the firms operate continuously at the frontiers of new development. Overheads (taken to include the teams of designers and other skilled staff) are high relative to turnover, and are, in effect, completely specific to manufacture of turbines. The firms concerned do all the research and development relating to the equipment they produce and bear the costs of rectifying it when it fails to work. Of central significance, for our purposes, is the magnitude of individual contracts in this industry, the value of which, at f20 mill. or more, exceeds the average annual turnover in turbo-alternators of any one of the firms.' The size of order is to be explained, in this case, not in terms of the buyer's preference for inviting firms to tender for a bunch of different items, but by the remarkably rapid increase in the scale on which it proves possible and economical to build single turbo-alternator sets. This development, moreover, is not yet complete and we may envisage even larger sets, and therefore larger,' and to that extent fewer, orders in the future. A nice balance between demand and capacity is no more possible to maintain in this market than in the market for transformers. The electricity authorities cannot avoid some fluctuation in their requirements, nor can the producers hope to expand their total capacity at a continuously appropriate rate. In addition, excess capacity is likely to develop, in the absence of a strong upward movement in demand, simply because rapid technical advance has made it possible to generate the same amount of electricity, from larger sets, with reduced inputs of capital and labour in turbine construction. These special circumstances, taken in combination, are very unfavourable to effective regulation by price competition. Failure to obtain a contract will certainly burden a firm with heavy financial losses and may indeed threaten its survival as a producer of turbines. Given that an interval of four years may elapse between the ordering and final commissioning of a turbo-alternator set, it is apparent that management will be obliged to attend, not to the current load on the works, but to the chances of getting work in the future. Each firm will be well aware of the disastrous effect on profits of competition, in terths of price, for a share in the total business; at the same time, it cannot fail to realise that failure to obtain an order may put it out of the race. The buyer also will be faced with its own dilemma. Presumably, according to the advocates of regulation by price competition, the Central Electricity Generating Board will award a contract to the firm that makes the lowest bid, allowing for differences in performance between rival equipments. But is it really conceivable that it could thus ignore the effects of its actions on the structure of the industry? It is perfectly possible for the distribution of its orders to cause a firm to be starved of technical experience or to be obliged to give up production for good. To place contracts blindly, in these exceptional circumstances, merely according to the lowest bid, would be to credit market forces with quite magical authority. I Twelve years ago, orders rarely exceeded £2 millions in value, it is worth observing that circumstances have therefore changed in this respect since the Monopolies Commission studied the industry-changed moreover in a way less favourable to the suitability of price competition. PAGENO="0244" 3680 I find it very difficult to predict what the effects of abrogating the price agreement between the turbine makers might be. It is worth while, as with transformers, to distinguish between two possible outcomes, the one in which prices fall in response to excess capacity and the other in which they do not. (ii) Alternative effects of ending an agreement Prices could fall sharply, given the threat of some excess capacity, if the firms strove, by endeavouring to under-cut their rivals, to get work. The export trade, it should be noticed, could not be called upon to redress the balance caused by a falling off of demand at home, for the prices at which it is conducted are below full cost. Inevitably, if this were to happen, firms would suffer losses; investment would be checked and, if the situation Were sufficiently grave, the currently available productive facilities might be contracted with an associated dispersal of design teams and other specially trained staff. Expenditure on research and development seems to me one of the forms of investment that would suffer a check or an absolute reduction, although the Restrictive Practices Court denied, in their judgment on the transformer case, that this kind of result would be likely to happen. The Court apparently took the view that, if conditions were to become more competitive, firms would be obliged to spend more rather than less on research. The superficial plausibility of this argument rests on an ambigu- ity in the term `competitive'. The market for turbines, even with agreed prices, is already highly competitive, in that firms have to strive hard, with the help of sustained investment in res~arch arid development, to stay in the technological race. Were the price agreement to be given up, the market would not become more competitive in this sense; the chief effect would be for receipts to fluctuate more widely (given periods of excess capacity) at a lower level. The decision as to how much to invest in research and development (never easy) will rationally depend upon the magnitude of the expected yield. If the general profitability of turbine business is to fall, then the yield from investment in research, aimed at securing for the firm a larger share of this business, will fall likewise. The Restrictive Trade Practices Court, in arguing as they did, would seem to believe that a man could be induced to increase his stake in a lottery provided only the value of the prizes were lowered. It is theoretically conceivable that the check to investment, occasioned by poor returns, could ultimately so reduce the volume of capacity relative to demand as to restore profitability. But, for reasons given in the discussion of transformers, this result, even if it could be assured, would not be in the public interest. Let us now assume, alternatively, that the producers would not make com- petitive price reductions when capacity came to exceed demand. Their resistance to the temptation to use the price weapon might find strength merely in a keen sense of common interest, but might be further re-infoi~~ed by the belief that the buyer would in any case choose to allocate business tn s~cli a way as ensured the survival of all three firms. In this case the disturbances ~ up by price instability would be avoided, but it is still necessary to ask, as with transformers, whether the public interest would he sufficiently safe-guarded. The fact that we have here PAGENO="0245" 3681 only three producers, rather than the dozen found in transformer production, strengthens the chances that mutual accommodation might serve not merely to stop prices falling to an unduly low level but to keep them permanently higher than they should be. We need not take a view as to whether firms would in fact choose to exercise any joint monopoly power; the point to be noted is that there would be no automatic competitive force sufficiently strong to ensure that they did not. These considerations seem to me to suggest that competition would fail to be an efficient regulator of prices in this market irrespective of the alternative assumptions one may prefer to make as to the outcome of abandoning the prac- tice of agreement. 6. Swiichgear. The market I or switchgear differs little, in basic structure, from that for turbines, but it is marked by a more developed system of co-operation between the four producers and between them and the Central Electricity Generating Board. Let us begin by noting that the cost of supplying electricity must depend upon the rapidity with which potential gains from improved technology can be realised through their embodiment in equipment actually in use. There are in fact substantial gains to be had in particular from increasing the power load with which a transmission system can deal, and the rate at which this can take place depends on the time taken to get the more advanced types of switchgear into service. This circumstance creates in itself the need for close co-ordination between the investment plans of the Generating Board and its suppliers.1 Under the current arrangements, the plans of the two sides are cO-ordinated at several stages. A forecast of the Board's switchgear requirements is made known about a decade in advance, thus enabling the manufacturers to take certain steps--such as acquiring factory space-that are an essential preliminary to future production plans. The second and most important stage is reached when the Board makes a bulk allocation of work between the manufacturers and thereby enables them to make their own production plans as well as to inform their own suppliers (the makers of porcelain and bushing) of their pro- jected needs. The point to note here is that the arrangement permits firms to go ahead with their programmes without having to wait for the Board's require- ments to be articulated in detail. Binding contracts are entered into only later and on the basis of prices listed or; a schedule agreed between the manufacturers. I find it hard to conceive that this procedure, or any other procedure equally able to save time, would be fully compatible with competitive price tendering. lithe allocation of work were to be determined by competing bids, then the Board would have to be in a position to specify its needs in appropriate detail. The producers would then take longer to learn of the amount of work for which they had to prepare, with a resultant delay in dates of commissioning. It may be 1 The reader will recall that Scotland and Northern Ireland have their own separate electri- city generating authorities. What is said, for brevity, about the Central Electricity Generating Board should be taken as applying to these bodies also. PAGENO="0246" 3682 iflL 1'1(it~1r'~I., U1~ flk.AVY ~LJ~.Ci1UCAL EQUiPMENT asked why the same degree of expedition could not be achieved by the Board's making its plans earlier, but, were this to be done, ~hesc plans would be based on less information about future demand and on a less advanced technology. Also relevant is the fact that detailed specifications are at present decided upon, not by the Board alone, but by the Board and the appropriate manufacturer after the bulk allocation of work. It is worth noting that the systeni of bulk allocation enables the Board, if it chooses, to distribute work among the firms in accordance with their relative advantages in capacity, skills, e~perience and the like. Competitive bidding, of course, is itself a system of allocation which, ideally, ensures that orders go to the firms able to execute them most cheaply. It seems doubtful to me, however, that it could in practice promote as efficient a distribution of work as it is possible to achieve directly, with only one buyer and four sellers. Different finns have different methods of costing and may have different ideas about the bids that others will submit, so that the prices quoted for particular jobs need not closely reflect the relative ability of firms to undertake them. Work has, in the past, been distributed between the firms in such a way that intertrading has had to take place on a fairly considerable scale. Up to 40 per cent of the value of a particular contract obtained by one of the firms may be represented by components bought from the others, the prices paid being those listed in the agreed schedules subject to a handling discount. Wbere there are significant economies of scale in the production of particular components, this arrangement has much to commend it, but I cannot believe that it would for long endure under a regime of competitive pricing. In the absence of the agreement, firms would be free to vary bOth the prices they quote to the Board, for main contracts, and the prices they quote to each other for the supply of components. Thus a firm competing for a main contract could demand prohibitive prices for the supply of essential components required by its rivals. If all four firms had given hostages to each other in this way, then one might hope that they would refrain from any attempt thus to hold each other up to ransom. But at present there is one firm nearly self-sufficient and therefore in a stronger position for this type of warfare than the others. It seems to me, therefore, that the present measure of rationalisation, let alone further extension of it, would clearly be prejudiced by the introduction of price competition. Each firm would be likely to strive for self-sufficiency, as far as its rivals are concerned, or run the risk of being put out of business. This consequence of price competition, as most of the others, cannot be predicted with certainty; it would be foolish to imagine that we are able to identify simple and dependable links between cause and effect in affairs of this kind; new or unperceived circumstances can easily upset one's speculations. The pOint I make is that, on the face of it, price competition is incompatible with rationalisation of the kind described; it is up to the protagon- ists of such competition to show either that this incompatibility .~ illusory or that the rationalisation achieved, or capable of achievement, is not ~vorth preserving. Further co-operation takes place, between the buyer and the producers, and between the prodocers themselves, in the development of standardised equip- ment. The aim is to provide components that are. interchangeable, thereby PAGENO="0247" 3683 reducing the average quantities that have to be held in stotk, and at the same time incorporate the best ideas of the four design teams. I am unable to estimate the gains from collaboration of this kind, but there seems little reason to doubt that the Generating Board, which took the chief initiative in this matter, regards them as valuable. What concerns us here is the compatibility between this exchange of ideas and the practice of price competition. Although it would be perfectly possible for firms to compete in terms of price while co-operating in development, I cannot believe that they would be likely to do so for long. There are hound to be times at which some firm is convinced that it has less to get from an exchange of ideas than it has to give and succumbs to the temptation to make use of this advantage in the competitive struggle. The temptation exists, of course, even under the price agreement, but abrogation, by obliging the com- panies to struggle for their share of the market, would greatly strengthen it. It is likely, moreover, that firms would seek some shelter from the full vigour of price competition by developing nonstandard products which, by the very fact of being incapable of substitution, have a low cross-elasticity of demand. 7. The Summary case againsi Price Competition. The unsuitability of price competition, for the three markets under dis- cussion, seems to me the consequence of several quite particular circumstances taken in conjunction. It is certainly not my intention in this paper to offer a general apology for restrictive agreements; circumstances alter cases and, in this field, can do so decisively. To sum up, the policy of promoting price competition, in the sale of heavy electrical equipment, is inappropriate for two main reasons. In the first place, it will fail to attain its own objective. The size of single orders, the inelasticity of demand, the gap between marginal and average costs and the predominance of one buyer, all taken together, make it impossible to combine normal profitability with price flexibility and periodic excess of capacity over demand. Something has to give. Normal profitability must be assured, if the firms concerned are to stay in the business. Excess capacity could be com- pletely avoided, if indeed at all, only at great social cost. Price flexibility is avoidable only if firms make an agreement or are able to refrain from active price competition even without one; in this latter eventuality, however, there will no longer be any guarantee that prices are not kept unduly high. Secondly, price competition would prejudice the attainment of other objec. tives important in this context. It requires only a very limited faith in the prin- ciple of planning as such to recognise that the particular character of the markets which concern us offers a special opportunity for the deliberate co-ordination of plans. Such co-ordination is made difficult, in the generality of industry, by the number of firms on both sides of the market; but the domestic requirements for turbines, transformers and switchgear depend on programmes made by a single nationalised electricity authority and framed several years in advance. Co- operation between the suppliers and the Generating Board has developed furthest, I believe, in switchgear, where, as we have seen, there is a system of bulk allocation. The utility of such co-operation, in matters of design and devel- PAGENO="0248" 3684 opment as well as the planning of investment, seems to me something no reason- able man could deny; in the nature of things, it would seem appropriate for the manufacturers and the Generating Board to work together as a team. I am indeed inclined to think, as an outsider, that co-operation might be closer, but even its maintenance would be threatened by the practice of price competition. Thus the real problem before us is to devise arrangements that permit the manu- facturers and their customer to work together as a team without sacrificing the objectives for the attainment of which price competition, in other circumstances, is a useful device. 8. The Alternative ~o Price Com~eii~ion. The alternative to price competition is agreement, but I do not wish to suggest that we should be satisfied with agreements such as have been in force during the last few decades. The electricity supply authorities have surely a right-indeed,~ a duty-to insist that the price they pay for equipment is not such as provide the manufacturers either with abnormally high profits or with a shelter for ineffici- ency. The agreements in operation hitherto have not given this guarantee; quite apart from whether they did promote high prices and costs-and on this we need not express an opinion-they offered the buyer no assurance that they did not do so. Neither, I have argued, would price competition provide this guarantee; some other way has to be found of providing the purchaser and the public with the assurances to which they are entitled. It might at first be supposed that the pricing policy of the firms operating an agreement would be subject to two forms of check or sanction, the first provided by the threat of new producers entering the market, the second by foreign competition. In fact, however, it is very difficult for new firms to enter the heavy end of the industry, in which much capital and experience is required. Nor would it be expedient for the Generating Board to purchase equipment from abroad. Obviously the balance of paymen~:s would suffer, and, in any case, the prices quoted by foreign suppliers would not provide a standard for home producers, as export prices seem generally to be below the level of. full costs. We have to conclude, therefore, that there are no natural checks such as would prevent a price ring from abusing its power. The need is clearly to devise an agreement to which both the Generating Board and the manufacturers are party and into which appropriate safeguards have been built. This could be done in a variety of ways, the details of which ought to be the subject of another paper. Clearly the level of price must be related to production costs, these being calculated as a weighted average for the firms concerned and set so as to provide a rate of return on capital comparable to that obtained in industry generally and not less than is required to finance expansion and provide a normal yield to shareholders. A fairly loose form of control would seem preferable, prices being set for a period of ----say-three years and revised subsequently if they did not provide the agreed rate of return on capital. The firms would be obliged to employ the same accounting techniques and their calculations would have to be submitted to some independent body, neither the producers nor the purchaser being left as judge in their own cause. PAGENO="0249" 3685 Negotiations along these lines have in fact, I believe, been under way between the parties concerned, but 1 am not informed as to their progress. Needless to say, there are important issues of principle and of practical administration that require to be resolved. One of these is the appropriate allocation of costs between home and export sales. First, in the production of heavy electrical equipment there are important overhead costs the allocation of which, between home and export sales, is essen- tially arbitrary. Capacity installed to make switchgear for the CEGB for example may be used at a later state of its life to produce for export. The development work done to produce ever larger turbo-generators will likewise serve both the home and export markets. In so far as these costs are concerned, any net contribution to them that the manufacturers can obtain from exports will reduce the level of home prices necessary to secure a reasonable return ovei all. Even if almost the whole of these overheads were attributed to the cost of producing equipment for the home market, it could not be said that the home customer was subsidisiiig exports; without the exports he would have to pay more. Secondly, it appears to be the case, throughout the world generally, that the domestic price of heavy electrical equipment exceeds the export price. Foreign manufacturers, that is to say, rely on their home markets for recouping the greater part of their overheads. Whether or not we approve of these arrange- ments, they are a fact of life and the British industry cannot hope to compete overseas unless it operates similarly. Thirdly, there are no statistics known to me that can provide us with the return earned on capital, in industry generally, on home sales alone. The avail- able figures relate to the return on capital on total business. This is important in that the permitted rate of return on the production of heavy electrical equipment -assuming that this were to be employed in fixing prices-would have to be related to the returns in other industries. If like were to be compared with like, then it is the manufacturers' return on their total sales of the electrical equip- ment in question that must be considered. For these three reasons, it seems to me that the prices fixed in any agreement between the industry and the supply authorities ought to be such as afford a normal rate of return to a firm of normal efficiency on its total business, home and export, subject to the condition that export prices are not actually below marginal costs. A further problem concerns the computation of the capital employed by the firms concerned and, more generally, the structure of production in the industry. The prices set ought to be such as to compensate producers for having installed an amount of capacity sufficient to meet the buyer's needswhen at their peak even although that capacity is not currently in full use. But it is possible for excess capacity to exist to an extent greater than that required to meet peak requirements, through lack of co-ordination between the firms' investment plans, technological change, a falling off in export orders or for some other reason. The Generating Board has no obvious obligation to take thisparticular burden off the firms' shoulders, and yet it may in practice be difficult to measure PAGENO="0250" 3686 the quantity of excess capacity attributable to one circumstance rather than another. I can see no hope of precise solutions to this problem, but it should not he so difficult for reasonable men to reach a compromise appropriate to the particular circumstances of each case. These considerations lead us to the question of the structural efficiency of an industry as a whole. Let us assume for example that it could be established, beyond reasonable doubt, that the number of, say, transformer makers was too great to permit full exploitation of all the available economies of scale. \Vere this the case, the firms would hav~ an incentive to form larger units in order to reduce costs, but it could be thatthis incentive was not strong enough to counter the effect of inertia and the desire to maintain independence. In these circum- stances price competition does offer some remedy. Firms that did merge would strive, by price reductions, to enlarge their share of the market and would thereby force rivalsto follow their example; even the threat that this might happen might encourage firms to exploit such scale economies as became available. A general fall in prices, produced by competition in conditions of excess capacity, would at least help to concentrate the minds of manufacturers on the need to improve their position. Under these conditions, it would be hard to justify any agreement that left firms, on average, with a normal return on capital employed and thereby pre- vented an unsatisfactory structure from registering itself in the way most likely to lead to its improvement. It ought to be understood that an industry is not entitled to enjoy the legal right to operate a restrictive agreement that serves to perpetuate inefficiency. But it would be wrong to turn to price competition as the sure way of bringing about desired rationa.lisation. No doubt poor returns, in the long run, will reduce an excessive number of producers, but they may also weaken the incentive and the ability, even for the most efficient firms, to invest in the development and installation of up-to-date productive equipment. It is conceivable that general impoverishment might prove the only way, in practice, of forcing the required changes, but I should hope that a less costly and more rapid method might be found in cooperative action in which both the manu- facturers and the electricity supply authorities would take part. A policy of agreed prices, based on a weighted average of the finns' costs, is `pen to the further objection that it ensures only that a company's profits are .ommensurate with its efficiency relative to rival producers as contrasted with its efficiency relative to industry as a whole. And the point could be made, in this connection, that three or four producers, as in both turbines and switchgear, represented a very small sample. The most obvious reply to an argument along these lines is that, given the difficulty of entering these markets and the objections to buying from abroad, competition would do no better; each firm woul(1 fare according to its efficiency relative to its t'~'o rivals irrespective of the level of efficiency of three firms as a whole. It is conceivable that, in fixing agreed prices, one might even do better, in that the buyer might be `sble to produce evidence of costs in other countries or to make his own estimates of what costs, employing the latest equipment and techniques, ought to he.' `Sir Robert Shone, in a comment on an earlier version of this article, pointed to the stee) industrvs experience of price control based on calculations of this kind. PAGENO="0251" 3687 Whether such developments would eventually be feasible, I cannot readily judge, but it would be wrong to rule them out of consideration. In a similar way, the buyer could claim that any very marked spread between the costs of the firms concerned was prima fade evidence of structural inefficiency or of the use of different accounting techniques. Some readers, dismayed by the number and difficulty of the problems bound up with the choice of an agreed level of prices, may feel that their sympathy for the policy of price competition is now being re-kindied. But reliance on such a policy, although it might encourage us to forget about these problems, would not ensure their solution. It would not, I have argued, guarantee that profits were neither persistently above nor persistently below those earned generally; it would not automatically correct any structural inefficiency, and it would not ensure that firms were in a position to compete, by differential pricing at home and abroad, in the international market as it currently exists. Other readers may blame me for not following, to their proper conclusion, the logic of m-y own arguments. They may see the plurality of producers as a permanent obstacle to the co-ordination of investment plans, the importance of which I conceded, and recommend that not only the generation and distribution of electricity, but also the manufacture of the equipment used in these processes, should be put under the control of a state monopoly. Such a proposal can appear reasonable, however, only if we focus on some of the requirements of economic efficiency'to the exclusion of others no less important. Given that we cannot hope to know, in advance, the forms of research and development that will prove the most fruitful, the designs that will be most effective, the techniques of organisation and management that will show themselves superior, the decentral- isation of decision-making provided by a plurality of firms is a sound strategy. Nor must we imagine that, price competition being appropriate, all forms of inter-firm rivalry serve no useful social purpose. We should see ourselves not as obliged to choose between competition and monopoly but as confronted with the problem (an economic problem quite strictly) of devising arrangements that provide, even approximately, an optimum balance between competition and planning, freedom and order. We should aim at getting (as far as is possible) the best of both worlds. SI. John's C~l1ege, Oxford. PAGENO="0252" 3688 EXHIBIT IV AGREEMENT BETWEEN THE CENTRAL ELECTRICITY GENERATING BOARD AND THE GRID SWITCHGEAR MANUFACTURERS Partie8 to the Agreement 1. The parties to this Agreement are the Central Electricity Generating Board and the Manufacturers of Grid Switchgear comprising Associated Electrical Industries Limited, The English Electric Company Limited, The General Electric Company Limited and A. Reyrolle and Company Limited (hereinafter referred to as "C.E.G.B." and "G.S.M." respectively). ,S~cope of Agreement 2. (a) The agreement covers the manufacture and installation by the four G.S.M. firms for C.E.G.B. of 400 kV, 275 kV and 132 kV switchgear. (b) In the manufacture of grid switchgear, the G.S.M. accounts disclose that the turnover :capital employed ratio has been in recent years about 1 :1 so that profit on sales is broadly equivalent to profit on capital employed. (c) The agreement will run for an initial period of five years from 1st january 1966 prov~dect that: (1) the operation of the pricing mechanism of the agreement shall be reviewed after two years to ascertain whether so far as the actual (as dis- tinct from notional) average profit earned by the two lowest cost producers at each voltage exceeds 161/2% on sales it is likely to be reduced to that level over a reasonable period, and also whether the average annual return over the five year period of the four G.S.M. firms on their grid switchgear busi- ness with the C.E.G.B. is likely, as expected by the parties to the agreement, to be below 161/2%. (2) if following the review referred to in (1) above the C.E.G.B. on the one hand or the G.S.M. on the other are not satisfied that the agreement is operating or is likely to operate in accordance with the intentions of the parties, either party may give notice to terminate the agreement with effect from 1st January 1969. (3) if notice to terminate the Agreement is so given it shall continue to apply in respect of contracts already placed but not to any future oontracts. Determination of Prices 3~ A uniform method of ascertaining costs, proposed by Cooper Brothers & Co., hereinafter referred to as "the independent accountant" is annexed to this Agreement (Annex I) and has been approved by the parties. 4. Until such time as adjustments are determined under Clauses 5 to 9 below, all new contracts will be placed at the net selling prices ruling at 31st December 1965 and incorporated in the agreed Schedule of Prices subject only to modifica- tion of such individual prices as may be agreed between the parties. 5. (i) At the end of each calendar year, each manufacturer will submit to the independent accountant a certified statement showing the total Grid Switchgear invoiced by him during that year for C.E.G.B. contracts together with the re- sultant profit. This return will show separate figures for 132 kV, 275 kV and 400 kV contracts and initially for the year 1964 as well as 1965 for 132 kV and 275 kV switchgear. For the purpose of this clause the term "invoiced during that year" is to be interpreted as relating to contracts for gear which during the year concerned have reached the point at which invoices for 95% of the contract price have been submitted (i.e. excluding retention money) and the invoice prices shall be in- creased in the ratio 100/95. Where major items of equipment have been sub-contracted between members of the G.S.M. the following procedure shall apply in preparing the above returns: (a) The subcontractor will include in his costs the cost to him of the sub-contracted items and in his invoiced price the price he obtained from the main contractor. (b) The main contractor will include in his cost return the cost of han- dling and engineering. In his contract price return he will include the differ- ence between the price he received from the C.E.G.B. and the price he pai(l to the sub-contractor. The term "major items of equipment" comprises circuit breakers, current transformers, voltage transformers, isolating and earthing switches and line traps. PAGENO="0253" 3689 The certified statement referred to above will show not only the actual invoice values, ascertained costs and resulting profits or losses but also the notional sales values, ascertained costs and corresponding adjusted profits or losses which would have resulted on these contracts if the contracts had been invoiced at the schedule price level ruling for tenders during the year. 5. (ii) When the inde- pendent accountant has received the returns under (i) above he will proceedin accordance with the annexed terms of reference (Annex 2). He will aggregate the sales and also the profits of each manufacturer over a three year period to which the return under 5(i) relates and the two previous years. For this purpose the sales and corresponding profits will be those which would have resulted if the invoices relating to the contracts for all three years had been invoiced at the schedule price level ruling during the third year. The independent accountant will then identify the two manufacturers (not necessarily the same for each of the three voltages) who, on this basis of computation of the profits, would have earned over the latest available three years the greatest percentage profit margin in respect of each of the three voltages. He will then summate the returns of these two manufacturers for the three years and ascertain the percentage profit margin for the three years on their combined sales to the C.E.G.B. at each of the voltages concerned. The returns of the two manufacturers with the lowest percentage profit margins for the three years will be ignored but they will never- theless be subjected to the price adjustment set out in Clauses 6 and 7 below. However, the first calculation to be made under this sub-clause shall be in accordance with Clause 9. A. similar calculation will be made using actual invoice values and resulting profits or losses and the percentage profit margins both actual and notional as ascertained for each of the three voltages will be advised to the O.E.B.G. and the G.S.M. 5. (iii) The G.S.M. agree to give the independent accountant such information and explanations as he may require. 6. (A) Unless otherwise agreed between the parties, prices in the agreed sched- ule of prices used for the preparation of tenders and for contracts placed during the calendar year following the year to which the returns under Clause 5(i) relates will be reduced by half the percentage, if any, by which the notional profit margin ascertained under Clause 5(u) for the particular voltage for the average of the three previous calendar years has exceeded the agreed profit margin of 16'/2 %, the schedule of prices so modified becoming the agreed sched- ule of prices. Provided that if the notional percentage profit margin of one of the two pro-~ ducers showing the highest notional rate of return under Clause 5 (ii) shall be lower than the agreed profit margin, then no reduction will be made in the sched- ule of prices. Any such reduction shall, in any case, be limited to the difference between- (a) the notional rate of return of the lower of the two highest margins identified under Clause 5(u) and (b) the agreed profit margin. Any limitation in price reduction arising from the proviso in the previous two sentences will be advised by the independent accountant to the C.E.G.B. and G.S.M. 6. (B) For the purposes of the calculations to be made under Clauses 5, 6 and~ 7 of this Agreement there shall be eliminated from the contract and invoice prices any amount arising from the operation of the contract price adjustment clause referred to in Clause 11 of this Agreement and the same amount shall be eliminated from the relevant costs. Any percentage adjustment made to the prices under the provisions of Clause 7 below shall not be made to that part of the price which represents the contract price adjustment referred to above. 6. (C) The agreed Schedule of Prices shall be expressed as an index and the price level at 31st December 1965 shall represent 100. Adjustments to the index shall only be made by reference to adjustments arising under Clause 6(A). Any adjustments made to the Schedule of Prices under the provisions of Clause 10 of this Agreement shall not affect the index. For the purposes of making any actual or notional adjustments to contract or invoice prices under Clauses 5, 6 and 7 by reference to the level of the agreed Schedule of Prices the adjust- ment shall be made by way of a percentage reduction based on the movement in this index of schedule prices. 7. The prices for all invoices, in respect of contracts covered by this Agree- ment, rendered to the C.E.G.B. by the G.S.M. for the particular voltage during PAGENO="0254" 3690 the calendar year following the year to which the return under Clause 5(i) re- lates shall be reduced to the schedule price level used for the preparations of tenders during that calendar year. 8. In addition to the review provided for under Clause 2(o) (1), the C.E.G.B. and G.S.M. will also review the operation of the Agreement from time to time with the intention of making appropriate changes in the event of :- (a) any material change of circumstances (e.g. merger of two or more manufacturers or the development of basically new types of switchgear) (b) the actual (as distinct from notional) average profit of the two most profitable manufacturers at any voltage failing to exceed 161/2% in three successive years; (c) there being a significant variation in three successive years in the relationship of capital employed to turnover from the ratio of 1 :1 which has pertained in recent years so that profit on sales ceases to be broadly equivalent to profit on capital employed. 9. The first cost returns will be in respect of the calendar years: 1964 and 1965 for 132kV and 275kV (early in 1966) 1965 and 1966 for 400kV (early in 1967) and the first adjustments to prices based on such returns will be as follows 132kV and 275kV: 1966 for all invoices and schedule prices used for tenders and new contracts. 400kV: 1966 and 1967 for all invoices, 1967 for schedule prices used for tenders and new contracts. 10. Schedule Prices will also be adjusted for variations in labour rates, mate- rials, etc. as agreed between the C.E.G.B. and G.S.M. Other Conditien~ 11. All contracts will be placed in accordance with standard Conditions of Contract agreed between the C.E.G.B. and B.E.A.M.A. The C.E.G.B. and the G.S.M. agree to negotiate a contract price adjustment formula consistent with this Agreement for application to contracts completed after 31st December 1966. Meanwhile the existing formula will apply. 12. If requested by the C.E.G.B. the G.S.M. will quote competitively as between themselves for 15% of C.E.G.B. requirements for 132kV switchgear taking one year with another. Any orders placed as a result of such competition will be excluded from the other provisions of this Agreement. 13. The C.E.G.B. do not undertake to order Grid Switchgear exclusively from the G.S.M. ANNEX I GElD SWITCUGEAR Compilation and Presentation of Comparable Costs of Grid Switcbgear 1. The following paragraphs set out the basis on which costs of grid switch- gear should be compiled and presented. I. COMPILATIQN OF COSTS Mat en ais 2. The quantity of material used in manufacture should include manufactur- ing scrap where identifiable with individual contracts, and would be obtained from the job cost account which would be compiled from material requisitions issued and charged to the job. Scrap, arising during the course of manufacture, not identifiable with individual contracts should be charged to works over- heads. In order to verify that all requisitions have been charged, the job costs should be compared with the material specifications. The material requisitions should be priced at cost and there should be no addition for handling charges. Where castings are produced in the member's own foundry, the cost charged as materials should include the direct labour and overhead costs of the foundry. 3. Where material is purchased in a rough machined state from outside sup- pliers the char~re to materials will include the labour and overhead charges for the rough machining. 4. The realised value of scrap should he credited to the material cost of the job where practicable or alternatively to general works overhead charges. 5. Any excess material issued for the job should be returned to stores and credited to the material cost of the job. 6. Where items are manufactured in other departments or by subsidiary companies the transfer value thereof should be included as part of the cost of PAGENO="0255" 3691 materials. The transfer value of such items should be cost unless the depart- ment or subsidiary company concerned supplies to third parties in the normal course of business in which case the transfer prices should be equivalent to the prices charged to third parties. 7. Any trade discounts or rebates directly applicable to the materials used in the product should be credited to the material cost. Any other discounts received should be credited to administration and selling expenses. Direct Labour 8. Direct labour may be defined as the work engaged in altering the form or shape of materials in fabricating or processing. The direct labour cost should be based on whichever of the following bases is appropriate: (a) The piece work prices paid plus the national award or cost of living bonus, and any incentive or production bonus paid to direct operatives. (b) The piece work times allowed evaluated at the budgeted labour cost per hour, plus the national award or cost of living bonus related to the hours worked, and time saved at the bonus rate per hour and any incentive or production bonus paid to direct operatives. (c) Where day work rates are paid the costs should be based on the day work rate, which would consist of the basic rate per hour plus national award and the lieu bonus rate. This consolidated rate should be applied to the hours charged to the job. Any incentive or production bonus paid to direct operatives should be included in the direct labour cost. 9. Where piece work prices or times allowed include the cost or time for setting by the operative this should be included in the direct labour cost. Where setting is performed by a setter the cost should be charged to the job where pos- sible but otherwise should be included in the general works overheads. All other labour engaged in supervision, servicing, transporting materials including crane men and slingers, and general labouring should be included in the general works overhead charges. Overhead Ea,pen~ses 10. The overhead expenses should be based on budgets for the period of pro- duction and where necessary should be adjusted to reflect normal activity i.e. 80% of single shift working plus normal overtime plus double shifting of some key machine tools. If Budgets are not used then the latest available financial accounts shiuld be used and adjustments made for any fluctuations in prices and wage rates between the period of production and the period of the financial accounts and should reflect normal activity. 11. The overhead expenses should be segregated between- (a) General Works Expenses (paragraphs 12-17). (b) Administration and Selling Expenses (paragraphs 18-21). (c) Packing Expenses (paragraph 29). (d) Site (paragraphs 22 and 23). (e) The Selective Employment Tax should be regarded as an overhead expense and should be segregated between the classes of overhead expense as set out above. Any refunds or premiums received should be regarded as a reduction of the overhead expenses. The type of expenses normally shown under groupings (a) (b) and (c) is shown in appendix A attached. Goueral Works E~rpenses 12. The general works expenses should be allocated between departments, shops or cost centres. Where possible, expenses should be directly allocated to the department, shop or cost centre and where that is not possible reasonable arbitrary bases of apportionment should be used for example- Type of expenses Basis of apportionment Rent, rates Floor space occupied Lighting Wattage of lamps Heating Cubic area of floor space Power Metered consumption or horse power of Maintenance of buildings motors in use Depreciation of plant Floor space occupied Gas Capital value of plant General labouring Technical estimate base on the number of jets used Direct labour PAGENO="0256" 3692 The works overhead expenses should be recovered in costs by machine hour rates related to the cost centres, or by the productive hourly rate related to the de- partment, shop or cost centre, or by percentage of direct labour cost applicable to the department, shop or cost centre. 13. Where budgeted overhead recovery rates are used these should be ad- justed by any over or under absorbed expenses to the extent that is necessary to reflect normal activity as defined in paragraph 10. Recoveries as a percentage of the material cost for material handling should not be used. 14. Overhead expenses should be collected for ancillary departments, i.e. tools and patterns, research and development etc. These expenses would be directly charged, where possible, to the products (see paragraphs 25 to 29). 15. Departmental accounts should be maintained for the direct cost of service departments, i.e. power ho~use, maintenance etc. The total cost of such service departments to which general overheads should not be charged would be ap- portioned to the production departments, shops or cost centres according to the service performed. 16. Notional charges, such as rent where buildings are owned, should not be included in the overhead expenses. 17. The depreciation included in costs should be calculated on the bases adopted by manufacturers in their accounts and should be based on the historical cost of the fixed assets. Investment and similar cash grants received should be de- ducted from the cost of the relevant fixed assets and depreciation should be calculated on the resulting net cost of those assets. Administration and selling Expenses 18. Administration and selling expenses which are attributable to the admin- istration and selling of the products manufactured are those set out in appendix A. Where applicable a due proportion of head office expenses should be included. 19. These expenses which will rate to both home and export trades combined should be segregated as between product divisions but not as between depart- ments, shops or cost centres in view of the arbitrary bases of apportionment which would have to be used and which may direct the costs. 20. The expenses should be recovered in costs as a percentage of the works cost and recoveries as a percentage of the material cost for handling should not be used. 21. Where budgeted recovery rates are used these rates should, if necessary, be adjusted so as to reflect normal activity as defined in paragraph 10, in the period of production. Erection and Installation on site 22. Any direct materials used should be charged to the job at cost. Direct labour employed at the site should also be charged to the job at the rates paid. The labour should be confined to the erection, installation and testing on the site. Work normally done in the works but for expediency done on the site, should be included in the works cost. 23. The overhead expenses would be those incurred at the site plus any other overheads directly attributable to the erection organization. The total of the materials, labour and overhead expenses would be a direct charge to the job. Design and Drawing Office Expenses 24. Design and drawing office time applicable to the job should be charged direct, based on time occupied at hourly rates. These rates should be set to in- clude the overhead expenses of the engineering and drawing offices, or alterna- tively an addition should be made to the direct costs to cover the overhead ex- penses concerned. Tools and Patterns 25. Tools and patterns purchased specifically for the job should be charged direct to the job at cost. 26. Tools and patterns made for the job by the member's own tools and pat- terns department should be charged to the job at the departmental works cost. The expenses of the department not chargeable direct should be recovered in costs as a percentage of works cost and should be added to the direct costs giving a total cost of tools and patterns applicable to the job. PAGENO="0257" 3693 Research and Development 27. The charge for general research to the product divisions concerned should be recovered in costs as a percentage of works cost. Materials, labour and over- head expenses incurred by the product divisions in developing and proving new or improved standard designs prior to putting such new or improved standard designs into production should be recovered in costs as a percentage of works cost. All research and development expenses referred to in this paragraph should be charged to home trade business only. 28. Special development should be charged direct to the contract under the ap- propriate headings design and drawing office expenses, tools and patterns or research and development. This expenditure includes special engineering and drawing office work, patterns and tools for a specific contract together with special modifications. Packing 29. Packing materials used should be charged to the job at cost where sepa- rately identifiable. Packing labour employed on the job should be charged at the rates paid. Overhead expenses of the department should be collected in a de- partmental account and recovered as a percentage of the labour cost of the department. Delivery 30. The cost of hired transport, or charges for own transport, for delivery should be charged direct to the job. Post Construction Maintenance Ecepenses 31. The charge in the product costs to cover post construction maintenance should be a provision based on past experience and anticipated future trends, and should be a percentage of the works cost. The provision relates to all main- tenance expenses incurred after the ~1ate of commissioning. IL PRESENTATION OF COSTS Cost Retii~rn 32. Attached at `appendix B is a cost schedule setting out the form `in which the costs of the grid switchgear, compiled in accordance with paragraphs 2 to 31 of this memorandum, should be presented. 33. The cost schedule sets out the elements of cost under which the costs should be analysed. For guidance, definitions of the elements of cost are set out in paragraphs 34 to 38. Materials 34. Materials represent items purchased or requisitioned from stores in ac- cordance with the contract specification, other than those items coming within the definition of sub-contracted work (see paragraph 35). Sub-Contracted Work 35. Sub-contracted work consists of processing, by outside firms, on material supplied by the main contractor. Where practicable, the cost of the material supplied should be included under "materials" and the charge for processing included under "sub-contracted work." Direct Labour 36. Direct labour may be defined as the work engaged in altering the form or shape of materials in fabricating or processing. Overhead Ea~pe'nses 37. The works overhead expenses are those indirect costs applicable to the manufacturer of the product, or expended in ancillary and service departments, as set out on appendix A. 38. Administration and selling expenses are those expenses incurred in the management and administration of the Company, and the sale of its products, as set out on appendix A. 95-159 0-68-pt. 8-17 PAGENO="0258" 3694 APPENDIX A GRID SWITCHGEAR Classification of Overhead Ea,penses I. GENERAL WORKS EXPENSES Indirect Labour: Tool setting Rectification `~\Taiting time f Or direct operatives Collecting and feeding materials for productive operations Moving work in progress between operations Moving finished materials from manufacturing departments or shops Unloading outside transport Internal transport labour Overtime and shift extras Extra allowances to direct operatives General labouring shopwork not specified Foreman, chargehands and supervisors Managers and staff of productive departments Inspection and testing of incoming materials Inspection and testing-production Planning and progressing Method, time study and ratefixing Timekeeping Works security Training, teaching and learning Storekeeping Stocktaking Plant equipment and layout staff Personnel Works Clerks Bonus to works staff Holiday pay National Insurance-Company contribution Selective Employment Tax Free Transport-works employees Pension scheme contributions and ex gratia pensions Retrospective wage adjustments Plant relayout Production replacement and repajrs (material and labour) Consumable materials Rejects and losses Redundant stores Protective clothing Works internal transport running expenses and depreciation Coal, coke, gas and fuel oil for works and works offices Employer's liability insurance Printing and stationery Power, light and heating of works and works offices Plant maintenance and reconditioning Water for works and works offices Rents and rates of works buildings Works Insurance Building maintenance Depreciation of works buildings, plant, machinery and equipment Carriage inwards when goods are not purchased at delivered prices Canteen and welfare Miscellaneous expenses PAGENO="0259" 8695 IT. ADMINISTRATION AND SELLING EXPENSES Management Accounting staff Secretarial staff Central typing staff Sales department staff Representative staff Agents' commission Drawing office and design (sales) National Insurance-company contribution Selective Employment Tax Bonuses Pension scheme contributions and ex gratia pensions Rents and rates of buildings Repairs and maintenance Depreciation of office furniture, fittings and equipment Management expense Light and heat Telephone and postage Office services Printing, stationery and duplicating Motor vehicles (administrative and sales) expenses, including depreciation General insurances, other than works Canteen and welfare Travelling expenses Bank charges (excluding bank interest) Patent renewal and license fees Donations and subscriptions Advertising General publicity, including catalogues and brochures Exhibitions Expenses of branch Offices and sales depots Consultants' fees Audit fees Legal charges Debt collecting expenses Bad debts Miscellaneous expenses Group tendering and associated expenses Note: Cash discounts received are to be deducted IlL PACKING EXPENSES Transport maintenance National insurance company contribution Selective Employment Tax Bonus Pension scheme contribution and ex gratia pensions Miscellaneous packing expenses Rent and rates of buildings Repairs and maintenance Light and heat Telephone and postage Printing and ntationery and duplicating PAGENO="0260" 3696 APPENDIX B COST SCHEDULE FOR GiuD SWITCHGEAE Description of Plant Period of production (from commencement of machining to despatch from works) from to Total (pounds) Materials (paragraphs 2-7 and 34) Sub-contracted work (paragraph 35) Direct labour (paragraph 8-9) - Works overhead expenses (paragraphs 10-17) Works cost Administration and selling expenses (paragraph 18-21) Erection and installation on site (paragraphs 22 and 23) Material Labour Site overhead expenses Design and drawing office expenses (paragraph 24) Tools and patterns (paragraphs 25 and 26) Research and development (paragraphs 27 and 28) Packing and delivery (paragraphs 29 and 30) Post construction maintenance expenses (paragraph 31) ANNEX 2 GRID SWITCHGEAR Terms of Reference to the independent accountant Cooper Brothers & Co. in connection with Clause 5 of the Agreement It being the wish of both parties to the Agreement that their joint and several financial interests thereunder shall be subject to the examination aDd judgement of a single independent accountant: Cooper Brothers & Co. are hereby authorised and instructed as follows: (1) To prescribe the form of a return to be compiled and certified by each manufacturer in respect of each calendar year showing particulars relating to all grid switchgear invoiced by him during the year for C.E.G.B. contracts and distinguishing between business for 132kV, 275kV and 400kV. (2) To be available at all reasonable times to advise accountants con- cerned in producing the returns and also the Central Electricity Generating Board. (3) To receive the certified returns and to scrutinise and appraise them with the financial interests of all parties to the Agreement in mind and to pursue any enquiries necessary to ensure that the costs shown therein have been arrived at in accordance with the costing principles detailed in Annex I to this Agreement and with any modifications, interpretations and techniques developed to give effect to these principles. (4) Having completed his examination of the returns and having made any necessary adjustments arising from his scrutiny and appraisal, to summate the returns in accordance with Clause 5 (ii) of the Agreement and advise the Central Electricity Generating Board and the Grid Switchgear Manufacturers of the percentage profit margins ascertained in accordance with Clause 5 (ii) of the Agreement. As witness the hands of Joseph Latham on behalf of Associated Electrical Industries Limited Gerald Noel Cabell on behalf of The English Electric Com- pany Limited Kenneth Gladstone Smith on behalf of The General Electric Com- pany Limited James Bennett on behalf of Reyrolle and Company Limited and PAGENO="0261" 3697 Leslie Frederick Miller on behalf of the Central Electricity Generating Board this 23d day of March 1967. Signed by the said Joseph Latham in the presence of: J. LATHAM. Signed by the said Gerald Noel Gabell in the presence of: G. N. GABELL. Signed by the said Kenneth Gladstone Smith in the presence of: K. G. SMITH. Signed by the said James Bennett in the presence of: JAMEs BENNETT. Signed by the said Leslie Frederick Miller in the presence of: A. B. HACKETT. L. F. MILLER. EXHIBIT V COMPARISON OF MARGINS ON FRENCH-MANUFACTURED POWER CIRCUIT BREAKERS [GE-PCBD costs=100J Home market Export to sale United States Delivered price Total delivered costs Indicated pretax margin 184. 0 1118. 6 86. 8 110. 4 65. 4 (23.6) 1 Includes tax on value-added. Note: Parentheses denotes loss. II. EUROPEAN MANUFACTURERS DERIVE TWO TRADE ADVANTAGES FROM THE "BORDER TAX" SYSTEM: INCREASED COST5 OF IMPORTS AND TAX REMISSIONS ON EXPORTS A. EMropean reliance on indirect taxes for revenues Indirect taxes are the major source of revenue for most European countries. In contrast the United States derives most of its revenue from direct taxes. Al- though some European countries have corporate income tax rates nominally as high as in the U.S., effective tax revenues from them are substantially less because of generous depreciation practices, allowance of special reserves and lower tax rates on distributed income. In General Electric's case we estimated that our corporate income tax would have been reduced by about one third if we had been subject to the German corporate income tax. European indirect tax rates-for sales, turnover and value added taxes-are high: 20% in France, 11% in Germany (as of July, 1968), and, probably a future harmonized rate of 17% for the entire European Economic Community in the 19TOs. In contrast, the average indirect tax in the U.S. (state sales taxes) is 3.7%. B. The trade effects of an indirect tax system competing with a direct tax system Because of GATT rules regarding imposition of import equalization charges and remission of taxes on exported goods, there are significant trade effects than can be achieved by one nation's use of high-level indirect taxes, coupled with lower direct taxes, against a competitor trading nation that depends almost entirely on direct taxes. PAGENO="0262" 3698 To the extent that an upward change in an indirect tax rate (either by initial imposition or by a rate rise), is not passed along in full to the purchaser, the residual amount must be absorbed by the manufacturer, becoming, in effect, a direct tax on corporate earnings. If, following such an increase in tax, a country raises its import equalization charges (border taxes) and export remissions by the full upward change in in- direct taxes, to the extent that the increase in the domestic tax is not fully shifted `to purchasers, imports are penalized by paying a higher burden than the equivalent product sold domestically, and exports are favored by a remission rate higher than the indirect tax being charged within the border. C. The need for analysis of the theory of tacv shifting If the situation outlined in Section B, above, does or can occur, then underly- ing tax theory regarding the shifting of direct and indirect taxes needs new analysis and empirical testing. The GATT provisions governing tax impositions and remissions seem to have assumed that indirect taxes are always shifted 100% forward, while direct taxes are not shifted at all. From that assumption trade advantages `and disadvantages are derived, in that U.S. products going into Europe face added costs of entry in the form of border taxes which overcompen- sate for the internal indirect taxes, while the European products going into ex- port receive substantial tax remissions that sometimes can make the difference between winning an order and losing it. The practical trade consequences of the GATT-endorsed theory of tax shifting are evident to General Electric as it competes in world markets: added costs of entry on its exports and import competition sharpened by tax remissions whose rates run as high as 20%. When these tax remissions are added to dual pricing disparities, they become a particularly significant and adverse factor in international competition. It is important, then, that the theoretical rationale on which the GATT provisions rest be re-examined and realistically tested for its soundness. Competitive equity demands no less. D. Additional inequities Two other aspects of the European administration of high rate sales taxes should be noted. The first of these arises from the fact that European countries compute im- port equalization taxes on a base that includes transportation, insurance and duties, in addition to the factory price of the goods. The U.S., in applying its few import equalization levies, does not include transportation. Two arguments can, therefore, be advanced: (a) since inclusion of transportation, insurance and duties unfairly raises the import equalization charge above the internal sales tax, the equalization charge should be based on the price f.o.b. country of origin, and (b) in any event, transportation charges should not be included in the base. Exhibit VI shows General Electric's experience with European border taxes that are levied on landed cost instead of on the price f.o.b. factory. The rates shown are those in effect ~1uring 1967. It will be noted that in the case of the Netherlands and France, the domestic sales tax rate and the rate of the import tax were the same. Yet, because these countries include transportation, insur- ance and duty in the tax base, the border tax was much higher than the tax paid by the European manufacturer. Exhibit VI also shows the effect of a second administrative practice on imports and exports where the turnover tax is of the "cascade" variety. Because of the total tax borne by an article is a function of the number of turnovers that brought it to market, the amount of import tax necessary to equalize sales tax burdens is imposed at a rate higher than that applicable to a single turn- over. For example, 11.5% as opposed to 7% in the case of tungsten carbide to Belgium. There is little evidence avsilabh' about the degree of vertical inte- gration among European industries. However, it is fairly clear that where the border tax is equivalent to the average integration of a European industry, the leaders of that industry who are more integrated than the smaller firms, bear a tax burden well below that of the American exporter. As the Kennedy round of tariff reductions takes effect, and the European Economic Community adopts a uniform t.v.a. system of taxation, the barrier effect will actually worsen in some countries, as demonstrated in the specific example of Exhibit VII. Assume that a U.S. manufacturer is exporting electric knives to West Ger- many, and the value of his product at the port of New York is 100-an index PAGENO="0263" 3699 value of 100. In 1967, at the German border, there was an import duty of 13%, adding 13.6 points to the price. A 6% import tax adds 7.1 points to the index. So the landed price of the U.S. product at the West German port is 125.2 index points in 1967. By 1973, the import duty will be cut in half (6.5%) but the import or border tax will match the expected t.v.a. rate of 17%. So the landed value goes up to 130.2 points under the new t.v.a. tax system, in spite of Kennedy Round tariff reductions. A system of tax rebates works to subsidize exports of integrated European firms in the cascade tax countries. Exhibit VIII shows data derived from exports of General Electric subsidiaries in Common Market countries. The "waived" tax simply shows the extent to which exports are exempt from sales taxes. The in- termediate line shows the additional rebate which the government pays the ex- porter and which supposedly is a function of the average number of turnovers in a given industry. To the extent that a European exporter is highly integrated, the rebate tends to exceed the actual tax burden. It represents an outright export subsidy. The specific manner in which the excess rebate system operates as an export subsidy is shown in Exhibit IX. Our West German subsidiary manufactures an electric alarm clock which has an f.o.b. plant price in West Germany of $3.86. When this clock is exported to the United Kingdom, the West German govern- ment waives 18 cents of inland sales tax and turnover tax. It also pays the Ger- man manufacturer an excess rebate of 11 cents. Thus, the clock leaves the German plant for its destination in the United Kingdom at a price of $3.57-or 29 cents less than its price in the German market. Tax rebates to manufacturers in Europe thus affect competitive positions in third markets. Exhibit X demonstrates the effect on refrigerators going to the United Kingdom, from U.S. and Italian plants. In each case, the price for home markets equals 100 index points. Going to export markets, the manufacturer in Italy gets tax waivers and rebates amounting to 25 points, reducing his export price to 75 points. By the time both have paid duties, customs, and transporta- tion, the total landed value at Liverpool is 125 points for the U.S. product, and 99 points for the Italian product. This gives the manufacturer in Italy such an advantage that, in the case investigated, he decided to take 10 points in extra profit, and sold at 109. It is conceded that these built-in trade advantages of high-rate sales taxes will diminish in the future as the EEC switches from the cascade to the t.v.a. system. But as long as the EEC countries base their import taxes on landed cost, and as long as their rates exceed U.S. sales taxes by a factor of four, EEC countries will continue to benefit from the current border tax practices. Uo'nclusioii,s A realistic interpretation of these data suggests that nations which rely pri- marily on direct taxes face a chronic problem in international trade, when they compete with industrialized nations whose tax structure is more heavily oriented toward indirect revenues. This in turn raises the question of whether the United States will be capable of correcting its balance of payments problems without either adapting its own tax structure along the lines of its key competitors, or obtaining GATT revisions that treat direct and indirect taxes more equitably for purposes of international trade. ExEnaIT VI EUROPEAN TRANSACTION TAXES, 1967 [In percentj U.S. export of- National turnover tax rate Import equal ization taxes ~ Official rate Eflective rate (percent of U.S. f.o.b.) Tungsten carbide to Belgium Refrigerator to West Germany Molding compound to Netherlands 7 4 6 11. 5 6 6 13. 5 5. 4 7. 3 X-ray equipment to France (t.v.a.) 25 25 35. 1 PAGENO="0264" 3700 EXHIBIT VII U.S. EXPORT OF ELECTRIC KNIFE TO WEST GERMANY 1967 1973 with unifor m t.v.a. rate Rate Index Rate (percent) (percent) Index F.o.b., U.S. price 100.0 Ocean freight and insurance 4. 5 100.0 4. 5 Subtotal 104. 5 Importtariff 13.0 13.6 6.5 Import equal. tax 6.0 7.1 17.0 104. 5 6.8 18.9 Landed price 125.2 130.2 EXHIBIT VIII EUROPEAN TAX WAIVERS AND REBATES-EXPORTING COUNTRY AND PRODUCT [Effective rate as percent of fob. pricel West Nertherlands, Germany, chemical houseware Italy, refrigerator Waived nationalindirecttaxes 4.6 5.5 Rebates national indirect taxes 2. 8 3. 8 11.4 9. 8 Total, waiver/rebate 7.4 9. 3 21. 2 EXHIBIT IX EUROPEAN TAX REBATES SUBSIDIZE EXPORTS [Case: Electric alarm clock made in West Germany; destination: United Kingdomj Amount West Germany fob. plant price Taxes included in fob. price: (1) Inland sales tax at 1 percent of export price (2) Turnover tax at 4 percent of export price Export rebate: (1) Above 2 taxes are exempt (waived) on exports (2) Excess rebate at 3 percent of export price West German f.o.b. price less tax adjustment $3.86 .04 14 (.18) (.11) 3.57 EXHIBIT X EUROPEAN TAX REBATES AFFECT COMPETITIVE POSITIONS IN 3D COUNTRIES [Case: Refrigerator. Destination: United Kingdom.J From United States From Italy Home market price 100 Less tax waivers and rebates 0 100 25 Home market price less tax adjustment 100 Duties, customs, and transportation 25 75 24 Total, landed value 125 Actual selling price 125 99 109 PAGENO="0265" 3701 CONCYLUSION A. The need for continuing convmitnvent to international negotiations Since World War II multilateral negotiations in the GATT and consultations in the OECD have been established as the principal means whereby the trading nations agree to uniform and non-discriminatory rules of trade. As such, they provide the essential foundation for orderly progression toward expanded inter- national trade and elimination of devices and restrictions by which nations seek either to protect their domestic economies from outside competition or to gain an unfair advantage in foreign markets. General Electric believes that the long- standing U.S. commitment to multilateral discussion and negotiation is desirable, necessary and productive. It is the foundation on which viable rules of inter- national law can be built. Part of these negotiations, in OECD or in the GAPT, could well be directed toward an agreement on uniform, publicly disclosed, non-discriminatory procure- ment rules which would open the European government owned or controlled markets to United States competition. The desirability of such an agreement has been well stated by The Brookings Institution to the Senate Finance Committee in connection with its review of U.S. trade policies: "Government procurement policy seems to be one of the more promising areas for progress in reducing nontariff barriers. The basic approach that has been suggested by U.S. officials is to obtain an agreement among governments to pro- vide foreign producers with the same opportunity to bid on Government contracts as domestic producers. This would involve such matters as establishing uniform procedures regarding the announcement of proposed purchases, publicizing re- quired standards, and publishing the bids that are accepted. Any preference granted to domestic producers would be explicitly expressed and put in percent- age terms." (Compendium .of Papers on Legislative Oversight, Feb. 7, 1968, vol. I, p. 340.) Thus, with respect to heavy electrical equipment, such suggested agreement would contain explicit provisions and definitive safeguards followed by all Gov- ernment authorities for the, purpose of assuring U.S.-manufactured electrical utility equipment the same access to European governmental markets that Euro- pean equipment producers now enjoy in selling to the United States Government procurement authorities. Certainly too, these ongoing negotiations should focus specifically on the trade effects of border tax adjustments which are presently export-promoting and import-restricting for the indirect tax countries. The basic assumptions under- lying the GATT provisions are open to substantial question, as has been previ- ously discussed. The full border tax adjustments provided for with respect to indirect taxes can constitute both an export subsidy and an import surcharge. Adjustments for indirect taxes should at least be reduced under carefully circum- scribed conditions, or some comparable advantage granted to countries who do not enjoy the international trade benefits of the indirect tax system. B. The inadeqnacy of existing 8tatutory remedies But proceedings in the GATT and OECD are not enough. An effective and comprehensive U.S. trade policy requires more: for example, determined and resourceful utilization of statutory and administrative procedures to cope with the many facets of international competition and provide timely remedies which can be invoked to discipline unfair competition on a case-by-case basis. As a practical matter, however, the available procedures discussed below have not provided effective relief against the consequences of exclusionary procurement practices of foreign governments and the dual pricing by foreign suppliers when selling to governmental agencies in the U.S. 1. Trade Expansion Act of 1962 On its face, Section 252 of this Act (19 USC Section 882) would appear to give the President broad discretionary authority to take a variety of retaliatory steps in order to end "unreasonable" or "unjustifiable" foreign import restric- tions, discriminatory acts and non-tariff barriers. Yet, thus far this statutory authority has not been invoked nor, so far as we are aware, have U.S. trade officials encouraged U.S. industries to provide specific information that would bring its provisions into play. This appears to he a missed opportunity, because the apparent legislative intent of this Section was to provide a means for execu- PAGENO="0266" 3702 tive action against precisely the sorts of non-tariff barriers and unfair competi- tion practices we have faced for many years. Until rules or regulations are pre- scribed for this statutory authority and initiative taken by the Executive Branch to exercise the responsibilities vested in the President, Section 252 of the Act will not accomplish its legislative purpose. 2. Couatervailing Duties The provision for countervailing duties, Title 19 USC Section 303, recites that whenever any foreign country or business organization thereof "shall pay or bestow, directly or indirectly, any bounty or grant" upon the export of any article produced within a foreign country, and the article is dutiable under the U.S. Tariff laws, an additional duty shall be levied upon its importation into the United States "equal to the net amount of such bounty or grant, as esti- mated by the Secretary of the Treasury." General Electric suggests the statute be re-examined in the light of the two types of trade imbalances previously discussed in this brief: dual pricing and the existing trade advantages of the European tax system. Admittedly, in none of the reported cases brought under the present Act, or its earlier counterpart, has evidence of the alleged "bounty" or "grant" been predicated upon the subsidization of low prices for exports through payment to the exporter by government owned or controlled purchasers of significantly higher prices in the home market for the same goods. In considering whether Section 303 of the current Act could not be interpreted to cover such a method of subsidizing exports, it is stressed: (1) the statute proscribes the payment of "any" type of bounty or grant, and covers those made "directly or indirectly," (2) the bestowal of the pecuniary benefit need not be made by the government, but by a corporation, partnership, association, or "any . . . person . . ." Indirect subsidy payments in the form of higher prices paid by a quasi-governmental body or a government owned utility would ap- pear to come within the literal scope of the language. In three early cases, remission of taxes at the border on account of the exportation of goods was held to be a bounty. U.. v. Passavant, 169 US 16 1897); Downs v. U.s., 187 US496, 47 L. Ed. 275 (1903); Nicholas ~ Co. v. U.s., 249 US 34 (1919). In the Nicholas case, the Court was strikingly clear on this point and treated as irrelevant the fact that the goods were sold in the United States for the same amount as they would have been sold in the United Kingdom if the latter had imposed no domestic tax. In spite of the Nicholas case, supra, the position of the United States Treasury has been that remission of indirect taxes on exports does not constitute a bounty. Hearings on HR. 1535, Customs Simplification Act of 1951, before the House Committee on Ways and Means 16 (1951) ; see also The Contracting Parties to tli e General Agreement on Tariffs and Trade, Antidumping and Count- errailing Duties, 9-10 (1958). The Treasury's position is undoubtedly influenced by the fact that Section 303 is not literally consistent with GATT Article VI, which specifies that counter- vailing duties should be imposed only under the following conditions: 1. The purpose of the duty is to offset a bounty or grant bestowed directly or indirectly upon the manufacture, production or export of merchandise; (Sec. 3) 2. There is a showing of material injury to an established domestic in- dustry, or retardation of the establishment of a domestic industry; (Sec. 6(a)) 3. The importation is not also subject to an antidumping duty; (Sec. 5) and 4. Provided that: "No product of the territory of any contracting party imported inito the territory of any other contracting party shall be subject to antidumping or countervailing duty by reson of the exemption of such product from duties or taxes borne by the like product when destined for consumj)tion in the country of origin or exportation, or by reason of the refund of such duties or taxes." (Sec. 4) U.S. law as expressed in Section 303, Title 19, USC, contains only the first condition; i.e., it does not require any showing of material injury, does not make antidumping and countervailing duties mutually exclusive remedies, and does not exclude from the bounty or grant category rebates or exemptions of indirect taxes. Legislation to conform Section 303 to the material injury require- ment of GATT was introduced but failed to pass the Congress (H.R. 1535, 82nd Congress, 1st Session). PAGENO="0267" 3703 At the request of the Contracting Parties, a group of experts has examined whether remission of indirect taxes upon exportation can be a subsidy or bounty under GATT. Their report, Antidumping and Countervailing Duties, (GATT/ 1961-2) was adopted by the Contracting Parties. They concluded as follows (at p. 20, supra): "Eremption from ta~ration does not constitute subsidization "The Group considered that it was perfectly justified that in conformity with the procedures of paragraph 4 of Article VI, countervailing duties should not be imposed on a product by reason of the exemption of such product from duties or taxes imposed on the like product when destined for consumption in the country of origin or exportation, or by reason of the refund of such duties or taxes. If, however, it were established that the exemption or the reimburse- ment exceeded the real charge which the product would have to pay in the exporting country, the difference could be considered as constituting a subsidy." Since the unshifted portion of an indirect tax is by the definition borne by the producer and not the product, the language of the last sentence of the para- graph would leave the United States free to treat as an export subsidy a rebate of either (1) an amount exceeding a. ta.x aetually paid, or (2) an amount repre- senting the unshifted increment of a TVA tax. 3. Antidumping Act With the previously described electrical utility equipment being sold in the United States at less than fair value, an action would ostensibly lie under the Antidumping Act of 1921 (19 USC 160 et seq). Here, it would seem, is precisely the sort of self-help remedy that the heavy electrical equipment industry, or any of its members, should pursue. The statute and regulations, however, require a finding of material injury or the likelihood of material injury to the domestic industry. Historically, this requirement has been so interpreted by the Tariff Commission that the U.S. electrical industry, which has relatively full employ- ment, increasing production volumes and overall profitability, probably has not sustained injury within the meaning of the Act. This observation does not mean General Electric believes the Antidumping Act should be used as a shield for domestic industry against inroads from fair foreign competition. To the extent a foreign manufacturer, exploiting advantages in costs, produ~tivity or innovation, can produce and sell on a non-discriminatory basis, a product in this country at a price lower than the equivalent U.S.-made product, U.S. manufacturers must look to the economics of the situation-even to the extent of shifting production facilities to offshore locations and exporting to the United States. General Electric suggests, however, that on the facts developed in this brief the concept of material injury could be broadened to permit the Tariff Commis- sion to draw persuasive inference of injury where the dumped sales are in signif- icant volume and such sales depend upon or are linked to the demonstrable exclusion of equivalent U.S. products from the home market of the foreign exporter. C. Certification The Brookings Institution proposal described at the outset of our concluding remarks, has considerable merit and should be considered as one of the methods for dealing with the dual pricing of heavy electrical equipment. The gravity of the situation, however, is such that government-to-government negotiation may not be concluded in time to make such an arrangement an effective remedy~ On a short-range basis, the serious trade imbalance caused by dual pricing might well be relieved by appropriate governmental action changing existing U.S. Government Procurement Regulations (e.g., 41CFR, Subtitle A, Chapter 1) to require foreign suppliers to certify specifically and in a prescribed manner, that the prices they are quoting are no lower than the comparable prices for like prod- ucts sold in their respective domestic markets. If the foreign supplier has not sold such products in his home market, appropriate alternative procurement cer- tifications could deal with either the supplier's prices to third countries, or the constructed value of the products as would be defined in the proposed new Pro- curement Regulations (compare provisions set forth in 19 CFR 14. 7). In view of the existing U~S. balance of payments problem and the consequent threat to the national interest from the current price discrimination practices of foreign suppliers, it seems clear there is ample authority to make such changes in the PAGENO="0268" 3704 U.S. Government Procurement Regulations. (See for example, Executive Order No. 10,582; Armed Services Procurement Regulations 32 CFR Sections 6.102, 6.104-4 (1967)) D. UJ~. tao, on value added The difficulty of determining the quantum of trade advantage that is con- ferred by a high rate indirect tax with border adjustments is the chief obstacle to effective international negotiation or acceptable U.S. counteraction. As long as opinion is widely divided on whether and by how much the United States is disadvantaged by its primary reliance on the direct net income tax, any U.S. bor- der adjustments designed to offset such disadvantage can be alleged to be un- unwarranted and in violation of the GATT. Unless justification for a border levy can be convincingly shown, retaliatory action by foreign nations can be expected. Of the available alternatives, the only border levy clearly exempt from this consideration would be a border tax and export rebate in support of a U.S. in- direct tax of the TVA variety. Should the European Common Market adopt a uniform TVA with a 17% rate, they could not complain if the United States were to replace a portion of its corporate net income tax with an appropriate TVA levy and the import equalization taxes and export rebates similar to those contained in the European TVA laws. A description and analysis of a value- added tax as part of the U.S. tax structure is contained in a statement by the Research and Policy Committee of the Committee for Economic Development, A Better Balance in Federal Taa~es on Business, April 1966, at Page 25 et seq. As an interim measure until a TVA system can be carefully studied and worked into the United States tax system, present international agreements would appear to justify a border tax and export rebate system with a rate equal to the calculated level of indirect taxes borne by goods produced in the United States and not now adjusted for at the border. Informal estimates have placed such a rate at 2-3%. A higher rate, 5% for example, would also be justifiable under Article XII of GATT if imposed as a temporary measure designed to alleviate current U.S. balance of payments difficulties. STATEMENT OF DON A. ELLIs, TREASURER, TEKTRONIX, INC. Tektronix, Inc., Beaverton, Oregon, is a fairly young, rapidly growing company in the technology-based field. Tektronix is the world's largest manufacturer of cathode-ray oscilloscopes, the basic electronic measuring instrument, used by all electronics companies and many others. Tektronix cathode-ray oscilloscopes are the preferred measuring instruments, not only in the United States but in the entire world. Because Tektronix has been able to manufacture oscilloscopes in the United States at a cost that would allow them to be sold competitively throughout the world if there were not trade barriers, the company is a strong advocate for free trade. It therefore strongly opposes the protectionist tendencies which are cropping up so frequently lately, and the program to restrict direct foreign in- vestment. We are sure you have heard all the arguments favoring free trade and opposing trade barriers. We see nothing to be gained by attempting to reword and expound these arguments. We would merely like to point out the obvious: That reduction or elimination of protective trade barriers will hurt those companies or industries that are uneconomic and survive only because they are protected. Obviously, also, the resources used in these industries would better contribute to the prosperity of this country if applied in a more economic use. Therefore, continuing or in- creasing protectionism because some company might otherwise be hurt is unwise, and its logic fallacious. If there had been free trade in the world the last 10 years, we firmly believe Tektronix would be supplying a larger share of the world market than at present, simply by exporting from the United States. Since there were trade barriers, Tektronix has found it necessary to manufacture outside the United States to overcome advantages enjoyed by competitors and potential competitors, advan- tages created by their countries' protective barriers. Tektronix products are now manufactured within the Common Market, the European Free Trade Area and Japan. Much of this output results from assembly PAGENO="0269" 3705 of components manufactured by Tektronix in the United States and exported to the manufacturing subsidiary. The following information shows the growth of Tektronix sales; how much of that was international; and how, even though an increasing porton of the prod- ucts sold internationally must be manufactured outside the United States, exports from the U. S. still have continued to increase. It also shows the amount invested outside the United States to keep Tektronix competitive-including receivables from customers and retained earnings of subsidiaries. Year ended May Net sales International sales Percent international Exported from United States Investment outside United States 1960 1961 1962 1963 1964 j965 1966 1967 1968 44,762,255 50,282,197 60,139,148 70,450,810 75, 502, 572 81,099,088 101,759,192 129,030,753 133,656,005 9,685, 133 12,209,493 14,260,093 18,255,864 22,335,008 25,870,467 30,061,655 35,082, 518 43,487,800 21.6 24.3 23.7 25.9 29.6 31.9 29.5 27.2 32.6 9,095,662 12,567,509 14,636,883 12,199,439 18,271,493 18,212,263 20,475,465 23,477,101 25,844,410 1,722,708 6,711,527 8,014,590 6,694,806 10,095,534 10,754, 121 12,675,550 15,520, 157 19,363,471 We regret we are unable to find reliable information on the total world sale of oscilloscopes, or even on the total United States sale. Most other manufacturers are large companies, with oscilloscopes only a small part of their output. If they announce what portion of their sales are oscilloscopes, we are unaware of it. Although it is not explicit in the figures, we firmly believe Tektronix exports would not be nearly so large had we not protected our competitive position around the world by manufacturing outside the United States. That is, a larger share of the world market would have gone to unchallenged competItors. We would much prefer to concentrate all our manufacturing within the United States. We are convinced that further elimination of trade barriers will increase the proportion of Tektronix manufacturing that is done within the United States. If trade barriers were eliminated, and Tektronix manufacturing expanded within the United States rather than outside it, the company would not be hampered by the program restricting foreign direct investments. As it is, invest- ment restriction considerably retards our ability to compete. We strongly urge that every attempt be made to resist trends toward trade protectionism, and that all efforts seek to rapidly approach free trade among all countries. Mr. FULTON. Our next witness is Mr. Lowe. Mr. Lowe, we welcome you to the committee and ask that you identify yourself for the benefit of the record. STATEMENT OP BERTRAM LOWE, CHAIRMAN, CUSTOMS COMMIT- TEE, AMERICAN WATCH ASSOCIATION; ACCOMPANIED BYSTAN- LEY L. TEMKO, COUNSEL - Mr. LOWE. Mr. Chairman and gentlemen, my name is Bertram Lowe. I am vice president and secretary of the Longines-Wittnauer Watch Co. and chairman of the Customs Committee of the American Walxth Association, on whose behalf I appear. Unfortunately, Mr. Julian Lazrus, president of the AWA and also the president of Benrus Watch Co., who was to be with me, was called away. Mr. Stanley L. Temko of Covington & Burling is counsel to the AWA, and he is here with me on my left. I have a brief statement which I -would like to make at this time, and a longer statement that I should like to submit for the record, to be included as part of my testimony. Mr. FULTON. It will be included. PAGENO="0270" 3706 Mr. LOWE. The AWA is an association of approximately 50 U.S. firms which import watch movements and assemble them, utilizing U.S. and foreign-made cases and other components, into complete watches for sale in the United States and world markets. We are here to oppose legislation that would restrict importation of watch movements either by raising the current rats of duty or by imposing quotas. In particular, we oppose H.R. 11738, which seeks to reimpose the escape clause tariff rates on watch movements in effect for 121/2 years-from July 27, 1954, until January 11, 1967, when they were terminated by the President. We are also opposed to H.R. 16936 and similar bills, lmown as the Fair International Trade Act of 1968. We believe that serious economic injury is the appropriate test for relief from import competition, not share of the market. Our testimony will show that the decision to rescind the escape clause rates was made only after a most careful economic study by the U.S. Government disclosed that the domestic producers have made a successful adjustment to import competition. It will further show that the domestic producers are today enjoying alltime record sales and profits. Significantly, it will show that domestic watch production increased following the tariff reduction, whereas the number of watches entering the United States from offshore sources declined sightly. Al- though we will be able to cover only a part of this material in our oral presentation, the longer statement we have submitted for the record provides detailed information on the performance of the domestic producers and on developments in U.S. watch trade. We believe that the evidence demonstrates that the domestic producers are competing successfully, and that they can continue to do so without additional protection from imports. PRESIDENT'S DECISION FOLLOWED PAINSTAKING INVESTIGATION The President's decision of January 11, 1967, to rescind the escape clause rates of duty on watch movements followed an exhaustive re- view begun by the U.S. Tariff Commission, on its own motion, on December 5, 1963. During the more than 3 years that this matter was under study, the companies which engage in the domestic production of watch movements had every opportunity to present their case, and they did so by resort to several administrative procedures established by Congress as part of the trade agreements program. First of all, there was the opportunity afforded by the basic escape clause review itself, under section 351 (d) (2) of the Trade Expansion Act. Secondly, in April 1964, some domestic producers petitioned for additional escape clause relief under section 301 (b) of the Trade Expansion Act. Thirdly, in a complaint originally filed in April 1964, and amended in December 1964, the domestic producers also brought an action alleging unfair import competition under section 337 of the Tariff Act of 1930. Finally, at the request of the President, an investigation was begun in April 1965, under section 232 of the Trade Expansion Act, into the issue of whether imports of watch products were threatening to injure the national security. PAGENO="0271" 3707 Thus, there were four separate proceedings and four separate in- vestigations, lasting for a period in excess of 3 years. Had the views of the domestic manufacturers prevailed in any one of these four proceedings, it is highly unlikely that the escape clause tariff rates would have been rescinded. Certainly no one can properly state that the domestic producers lacked adequate opportunity to present their views, or that those views received less than thorough consideration. The President's decision, which was taken only after all four of these proceedings had been completed, resulted in the restoration of watch tariffs to the levels established under the United States-Swiss Trade Agreement of 1936-that is to say, the rates existing before the escape clause was invoked in 1954. The reductions amounted to 331/3 percent, as compared to the 50-percent reductions agreed to on a broad range of products in the Kennedy round negotiations. In com- pensation for the restoration of the 1936 rates, the United States received equivalent concessions from Switzerland, to the benefit of U.S. exporters. It should be noted that despite the restoration of the 1936 rates, U.S. watch tariffs remain among the highest levied on any imported product, averaging approximately 40 percent ad valorem equivalent. It is easy to look at watch tariff disputes as a traditional battle between the importers and domestic producers. But the structure of the U.S. watch industry differs from that of other U.S. industries. All major firms in the industry have substantial facilities abroad and in the United States, and all add substantial value to their products here as well as overseas. My company, Longines-Wittnauer, and the other members of the AWA are importers of watch movements, but AWA members do not sell watch movements. We sell complete watches. The value of the imported watch movement represents only a small percentage of the total cost of the watch. As the Tariff Commission pointed out in a comprehensive study of the industry issued in 1947: "The cost of the movement, the only imported element, accounted for about 36 percent of the total cost of the importer-assembler, 25 percent of the cost to the retailer, and 12 percent of the price to the consumer." At the time of that study, in other words, about 88 cents of every dollar paid by a customer for a so-called imported watch remained in the United States to pay for goods and services and for the U.S. duty. The essential point we want to make today is that the domestic watch producers have already enjoyed more substantial tariff pro- tection for a longer period of time than any other American industry of which we are aware. During this extended period, the domestic producers successfully made their adjustment to import competition. In the interest of brevity, I shall skip over most of the detail appearing in our written statement, but I do want to emphasize certain key facts: (1) Domestic watch production was at an alltime high in 1967. As shown in table 1, consumption of U.S.-made watch movements rose from 7.2 million in 1954, the year the escape clause increases were imposed, to 16.6 million in 1967, an increase of 130.6 precent. As shown in table 2, manufacturers' sales in U.S. durable goods industries increased 95.6 percent in that span, and manufacturers' sales in nondurable goods industries increased 87.6 percent. PAGENO="0272" 3708 Thus, the domestic watch manufacturers have substantially out- performed U.S. industry in general over the 13-year period. Watch imports have also increased. Yet, based on the report to the President issued by the Tariff Commission following its compre- hensive review of the watch escape clause, action, imports by importer- assembler firms in 1963 were 10 percent below their 1953 level. On the other hand, imports of watches and watch movements by the domestic manufacturers themselves had increased more than 95 per- cent. The trend is shown in table 3. The Tariff Commission has not made figures of this type available for years after 1963. (2) Sales and profits of the U.S. manufacturers were at an alltime high in 1967. Since the escape clause action of 1954, the watch industry li as undergone a series of changes which have markedly strengthened the competitive capability of the firms which produce watch move- ments domestically. chief among these changes is the growth of U.S. Time, or Timex, from a relatively unimportant company into the giant of the industry. By its own proud boast, U.S. Time is the world's largest watch company, marketing more than 40 percent of all the watches sold in the United States. Its sales last year amounted to $201 million, representing, incidentally, a 40-percent increase over 1966, and a 169-. percent increase since 1962. Please note that this latest increase of 40 percent came after the tariff reduction, which occurred in January 1967. Forbes magazine recently estimate4-June 1, 1~68-that U.S. Time last year earned a return on stockholders' equity of 25 percent. The most recent Fortune 500, reporting on 1967 results, showed only 11 of the 500 largest industrial companies in the United States with a higher earnings rate on invested capital. U.S. Time is a privately held company. If it were a public company, it would, of course, be represented on the Fortune 500. It is ironic that this company-which sells five or six times as many watches as its closest competitor, and is substantially more profitable than any other firm in the industry- should come before Congress and ask to be protected from competition. The other principal domestic producers are also enjoying unpre- cedented prosperity, as shown in table 4. Bulova's sales in the year ended March 31, 1968, were $139.8 miflion, up 13 percent from $123.9 million a year ago. Profits were $4.5 million, an increase of 15% per- cent from $3.9 million a year ago. The results in the year ended March 31, 1968, represented an all-time record for the company, the previous records having been established in the year ended March 31, 1967. Since 1962, Bulova's sales have increased approximately 122 percent. Hamilton increased its sales during the year ending January 31, 1968, to $68.4 million, a new high, and an increase of 81.9 percent since 1962. Hamilton's earnings were below the record level achieved in 1966 because of-and I quote here from the most recent annual report: ~ * * difficulties with a major military contract involving heavy training expenses, difficulty in obtaining parts from certain vendors, and high investment in inventories." First quarter results for 1968 showed an increase of more t.han 45 percent in sales and of about 75 percent in profits from the first ~uart.er of 1967. Hamilton's president, Richard J. Blakinger. said: "We look for continuing improvement for Hamilton through the balance of the year. Based on incoming PAGENO="0273" 3709 orders and operating performance so far, we expect all divisions to complete the year ahead of 1967 in both sales and profits." A second major development in recent years has been the marked trend toward the internationalization of watch production. This trend has affected the domestic manufacturers as well as it has affected most other watch producers in the world. In testimony before the U.S. Tariff Commission in March 1964, a U.S. Time executive asserted that "the importation of parts keeps our labor force at work here." He was saying, in other words, the U.S. Time has taken advantage of international specialization, based on production of certain parts in its foreign factories, production of cer- tain other parts in its U.S. factories, and assembly of completed move- ments for the U.S. market in Puerto Rico, the Virgin Islands, and in the continental United States. This formula enabled U.S. Time to achieve the lowest possible unit cost of production, and is one very important reason for U.S. Time's fantastic success, which has led to a manifold increase in the company's U.S. employment. Certainly there is no basis in fact for the subterranean argument encountered again and again, that U.S. Time could do better by shut- ting up its U.S. factories and supplying the American market entirely from abroad. On the pin-lever watches which continue to be the main- stay of U.S. Time's business, the protection which the company con- tinues to enjoy since the tariff reduction amounts to approximately 75 cents per unit, which is considerably in excess of anything U.S. Time could possibly save by producing movements abroad instead of in the United States. The simple fact is that today the watch industry has become a truly international industry. Even though Switzerland remains by far the largest producer, Swiss and other foreign-based companies, like those in the United States, are using facilities in a number of nations to make watthes with components from a variety of sources. I believe we will see more of this in the future. I also believe firmly that there will continue to be a large and growing role for the American watch industry in this picture. (3) Developments in 1967 confirm that the domestic producers are capable of competing effectively at current rates of duty. As reflected iii table 1, domestic production in 1961 reached 16,599,000 units, an increase of 9.2 percent from the 1966 level. Dutiable imports amounted to 22,913,000 units, an increase of only 6 percent. Shipments from U.S. insular possessions, which are entered free of duty under a special tariff provision, dropped 30.6 percent, to 3,182,000 units, largely because of a quota imposed by Congress, but also partly because the tariff reduction reduced the edge enjoyed by insular watch shipments over dutiable imports. Thus, in spite of the tariff rollback, which might have been expected to stimulate imports relative to domestic production, the total number of watches and watch movements entering the United States from. off- shore sources-that is, dutiable imports plus shipments from the U.S. Virgin Islands and Guam-actually declined 1.3 percent last year. This development substantiated the prediction which the AWA made in 1954 in its testimony before the U.S. Tariff Commission. We said at that time that the principal result of restoring the 1936 tariffs would be to limit production in the Virgin Islands and Guam, and that 95-158 0-68--pt. 8-18 PAGENO="0274" 3710 the domestic companies particularly U.S. Time, would pick up a sub- stantial share of the market vacated by merchandise from the islands. Experience has demonstrated that we were correct. PROPOSED BILL ATTACKS THE BASIC PROCEDtTRES ESTABLISHED BY CONGRESS The real issue posed by }LR. 11738 to this committee, it seems to us, is the integrity of the procedures and guidelines which the Congress has enacted over the years for the conduct of U.S. trade policy. Surely, after 1~½ years under the escape clause, and a careful economic review which documented the successful adjustment of the domestic procluc- ers, Congress will not arbitrarily put aside the procedures which it has established, and which have been fully utilized in this case, thus confirming confidence in them on the part of the trading community. The existence of fair and dependable procedures is essential to the reciprocal trade program and to orderly trade relations with the rest of the world. Thank you for giving us this opportunity to present our views. (Mr. Lowe's prepared statement follows:) STATEMENT OF BERTRAM LOWE, CHAIRMAN, CUSTOMS COMMITTEE, AMERICAN WATCH ASSOCIATION My name is Bertram Lowe. I am Vice President and Secretary of the Longines-Wittnauer Watch Company and Chairman of the Customs Committee of the American Watch Association, on whose behalf I appear. With me is Mr. Julian Lazrus, President of the AWA and also President of the Benrus Watch Company. The AWA is an association of approximately 50 U.S. firms which import watch movements and which assemble them, utilizing U.S. and foreign-made cases and other components, into complete watches for sale in the U.S. and world markets. Many of our members also import watches. In addition to Longines-Wittnauer, members of the AWA include the firms which market such well-known brands as Audemars Piguet, Benrus, Girard Perregaux, Gruen, Lucien Piccard, Louvic, Movado, Omega, Rolex, Waltham, Wyler and Zodiac. We are here to oppose legislation that would restrict the importation of watch movements either by raising the current rates of duty or by imposing quotas. In particular, we oppose H.R. 11738, which seeks to reimpose the escape clause tariff rates on watch movements in effect for 121/2 years-from July 27, 1954, until January 11, 1967, when they were terminated by the President. We are also opposed to H.R. 16936 and similar bills, known as the Fair International Trade Act of 1968. We `believe that serious economic injury is the appropriate text for relief from import competition, not share-of-the-market Our testimony will show that the decision to rescind the escape clause rates was made only after a most careful economic study by the U.S. Government disclosed that the domestic producers have made a successful adjustment to import competition. It will show further that the domestic producers are today enjoying alltiine record sales and profits. Significantly, it will show that domestic watch production increased following the tariff reduction, whereas the number of watches entering the U.S. from offshore sources declined slightly. It provides detailed information on the performance of the domestic producers and on developments in U.S. watch trade. We believe that the evidence demonstrates that the domestic producers are competing successfully and that they can con- tinue to do so without additional protection from imports. THE WATCH TARIFF ROLLBACK FOLLOWED PAINSTAKING ECONOMIC REVIEW On January 11, 1967, President Johnson rescinded the escape clause rates of duty on watch movements following an exhaustive review begun by the U.S. Tariff Commission, on its own motion, on December 5, 1963. During the more than three years that this matter was under study, the companies engaged in the domestic production of watch movements had every opportunity, under PAGENO="0275" 3711 procedures established by Congress as part of the trade agreements programs, to present their case, not only on the economic issues but also on the subject of their alleged essentiality to the national defense. I think it is safe to say that no other industry in the entire history of the trade agreements program has been subjected to such a painstaking and definitive exsmination. First of all, there was the basic escape clause review itself under Section 351(d) (2) of the Trade Expansion Act. Secondly, in April 1964, some domestic producers petitioned for additional escape clause relief under Section 301(b) of the Trade Expansion Act. Thirdly, in a complaint originally filed in April 1964 and amended in December 1964, the domestic producers also brought an action alleging unfair import competition under Section 337 of the Tariff Act of 1930. Finally, at the request of the President, an investigation was begun in April 1965, under Section 232 of the Trade Expansion Act, into the issue of whether imports of watch products were threatening to injure the national security. Thus, there were four separate investigations made, involving three entirely separate sets of hearings and four separate sets of briefs, rebuttal briefs, in- formational memoranda, etc. Had the views of the domestic manufacturers prevailed in any one of these four proceedings, it is highly unlikely that the escape clause tariff rates would have been rescinded. The application for additional escape clause protection was unanimously rejected by the Tariff Commission in October 1964. The complaint of unfair import competition was unanimously rejected in June 1966. The Tariff Commission completed its work on the basic escape clause review in March 1965, at which time the Conrndssion's report became the basis for further studies by the departments and agencies charged with responsibility for advising the President. This review and the national security investigation, which also involved extensive inquiry by several depart- ments and agencies, were completed simultaneously in January 1967. The na- tional security investigation resulted in a finding that imports of watch products were not threatening to impair the national security, and the escape clause review disclosed that the domestic producers had made a successful adjustment to import competition, as contemplated in the Trade Expansion Act of 1962, and would not be injured by restoration to the trade agreement rates. Certainly no one can successfully assert that the domestic producers lacked an adequate opportunity to present their views or that those views received less- than-thorough consideration. The President's action of a year ago January, based on the Tariff Commis- sion's investigation and upon the advice of the Commerce Department, the Labor Department, and other government agencies, resulted in the restoration of watch tariffs to the levels established under the U.S.-Swiss Trade Agreement of 1936- that is to say, the rates existing before the escape clause was invoked in 1954. The reduction amounted to 3314k percent as compared to the 50 percent reduc- tions agreed to on a broad range of products in the Kennedy Round negotiations. In compensation for the restoration of the 1936 rates, the United States received equivalent concessions from Switzerland to the benefit of United States exporters. It should be noted that, despite the restoration of the 1936 rates, U.S. watch tariffs remain among the highest levied on any imported product, averaging approximately 40 percent ad valorem equivalent. Parenthetically, I should explain that watch duties are assessed at so many dollars and cents per unit, ranging from 750 on a pin-lever movement to $2.70 for a small, 17-jewel ladies' movement. Additional charges are levied if a movement is self-winding or adjusted to position and temperature. Watches containing in excess of 17-jewels were not subject to the escape clause increitses; they are cur- rently dutiable at $9.67 and are scheduled to be reduced eventually to $5.37~/2 under the agreements reached in the Kennedy Round. The essential point we want to make today is that the domestic watch pro- ducers have already ehjoyed more substantial tariff protection for a longer period of time than any other American industry of which we are aware. The domestic producers have made their adjustment to import competition. The decision which the President made in January 1967 was entirely just and proper and should not be reversed by an act of Congress. THE EVIDENCE SHOWS DOMESTIC PRODUCERS ARE ENJOYING RECORD PROSPERITY Turning now to the condition of the industry, at the outset let me emphasize these key facts; they will be discussed in greater detail later on. (1) Domestic watch production was at an all-time high in 1967. PAGENO="0276" 3712 (2) Sales of the domestic manufacturers were at an all-time high in 1967. Profits of the domestic manufacturers were undoubtedly also at an all-time high in 1967. The largest domestic manufacturer, Timex, is a closely-held corporation and is not required to report its earnings publicly. But since Time~r sales have nearly trebled since 1960 and went up 40 percent last year alone, we think the assumption is entirely safe. Indeed, Forbes magazine recently estimated that U.S. Time last year earned 25 percent on stockholders' equity. (3) Especially striking is the fact that, as indicated, domestic watch produc- tion increased in 1967 to an all-time high, despite the restoration of trade agree- ment rates on watch imports. Conversely, the number of watch movements enter- ing the U.S. from off-shore sources actually declined. A slight increase in dutiable imports was more than offset by a sharp decline in duty-free shipments from U.S. insular possessions. WATCH TARIFF BATTLES ARE BETWEEN COMPETING SEGMENTS OF U.S. INDUSTRY It is easy to look at watch tariff disputes as a traditional battle between im- porters and domestic producers. But the structure of the U.S. watch industry differs from that of other industries. All firms in the industry have substantial facilities abroad and in the TJ.S., and all add substantial values to their products here as well as overseas. My company, Longines-Wittnauer, and the other members of the AWA, are importers of watch movements. But we do not sell watch movements; we sell complete watches. The value of the imported watch movement represents only a small percentage of the total cost of the watch. As the Tariff Commission pointed out in a comprehensive study of the in- dustry issued in 1947, "the cost of the movement, the only imported element, accounted for about 36 percent of the total cost of the importer-assembler, 25 percent of the cost to the retailer, and 12 percent of the price to the consumer." At the time of the study, in other words, about 88 cents of every dollar paid by a customer for a so-called imported watch remained in the United States to pay for goods and services and for the U.S. duty. While these figures may have changed somewhat in the intervening years, it continues to be a fact that the operations of watch importer-assembler com- panies contribute heavily to the Arerican economy. Conversely, the so-called domestic watch manufacturers are heavily internationalized. Each of theni owns substantial productive facilities overseas and imports a very large number of watches, movements, and parts into this country. Bulova is the largest single U.S. importer. Hamilton is the largest pro- ducer of watch movements in the U.S. Virgin Islands as well as a very substan- tial importer of dutiable merchandise. And U.S. Time imports large quantities of watch parts which it utilizes, together with U.S.-made parts, to assemble the watch movements its manufactures domestically. What the controversy over watch import duties involves is a commercial struggle within the total U.S. watch industry. H.R. 11738 would intervene on the side of ~ few companies which are prospering by every conceivable measure- ment of economic performance and which are well able to take care of themselves. The domestic producers are fond of saying that they could make more money as importers, implying that they are responding to a higher motive in campaigning against imports. But what they really want is the best of both worlds. When Edward T. Carmody of U.S. Time testified before the Tariff Commission in March 1964 in favor of lower duties on imports of watch parts in the pre-Kennedy Round hearings, he acknowledged that be found himself "in a rather unexpected posi- tion, that is historically unexpected," and that his request for lower tariffs on watch parts "might appear at first blush to be a somewhat unusual approach." Re hastened to assure the Commission that when the escape clause hearings began on duties for watch movements as opposed to watch parts, "we will be heard, I hope effectively, in crying against any disturbance of the present tariff structure in any downward form." The question that is raised by the proposal to restore the escape clause rates is whether, with respect to this one industry, ignoring the growth and present prosperity of the domestic manufacturers, ignoring also the proofs of injury required under the escape clause. Congress will impose permanently what are essentially the Smoot-Hawley rates on these products-alone or almost alone among products in the Tariff Schedules of the U.S. I hasten to add that imposi- tion of quotas on watch imports would be equally unfair. PAGENO="0277" 3713 DOMESTIC COMPANIES DOMINATE U.S. MARKET AND SEEK EXCLUSIVE PRESERVE Such protection is surely unwarranted. We do not know the current figure, but the domestic watch manufacturers were responsible for approximately (10 percent of U.S. watch sales at the time the Tariff Commission issued its report to President Johnson in March 1965. In other words, a small handful of firms accounted for three-fifths of all watches sold in the United States conipared to two-flfth~ for the hundreds of firms comprising the importer-assembler segment of the industry. Each of the major domestic companies is larger than the largest of the importer-assemblers. There are certainly few consumer indus- tries in which a small group of companies dominates so large a segment of the market. In a nutshell, this dispute is about how large a guaranteed market companies like Timex ought to have. The various studies conducted by the Administration between 1963 and 1967 demonstrated to the satisfaction of any objective observer that Timex and the other domestic companies can compete successfully at the pre-escape clause rates. The Administration was obviously convinced that the threat to pick up and move overseas is an empty threat. What these companies are asking for is, very simply, an exclusive preserve. DOMESTIC WATCH PRODUcYJI'ION HAS INCREASED 130 PERCENT SINCE 1954 We turn now to a more detailed examination of watch industry trends. Even so, we have-only touched the high points here of a very complicated situation. As previously indicated, during the 121/2 years while the escape clause tariff rates were in effect, the domestic watch industry, made a substantial and succes&- ful adjustment to import competition. A.s shown in Table 1 (attached), apparent consumption of U.S.-made watch movements rose from 7.2 million units in 1954, the year the escape' clause increases were imposed, to 16.6 million in 1967, an increase of 130.6 percent. I am sorry that dollar figures are unavailable, but it is nevertheless instructive to compare the 130.6 percent increase in the volume of U.S. watch production from 1954 to 1967 with increases in sales recorded by other U.S. manufacturing industries during the same period. As shown in Table 2, manufacturers sales in U.S. durable goods industries increased 95.6 percent in that span, and manu- facturers sales in non-durable goods industries increased 87.6 percent. Among the major subcategories of manufacture, there are only three in which the rate of increase exceeded 130 percent-instruments, plastics, and electrical machinery which includes the electronics industry. These three subcategories encompass most of the real "high flyers" in American industry during the past decade- and-a-half. "DOMESTIC" COMPANIES ACCOUNT FOR LARGE PROPORTION OF INCREASED IMPORTS SINCE 1954 Watch imports have also increased. Yet, based on the report to the President issued by the Tariff Commission following its comprehensive review of the watch escape clause action, imports by importer-assembler firms in 1963 were 10 percent below their 1953 level; on `the other hand, imports of watches and watch movements by the domestic manufacturers themselves had increased more than 95 percent. The trend is shown in Table 3. No figures of this' type are available for years after 1963, though imports by importer-assemblers have probably increased faster than those of the domestic producers in the last couple of years. One reason for the decline in imports by importer-assemblers registered during 1963 was the sharp expansion which occurred in that year in shipments of watch movements entering the United States duty-free from the U.S. Virgin Islands. The first firm to assemble movements in the U.S. Virgin Islands was Standard Time Corporation, now a subsidiary of the Hamilton Watch Company. U.S. Time and Bulova also own subsidiaries in the Virgin Islands, as do General Thne, Benrus, and Sheffield, among Other mainland companies. Hamilton, Bulova, and U.S. Time together have quotas to ship about 1.3 million units in 1968 or approxi- mately 25 percent of the total allotted to the V.1.' In the last couple of years, dutiable watch imports have increased substan- tially, primarily as the result of the spectacular growth in the market for ladies' fashion watches, including pendant watches worn on a chain around the neck and, more recently, wrist watches in the so-called "mod" or "go-go" styles. As the U.S. PAGENO="0278" 3714 Tariff Commission has pointed out, imported fashion watches satisfied a new demand and thus did not compete to any significant extent with domestic produc- tion. Initially an inexpensive vogue item for teen-agers, fashion watches sub- sequently caught on as a medium-priced or relatively expensive item of jewelry for older women. Domestic producers began to compete in this market only after it was carved out by the importers. The recent increase in watch imports has certainly not come at the expense of the domestic industry. On the contrary, im- ports helped to establish an important new watch market in which the domestic manufacturers themselves are now competing. DOMESTIC EMPLOYMENT HAS PROBABLY INCREASED SINCE 1954 Employment in watch production fluctuated within a relatively narrow range from 1954 through 1965 and, at the end ~ the period, was down slightly from the 1954 leveL In 1966 and 1967, domestic watch production increased a total of ap- proximately 3 million units. Bulova reported in 1967 that its employment was at an all-time high. Hamilton reported earlier that it had hired 500 new workers in 1965 and anticipated hiring an additional 500 in 196(1. U.S. Time's domestic em- ployment has trebled over the years. While these increases are certainly not attributable entirely to watch production, neither are they consistent with the picture of an aging work force that is being driven to the wall by import competition. Statistics recently reported by the Department of Commerce indicated that employment of production workers in the watch and clock industry rose from 18,308 in 1958 to 22,832 in 1966, up about 25 percent. Much of this increase was undoubtedly in clock assembly, but it must also reflect increased employment by watch-importer asselnl)lerS, as well as the stable trend in employment in watch movement production. In addition, production employment in the watch case industry rose from 2,227 in 1958 to 3,591 in 1966, an increase of more than 60 percent. In summary, while we do not have complete figures at our disposal, we believe that total employment in the U.S. watch industry and its supplier industries has risen since 1954, probably by a couple of thousand or 10-15 percent DOMESTIC COMPANIES HAVE STRENGTHENED THEIR COMPETITIVE POSITION SINCE 1954 Since the escape clause action of 1954, the watch industry has undergone a series of changes which markedly strengthened the competitive capability of the firms which produce watch movements domestically. Chief among these changes is the growth of U.S. Time, or Timex, from a relatively unimportant company into the giant of the industry. By its own proud boast, U.S. Time is the world's largest watch company, marketing more than 40 percent of the watches sold in the United States. Its sales last year amounted to $201 million, representing incidentally a 40 percent increase over 1966 and a 169 percent increase since 1962. I would remind you that this latest increase~ of 40 percent came after the tariff reduction which occurred in January 1967. Forbes magazine recently estimated (June 1, 1968) that U.S. Time last year earned a return on stockholders' equity of 25 percent. The most recent Fortvne 500, reporting on 1967 results, showed just 11 of the 500 largest industrial companies in the U.S. with a higher earnings rate on invested capital. Xerox, to use a familiar bench mark, earned 24.0 percent and stood 13th on the earnings rate list Among those who trailed Timex: Gen- eral Motors (17.6%), IBM (17.4%), RCA (17.4%), Litton Industries (16.4%), Coca-Cola (22.5%), Pfiser (13.9%), Texas Instruments (9.5%), LTV (13.9%), and Eli Lilly (19.2%), all regarded as exceptionally profitable companies. Ac- cording to Forbes, U.S. Time's earnings per share have increased 200 percent since 1962. U.S. Time is a privately-held company. If it were a public company, it would, of course, be represented in the Fortwne 500. Forbes recently quoted U.S Times Vice President Robert E. Mohr as saying: "Labor may be cheaper in Switzerland, but through automation we can keep our costs down." In view of U.S. Time's growth, its obvious profitability, and its remarkable dominance of the low price market, no one can seriously question this company's ability to take care of itself competitively. In fact, it is ironic that this company-which sells five or six times as many watches as its closest com- petitor and is substantially more profitable than any other firm in the industry- should come before Congress and ask to be protected from competition. PAGENO="0279" 3715 The other principal domestic producers are also enjoying unprecedented pros- perity, as shown in Table 4. Bulova's sales in the year ended March 31, 1968, were $139.8 million, up 13 percent from $123.9 million a year ago. Profits were $4.5 million, an increase of 15'/2 percent from $3.9 million a year ago. The results in the year ended March 31, 1968, represented an all-time record for the company, the previous records having been established in the year ended March 31, 1967. Since 1962, Bulova's sales have increased approximately 122 percent. Bulova officials have stated flatly that the reduction in the escape clause rates "imposed no economic penalty on the company." The Long Island Newsday last year quoted Bulova President Harry B. Henshel as saying that Bulova is working at peak capacity, "particularly at its Long Island plants," where the phenomenally suc- cessful Accutron is produced for the U.S. market. Bulova officials told stockhold- ers on June 13, 1967, "in the next two years we will continue to expand our manufacturing facilities for both watch cases and movements." More recently, in March of this year, Bulova's national sales manager, Michael D. Roman, fore- cast that Accutron would be the "leading selling watch brand in the United States in dollar volume within three years." Hamilton increased its sales during the year ending January 31, 1968, to $68.4 million, a new high, and an increase of 81.9 percent since 1962. Hamilton's earn- ings were below the record level achieved in 1966 because of-and I quote ht~r~~ from the most recent annual report-difficulties with a major military contract involving heavy training expenses, difficulty in obtaining parts from certain vendors, and high investment in inventories." The annual report forecast "a good year ~n i~,& anu predicted that ~industry-wide sales of watches probably will reach new highs." Arthur B. Sinkler, now the firm's chairman, said in 1967 that Hamilton's factory in Lancaster, Pa., was operating "at near-capacity levels." First quarter results for 1968 showed an increase of more than 45 percent in sales and of about 75 percent in profits ($19,240,000 and $414,000 in the quarter ended April 30, 1968, compared to $13,050,000 and $237,000 in the first quarter of the previous fiscal year). General Time, which is a relatively small factor in the watch business though a major producer of clocks, also achieved record sales of $129.5 million in 1967 and, according to Forbes, boosted sales during the most recent 12-month period to $132.8 million, a gain of 92 percent since 1962. Spokesmen for the domestic companies have been extremely optimistic about the future. Harry B. Henshel of Bulova, in December of 1967, forecast "an all-time record watch market in the United States in 1968," with an increase in unit sales of "at least 10 percent during the next 12 months." We have already mentioned the forecast by Mr. Roman of Bulova regarding his expectation for the Acoutron. Hamilton's President Richard J. Blakinger, also in December 1967, predicted that watch sales "should reach a new high of 46 million units and exceed $1 billion in 1968." He said that "the pace is accelerating as we enter 1968." In announcing his firm's first quarter results for 1968, Mr. Blakinger said: "We look for continuing improvement for Hamilton through the balance of the year. Based on incoming orders and operating performance so far, we expect all divisions to complete the year ahead of 1967 in both sales and profits." A second major development in recent years has been the marked trend toward the internationalization of watch production. This trend has affected the domestic manufacturers as well as it has affected most other watch producers in the world. U.S. Time and its affiliates now have factories in England, Scotland, France, West Germany, Canada, Puerto Rico, and the U.S. Virgin Islands, as well as in the continental U.S. In addition to producing watches for marketing abroad- and I would note that, according to U.S. News c~ World Report of August 21, 1.967, Timex now accounts for one-third of the watches sold in Britain, 20 percent in France, and about 10 percent in West Germany-these factories also produce parts for incorporation in the watch movements which U.S. Time manufactures domestically. -. In testimony before the U.S. Tariff Commission in March 1964, a U.S. Time executive asserted that "the importation of parts keeps our labor force at work here." He was saying, in other words, that U.S. Time has taken advantage of international specialization to achieve the lowest possible unit cost of produc- tion on the millions of watch movements it produces in the United States. This technique is one very important reason for U.S. Time's fantastic success and has led to a many-fold increase in the company's U.S. employment. PAGENO="0280" 3716 In light of U.S. Time's current position on watch tariffs, it is extremely interesting that this statement was made by the U.S. Time spokesman at hear- ings in advance of the Kennedy Round negotiations and was designed to per- suade U.S. negotiators to grant a full 50 percent reduction in U.S. tariffs on watch parts, the maximum permitted under the Trade Expansion Act of 1962. U.S. negotiators did, in fact, agree to a full 50 percent reduction in tariffs cm watch parts-as contrasted to a 33% percent reduction from the 1930 level in the tariffs on most watch movements after the rollback. We believe that U.S~ Time continues to enjoy the advantages of international specialization based on production of certain parts in its foreign factories, production of other parts in its U.S. factories, and assembly of completed movements for the U.S. market in Puerto Rico, the Virgin Island's, and in the continental United States. Certainly there is no basis in fact for the subterranean argument encountered again and again that U.S. Time could do better by shutting up its U.S. factories and supplying the American market entirely from abroad. On the pin-lever watches which continue to be the mainstay of U.S. Time's business, the pro- tection which the company con~tinue8 to enjoy since the tariff reduction amounts to approximately 75 cents per unit, which is considerably in excess of anything U.S. Time could possibly save by producing movements abroad instead of in the United States. The other major domestic manufacturers are also substantial importer-assem- blers. Bulova has foreign facilities in Toronto, Canada, and in Bienne and Neuchatel, Switzerland. In 19(30, it acquired majority control of the Recta Watch Company of Bienne. Also in 1960, Bulova established a new subsidiary, Bulova International Ltd., in Bermuda to import jeweled-lever watches from the Citi- zen Watch Company of Japan. Bulova's Caravelle line, utilizing principally Japanese movements, has become one of the market's major brands in recent years. In 1967, Bulova acquired Universal Geneve, one of Switzerland's most prestigious watchmakers. Today Bulova is the largest single manufacturer in Switzerland and the largest U.S. importer. It also operates a substantial facility in the U.S. Virgin Islands. Hamilton established a Swiss manufacturing subsidiary, Ha~mill S.. A., in 1969, and subsequently purchased all the outstanding stock of A. Huguenin Fils, S.A., of Bienne, which had been Hamilton's major supplier of imported watch movements since 1952. A Japanese affiliate, the Hamilton-Ricoh Watch Company, which is 60 percent owned by Hamilton, was established in 1962. In 19643, Hamilton acquired the Buren Watch Company, a leading Swiss manufacturer. In addition, in October 1967, Hamilton purchased the Semca Watch Company and organized a `new subsidiary, Vantage International G.m.b.H. in Pforzheim, West Germany, to provide watch movements for Hamilton's Vantage line. Additionally, Hamilton owns and operates Standard Time Corp., the oldest and largest of the watch firms in the U.S. Virgin Islands. General Time has subsidiaries in Mexico, Oanada, Brazil, Scotland, and Hong Kong, as well as in the U.S. Virgin Islands. In brief, each of the domestic manufacturers has become a major international company, with world-wide production and marketing facilities. Each is a major importer for the U.S. market. This trend toward internationalization took place for the most part after the tariff increase of 1954. It came about, in part, because higher tariffs shut out inexpensive jeweled-lever watches and opened the way for Timex to grab the lion's share of the low price market. Timex found a formula for manufacturing some parts overseas and some parts in the U.S. that enabled it to take advantage of scale economies in both places. U.S. Time's example, and, equally important, its challenge in the marketplace forced the other companies, like Hamilton, to revise their traditional marketing strategy and to broaden their base of supply. The sudden and spectacular growth of watch operations in the Virgin Islands added to the ferment, affecting everyone in the industry- both those who went `to the Virgin Islands and those who did not. The simple fact is that today the watch industry has become a truly inter- national industry. Even though Switzerland remains by far the largest producer, Swiss and other foreign-based companies, like those in the United States. are using facilities in a number of nation's to make watches with components from a variety of sources. Already watch movements are made from parts produced in several countries, assembled in cases manufactured in yet another country. and completed with bracelets or watch bands made in still another country. I believe we will see more of this in the future. I also believe firmly that there will PAGENO="0281" 3717 continue to be a large and growing role for the American watch industry in this P]cture. Developments in 1967 confirm that the domestic producers are perfectly capa- ble of competing effectively at current rates of duty. As reflected in Table 1, domestic production in 1967 reached 16,599,000 units, an all-time high and an increase of 9.2 percent from the 1966 level. Dutiable imports amounted to 22,913,000 units, only an increase of 6 percent. Shipments from U.S. insular possessions, which are entered free of duty under a special tariff provision, dropped 30.6 percent to 3,782,000 units. As the Committee knows, shipments from TJ.S. possessions are controlled under a system of quotas enacted by Congress in 1966. It is important to note, however, that the decline last year was greater than that required by the quota system. Because watch movements produced in the islands must be able, in order to qualify for duty-free treatment, to sell on the mainland for more than twice the value of their foreign components, the rollback in the tariff on dutiable watch movements had a substantial impact on insular production. Many watch com- panies in the Virgin Islands and Guam failed to produce up to their quotas in 1967. In fact, most observers are convinced that if it had not been for the desire of operators in the islands to keep their production as high as possible in order to retain their quotas for 1968, insular watch production would have been even lower in 1967. Thus, in spite of the tariff rollback, which might naturally have been expected to stimulate imports relative to domestic production, the total number of watches and watch movements entering the United States from offshore sources-i.e., dutiable imports plus shipments from the U.S. Virgin Islands and Guam-actu- ally declined 1.3 percent last year. As I pointed out a moment ago, domestic production in contrast rose 9.2 percent. This development substantiated the pre- diction which the AWA made in 1964 in its testimony before the U.S. Tariff Commission. We said at that time that the principal result of restoring the 1936 tariffs would be to limit production in the Virgin Islands and Guam and that the domestic companies, particulariy U.S. Time, would pick up a substantial share of the market vacated by merchandise from the islands. Experience has demonstrated that we were éorrect. I have dwelt on this point at some length because developments in 1967, fol- lowing the rollback, tend to prove that the President was entirely right in his assessment of the industry's situation. That the domestic producers have made a successful adjustment during the 121/2 years while the escape clause was in effect is shown by their resilience in dealing with the consequences of the rollback. Spokesmen for the domestic producers respond by pointing out that there are fewer domestic watch producers today than there were in 1950. They call atten- tion to the recent decision of the Elgin National Watch Company to quit domestic production as evidence that the prosperity of the domestic industry is a false glow. On the surface, the argument is a highly plausible one. But only on the surface. The fact that there are only four surviving U.S. automobile manufac- turers is scarcely a sign that the automobile industry is failing. Nor does the dominance of General Electric and Westinghouse foreshadow the decline of the electrical industry. Elgin got into difficulty because of bad management decisions. Elgin's domestic production was highly inefficient, utilizing old-fashioned methods and obsolete machinery. For example, Elgin had cutting machines which cut one tooth at a time without using automatic feeders. A worker could produce 1,800 parts a day on these machines. On the modern cutting and milling equipment employed by Elgin's competitors, a worker can produce 10 to 15 times as many parts. Many other examples of inefficient production practices could be cited. In the early 1960's, Elgin also experienced serious financial difficulty because of what were described as substantial "cost overruns" on defense contracts. The company lost $13.9 million in the 1962-66 period, and shareholders' equity-that is, net worth-dropped from $19.7 million in 1963 to $8.9 million in fiscal 1965. The company's troubles, resulting from an ill-advised attempt at diversification, sparked a bitter proxy fight leading to the ouster of Elgin's previous management and the company's complete reorganization. The company abandoned its defense operation entirely and cut back its sales from a high of $66.2 million in the year ended February 29, 1964 to $38.7 million in the year ended February 29, 1968. Indeed, Elgin's sales in fiscal 1968 were 11 percent below fiscal 1962. With the company in a weakened position financially, the new management decided that instead of investing in a costly modernization program it would PAGENO="0282" 3718 shift production to its other plants in the U.S. Virgin Islands and abroad. Elgin's failure, in short, was a management failure. We see no basis in the Elgin example for concern about Bulova, Hamilton, or U.S. Time. PROPOSED BILL ATTACKS THE BASIC PROCEDURES ESTABLISHED BY CONGRESS Gentlemen, it seems to us that fundamental trade policy questions are raised by these proposals to limit watch imports, whether by restoring the escape clause tariff rates or by imposing a ceiling on imports as a prelude to a possible quota. Last year, American consumers purchased about 43.3 million watches. Of this total about 16.6 million were U.S.-made, 22.9 million contained imported move- ments, and 3.8 million contained movements entered free of duty through the U.S. Virgin Islands and Guam. The real issue posed by H.R. 11738 to this Committee, it seems to us, is the integrity of the procedures and guidelines which the Congress has enacted over the years for the conduct of United States trade policy. Surely, after 12% years under the escape clause and a careful economic review which documented the successful adjusted of the domestic producers, Congress will not arMtrarily put aside the procedures which it has established-and which have been fully utilized in this case, thus confirming confidence in them on the part of the trading com- munity. The existence of fair and dependable procedures is essential to the reciprocal trade program and to orderly trade relations with the rest of the world. From the standpoint of the watch industry, I must add that the Herlong bill would be no less damaging than the proposal to restore the escape clause tariff rates. Section 5(d) (3) of that bill would require the certification of a ceiling on imports which supply more than 40 percent of domestic consumption and have incerased 15 percent since 1960. Since 1960. U.S. watch consumption has increased more than 90 percent; imports have increased about 75 percent. Al- though watch imports today supply a smaller portion of the domestic market than they did in 1960, a ceiling would be imposed by this legislation requiring a cutback of approximately 1.5 million units from present import levels. In addition, we are opposed to H.R. 16926 and similar bills because of the admin- istrative difficulties and inequities which inevitably accompany a quota system. Thank you for giving us this opportunity to present our views. Table 1.-Apparent consumption of Uf~.-produced watch mo'vements [In units] Year: Volume 1954 7, 183,000 1955 8,358,000 1956 9,286,000 1957 7, 782,000 1958 9,448,000 1959 11,282, 000 1960 9,475,000 1961 9,668,000 1962 11,919,000 1963 12,135,000 1964 11,970,000 1965 13, 609,000 1966 15, 192,000 1967 16,599, 000 ~oTE.-Apparent consumption of domestic watch movements represents domestic pro- duction of watch movements in the U.S. minus U.S. exports of watches containing such movements. Source: U.S. Tariff Commission. PAGENO="0283" 3719 TABLE 2.-U.S. MANUFACTURERS SALES [Dollar amounts in billionsj 1954 1967 Percent increase Durable goods industries $141.9 $277. 5 95.6 Nondurable goods industries 138.3 259. 5 87. 6 Stone, clay, and glass products 7.4 11. 8 59. 5 Primary metals 23.9 42.6 78.2 (Blast furnaces, steel mills) (13. 2) (22. 2) (68. 2) Fabricated metal products 15.4 25. 7 66. 9 Machinery, except electrical 18. 8 43. 1 129. 3 Electrical machinery 16. 2 40. 9 152. 5 Transportation equipment 37.2 73. 0 96. 2 (Motor vehicles and parts) (21. 8) (42. 2) (93. 6) Instruments and related products 3. 6 10. 7 197. 2 Food and kindred products 50.6 92.4 82.6 Tobacco products 3.4 5.1 50.0 Textile mill products 11.6 19.2 65. 5 Paper and allied products 10. 5 22. 5 114. 3 Chemicals and allied products 17.9 40. 1 124. 0 Petroleum and coal products 13. 1 21.3 65. 6 Rubber and plastics products 5. 1 13. 3 160. 8 Source: Statistics for 1954 from Business Statistics: 1967, 16th Biennial Edition, U.S. Department of Commerce,Office of Business Economics, pp. 24-45. Statistics for 1967 from Survey of Current Business, May 1968, p. S-5. TABLE 3.-IMPORTS BY DOMESTIC WATCH MANUFACTURERS VERSUS IMPORTS BY OTHER IMPORTER-ASSEMBLERS [In unitsj Dutiable imports Duitable imports by U.S. watch by other importer- manufacturers assemblers 1953 1,925,000 9,950,000 1954 1,911,000 7,106,000 1955 1,903,000 7,452,000 1956 2,070, 000 10, 192, 000 1957 2,246, 000 9,997, 000 1958 1,976,000 8,411,000 1959 2,738, 000 10,734,000 1960 2,804, 000 10,354, 000 1961 2,458,000 10,169,000 1962 3,231,000 10,567,000 1963 13,774,000 `8,971,000 1964 (2) (2) 1 Only the 1963 statistics reflect all imports by U.S. producers. If statistics for 1953-62 were available on the same basis the effect would be to increase the quantity of imports credited to U.S. watch manufacturers and to decrease the quantity credited to importer-assemblers by an unknown amount. Undoubtedly, this amount was near zero in 1953 but fairly sizable during 1962. 2 In 1964, according to the U.S. Tariff Commission, U.S. proucers brought in 4,200,000 units, including both dutiable imports and shipments from the U.S. Virgin Islands; however, the Tariff Commission did not specify how many were dutiable imports. Source: Statistics for 1953-62 based on table 3, sales of products by U.S. establishments in which watch movements are produced, and table 7, U.S. imports for consumption, U.S. Tariff Commission, Watch Movements, Preliminary Statistical Data for Use in Connection with Investigation No. TEA-lA-2 (Apr. 28, 1964). Statistics for 1963 from table 7 estimated U.S. consumption by supplier, origin, and type, 1963, U.S. Tariff Commission, Watch Movements, Report to the President on Investigation No. TEA-lA-2 Under sec. 351(d)(2) of the Trade Expansion Act of 1962. PAGENO="0284" 3720 TABLE 4.-DOMESTIC WATCH MOVEMENT MANUFACTURERS FINANCIAL SUMMARY LIn millions of dollarsj 1968 1967 1966 1965 1964 Bulova (years ended Mar. 31): Net sales Net income $139.8 4. 5 $123.9 3. 9 $99.8 3. 2 $84.2 2. 8 $73.0 2.4 Current assets Current liabilities Stockholders' equity (1) (1) (1) 99. 3 41.9 46.4 88.2 32.2 43. 4 74. 0 18.9 41. 3 62. 2 26.3 39. 4 1967 1966 1965 1964 1963 General Time: Netsales Net income $129.5 3.8 $110.8 3.3 $91.6 2.5 $79.9 1.9 $73.6 1.4 Current assets Current liabilities Stockholders' equity (1) (1) (1) (`) (1) (1) 42. 4 16.6 32.3 40. 1 14.2 30.9 33. 1 10. 8 29.4 1968 1967 1966 1965 1964 Hamilton (years ended Jan. 31): Net sales Net income $68.4 1.9 $61.9 2.6 - $44.8 2.0 $38.1 1.1 $37.1 .6 Current assets 50.7 40.4 26.8 23.4 23.3 Current liabilities 7.6 12.4 4.3 3.0 7. 5 Stockholders' equity 31. 9 27. 3 21. 4 18. 2 17. 7 1967 1966 1965 1964 1963 U.S. Time: Net sales Net income Current assets Current liabilities Net worth $201. 6 (3) (1) (1) +40 $143. 0 (1) (1) (1) (`) (2) (1) (1) (1) (1) $90.9 5. 4 30.9 13. 3 25.4 $83. 5 4. 0 (1) (1) 23. 1 1 Not available. 2 U.S. Time Chairman and President Joakim L. Lehmkuhl said that the company's sales topped $100,000,000 in 1965, according to Newsweek, Mar. 16, 1966. 3 "Well over $10,000,000" or 25 percent of stockholders' equity according to estimate by Forbes, June 1, 1968. Mr. TJLLMAN (presiding). We thank you very much, Mr. Lowe. Are there questions? You have been very helpful to the committee. You have a very fine paper. We appreciate your appearance. Mr. LOWE. Thank you, sir. Mr. TJLLMAN. Mr. Carmody. Mr. Carmody, we are very happy to have you before the committee. STATEME~ OP EDWARD T. CARMODY, VICE ~XRAIRMAN AI~D DI~ RECTOR, TIMEX, THE U.S. TIME CORP.; ACCOMPANIED BY RONALD MARiSOHING, SECRETARY AND GENERAL COUNSEL Mr. CARMODY. Thank you very much, Mr. Chairman. Mr. TJLLMAN. For the record, would you please identify yourself and your colleague and with the understanding your full statement will appear in the record, proceed as you see fit, sir. Mr. CARMODY. Thank you very much. My name is Edward Carmody. I am a director and vice chairman of the TJ.S. Time Corp., with headquarters in Middlebury, Conn. PAGENO="0285" 3721 With me is Mr. Ronald Marsching, secretary and general counsel of the U.S. Time Corp. We will summarize here the brief we have filed with the committee. Our company was established in 1857. We make the Timex watch, and in this testimony I will refer to the Timex group of companies, including our affiliated companies, as Timex. Timex has watch factories in the mainland U.S.A., in Middlebury and Watertown, Conn.; Little Rock, Ark.; and Abilene, Tex. We also produce watches in Puerto Rico and the Virgin Islands; Toronto, Canada; Dundee, Scotland; Feitham, England; Pforzheim, West Germany; Besancon, France; and Hong Kong, and are in the process of building a plant in Taiwan. We have research laboratories in Middlebury, Irvington-on-Hudson, N.Y., and in Scotland, France, and England. We are the world's largest producer of watches. And from all I have just enumerated, you might gather that there was not a cloud in our sky, and wonder why we are here. Specifically, we are here to support H.R. 11738, which would restore tariffs on watch movements to the levels prevailing immediately prior to the action of the President on January 11, 1967, which removed es- cape clause rates for imported movements, and to oppOse H.R. 17551, which among other things would permit the President further to re- duce the tariffs on movements. It is almost 20 years ago that we began to come to Washington to plead for the survival of the horological industry in the Umted States, and to prophesy its eventual extinction unless it was given tariff or quota protection. Eighty-five percent of the cost of a watch is labor, and it was ob- vious to us that with the productivity of foreign labor being the equal of ours here in the United States, and with foreign labor rates a fraction of ours here in the United States, there was no place for our domestic watch and clock industry to go but out. For whatever consolation it gives us, we have been good prophets. In 1957 the Waltham Watch Co., discontinued the production of watches. In 1959, New Haven Clock and Watch Co., went out of busi- ness. In the same year, Ingraham Co., gave up the production of wrist watches. In 1963, Precision Time Co., went into bankruptcy. In 1964, General Time Corp., gave up the production of wrist watches. In that same year, Elgin Watch Co., which a year earlier had closed its Elgin, Ill., plant and discontinued all domestic production of men's watches, discontinued the manufacture of all watches in the United States. And now Hamilton Watch Co., is planning further restrictions on the number of calibers it makes in the United States. So here we are, almost 20 years later, the only domestic manufacturer of wrist watches which does not also manufacture watches in Switzer- land. And the only reason we are still here is that our foreign plants supply us with about half the parts that go into our Timex watches. This state of affairs, of course, makes the Swiss watch cartel re- joice-which cartel the U.S. District Court for the Southern District of New York in 1962 found, in an opinion of over 100 pages, guilty of violating the U.S. antitrust laws. And the Tariff Commission reached the same conclusion in its June 1966 report to the President-also over 100 pages. PAGENO="0286" 3722 And the free traders among us think that this attrition in the ranks of our industry is a necessary step forward toward the Utopia they envision, when all tariffs and trade barriers have been abolished. We do not question the motives of the free traders, but we cannot understand their lack of concern over who will supply our country- speedily and in volume-with artillery fuzes and other small and in- tricate armaments, when they are needed. The Defense Department, at least the top echelon of the Defense Department, was of the opinion in 1966 that as to other domestic in- dustries not presently making such fuzes and armaments: * * * as a result of the experience they were gaining in the current procure- ment program to meet Vietnam needs, their capability for making the more difficult mechanical timing devices used in fuzes and other ordnance items will increase substaTitially. Well, said capabilities do not seem to have increased substantially enough, because, just as they did in World War II and the Korean action, the Defense Department has had to come back to' what is now left of the domestic horological industry for `mechanical time artillery fuzes for Vietnam and this industry is the only industry supplying them-critically as they have been needed. In 1964, the Special Preparedness Investigating Subcommittee of the Committee on Armed Services of the U.S. Senate looked carefully into the importance of the horological industry to national security. Their conclusion was forthright, to wit: that the watch industry was involved in over 90 percent of our missile programs; that it was the only industry capable of making timing devices for certain nuclear weapons; that there is a definite need for the industry in the field of miniature timing devices of many kinds, both for current and emer- gency production; and t:hat Russia, Red China, Japan, France, and Germany have been fostering their watch industries, while the United States allows it to wither. It would be a foolish prophet who does not heed his own prophecies. We have, perforce, heeded ours. For more than 10 years, seeing the apathy of Government toward the plight of our industry, we have been making ready for the day when we, too, will have to disappear from this country. Timex has established the foreign plants I have mentioned above, has examined the possibilities of establishing plants in six additional countries, and has bought land in two of them. We never forget that figure-that 85 percent of the cost of a watch is labor. And we observe the labor rates not only in Europe, but espe- cially in Japan, Russia, and Red China, and reflect at the same time on the additional assistance all foreign watchmakers are offered here by our descending tariffs. It takes a long time to make a watch plant in a foreign country self-contained and profitable. It takes many years just to train the too1makers required. But we have been working at it. We have no other choice. We know that, in time, unless we are given, with urgent speed, help from our own Government, we will have gone the way so many of our industry have been forced to follow-out. Thank you. (Mr. Carmody's prepared statement follows:) PAGENO="0287" 3723 STATEMENT OF EDWARD T. CARMODY, VICE CHAIRMAN AND DIRECTOR, TIMEX, THE UNITED STATES TIME CORPORATION My name is Edward Carmody. I am a Director and Vice Chairman of The United S~ates Time Corporation of Middlebury, Connecticut-manufacturers of TIMEX watches. We were established in 1857. We are the world's largest producer of watches. In this testimony I will refer to TIMEX, including our affiliated companies, as TIMEX. TIMEX has watch factories in the mainland U.S.A. in Middlebury and Water- town, Connecticut, Lii,tle Rock, Arkansas and Abilene, Texas. We also produce watches in Puerto Rico and the Virgin Islands, Toronto, Canada, Dundee, Scot- land, Feltham, England, Pforzheim, West Germany, Besancon, France and Hong Kong and are in the process of building a plant in Taiwan. We have research laboratories in Middlebury, Irvington-on-Hudson, New York and in Scotland, France and England. Specifically, we are here to support H.R. 11738 which would restore tariffs on watch movements to the levels prevailing immediately prior to the action of the President on January 11, 1967 which removed Escape Clause rates for imported movements and to oppose H.R. 17551 which among other things Would permit the President further to reduce the tariffs on movements. Existing tariffs on movements which were originally established in 1930 have over the years been reduced approximately 38% by administrative action. But additional penalty exists in these tariff rates because they are fixed in amount rather than ad valorem so that they have in effect been reduced approximately 34% by inflation. Consequently today's tariffs on movemeuts are approximately 72% lower than the tariffs in effect in 1930. We will be glad to furnish to the Committee the statistical data underlying these figures. I want first to tell you something about our company, then briefly to picture for you the chaotic condition of the watch industry in the United States, includ- ing the extent to which it is controlled by the Swiss watch cartel, and finally the effect upon the national security of depriving this nation of the capacity to prn(l'~Pr~ n~ fr'nic'~I t~me artillery fuses for the military which are now supplied only by the domestic horological industry-an industry that will cease to exist unu~r die pre~ai~ing trenU ot tariffs. THE BUSINESS OF TIMEX From its inception in 1857 to the end of World War II, TIMEX had never manufactured outside the United States. During World War II, TIMEX was a principal producer for the United States Government of mechanical time artillery and anti-aircraft fuses as well as such aircraft instruments as screw jack actuators, hook retractors, shutter controls, depth controlled gears and oil pressure gauges. At the time of the Korean conflict TIMEX was the largest producer in the United States of mechanical time artillery fuses, producing 25,000 fuses per day, in addition to safety devices for proximity fuses. Today, artillery fuses are produced by TIMEX under govern- ment contract and various types of timing mechanisms are produced for, among others, Sandia Corporation, contractor for the Atomic Energy Commission. TIMEX is now a very substantial supplier of the M-564 and M-565 mechanical time fuses for the Army. Following World War II, TIMEX resumed the pro- duction of civilian timepieces and in 1949 introduced TIMEX watches in the United States. TIMEX at this time makes over 80% of the watches produced in the United States because our competitors have been compelled to abandon domestic production due to lower foreign production costs. In the 1940's and 1950's TIMEX opened plants in Scotland, England and West Germany, and in 1962 opened an additional plant in France. TIMEX supplies the entire world deman~1 for TIMEX watches, outside the United States, from its foreign plants. Domestic plants cannot compete abroad. About 50% of the parts TIMEX uses in the domestic manufacture of watches are imported from its plants abroad. The primary purpose of our building plants abroad has been to insure a flow of parts and movements which would keep us competitive in the domestic market. TIMEX employs about 9,000 people in the United States and about 8,000 `abroad. About 3,500 of these people are employed by us at Little Rock, where we have received an award from the Urban League for our non-discriminatory employ- PAGENO="0288" 3724 mont practices and our contributions to race relations. Unfortunately, most of our negro employees have much less seniority than our white employees and therefore under seniority requirements they would be the first to go if and when that labor force is reduced. We are told by the Arkansas State Unemployment Agencies that there is no employment available locally for those potentially unemployed persons except domestic work. THE DOMESTIC HOROLOGICAL INDUSTRY Since before World War II the watch industry in the United States has been dominated by the Swiss watch cartel. The nature, character and extent of the Swiss watch cartel is described in detail first, in an opinion of the United States District Court for the Southern District of New York, dated December 20, 1962, United States v. The Watch Makers of Switzerland Information Center, et al., in which the Court found the Swiss watch cartel guilty of violating the United States antitrust laws, and secondly, in a June 1966 Report to the President from the Tariff Commission (T. C. 177). Each is more than 100 pages long. Perhaps second only to the South African diamond cartel, the Swiss watch cartel is probably the most powerful cartel in the world. Its influence is such that it was able to persuade the Swiss Government to prevail upon the President of the United States, on January 11, 1967, to withdraw the then existing Escape Clause rates on watch tariffs of the United States as a pre-condition to the Swiss Government's participating with the United States and other Governments in the Kennedy Round tariff negotiations in the Spring of 1967. Existing tariff rates for watch movements were established by paragraph 367(a) of the Tariff Act of 1930. These rates were very substantially reduced by concessions in a Trade Agreement with Switzerland (T. D. 48093), effective February 15, 1936, entered into under the Trade Agreement Extension Act of 1934. Following an Escape Clause investigation by the Tariff Commission, pur- suant to the Trade Agreements Extension Act of 1951, and on the recommenda- tion of the Tariff Commission, the President on January 27, 1954 increased the duties on watch movements by Proclamation No. 3062 to roughly the levels estab- lished by the Tariff Act of 1930. On January 11, 1967, the President by Proclama- tion No. 3761 withdrew the Escape Clause tariff rates on watches provided for by the 1954 Presidential Proclamation and reinstated the tariffs provided for by the 1936 Trade Agreement with the Swiss. At least 85% of the watches imported into the United States are from Switzer- land. Excluding TIMEX's sales, approximately 70% of the U.S. consumption of watches are watches produced in Switzerland. In the period 1958 through 1967 domestic consumption of watches increased from 19.8 million to 43.3 million, an increase of approximately 23 million watches. Yet domestic production in- creased by only 7 million watches (from 9.4 million to 16.6 million). Thus domestic production accounted for less than one-third of the increased consumption during that ten-year period. These data are all from official reports of the United States Tariff Commission. The specific results of Swiss imports are shown in the following. In 1957 Walt- ham Watch Company, then a domestic manufacturer of watches, discontinued the production of watches. In 1959 New Haven Clock and Watch Company, then a domestic manufacturer of watches, went out of business. In 1959 Ingraham Com- pany, then a domestic watch manufacturer, discontinued the production of wrist watches and continued domestic production only of pocket watches. In 1963 Precision Time Company, a manufacturer of wrist watch movements, went into bankruptcy, and its plant and equipment were sold in 1964. In 1964 General Time Company discontinued the manufacture of wrist watches in the United States, continuing the domestic manufacture of only pocket watches. In 1963 Elgin Na- tional Watch Company closed its Elgin, Illinois plant and trhnsferred its watch- making facilities to a new plant in Elgin, South Carolina, for the announced pur- pose of reducing production costs. But in 1964 Elgin discontinued all domestic production of men's watches and in 1967 Elgin discontinued the manufacture of all watches in the United States-although its South Carolina plant was but four years old. The day following the President's January 11, 1967 reduction of tariffs on watch movements, Hamilton Watch Company issued a press release stating: "The action taken by the President yesterday will not benefit American con- sumers for through this action the United States will be dependent on foreign cartel-controlled sources for watches. PAGENO="0289" 3725 "So far as the Hamilton Watch Company's future is concerned, Hamilton fully protected for its sources of supply through both foreign and domestic manu~ facturing facilities. During the past eight years, we have had watch manufactur- ing capacity in Switzerland, Japan, and the U. S. Virgin Islands. At the present time, about 40% of the Hamilton watches sold in the United States are manu- factured in our factories in Switzerland. We must, as a result of the President's action, anticipate a gradual incr~ase in foreign manufacturing and a lessening of our watchmaking activies in the United States." As of this date Hamilton reports that it is planning further restrictions in the numbers of calibres it makes domestically. In the United States today there are but three manufacturers of wrist watches-(1) TIMEX, (2) Hamilton and (3) Bulova-originally a Swiss watch manufacturing company which came to the United States some years ago and now manufactures watches both in Switzerland and in the United States. TIMEX is the only domestic manufacturer of wrist watches that does not also manufac- ture watches in Switzerland. In the last ten years TIMEX has been forced com- petitively to make half the parts abroad which it uses in its domestic watch pro- duction. Neither Elgin, which gave up all domestic wrist watch production since the President reduced watch tariffs on January 11, 1967:, nor Hamilton imported any watches prior to 1950. As early as July 1963 the Tariff Commission, apparently ignoring the effect on domestic employment, unanimously found that the losses domestic companies would incur by liquidating their domestic plants would "be partly or fully offset by increased profits arising from increased import operations." The United States District Court's 1954 decision in the Swiss Watchmakers case found in part: Since at least 1931 and continuing to date, the defendants (the Swiss cartel and certain domestic importers of Swiss watches) have been engaged and are engaged in a combination and conspiracy to restrain unreasonably the foreign and inter- state trade and commerce of the United States in the manufacture, import, export and sale of watches, watch parts and watch-making machines in violation of Section 1 of the Sherman Act and Section 73 of the Wilson Tariff Act. The Court further found: The United States watch industry was the Swiss watch industry's biggest competitor, and the restrictions of the Convention 1 have obviously had a crippling effect in this country, and were so intended. The Court cited examples of the cartel injury to the domestic watch industry including an agreement under which Benrus Watch Company agreed to liquidate certain of its United States watch making facilities which had been converted to war production during World War II. Despite the injunctions in the District Court's decree against the cartel, the primary source of watches supplying the domestic market is still Switzerland- excluding only that portion of the market supplied by TIMEX. While TIMEX, Bulova and Hamilton are the only remaining domestic wrist watch manufacturers, and Hamilton and Bulova also manufacture in Switzer- land, the cartel continues to expand its control over firms distributing watches in the United States. In recent years the cartel has acquired substantial shares of stock in both Elgin and Gruen. In 1968 financial publications report on nego- tiations by the cartel to acquire shares in Waltham Watch Company and Bulova Watch Company. See in particular Forbes Magazine for June 1, 1908. It is interesting to compare what has happened to the watch industries of the w-orld since the end of World War II. In 1948 the United States produced 14.3 million watches, in 1963 12.3 million watches, while in 1967 it produced 16.6 mil- lion watches. In 1948 the Soviet Union produced 4 million watches, while in 1963 it produced 27 million watches (and The New York Times says its 1967 production was 40 million watches). Switzerland increased its watch produc- tion between 1948 and 1963 from 24 million to 45 million watches. Japan's watch production was 0.6 million in 1948 and 12 million in 1963. Red China which produced no watches prior to World War II (1948 figures are not available) pro- duced 8 million watches in 1963. In the period 1948-1963 world production of watches increased 250% from 49 million to 123.8 million while United States production of watches declined 15%. These data are from hearings before a Sub- committee of the Senate Armed Services Committee, on August 17, 1964, p. 285. 1 Which comprised the rules and regulations of the Swiss watch cartel. O~i-159-6S-pt. S-19 PAGENO="0290" 3726 From the earliest days of mechanized warfare nations have recognized the~ importance of their horological industries to national defense. Only the UnitedL States seems oblivious. In commenting on the great growth of Soviet Russian watch production since- World War II, a 675% increase between 1948 and 1963, it is pertinent to note an article in the Sunday New York Times of February 18, 1968 which states that- Russia sold 40 million watches in 1967 (up 50% from 1963, and 1000% from 1948). That article in The New York Times further reports that Russian-made- watches are entering the United States duty free through the Virgin Islands, under the tax loophole that permits the duty to be avoided when certain minimal assembly operations take place in the Virgin Islands. It is true that Russian watches are `thus being imported into the United States duty free. That article,. however, er~oneously gives the impression that Russian watches are thus being: imported into the United States and sold by TIMEX under the TIMEX trade- mark. TIMEX is not importing and has not imported into the United States any watches or watch movements, or watches or watch movements made from parts originating in Soviet Russia, either through the Virgin Islands or otherwise.. NATIONAL SECuRITY INTERESTS A Special Preparedness Investigating Subcommittee of the Committee on Armed Services of the United States Senate reported on December 23, 1964, on the importance of the horological industry to national security. The report. addresses itself "to the relationship and importance of the domestic watch in- dustry to our national defense and space programs." The report further states. that "it is the conclusion of the Subcommittee that the domestic watch industry,. now making a significant contribution to our missile, space and other military programs, is important to the national security of the country." The report showed: (a) that the watch industry was involved in over 90% of our missile programs, (b) that it was the only industry capable of making: timing devices for certain nuclear weapons, (c) that there is a definite need for the industry in the field of miniature timing devices of many kinds, both for current and emergency production, and (d) that Russia, Red China, Japan,. France and Germany have been fostering `their watch industries while the United States allows its to wither. An investigation of a similar character today would show not only that which. the Senate Committee found in 1964, as to the need for this industry for na- tional security, but substantial deterioration since then in the health of the industry and in its capacity to protect the national security in future times of need... The vast majority of the critical machinery and `trained operators in the United States needed for fuses and safety and arming devices are in the domestic watch industry. Even today the United States is required to import from abroad' a substantial part of its fuse requirements. As early as 1966 between 150 million and 200 million small gears and pinions were being procured abroad because of domestic shortages of special screw-machine capacity and deliveries of the XM-92 mortar fuses were than being held up because of delays in the delivery of Swiss parts. This situation has prevailed in spite of the fact that a very sub- stantial part of the domestic watch industry is currently at work on the nation's. defense needs. In World War II the watch industry made very substantial contributions to defense requirements. Following World War II, the skilled workmen who pro- duced those military timing devices returned to the manufacture of watches where their skills remained available to national security. In the Korean War' again the watch industry made similar contributions and when that war ended those skilled workmen were able to return to the production of civilian watches. The industry has made and is making similar contributions to our military en-- gaged in Vietnam. But if there is no domestic watch industry, because domestic manufacturers cannc~t compete with foreign producers, there will be no trained pool of watch makers available to the nation in the event of a future need for~ timing devices to meet the security requirements of the country. Only by the maintenance of a healthy domestic watch industry can these skilled craftsmen be available when needed for the nation's security. Three examples of emergency requirements of the nation being met by the' watch industry are the safety and arming device for the proximity fuse used' in Korea and the safety and arming device for the XM-423 and XM-427 fuse for `the 2.75 inch rocket for helicopters and jet use in Vietnam. These were PAGENO="0291" 3727 developments or modifications of stockpile items to meet new requirements and specifications. In all three instances the watch industry met the emergency need. Non-watch companies were brought in later-two years later-as to the XM423 and XM-427 fuses for additional production. Even were the Federal Government to "mothball" plants for emergency tim- ing device needs, there is no way to mothball the skilled work force needed to produce such timing devices. On February 26, 1966, then Secretary of Defense Robert McNamara wrote the Acting Director of the Office of Emergency Planning with respect to the national security aspects of the watch industry. Secretary McNamara concluded that: "The United States watch industry has been an important and responsive source for horological-type items used in rockets, missiles, and ammunition, as well as a supplier of watches, chronometers, and other items." The Secretary noted the domestic production of watches had declined in spite of "escape clause" tariff rates and he predicted a further decline in domestic production, thus proving, in our opinion, that even with the "escape clause" rates, watch tariffs were too low to protect the domestic industry since that decline in domestic production of watches was' in the face of a very substantialgain in domestic watch consumption. The Secretary commented that companies not now Involved in watch mak- ing were a growing source of capability for horological-type items and that "as a result of the experience they were gaining in the current procurement program to meet Vietnam needs, their capability for making the more difficult mechanical timing devices used in fuses and other ordnance items will increase substantially." The Secretary was referring to the production of timing devices by non-watch making firms which devices had been developed and initially produced by watch making firms. Thus, while non-watch making firms during the six years since the Vietnam action began have acquired a certain capability to produce these fuses, they will return to the production of non-watch commodities at the cessation of hostilities and if the domestic watch industry should cease to exist, then in the event of a future emergency requiring these skills there will be no existing pool of skilled workers or machinery possessing the capabilities necessary to fill those security needs. TIMEX `therefore vigorously urges the enactment of H.R. 11738 to protect what is left of the domestic watch industry and vigorously opposes H.R. 17551 to the extent it can be used further to reduce watch tariffs not only because of the bill's national security implications but in `the interest of keeping alive a domestic watch manufacturing industry and in the interest of its employees. For us, moving abroad will mean embarking upon hazardous ventures, for our employees, loss of employment and for our national defense, a serious elimina- tion of an important source of military mat~riel. Mr. TJLLMAN. Does that complete your testimony? Mr. CARMODY. That completes my testimony. Mr. TJLLMAN. Are there questions? Thank you very much, sir; for your appearance before our com- mittee. We appreciate your testimony. (The following letters and statement were received, for the record, by the committee:) AMERICAN WATCH ASSOCIATION, INC., New York, N.Y., July 11, 1968. Hon. WILBUR D. MILLs, Chairman, House Committee on Ways and Means, Longworth House Office Building, Washington, D.C. DEAR MR. CHAIRMAN: The American Watch Association would like to comment for the record on several issues raised by Edward Carmody of U.S. Time Corpo- ration in his testimony of June 25, 1968, favoring an increase in tariffs on watch movements: 1. Mr. Carmody's charges relating to alleged violations of U.S. antitrust laws by the Swiss watch industry concern conditions and practices which date from before 1954 and which no longer affect the U.S. watch market. Mr. Carmody neglected to point out that a final judgment of the U.S. District Court in New York, entered on February 3, 1965, dealt fully with these past violations of U.S. antitrust law and precluded their repetition. The imposition of any future re- PAGENO="0292" 3728 strictions on United States domestic or foreign commerce in watches, watch movements, watch parts and watchmaking machinery was specifically prohibited. The Court's authority to enforce this judgment under its contempt powers, and the Justice Department's broad investigatory authority under the judg- ment, assure that the Court's orders will continue to be carried out. Indeed, the Department of Justice, in a memorandum to the Court dated December 4, 1964, stated that this judgment effectively assures "free and open competition" in the U.S. watch market, and achieves "the economic and basic antitrust objectives sought by the Government in this action." Mr. Carmody's references to the findings of the U.S. Tariff Commission in the Section 337 case are simpiy incorrect. The Commission's June 1906 report stated flatly: "The record before the Commission does not disclose that time respondents (i.e., the importers and the Swiss industry) are engaged in a combination or con- spiracy to restrain or monopolize trade and commerce in the United States. There is no evidence of current application of the `cartel's' restraints to importations into, or sales in, the United States. Nor is there evidence that the Swiss watch- makiig industry, or any of its elements, have monopolized or are presently con- spiring or otherwise attempting to monopolize United States trade and commerce in watches, watch movements or watch parts. As a consequence, no basis exists for a recommendation by the Commission that the President, pursuant to Section 337, order the exclusion of articles from entry into the United States." The Com- mission's finding was unanimous. Concerning the Court's decision in the antitrust case, the Commission observed specifically that "the conditions found by the Commission currently to exist differ materially from those determind by the Court to have prevailed in the past." As indicative of the changed situation, the Commission pointed to "the steps certain of the respondents in this investigation have taken at the instance of the Court to remove restraints on U.S. trade and commerce from their agreements, and the inhibitions placed upon them by the Court's final order." In short, contrary to the views imputed to the Tariff Commission in Mr. Carmody's statement, the Commission's report explicitly rejected the claims of the domestic producers that U.S. antitrust laws are being violated by the Swiss watch industry, and accordingly the petition of the domestic manufacturers for relief under Section 337 of the 1930 Trade Act was unanimously denied. 2. Mr. Carmody's discussion of the role of the domestic watch manufacturers in production of defense items is similarly misleading. Mr. Carmody failed even to mention the fact that the domestic watch industry's national security argument was rejected by the Office of Emergency Planning following a thorough investiga- tion instituted in April 1965 at the request of the President. (The same con- clusion incidentally, was reached following an earlier investigation by the Office of Defense Mobilization begun in 1955 arid completed in 1958.) Governor Farris Bryant, the Director of the O.E.P., wrote the President on November 14. 1966: "I have concluded that watches, watch movements, and watch parts are not being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security. I have also concluded, based on the studies and judgments of the interested defense agencies, that the domestic watch manufacturers will be likely to continue production of defense materials for the foreseeable future, that the non-horological industry now has and will continue to have a role in the production of essential military timing devices, and that horological-type defense items will continue to be avail- able from one source or another without regard to the level of imports of watches, movemnents and parts." Mr. Carmody did refer, however, to the report submitted to O.E.P. by Secre- tary of Defense Robert MeNamara. He conveyed the impression that the Defense Department agreed with the claims of the domestic producers. Mr. Carmody quoted Secretary McNamara out of context, however. In point of fact, the De- fense Department reached a conclusion precisely opposite to Mr. Carmody's. Immediately following the statements quoted by Mr. Carmody, Secretary MeNainara went on to say: "Termination of domestic watch production, in whole or in part, if it occurs at all, will not take place at a given moment in time but rather over a period of time. During this period the Defense Department can make plans for dealing with the developing situation. The Department considers it unlikely that all do- mestic production of w-atch movements would cease. "Defense requirements, while an uneven source of sales volume for the watch companies, have nevertheless been a continuing source. These requirements will PAGENO="0293" 3729 continue for the foreseeable future and should constitute an important source of volume for the watch companies of particular interest to them should domestic production of watches decline. "In the interest of preserving both a quick reaction capability and a mobiliza- tion base, the Defense Department can under Exception 16 to the Armed Services Procurement Regulations confine contract awards for horological type items to watch companies or other companies capable of making the needed items. "The watch industry is currently up to capacity in military production which necessitated a continuing introduction by the Department of non-watch com- panies as producers of these items. Companies outside of the watch industry are a growing source of capability for the horological-type items produced by the watch industry and are currently able to meet the peak mobilization requirements for safety and arming devices. As a result of the experience these companies are gaining in the current procurement program to meet Vietnam needs, their capability for making the more difficult timing devices used in fuzes and other ordnance items is increasing su:bstantially, there is a basis for believing that they would be able to meet peak mobilization requirements for mechanical timnmg devices as well as safety and arming devices. "If necessary, the Government could establish an in-house capability for mak- ing critical components in the event that circumstances disclose that they cannot be obtained from either the watch or non-watch companies. The Department does not believe, however, that such an alternative is likely to become necessary in view of the broad capability of American industry. "Over the long run the current dependence upon mechanical timing devices for rockets, missiles and ammunition in general may be reduced if mion-mechanical devices based on chemical or electronic techniques prove to be feasible. "In the area of research and development, the Department's principal use of the industry has been in the developmental area, particularly in production engi- neering. Fuze design philosophy, conception, engineering design and other phases of invention are ordinarily done in the Department's own arsenals and labora- tories. Although technical know-how and equipment is, to a minor degree, avail- able in-house for prototype production, it is customary to use private industry for this work. The watch industry relies on its production resources to support its capabilities in developmental work. While these companies have contended that loss of production facilities would result in an impairment of developmental resources, the continued requirement for a defense production base should prevent any diminution in these capabilities in the foreseeable future. "In the light of the above, the Department cannot assert that the continued importation of watch movements will threaten to impair the national security, because action will be taken to assure a source of production with or outside the watch industry." It is worth noting also that the O.E.P. report expressed substantial doubt that watch production and defense production are interdependent, as claimed. Gov- ernor Bryant observed that U.S. Time's own non-watch capabilities "are of such a nature and size as to be largely self-sustaining." In other words, it was O.E.P.'s judgment that U.S. Time's own defense production was largely unrelated to watch production. Similar observations about the separability of defense produc- tion and watch production were made with respect to General Time and Ingra- ham. Attached for the Committee's files is a copy of the entire O.E.P, report. 3. Mr. Carmody notes that several U.S. companies have discontinued domestic watch production during the past 15 years, but he neglects to mention that com- petition from U.S. Time, not imports, was the principal factor in the decision of most of these companies to abandon domestic production. U.S. Time's rise to dominance in the watch market came at the expense of many other firms, just as General Motors' rapid growth was accompanied by the failure of many of its competitors. The analogy to the automobile industry is carried through in the sales and profits performance of the three domestic wrist watch producers, As I testified, in spite of the restoration of the pre-1954 watch tariff rates, do- mestic watch production is at all-time high; the sales of the domestic producers are at an all-time high; the profits of the domestic producers are at an all-time high. These are the incontestable facts which rebut Mr. Carmody's testinionv. We would be grateful if you would include this letter in the record of the June 25 hearings. Very truly yours, BERTRAM LOWE. Attachment PAGENO="0294" 3730 EXECUTIVE OFFICE OF THE PRESIDENT, OFFICE OF EMERGENCY PLANNING, Washington, D.C., November 14, 1966. MEMOBANDUM FOR THE PRESIDENT INTRODUCTION In April 1965 the Director of the Office of Emergency Planning, at your request, ordered an investigation under Section 232 of the Trade Expansion Act of 1962 to determine whether or not watches, movements and parts are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security. Notice of the investigation was published in the Federal Register on April 8, 1965. A press release of the same date announcing the investigation invited all interested parties and organizations to submit their comments and views within the time prescribed by OEP Regulation 4. Initial briefs, statements and rebuttal material were filed for the record of this investigation by the Bulova Watch Company, Hamilton Watch Company, Elgin National Watch Company and General Time Corporation on behalf of the domestic watch manufacturers, and by the American Watch Association for the U.S. watch importers. Two other domestic watch manufacturers, the ilLS. Time Corporation and the Irigrahain Company, did not submit their views for the record of this investi- gation. The import products encompassed in the investigation included watches and watch movements of jeweled and pin-lever construction and watch parts. The domestic watch' indvstrji The domestic watch industry consists of the manufacturing segment produc- ing watches and watch movements of both jeweled and pin-lever construction, and of some 200 firms which import movements and assemble watches for sale in the United States and world markets. The manufacturing segment consists of six companies. Of these, Bulova, Elgin, and Hamilton produce mainly jeweled-lever movements, and General Time, U.S. Time, and Ingraham produce pin-lever movements. Since 1961 U.S. Time had also been producing watches incorporating a 21 jeweled-lever movement differing somewhat from a conventional jeweled-lever movement. The pin-lever movements produced by U.S. Time are assembled domestically from an admixture of im- ported and domestic parts. General Time and Ingraham, at present, produce only pin-lever pocket watches and clocks. Elgin's production is now limited to ladies jeweled-lever wrist watches. Currently, Bulova and Hamilton also produce watch movements powered by miniature electric cells, and U.S. Time is marketing a watch incorporating an imported movement powered by an electric cell. All of the domestic watch manufacturing companies, with the exception of Elgin. are engaged in varying degrees, in the production of components utilized in military ordnance, missile and space programs. By May 1965, Elgin had com- pleted or discontinued work on all Government contracts and had sold nearly all of the machinery and equipment used in such production. U.S. consumption, production, and imports Apparent U.S. consumption of watches incorporating both jeweled and pin- lever movements has increased substantially during the past decade, reaching an annual average of over 26 million units in 1962-64, as compared with some 16 million in 1954. The 1965 consumption reached an all-time high of over 34 mil- lion units, an increase of some 25 percent over 1964. Consumption figures are understated by watches brought in by tourists or smuggled into the U.S. custom territory. Of the 1965 consumption total, some 18 million units were sold by the six domestic companies, and some 16 million by the more-than-200 firms in the importer-assembler segment of the industry. The Tariff Commission in a report to the Senate Finance Committee estimates that consumption during 1966 will reach 42,000,000, up some 22 percent from 1965. The increase in quantity consumed since the beginning of the last decade was almost entirely of watches incorporating pin-lever movements. However, since 1961 there was a significant upward trend in the consumption of jeweled- PAGENO="0295" 3731 -lever watches, particularly in the lower price ranges imported from abroad and the U.S. Virgin Islands. U.S. production of all movements increased from 7.4 million in 1954 to about 13.7 million in 1965. The trend, however, of U.S. production of jeweled- lever movements declined from 1.7 million units in 1954 to 1.3 million in 1965. During the past decade domestic jeweled-lever production has tended to become concentrated on over-17-jewel movements. The demand for less expensive watches -has been met by imports from the companies' overseas facilities or other sources. The over-17-jewel movements have never accounted for a significant proportion -of the imports, apparently because the high import duty in effect on such movements substantially precludes import competition. In recent years two of the major jeweled-lever producers, Hamilton and Bulova, have been concen- trating on developing the production and marketing of electronic and electric watch movements for which no competitive imported product is being marketed in the U.S. to any substantial degree. Their production and sales of movements -of this type are still a minor portion of their production and sales of conven- tional type movements. The aggregate imports in the period 1954-1964 (including shipments from the Virgin Islands which began in 1959) did not show any appreciable upward -or downward trend, accounting for an average of about 55 percent annually of apparent domestic consumption. In 1965 the ratio was about 60 percent. The major companies in the domestic watch manufacturing industry have in recent years acquired or expanded facilities abroad and in the Virgin Islands for producing movements. Bulova, Hamilton and Elgin, which also own or control a number of foreign plants in Switzerland or Japan, have in recent years accounted almost wholly for the increase in U.S. imports of jeweled-lever movements. Each of these companies imports watch movements in quantities exceeding several times its domestic production. In 1964 these three companies accounted for about 46 percent of the total imports. U.S. Time and its affiliates operate foreign plants in England, France, West Germany, Scotland, Puerto Rico, Canada and Hong Kong. Its domestic output -during the past decade increased very substantially and now accounts for prac- tically the entire domestic production of pin-lever watches. General Time in addition to its domestic plants owns or -controls a number of foreign subsidiaries. The Ingraham Company has a fabricating and an assem- bly plant in the United States and through a subsidiary operates a pocket watch ~assembly plant in Canada. While some parts incorporated in domestically produced movements are im- ported, such imports are not significant except for U.S. Time. The latter has been importing since 1955 an increasing share of parts for use in the assembly of its domestically produced movements. Some of the other jeweled-lever pro- -ducers have been importing from time to time some parts for their domestic production of movements. All domestic producers are importing jewel bearings. Since 1959, the Virgin Islands became an important source for shipments to the United States of 17-jewel movements. The movements are assembled from foreign-made parts or subassemblies imported into the Islands at a very 1-ow rate -of duty. The assembled movements or complete watches are shipped to the United *States duty-free if they do not contain foreign materials having a landed cost -of more than 50% of the appraised value of the movements. The 1965 shipments from the Islands were almost three times the number of jeweled-lever move- nients produced in the U.S. during that year. In 1966, sixteen companies were assembling watches in the Islands. Five of the plants are owned by Bulova, Elgin, Hamilton, General Time and U.S. Time, and at least five of the other ten plants are owned by major U.S. watch importers. In August 1965, the Gov- ernment of the Virgin Islands instituted a quota system through the imposition of a production tax of $2.50 on each watch movement manufactured in the Islands for shipment to the United States in excess of a stipulated quantity. Beginning April 1, 1966, this tax applies to each movement in excess of annual quantity equal to one-ninth of the U.S. consumption of watch movements. In 1966 the Virgin Islands District Court invalidated the methods used for enforcing this quota. - Late in 1965 a watch movement assembly plant was established in Guam. Duty-free shipments from that plant to the U.S. customs territory began in November 1965. In October, this year, Congress passed legislation limiting shipments from U.S. insular possessions to ~th of the total U.S. watch consumption-7/s ths to PAGENO="0296" 3732 be allocated to the Virgin Islands, while the remaining 1/~ to be divided in a two- to-one ratio between Guam and American Samoa. On the basis of estimates for 1960, the Virgin Islands will be allowed to ship approximately 4.1 million units in 1967, Guam about 400,000, and American Samoa about 200,000. ~8a7es, income, and employmeat Total sales of all products of the six watch companies have been steadily in- creasing during the last five years. The following is a summary of available data conceri~ing total sales of all products and net income of domestic watch manufacturers. BU LU VA [In millions of doilars[ Fiscal ye as ending Mar 31- 1966 1965 1964 1963 1962 Net sales - Net income 9 9. 8 3.2 84. 2 2.8 73. 0 2.4 6 3. 3 1.5 62. 8 1.3 Sales and net income for the quarter ended June 30, 1966 were $24.702,178 and $629,000, against $18,838,034 and $521,900, respectively, a year earlier. HAMI LION [In millions of dollarsi Fiscal yea r ending Jan. 31- 1966 1965 1964 1963 1962 Net sales Net income 4 4.8 2.1 38. 1 1.1 37. 1 .6 37.6 .7 35 . 8 .025 During the first six months ended July 31, 1966, sales were reported as $24.9 million, an increase of nearly 40 percent over the same period a year ago. GENERAL TIME [In millions of dollars[ Fiscal yea r ending Oec. 31- 1965 1964 1963 1962 1961 Netsales Net income 9 1.6 2.5 79.9 1.9 73.6 1.4 69.2 1.1 65.6 .5 For the quarter ended March 31, 1960 sales and net income were substantially ahead of the corresponding quarter a year ago. U.S. TIME' [In million dnllars[ Fiscal year ending De c. 31- 1964 1963 1962 1961 1960 Net sales 9 0.9 83.5 74.5 7 1.2 69.8 1.7 Net income 5.4 4. 0 3.2 2.9 1 The figures were obtained from investment reparting services. U.S. Time is a privately held corporation and is not required to report its earnings publicly. PAGENO="0297" 3733 Newsweek magazine on March 16, 1966 quoted the company's Chairman and President as having reported that sales topped $100 million during 1965. No profit figures for that year were cited. ELG III (In millions of dollarsj , . Fiscal year e nding Feb. 28 (or 29) 1966 1965 1964 1963 1962 Net sales Net income (loss) 42 . 4 .6 54. 8 (8.4) 66. 2 (2.4) 46. 3 1. 1 40. 4 1.4 Elgin's net losses in the fiscal years ended February 28 (or 29) 1964 and 1965 were said to have been associated in large part with substantial "cost overruns" in prior years on defense contracts. Net decrease in sales during fiscal 1966 reflected the company's elimination of all its Government business. Consumer sales increased both in fiscal 165 and 1966 as defense sales declined. INGRAHAM The Ingrabam Company is a privately-owned firm and does not publish any financial operating statements. However, information from reliable sources indicates that sales in 1964 were more than two and one-half times the 1960 sales, primarily as a result of defense w-ork. The Company's defense backlog on the last day of 1965 was more than its total sales for 1964. Employment The Department of Labor has recently surveyed the employment of the four domestic wrist watch producers (Bulova, Hamilton, Elgin and U.S. Time). The total employed in 1965 by the four companies on all products was 9,880. The figure includes clerical, managerial, technical, and professional workers. In general, there was no discernible trend during the past decade in the em- ployment of production workers on domestic watch movements. A decline of workers in the jeweled-lever segment during the period was partially offset by a gain in the pin-lever segment, and since 1958 the pin-lever segment has employed more workers than the jeweled-lever segment. THE INVESTIGATION Following the formal announcement of the investigation on April 8, 1965, this Office undertook an exhaustive study of the domestic watch industry's role in national defense. As required by the statute, the study employed the resources of a number of Government agencies having responsibilities or interest in the matter under review. The agencies collaborating in the study, the Departments of Defense, Commerce, Labor, the Atomic Energy Commission, and the National Aeronautics and Space Administration made material available to this Office as to pertinent aspects of this case which fell within their respective respon- sibilities. In addition, advice was sought and received from the Department of State and the Council of Econosnic Advisers. The views of these agencies in the matter follow. THE DEPARTMENT OF COMMERCE The Commerce report on this investigation dealt primarily with the question as to whether there is enough machine capacity in the domestic watch industry to meet total mobilization requirements for (1) military components planned for the industry and (2) watches for essential civilian and war-supporting re- quirements. The report did not address itself specifically to the overall problem of the impact on the national security of imports of watches. As part of its investigation, the Department undertook a survey ot the watch industry to obtain information on the nature and variety of production equip- ment, the character of current operations, usage of imported parts and move- ments, production records and capacity potentials. Total mobilization require- ments were then analyzed for critical parts which in turn were related to ma- chine time and machine availability. Based on this information and* informal PAGENO="0298" 3734 consultations with industry, an evaluation of the supply-requirements situation was made. In brief, the conclusions drawn were that: 1. Under present planning assumptions estimated mobilization requirements. for horological items that could be placed on the watch industry could not be met with currently available equipment. Thus, the report states, a precarious situation would exist in the event of a conventional war. 2. Watchmaking equipment in the watch industry and elsewhere is inadequate at this time to meet demand stemming from the Vietnam operations, and with- out substantial imports of parts, production of fuzes and timing devices would fall short of current requirements. 3. Present planning assumptions raise a question regarding reliance on im- ports in a conventional war and such uncertainty of supply of foreign-made parts could affect the national security. The report concludes that the prospective deficit in production equipment in a mobilization period is a serious matter and recommends measures which could strengthen the defense posture, such as adopting programs to develop additional capacity, stockpiling of watchmaking equipment and maintaining a watchmaking complex capable of quick response to defense orders. DEPAIiTMENT OF DEFENSE The Department conducted a comprehensive study to determine the extent te which overall military requirements for horological-type products could be met by watch and non-watch producers. In the course of the study, the Department solicited and obtained information and comments from its component elements which have a significant interest in the matter, and assembled data on the capabilities of the horological and non- horological producers for meeting foreseeable defense needs. The overall military requirements for horological-type products considered in the study are based on the needs for meeting ammunition and other inventory objectives for presently planned forces, amended wherever possible to reflect Viet- nam demands; plus monthly production rates needed to meet anticipated require- ments under mobilization conditions. The study encompassed jeweled and non- jeweled watches, clocks and chronometers, timing mechanisms for ammunition, guided missiles, fire control equipment, photographic equipment, miscellaneous timing mechanisms, and safety and arming devices for missiles, rockets, and bombs. An evaluation of the study led the Department to the following conclusions: The United States watch industry has been an important and responsive source of horological-type items used in rockets, missiles and ammunition as well as a supplier of watches, chronometers, and other items. Despite the protection of the "escape clause" rates, domestic production of jeweled watches declined, and further decline may be expected whether or not the higher rates are extended beyond their terminal date of October 1967. The Department therefore must anticipate the possibility of a further production re- trenchment, or even complete termination of production, and has considered alter- natives available to it should these possibilities occur. - Termination of domestic watch production, in whole or in part, if it occurs at all, will not take place at a given moment in time but rather over a period of time. During this period the Defense Department can make plans for dealing with the developing situation. The Department considers it unlikely that all domestic production of watch movements would cease. Defense requirements, while an uneven source of sales volume for the watch companies, have nevertheless been a continuing source. These requirements will continue for the foreseeable future and should constitute an important source of volume for the watch companies of particular interest to them should domestic production of watches decline. . . . In the interest of preserving both a quick reaction capability and a mobiliza- tion base, the Defense Department can under Exception 16 to the Armed Services Procurement Regulation confine contract awards for horological-type items to watch companies or other companies capable of making the needed items. The watch industry is currently up to capacity in military production which necessitated a continuing introduction by the Department of non-watch com- panies as producers of these items. Companies outside of the watch industry are a growing source of capability for the horological-type items produced by the watch industry and are currently able to meet the peak mobilization require- ments for safety and arming devices. As a result of the experience these com- PAGENO="0299" 3735 panies are gaining in the current procurement program to meet Vietnam needs, their capability for making the more difficult timing devices used in fuzes and other ordnance items is increasing substantially. Accordingly, there is a basis for believing that they would be able to meet peak mobilization requirements for mechanical timing devices as well as safety and arming devices. If necessary, the Government could establish an in-house capability for mak- ing critical components in the event that circumstances disclose that they cannot be obtained from either the watch or non-watch companies. The Department does not believe, however, that such an alternative is likely to become necessary in view of the broad capability of American industry. Over the long run the current dependence upon mechanical timing devices for rockets, missiles and ammunition in general may be reduced if non-mechanical devices based on chemical or electronic techniques prove to be feasible. In the area of research and development, the Department's principal use of the industry has been in the developmental area, particularly in production engineering. Fuze design philosophy, conception, engineering design and other phases of invention are oridnarily done in the Department's own arsenals and laboratories. Although technical know-how and equipment is, to a minor degree, available in-house for prototype production, it is customary to use private in- dustry for this work. The watch industry relies on its production resources to support its capabilities in developmental work. While these companies have con- tended that loss of production facilities would result in an impairment of devel- opmental resources, the continued requirement for a defense production base should prevent any diminution in these capabilities in the foreseeable future. In the light of the above, the Department cannot assert that the continued importation of watch movements will threaten to impair the national security, because action will be taken to assure a source of production within or outside the watch industry. At the request of this Office, the Department reviewed the report on this in- vestigation submitted by the Department of Commerce. On September 28, 1966, Secretary McNamara advised as follows: The Department finds the report informative and helpful as a document to be used in maintaining continuing surveillance over the situation and for planning to insure that both current and mobilization requirements for timing devices will be met. However, in the Department's opinion, there is nothing in the report to cause it to alter or modify the conclusions stated in the previous DOD report to this Office. The Department further advises that it has made a detailed check of its in- ventory of equipment of the type specified in the Commerce report. The results show: 1. Sufficient DOD equipment is available to meet the alleged shortages men- tioned in the Commerce report. The equipment is in very good condition and a substantial portion of it is unused. 2. While the available equipment may not in all instances be the most modern type, it is adequate and fully capable of meeting defense production require- ments. Therefore, there is no need to be dependent upon imports to satisfy these requirements in a mobilization period. 3. Should it ever be considered necessary, replacement of part of this equip- ment is possible by importing Swiss-type machines which are available within reasonable price levels and lead times. Furthermore, some American firms are interestedin providing this type of equipment, if orders of sufficient magnitude are involved. Lead time of such domestic equipment is about two years. 4. As a further consideration affecting equipment requirements, an intensive product improvement program is now under way which includes the redesign of fuzes to allow such parts as gears to be manufactured by stamping and die casting the gear, pinion and pin as one piece, thus eliminating more costly and time-consuming machinery processes. The Department which has been continuously exploring potential replace- ments for mechanical timers now advises that since its previous report to this Office, many advances in integrated circuit techniques have been achieved by industry which bring electronic timers closer to realization. THE ATOMIC ENERGY COMMISSION The AEC advised this Office that national security implications pertinent to the investigation were found only in the ordnance segment of AEC's nuclear weapons program, and that certain horological skills and experiences presently found only in the jeweled-lever segment of the domestic watch industry "have PAGENO="0300" 3736 been and are expected to continue to be of considerable importance to AEC's weapons program." The AEC concluded however that: "Though the jeweled lever segment of the domestic watch industry has played an important role in AEC's past programs and its availability would be desir- able in the future, it cannot be concluded that it is essential. If a domestic watch industry were not available for future AEC work, the AEC programs would sur- vive by the pursuit of new timing concepts, reverting to old ones with perhaps some compromises, or developing a jeweled detached lever capability in a precision company outside the horological industry. The latter alternative is estimated as a three-year program costing several million dollars." NATIONAL AERONAUTICS AND SPACE ADMINISTRATION In reporting on this investigation, NASA advised that a survey of its Field Centers indicates that although the watch industry has supplied items for the space program, the major portion of timing devices used by NASA for all appli- cations is essentially of the electronic rather than the mechanical type, furnished by firms other than the watch industry. In some cases, however, the watch in- dustry may be a subcontractor for some part of the subsystem which contains the tiniing devices. DEPARTMENT OF LABOR In an investigation under Section 232 of the Trade Expansion Act of 1062, the Director of the Office of Emergency Planning must, in the light of the require- ments of national security, give consideration, among others, to ". . . existing and anticipated availabilities of the human resources . . . essential to the national defense . . Accordingly, we requested the Department of Labor to furnish us information on the manpower aspects of the watch industry. To meet this request, the Department initiated manpower evaluation studies based upon information obtained in field surveys of jeweled-lever and pin-lever wrist watch firms and of 36 non-horological firms producing related products. A job analysis study was made of 18 occupational skills agreed upon by represent- atives of the domestic watch industry as being critical to their operations. These key horological jobs were then compared with similar jobs found in the non- horological companies in terms of training times required to reach proficiency, dimensions of work pieces produced and assembled, and tolerances required. The following findings from the I)epartment's study are considered relevant to the question at issue: Only the jeweled-lever watch industry now has the combination of skills and procedures to produce precision jeweled-lever watch movements. Management in many related product factories estimated that it would re- quire about two years to establish from scratch a manufacturing capability to produce precision watch movements on a mass basis. Only three of the eighteen key skilled occupations in the industry did not have approximate counterparts in other types of manufacturing. The three occupa- tions are only needed to produce electric watches. It is estimated that combined jeweled watch and pin-lever wrist watch in- dustry would need 3,700 workers to manufacture products needed by the Depart- ment of Defense in a peak mobilization period. This represents about three- eighths of the 9,880 employed by the four wrist watch companies in 1965. About 200 workers, approximately one-third of whom would be technical and highly skilled workers, would be needed to manufacture precision time keeping devices to meet military requirements under mobilization conditions. The other 3,500 would be working on a variety of defense-associated timing devices and related products which do not require as much of the highly skilled work es- sential in the production of precision watches and chronometers. Few of time highly skilled specialized workers now engaged in precision watch movement production would be needed in the manufacture of defense goods pro- vided by this industry. COUNCIL OF ECONOMIC ADVISERS In his letter to this Office, Mr. Gardner Ackley, Chairman of the Council of Economic Advisers, discussing the statutory requirement in Section 232 that "the Director and the President shall further recognize the close relation of the economic welfare of the Nation to our national security,..." concluded that there is "no evidence to suggest that imports of watches, watch movements, and parts are currently such as to threaten the welfare of the domestic watch PAGENO="0301" 3737 manufacturing industry, much less the health of the economy as a whole." Mr. Ackley continues with the statement that viewing the question on this narrow ground alone, he does not conclude that watch imports are threatening to impair the national security. FOREIGN POLICY CONSIDERATIONS United States foreign policy interests and objectives were considered in this case. The comments of the Department of State, whose advice was sought in this investigation, were directed broadly toward an evaluation of the importance of watch imports to our foreign economic relations and the relevance of such rela- tions to the overall national security and well being of the American people as a whole. SUMMARY AND CONCLUSIONS During 1950 and 1957 the Office of Defense Mobilization (0DM), a predecessor agency of OEP, conducted an exhaustive investigation, under the "national se- curity clause" then embodied in Section 7 of the Trade Agreements Extension Act of 1955, to determine the effect on the national security of imports of horo- logical products. The investigation led to a finding in February 1958 that the level of imports of such products did not threaten to impair the national security. The present investigation which lasted nearly a year and a half, while parallel in scope to the Office of Defense Mobilization investigation, was conducted as a new and independent examination of the problem in light of many new factors that have arisen since 1958, such as changes in military concepts, new weapon technology, and changed military requirements. The investigation was carried out in accordance with the criteria contained in the statute and OEP Regulation 4, giving consideration to the overall produc- tion facilities and capabilities available within and outside the domestic watch industry, in terms of the human resources, equipment and materials which are necessary to meet present and projected defense requirements for horological- type items, and giving recognition to certain other economic factors related to the national security. Without question, imports of watch movements have in the past decade consti- tuted a substantial portion of the total domestic watch consumption. These im- ports have had an economic impact on the domestic watch manufacturing indus- try as a whole and have contributed to some extent to the demise of a few watch manufacturing firms and to the curtailment of the activities of others in the field. On the other hand, nearly all the remaining watch manufacturing com- panies seem to have made far-reaching and fundamental adjustments to the economic environment of import competition, and were able at the same time not only to maintain but actually increase their related defense production capability. We have considered carefully the statements by spokesmen for the industry that imports threaten the survival of unique watchmaking, managerial, and pro- duction-line skills needed in the manufacture of military end products. We do not believe that there would be any significant loss of skills and facilities im- portant to national defense during emergency periods. First, if the watch industry should find it advantageous from an economic standpoint to turn more and more to imports and gradually curtail or even phase out domestic watch production, it does not appear that it would abandon its defense production activities so long as the military demand for their products continues. In light of current military procurement plans involving an expanded industrial production base to meet ammunition and other inventory objectives, the defense capabilities of the watch industry should be in steady demand for a number of years to come. Second, even if some of the watch companies should decide to discontinue their defense production along with that of watch manufacturing, there is reason to expect that the skilled personnel, production facilities and equipment now being utilized in production of defense items would be absorbed by or continued as separate entities of other watch or non-watch companies. This has happened in the not too distant past. For example, Waltham, Gruen, and Elgin, upon complete or partial discontinuance of watch manufacturing sold their defense production facilities to other companies engaged in the supply of defense or industrial products. Third, an increasing number of non-watch companies are showing a capability to produce components requiring equally close or closer tolerances and to develop complex weapons systems employing such components. PAGENO="0302" 3738 Statements were made by representatives of the jeweled-lever watch industry that there is an interdependence between watch production and defense produc- tion, and that the latter could not be sustained economically unless watch produc- tion at adequate levels is maintained. The facts, however, as to, three of the five domestic watch manufacturers involved in defense production, do not appear to support this contention. Two of these companies, General Time and Ingraham, prQduce, in addition to clocks, only pocket watches of pin-lever construction which are not significantly affected by import competition, if at alL Notwith- standing this, these companies are very substantial producers of sophisticated military components and their defense sales and defense backlogs have been increasing at a rapid rate in the past several years. In the case of the third company, the United States Time Corporation-the largest U.S. producer and assembler of pin-lever wrist watches-the non-watch capabilities of that firm are of such a nature and size as to be largely self-sustaining. As in the case of General Time and Ingraham, the defense sales of U.S. Time account for a significant proportion of its total sales, and the current defense backlog is the highest in the firm's history. The domestic watch industry with its long tradition of experiences in micro- miniature precision skills required for defense production is an important seg- ment of our mobilization base. The Department of Defense and the Atomic Energy Commission are currently relying and will continue to rely for some years to come on the watch industry to meet a good portion of the current and projected requirements for certain types of timing devices, saIety and arming devices, and timepieces. In many instances the industry has excelled in meeting the need for both speed and quality in the procurement of horological-type defense items. However, the basic issue in this investigation is not a determination as to whether or not the watch industry's facilities and skills are important to our mobilizatio~i base. Virtually every industry in this country has a role to play in our defense effort whether in peace or war. In times of a major emergency a maximum logistic effort to save the nation will require the conversion and use of all the machinery, skills and experience wherever found throughout the economy. We must ascertain whether the quantities or circumstances of continued im- ports of watches, movements and parts threaten to impair the national security by impairing, or inhibiting the creation o,r maintenance of, essential productive capacity, specialized skills or other factors important in times of a national emergency. Stated differently, (a) are watch imports having such a debilitating effect on the domestic watchmaking operations as to impair the ability to meet current and projected defense requirements, and (b) will an impairment of such ability in turn impair or threaten to impair our national security? In considering existing capability outside the watch industry, the issue with which this investigation is primarily concerned is not whether non-horological firms can produce wo~tches in an emergency, but whether such firms possess the skills and facilities to produce the same types of components for military hard- ware as the watch companies. We therefore considered carefully the existing ca- pability in the total U.S. micro-minature precision industry. The conclusion ar- rived at, supported by studies made by interested defense agencies, is that even though the watch industry has valuable capacity and skills which are being and will continue to be utilized in the defense effort, its abilities cannot be considered unique outside the watchmaking field. The non-watch companies, even though they encountered in many instances production difficulties with certain horo- logical-type defense items, are mastering the prcthlems. If necessary, the defense agencies can use the so-called "mobilization base" exception to confine contract awards for horological-type items to particularly qualified non-watch companies needed to maintain a production base should the watch companies not be available. As regards watches per se, accurate timepieces are important to the conduct of war and essential civilian operations. Military requirements for watches in a mobilization period are but a small fraction of one percent of the amount currently consumed in the United States, and the defense agencies are able, by stockpiling, to meet military needs in the event they are cut off from fresh supplies. With respect to essential civilian requirements, the estimate by the Depart- ment of Commerce was based largely on the experience of World War II, ad- justed upward for such factors as increase in the U.S. population and the in- creased mechanization and urbanization of the economy. Civilian (including in- PAGENO="0303" 3739 dustrial) requirements for watches, as computed by Commerce, actually exceed the military requirements. According to information obtained from both trade and Government sources, the number of jeweled-lever and pin-lever watches currently in the hands of the American public is estimated between 145 to 170 million units. This estimate is based on domestic consumption figures for the past 10 years and the average serv- ice life of the watches under normal maintenance conditions. In addition, the total inventory of watches at the retail level is estimated at 17.5 million watches at the end of 1965. Estimates of watches in the domestic producers and importer- assemblers inventories ran to some 6 million units, making a total inventory in 1965 of over 23 million units. Thus, there appears to be a pool of about 165 to 190 million watches in consumers' hands and inventories, most of them being of jeweled-lever construction. In addition, the number of clocks of all types in the hands of consumers and in inventories exceed the number of watches above re- ferred to. This available supply of timepieces should be more than enough to meet all essential civilian needs even in a war lasting several years. With respect to the repair and maintenance of watches in the hands of the public, the Department of Labor publication, "Occupational Outlook Handbook" 1966-1967 edition, states, among other things, that there are over 25,000 watch- makers in the United States outside of manufacturing facilities. A great num- ber of these are employed in retail stores, only a few hundred being employed either by the domestic watch manufacturers or importer-assembler firms. In fact, about one-half of the total are self-employed. During World War II, most of these watchmakers continued in the retail establishments. It is likely that during a major emergency most of the watchmaking opera- tions would be curtailed to an irreducible minimum and the facilities utilized to fulfill higher priority needs. According to the study by the Department of Labor, referred to in this report, only about 200 workers of the present nearly 10,000 workers employed in the four major watch companies would be needed to manu- facture precision time keeping devices to meet defense requirements in a mobil- ization period. Of these 200 workers, approximately only one-third would be tech- nical and highly skilled workers. The level of imports dealt with in "national security" investigations is related to quantities which have been and are entering this country under existing rather than prospective tariffs. However, we have taken account of the fact that the higher "escape clause" rates of duties on watches imposed in 1954 are currently in the process of review. Our findings in this national security investigation took into consideration the alternatives considered by the defense agencies, referred to earlier in this report, should further changes in domestic watch production take place as a result~ of termination of the duty protection now enjoyed by the industry. I have made a careful analysis of the comprehensive record assembled in this case and of the thorough and exhaustive studies by the Departments of Defense and Commerce, the Atomic Energy Commission and the other agencies collaborat- ing in this investigation. There is ample evidence that the military production capability of the companies composing the domestic watch manufacturing in- dustry has not only been unimpaired by substantial imports in the past decade but is currently at its maximum and is expanding. In this connection, we have taken note of the judgments of the defense agencies which rely on the watch industry for the supply of a significant portion of horological-type defense items that in the event any changes result in the impairment of this source, not now foreseen, timely action can be taken by them to provide a source of production within or outside the watch industry for meeting peacetime and mobilization requirements for horological-type defense products. Accordingly, I have concluded that watches, watch movements, and watch parts are not being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security. I have also concluded, based on the studies and judgments of the interested defense agencies, that the domestic watch manufacturers will be likely to continue production of defense materials for the foreseeable future, that the non-horological industry now has and will continue to have a role in the production of essential military timing devices, and that horological-type defense items will continue to be avail- able from one source or another without regard to the level of imports of watches, movements, and parts. FARRIS BRYANT, Director. PAGENO="0304" 3740 STATEMENT OF ANTONIO B. WON PAT, TERRITORY OF GUAM, REPRESENTATIVE IN WASHINGTON, D.C. Mr. Chairman and members of the Committee, I am Antonio B. Won Pat, the elected Representative of the people of Guam in our Nation's Capital, and I am presenting this statement on behalf of equity, fairness and justice `for the 100,000 American citizens of Guam with respect to the division of future increases in the importation into the mainland of watches assembled in the insular possessions of the United States. I might point out that as the incumbent of the only territory- wide elective office in Guam, I in my official capacity am the authorized spokes- man in Washington for the Guamanian people, all of whom, as you know, are American citizens. This Committee is well aware that Public Law 89-805 limits duty-free imports of watches and watch movements containing foreign components, from the in- sular possessions. These insular possessions consist of Guam, the Virgin Islands and American `Samoa, although the status of the latter area has never been clearly defined by the Congress. Under PL 89-805, which grew out of legislation sponsored in this Committee, one-ninth of the total domestic consum~Ytion for the previous year of watches and watch movements may enter the mainland from all three insular areas. The formula set forth in the Act gives the Virgin Islands seven-eighths of this one-ninth quota, with the remaining one-eighth divided, two-thirds of it for Guam and one-third for American Samoa. At the time of enactment of PL 85-805 the American citizens of Guam were at a loss to understand this highly inequitable, highly unfair formula. The passage of time since enactment has not made its logic any clearer nor its justice any more apparent. The effects of this inequitable formula for 1968 are shown, painfully for Guam, by the recent determination of the United States Tariff Commission, published in the Federal Register for March 27, 1968, as Document 68-3644. Under this de- termination, during 1968, the Virgin Islands may enter 4,208,750 units, Guam only 400,673 units and American Samoa 200,577 units. That is, the Virgin Islands are entitled to almost 10 times the number of units to which Guam is entitled! Yet by every reasonable standard, we merit treatment at least equal to that accorded the Virgin Islands: Under Acts of Congress, both the Virgin Islands and Guam are unincorporated territories of the United States; and the citizens of each are American citizens. Our population is substantially greater than that of the Virgin Islands-nearly twice, as a matter of fact. The economy of the Virgin Islands was not destroyed by enemy capture, occupation and subsequent liberation as was that of Guam, which is the only area now under the American flag to suffer such devastation. In terms of specific economic effect, prior to the imposition of this formula, 400 Guamanians were employed in eight separate watch assembly plants on Guam. During the calendar year 1966, they produced over one million watches. However, with the imposition of the highly inequitable quota, 370 of our people lost their means of livelihood, five of the plants have been forced to close eu- tirely, and quarterly salaries and withholding taxes associated with our watch industry have fallen from $219,150.40 and $35,411.21 to $85,516.02 and $12,190.05, respectively. However inequitable and unfair this formula is as between the Virgin Islands and Guam, we are not asking you to change it. What we are asking is a fair division of future unit increases under the quota you have established. As the consumption on the mainland of America grows, so will the number of units coming under the one-ninth limitation increase. What the people of Guam now propose and urge is that future increases over the 1967 quota level be divided equally among the three areas-Virgin Islands, Guam and American Samoa. A draft of proposed legislation to accomplish this purpose previously was sub- mitted last fall to Chairman Mills; in the Senate it has been introduced as S 3124. A copy of S 3124 is attached and made a part of my presentation. Mr. Chairman and members of the Committee, I want to thank you for allow- ing the American citizens of Guam to present this petition to you, through PAGENO="0305" 3741 me, their elected representative, and to urge your prompt and favorable consideration. [S. 3124, 90th Cong., second sess., introduced by Senator Metcalf on March 18, 1968] A BILL To provide that annual Increases in the quota of watches and watch movements which may be entered duty-free from the insular possessions shall be equally divided among the Virgin Islands, Guam, and American Samoa Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) headnote 6(b) of schedule 7, part 2, subpart E of the Tariff Schedules of the United States (19 U.S.C. 1202) is amended by adding at the end thereof the following new sentence: "If such total quantity for any calendar year after 1967 exceeds 4,693,000, then of such total quantity- "(iv) not to exceed 4,106,375, plus ½ of the number by which such total quantity exceeds 4,693,000, shall `be the product of the Virgin Islands. "(v) not to exceed 390,927, plus ½ of the number by which such total quantity exceeds 4,693,000, shall be the product of Guam, and "(vi) not to exceed 195,698, plus ½ of the number by which such total quantity exceeds 4,693,000, shall be the product of American Samoa." (b) The amendment made by subsection (a) shall apply with respect to articles entered, or withdrawn from warehouse, for consumption on or after January 1, 1968. HAMILTON WATCH COMPANY, Lancaster, Pa., July 12, 1968. Hon. WILBUR MILLS, Chairman, Committee on Ways and Means, Hous~e of Representatives, Washington, D.C. DEAR Mn. CHAIRMAN: As you know, few U.S. industries have been more deeply affected by or more actively interested in U.S. trade policies and their adminis- tration over the past thirty years than the producers of jeweled-lever watch movements. This experience has shown rather conclusively that it is not possible to produce watch movements in this country without a very substantial tariff to equalize the difference between foreign and domestic labor rates. It has also shown that such rates cannot be maintained, certainly not through adminis- trative channels. In 1950, when I first became active on the tariff problem for Hamilton Watch Company, there were seven companies making complete wrist-watch move- ments in the United States, three producers of non-jeweled or pin lever move- ments and four producers of jeweled-lever movements. Today there are only two companies which have the capability to produce complete movements in this country. The total domestic production of these two companies is quite limited, is substantially less than in 1950, and its continuation even at this level is problematical. Four of the other five companies have ceased all U.S. production of wrist- watch movements (although two continue to make an inexpensive, large, pin lever pocket watch of the type which once was known as the $1 watch). The The fifth company, U.S. Time Corporation, has presented testimony to your Committee. It produces more watches than any other company in the world, but the greatest part of its production is from its plants in several foreign countries. It now makes only one-half of the parts for its U.S. produtcion in the United States. Irts more complicated operations, which require more labor, are centered elsewhere. The President's reduction of tariffs on watch movements in January, 1967, by revocation of the escape clause rates established by President Eisenhower in 1954, has already resulted in the further decline of U.S. watch-movement pro- duction, and the full effects of his action will become more evident in the next few years. In March, 1965, before the President acted, the Tariff Commission had reported to him that the revocation of the escape clause rates would result in "idling of productive facilities and a decrease in employment in the manu- facture of U.S. watch movements. . ." That is precisely what has happened 95-159-68-pt. S-20 PAGENO="0306" 3742 and what will inevitably continue to happen to the industry under present cir- cumstances. As you know, all U.S. companies have long ago been forced to establish some plants abroad. We, ourselves, now have facilities in Germany and Switzerland. As it becomes necessary, the oniy two companies which make complete move- ments in the United States must make further shifts abroad and U.S. Time niust move the remaining portion of its U.S. production. This process, apparently, is what the witness for importers of watch move- ments referred to so euphoniously before your Committee as "a successful ad- justment to import competition," or "taking advantage of international special- ization." The witness' reference to increased sales and profits of the U.S. watch- movement producers, including Hamilton, is wholly misleading.. I can tell you categorically that our sales of watches with domestic movements have declined, not increased, and that we are not profiting from the sale of such movements. Under present circumstances, we must look to imported movements or to wholly different products for the profits we report. As we have said over the years, a shift to complete importation of watch move- ments is not necessarily injurious to our profits. It is easy to see that any com- pany can generate more profit by making movements in Switzerland rather than in the United States because the Swiss wage rates are less than half the U.S. rates for the same skills. But transferring jobs abroad is not helpful to our em- ployees, and the loss of watchmaking skills in America is not in the interest of our national security. Subcommittees of the Senate Armed Services Committee reported in 1954 and again in 1964, that the industry was important to our national security because of its ability to shift its watchmaking skills to emergency production of precision timing devices for missiles, rockets, shells and other weapons. As a preliminary to the 1967 reduction of watch tariffs, the Secretary of Defense advised the Director of the Office of Emergency Planning that the watch industry was im- portant, but refused to advise that any steps should be taken-specifically, the retention of the 1954 escape clause rates-in order to preserve the industry. I use the word "refused" advisedly because the Secretary acted contrary to the advice of the office of the Assistant Secretary for Installations and Logistics and that of the Government arsenals and laboratories directly responsible for procurement of precision mechanical timing devices. The Secretary's letter actually took the position that there was adequate capacity for precision timing devices in other less-skilled industries, although it was a known fact at the time that a shortage of U.S. capability existed even with the watch industry fully involved in the fuse program. At present, every one of the producers of one important new time fuse is a watch company. The Secretary's reversal of the staff recommendations based upon many months of study resulted from intervention of the office of the As- sistant Secretary for International Security Affairs, which was activated by those who believe that reduction of U.S. tariffs is of paramount importance. Based npon this, and many similar experiences which I will not take time to recount, it is our firm opinion that the present procedures for preservation of industries which are seriously injured economically and those whose loss is not in the national interest are wholly ineffective. The futility of escape clause pro- cedures is demonstrated not only by the small number of escape clause actions taken, but even more clearly by the recent determined and systematic revoca- tion of those few which had been taken. The domination of trade policy over national interests in preservation of an industrial base for emergency military procurement has been made clear to us by the experience I have just described. Those responsible for administration of the trade program seem firmly convinced that no consideration should stand in the way of tariff reduction. The safeguard procedures written into the Trade Expansion Act by the Congress are regarded not as applicable principles of administration but as unwise obstacles to de- velopment of free trade to be circumvented after appropriate lip service. This attitude has now become so pervasive in the various Departments and Agencies, largely through a program of strategic placement of personnel totally indoctrinated in their free trade philosophy that there is no hope for a change of administrative policy. Any meaningful restraints or remedial action must be legislatively imposed. Sincerely, ARTHUR B. SINKLER, Uha'irrnan 01 the Board. PAGENO="0307" 3743 The next witness is Mr. Robert Ward. Mr. TJLLMAN. Mr. Ward, I am particularly pleased to welcome you before the committee. Members of the committee have a~lways enjoyed Oregon strawberries. Would you please identify yourself for the record. Are you appearing alone? STATEMENT OF ROBERT E. WARD, ON BEHALF OF NORTHWEST CANNERS & FREEZERS ASSOCIATION, OREGON STRAWBERRY COUNCIL, ANIJ CALIFORNIA STRAWBERRY ADVISORY BOARD Mr. WARD. Yes. Mr. TJLLMAN. Very good. I want the members of the committee to know that we in the North- west produce the finest fruits and vegetables in the country, and cer- tainly the finest strawberries. You, sir; represent an outstanding orga- nization with a fine record of public service, and I particularly am pleased to see you here today. You may proceed. Mr. WARD. Thank you. Representative TJllman, Mr. Chairman, and members of the com- mittee, my name is Robert E. Ward. I am the assistant general man- ager of United Flav-R-Pac Growers, a grower-owned processing co- operative, with plants in Gresham, Newberg, and Salem, Oreg. I am presenting this testimony in behalf of the California straw- berry industry, including growers, processors, and shippers; North- west Canners & Freezers Association, a trade association of fruit and vegetable processing companies located in Oregon, Washington, and Idaho; the Oregon Strawberry Council, representing the straw- berry growers of the State of Oregon; and growers and packers in the States of Michigan and Tennessee. Mr. Chairman, with your permission, I would like to read a few letters into the record, one from Michigan, and one from Tennessee. Mr. ULLMAN. Will you proceed? Mr. WARD. The letter from Michigan is from Mr. James Bryan, president of Smeltzer Orchard Co., who is also vice president of the National Association of Frozen Food Packers, and a member of that organization's legislative committee: DEAR BOB: We appreciate your efforts on the Mexican strawberry bill regard- ing a 20-percent import quota. Michigan packers and strawberry growers are definitely behind this bill, as we have met with Senator Hart and Senator Griffin in connection with Mexican import quotas. We are just beginning our 1968 pack with a substantially reduced acreage in Northwestern Michigan. We are receiving extremely competitive prices from imported strawberries in New York and Philadelphia markets. To date we have been unable to obtain information as to the quality of the fruit. Sincerely. The other letter is from Winter Garden Freezer Co., Inc., in Bells, Tenn., from Mr. Clay Cosco, who is a member of the National Asso- cmtion of Frozen Fruit Packers Legislative Committee: Dear Bob: We will support you in your attempts to enact a 20-percent import quota on Mexican strawberries. Please advise me concerning the date the corn- PAGENO="0308" 3744 mittee presides. I will attempt to contact the appropriate legislators at the time of the hearing to gain their support. Very truly yours. These growers and packers represent approximately 95 percent of the national pack of frozen and canned strawberries. In the three Pacific Coast States, where the largest percent of proc- essed strawberries are handled, there are approximately 2,000 growers whose primary market is provided by processors. You will note in table I that strawberries are grown commercially and are important to growers in 28 States. This processing strawberry production represents approximately a $35 million income to growers, and $3.8 million to workers in proc- essing plants. It is a significant part of both afrrn and processing diversification, which is already seasonal and marginal. A major factor causing depression in these important industries is the increasingly large imports of frozen strawberries, principally from Mexico, and the potential for further growth in imports and disrup- tion of domestic marketing. U.S. strawberry growers and processors need your assistance in limiting excessive imports, if they are to continue in this business. During the most recent 5-year period, average total disappearance was somewhat less than during the previous 5 years, which, when meas- ured against the substantial increase in population, indicates a declin- ing per capita consumption. In the absence of market expansion potential, there is little or no room in the domestic market for a large volume of imports of this product, and any increase in such volume must be regarded as a re- placement of domestic production, to the detriment of all segments of the domestic industry. The U.S. grower overproduced strawberries in the period of 1956 to 1959, and then adjusted his planting to correspond with the market demand and a fair return. The success of this self-help program of acreage reduction was short lived, due to the beginning of a rapidly expanding strawberry indus- try in Mexico. Imports from Mexico moved from 14.2 million pounds, or 5.3 percent of U.S. disappearance, in 1959, to a high of 82.8 million pounds, or 31.5 percent of U.S. disappearance, in 1966. The 1966 imports of 82.8 million pounds was a 60-percent increase over the previous year. This has upset a balance needed by U.S. growers to keep producing strawberries economically. The 82.8 million pounds of strawberry imports represents over $3.5 million to farm labor, $1.5 million to processing labor, and $10 million to growers. Many growers and processors are small operators who have been able to compete effectively in normal domestic marketing, but are most severely affected when the supply is inflated by imported product and prices are depressed. Strawberry growing and processing is really a small business gen- erally carried on by small and medium sized processors. We encourage the committee to consider the strawberry problem in this perspective. U.S. growers are unable to compete successfully in the domestic market with frozen strawberries produced in Mexico. The reasons PAGENO="0309" 3745 are simple. Strawberry growing and prOcessing has a very high re- quirement for labor, ingredients, and supplies. Labor costs in Mexico, both on the farm and in th~ plant, are less than 10 percent of such costs in the United States, Mexican sugar prices are about 53 percent, and30-pound containers are roughly 94 percent of current prices in the United States. The direct result of these and other similar advantages has been the extremely rapid growth of a fledgling industry in Mexico, based almost entirely on an export market, principally the United States. Canada has also become an important export outlet for this produc- tion, and this export volume has almost completely replaced that formerly enjoyed by U.S. exporters. The U.S. strawberry industry is not subsidized, nor is it asking for a subsidy. It has made every effortto help itself, bñt it cannot control imports. The import duty has been lowered from 35 to 14 percent, which en- courages imports. Representatives of U.S. processors and growers met with Mexican processors and growers in 1963, and the Mexicans agreed to limit imports to quantities that would not unduly upset the balance of the TJ.S. market. * However, this voluntary approach was not successful, and imports continued to rise sharply. * This situation has resulted in instability in the American market, and uncertainty among growers. This industry realizes that the U.S. must share its markets, but proposes that this share be limited to a formula* based on a moving 5-year average of annual disappearance. The average disappearance in the United States for the most recent 5-year period, 1962-63 through 1967-68, is 273 million pounds. During this same period, imports of frozen strawberries from Mexico have averaged 56.3 million pounds. In the light of these figures, an annual quota. of 20 percent for frozen strawberry imports would be reasonable., including fruit pastes and fruit puips. We suggest that a quota of, say, 20 percent of annual domestic dis- appearance of frozen strawberries be established for imports, based upon the average disappearance for the last 5 marketing years. This sort of formula would enable foreign exporters to take ad- vantage of increasing markets in the United States, or conversely, it would hold them to reasonable levels in a declining market. (See tables II and III.) The market prices of Mexican imports in table III also reflect the crowing problems of the U.S. strawberry growers and producers. These prices run 1 to 5 cents per pound below the U.S. market. U.S. growers are faced with increasing demands for higher wages and benefits for farm labor. The grower is generally in favor of these increases, but grower returns are not sufficient to provide needed dol- lars without a higher market price. Low prices of uncontrolled imported strawberries are a major factor in suppressing grower prices and the wages he can pay. Strawberry growers and processors do provide a great many jobs for young people, both in the field, and in the processing plants. The PAGENO="0310" 3746 seasonal nature of this crop in most States makes its labor requirement needs occur during summer vacation, and it is completed prior to the start of school in the fail. This again fills a void in supplying a large number of summer jobs asked for by the President. U.S. growers are being squeezed by rising costs of equipment and supplies as well as labor, plus demands from consumers for lower prices. This system will not work. U.S. citizens can afford products grown by U.S. growers. We feel that ELR. 9071, using 20 percent of the 5-year average dis- appearance of the U.S. market gives ample room for imports and a healthy domestic market. (Tables referred to follow:) TABLE 1.-STRAWBERRIES-ACREAGE AND INDICATED PRODUCTION, BY SEASON AND STATE, 1968 WITH COMPARISONS Acreage Crop and State Harvested - 1962-66 1967 Production ( in thousand s of pounds) For harvest, 1968 Average 1962-66 1967 Indicated, 1968 Strawberries: 1 Winter 2,380 2,000 1,800 20,906 17,600 14,400 Spring: California 9,080 8,000 8,500 212,978 208,800 238,000 Early spring 5,660 4,400 3,800 16,460 13,280 11,200 Mid-spring: Illinois 1,700 1,500 1,500 4,136 4,050 3,600 Missouri 1,040 800 750 2, 567 2, 080 1, 950 Maryland 870 800 750 2,856 2,320 3,750 Virginia 2,000 1,400 1,300 5,408 4,200 3,900 North Carolina 2,040 2, 000 1,900 5,736 4, 200 6, 650 Kentucky 1,280 1,000 900 3,888 3,0)0 2,340 Tennessee 4,040 2,400 1,700 10,087 6,720 4,250 Alabama 730 650 600 1,662 1,300 1,140' Arkansa~s 3,880 2,600 2,300 9,057 7 800 5 750 Oklahoma 1, 160 900 900 2,886 3,600 3,600 Grouptotal 19,120 14,050 12,600 48,880 39,270 36,930 Late Spring: Maine 360 350 320 1,109 1,155 990 Massachusetts 370 370 250 1,385 1,591 1,330 Connecticut 360 350 300 1,079 1,050 990 New York 2,780 2,400 2, 100 9,660 6,480 6, 720 Newiersey 2,520 2,400 2,500 11,840 9,120 11,000 Pennsylvania 1,540 1,800 1,800 4,934 5 040 5,040 Ohio 1,760 1,500 1,600 4,894 4,800 3,840 Indiana 1,200 1,100 1,300 3,756 4,620 5,850 Michigan 7,560 6,800 5,900 33,098 29,240 23,600 Wisconsin 1,920 1,900 1,900 5,000 4,940 3,990 Washington 6, 180 5,600 5, 300 42, 004 35,840 34, 450 Oregon 13,400 14,000 12,300 83,740 95,200 81,180 Group total 40, 060 38, 570 35,670 202,914 199,076178,950 AllStates 76,300 67,020 62,370 502,138 478,026 479,480 1 Includes processing. Source: U.S. Department of Agriculture Statistical Reporting Service, Sacramento, Calif. PAGENO="0311" 3747 TABLE Il-STRAWBERRIES (FROZEN)-U.S. SUPPLY AND DISAPPEARANCE, SEASONS 1942-43 TO 1966-67 [Million pounds) Mexico Average f.o.b monthly price quotations imports (cents per pound) (million (pounds) California Northwest Mexico Beginning Total Disappear- Ending stocks Pack Imports supply ance stocks (May 1) (Apr. 30) Season (May-April) 1942-43 25. 9 63. 8 1943-44 15. 4 29. 8 1944-45 11.5 34.8 1945-46 12. 7 36. 9 1946-47 16.8 78.1 1947-48 17.7 109.0 1948-49 15.9 160.1 1949-50 36.4 107.6 1950-51 11.1 192.7 1951-52 50.6 157.7 1952-53 41.5 200.3 1953-54 45.4 226.0 1954-55 51.5 221.4 1955-56 40.6 273.0 1956-57 65.0 312.3 1957-58 102. 3 259. 3 1958-59 84.2 261.5 1959-60 88. 7 248. 2 1960-61 84.6 217.5 1961-62 89. 5 222. 7 1962-63 76. 6 234. 6 1963-64 79. 4 234. 4 1964-65 61.6 252.6 1965-66 84.7 191.6 1966-67 86.8 213.3 0.1 89.8 74.4 15.4 .1 45.3 33.8 11.5 .4 46.7 34.0 12.7 .2 49.8 33.0 16.8 .1 95.0 77.3 17.7 .2 126.9 111.0 15.9 8 176. 8 140. 4 36. 4 1.6 145.6 134.5 11.1 3.6 207.4 156.8 50.6 6. 6 214. 9 173.4 41. 5 5.4 247.2 201.8 45.4 7. 4 278. 8 227. 3 51. 5 8.9 281.8 241.2 40.6 12.0 325.6 260.6 65.11 12. 3 389. 6 287. 3 102. 3 13.7 375:3 291.1 84.2 16. 3 362. 0 273. 3 88. 7 15.0 351.9 267.3 84.6 33. 5 335. 6 246. 1 89. 5 29. 0 341. 2 264.6 76. 6 34. 5 345. 7 266. 3 79. 4 40. 7 354. 5 292. 9 61. 6 42. 9 357. 1 272. 4 84. 7 74. 6 350. 9 264. 1 86. 8 76. 5 376. 6 269.3 107. Source: Annual reports of Foreign Agricultural Service, Agricultural Estimates Division, SRS, and National Association of Frozen Food Packers. TABLE 111.-STRAWBERRIES (FROZEN)-IMPORTS FROM MEXICO; AVERAGE PRICES, UNITED STATES AND MEXICAN PRODUCT, YEARS 1957-67 Calendar year 1957 13.8 16.0 18.2 16.11 1958 14. 4 17. 0 18. 0 17. 0 1959 14.2 19.5 20.7 18.5 1960 24.9 20. 2 20. 5 19. 0 1961 29.9 18.0 20.5 17.0 1962 32.3 17.0 19.0 17. 0 1963 34.6 17. 7 19. 5 17. 7 1964 39. 7 20. 5 20. 7 19. 0 1965 51. 8 23. 2 24.2 23. 0 1966 82.8 23.7 25.0 20.0 1967 72. 7 23. 0 22. 5 18. 0 1968 1443 1 Preliminary, through June 2. Sources: Mexico imports, U.S. Bureau of Census; California and Pacific Northwest price quotations, Quick Frozen Foods (monthly); Mexico prices, New York Journal of Commerce. Mr. ULLMAN. Thank you very much, Mr. Ward. Are there questions? Mr. Conable. Mr.CONABLE. Mr. Ward, do you have any idea what percentage of the strawberries coming in from Mexico are being produced there by Americans? Mr. W~iw. No, we don't have that figure. Mr. CONABLE. My understanding is that there is a substantial out- flow of American productive capacity from California to Mexico, as a result of labor shortages in California. PAGENO="0312" 3748 Mr. WARD. We in discussing this estimated the percent to be small, not real large. I mean less than half. Mr. CONABLE. I see. Thank you. That is all, Mr. Chairman. Mr. ULLMAN. You are saying that it is not possible to compete in the American market with Mexican strawberries? Is that right? Mr. WARD. Correct. Mr. ULLMAN. Are they able to produce a comparable berry there? Mr. WARD. Their quality is improving. However, their quality has not been as good a quality as you do have in certain strawberry- producing areas. However, for preserves versus a retail pack, they do a fair job. Mr. ULLMAN. I am sure you have explored every possible avenue of protecting your industry. Your industry has had to cut back in its production, has it not? Mr. WARD. Yes. We have cut back, from 1956 to 1959, since that time, and it appears that we. are now starting on another decline in our acreages throughout the several States producing strawberries. Mr. ULLMAN. Is it your feeling that they can go on developing new acreage in Mexico? Is there still a lot of land that can be used for berries? Mr. WARD. Yes. It is our feeling that in 10 years they could com- pletely take over the processed strawberry market in the United States, if they so desire, or were pushed ahead that fast. Mr. ULLMAN. It is a heavy labor using commodity, and does this account for most of the advantage they have down there? Mr. WARD. Yes. Our recent figures, which were stated in a report to the National Advisory Commission on Food and Fiber on January 11, 1967, stated that the Mexican field labor runs from $1 to $1.20 per day, versus $1.40 an hour in California, and the cost of labor in Mexi- can plants is $1.56 a day, versus $2.09 an hour in California. Mr. ULLMAN. Thank you very much, Mr. Ward. I am sure that the committee will take the matter under consideration. Mr. WARD. Thank'you. Mr. BuR1c1~. Without objection, Mr. Chairman, I think it would be appropriate to place in the record a number of Tariff Commission statistical tables and comments on strawberries, in connection with Mr. Ward's testimony. Mr. Uu~rAN. Without objection, the material will be placed in the record at this point. (The material referred to follows:) PAGENO="0313" 3749 STRAWBERRIES I. Tariff status, TSUS numbers, and rates of duty TSUS No. Rate of duty Description December 1967 Post KR. U.S. imports, 1967 (thou- sands of pounds) 146.58 146, 60 146. 7520' 152. 7420~ Fresh, or in brine: Entered during June 15-Sept. 15, in- 0.5 cent per poundl_ 0.2 cent per pound__ clusive, of any year. Entered any other time 0.75 cent per pound 2_ 0.75 cent per pound - - Frozen strawberries 14 percent 14 percent Strawberry pulp and paste 15 percent 15 percent 1,216 20, 520 74, 659 6,042 1 Based on 1967 imports, virtually all from Canada, the AVE was 1.4 percent. 2 In 1967, the AVE ranged from 0.8 percent to 12.0 percent. The average AVE on imports from Mexico, which accounted for the great bulk of the entries, was 4.8 percent. 3 Formerly 146.7220. Formerly 152.70 (part). Note: Import data include fresh and frozen strawberries and strawberry paste and pulp but exclude minor quantities of strawberry jam; imports of strawberries in all other forms have been negligible. II. U.S. production and trade STRAWBERRIES: FRESH AND PREPARED OR PRESERVED 1 (TSUS 146.58, -.60, -.7520. AND 152.7420) un millions of pounds, fresh weight equivalentJ Year Production Imports Exports 2 Apparent consumption Ratio of i Production (Percent) mports to- -- Consumption (Percent) 1963 510 36 22 524 7.1 6.9 1964 1965 1966 557 459 464 43 55 87 22 15 14 578 499 537 7.7 12.0 18.8 7. 11. 16.2 1967 478 86 10 554 18. 0 15. 5 1963-67 average 494 61 17 538 12.3 11.3 I Data on production includes output for the fresh market and for processing. The fresh weight equivalent of imported frozen strawberries and strawberry pulp is computed at 80 percent of the reported total weight of the imports to fake account of the sugar content of the entries. 2 Data on exports, which are not separately available, are estimates based upon import statistics for Canada, which accounts for the great bulk of U.S. foreign shipments. Note: The data on production include small quantities of strawberries for canning. The combined output of fresh and frozen strawberries shown on the succeeding tables do not add to the total shown above, primarilybecause the production data for the following table on frozen strawberries is on a finished product basis, including the weight of added sugar. Source: Production compiled from official statistics of the US. Department of Agriculture; imports compiled from official statistics of the U.S. Department of Commerce. PAGENO="0314" 3750 FRESH STRAWBERRIES (TSUS 146.58 AND 146. 60) [Quantity in millions of poundsj Year Production 1 Imports Exports Apparent consumption Ratio of im ports to- Production (percent) Consumption (percent) 1961 1962 1963 1964 1965 2 1966 1961-66 average - :1967 285.9 290. 5 295. 1 297.3 249. 2 257. 4 0.7 1. 0 3. 6 5.2 6.4 13. 1 225.1 2 21. 3 2 20. 4 221.0 13. 0 12. 7 2261.5 2 270.2 2 278. 3 5281.5 242. 5 257. 8 0.2 .3 1.2 1.7 2.6 5. 1 0.3 . 4 1. 3 1.8 2. 6 5. 1 279. 2 5. 0 18. 9 265. 3 1. 8 1. 9 278. 4 21. 7 9. 8 290. 3 7. 8 7. 5 I Production for fresh market; includes small quantities for processing from some States. 2 Export data used in computing apparent consumption for the years 1961 to 1964 represent Canadian imports of fresh strawberries from the United States as reported in the official statistics of the Dominion of Canada. Excludes 22,100,000 pounds produced in 1965 but not marketed. Source: Production compiled from official statistics of the U.S. Department of Agriculture; imports and exports compiled from official statistics of the U.S. Department of Commerce, except as noted. Note: The Fresh Fruits and Vegetables Market-Sharing Act of 1968 (HR. 16416) provides that quotas be base so- called "import year" which includes the months of January through July plus December in any calendar year. It is estimated that of the 1961-66 averages, approximately 99 percent of production, 88 percent of imports, 100 percent of exports, and 99 percent of consumption occurred during this "import year." Based on this "import year" the estimated ratios of imports to production and to consumption over the years 1961-66 would have been about 1.6 and 1.7 percent, respectively FROZEN STRAWBERRIES, AND STRAWBERRY PULP AND PASTE, (TSUS 146.7520 AND 152.7420) [Quantity in thousands of poundsj Apparent Year Production Imports u Exports x consumption Ratio of i mports to- Production Consumption - 1961 222,694 33,817 2,978 262,745 15.2 12.9 1962 234,620 36,781 2,545 261,712 15.7 14.0 1963 234,440 40,146 2,414 299,202 17.1 13.4 1964 252,646 46,997 877 273,420 18.6 17.2 1965 191,613 60,366 2,588 283,552 31.5 21.3 1966 236,492 91,807 969 295,784 38.8 31.0 Average 1961-66.. 228,751 51, 652 2, 062 279, 402 22. 6 18. 5 1967 198, 940 80, 701 508 288, 258 40.6 28. 0 I Frozen strawberry imports were not separately reported prior to Aug. 31, 1963. Data used for years prior to 1964 are for imports of frozen berries from Mexico; such entries are believed to have consisted almost enitrely of strawberries, and Mexico was virtually the only supplier. Imports of strawberry paste and pulp, all of which are believed to have been `frozen, were not separately reported prior to 1967. Data used for 1961-63 are estimates based on information obtained from trade sources; the data for 1964-66 are based on an analysis of impart documents. 2 U.S. export statistics are not separately reported. Data shown are Canadian imports from the United States. Exports to other countries are believed to have been negligible. 3 Consumption data have been adjusted to reflect carry-in and carry-out stocks. Source: Production data are compiled from official statistics of the National Association of Frozen Food Packers. Im- ports are from official statistics of the U.S. Department of Commerce, except as noted, and exports from official import statistics of Canada. PAGENO="0315" 3751 III. Principal sources of imports FRESH STRAWBERRIES (TSUS 146.58 AND 146.60) (Quantity in thousands of poundsj Source 1965 1966 1967 Total, all countries: Quantity 6,442 Value (1,000 dollars) 1, 023 Unit value (cents per pound) 15.9 Mexico: Quantity 5,791 Value (1,000 dollars) 844 Unit value (cents per pound) 14. 6 *Canada: Quantity 608 Value (1,000 dollars) 165 Unit value (cents per pound) 27. 1 13, 135 21, 736 2,404 3, 621 18. 3 16. 7 11,747 20,499 2, 048 3, 180 17. 4 15. 5 1,128 1,216 316 436 28. 0 35. 8 FROZEN STRAWBERRIES (TSUS 146.7520) Source 1965 1966 1967 Total, all countries: Quantity 53,866 Value (1,000 dollars) 8, 193 Unit value (cents per pound) 15. 2 Mexico: Quantity 51,796 Value (1,000 dollars) 7, 805 Unit value (cents per pound) 15. 1 Poland: Quantity 1,313 Value (1,000 dollars) 242 Unit value (cents per pound) 18. 5 Netherlands: Quantity 757 Value (1,000 dollars) 146 Unit value (cents per pound) 19.3 85,707 15, 874 18. 4 82,826 15, 264 18. 4 2,523 449 17. 8 276 54 19. 6 74,659 10, 319 13. 8 72,693 9, 991 13.7 1,830 302 16. 5 128 24 18. 9 Source: Compiled from official statistics of the U.S. Department of Commerce. COMMENTS Imports The great bulk of the U.S. imports of both fresh and frozen strawberries are supplied by Mexico. Canada has supplied most of the remaining imports of fresh strawberries; Poland and the Netherlands have in recent years exported small amounts of frozen strawberries to the United States. Generally, the import season for fresh Mexican strawberries begins in the fall (usually November), peaks in winter months and declines sharply in the spring as the domestic crop begins to enter the market in increasing volume (usually April). PAGENO="0316" 3752 STRAWBERRIES, FRESH: U.S. IMPORTS FROM MEXICO1 [In thousands of pounds[ Month 1960 Year beginning November 1_ -- 1961 1962 1963 1964 1965 1966 1967 November 43 41 394 464 746 870 982 December 23 January 26 February 10 March 305 April 19 May 4 201 187 150 329 72 14 403 576 702 319 595 113 703 210 538 1,357 354 233 931 722 729 1,273 921 111 1,256 1,945 1,849 2,288 1, 519 176 3,080 2,730 4,741 4,741 2, 912 748 4,730 6,850 6,439 3,205 2, 390 Total 387 966 2, 449 3, 794 5, 151 9, 779 18, 715 - -- I The Mexican season for fresh marketing begins in November of the year shown and ends in May of the following year. Source: U.S. Department of Agriculture. All of the entries of fresh strawberries from Mexico enter at the "non- seasonal" rate of duty of 0.75 cents per pound (about 4.8 percent AVE in 1907). Most of the small imports from Canada enter at the seasonal (June 15-September 15) rate of 0.5 cents per pound-the equivalent of about 1.4 percent ad valorem in 1907. Mexican strawberry production began in significant commercial quantities in 1948. The first shipments to the United States were frozen strawberries, and the sizeable shipments of fresh strawberries commenced in 1959. During the 1905 crop year Mexico produced about 110 million pounds of strawberries, more than 80 percent of which are estimated to have been exported to the United States, particularly in the form of frozen strawberries. In the Bajio-which is the principal growing area and which extends from Leon and Irapuato on the north to Zamora on the west and Morelia on the east and covers the major portion of the State of Guanajuato and of Michoacán- strawberries have been the most important horticultural crop grown and proc- essed.1 In recent years growers, as well as processors, have begun diversifying production, and this area is becoming an important center for freezing vegetables for export. Prior to a hugh crop in 1965-00, the area experienced a large expan- sion in both acreage and production facilities. Subsequently, the emphasis was placed upon .marketings geared to sales that could be made at profitable prices, and efforts have been made to diversify by producing other commodities such as fruit juices, nectar concentrates, and the like. U.S. imports of frozen strawberries from Mexico reached a peak of 82.9 niil- lion pounds in 1966. The resulting low prices, coupled w-ith adverse weather, brought a reduction in imports the following year. Iniports of frozen berries during January-March 1968 were about twice those of the comparable period in 1967. However, imports during April were less than half as large as in April 1967, so that total imports through April were about the same as those of last year. Processors and growers in the Bajio expect total 1967-68 exports to be no larger than in the previous season. The freezers believe that under present con- ditions exports should be in the neighborhood of 70 million pounds. The frozen berries are trucked to the United States, with the bulk of the ship- ments entering at Laredo. The 30-pound can of whole berries is the standard pack although some berries are sliced upon order. Some processors are individ- ually quick freezing (IQF) selected large berries, but IQF installations are limited to a few processors. Almost all of the imports from Mexico are of large (over 10 pound) packs for use by the manufacturers of preserves, janis, ice cream, baking products, and the like. About 50 percent of the domestic output of frozen strawberries has been put up in large containers in recent years for tile food processing industries. While the imports of the frozen pack from Mexico enter the United States the year around, the bulk of the entries in recent years has occurred during the spring and early summer season. 1 The following discussion of the Mexican industry is taken from the U.S.D.A. publication, Mexico's Production of Horticultural Products for Export, FAS-M-199, ~Tune 1968. PAGENO="0317" 3753 STRAWBERRIES, FROZEN: U.S. IMPORTS FROM MEXICO [Million pounds[ Month Average 1959-61 1962 1963 1964 1965 1966 1967 1968 January February 0.3 1.2 0.3 1.0 0.7 2.7 0.7 1.8 1.5 4.5 2.2 6.2 3.6 6.8 1.3 7.9 March 3.4 6.5 7.3 13.0 9.3 12.7 6.6 7.5 April May June 6.5 5. 7 2.9 8.7 5. 3 6.0 8.1 7. 0 3.4 9.6 5. 6 4.2 13.0 7. 0 5.9 22.1 15. 0 7.3 17.7 7.6 12. 3 9.6 July 1.4 1.4 2.3 2.8 3.1 5.2 5.0 August Seotember October - .4 . 4 . 4 1.3 . 6 .6 1.0 . 6 . 5 .8 . 6 . 1 1.9 . 6 . 9 3.3 2. 5 1. 7 4.8 3. 8 3.9 November . 1 . 4 . 4 . 2 1. 9 2. 5 1. 1 December Total . 3 . 2 . 6 . 3 2. 2 2. 2 3. 0 23. 0 32. 3 34. 6 39. 7 51. 8 92. 9 72. 7 Source: U.S. Department of Agriculture. During the current year, excess berries have been shipped fresh. Fresh ship- ments increased materially in the 1968 season, largely because of the voluntary restrictions on frozen berries. Reports indicate that grower associations are again discussing acreage restrictions for next season to enforce their orderly marketing plans. Similar efforts in the past, however, have not been effective. Shipments of fresh strawberries can be expected to continue to increase. The growers ship their best size and quality berries to fresh markets and the balance to the freezer. About 75 percent of the fresh berries coming to the United States at McAllen, Texas, and most of the renoainder cross at Laredo in the same State. Mexican fresh berries are also being airfreighted to Europe via the United States and Mexico City. U.~8. ca~ports U.S. exports of fresh strawberries, which until 1966-67 were larger than im- ports, traditionally have been to Canada. In recent years such exports have de- clined somewhat as Canadian imports from Mexico have increased. U.S. exports of fresh strawberries to Europe by air transport is a small but apparently grow- ing trade. Exports of prepared strawberries, including frozen, are not separately reported but are believed to be small and to have consisted chiefly of shipments to Canada. U.s. production Strawberries are grown commercially in every State in the Union and consti- tute a perennial crop which provides production from the same acreage for both the fresh market and for processing. During 1961-66, about 55 percent of the average annual domestic crop was sold fresh. In California, which in recent years has accounted for about two-fifths of total U.S. production, from 65 per- cent to 75 percent of the crop is usually sold on the fresh market. In 1967, Cali- fornia's output totaled 209 million pounds (148 million for the fresh market) compared with 213 million pounds annually during 1962-66. According to the U.S. Department of Agriculture, California's 1968 harvest is estimated at 14 percent above last year's crop. The other ranking producers of strawberries for the fresh market are Florida, Michigan, Louisiana, New Jersey, and Arkansas. The bulk of the production in those States is marketed fresh, although about a third of the Michigan crop is normally processed. In contrast to California's gain in 1968, production in the latter States in the 1968 season is expected to be substantially below those of a year ago as a result of acreage reductions and a decline in yields due in part to adverse weather. PAGENO="0318" 3754 STRAWBERRIES: PRODUCTION BY GROUPS AND STATES, AVERAGE 1962-66, ANNUAL 1967 AND INDICATED 1968' [1,000 pounds[ Group and State Average 1962-66 1967 Indicated 1968 Winter: Florida 20, 906 Spring: California___ 212,978 Early spring: Louisiana 14,076 Texas 2,384 17, 600 208,800 14, 400 238,000 11,780 1,500 10,200 1,001) Grouptotal 16,460 Midspring: Illinsis_ 4, 136 Missouri 2,567 Maryland 2,856 Virginia 5,408 North Carolina 5,736 Kentucky 3, 888 Tennessee 10,087 Alabama 1,662 Arkansas 9, 057 Oklahoma 2,886 Grouptotal 48,880 Late spring: Maine 1,109 Massachusetts 1,385 Connecticut 1,079 NewYork 9,660 Newiersey 11,840 Pennsylvania 4, 934 Ohio 4,894 Indiana 3,756 Michigan 33, 090 Wiscons!n 5, 000 Washington 42, 004 Oregon 83,740 Grouptotal 202,914 All Stat3s 502,138 13,280 - 11,200 4,050 2,080 2,320 4,200 4,200 3, 000 7,720 1,300 7,801) 3,600 3,600 1,950 3,750 3,900 6,650 2, 340 4,250 1,140 5,750 3,600 39,270 36,330 1,155 1,591 1,050 6,480 9,120 5, 040 4,800 4,620 29,240 4, 940 35, 840 95,200 960 1,330 990 6,720 11,000 5, 040 3,840 5,850 23,60~ 3, 990 34, 450 81,180 199,076 178,950 478,026 479,480 1 For fresh market and processing. Source: U.S. Department of Agriculture. Most of the strawberries for processing are grown in the Pacific Northwest. Washington and Oregon together have accounted for from 25 percent to 3Q~ percent of total U.S. production for all uses in recent years, and for most (more than two-thirds in 1967) of the U.S. frozen pack. Total production in those two States is estimated at 116 million pounds for the 1968 season, compared with 131 million in 1967, and an average annual of 126 million during 1962-66. Through June 15 of 1968, only about 17 million pounds of strawberries had been delivered to processors in Oregon and Washington, compared with 25 million pounds a. year ago. This decline in deliveries, was expected to be offset by an increase in California's deliveries to freezers, which, through mid-June, were reported at about 29 million pounds-or about 53 percent more than during the same period last year. PAGENO="0319" 3755 STRAWBERRIES FOR PROCESSING: PRODUCTION, VALUE PER POUND, AND TOTAL VALUE, AVERAGE 1961-65, ANNUAL 1966 AND 1967 Production Season and State pounds) Value (thousand Per p ound (cents) Total (tho - usand dollars) Average, 1961-65 1966 1967 Average, 1961-65 1966 1967 Average, 1961-65 1966 1967 Spring: California 1 79, 760 60, 500 60, 700 13. 0 16. 5 14. 7 10, 112 9, 982 8, 923: Early spring: Louisiana_ ...966 176 144 13. 0 15. 0 15. 0 123 26 22 Mid-spring: Kentucky 1,208 1,240 380 14.6 18.0 13.5 172 223 51 Tennessee 7,512 3,500 704 14.2 17.8 14.9 1,031 623 105 Oklahoma 2, 480 2, 100 1, 300 15. 8 21. 0 18. 0 372 441 234 Total or average_ - - _11, 200 6,840 2, 384 14. 6 18. 8 16. 4 1, 574 1,287 390 Late spring: New York 1 680 1 500 700 12.7 13.2 13.1 210 198 92 Michigan 11,748 11,160 11,100 15.3 15.3 15.6 1,842 1,707 1,732 Washington 39, 432 33,940 32, 340 14. 0 16.6 15. 0 5, 395 5, 634 4, 851 Oregon 1 74, 288 93, 000 1 92, 300 13. 3 17. 3 14. 1 9, 642 16, 089 12, 422 Total or average_ - - - 127, 148 139, 600 136, 440 13. 7 16. 9 14. 4 17. 090 23,628 19,097 United States 219, 074 207, 116 199, 668 13. 4 16. 9 14. 5 28, 899 34, 923 28. 432 some quantities not marketed and excluded in computing value: Late Spring, Oregon, 4,200,000 pounds in Source: U.S. Department of Agriculture. In 1963 (the latest year for which data are available) frozen strawberries. were produced in 78 U.S. establishments compared with 94 in 1959. Two-thirds of the establishments were located in Oregon, Washington, and California in 1963. The U.S. Department of Commerce indicates that in 1963, 20 of the largest strawberry freezers accounted for 77 percent of the total production in that year. Fifty of the largest accounted for 99 percent of total output. Most establishments. freezing strawberries also process other fruits and/or vegetables; frozen straw- berries provide a substantial portion of the total income of a number of these producers. Data on the number of workers engaged in harvesting and processing strawberries are not available. Because of the short season for the crop, much. of the labor is recruited locally as temporary help. In the major producing areas,. wages for strawberry harvests have been increased to insure sufficient labor. Mr. TJLLMAN. Our next witness is Mr. Howard P. Chester. Mr. `Chester, we are very happy to have you before the ~oniinittee. For the record, will you please identify yourself, and also all of' your colleagues, and with the understanding your full statement will be in the record, proceed as you see fit. PAGENO="0320" 3756 STATEMENTS OP HOWARD P. CHESTER, EXECUTIVE SECRETARY, STONE, GLASS, AND CLAY COORDINATING COMMITTEE; APPEAR- ING JOINTLY WITH RALPH REISER, INTERNATIONAL PRESI- DENT, UNITED `GLASS & CERAMIC WORKERS OF NORTH AMERICA; GEORGE BARBAREE, INTERNATIONAL SECRETARY-TREASURER, INTERNATIONAL BROTHERHOOD OF OPERATIVE POTTERS; VIC- TOR THOMAS, GENERAL VICE PRESIDENT, UNITED CEMENT, LIME, & GYPSUM WORKERS; HOLLAN OORNETT, EXECUTIVE BOARD MEMBER, UNITED STONE & ALLIED PRODUCTS WORKERS OP AMERICA; AND ROBERT LORD, VICE PRESIDENT, INTERNA- TIONAL BROTHERHOOD OF OPERATIVE POTTERS Mr. CHESTER. We appreciate that, Mr. Chairman. My name is Howard P. Chester. I am executive secretary of the stone, glass, and clay coordinating committee. This is a committee that consists of seven international unions, `and these are all union officers here, and with your permission I would like to introduce them. Mr. ULLMAN. Would you do that, please? Mr. ChEsTER. Starting on my left, Mr. Hollan Cornett, executive board member, United Stone & Allied Products Workers of America. Next to him is Mr. Ralph Reiser, international president of the United Glass & Ceramic Workers. Starting on my far right is Mr. Robert Lord, vice president of the International Brotherhood of Operative Potters. Next to him is Mr. George Barbaree, secretary-treasurer, International Brotherhood of Operative Potters; and next `to me, on my right, is Mr. Victor Thomas, general vice president of the United Cement, Lime & Gypsum Worker5 Mr. ULLMAx. We are pleased to have all you gentlemen before the committee. Mr. CHESTER. Mr. Chairman and members of the committee, we have in all cases briefed our testimony, and, of course, `we will submit more extensive documents for the record, with your permission. I would first like to thank you for this opportunity to express our views. Our stone, glass, and clay coordinating committee represents seven international AFL-CIO unions. We have a combined member- ship of 250,000 workers, with active locals in almost all `of the 50 States. The first subj ect covered in our brief is private foreign investments, and points up the tremendous increase in private investment abroad, from $19 billion in 1950 to $86.2 billion in 1966. Turning to the distribution of direct private foreign investment, which has risen from $11.7 billion in 1950 to $54.5 billion in 1966, we find that contrary to the flow being to underdeveloped countries, where the need had been emphasized in the 1958 hearings, the investment flow has instead gone to developed countries, with Western Europe showing a 14-percent increase over 1957 for a total of 30 percent, which combined with Canada's 31 percent, shows that 61 percent of all private direct investment abroad has been made in the two highly developed areas. PAGENO="0321" 3757 With regard to industry distribution, manufacturing leads with 40 percent of the total, or $22 billion, in all areas. Many of these global corporations are showing their concern against any restrictions to their access to the U.S. market. They recognize that free access to U.S. markets is in their corporation interest. They want to invest abroad, enjoy the markets and lower wage labor, and they also want to enjoy the U.S. market from abroad, in some cases in direct competition with their domestic operations, or other domestic producers of the same product. For example, in 1965, U.S. foreign affiliates exported back to the United States $5.133 billion in products from manufacturing, mining, and petroleum. We certainly agree with the mandatory restrictions on foreign invest- ment issued by President Johnson on January 1, 1968. The second subject is the U.S. method of valuing imports on an f.o.b. as opposed to the method used by most countries, or c.i.f. Our f.o.b. method definitely undervalues our imports by at least 10 percent, and creates several serious disadvantages. An unrealistics figure is released, which inflates our supposed sur- plus in balance of trade. A realistic trade policy must be considered on accurate.comparable statistics in order for Congress to make respon- sible trade legislation. For example, our quoted 1967 surplus in trade of $4.3 billion would be reduced to $1.63 billion, if we added only 10 percent to our 1967 im- port figure for insurance and freight. Our third subject is the effect of Government subsidies on U.S. trade statistics. To reflect a true figure for calculating a surplus or deficit in trade, subsidies must be considered. Testimony on the Trade Expansion Act before the Senate Finance Committee clearly shows that agricultural exports that are subsidized were included in overall export figures. Later testimony revealed that of the $5.1 billion of agriculture ex- ports, $2 billion of such exports were subsidized under Public Law 480, and for proper reporting, should have been excluded from the $5.1 billion figure of agricultural exports. Our trade statistics should truly show our position in trade, so that trade policy decisions can be based on accurate figures, and not figures that undervalue imports and overvalue exports. The fourth subject is the useless portion of the Trade Expansion Act, section 301, or adjustment assistance to workers or firms. To date, not one case has been certified for assistance. The words "in major part" should be stricken from this section, as they were not in the bill when passed by the House. I know there is recognition of this unworkable section, but I might suggest deletion of the words "in major part." Then the section has meaning. Of course, I must point out that there is no substitute for a job, and a productive place in society, and labor, as I know it, is not interested in any dole, but by far prefers to work. The fifth and concluding subject is the effect on labor of U.S. trade policy. 95-159-OS-pt. S-21 PAGENO="0322" 3758 `We believe all working Americans are affected by U.S. trade policy. Our Nation requires maximum employment, and healthy industries, to maintain a healthy economy. Most industries are willing to share in the growth of the U.S. mar- ket with the foreign producers, but they are not willing to have this growth completely absorbed by imports, or to have present productive capacity and employment displaced by imports. We believe that the tremendous rise in American investment and technology abroad added to rising capacity of foreign firms results in decreasing exports and increasing imports, and eliminates existing jobs and job potential, and reduces domestic industry's capacity to operate at a healthy level and properly share in our country's growth. Our experience, borne out by statistics, shows that the products produced by the employees who are members of our committee have been and will continue to be faced with constantly rising imports, de- clining employment, plants closing their doors, and no relief in sight. In pottery, for example, the 60-percent increase in imports in 1966 over 1961 is called the adding of insult to injury. Imports of china and earthenware, made in major part by the Jap- anese, had already captured 48.4 percent and 33.6 percent of the do- mestic market respectively. Twenty pottery plants have closed their doors since 1954, unable to compete with imports. This is an almost unbelievable, but factual, account of what has happened in the pottery industry. Of the $55 million of total pottery imports in 1966, the Japanese captured $33 million. You will note the rising increases in imports of cement, lime, and gypsum products, with a 90-percent increase; ceramic floor and wall tile, 85-percent increase; flat glass, including sheet, plate, float, cast, and rolled, tempered, laminated, and mirrors, 22-percent increase; illuminating and table and arc glassware, a 67-percent increase. These increases are based on a comparison of 1961 with 1966, and like pottery, do not show the previous damage. Exports in all of these industries are minimal, while imports have displaced in excess of 50,000 workers. Something must be done to prevent annihilation of these industries and their workers. On behalf of the Stone, Glass, and Clay Coordinating Committee, we urge legislation to regulate foreign imports, U.S. foreign invest- ment policy, and congressional consideration and approval before any changes are made in our antidumping procedures. We support the Fair International Trade Act first introduced by Congressman Herlong on May 1, 1968, and subsequently introduced by more than 30 Congressmen, expressing their concern on the serious problem of uncontrolled imports. As a closing comment, the United States has been warned by the EEC that we are risking further deterioration of our balance of pay- ments unless we take vigorous remedial action against rising imports from the EEC. This article was in the Washington Post May 21, 1968. We cer- tainly should heed their timely warning. Thank you very much. PAGENO="0323" 3759 (Mr. Chester's prepared statement follows:) STATEMENT OF HOWARD P. CHESTER, EXECUTIVE SECRETARY, STONE, GLASS, AND CLAY COORDINATING COMMITTEE MEMBERS OF COMMITTEE Mr. George M. Parker, President, The American Flint Glass Workers Union of North America Mr. Lee W. Minton, President, The Glass Bottle Blowers Association of the United States and Canada Mr. E. L. Wheatley, President, The International Brotherhood of Operative Potters Mr. Paul Peifrey, President, The United Brick and Clay Workers of America Mr. Felix C. Jones, President, The United Cement, Lime and Gypsum Workers International Union Mr. Ralph Reiser, President, The United Glass and Ceramic Workers of North America Mr. Harry Baughman, President, The Window Glass Cutters League of America Mr. Chairman, my name is Howard P. Chester. I am the Executive Secretary of the Stone, Glass and Clay Coordinating Committee. We are composed of seven international unions, all affiliated with the AFL-CIO, who have joined together to cooperate on mutual problems that affect any one of our seven affiliates. We have a combined membership of 250,000 workers, with active locals in almost all of the fifty states. In this Hearing on U.S. trade policies we would like to make it clear from the beginning that the Unions listed above represent employees in industries that are already extremely import sensitive and we know that the Kennedy Round of tariff cuts will serve to further accelerate the foreign low-wage imports in these industries. They are presently faced with large shares of the domestic market being captured by foreign imports, causing plants to close and workers to suffer loss of their employment. To list some of the industries we are concerned with that are now suffering severe damage: pottery, ceramic tile, illuminating and table and art glassware, hydraulic cement, lime, gypsum, and fiat glass. There are many other industries also showing their concern. We submit that for these labor-intensive industries to compete with the like product produced in foreign countries, who have willing- ly accepted our technology and our mass production system but did not accept our high wages, can only be destructive to our high wage, high purchasing power economy. Most industries are willing to share in the growth of U.S. markets with the foreign producers, but they are not willing to have this growth completely ob- sorbed by imports or to have present productive capacity and employment dis- placed by imports. The Congress is showing great concern with our foreign trade policies and bills have been introduced; to establish import quotas on specified products; to amend the Trade Expansion Act; to amend the Anti-Dumping Act; to provide for orderly marketing, and to amend the Fair Labor Standards Act of 1938, to es- tablish procedures to relieve domestic industries and w-orkers injured by in- creased imports from low-wage areas. This last-described Bill, HR. 478, known as the Dent Bill, resulted from years of research and testimony given before Congressman Dent's Subcommittee of the Committee on Education and Labor on "The Impact of Imports on American Labor." After thorough debate on Septem- ber 28, 1907, the Bill passed the House by a strong majority of 340-29. Senator Long, Chairman of the Senate Finance Committee, conducted Hear- ings October 18, 19 & 20, 1907 on the import quota bills that had been introduced in the Senate. Considerable interest was shown by the public, business, labor, Con- gress and Cabinet Officers of the Administration. Senator Long also will be con- ducting hearings on a legislative oversight review of U.S. trade policies, seeking more data on our trade policies. Certainly we in Labor who are vitally affected by imports and U.S. trade policy should concentrate our efforts and battle for fair and just legislation. There are several important deficiencies in our present foreign trade policies that work in direct opposition to our national interest. Private Foreigm Investment U.S. foreign investment-and, as a substantial part of this category, U.S. pri- vate foreign investment-must be given full consideration as an inseparable part of our foreign trade policy. The following Chart "A" will serve to show the PAGENO="0324" 3760 astounding increases in our U.S. foreign investments; Chart "B" the area dis- tribution of U.S. direct private foreign investments; Chart "C" the industry dis- tribution of U.S. direct private foreign Investments. (The sources of informa- tion for Charts A, B and C were the 1958 Hearings by the Subcommittee on Pri- vate Foreign Investment, and the Department of Commerce Survey of Current Business, September, 1967.) CHART A-U.S. INVESTMENTS ABROAD (In millions of dollarsJ 1950 1957 1966 $32,844 $54,215 $111,874 19,004 36,812 86,235 17,488 33,588 75,565 11,788 25,252 54,562 5,700 8,336 21,0i3 1,516 3,224 10,670 13,840 17,403 25,639 13,518 15,548 21,182 322 1,855 4,457 In Chart "A" we find that total U.S. investment abroad in loGO has increased by practically four times the 1950 figure of $32.8 billion. The large share of the 1966 total figure is made up of private investments, $86.2 billion of the $111.8 billion total for 1966. The divisions of private investment are long-term meaning a period in excess of one year, and short-term. The book value of our various short-term private investments at the end of 1960 totaled .$10.6 billion. Long-term private investments can be placed in two categories, portfolio and direct. Portfolio investment largely entails private ownership of foreign govern- ment bonds and business securities, with no implication iii management decisions. Portfolio investment abroad in 1966 totaled $21 billion. Direct foreign investment is ownership of 25 percent or more of a business and usually important management participation. Private direct foreign investments abroad in 1966 totaled $54.5 billion. In all divisions of private foreign investment, comparing 1950-1957-1966, there have been tremendous increases in the holdings of U.S. companies and private investors abroad. CHART "B" AREA DISTRIBUTION OF U.S. DIRECT PRIVATE FOREIGN INVESTNENTS 19~7 1966 Total U.S. investments abroad - Private investments Long term Direct Portfolio Shortterm U.S. Government credits and claims Long term Short term BOOK VALUES, $2~.3 BILLION BOOK VALUES, $~Ii-.S BILLION PAGENO="0325" 3761 In Chart "B" comparing the area distribution of direct private foreign invest- ment for 1957 with 1966 we find that considerably more investment dollars went into Western Europe, with a 14 percent increase, *so the investment flow is to the developed countries, in Western Europe and to Canada, while the less devel- oped and underdeveloped countries in Latin America, Africa and the Middle East dropped considerably in investments to their areas. And this happened despite the emphasis, stated in the 1958 Hearings, on the necessity of changing the private investment pattern to encourage more flow to Latin America, Middle East and Africa to deter the Soviet economic offensive in those areas. CHART ~~CI? INflUSTRY DISTRIBUTION OF 11.S~ DIRECT PRIVATE FOREIQN INVESTMENTS 1957 1966 Chart "C" compares the industry distribution of U.S. direct private foreign investments in 1957 with 1966. You will note a strong upward thrust in manu- facturing investment, a 9 percent increase over 1957, a decline in petroleum, mining and public utilities. Manufacturing leads all other industry investment with a 1906 foreign total of $22 billion in all areas, while petroleum is in second place with $16 billion. The three charts which show the increases in U.S. private foreign investment bear out a prediction made by Mr. Robert M. Mitchell, Vice President of the Whirlpool Corporation, in Hearings held on the subject of private foreign investment by the Subcommittee on Foreign Trade Policy, December 1958. After Mr. Mitchell's testimony, questions were asked by Congressman John W. Byrnes: "Mr. BYRNES. As I gather the basis of your concern here, among other things, is the fact that you foresee a necessity as far as American business is concerned to shift from an export business to manufacturing abroad, an investing and going through the manufacturing process abroad; is that right? "Mr. MITCHELL. That is correct, Mr. Byrnes. "Mr. BYRNES. Do you attribute that trend in part to this common market trend, the European Common Market and the proposals for a common market in other areas? Is there any other factor that gives rise to tha't? "Mr. MITCHELL. Basically that is it, Mr. Byrnes. In many of the Latin Ameri- can countries at the moment for practical purposes it is impossible to export particularly consumer durable goods. There is a rising nationalism in many of these countries, and they are trying to industrialize, and to raise their `standard of living. So that American companies, if they are going to have a part of that mar- ket at all, must invest in some form or other.. "Mr. BYRNES. You don't see a great future then as far as the export of finished commodities from this country. You see that contracting, I gather, and an in- crease in manufacturing abroad and with foreign labor? BOOK VALUES~ $25~3 BILLI~N BOOK VALDES, $5L~.5 BILLION PAGENO="0326" 3762 "Mr. MITCHELL. I think that is the way it will happen; yes, sir. "Mr BYRNES. Great emphasis has been put on the fact of the importance of the trade-agreements program and all of the rest of it, and the increase in our exports, and .the developing of this freer trade. I gather that you would suggest at least by your testimony that we may be getting into a period where that is going to be reversed? "Mr. MITCHELL. I think that that is quite right, sir. "Mr. BYRNES. That is all." This prediction of increasing investment abroad and the decrease in the ex- port of finished commodities from this country has come to pass. This increased foreign capacity can only serve to decrease our exports and increase our imports, and since capital is mobile and labor is not, the result has been loss of American jobs and loss to those American industries that do not choose to move or that do not have the capital to make such a move. Many U.S. corporations are becoming global in their makeup, with vast hold- ings and assets in other nations. Consider that in 1950, in direct private foreign investment the U.S. bad $11.8 billion invested around the world, this rose to $25.3 billion in 1957 and to $54.5 billion in 1966. Many of these global corporations are showing their concern against any restriction to their access to the U.S. market. They recognize that free `access to U.S. markets is in their corporation interest; they want to invest abroad, enjoy the markets and low-wage labor; and they also want to enjoy the U.S. market from `abroad, in some cases in direct compe- tition with their domestic operation or other domestic producers of the same product. United States foreign manufacturing affiliates' sales in 1965 were $42.4 billion compared to $18.3 billion in 1957, for an increase of 132 percent. In 1965, $34.7 billion of such sales were within the area of plant location, how- ever $7.7 billion represented export sales to other countries, including the United States. The products shipped to the U.S. am9unted to 24 percent of total export sales of manufacturing affiliates, or $1856 billion. This figure does not include exports to the U.S. of foreign mining affiliates of U.S. firms in the amount of $1.225 billion, nor does it include exports to the U.S. of petroleum and petroleum products by U.S. foreign petroleum affiliates. estimated at $2052 billion. Combining manufacturing, mining and petroleum export sales to the U.S., `by U.S. foreign affiliates in 1965, the total would be an astounding $5.133 billion. The time has come for a re-evaluation of this expanded investment program in terms of the U.S. economy, employment, outflow of capital. loss of revenue to the United States and effect of imports' on U.S. industry and labor. Our rising deficit in our balance of payments has brought this problem into focus and President Johnson has wisely issued mandatory restrictions on pri- vate foreign investment as of January 1, 1968. We heartily agree with his actions designed to preserve our country's financial strength. FOB versus CIF The official valuation of U.S. imports is based on foreign value of the merchan- dise abroad prior to shipment, and therefore excluding ocean freight and in- surance charges. The major alternative method in use by most other countries is referred to as CIF valuation; to the value of the goods in the country of origin is `added the cost of ocean freight and inOurance involved in shipment to the importing country. The resulting reported value of import's is thus higher than the foreign value by the amount of ocean freight and insurance. The United States method of foreign valuation of imports is completely out of step with most of the world; of 154 countries that tabulate import statistics, 131 use the OIF method while only 23 use the FOB method. The United Nations has recommended the use of the CIF method to promote international compara- bility of foreign trade data. There are many serious disadvantages in being out of step in valuing our imports; the American public get an inflated, unrealistic figure with respect to balance of trade overall and with respect to country by country comparisons; a realistic trade `policy must `be considered on accurate, comparable *statistics in order for Congress to `make responsible trade legislation; a `C'IF valuation is estimated at the very least `to provide a 10 percent increase in the value of U.'S. imports: C'IF values are far more accurate for analysis of imports in relation to domestic consumption or production. PAGENO="0327" 3763 Based on Department of Commerce figures (Washington Post, January 12, 1968) exports for 1967 were estimated $31 billion and imports $26.7 billion. Adding 10 percent-a conservative figure-to imports for ;CIF valuation, this figure becomes $29.37 billion, and our `balance of trade figure quoted at $4.3 billion drops to $1.63 billion, a sharp drop of $2.67 billion. Of course many coun- tries use in excess of 20 percent to add the C~IF valuation. If we used their CIF percentage in computation, we would have a deficit in our `trade account. Effect of U.S. Go~vernment Subsidies Government subsidies have a tremendous effect on U.S. trade statistics; to reflect a true figure for calculating a surplus or deficit in trade, subsidies must be considered. For example, in testimony before the Senate Finance Committee in their consideration of the Trade Expansion Act, Secretary of Agriculture Freeman, August 15, 1962, on a request `by Senator Bennett `to supply the record with figures to show the percentage of total exports agriculture represented, the following are the figures supplied: Value of U.S. ewports, total and agricultural, in fiscal year 1961-62 Total exports $21, 216, 874, 000 Agricultural exports 5, 138, 837, 000 Percentage of agricultural to total exports 24 In order to find the true figures of our exports that move in commercial com- petition or for dollar sales we must know the breakdown of the subsidized prod- ucts and shipping `costs `paid for by the U.S. Government. In response to a request by Senator `Curtis on the same day, for a breakdown on export subsidies, P.L. 480 subsidies shipping costs, trade mission costs, Secretary Freeman supplied the following information: Cost of financing agricultural exports under Food for Peace (Public Law 480) and export subsidy programs July 1, 1961 through May 31, 1962: Public Law 480: Gross cost to CCC of financing sales of agricultural commodities Millions for foreign currency under title I 1 $1, 2.12. 7 Ocean transportation costs financed by CCC 88. 3 CCC cost of commodities granted under title II 165. 8 CCC cost of commodities donated under title III 194. 7 `Excess of CCC investment over exchange value of materials re- ceived under title III barter program 3. 9 CCC cost of title IV sales in excess of anticipated dollar re- payments 16. 9 Total, Public Law 480 1, 682.3 Cost to CCC of payment in kind and cash subsidies (excludes $249,- 800,000 P1K and cash subsidies included under gross cost of title I sales, above) 322.1 Total cost of Public Law 480 and export subsidy programs_. 2, 004.4 1 In payment for commodities sold under this program, foreign governments are required to deposit the equivalent of $907,000,000 in their local currency `to the account of the U.S. Government. These currencies are used for various purposes authorized under sec. 104 of Public Law 480, such as payment of U.S. obligations abroad, agricultural market develop- ment, loans and grants for economic development, loans to U.S. and foreign private business, and other mutually agreed purposes. USDA expenditures for trade fairs and other market development projects abroad amounted to $7,500,000 during fiscal year 1962. This information points up that our method of reporting exports is misleading and very unrealistic. In the above case agricultural exports of $5.1 billion, and reported in the figure of total exports as such, should have been reported at $3.1 `billion or the staggering figure of $2 billion less, and which immediately reduces the total export figures from $21.2 billion to $19.2 billion. Our trade statistics should truly show our position in trade, so that trade policy decisions can be based on accurate figures, and not figures that under- value imports `and overvalue exports. Adjustment Assistance under TEA As an important part of the Trade Expansion Act, provisions are made for petitions to be filed with the Tariff Commission by workers or firm's for adjust- ment assistance. The Tariff Commission makes an investigation and if their PAGENO="0328" 3764 report to the President is in the affirmative, the President may take action to provide tariff adjustment, provide that firms may request the Secretary of Commerce for certification of eligibility to apply for adjustment assistance, pro- vide that the workers of such industry may request the Secretary of Labor for cert1fication of eligibility to apply for adjustment assistance, or the President may take any combination of such actions. This is what is provided in the law, but in actual practice since the enact- ment of the law October 11, 1962, not one case has been, certified for adjustment assistance, and this very important provision has been rendered useless by a rigid interpretation by the Tariff Commission of Title III, Sec. 301, subsections (b) and (c) and the damaging phrase repeatedly used (quote): "Whether, as a result in major part of concessions granted under trade agreements, an article is being imported into the United States in such increased quantities as to cause, or threaten to cause, serious injury to the domestic industry producing an article which is like or directly competitive with the imported article." (end of quote) The words "in major part" were not in `the bill as passed by the House, it there read "whether, as a result of concessions granted under trade agreements." This is the wording under H.R. 11970 when it was being considered by the Senate Finance Committee and as Senator Harry Byrd placed it in the record at the outset of the Hearing, Monday, July 23, 1962. The addition of the words "in major part," added by the Senate Finance Committee, stripped the law of any meaning, and resulted in a rigid interpreta- tion by the Tariff Commission, and prevented any intent to provide assistance to workers and firms adversely affected by imports due to U.S. trade policy. A workable and effective adjustment assistance program was vitally important to Labor, in fact as AFL-CIO President Mr. George Meany testified, "It is indis- pensable to our support of the trade program as a whole." Secretary of Commerce Hodges testified that he estimated that this part of the program would cost $122 million for finns and $45 million for workers over the five-year period of the law, a total of $167 million. To date not one case has had an affirmative finding for workers or firms. In direct contrast the Automotive Products Trade Act of 1965, legislated after the trade agreement reached with Canada by the United States on automotive products, provides a more realistic approach to adjustment assistance. The Act provides for petitions by workers and firms; it provides for investigation by the Tariff Commission but contrary to the procedure under the Trade Expansion Act, the Automotive Adjustment Assistance Board makes the final determina- tion and not the Tariff Commission. This Board, consisting of the Secretaries of Commerce, Labor and Treasury, has been delegated authority by the President to carry out the provisions of Ad- justment Assistance and in 12 of the first 16 cases filed, assistance has been pro- vided and $3 million in benefits have been paid to workers in approximately a two-year period. Of course there is no substitute for a job and a productive place in our society. Effect on Labor of 1J.2. Trade Policy All working Americans are affected by United States trade policy; our Na- tion requires maximum employment and healthy industries to maintain a healthy economy, and without a healthy economy our position as a world power and leader of the free world will quickly deteriorate, and just as quickly be replaced by another country less generous than the United States. The tremendous rise in American investment and technology abroad, added to rising capacity of foreign firms-with the resulting decrease in exports and increase in imports-eliminates existing jobs and job potential, and reduces domestic industry's capacity to operate at a healthy level and properly share in our country's growth. With 40 percent of direct private foreign investment or $22 billion at the end of 1966. invested in manufacturing abroad, what effect will this have on U.S. imports and displacement of U.S. labor? Manufactured products incorporate more steps of labor than do raw products. A manufactured product may go through a number of processes and fabrica- tions in each of which additional labor is applied. A raw product goes through a minimum of steps, possibly only one or two exclusive of transportation. Semi- manufactures fall into a halfway slot between raw products and finished manufactures. PAGENO="0329" 3765 U.S. IMPORTS [Dollar amounts in billions[ 1961 1966 Increase (percent) Crudefoodstuffs Crude materials $1.60 2.87 $2.12 3.85 32.4 33. 9 Semimanufactures Manufactured goods, in cluding food 3.38 6.68 5.59 13.99 65.3 109.5 Comparing the five-year period 1961-66, the chart above points up with great clarity the large increases in imports of semimanufactures and manufactured goods, 65 percent and 109 percent respectively. Since these two classes of prod- ucts carry with them the greatest amount of labor expended, it results in a larger displacement of LT.S. workers and job opportunities. U.S. IMPORTS [Dollar amounts in millions[ 1961 1966 Increase (percent) Cement, lime and gypsum $18,759 $35,379 90 Ceramic floor and wail tile - 14,952 27,744 85 Pottery, earthenware and chinaware 33,643 55,222 60 Flat glass 47,449 57.712 22 Illuminating and table and art glassware 21,712 36,239 67 The above comparison of 1961 w'ith 1966, in the products produced by members of the Stone, Glass and Clay Coordinating Committee bear out the previously shown increases in imports of semimanufactures and manufactures of labor intensive products. It does not show the many years of damage causing plant closings, jobs eliminated and overall loss of potential jobs. These figures do show the increasing penetration of imports and the dollar amounts are based on FOB values and do not include ocean freight or marine insurance which would increase the amounts by at least 10 percent. In pottery for example, the 60 percent increase in imports in 1966 over 1961 is called the adding of "insult to injury." Imports of china and earthenware, led in major part by the Japanese, had already captured 48.4 percent and 33.6 per- cent of the domestic market, respectively. This is an almost unbelievable but factual account of what has happened in the pottery industry. Of the $55 million of total pottery imports in 1966 the Japanese captured $33 million. Something must be done to prevent annihilation of this industry and its workers. Note the rising increases in imports of cement, lime and gypsum pi~oducts, with a 90 percent increase; ceramic floor and wall title 85 percent increase; flat glass (includes sheet, plate and float, cast and rolled, tempered, laminated, and mirrors) 22 percent increase; and illuminating and table and art glassware, 67 percent increase. The officers and members of these International Unions are showing great concern over the jobs that are continuing to be eliminated, by imports, and auto- mation attempts to compete that have not slowed the tide, but acted as a deter- rent to annihilation. Immediate action to halt job losses due to our trade policies would be in our Nation's interest, and corrective measures should be taken, in conjunction with existing and proposed Government programs, to help our unemployed, and to put a stop to the dangerous erosion of U.S. employment due to the rising tide of foreign imports. ~umrnary American jobs are being exported to other countries by the astounding in- crease in private foreign investment. Increasing from a 1950 figure of $19004 billion to a 1966 figure of $86.235 billion or a 454 percent increase, using Amer- ican investment plus foreig-n labor to produce products for sale within the for- eign market and for export to the LTnited States, displacing American labor and PAGENO="0330" 3766 yet expecting American workers to purchase products that are putting them out of work and destroying job potential. U.S. foreign affiliates exported products back to the U.S. totaling $5.133 billion, in manufactured products, mining prod- ucts, and petroleum and petroleum products. These exports flow from private direct foreign investment of $54.5 billion, as of the end of 1966, located primarily in Canada and Western Europe. The American people have for many years been misled, with regard to our balance of trade figures, into believing the United States has been enjoying large surpluses in our trade account, when in fact we are not~ If we valued our imports as most countries do, on a CIF basis, our import valuations would increase by ten to twenty percent. Also, we overvalue our exports by including Government subsidies within our export figures. As previously shown for fiscal 1961-62, $2 billion was included in our agricultural export figure, that in reality represented the Government paid subsidies and Public Law 480 subsidies. Reporting imports on a CIF basis, withdrawing Government subsidies when reporting agricultural exports, would give a true picture of our balance of trade, and in many, many cases would have resulted in a deficit in our trade account. Accurate and realistic trade statistics on our imports and exports would make possible more responsible and responsive decisions on our Nation's foreign trade policy. It is imperative for the Congress to have the accurate facts at their dis- posal so they can regulate foreign commerce and preserve this Nation's economic well-being. The adjustment assistance section of the Trade Expansion Act, providing for assistance to firms and workers has proven worthless, negated by the addition of the words "in major part." As a result there has not been a single case with an affirmative finding by the Tari~ Commission since enactment of the law in 1962. On behalf of the Stone, Glass and Clay Coordinating Committee, we urge legislation to regulate foreign trade and investment policy to restore the economic well-being of domestic industry and American workers. I want to thank you for this opportunity to express our convictions before this Committee. Mr. TJLLMAN. Thank you, Mr. Chester. Are there questions? Mr. Collier. Mr. COLLIER. May I ask, is the porcelain insulator business repre- sented by your unions? Mr. CHESTER. I would have to check. Mr. REISER. We represent three plants in porcelain. Mr. COLLIER. Is this business particularly affected by Japanese importation? Mr. REISER. The large insulators are, and of course in that area of the smaller insulators, there are other products, like glass, and that, which has affected the volume of porcelain products. Mr. COLLIER. May I ask, is tile also in your union? Mr. REISER. That is right. Mr. CoLLIER. There has been some voluntary limitation of Japanese ininortation of tile, hasn't there? Mr. REISER. Yes, sir, that is correct. Mr. COLLIER. In order to preserve some part of the market for American producers? Mr. REISER. Yes. Mr. COLLIER. Do you know what percentage that is? Mr. REISER. Well, no, I don't, because there seems to be not too much said about it. Somebody is afraid of rocking the boat, I think is what it is. Every time I seek some information, it is better not to say anything about it. Now, we lost approximately 4,000 tile workers~ that is, floor and n-all tile, and it took 3 or 4 years to establish that they were dumping. PAGENO="0331" 3767 I think the recession in the building industry is what the tipoff was in the thinp. Now, I understand that agreements were reached on a self-imposed ceiling, and I don't know the increment, but as I understand it, it is predicated on the iroiected production of tile in the coming year, and this is a preestablished figure. I understand a vulnerable part of that is that most~ of these pro- jections are optimistic in their makeup, and this kind of gives a false result, but it is a whole lot better than what it was. Mr. COLLIER. I understand the ceramic tile people were going to testify at these hearings, and they canceled. I wondered if you knew the reason. Mr. REISER. This is a very low paid industry, about $2.23 an hour, and we put in a modified form of a Scanlon plan, which is a scheme to reward the worker if he reduces his unit cost on labor. We were continually increasing our production, but we couldn't get any yield from this formula. But since this agreement has been reached, we went up approximately 20 cents an hour in this Scanlon plan, so that the reaction was nearly immediate. But the tragedy of it is that, under this assistance feature, there was no substance to it. Now, these some 4,000 workers are out and they haven't been retrained. They have received nothing, and, being a low paid industry, they have no pensions to speak of, because what money we had negotiated we put in across the board rather than in the fringes. Mr. COLLIER. Thank you very much. That is all, Mr. Chairman. Mr. LLLMAN. Thank you very much. Mr. CHESTER. Our whole panel, Mr. Chairman, will be testifying. We have been allotted so muc.h time. We had planned to start with Mr. Raiser, and then Mr. Thomas, and then Mr. Cornett, and then Mr. Barbaree, assisted by Mr. Lord. Mr. ULLMAN. You may introduce each one, and proceed as you see fit. We will withhold questions until yOu are through. Mr. CHESTER. Mr. Raiser will be first, of the United Glass & Ceramic Workers, the international president. STATEMENT OP RALPH REISER Mr. REISER. We have 42,000 members in our organization, 35,000 in the United States, and 7,000 in Canada. About 25,000 of our members in the United States, or more than half, are what has been called over- exposed to some type of trade agreement. In fact, we have been overexposed so long you might say we are pretty well done in the thing. Of course, all these other side arrangements, agreements, and under- standmgs result in loss of jobs to us. What we really want to talk about, not downgrading the importance of this assistance feature, is about our jobs, our own jobs, and we would like to see a type of tariff that would be flexible enough to provide for special problems of differ- ent industries. S Now, also, we are in a position that, come this fall, Pittsburgh Plate Glass-and I will address myself to the block glass industry_-and Libbey-Owens~For~ Co. have built new plants in Canada, and they- will be in full production in the fail. PAGENO="0332" 3768 Now, that means that they will come underneath the Canadian- American Automobile Act. Of course, this act did have an assistance program. However, it expired this month, I believe, and, if it isn't extended, we will get a zero on that one. However, we are not too pessimistic about the Canadian situation, because we got a chance there to do a little work of our own, in nego- tiating equal pay, just as the United Automobile Workers have done. However, in other phases of this, what we have been exposed to, what we really want, is a time element. What we really want is our jobs as glassworkers, and all we ask is a chance and time to adjust to new methods and new processes. We need time to adjust to new processes of manufacturing flat glass, developed by foreign glass companies, because it so happens that in the fiatglass industry, all the innovations, all the new methods, have been developed by foreign glass companies, and licensed by foreign glass companies.. We are willing to work our way out of this economic press, if we are only given a chance to compete. In 1962 we asked President Kennedy for time to meet the flood of imports triggered by the new modern plants financed by the Marshall plan. President Kennedy increased duties effective June 1962. Did we respond? We did. Using the Federal Reserve Index, 1957-59 as 100, we increased our productivity to 167 by 1966, while during the same period our wages went up 17.5 percent, while the average earnings for all manufactur- ing went up 28.8 percent. A good performance? Yes, but not good enough; for, in the mean- time, Pilkington Bros. of England developed a new method for making glass. It is called float glass, that makes all the new plants built since the war obsolete. So it is a new ball game. With the advent of float glass throughout the world, and some 34 licenses have been granted, the imports reacted dramatically, rising from 8.6 in 1966 to 13.6 in the first 6 months in 1967. President Johnson, in October of last year, saw fit to keep into effect the relief that was granted in 1962 on single and double strength. Now, just last week I was at Charleston and Shreveport, and Libbey- Owens-Ford has developed a new method called the air flotation proc- ess, which they believe may compete with thin glass as far a.s float is concerned. Now, they gave the proposition to us that either we cut manpower, or they could build this plant overseas. In fa.ct., I think I can say without hesitation that most of the flat glass that is supplied to the coastal cities is partly manufactured by Pittsburgh Plate or Libbey- Owens-Ford in their plants overseas, because again we are in the un- enviable position that when the trade is favorable to the United States empty bottoms coming back, they put glass on, flat glass on as ballast, and it is practically a premium of getting glass as a ballast in the thing. So that, as trade is favorable, this gives us an unfavorable reaction in the thing. Now, we did cut off approximately 75 men in the process at Charles- ton and Shreveport. Now, Charleston, W. Va., isn't what you call a lush employment centerS Now, our average earnings are $3.65 an hour, and when you cut a guy out of the glass plant, he has to go over and work for $1.80 an hour, and you have a pre.tty sore guy on your hands. PAGENO="0333" 3769 It took our local committees and our international representatives about 2 weeks to work this out. I went down there last week to report on it, and they said, "You guys weren't negotiating. You guys were waiting for Congress to pass a stiff gun law before you come back here to report," and in West Virginia, that is no outlandish statement. Now, we believe that the fact that a new process has come into being, and Ford Motor Co. is going to build two more floats, that these things should be taken into consideration. Now, we have pledged ourselves, and if I may, I will put in the record two booklets that we are going to give at our convention, in which we promise and in which we pledge ourselves to cooperate in the installation of new methods, full utilization of the work force, which is something new for our industry. We are seeking through other organizations, like the coordinating committee, fair labor standards, although the more you dig into it, what fair labor standards are is pretty elusive in detail, but what they seem to imply-and we are getting active in the ICF, which is the trade secretariat that nearly all glass workers in the free part of the world belong to, and we are feeding them information. I have accepted a cochairmanship on a committee-we are feeding them all the information, the imports, the prices that their manu- facturers are receiving, to beef up their bargaining. We are following the same type of our parallel organization, of the IMF, which is the automobile version of it. I am sure that the recent increases that the workers in France got in the automobile factories came from some of the information and some of the activities triggered by the IMF committee, so that we are not looking on this in a defeatist attitude. In principle, we believe in free trade, but we are asking for a break, or an adjustment. We think that something could be arranged, that if `the industry lagged in its productivity, if the exporter, the importer, don't come up in some of this fair labor or minimum wage deal, that these factors should be taken into account, allowing some kind of a workable in- centive for the right to go into these markets. In closing, I would like to read a news item which I ran' across, and it is an article in Glass Review Monthly, "Glass Around the World." I am not going `to pronounce the companies, because I am not very good on pronunciation if it isn't German or Irish. Future competition between the capitalist and communist flat glass indus- tries was projected at a recent conference in Belgrade. Organized by the Yugos- Jar Glass Industries, Pancevo, the conference was attended by representatives of exporting organizations of several countries, including Razno Export (Soviet Union), Glas Export (Czechoslovakia), Mineks (Poland), Mineraliniportexport (Rumania), Diaglass-Keramik (East Germany), Industrieimport (Bulgaria), and Femunion (Hungary). Officials of the Yugoslav glass factory at Paneevo, and sheet glass factories in Lipik, Novo Mesto, and Zajeca, also attended the meeting. Representatives of the Yugoslav trade firms in charge of exporting flat glass, Hemikalija, Zagreb, and Kemijaimpex, Liubijana, were present, too. Coordination of production and merchandising of flat glass in all of the communist countries was long overdue. Domestic requirements of each coun- try were evaluated and deliveries assigned to domestic facilities and neighbor- ing countries. In view of the ever-increasing exports of Eastern European flat glass to the West, the question of selling prices has become paramount. Because Pilkington 95-159 O-68-~pt. 8-22 PAGENO="0334" 3770 has granted licenses to Russia and Czechoslovakia, the problem of how to over- come the price disadvantage between the Fourcault drawn glass and the Puking- ton process has to be solved. In view of the concerted movement of the communist countries, it would seem mandatory for the flat glass industries of the West to get together as soon as possible in order to be better prepared for the coming battle for a share of the world's markets. So it looks like the comrades are pretty well organized in this thing. Mr. ULLMAN. We would hope you could keep your remarks brief, because we want to hear all the members, and you have already ex- ceeded your time. Mr. Rnisnn. Thank you for listening to me. (The material referred to follows:) GLASS ABOUND THE WORLD Future competition between the capitalist and communist flat glass industries was projected at a recent conference in Belgrad. Organized by the Yugoslav Glass Industries, Pancevo, the conference was attended by representatives of exporting organizations of several conutries, including Razno Export (Soviet Union), Glas Export (Czechoslovakia), Mineks (Poland), Mineral-importexport (Rumania), Diaglass-Keramik (East Germany), Industrieimport (Bulgaria), and Ferunion (Hungary). Officials of the Yugoslav glass factory at Pancevo, and sheet glass factories in Lipik, Novo Mestro, and Zajeca, also attended the meeting. Representatives of the Yugoslav trade firms in charge of exporting flat glass, Hemikalija, Zagreb, and Kemijaimpex, Llubljana, were present, too. Coordination of production and merchandising of flat glass in all of the com- munist conutries was long overdue. Domestic requirements of each conutry were evaluated and deliveries assigned to domestic facilities and neighboring countries. In view of the ever-increasing exports of Eastern European flat glass to the West, the question of selling prices has become paramount. Because Pilkington has granted licenses to Russia and Czechoslovakia, the problem of how to over- come the price disadvantage between the Fourcault drawn glass and the Pilking- ton process has to be solved. In view of the concerted movement of the communist conutries, it would seem mandatory for the flat glass industries of the West to get together as soon as possible in order to be better prepared for the coming battle for a share of the world's markets. AUSTRIA Austria's glass industry is hard hit by increasing competition not only from sonic Eastern European countries, but from Italy, one of its former main export out- lets, as well. Shipments from the communist countries are usually sold at dump- ing prices and Italian quotations are extremely low. Austria points out that she considers the Italian quotations particularly damaging because Italian produc- tion capacity has almost doubled in recent years and presently exceeds require- ments of the domestic market by 50 per cent. Austria recently started production of insulating glass. Up to the middle of 1967, domestic factories could only supply one-third of Austrian requirements. Two- thirds had to be imported, primarily from Belgium, Germany, and France. In 1966, 5.72 million pounds (2.6 million kilograms) of insulating glass, valued at $1.68 million (42 million Austria schillings), was delivered by foreign countries. Austria has continuously complained about the imports of window glass from the communist countries at prices which are far below the existing Austrian price level. Because Austria has to trade with her neighbors, it is understandable that, in every new trade agreement, a certain amount of flat glass is included by Austria reluctantly. A short while ago, the new trade agreement between Austria and Czechoslo~ vakia, covering all of 1968, was signed. As usual, flat glass for special purposes and signal lights, as well as insulating glass, amounting to $100,000, will be im- ported by Austria. Starting January 1, Austrian glass wholesalers increased prices for flat glass up to 5/64-inch (2 millimeter) thick by a maximum of 3 per cent. All other thick- nesses over 2 millimeter were upped by a maximum of 5 per cent. PAGENO="0335" GOLD `~ AND THE NATIONAL ECONOMY A PLAN TO REGULATE FOREIGN TRADE AND INVESTMENT POLICIES TO RESTORE THE ECONOMIC WELL-BEING OF DOMESTIC INDUSTRY AND LABOR* :.~ 1 ..4) (3771) PAGENO="0336" 3772 ~FAIR INTERNATIONAL TRADE ACT This is a bill that has now been introduced by 25 Congressmen to provide for regulation of imports in all industries. The bill provides for investigationand hearings by the Tariff Commission a ft e r filing of a petition for an import ceiling, s u c h filing is open to anationallabor union, industry, Senate Finance Com- mittee, House Ways and Means, or r eq u e s t of the President. After investigation by the Ta r if f Com- mission if imports related to domestic consumption meet the criteria of the bill they certify a ceiling on imports to the President, the import ceiling is pro- claimed by the President; if impo rts penetrate the ceiling proclaimed in any six-month period, a quan- tity limitation is invoked by the President. There is considerable interest in this bill by in- dustry, congressmen, and la.bo r unions.. We have collabdrated.on the bill and been successful in getting many introductions by congressmen who like the con- cept of a broad-base bill as opposed to specific in- dustry bills.~ This is a real opportunity to help ob- tain passage of a bill which would prevent rising im- ports from displacing our employment and employ- ment potential. T h e Chairman of Ways and Means, Wilbur Mills, is interested in this bill and suggested we get Congressman Herlong to introduce it which he did May 1, 1968. Following this introduction we have been able to get multiple introductions by the follow- ing Congressmen: Herlong, Fla. (16936), Utt, Calif. Collier, Ill. , Perkins, Ky. , Staggers, W. Va., Hech- ler, W. Va., Moore,, W. Va., Der~t~ Pa. (17043), Whalley, Pa., Clark, Pa. , Saylor, Pa., Ashbrook, Ohio, Thomson, Wis., Okonski, Wis., Fisher, Texas, Philbin, Mass., Hunt, N. 3. , Langen, Mimi.. Pelley, Wash., Baring, Nev., Barry, S. Dak., Harri- son, Wyo., Lennon, No. Car., Korm~gay, *~. Car., Keith, Mass. PAGENO="0337" ECONOMiC TRENDS IN THE U.S. FLAT GLASS INDUSTRY TARIFF %CHANGE TARIFF PEAK REDUCTION 1958-80. 1965 ~VERAGE INCREASE YEAR 1967 to to . VALUE OF SHIPMENT.S, ALL FLAT GLASS (in millions of dollars) 1958-60 1962 1965 (annual rate) 1967 1967 $490. 6 $490. 6 - $676. 4 $585. 9 +19.4% -13.4% of which - , Sheet glass Plate, float, rolled & wire glass Laminated, specially tempered & other flat ~lass 111. 1 157.1 222.4 126. 4 159.5 204.7 140. 6 213.7 322. 1 116. 5 190.4 279.0 + 4.9% +21.2%. ~ +25,4% -17. 1% -10.9% -13.4% EMPLOYMENT.r (in thousands) AVERAGE WEEKLY HOURS, PROD, WKRS. AVERAGE HOURLY EARNINGS, PROD. WKRS. 32.2 40.1 $ 3.09 30. 4 38. 3 $ 3. 29 32~3 42.5 $ 3. 52 30. 2 40. 8 $ 3. 63 + 6. 2% -6. 5C7~ + 1.7% -4.0% +17. 5% +3. 1% - Avg.. Hourly Earnings, AIl,Mfg, DOMES TIC MA~ET ~$ millions) IMPORTS, f.o.b. U.S. port . ($ millions) EXPORTS, f. o. b, mill ($ millions) of which, Canada ($ milliOns) IMPORTS AS A % OF DOMESTIC MARKET $ 2, 19 $538.6 $ 63. 4 $ 15. 5 $ 10. 1 11.8% $ 2.39 $542. 9 . $ 70. 6 $ 18. 3 $ 12. 0 130% $ 2. 61 $720.6 $ 69. 4 $ 25. 2 $ 15. 8 9.6% $ 2. 82 $636. 6 $ 86. 4 $ 35. 7 $ 23.6 13.6% +28. 8%. +8.0% +18. 2°Jo -11, .7% , +36. 3% +24. 5% + 130. 3% +41.7% + 133. 7% + 49. 4% +15.3% +41.7% ~A D~TT~T/'C ~ ~ Ld~ L~.LNiLN `.30 ~&LSJtJLUV1I~ ~ Net Profit After Taxes as a % of Sales (Sheet Glass) Gross Earnings, *All Flat Glass, as a % of Sales 4,9% 1,1% 4,8% 2,7%(1966) 44,9% 43.8% 35, 8% 31, 1% 38. 1% 33. 8% 5. 6% .-11. 3% * Sales less payroll and materials purchases, before payment of overhead, depreciation, and taxes, PAGENO="0338" GOLD AND ECONOMIC GROWTH While Gold Supply Declined, The National Economy Grew 1947-1967 (In Billions of Dollars) Source of data: Economic Report of the President: 1968. PAGENO="0339" 37Th The recent gold crisis was blafrned on eve rything 1,-n Vii'twi,u War and well heeled tourists to I I i k () I. (~ 1)1(1 country - - &-v- ()I1~( ~fl a \V 11 ii e SOIflCOflC mentioned U. S.. investments abroad to explain ou r deficit in the bal~- ance of payments. Further, they have claimed the only effect on the a v e r a g e Joe would be that he would pay more for a gold filling, or wedding ring. T~tey, say all that glistens is not gold. Neither can explanations hide the fact that private foreign in- vestment results in the export of American jobs. With the tremendous r i s e in private foreign in- vestment of 454 percent between the years 1950 and 1966, this increased foreign capacity can only serve to decrease our exports and increase our imports, adding further distress to our b alan c e of payments deficit. The United States is importing products from U.S. foreign subsidiaries and affiliates of U.S. com- panies, in direct competition with their domestic operation or o the r domestic producers of the same product. In 1965 U. S. foreign affiliates exported pro- ducts bacl~ to the U.S. totaling $5, 133 billion. Many of these affiliates have more workers employed abroad than they do in the U.S., and if not restricted this trend of decreasing exports, increasing imports and displacement of Am e r i c a n industry and labor will continue. PRIVATE FOREIGN INVESTMENTS U. S. foreign investment - - and, as a substantial partof this category, U.S. private foreigninvestment -- must be given full consideration as an inseparable part of our foreign trade policy. The following Chart `A" will s e r v e to show the astounding increases our U.S. foreign invesn-iients; Chart "B" the a~e. PAGENO="0340" 3776 distribution of U.S. di~ect private foreign invest- ments ; Chart "C" the industry distribution of U.S. direct private foreign investments. (The sources of information for Charts A, B and C were the 1958 Hearingsby the Subcommittee on Private Foreign In- vestment, and the Department of Commerce Survey of Current Business, September, 1967.) CHART "A" United States Investments Abroad (Millions of Dollars) 1950 1957 1966 Total U.S. investments abroad $32,844 $54,215 $111,874 Prviate Investments 19,004 36,812 86,235 Long-term 17,488 33,588 75,565 Direct 11,788 25,252 54,562 Portfolio 5,700 8,336 21,003 Short-term 1,516 3,224 10,670 U.S. Government credits & claims 13,840 17,403 25,639 Long-term 13,518 15,548 21,182 Short.term 322 1,855 4,457 In Chart "A" we find that total U.S.. investment abroad in 1966 has inc~reas ed by practically four times the 1950 figure of $32.8 billion. The large share of the 1966 total figure is made up of private invest- ments, $86.2 billion of the $111.8 billion total for 1966. The divisions of private investment are long-term meaning a period in excess of one ye a r, and short- term. The book value of our various short-term pri- vate investments at the end of 1966 totaled ~i0.6 billion; Long-term private investments can be placed in two categories, portfolio and d i r e c t. Portfolio in- vestment largely entails private ownership of foreign government bonds and business securities, ~ no implication i n management decisions. Portfolio in- vestment abroad in 1966 totaled $21 billion. PAGENO="0341" 3777 Direct foreign investment is ownership of 25. per-. cent or more of a business and usually i m p o r t a n t managementparticipation. Private direct foreign in- vestments abroad in 1966 totaled $54. 5 billion. In all divisions of private foreign investment, comparing 1950-1957-1966, there have been tremen- dous increases in the holdings of U.S. companies and private investors abroad. In Chart "B' comparing the area distribution o~f direct private foreign investment for 1957 with 1966 we find that considerable went into Western Europe, with a 14 percent increase, so the investment flow is to the developed countries of Western Europe, while the less developed and under developed countries in Latin America, Africa a n d the Middle East dropped considerably in investments to their areas. And this happened despite the emphasis, stated in the 1958 hearings, on the necessity of changing the private in- vestment pattern to e n c o u r a g e more flow to Latin America, Middle East and Africa to deter. the Soviet economic offensive in those areas. CHART "B' AREA DISTRIBUTION OF U.S. DIRECT PRIVATE FOREIGN INVESTMENTS ]-9S7 1966 BOOK VALUES, $25.3 BILLION BOOK VALUES, $51~.5 BILLION PAGENO="0342" 3778 Chart "C" compares the industry distribution of U.S. direct private foreign investments in 1957 with 1966. You willnote a strong upward thrustin manu- facturing investment, a 9 percent increase over 1957, a decline in petroleum, mining and public uti- lities. Manufacturing leads all o t h e r indüs try in- vestment with a 1966 foreign total of $22 billion in all areas, while petroleum is in second place with $16 billion. CHART "C" INDUSTRY DISTRIBUTION OF U.S. DIRECT PRIVATE FOREIGN INVESTMENTS 1957 1966 The three charts which show the increases in U.. S. private foreign investmentbear out a prediction made by Mr. Robert M. Mitchell, Vice President of the Whirlpool Corporation, in Hearings held on the subject of private foreign investmentby the Subcom- mittee on Foreign Trade Policy, December 1958. After Mr. Mitchell's testimony, questions were asked by Congressman John W. Byrnes: "Mr. Byrnes: As I gather th e b a s i s of your concern here, among other things, is the fact that youforesee a necessity as far as American business is c o n c e r n e d to shift from an export business to manufacturing abroad, an investing and going through ~N~(6% 7% BOOK VALUES, $25.3 BILLION BOOK VALUES, $SIi.5 BILLION PAGENO="0343" 3779 the manufacturing process abroad; is that right? Mr. Mitchell: That is correct, Mr. Byrnes. Mr. Byrnes: Do you attribute that trend in part to this common Market trend, the European Common Market and the proposals fo r a common market in other areas? Is there any other factor that gives rise to that? Mr. Mitchell: Basicallythatis it, Mr. Byrnes. In many of the Latin American countries at the mo- ment for practical purposes it is impos sible to. ex- p o r t particularly consumer durable goods. There is a rising nationalism in many of these countries, and th~y are trying to industrialize, and to raise their standard of living. So that American com- panies, if theyare going to have a partof that market at all, must invest in some form or other. Mr. Byrnes: You don't see a great future then a s far as the export o f finished commodities fror~ this country. You see that contracting, I g a t h e r, and an increase in manufacturing abroad and with foreign labor? Mr. Mitchell: I t h i n k t h a t is the way it will happen; yes, sir. Mr. Byrnes: Great emphasis has been put on the fact of the importance of the trade-agreements program and all of the rest of it, and the increase in our exports, and the developing ofthis freer trade. I gather that you would suggest at least by your tes - timony that we may be getting into a period where that is going to be reversed? Mr. Mitchell: I think that that is quite right, sir. Mr. Byrnes: That is all." PAGENO="0344" 3780 This prediction of increasing investment abroad and the decrease in the export of finished commod- ities from this country has come to pass. This in- creased foreign capacity can only serve to decrease our exports and i n c r e a s e our imports, and since capitalis mobil and labor is not, the result has been loss of American jobs and 1 o s s to those American industries that do not choose to move or that do not have capital to make such a move. Many U. S. corporations are becoming global in their makeup, with vast holdings and assets in other nations. Consider that in 1950, in direct private foreign investment the U~ S. had $11.8 billion inves - tedaround the world, this r o s e to $25. 3 billion in 1957 and to $54. 5 billion in 1966. Many of these global corporations are showing their c o n c e r n a- gainstanyrestrictionto their access to the Canadian and U.S. markets. They recognize that free access to Canadian and U. S. markets is in their corporation interest; they want to invest abroad, enjoy the mar- kets and low-wage labor; and they also want to enjoy the Canadian and U.S. market from abroad, in some cases in direct competition with their domestic oper - ation or other domestic producers of the same pro- duct. United States foreign manufacturing affiliates sales in 1965 were $42. 4 billion compared to $18. 3 billion in 1957, for an increase of 132 per cent. In 1965, $34. 7 billion of such sales were with- in the area of plant location, howeve~, $7. 7 billion represented export sales to other countries, includ- ing the United States. The products shipped to the U. S. amounted to 24 `percent of to ta 1 export sales of manufacturing affiliates, or $1. 856 billion. This figuredoes notinNc~ude exports to the U.S. of foreign mining affiliates o~f'U.S. firms in the a- mount of $1. 225 billion, nor does it include exports to the U. S. of petroleum and petroleum p r o d u c t s PAGENO="0345" 3781 by U. S. foreign petroleum affiliates, estimated at $2, 052 billion. Combining manufacturing, mining and petroleum export sales to the U. S., by U. S. foreign affiliates in 1965, the total would be an astounding $5. 133 billion. The tim.e has come for a re-evaluation of this expanded investment program in terms of the U.S. economy, employment, o ut flow of capital, loss of revenue to the United States and effect of imports on U. S. industry and labor. Our rising deficit in our balance of payments has broughtthis problem into focus and President Johnson has wisely issued mandatory restrictions on private foreign investmentas of January 1, 1968. We heartily agree withhis actions designed to preserve our coun- try's financial strength. NTERNATIONAL MONETARY FUND We've all seen and had Canadian coins in our pocket change at one time or another and have en- countered little or no trouble in spending the foreign currency as though it were our own. The same is true for U. S. coins in most of Canada. Butimaginetryingto putour coins in a cigarette or coffee machine in Japan, Sweden, France, Italy, West Germany, Belgium or the Netherlands. Yet these nations, along with the U. S. , Canada and the united Kingdom are the Big 10 in foreign trade and account for 56 per cent of the votingpower in the International Monetary Fund which b o a s t s a total membership of 106 nations. And if you want to do business with these or any of the other International Monetary Fund nations and PAGENO="0346" 3782 make the Kennedy rounds (GATT) work, youhad better have some form of payment or exchangable currency acceptable by the individual n a t i o n s, backed up ~by adequate reserves. Right now, however, the F r e e World's trading nations face the threat of running short of ready re- serves of gold, U.S. dollars, other readily accepted currencies and credit. Some economists fear that a reserve shortage would put a severe crimp in world trade. The most recent example of this is the devalua- tion of the pound sterling by Britain. Full effects of the devaluation may not be known for months but world governments began reacting instantly following Bri- tain's decision. The same nations that have depended upon the pound sterling as a solid fo rm of currency and reserve have now been asked through the IMF to loanthe British government $1.4 billion dollars in an effort to s a v e the British economy, narrowing even further the number of world currencies that generally preserve and guarantee the others. To remedy the reserve and credit shortage the Big 10 leaders in world trade and manufacturing have supported a contingency plan to create a new kind of international money that was p r e s e n t e d to the 106 IMF nations at their i'ec~nt 22nd annual meeting. The technical n a m e of the new money would be special drawing rights (SDR) from the IMF. Some experts loosely call it "Paper Gold." But what ever the name, each nation would get some of the new kind of money to add to its reserves. If you t h i n k that t h e new "drawing rights" are like creating money out of thin air, you a r e right to a considerable extent. But that doesn't mean that it is "funny money" PAGENO="0347" ~783 because all of it will have the b a c k i n g of the total resources of the 10 major nations a s well as every other nation participating in its use. The reason for creation of some new reserve asset is simple: There is a growing shortage of gold and dollars necessary to settle the trading balances among nations. What is not so well understood is the mechanics of the new proposal. But this is not surprising: No- body has tried to create mqney on this scale in the hi s to r y of the world and many technical questions are&t yet settled. Such a pl an is crucial to the United States be- cause for several years more dollars have been leav- ing the country in trade, aid and military and tourist spending than have been returning in expenditures by foreigners in the United States. In other words, the United States has a balance-of-payments deficit. This means thatmanynations have built up huge reserves of U.S. dollars, which the United States is committed to redeem for gold upon demand. Thus, these claims. In recent years however, the U.S. Gold supply had dwindled consistently as foreign central banks Lave sought to r e d e em their American dollar reserves for gold. The U.S. gold reserve stood at $26 billion at the end of W o r 1 d W a r II, but it has been cut in half since then. Durin.g July alone it dropped another $33, 000, 000 to $13, 136, 000, 000. In an effort to cope with its balance-of-payments deficit, the United States has sought to slow it~ flow of dollars into the world economy. The result has been a reduction in Free World reserves, which are composed predominently of U. S. dollars, as well as g o I c a n d o t h e r convertible currencies. At the PAGENO="0348" 3784 same time, the amount of gold i n national reserveâ also has started to decline, largely because of pri- vate hoarding in Europe. Some economists argue that these reductions are danger signals that could r e s ul t in a slow-down in world trade. Thus they have argued that it's time to* develop a contingency plan to add to world reserves. Franceand some other nations, on the other hand argued that the r e was no shortage of reserves and that making it too easy for countries to continue hav- ing payment deficits might encourage loose fiscal practices and feed global inflation. The debate continued for six years and was not resolved until the Big 10 settled on the special draw- ing rights formula. Assuming approval by participating countries, the IMF would ration SDRs to each member country based roughly on economic size. In effect, each na- tion would get a free bond. Of a hypothetical $1 billion issue of SDRs the United States would be entitled to $246, 000, 000. The United States could spend them directly in pay- ment fo r surplus dQllars held by another country if that country would accept them. However, nothing would prevent France, for example, from refusing to ho no r the SDRs as redemption for U. 5. dollars; it could still demand gold. IfFrancedidn'taccept theSDRs the UnitedStates could turn the SDRs back to the IMF whichwould be- come a middleman and pick out another country with a fast-growing supply of dollars. Such a country would be obligated to take SDRs up to three times the size of its own allocation of SDRs. In exchange the United States would get a c u r r e n c y or currencies acceptable to France. In this way the United States PAGENO="0349" 3785 could redeem dollars without ha v i n g to give up its gold. If the 106 IMF nations approve the new money the IMP' charter would have to be revis ed and ap- proved through ratification by a `majority of the mem- ber countries. It is doubted'this `can beàccomplished before 1969. Even though the new money is not as sured, France has insisted on a weighted v o t e by the IMF representatives that will require 85 percent appro- val. The weighted vote g i v e s the Common Market, countries a bloc vote that could veto any issuance of the SDRs. Previously ~y the United States had e- nough power in a single vote to block IMF action on a large percentage vote, the United States being en- titled to a weighted vote of 24. 59 percent. And France, for one, ha's not indicated that its convinced more reserves arenecessary. it has a- greed only to the contingency plan. In otherwords the IMF wouldbe unlikelyto pro- pose the creation of new reserves unless the big powers shared a unive~rsal feeling that there was a need. But for the U. S., Canada, Britain and :hose a- mong the Continentals who agreed that the tin-ic has come to provide a new reserve asset to rank along with gold and dollars, the SDR agreement..appears to be a great victory. It seems to assure that those who speculated in gold by hoarding or buying gold stock have met a spectacular defeat. Thosewhohadhoped the existing monetary system would fail, necessitating a big hike in the price of gold, have ~-iade a bad' guess. 95-159 0 - 68 - pt. 8 - 23 PAGENO="0350" 3786 Mr. CHESTER. Mr. Victor Thomas, of the United Cement, Lime, & Gypsum Workers. STATEMENT `OP VICTOR TROMAS Mr. THOMAS. Mr. Chairman and members of the committee, I am Victor H. Thomas, fifth general vice president of the United Cement, Lime, & Gypsum Workers, AFL-CIO. I would like to thank the chairman and this coimuittee for giving me the opportunity to express the views of my union on several pending proposals relating to the International Antidumping Code, and the Antidumping Act of 1921. I have submitted a written statement with tables attached setting forth these views in full. At this time I would like to present only a brief summary of our position. My union is concerned primarily with the particular unfair trade practice which has been all too prevalent in the importation of cement in the United States. This is the unfair trade practice known as dumping, a practice under which foreign manufacturers of cement dump their excess production in the United States at prices greatly reduced below their own home market prices. Dumping is condemned by our domestic laws, most importantly by the Antidumping Act of 1921. The effectiveness of this act, limited as it is in protecting domestic industry and workers from the effects of this unfair trade practice, would be seriously undermined by the proposed International Antidumping Code negotiated during the past year in Geneva, and by the regulations proposed by the Treasury to implement this code. There was no authority for the negotiation of this code in the 1962 Trade Expansion Act, and its promulgation as an executive agree- ment would encroach and undermine the proper authority of the Congress to determine our domestic laws by substantially amending the provisions of the 1921 act. Thus, I appear on behalf of my union to strongly urge this commit- tee and the Congress to prevent the International Dumping Code from becoming effective without congressional approval. Specifically, we urge this committee to report favorably on House Concurrent Resolution 447, and to support its passage by the Con- gress prior to July 1, 1968, when the code is scheduled to become effective. The reason why the dumping of imports is of such concern to the members of my union are fully set forth in my written statement, and in the testimony of Mr. John Mundt on behalf of the cement industries committee for tariff and antidumping, presented to this committee on June 14, 1968. During the last 10 years, workers in the domestic cement industries have continually been seriously affected by the dumping of foreign cement in the United States. On two previous occasions, I have sought to bring this unfair and illegal situation to the attention of those concerned here in the Con- gress. The first time was during the August 1961, hearings before the House Committee on Education and Labor, the General Suboom- PAGENO="0351" 3787 mittee on Labor, on the impact of imports and, exports on ~rnemp1oy- ment. The second time was during the September and October 1966, hearings of that same subcommittee on the effect of imports and exports on American labor. Such efforts were in support of legislation to strengthen the Anti- dumping Act of 1921. Representatives of the cement industries have also pursued the currently available remedies in a series of proceedings under the art, which have involved no less than 15 foreign countries over the `last 10 years. It is most important that our ability to deal with these recurring instances of. dumped imports, with substantial amounts of employ- ment and unemployment caused thereby will not be undermined by implementation of the International Antidumping Code. `My union feels that the new code procedures for combating such dumping would inevitably and substantially increase the exposure of workers in general, and our members in particular, to `lost jobs in the underemployment as a result of dumping. This would be particularly true in the cement industry, which under the new code provisions could hardly ever expect to qualify as a re- gional industry, therefore exposing our members working along the gulf coast, the east coast, and the Great Lakes to mect loss of jobs without ever satisfying the new very difficult code standards for find- ing injury to a domestic industry. We also particularly object to the fact that the new proviskrns do away with any effective interim relief while an investigation takes place. Our experience has been that such investigations take anywhere from 6 to 18 months, a period of time during which domestic workers can well be, and often have been, entirely thrown out of work. Even though the eventual result of the legai jousting is to find that injurious dumping has been taking place, once again, this is a highly unfair, intolerable, vulnerable position into which to place American workers. The unrealistic standards and complex procedures of determining injury under the International Anti-Dumping Code are unhappily similar to the provisions for determining injury now contained in the adjustment assistance section of the 1962 Trade Expansion Act. As you know, no American worker has ever successfully petitioned for relief under these provisions. In his message of May 28, 1968, the President has recommended that these sections be amended, `and that the relief be substantially broadened, so that it would be available to all American workers whenever imports are a substantial cause of injury. It is difficult for `my union to understand why we should allow standards for relief under the antidumping laws to become more lim- ited and less available at the same time that we `are trying to liberalize these adjustment assistance provisions. Most important of all, such steps should never be taken without the regular or due consideration of Congress. Once again, we urgently request this committee to support House Concurrent Resolution 447, and to oppose any weakening of our do- mestic unfair trade practice laws. PAGENO="0352" 3788 Thank you for your time and indulgence. (Mr. Thomas' prepared statement follows:) STATEMENT OF VICTOR H. THOMAS, GENERAL VICE PRESIDENT, UNITIm CEMENT, LIME. AND GYPSUM WORKERS' INTERNATIONAL UNION, AFL-CIO I am Victor H. Thomas, 5th General Vice President of the United Cement, Lime & Gypsum Workers' International Union, AFL-CIO. I would like to thank the Chairman and this Committee for giving me the opportunity to express the views of my union on several pending proposals relating to the International Antidumping Code and the Antidumping Act of 1921. My union has long been concerned with the injury which American workers have sustained as a result of the international unfair trade practice known as "dumping", especially as it has affected those employed in the domestic cement industry. On two previous occasions I have sought to bring this serious and unfair situation to the attention of those concerned here in the Congress. The first time was during the August, 1961 hearings before the House Committee on Education and Labor, General Subcommittee on Labor, on the impact of imports and exports on employment. The second time was during the Sep- tember and October, 1966 hearings of that same Subcommittee on the impact of imports and exports on American labor. On both of these occasions I filed statements dealing at some length with recurring instances of dumped imports of foreign cement and with the substantial amount of unemployment and under- employment caused thereby to American workers and to members of my union. I would like to incorporate by reference both my 1961 statement and my 1966 statement for consideration now by this Committee. I would also like to bring this testimony up-to-date and to emphasize these problems again, as they con- tinue unabated. The dumping of cement into the domestic market is fully described and thoroughly documented in the statement which was submitted to the Committee in these hearings on June 14, 1968 by the Cement Industry Committee for Tariff and Antidumping and in the statements previously presented by the Cement Industry Committee and by its counsel, Covington & Burling, in the 1961 and 1966 hearings. My union feels that the extended and continual legal proceedings in which the cement companies have engaged over the years in an attempt to halt such dumping constitute a more than adequate effort by the industry to keep it free of such unfair trade practices. If our domestic legislation were adequate, these efforts would have been effective and the legitimate interests of American workers in not losing jobs as the result of the unfair competitive practices of foreign companies would have been protected. The record makes it apparent, however, that such efforts were not effective, and both domestic in- dustry and labor continue to suffer serious injury. In order to bring borne the seriousness of the situation, I would like to refer to a series of five tables presented in the 1966 hearings by Covington & Burling as counsel to the Cement Industry Committee. For the convenience of the Com- mittee I have attached to my testimony copies of these tables, revised to make them current and to reflect the most recent import statistics of the Department of Commerce, Bureau of International Commerce, U.S. Trade Section. Table I is a list of the antidumping proceedings filed by the domestic industry against imports from no less than 15 foreign countries during the years 1958- 1967. Table II records the `amount of foreign cement imported from these "dump- ers" during the same period. Table III shows how much this unfair competition has hurt our critical balance of payments position. These figures were computed by adding to the F.O.B. value of the imports (as recorded by the Commerce De- partment from U.S. Customs duty valuation certificates) an additional factor of 10% to cover freight and insurance, which is also uniformly purchased from overseas firms. Addition of the 10% factor for these items is in accordance with the report of the U.S. Tariff Commission, "C.I.F. Value of U.S. Imports", Feb- ruary 7, 1967. Using the latest Bureau of Labor Statistics figures on productivity in the domestic cement industry (5.l~7 barrels per man hour in 1966 and 6.27 barrels per man hour in 1967), Table IV translates these unfairly, lost sales into man hours lost for domestic workers. Finally, using average domestic cement industry wage rates ($3.97 per hour in 1966 and $4.27 per hour in 1967), Table V shows the amounts of wages by which American labor has been unfairly de- prived as a result of the dumped and tainted imports. PAGENO="0353" 3789 I would like to call the Committee's attention particularly to the figures in Tables IV and V. These tables show that American labor has lost well over 7 million man hours during the 1958-1967 period, an average of more than 700,000 man hours per year. Similarly, the equivalent wages lost have amounted to over $24,000,000, an average of almost $2.5 million a year. Surely American labor should not have tc sustain such drastic injury from an importing practice that- has been condemned as an unfair method of competition not only by the United States Congress but also by Article VI of GATT. For these reasons my union strongly endorses and supports the position of the Cement Industry Committee in these hearings that the relief from dumping prac- tices now available under the Antiduinping Act of 1921, limited as it is, surely should not be further restricted by implementation of the International Anti- dumping Code and by the new implementing regulations issued by the Treasury Department to become effective on July 1. My union feels that these new pro- cedures for combating the dumping of foreign imports would inevitably and substantially increase the exposure of American workers in general, and our members in particular, to lost jobs and underemployment as a result of dumping. This would be particularly true in the cement industry, which under the new provisions could hardly ever expect to qualify as a regional industry, therefore exposing our members working along the Gulf Ooast, the East Coast, and the Great Lakes to complete less of jojs without ever satisfying the new, very difficult Code standards for finding injury to a domestic industry. We also particularly object to `the fact that the new provisions do away with `any effective interim relief while an investigation of injury takes place. Our experience has been that such investigations take anywhere from 6 to 18 months, a period of time during which domestic workers can well `be, and often have been, entirely thrown out of work, even though the eventual result of the legal jousting is to find that injurious dumping has taken place. Once again, this is a highly unfair and in- tolerably vulnerable position in which to place American workers. The unrealistic standards and mixed procedures for determining injury under the provisions of the International Antidumping Code are unhappily similar to the provisions for determining injury now contained in the adjustment assistance sections of the 1962 Trade Expansion Act. As you.know, no American workers have TABLE I Date of Treasury initial Country of exportation formal finding of reason Nature of final determination by treasury department complaint to believe or of Tariff Commission suspect dumping Belgium Oct. 2, 1959 Yes Treasury found dumping and Tariff found injury to the domestic industry. Canada May 28, 1959 Yes Treasury found dumping, but Tariff found no injury to the domestic industry in part because continua. tion of dumped sales seemed unlikely. Colombia Sep. 25, 1959 No Treasury found no dumping. Denmark Apr. 28, 1960 Yes Treasury found dumping but did not refer it to Tariff partly because of cessation of shipments. Dominican Republic Aug. 19, 1961 Yes Treasury found dumping, but Tariff found no injury at the time to the domestic industry. May 4, 1962 Yes Treasury found dumping and Tariff found injury to the domestic industry. Israel July 21,1959 Yes Treasury found no dumping partly because of a non- cost-justified quantity discount allowance. Italy June 7,1962 No Treasury found no dumping. Japan Dec. 1, 1961 None Treasury found dumping but did not refer to Tariff partly because of assurances by the producer that dumping would not be resumed. Feb. 5, 1963 Yes Treasury found dumping, but Tariff found no injury to the domestic industry. Aug. 26, 1965 No Treasury found no dumping. Norway Sep. 15, 1958 Yes Treasury found no dumping solely because of a non- cost-justified quantity discount allowance. Dec. 27, 1961 Yes Do. Poland Dec. 29,1960 Yes Treasury found no dumping, but used a 3d-country - price and not Polish as home market price~ Portugal June 9, 1960 Yes Treasury found dumping and Tariff found injury to the domestic industry. Sweden Nov. 25, 1958 Yes Do. Tunisia Sep. 13, 1960 No Treasury found dumping but did not refer it to Tariff on assurances by the producers that dumping would not be resumed. West Germany Aug. 13, 1959 Yes Do. Yugoslavia Aug. 28, 1961 Yes Do. PAGENO="0354" TABLE ll.-DUMPED OR "TAINTED" CEMENT IMPORTS, 1958-67 (BILLIONS OF BARRELS)' West Dominican Japan Year Canada Belgium Sweden Germany Colombia Norway Poland Israel Italy Yugoslavia Republic Tunisia (white Portugal Denmark Total cement) 1958 657, 100 410, 800 339, 900 325, 100 473,900 335,600 68, 500 58,200 47, 500 7, 500 192, 800 2,916,900 1959 1,491,200 581,400 280,700 578,600 791,400 454,400 42,000 349,000 67,400 129,800 4,765,900 1960 868,700 326,200 289,600 51,400 537,000 310,200 243,700 58,800 111,100 85,400 290,800 3,172,900 1961 1 221, 800 89, 500 29, 000 17, 900 513, 300 721, 500 206,900 24,200 49, 100 439,600 58,900 3,371,700 1962 1,170,100 445,100 117,600 314,800 584,200 1,162,500 144,900 420,000 188,900 16,400 292,200 60,500 4,917,200 1963 1, 485,200 110, 800 254,000 28, 800 378, 500 919, 000 300, 000 20,600 29,600 52, 300 3, 578, 800 1964 1,399,300 41,400 51,200 17,400 540,000 949,700 23,100 54,900 3,077,100 1965 1,431,600 17,400 200 15,500 623,700 954,300 17,100 64,700 3,124,500 1966 2, 118,200 18,700 19,300 479, 400 1, 004,300 23,200 66, 500 43 3,729,643 1967 1,692,600 12,400 37,200 13,800 444,100 16,200 52,300 2,268,600 TotaL.... 13, 535, 800 2, 053, 700 1,399, 400 1,382,600 5,365, 500 6, 811, 500 706, 000 1, 127,200 213, 100 339,400 880,000 85, 400 410, 100 290, 800 322,643 34,923,243 1 Excludes clinker and white cement (except Japan). TABLE 111.-DOLLAR OUTFLOW West Dominican Japan Year Canada Belgium Sweden Germany. Colombia Norway Poland Israel Italy Yugoslavia Republic Tunisia (white Portugal Denmark Total cement) 1958 1 314,200 821,600 679,800 650,200 947,800 671,200 137,000 116,400 95,000 15,000 385,600 5,833,800 1959 2,982, 400 1, 162, 800 561, 400 1, 157, 200 1, 582, 800 908,800 84, 000 698, 000 134,800 259, 600 9, 531, 800 1960 1 737, 400 652, 400 579, 200 102, 800 1, 074, 000 620, 400 487,400 117, 600 222,200 1,218,614 414,844 6, 812, 014 1961 2, 443,600 179, 000 58, 000 35, 800 1, 026, 600 1,443, 000 413, 800 48, 400 98,200 879, 200 222, 455 6, 848, 055 1962 2,340,200 890,200 235,200 629,600 1, 168, 400 2,325, 000 289, 800 840, 000 377, 800 32,800 584, 400 207,705 10,335,989 1963 2,970,400 221, 600 508, 000 57, 600 757, 000 1,838, 000 600, 000 41,200 59, 200 175, 185 7 228, 185 1964 3 868 490 116 998 95 000 171.106 1,197,551 1 925 668 159 996 249 629 6,407 625 1965 3,810,544 46,251 3,948 139,489 1,327,246 2,140,715 99,417 393,872 6 488 689 1966 5,902,380 49,270 199,275 1, 052, 598 2, 178,829 177, 538 318, 586 3, 581 9 882, 057 1967 4,496, 148 32, 569 67,824 143,986 1, 031, 029 130,282 238, 836 12, 042, 522 TotaL... 31,865,762 4,172,688 278,372 3,287,056 11,165,024 14,052,612 1,412,000 2,254,400 426,200 1,086,833 1,760,000 1,218,614 1,716,268 414,844 648,781 81,410,736 PAGENO="0355" TABLE IV.-MAN-HOURS LOST Year Canada Belgium Sweden West Colombia Norway Poland Israel Italy Yugoslavia Dominican Tunisia Japan Portugal Denmark Total Germany Republic 1958 169,356 105, 876 87,603 83,789 122, 139 86,495 17,655 15, 000 12,242 1,933 49,691 751,779 1959 344 388 134 273 64 827 133,626 182 771 104,942 9,700 80,601 15,566 29,977 1,100,671 1960 202 494 76,037 67 505 11 981 125 175 72,308 56,807 13,706 25,897 19,912 67,785 739,607 1961 290 214 21,259 6,888 4,252 121,924 171,378 49,145 5,748 11,663 104,418 13,991 800,880 1962 242 759 92,344 24,398 65,311 121,203 241,183 30,062 87,137 39,191 3,403 60,622 12,552 1,020,165 1963 290 078 21, 641 49, 609 5,625 73, 926 179,492 58, 594 4,023 5, 781 10,215 698, 984 1964 259,130 7,667 9,482 3,222 100,000 175,870 4,278 10,185 569,834 1965 251,158 3,053 35 2,719 109,421 167,421 3,000 11,351 548,158 1966 354,807 3, 132 3,233 80,302 168,224 3,886 11, 139 7 624, 730 1967 269,952 1,928 5,933 2,201 70,829 2,584 8,341 361,768 Total__ 2,879,293 467,210 316,280 315,859 1,107,710 1,367,313 163,369 241,332 44,939 74,351 198,651 19,912 77,774 67,785 79,675 7,148,811 TABLE V.-EQUIVALENT WAGES LOST Year Canada Belgium Sweden West Colombia Norway Poland Israel Italy Yugoslavia Dominican Tunisia Japan Portugal Denmark Total Germany Republic 1958 457,260 285, 866 236, 528 226,229 329, 775 233, 536 47,667 40, 500 33, 054 5,219 134, 165 2 029 791 1959 988,393 385,362 186,053 383,506 524,554 301,184 27,838 231,323 44,674 86,034 3 158 924 1960 619,632 232,674 206,567 36,663 383,034 221,261 173,827 41,941 79,246 609,307 207 422 2 811 579 1961 922,879 67,603 21,905 13,520 387,718 544,981 156,280 18,279 37,087 332,049 44,491 2 546 792 1962 803,533 305,659 80,758 216,180 401,182 798,314 99,505 288,423 129,721 11,262 200,660 41,541 3 376 738 1963 994,967 74, 227 170, 160 19,293 253, 565 615,658 200, 976 13, 800 19, 829 35, 037 2 397 512 1964 909,544 26,910 33,280 11,309 351,000 617,305 15,015 35 749 2 000 112 1965 929,284 11,294 129 10,061 404,857 619,457 11,100 41,999 2 028 181 1966 1,408,584 12,434 12,835 318,799 667,849 15,427 44,222 28 2 480 178 1967 1,152,695 8,233 25,334 9,398 302,440 11,034 35,616 1,544,750 TotaL... 9, 186,771 1,424, 157 960,714 938,994 3,656,924 4,619, 545 505, 117 761,222 148, 000 234,394 637, 003 609,307 278,655 207, 422 220,227 24, 167, 135 PAGENO="0356" 3792 ever suecessfully petitioned for relief under those provisions. In his message of May 28, 1968, the President has recomineded that these sections ~e amended and that relief be substantially broadened so that it would be available to American workers whenever increased imports are a substantial cause of injury. It is difficult for my union to understand why we should allow the standards for relief under the antidumping laws to become more limited and less available at the same time that we are trying to liberalize these adjustment assistance provisions. For these reasons, on behalf of my union I strongly urge this Committee to give immediate support to House Concurrent Resolution 447 and Senate Con- current Resolution 38, which express the sense of Congress that the Code should be submitted for legislative consideration prior to its becoming effective in this Country. Surely the representatives of American workers should be given the opportunity to express their views on such an important change in our domestic fair trade laws, laws which so directly affect the welfare of these workers, under the normal procedures of the legislative process. To allow the new Oode provisions to take effect without careful deliberation under regular legislative procedures would amount to an unfair and unlawful by-passing of Congressional functions. Mr. CHESTER. Mr. Hollan Cornett, of the United Stone & Allied Products Workers. STATEMENT OP HOLLAN CORNETT Mr. CORNETr. Mr. Chairman and members of the committee, the largest part of my job with this union consists of representing the workers of the six operating companies with potash plants in the Carls- bad, N. Mex., area. I am here today to plead with you gentlemen to give these workers some protection from the scourge of potash imports which is rapidly changing them from workers making a decent living wage to recipients of unemployment insurance and public welfare. In the prepared written statement that I have submitted to you are tables relating the facts on potash production and the increases of imports into the United States, along with exhibits showing the actual factors of what is `happening to the union members of our local unions, as well as other unions made up of the workers of the domestic potash industry, and what is happening to the economy of Carlsbad and the State of New Mexico. I am not going to belabor the facts and figures; they are all before you, and I urge you to study them thoroughly. What I really want to impress upon you is the human side of the story, for I am convinced that we here in the United States have a moral obligation to our own citizens that should take precedence over the attitude and well-being of other countries. This is not just a problem for Carlsbad, N. Mex., and members of our union. Even though the majority of domestic potash production comes from New Mexico, there are producers in California, Utah, `and Idatho. They too, have suffered because of the increase in imports from Canada and other countries. The United States enjoys a generally high standard of living, with high salaries and high taxes. These high taxes give all foreign potash producers, especially Canada, `an artificial advantage over the domestic producer. Canada is by far the largest exporter of potash to the United States. Mo~t of the U.S. producers of potash have established plants in Oanada, and gain further advantage of a 5-year moratorium on taxes by estab- lishing Canadian operations. PAGENO="0357" 3793 This will change, once the domestic producers are eliminated. As the tables will show you, a great deal of these imports come from West Germany, France, and Spain. The operations in those countries are controlled by a cartel, who have for years threatened the domestic producers with price cuts. They have, during the past couple of years, carried out this threat. They have sold potash right here in the United States at a price much lower than even they can produce the product. I am sure the farmers are quite glad to be able to buy potash at these temporarily reduced prices. The cartel and the foreign producers will raise their prices after domestic production is eliminated, to a point where they will be more than compensated for their temporary losses. The U.S. farmer will pay much more in the long run for this fertilizer. But what about the workers who are being forced out of work by this cartel, and Canadian imports? During the last 12 months, one Carlsbad producer has closed their operation down completely, putting over 850 workers out of work. IMCC has reduced their work force by over 50 percent, putting over 450 more workers out of work. Duval Corp. closed down one mine and laid off 50 workers. Potash Co. of America just laid off an additional 75 workers last month. All together, we have, during the last 12 months, had over 1,480 workers put out of work in the Carlsbad area, because of potash im- ports. Most of these now unemployed workers are over 50 years old, they only know one trade, potash mining. It is very late in their life to re- train them for other jobs. Even if it were possible to retrain them, there are no jobs available for them in the Carlsbad area. Gentlemen, in the western part of the United States, there are many old mining industry ghost towns. Some are long forgotten, others are used somewhat as a tourist attraction. Oarlsbad, N. Mex., is rapidly becoming such a town. It will be a mod- ern version of a ghost town, with real live ghosts being fed at the ex- pense of the American taxpayer. We will have a few tourists stopping in town to view the vacant buildings and to talk to the citizens about the good old days when the mines were operating, as they make their way to the Oarlsbad Caverns. It does not have to be this way. Something can be done to protect the life of the domestic potash industry, by putting a stop to the im- ports of potash. This is a vital, basic industry, one which the United States cannot afford to lose, or to let foreign powers gain complete control of. This is just what is going to happen, if we are not `successful in obtaining reasonable quotas on the imports of potash. You gentlemen are our only hope. You, the U.S. Congress, are the only body that can give us the protection that we need. I beg of you gentlemen not to put the high-sounding theory of free world trade, or the friendship of foreign countries, above the welfare of the U.S. citizens who work in our domestic potash industry. I thank you. PAGENO="0358" 3794 (Mr. Cornett's prepared statement follows:) STATEMENT OF HOLLAN CORNIerr, ExEcuTivE Boaiw MEMBER, UNITED STONE AND ALLIED PRODUCTS WORKERS OF AMERICA, AFL-CIO The TJnited States potash industry has suffered disastrous setbacks in the last several years. It faces virtual annihilation in the immediate future. The question is not one of margin of profit as is faced in many other industries in the United States but whether or not its very existence can be continued under the present and foreseeable circumstances. The following tables are attached as exhibits to this statement being the best information available through the year 1906. The first table shows potash opera- tions in Canada. Table 2 shows United States domestic consumption of potash. Table 3 shows United States domestic production capacity. Table 4 shows United States imports of potash from Canada and other countries. Table 5 shows Canadian consumption of potash. Table 6 is world wide potash production capability vs. consumption, estimated through the year 1971. Present production of potash in the United States is roughly equal to the consumption in the United States and the domestic potential is sufficient to pro- vide for the estimated annual increased use of potash for many years to come. Accurate figures are difficult to obtain covering United States consumption up to date, however, it does appear apparent that potaSh will be in increased use in the United States as well as in many foreign countries. The cost of actual production in the United States is comparable to the cost of production in other countries with the difference in competitive positions being determined by cheaper labor and principally artificial tax advantages held by foreign producers. There are no natural advantages held by foreign producers. Potash shipped from West Germany, France and Spain is controlled by a cartel who can fix prices regardless of costs and who have deliberately undercut, even below their own costs, the price of potash being delivered to the United States and for other economic reasons are able to sustain the loss suffered in potash shipments. The Canadian producers were given approximately five years tax moratorium as an inducement to expend huge sums of capital investment in Canada. The Canadian mines are of much higher grade potash, however, being lo- cated at a considerably greater depth than the potash in the Carlsbad area and requiring several times the capital investment, do not have too great an advantage excepting, as to taxes over the United States producers. Canadian imports have risen from less than one percent domestic consumption in 1960 and 1901 to over thirty two per cent of domestic consumption in 1966. Total foreign imports have risen from nine percent of domestic consumption in 1960 to over thirty eight per cent in 1966. Nineteen sixty seven and 1968 figures are not available, however the trend is certainly established and is continuing. The loss of this industry in the Carlsbad area only, to the United States in em- plOyment is shown by exhibits attached from several of the local unions and the local employment service. The human cost is unmeasureable because many of the men now in their fifties who have spent 25 years in this particular industry have no place to go with their training. The city of Carlsbad has dropped in population as shown by attached water and electric meter readings and mail count. The depression created is further evidenced from the Credit Bureau's reports on comparable periods of foreclosures filed. The potash industry in the year 1966 paid total taxes in excess of $10,000,0(X).00. It is respectfully submitted unless action is taken by this committee restrict- ing foreign imports, especially Canadian, the industry in the United States will disappear with terrific hardship on those immediately involved and the entire country will suffer ultimately with control of this vital basic product being delivered into the hands of foreign producers. PAGENO="0359" 379.5 TABLE 1.-BOX SCORE OF POTASH OPERATIONS IN CANADA I Output (tons per Capital cost Production start Shafts year) Operating: International M. & C., K-i 2, 000, 000 $65, 000, 000 September 1962 Kalium Chemicals 600, 000 50, 000, 000 September 1964 None Potash Co. of America.. 600, 000 45, 000, 000 April 1965 Total, operating 3,200,000 160, 000 000 Under construction: Allan Potash 1,500,000 70 000,000 Summer 1967 2 Aiwinsal Potash 1,000,000 50, 000, 000 Early 1968 Cominco Potash 1, 200,000 65, 000, 000 Late 1969 2 Duval Corp 1,000,000 63,000,000 Early 1969 .2 International M. & C., K-2 1, 500, 000 60,000,000 Early 1967 Noranda Potash 1,200,000 73,000 000 Early1969 2 Southwest Potash 1, 500,000 60, 000, 000 Early 1970 2 Total, under construction 8,900,000 441, 000, 000 Total 12, 100,000 601, 000, 000 1 The Northern Miner, July 14, 1966. Note: Potash Co. of America is planning a second shaft on which work is to commence early next year. International Minerals & Chemical Corp.'s K-i and K-2 shafts connect underground. Alwinsal Potash expects to start sinking a second shaft shortly after production attained. TABLE 2 -U.S. DOM ESTIC CON SUMPTION OF POTASH Year . . . Product (tons (KC1) 1) K2O (tons) 2 Change over prior year (percent) 1960 2,119,397 (3) 1961 3,911,896 2,054,097 -3.1 1962 4,248,931 2,342,876 +14.1 1963 4,293,141 2,645,040 +12.9 1964 4,820,741 2,935,989 +11.0 1965 4,692, 760 3, 141, 856 +7. 0 1966 4,931,686 3,810,531 +21.3 Total 26,898,155 19,049,786 1 Measured in terms of the mineral known as potassium chloride KC1. Source for figures is the Atchison, Topeka & Santa Fe RR. 2 Measured in terms of the oxide content (l(~O). Pure sylvite, or pure muriate of potash, contains 63.2 percent of K2O. Mining companies strive for a product containing a minimum of 95 percent sylvite(KC1) which then contains over60 percent K2O equivalent, the usual minimum standard. Source for figures is the American Potash Institute. Note: Average increase per year over base year of 1960 averages 13 percent per year. S . TABLE 3.-U.S. domestic production capacity of potash1 Year: . KnO'ton~ 1960-64 2, 800, 0(u) 1965 2,875, 000 1966 3,400, 000 `USDA publication "The Fertilizer Situation, 1963-64, 1964-65, 1965-66" (production capacity for 1960 through 1963 assumed to have been the same as 1964). The published flgure.s have been reduced by 200,000 K20 tons to reflect the net production capacity of KnO as potassium chloride. PAGENO="0360" 3796 TABLE 4.-U.S. IMPORTS OF POTASH 1 CANADA Year KCL (tons) 2 I(~O (tons) 3 Percent of domestic consumption 1960 1961 1962 6,717 3 76,395 563,344 837,357 1,485,148 2,015,838 4,030 2 45,819 338,006 502,414 891,089 1,209,503 (4) (4) 2 13 17 28 32 1963 1964 1965 1966 OTHER IMPORTS 1960 1961 1962 1963 1964 1965 1966 321,992 331,901 386,734 313,192 358,360 295,133 366,383 193, 195 199,141 232,040 187,915 215,016 177,080 219,830 9 10 10 7 7 6 6 TOTAL IMPORTS 1960 1961 1962 1963 1964 1965 1966 328,709 331,904 463,129 876,536 1,195,717 1,780,281 2,382,221 197,225 199,143 277,859 525,921 717,430 1,068,169 1,429,333 9 10 11 20 24 34 38 Total 7,358,497 4,415,080 123 1 American Potash Institute. 2 Measured in terms of the mineral known as potassium chloride (KC1). 3 Measured in terms of the oxide content (K2O). Pure sylvite, or pure muriate of potash, contains 63.2 percent of K2O. Mining companies strive for a product containing a minimum of 95 percent sylvite (KC1) which then contains over 60 percent K20 equivalent, the usual minimum standard. 4 Less than 1 percent. 5 Over the 7 years from 1960 to 1966, the total imports of K2O into the United States averaged approximately 23 percent of our domestic consumption for those 7 years. Year: KuO 2 tona 1960 100, 880 1961 105,951 1962 105,282 1963 121,909 1964 154, 663 1965 185, 021 1966 197, 162 1 Potash Institute. 2 Measured in terms of the oxide content (K20). Pure sylvite, or pure muriate of potash, contaIns 63.2 percent of K20. Mining companies strive for a product containing a minimum of 95 percent sylvite (KC1) which then contains over 60 percent KxO equivalent, the usual minimum standard. TABLE 5.-Canadian consumption of potash1 PAGENO="0361" 1960 1961 1962 1963_ 1964_ 1965_ 1966 1967 1968 1969 1970 1971 1 Chemical Week, July 2, 1966. Measured in terms of the mineral known as potassium chloride (KC1). Pure sylvite, or pure muriate of potash, contains 63.2 percent of K20 the oxide content Mining companies strive for a product containing a minimum of 95 percent sylvite (KC1) which then contains over 60 percent (K2) equivalent, the usual minimum standard. 2 Not available. TOTAL NUMBER OF MEN REPRESENTED BY USAPWA, AFL-CIO AT THE FOLLOWING MINES IN THE CARLSBAD POT- ASH BASIN FROM JANUARY 1965 TO JUNE 1968, MEMBERS AND NONMEMBERS INCLUDED January 1965 Local Plant Members Nonmembers Total 177 PCA and NPC 473 8 179 U.S. Borax 271 10 181 SWP 359 0 183 Duval 249 8 188 IMCC 86 636 Total 1,438 662 2,098 June 1965 177 PCAandNPC 487 8 179 U.S. Borax 270 10 181 SWP 351 0 183 Duval 273 8 188 IMCC Total 135 577 1,516 602 2,118 January 1966 177 PCAandNPC 498 8 179 U.S. Borax 270 10 181 SWP 348 0 183 Duval 278 8 188 IMCC 175 437 Total 1,569 463 2,032 June 1966 177 PCAandNPC 497 8 179 181 U.S. Borax SWP 278 345 10 0 183 Duval 270 6 188 IMCC 166 436 Total 1,556 450 2,006 3797 TABLE 6.-WORLDWIDE POTASH PRODUCTION CAPABILITY VERSUS CONSUMPTION World production capability Year (including Carlsbad production) 1 World consumption 1 Excess capability over consump- tion 1 Carlsbad produc- tion capability (estimated) 8,500, 000 8, 500, 000 None 4, 200, 000 9,500, 000 9, 500, 000 None 4,200, 000 10, 000, 01)0 10, 000, 000 None 4, 200, 000 10,500,000 10,500,000 None 4,200,000 12,000, 000 12, 000, 000 None 4,200, 000 13,000,000 13,000,000 None 4,500,000 15, 000, 000 14, 000, 000 1, 000, 000 5, 100, 000 16, 000, 000 15, 000,000 1,000, 000 (2) 17,000,000 15,000,000 1,800,000 (2) 18, 800, 000 16, 000, 000 2, 500, 000 (2) 20, 500, 000 17, 000, 000 3, 500, 000 (2) 25,000, 000 18, 500, 000 6, 500, 000 6, 500, 000 PAGENO="0362" 3798 TOTAL NUMBER OF MEN REPRESENTED BY USAPWA, AFL-CIO AT THE FOLLOWING MINES IN THE CARLSBAD POT- ASH BASIN FROM JANUARY 1965 TO JUNE 1968, MEMBERS AND NONMEMBERS INCLUDED-Continued January 1967 Local Plant Members Nonmembers Total 177 179 181 183 188 PCA and NPC U.S. Borax SWP Duval IMCC 500 278 352 280 161 8 10 20 6 427 Total 1,571 451 2,022 June1967 177 179 181 183 188 PCA and NPC U.S. Borax SWP Duval IMCC 501 281 348 282 163 8 10 0 6 459 Total 1, 575 483 2, 058 January 1968 177 178 179 181 183 188 PCA NPC U.S. Borax - SWP Duval IMCC 308 185 7 370 243 81 8 0 0 0 6 325 Total 1,194 339 1,533 June 1968 177 178 179 181 183 188 PCA NPC U.S. Borax SWP Duval IMCC 252 189 6 336 244 60 8 0 0 0 6 315 Total 1,087 329 1,416 JUNE 18, 1968. Mr. HOLLAN CORNETT, International Representative, United Fitone and Allied Products Workers of America, Carlsbad, N. Me~v. DEAR HOLLAN: In response to your request of how my membership at the local potash mines has fluctuated, is as follows: January 1967: U.S. Borax 140 PCA 54 Duval Total 228 June 1967: U.S. Borax 140 POA 54 Duval ____ 34 Total 228 January 1968: U.S. Borax 2 POA 54 Duval 30 Total 86 PAGENO="0363" 3799 June 1968: U.S.. Borax - 2 PCA 54 Duval 24 Total 80 in 1967 we had 228 members working in the potash mines. Today we have 80 members working in the mines. if I can be of any other help, please call on me. Sincerely, W. R. E&ns, Business Manager, Local No. 703, I.B. of E.W. CAVERN CITY LocAL 1124, INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, Carlsbad, N. Mew. HOLLAN C0RNETT: DEAR SIR: Active membership from 1965, 300 members; 1966, 295 members; 1967, 291 members; 1968, 13 members. These members were working till Nov. 10 1967 when Company shut down operations at refinery, The U.S. Borax & Chemical Co. Potash Division. REX KEEN, Financial f~ecretary. JUNE 19, 1968. #1912 I.A.M. 1965, 110 Members 1966, 108 Members 1967, 105 Members 1968, 1 Member To whom it may concern: Listed above is the active membership of International Association of Machin- ists & Aerospace Workers Permian Basin Lodge #1912, located at Carlsbad, New Mexico, on the given dates, The above information is true to the best of my knowledge and belief. H. A. GREEN, President. EMPLOYMENT SECURITY COMMISSION, NEW MEXICO EMPLOYMENT SREvICE, Carlsbad, N. Mew. To Whom It May Concern: Due to the installation of highly mechanized and larger equipment in an et!ort to become more competitive in the potash market, there were reductions in labor forces for several years by the potash industries in the Carlsbad, New Mexico, area. More recently, the potash companies have stated that they have been having difficulty in competing with the foreign markets which resulted in the closing of one of the major firms. The area eventually became one of substantial unemployment and on September 21, 1967, it was classified as a "Redevelopment Area" under Section 401(a) (4) of the Public Works and Economic Development Act of 1965. Criteria for a desig- nated area is clearly specified in this Act. Statements used in determining the designation of Carlsbad as a Redevelopment Area should be on file with the Federal Government prior to the date of designation. Such documents describe the conditions in this area at that time, which was prior to the closing of one of the major potash industries in November of 1967. HAROLD R. CONWAY, Manager, Carlsbad Local Office. PAGENO="0364" 3800 CITY OF CARLSBAD, POTASH CAPITAL OF THE WORLD, Carlsbad, N. Mex., June 18, 1968. To Whom It May Concern: Below is listed the number of water meters in service in the City of Carlsbad by six months intervals since January 1, 1965. The information is directly re- lated to the economic situation in Carlsbad that has resulted in a large number of people leaving the area because of unemployment. Numberof Date operating meters Numberof Date operating meters Jan. 1, 1965 7,451 Jan. 1, 1966 7,419 Jan. 1, 1967 7,321 Jan. 1, 1968 6,996 July 1, 1965 7,470 July 1, 1966 7,453 July 1, 1967 7,295 June 1, 1968 6,943 CHARLES R. GRIGO, Wa4er and Sewer Superintendent. SOUTHWESTERN PUBLIC SERVICE (Jo., Carlsbad, N. Mecv., June 19, 1968. To Whom It May Concern: A check of our records indicates the following meter count taken at six month intervals for Carlsbad, New Mexico, beginning with January, 1960. January 1966 10,633 June 1966 10,762 January 1967 10,531 June 1967 10, 639 January 1968 10,267 June 1968 10,066 W. K. ROTAN. QREDIT BUREAU OF CARLSBAD, Carlsbad, N. Mea'., June 18, 1968. To Whom It May Concern: Upon request, I have examined our records and find that the following number of Mortgage Foreclosure Suits have been filed in Eddy County during the first five months of each of the past three years, as listed below. 1966 27 1967 30 1908 70 W. R. MIDDLETON, Owner. POTASH TAXES PAm ro STATE OF NEW MEXICO IN 1966 Local and State taxes and royalties borne by the potash industry total more than 10 million dollars annually. For the calendar year 1966. the potash in- dustry paid the following amounts: Gross receipts tax (on sales) $802, 905 Sales Tax (on purchases) 758, 306 Oompensating tax (on purchases) 143,862 Ad Valorem tax 2,079, 476 Royalties 5,066, 891 Mineral lease 500, 821 Occupation tax ~` ~ State income tax 212,741 Severance tax 497,498 Total 10,088, 342 PAGENO="0365" 3801 Mr. CHESTER. Mr. George Barbaree, assisted by Mr. Lord. STATEMENTS OP GEORGE R. BARBAREE AI~fl) ROBERT LORD Mr. BARBAREE. Mr. Chairman and members of the committee, my name is George R. Barbaree. I am international secretary-treasurer of the International Brotherhood of Operative Potters, AFL-CIO. On behalf of our union and its membership, I thank you for giving of your time to listen to our views regarding the serious impact that the present import policy has, and is having, on the pottery industry, and more specifically the earthenware dinnerware potteries, where our members are employed. We have prepared some charts to emphasize to you the reduction in shipments from the U.S. Pottery Association, and the cor- responding unemployment that was a result of the reduction in man- hours worked due to the continued increase in foreign imports dur- ing the years from 1947 to 1967. The black line on the chart shows that 27,293,281 dozen of earthen- ware was shipped in 1947, and that with the exception of the years 1958 through 1962, there has been a steady decline, with only 7,737,549 dozen being shipped in 1967, or a reduction in dozens shipped of over 70 percent. The blue line, representing man-hours worked during the same period, reflects an almost parallel decline, dropping from 25,681,758 hours worked in 1947, to 5,297,424 hours worked in 1967, or a loss of over 75 percent. The red line depicts the continued rise in imports during this same period, from approximately 2 million dozen in 1947 to approximately 25 million in 1967. As a result of this invasion of the domestic market by unfair foreign dinnerware imports, the next chart shows that our members employed in the industry declined from approximately 12,000 in 1947 to 3,599 in 1967. or a loss in job opportunity of 70 percent. From 1953 to 1967, 18 dinnerware potteries affiliated with the U.S. Potters Association in various States have been forced out of business because of being unable to compete with these foreign imports pro- duced with low-wage rates. Other plants under contract with our union, and not members of the USPA, also have gone out of business. The financial plight of our inudstry can in no way be attributed to unreasonable wage or fringe demands by the union. As a matter of fact, the union has had to recognize the import prob- lem, and temper its demands accordingly. The average hourly earnings in union potteries are approximately 60 cents per hour below the national averages for all manufacturers. If our union members had not restrained their demands, there would be no pottery manufacturers remaining today. Not only has cheap foreign imports caused numerous losses of jobs to American potters, but they are causing the standard of living of the remaining pottery workers to be lowered substantially. In view of the above facts, it therefore becomes imperative for Con- gress to pass legislation to restrict this unfair foreign competition, so that a vital domestic industry, providing jobs for American workers, 95-i59 0-68-pt. 8-24 PAGENO="0366" 3802 will not be completely destroyed by products made with unreasonably low wages in foreign countries. We therefore respectfully request that you support H.R. 16936, entitled t.he Fair International Trade Act, introduced by Congress- man Sydney Herlong of Florida. Mr. FULTON (presiding). Thank you, sir. Mr. CHESTER. That finishes our testimony, Mr. Chairman. If there are any questions, we will stand ready to answer them. Mr. BYRNES. Some of the witnesses emphasized adjustment assist- ance. It is my impression that most of your workers are rather highly skilled. Am I wrong in that, or not? Mr. CHESTER. In some cases, Mr. Byrnes. In the flat glass industry, it is probably the highest paid of all of our affiliates. Mr. BYRNES. I am talking principally of the training that is re- quired, and the fundamental skills that the normal worker has to attain. Mr. CHESTER. I think they could probably address themselves to that question. On flat glass, they have skills, and P. and M., production and main- tenance workers. Mr. REISER. In flat glass, most of that is mechanized equipment, and during the war they stepped right into the ammunitions. Mr. BYRNES. Then adjustment assistance can be of some help. It seems to me that where you have higher skills-which I assume you have in the pottery, chinaware production-trying to acquire another skill through new training is not a very satisfactory solution to the problem. Mr. BARBAREE. And also the average age in the potteries is very high. Because of the decline in job opportunities, we have not been attracting young people. Mr. BYRNES. That is true in flat glass? Mr. REISER. Well, yes. It takes nearly 12 to 15 years to even hold on to a labor job, because if it wasn't for our early retirement systems, at age 62, we would be in real trouble. Now, about the training, most of our plants are in small towns, and the people at that age are hesitant to leave, if they do get the chance. Mr. BYRNES. You have to move someplace else. One of my colleagues made the remark that someone said that you people want a break. We thought that that was a bad word to use if you were in the glass business, so maybe we could find a little different phrase. Mr. RETSER. It is an ill wind that doesn't blow somebody some good. When they break them, we make them. Mr. BYRNES. Thank you very much. Mr. FULTON. Congressman Burke? Mr. BURKE. Do any of you gentlemen represent the workers em- ployed in the stonecutting industry, the granite industry? Mr. CHESTER. The Stone and Allied Products Workers represent them. Mr. CORNETT. I do. Mr. BURKE. I know in Quincy, Mass., where they have the Quincy granite, they find it very difficult to get new workers into this trade. PAGENO="0367" 3803 Most of the oldtimers are immigrants from Italy, doing the polish work and the sculpture work. Mr. CORNErr. I think that is true all over the New England States, in the granite and marble industry. I am primarily concerned with the union in the western part of the United States, in the potash, and don't know much about the New England stone part. I do know they are having problems getting people to go in and take the training and learn the jobs. They are not interested in being quarry men and stone polishers, as their forefathers were. In that part of the industry, there again, in age bracket, the people are quite old, most of them. Mr. B1JRKE. I was wondering what the industry was doing about developing workers to take the place of these older men. Mr. CORNETT. They are setting up training programs under the various Government programs that they get assistance through to train people in that area. Mr. Bu1iKE. I understand that in some of these buildings erected in Washington in recent years, they had to import stonecutters and stone masons to do some of the work. Mr. FULTON. We certainly thank each of you gentlemen. Our next witness is Mr. Golden. Gentlemen, we welcome you to appear before the committee, and will you identify yourselves for the record. STATEMENT OP DAVID A. (+OLDEN, CUSTOMS AI~]) TARIFF COUN- SEL, UIIITED STATES POTTERS ASSOCIATION; ACCOMPANIED BY J~0SEPR M. WELLS, flt., AN]) J~OHN T. HALL Mr. GOLDEN. Mr. Chairman and members of the committee, my name is David A. Golden, and I am. the customs and tariff counsel for the U.S. Potters Association. At the outset, I would like to say that we wholly subscribe to and endorse the remarks just made by Mr. Barbaree, who is the secretary- treasurer of the International Brotherhood of Operative Potters, and I may also state that it is refreshing, at least in this industry, to see labor joining with management in seeking some sort of relief for this industry. Also, I would like to state that all the remarks made by me are limited to earthenware dinnerware, which is manufactured by the Potters Association members. Now, on my left is Mr. Joseph M. Wells, Jr., vice president of the Homer Laughlin China Co., of Newell, W. Va., and on my right is Mr. John T. Hall, president of the Hall China Co., of East Liverpool, Ohio. I am not going to read my statement, Mr. Chairman and gentlemen. However, I do request that it be printed in the record along with the statement that we are making now. Mr. FULTON. Without objection, it will be done. Mr. GOLDEN. The first thing that I would like to talk about is the tariff adjustment assistance program. PAGENO="0368" 3804 Under the Trade Expansion Act of 1962, as you gentlemen well know, the criteria for relief were changed by Congress from that under the old Trade Expansion Act of 1951. I was the first one who fell under the ax of the investigation `by the Tariff Commission under the new criteria, as expounded in the 1962 act. As a matter of fact, the Potters Association filed a petition for relief in 1962, in August, and before the case was decided, the new act went into effect, and we were caught under the new criteria. Obviously, as you well know, we did not get the relief, and at the time we felt pretty badly about it, although the Tariff Commission found that we were injured, and imports were coming in, and we were being injured by them, but since the other 20 applications that have been filed subsequent to ours received the same treatment, we are in pretty good company. Now, it is the administration's proposal under the new act, the Trade Expansion Act of 1968, to change the criteria as affecting mdi- vidual firms and workers. It does not intend to change the criteria affecting industries, and, gentlemen, I submit that to do that would be a mere nullity. What good would it do if you are going to give a worker increased benefits, or retrain him, or relocate him, or give an individual firm long-term loans at low interest, or reductions in taxes, or whatever the case may be, if the industry goes out of business? Now, you just asked the gentlemen that preceded me about the skill of the workers, and the training of the workers, and so on. Fine. You are going to give them the assistance, which is economic, but you are not going to save the industry, and again, as the President in his recommendations urged the Congress to do certain things, I strongly urge that if you change the criteria under the trade adjustment assistance program, to affect or to help individual firms and workers, you do the same for the industry. I may also pose this: It is possible, if you do not change the criteria affecting industries, that an individual firm, an industry and workers may come in and file petitions affecting the same industry. Using the same evidence, the same facts, you will give relief to the. firm and to the workers, and the industry will get no relief on the same basis, facts, law, or whatever may be involved. If you change it, whereby all of them will come under the same criteria, and again I submit all I mean is the industry, the firm, and the worker, then they will qualify under the criteria announced by Congress, and relief will be given, if it so meets the criteria. Again, I strongly urge that, if you change the criteria, you include also the industry. Another thing-and this I am firmly opposed to-is granting to the President further authority to reduce duties on imports. And I believe there the administration has put itself in an untenable po- sition. The administration wants the authority to further reduce duties, or to use that unused portion under the Kennedy round, for the next 2 years, until 19W. This industry is very, very vulnerable by that. By that I mean we have received reduction under the Kennedy round, except in one in- PAGENO="0369" 3805 stance, where the negotiators culled out a new category, which ap- pears in the tariff schedules of the United States as though no re- duction had been given to this particular cull-out of the odd sections of the tariff schedules, so that at the present time they would be sus- ceptible to a full 50 percent cut. And for that category, we believe it is the category containing the largest amount of imports, and where the industry is hurt to the greatest extent. Now, the untenable position of the administration is this: The Ad- ministration says that- We want that authority because- And let me quote from page 2 of this committee's proposed Trade Expansion Act of 1968: For example, the United States may find it necessary to increase the duty on a particular article as the result of an escape clause action or a statutory change in tariff classification. On the next page they say: The escape clause action hasn't worked. We are going to change it. Now, if it hasn't worked, why does the President need authority to increase rates of duty because of the compensatory raites that we may have to give another country under the escape clause actions? They can't be on both sides. They cannot say the same thing. Then he says "a statutory change in tariff classification." If there is a statutory change in tariff classification, that means Congress passes a statute. If Congress sees fit in a particular statute to increase the rate of duty on a particular item, in the same statute, they can decrease the rate of duty on a particular item, why does the President at this time need further authority to continue the unused portions of the Ken- nedy round authority that was given to him in 1962? Again, I repeat this industry is very, very vulnerable to anything along those lines. Furthermore, I am naive enough, and I believe that the reductions made under the Kennedy round were based on the economics of this country. When Ambassador Roth's office and other negotiators to GATT sat down and polled all the information, they came to the conclusion that the maximum cut we can give on that article, this article, so on down the line, were those reductions which the industry could stand. I believe that. If that is the case, then why does the President want at this time, or need at this time, authority to further reduce the rate of duty? I say that there should be anywhere from 3 to 5 years waiting period to see the effect of the Kennedy round reductions before we go into anything else. Another area I would like to explore is the omnibus bill, or across- the-board quotas. Now, this committee -is very well aware, much more than I am, of the number of quota bills that are thrown into the hopper. Some come out, and some do not. If there was an omnibus bill in which Congress had set out a stated policy and criteria, any industry which met that criteria and is in- PAGENO="0370" 3806 jured and makes the overt step of seeking relief should get relief without coming in and filing t~ quota bill and having to appear before the Ways and Means Committee and the Senate Finance Commit- tee, and all the other governmental agencies before he is granted the relief. Again, whatever the announced criteria is, which Congress may im- pose, if it is a fair one, and a workable one, I don't think anyone is disadvantaged. No one is hurt. Quotas in that sense is not a dirty word. The Congress can state what kind of quotas they shall be, whether absolute, and I do not favor absolute quotas, but it can be a limited quota whereby so much can come in at a reduced rate, and not a complete cutoff, but so many more hundreds or thousands or millions of dollars or commodities at an increased rate of duty. I think that is fair, workable, simple, and helps both industry, knowing they can do it. and helps Congress, `by saying, "You qualify under the quota," or, "You don't." There is your relief, rather than the individual quota bills on which the administration has come down here time after time and said, "Don't do it. They are going to retaliate. Every time that anything happens along those lines, there is going to be retaliation." Maybe there will, and maybe there won't. I don't know, but that gets to be worn a little thin, also. Any questions that the committee may have along the lines of the skill or the workers or the numbers or the amounts involved, Mr. Wells and Mr. Hall will be more than happy to answer anything that the committee may have. Gentlemen, I want to thank you for the opportunity to appear before you, and to state our position. (Mr. Golden's prepared statement follows:) Re: Trade Expansion Act of 1968, H.R. 17551 STATEMENT OF DAvm A. GOLDEN, CUSTOMS AND TARIFF COUNSEL, UNITED STATES PorrEns ASS0cIArE0N My name is David A. Golden `and I am an attorney associated with the firm of Lamb & Lerch, located at 25 Broadway, New York, New York, 10004. I am Tariff and Customs Counsel to the United States Potters Association, located in East Liverpool, Ohio. The United States Potters Association is one of the older trade associations in the United States having its beginning in 1875. At the present time the Asso- ciation having its beginning on 1875. At the present time the Association is com- prised of six active members and approximately 25 associate members. All of the active members are producers of earthenware dinnerware. These six plants represent about 70% of the dollars and approximately 60% of the dozen of the domestic production in this field. The six active members are: Canonsburg Pottery Co., Canonsburg, Pa., 15317; The Hall China Co., East Liverpool, Ohio 43920; The Harker China Co., East Liverpool, Ohio, 43920; The Homer Laughlin China Co., Newell, W. Va., 26050; Royal China, Inc., Sebring, Ohio, 44672; The Taylor, Smith & Taylor Co., East Liverpool, Ohio, 43920. TO LTBERALIZE ADJUSTMENT ASSISTANCE CRITERIA FOR FIRMS AND WORKERS WITHOUT LIBERALIZING THE ESCAPE CLAUSE PROCEDURES FOR DOMESTIC INDUSTRIES WOULD BE LESS THAN A NULLITY A. History Of The Eseape Clat~se From the beginning of the Trade Agreements Program there has been concern that as a result ocf a decreuse in import restrictions there would be sudi an in- crease in imports as to seriously injure or to threaten serious injury to domestic PAGENO="0371" 3807 manufacturers. When the President was given authority in 1934 to reduce import restrictions he committed himself to use the authority in such manner as not to injure sound and important American industries. However, in administering the Trade Agreements Act it soon became apparent that some domestic industries would be seriously injured. An "escape clause" was, therefore, included in trade agreements which periniitted the United States to withdraw a concession under certain conditions. The Trade Agreements Extension Act of 1951 for the first time had an "escape clause" procedure provided for by statute (Sec. 7). This provision in substance held that the Tariff Commission should investigate all escape clause applications; impose a time limit for the investigation; and allowed an actual as well as a relative increase in imports to satisfy the procedural critieria. The Tariff Com- mission pursuant to the investigation then had to determine if as a result in whole or in part of concessions granted, imports of the article under investiga- tion were being imported into the United States in such increased quantities, either actual or relative, as to cause, or threaten, serious injury to the domestic industry producing like or directly competitive products. Section 7 of the Trade Extension Act of 1951 was re-enacted in 1955 and 1958. It lasted until 19(32. B. Application Of The Escape Clause Under Section 7 of the Trade Extension Act of 1951 (and its re-enactment) 113 investigations were completed by the Tariff Oomimission. Of that number of investigations the Tariff Commission found that in 33 investigations the criteria for injury was met by the domestic industry and reconunended to the President that relief be granted; in 8 investigations the Tariff Commissioners were divided as to their findings and therefore, the cases had to be referred to the President for disposition; and 72 cases were dismissed by the Tariff Commission on the grounds that the domestic industries did not meet the criteria set up by Con- gress for relief. Of the 41 investigations referred to the President, 15 were granted relief pur- suant to the statute and 2(3 were denied relief. C. Changes Made in The Present Act (Trade Ea~pa~sion Act of 1~962). From Section 7 Of The Trade Agreement Eo,tension Act of 11)51 In the Trade Expansion Act of 1962 Congress enacted a sweeping reorganiza- tion of safeguard procedure which among other things made a form of relief available to groups not covered by earlier acts, such as individual firms and employees of injured industries. Under the 1962 Act the President could provide relief in cases of injury to an industry, firm or workers by withdrawing, or modifying the concession or he may grant trade adjustment assistance such as loans, tax relief and technical assistance. During the debates in Congress on the 1962 legislation it was held out to `labor as an inducement for the passage of the Act that individual groups of workers, not provided for under previous legislation could obtain trade adjustment assistance. However, in addition to the attempted beneficial changes made by the 1962 Act, the criteria for "injury" was changed which change made it impossible for domestic industries, firms or individuals to get any trade adjustment assistance. Before the Commission can make an affirmative finding under section 3(~1 (b) (1) of the Trade Expansion Act of 1962, it must determine (1) that the imports in question are entering the United States in inéreased quantities; (2) that the increased imports are a result in major part of trade agreement concessions; and (3) that such increased imports have been the major factor in causing or threatening to cause, serious injury to the domestic industry concerned. If the Commission finds in the negative with respect to any one of these three requisites, it is foreclosed from making an affirmative finding for the industry. D. Impossibility of Qualifying for Relief Under Present Criteria Since the drastic change made by Congress in the Act of 1962 in determining the criteria for injury to be found by the Tariff Commission before relief can be secured by an industry, firm or individual, not one petition was found to have met that criteria. From the enactment of the 1962 Trade Expansion Act to date, domestic industries have filed 10 petition.s with the Tariff Commission for investigation and trade `adjustment assistance; domestic firms have filed 6 petitions and workers have filed 5 petitions. In all, 21 petitions have been filed and as previously stated the Tariff Commission has not made an af/irma- tive finding in any. PAGENO="0372" 3808 B. The United States Potters Association Was One of the Many Domestic Indus- tries Denied Relief After an Escape Clanse Hearing by the Tariff Corn- mission Under the Present Criteria An excellent example of relief denied under the present escape clause criteria is the petition filed by myself on behalf of the United States Potters Association. It was the first case which came before the Tariff Commission for relief under the Trade Expansion Act of 1962. As a matter of fact the petition was filed under Section 7 of the Trade Agreement Extension Act of 1951 as amended, and the hearings were also held under the provisions of the act. However, before the Tariff Commission could render its findings the Trade Expansion Act of 1962 was passed and, therefore, this petition had to be adjudicated under the new act with its changed criteria for "injury". The Commission found that there was an upward trend of imports of earthen- ware tableware and kitchen articles and that such earthenware "is being imported * * * in * * * increased quantities" within the meaning of the Trade Expansion Act (Page 4-Report to the President on Investigation No. 7-114- TEA-1-2). They also found (in one category) that the significant increase in imports occurred years after the duty reductions were made, hence the duty reductions could not be the major cause of the increased imports. The Tariff Commission stated that 15 domestic producers of earthenware had ceased production, 8 of which terminated production in the period 1957-1961. Production declined from 30 million dozen pieces in 1954 to 26.8 million dozen pieces in 1957 and to 22.1 million pieces in 1958; production then increased to 24.4 million dozen pieces in 1959 and declined to 21.6 million dozen pieces in 1961. In all of the yOars 1957 through 1961, dinnerware accounted for more than 98 per cent of the total quantity of earthenware produced. Sales of house- hold earthen dinnerware by domestic producers declined from 26.4 million dozen pieces valued at $57.1 million in 1957, to 23.0 million dozen pieces valued at $48.4 million in 1961. During 1958-60 the average annual imports were 17 per cent greater than 1955-57, and in the 2 year period 1961-2, they were 11 per cent greater than in 1958-60. Imports of earthenware amounted to 6.5 million dozen pieces in 1957, increased to 9.2 million dozen pieces in 1960. Estimated imports of earthenware dinnerware rose from 2.5 million dozen pieces in 1957 to 4.3 million dozen pieces in 1960, then to 3.4 million dozen pieces in 1961. These im- ports were equivalent to 9 per cent of the apparent consumption of such din- nerware in 1957 and to 13 per cent in 1961. (See report to the President on In- vestigation No. 7-114 (TEA 1-2) under Section 301 (b) of the Trade Expan- sion Act of 1962). The statistical information secured from the Labor Depart- ment, Bureau of the Census, Customs Bureau, etc. can be found in the report submitted to the President; the testimony adduced at the hearings nnd the exhibits submitted can be seen at the Tariff Commission. F. The Proposed Liberalization Of The Tariff Adjnstment Provisions Of The Trade Expansion Act of 1962 By The Trade Expansion Act of 1968 (H.R. 17751) For The Benefit Of Firn~s And Workers Will Help Those Classes Little If At All Unless There Is A Change In The Criteria For Injury Applying To Domestic Industries As above stated, when Congress changed the criteria for relief to domestic industries injured as a result of increased imports due to a trade concession from the escape clause provisions contained in the Section 7 of the Trade Exten- sion Act of 1951 to the provisions contained in the present act (Trade Expan- sion Act of 1962) and included also therein for the first time tariff assistance to injured firms and workers, not one petition on behalf of domestic industries, firms or workers qualified. The criteria for securing relief in the present law (Trade Expansion Act of 1962) is the same for domestic industries, individual firms or workers. The Administration recognizing that whereas the escape clause provisions of the Ti~ade Extension Act of 1951 were successfully applied by several domestic industries which qualified thereunder, the changes made for securing relief by injured industries, individual firms or workers under the Trade Expansion Act of 1962, proved to be a complete nullity, is now suggesting amendments to the latter Act through the proposed "Trade Expansion Act of 1968" (H.R. 17551). However, the proposed changes in H.R. 17551 apply merely to individual firms and workers and does not apply to domestic industries. In other words the pro- posed new Act will make it easier for individual firms and workers to secure relief from loss of jobs or loss of income due to increased ruinous imports, but PAGENO="0373" 3809 the domestic industry which contains the individual firms and employs the workers will still be handicapped by the criteria under the Trade Expansion Act of 1962, which criteria has been impossible to meet up to the present time. The President in requesting Congress to liberalize the previous impossible re- strictions placed on those industries, firms and individuals seeking justifiable relief from imports, very studiously limited the proposed changes to apply only to firms and workers. He stated: "Some firms, however, have difficulty in meeting foreign competition, and need time and help to make the adjustment. "Since international trade strengthens the nation as a whole, it is only fair that the government assist those businessmen and workers who face serious prob- lems as a result of increased imports. "The Congress recongized this need-in the Trade Expansion Act of 1962- by establishing a program of trade adjustment assistance to businessmen and workers adversely affected by imports." It is respectfully pointed out that to offer relief to firms and workers and not to the domestic industry involved is absolutely worthless . . . What can it possibly benefit a firm if it receive tax assistance or a loan or other adjustment, if the industry is forced out of the business of producing the article because of low cost foreign competition? What can it possibly benefit a worker in the long run if he gets extra unemployment benefits or training or relocation, if the in- dustry in which he was employed transfers its manufacturing ability and know- how to low wage countries because of imports from similar low wage countries? If the proposed "Trade Expansion Act of 1968" (HR. 17551) is passed in the present form as relates to escape clause provisions for domestic industries; and tariff adjustment provisions as relates to individual firms and workers, it is possible that a firm or worker could qualify for relief under the new provisions but the domestic industry could not qualify even though petitions could be filed by all three categories at the same time and the same evidence adduced by the Tariff Commission in its investigation. It is strongly urged that the criteria for relief proposed by the new act (H.R. 17551) be changed so that it would be identical for domestic industries, individual firms or workers. THE PRESIDENT SHOULD NOT BE GIVEN FURTHER AUTHORITY TO REDUCE DUTIES Under the proposed Trade Expansion Act of 1968 (H.R. 17551) the President is seeking further authority to reduce duties. Under the Trade Expansion Act of 1962 the President was given authority to reduce the rates of duty on imported merchandise tO 50 per cent of the rates which existed on July 1, 1962. The authority expired on June 30,1967. Under the auspices of the so-called Kennedy Round of negotiations most of the authority granted to the President to reduce rates of duty was used. It is believed that the reductions in the rate of duty applying to imports into the United States were predicated not so much on the concession we received from the negotiating parties under GATT but took into account the domestic industry involved, its relation to the country, its relation to the community, the protection needed (if any) from competitive imports, capital invested, number of employees, etc. If it is a fact that those factors were taken into account, then the reductions in duty under the Kennedy Round were probably the maximum reductions pos- sible, even if less than the full 50 per cent permitted. Therefore, to permit the President to have authority to further reduce duties for any reason in those instances where the full 50 per cent reduction in duty was not used would be imposing an undue hardship by the mere threat of further reductions on those domestic industries. The results of the Kennedy Round have hardly been realized and the mere authority to further reduce duties could result in a mass exodus of domestic industries to low wage countries. For example the rate of duty on all categories of imported earthenware dinnerware was not reduced the full 50 per cent authorized. Nevertheless, the categories which received a full per cent recluc- tion in duty are dependent and inter-related with the categories which did not receive the full 50 per cent reduction; so that a definite loss of over-all business in the domestic earthenware dinnerware trade is anticipated as a result of the Kennedy Round reductions. Before an additional authority be given to the President to reduce the rate of duty on those categories of earthenware dinner- ware which were not originally reduced the full 50 per cent, a waiting period of at least 3 years be set up to determine the effect of the Kennedy Round. PAGENO="0374" 3810 Also certain new categories of earthenware dinnerware were established for customs treatment and duty application under the Kennedy Round. It appears as though the duty on these new categories was not reduced under the Kennedy Round. However, the duty was reduced under previous customs classifications and under prior trade agreements and, therefore, to permit these categories to be reduced at the present time a full 50 per cent of the rate of duty existing on July 1, 1962 would be imposing an undue hardship on an already over bur- dened industry. No one is disadvantaged if the President is denied at the present the authority to reduce duties to the full 50 per cent authorized under the Trade Expansion Act of 1962. If in a specific instance for a specific purpose it is necessary, Con- gress can authorize such authority. Blanket authority to the President at this time can only be detrimental to domestic industries. AN OMNIBUS QUOTA BILL SHOULD BE PASSED SO THAT ANY DOMESTIC INDUSTRY WHICH IS INJURED AND QUALIFIES UNDER AN ANNOUNCED CRITERIA WOULD BE ABLE TO GET RELIEF FROM RUINOUS IMPORTS Congress is well aware of the many quota bills presently pending and cover- ing many imported articles. There is no doubt that at least some are meritorious and are deserving of Congressional action. Obviously some of them are merely put into the hopper by Congressmen in order to appease constituents. In order to reduce the work load of Congress in this connection and to remove the doubt as to whether or not a domestic industry is entitled a relief from imports by limiting the amount of imports, an omnibus quota bill should be passed. The criteria for qualifying for relief under such a bill could be spelled out by Congress and would require an overt act on the part of such industry to seek relief. Therefore, even if a particular industry may be entitled to relief under such a bill, the relief would not be forthcoming automatically, but it would be necessary for `the industry to petition for the relief necessary. Again using the domestic earthenware dinnerware industry as an example, we find that since the Tariff Commission ruled under the criteria of the Trade Expansion Act of 1962 that the industry was not entitled to relief, matters have worsened. Furthermore, the duty reductions made under the Kennedy Round have not yet been felt due to the shortness of time that they have been in exist- ence (January 1, 1968). Attached hereto is Exhibit I which is a report of the Bureau of Labor Statistics covering this industry and tells its own story. It shows that from 1960 to 1965 employment decreased 26 per cent and imports increased 42 per cent. Furthermore, and most important, is the fact that in 1960 imports was 18 per cent of total consumption and in 1965 it jumped to 27 per cent. An omnibus quota bill would probably have a percentage of imports as related to domestic consumption as part of its qualifying criteria, and in all probability, would not be as drastic as the jump in this industry from 18 per cent in 1961) to 27 per cent in 1965. Furthermore, attached hereto is Exhibit II which shows domestic shipments in a steady decline from 1954 to 1966 and a steady increase in the value of im- ports (based on foreign value) during the same period. During -the period the ratio of imports to consumption jumped from 7.7 per cent to a whopping 32.5 per cent. See also Exhibit III, a report of the Bureau of the Oensus showing the tremendous increase in imports of earthenware table and kitchen utensils from 1954 to 1967 and the negligible amount of exports. As a result of such increased imports against decreased domestic production, the number of pro- duction workers decreased from 12,333 in 1954 to 5,626 in 1966 (Sec Exhibit IV attached hereto). When combined with certain chinaware imports, Exhibit V, a report from the Bureau of the Census, shows that earthenware table and kitchen articles domestic shipments decreased from $67,029,000 in 1954 to $47,599,000 in 1966 whereas imports increased from $5,522,000 to $22,332,000; and when combined with chinaware imports, the ratio of total imports to do- mestic shipments rose from 28.8 in 1954 to 116.6 in 1966. No domestic industry can long survive with increases of that nature, especially one like the earthenware dinnerware industry, where approximately 60 per cent of the cost of production i's attributable to direct labor. . PAGENO="0375" 3811 As has been previously stated an omnibus quota bill would probably cover a situation presently encountered by the domestic earthenware dinnerware in- dustry and permit it to qualify for relief under a defined criteria. It would not then be necessary for this industry to seek Congressional relief. BALANCE OF TRADE PAYMENTS Our balance of trade payments are linked with and tied up with our trade balances relative to imports and exports. For years it has been the theory that we are a solvent country as reflected in at least one instance by our favorable balance of trade. As a result of this fiction we were advised that in order to keep up our favorable balance of trade, and in fact increase it, we would have to reduce tariffs so that other nations could sell their exports to us before they could buy our exports. This concept was stressed even if it meant the exter- mination of some domestic industries which were economically operated and turn over the production of that article to foreign countries. As of several weeks ago we no longer have a favorable balance of trade. Our exports, including government-financed exports, did not exceed our imports. As recently as May 20, 19(18 there appeared in the New York Times a statement made by a Vice President of the overseas division of a very large bank, who said: "If Government-financed exports are left out of account, the commercial trade balance this year may show a deficit of $1.5 to $2.5 billion, compared with a small commercial surplus last year of $250 million." Since our export statistics when stripped of government financed shipments will show an unfavorable balance of trade it reduces considerably the argument of those who claim that duties must be reduced at any cost in order to be able to export. We now have an unfavorable balance of trade and practically free trade. Perhaps it is time to take a hard look at the entire picture of world trade with a view to domestic industries sharing in it. EXHIBIT I TABLE 1.-FINE EARTHENWARE TABLE AND KITCHEN ARTICLES, SIC 3263 Shipments Imports Total Imports Employment Imports (millions) (millions) (supply) percent of Employment decrease increase total (percent) (percent) 1960 1965 60.2 51.1 13.0 18.5 73.2 69.6 18 27 8,770 6,447 -26 +42 EXHIBIT II EARTHENWARE TABLE AND KITCHEN ARTICLES-U.S. MANUFACTURERS' SHIPMENTS, IMPORTS FOR CONSUMPTION, EXPORTS, AND APPARENT CONSUMPTION, 1954-66 IDollar amounts in thousandsj Year Manufacturers' shipments value Imports value (foreign) Exports value Apparent consumption Ratio of imports! consumption 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 $67,029 67,985 69, 307 63,212 50,230 58,215 58,326 46,446 48,383 59,046 62,242 52,334 47,599 $5,522 6,823 7,869 8,788 9,037 11,614 12,963 11,662 13,562 14,033 16,861 18,545 22,332 $1,358 1,435 1, 149 1,494 1,487 1,172 1,074 752 640 779 664 898 1,119 $71,193 73,373 76, 027 70,508 57,780 58,657 70,215 57,356 61,305 72,300 78,439 69,981 68,812 7.7 9.3 10. 4 12.5 12.3 16.5 18.4 20.3 22.1 19.4 21.4 26.5 32.5 Source: U.S. Bureau of the Census and Consumer Durables Division. PAGENO="0376" Cl, C Cl) w C) Cl) ~ C) C) 3 N) C~) C)~4.JC)~CO OO~ ~4 ~ U~C~) O)(C) ~J ~ ~N) ~~-J~O Co N) 4000 ~ (4,0) (J1~ ~ (4) ())C4)0) 0)0)0) CJ)CC) N) ~C~) ~Cl) 3N)N)o4 CO Co dli. 2 3 -4 Co -4 2 -4 Co 2 -Co 2 Cl) C) Cl)> R~ C)C) ~ w DC') 4-4 ~C) .~ ~(fl(4)C)CYiC.3 ~w0o-.4O,~ C,~.3C,)C~) ~ C) 0N3~C) ~ 00 (41(0 -J~ 0000 ~ N) 00C4100(43 - 4, 01(000 ~W Co N) ~ N) -4 ~ (0(3100 -4 > Co > -4 2 > -4 > Co > 2 Co -4 - C) Co = 2 >~ F ~ Cl) ~ ~ 0 -4 Cl~ 0 C) 0 2 Cl) C -a -4 0 2 > 2 Co C ~l) -a 0 -4 C/) a a PAGENO="0377" 3813 EXHIBIT V HOUSEHOLD EARTHENWARE TABLE AND KITCHEN ARTICLES-DOMESTIC SHIPMENTS AND IMPORTS AND I MPORTS' OF CHINAWARE TABLE AND KITCHEN ARTICLES 1954-66 (Value in thousands of dollarsj Year Earthenware Chinaware imports Total chinaware and earthenware imports Ratio total imports to domestic shipments Domestic Imports shipments 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 67,029 5,522 67,985 6, 823 69,307 7,869 63,212 8,788 50,230 9, 037 58,215 11,614 58,326 12,963 46,446 11,662 : 48,383 13,562 59, 046 14, 033 62,242 16,861 52, 334 18, 545 47,599 22,332 13,754 15,222 16,942 18,359 17,772 21,806 23,382 21,108 24,791 20, 757 27,690 30, 767 33,185 19,276 22,045 24,811 27,147 26,809 33,420 36,345 32,770 38,353 34,790 44,551 49, 312 55,517 28. 8 32. 4 35.8 42.9 53.4 57.4 62.3 70.6 79.3 58. 9 71.6 94. 2 116.6 Source: Bureau of theCensus. Mr. FtriIroN. Thank you, Mr. Golden. Mr. human? Mr. ULLMAN. I have no questions. Mr. FULTON. Mr. Byrnes. Mr. BYRNES. I have no questions. Mr. FtILTON. Mr. Conable. Mr. CONABLE. I have no questions. Mr. FULTON. There being no further questions, we certainly appre- ciate your contribution. Mr. GOLDEN. Thank you. (The following statements were received, for the record, by the committee:) STATEMENT ON BEHALF OF THE EXPANDED SHALE, CLAY & SLATE INSTITUTE, THE LIGHTWEIGHT AGGREGATE PRODUCERS AS500IATI0N, AND THE NATIONAL SLAG ASSOCIATION The Expanded Shale, Clay and Slate Institute is a trade association represent- ing 32 United States producers of expanded shale, clay, and slate for use as a lightweight concrete aggregate. Its members operate 46 plants in 28 states and Puerto Rico, employ many hundreds of people, and annually produce 5,400,000 tons of lightweight aggregate worth $30,000,000. PAGENO="0378" 3814 The Lightweight Aggregate Producers Association is a trade association repre- senting 13 United States producers of sintered clay, shale, and fly ash for use as a lightweight aggregate. Its members operate 14 plants in 9 states, employ several hundred people, and annually produce 2,400,000 tons of lightweight aggregate worth $13,200,000. The National Slag Association is a trade association representing 9 sellers of expanded slag for use as a lightweight aggregate. Its members operate 12 plants in 9 states, employ several hundred more people, and annually market 2,450,000 tons of lightweight aggregate worth $7,250,000. We are attaching to this statement a listing of our members and the locations of their plants. Together they account for approximately 85 percent of domestic production of expanded shale, clay, and slate aggregates, approximately 95 percent of domestic sales of slag aggregates, and roughly two-thirds of domestic production of all light-weight aggregates. The lightweight aggregate industry Aggregate is the material that is added to cement or a similar adhesive to make concrete. Sand, gravel, and crushed store are used as aggregate in the mak- ing of heavier grades of concrete. Lighter grades of concrete require a light- weight aggregate. These lighter grades enjoy obvious advantages in large-scale construction projects and have achieved general acceptance for that use, partic- ularly in the form of concrete blocks. The market for light aggregates derives directly from the demand thus generated for lightweight concrete~ Lightweight aggregates are invariably low-priced bulk minerals. Expanded shale, clay, and slate are produced by burning certain types of raw shale, clay or slaite in rotary kilns or sintering them on traveling plates. The burned or sintered raw material expands to as much as several times its original size without any increase in weight and thus becomes suitable for use as lightweight aggregate. Slag is a byproduct of the iron blast furnace process. When molten slag is expanded with controlled applications of water, it too is suitable for use as lightweight aggregate. Other lightweight aggregates include coal cinders, vermic- ulite, perlite, and pumice. Pumice is a glass-like form of cooled volcanic lava which is light in weight because it is full of minute cavities caused by expanding volcanic gases that become entrapped when the lava suddenly cooled. Limited quantities of pumice are mined in some of our own western states. Recently, however, floods of imported pumice, primarily from Greece and Italy, have been pouring into our eastern seaboard markets for lightweight aggregate. Impeded by no tariff barrier at all-the pumice we are concerned with comes in dutv-free---this imported pumice is making sudden and deep inroads in cities and localities near several eastern ports. Our member firms and the people who work for them find their businesses and their jobs threatened. We come to seek relief from this threat. The development of the pumice aggregate threat During the 1950's and before, little pumice entered the United States from abroad, and most of what did was intended for use as an abrasive. Some pumice still is brought for this purpose, and to this day pumice is classified among the abrasives in the Tariff Schedules of the United States. The Tariff Act of 1930 originally subjected the type of pumice which primarily concerns us to a duty of 0.1 cent per pound. By 1956, however, trade agreement concessions had lowered the duty to 0.0425 cent per pound. Meanwhile, in the late forties and early fifties, domestic pumice in small quantities and imported pumice in even smaller quantities began to be employed as a lightweight aggregate. The domestic pumice all comes from western mines and processing plants. Then as now, transportation costs made it unavailable east of the Mississippi. Then as now, all or almost all imported pumice entered through the eastern seaboard and was marketed only in the East. Then, however, most such pumice imports came to Florida ports for use within that state. They were not a significant factor in any larger lightweight-aggregate market. In 1959 a special law was enacted for the benefit of Florida importers and concrete block producers eliminating the tariff on "pumice stone to be used in the manufacture of masonry products such as building blocks, bricks, tiles and similar rm' (Now Item 519.05, United States Tariff Schedules Annotated.) 1 PublIc Law 86-325, 73 Stat. 596 (1959). PAGENO="0379" 3815 At that time our industry opposed this law because we foresaw that it would inevitably allow the importation of pumice to spread to a much wider area on the East Coast and to take on a much larger scale. Unfortunately, we were proved right about that. The only east coast area who~e imports of masonry pumice have not risen since the duty was eliminated is Florida. The subsequent poor performance of the low- quality pumice then being imported there temporarily eliminated the local market for pumice. As we had feared, it temporarily damaged the local market for other lightweight aggregates as well. The rising swell of imports Elsewhere the story was quite different, and it bore out our fears that elimina- tion of the tariff would invite destructive competition all over the East Coast. Imports, which were negligible outside of Florida in 1959, had by 1961 reached 24,000 tons. In 1962 they tripled to 76,000 tons. In 1963 they doubled again to 146,000 tons. Since then they have proceeded in an erratic but unmistakable climb that last year brought them to 238,000 tons, ten times the level of 1961. If unrestrained, these imports will undobtedly go higher. The worst of it is that the full brunt of this asault on U.S. markets falls on a few firms located at or near the East Coast. Almost all the pumice imports are coming into the eastern seaboard ports between Boston and Norfolk and are being marketed near those ports. Though local markets for lightweight aggre- gate are growing as builders discover the advantages of these materials, they remain limited, and as a result of this intense import competition individual plants and even companies are in danger of being swamped and driven out of business. When low-priced pumice became available in the Norfolk area a year or so ago, for example, it put domestic competitors at a sudden and severe competitive disadvantage. Lured by lower prices, local concrete block makers turned to pumice, and local construction firms turned to the correspondingly cheaper pumice block. Whereas in 1966 no pumice at all had been sold in the Norfolk area, last year pumice took up 21 percent of the lightweight aggregate market there, and in the first six months of this year pumice has preempted a full 55 percent of that market. Perhaps coincidentally, a local block maker who had been using another type of lightweight aggregate went into liquidation and has left the business. Similar, if less drastic, consequences have followed the import surge in other areas. On up the east coast last year pumice imports chewed up an estimated 15 percent of the lightweight aggregate market in the Baltimore area; 60 percent of the market in Philadelphia; 47 percent of the market in Elizabeth, New Jersey; 83 percent of the market in Milford, Connecticut; 71 percent in New Haven, Connecticut; 69 percent in Providence, Rhode Island; and 41 percent in Boston. Evidence so far this year is that these percentages will rise further. Naturally, the domestic firms in these areas are being hurt by the loss of business. Workers in these areas are being hurt by the loss of jobs. Meanwhile the pumice importers have promised to extend their marketing efforts back down the remainder of the East Coast, around to the Gulf Coast, and through the St. Lawrence Seaway to Great Lakes ports as well. When and if they are able to carry out their promise, many more domestic producers and their employees will be similarly threatened. Causes and adverse effects of pumice imports The price advantage imported pumice enjoys over competing domestic aggre- gate stems from its distinct advantages in labor and materials costs. The wages paid to Italian or Greek laborers are far below those we pay our workers here in the United States. Moreover, the pumice is considerably less complicated to mine and process than the expanded or sintered materials we market. It re- quires nothing like the millions of dollars of plant and equipment in which our firms must invest. Even the costs of transporting the pumice across a thousand miles and more of ocean adds no more to the dockside price than a rail journey of a few hundred miles adds to the price of domestic aggregates. Ships whose holds would other- wise be empty or filled with ballast on return trips to the U.S. give rock-bottom rates to shipments of materials like pumice that can be transported in bulk. We consider this invasion of our markets by cheap materials processed by cheap labor and brought to the United States at cut rates a form of unfair corn- PAGENO="0380" 3816 petition. United States customs offers no relief, since the pumice imports come in duty-free-a fact which the importers are quick to point out to potential customers. The upshot is that dockside prices on the imported pumice generally are con- siderably less than the best prices domestic competitors can offer.2 The s~irong and swelling surge of imports that results is threatening the growth of an important domestic industry, costing American workers jobs, and contribut- ing to the newly unfavorable trend in our balance of trade and the already unfavorable condition of our balance of payments. The lightweight aggregate industry was a relative newcomer in the postwar period and expanded rapidly during that period. Recent years have seen some leveling off of production and consumption. But as the advantages of lightweight aggregate and of the lightweight masonry it makes possible become better known and more widely appreciated, we anticipate a renewal of rapid growth in the market as a whole. If the importation of pumice continues to grow even faster than the overall market, however, the growth of our domestic industry and in particular the growth of firms whose plants lie near ocean ports will be stymied, if not reversed. By the same token, the employment of American workers in the industry will be severely curtailed. Meanwhile, increasing imports of pumice are helping to aggravate this na- tion's already severe balance of trade difficulties. Because lightweight aggregates are low-priced commodities for which transportation costs over great distances at normal rates are generally prohibitive, they are not exported from the United States except in very small quantities to nearby islands. Thus almost the entire amount of pumice imports-over half a million dollars last year-is a net drain on the balance of payments. In this respect of course the experience of the lightweight aggregate industry differs from that of other industries only in its complete one-sidedness. In indus- try after imports are outpacing exports, to the point that in March and May even the balance of trade, long the bright spot in the payments picture, turned against the United States for the first time. Something must be done, and Congress is the right place to start. The need for Congressional Actioiv Before this Committee now are several measures that will alleviate the current general trade situation and the situation of industries being injured, as ours is, by rising imports. We support the President's move to make it easier for injured firms and work- ers to qualify for adjustment assistance and to simplify the attendant procedures. We support also bills like that introduced by Mr. Herlong (H.R. 16936) to im- pose import quotas whenever imports threaten to overwhelm an industry before it has time to react. But because of the peculiar regional nature of the threat to our industry, we are uncertain that these bills will meeet it. For this reason and for the protection of our firms and their employees, we respectfully request that imports of ma- sonry pumice (Tariff Item 519.05) be limited by law to an amount equal to the av- erage of such imports over the past five years, 1963-1967. Such a limitation, while not excluding imports altogether, would permit domestic lightweight aggregate producers to maintain their just share of the now-threatened markets in our seaboard cities and would reduce the drain from these imports on our balance of payments. We further ask this Committee to give our problem careful consid- eration in the formulation of more general legislation, and we add our voices to the proposition that in the formulation of United States trade policy the needs of U.S. business and U.S. workers should be placed first. JOHN J. SAPIENZA, CHARLES H. Hniiz, _________ Of Counsel. 2Exact price figures are unfortunately unavailable, since prices vary with each transaction. PAGENO="0381" 3817 Attachment Rosmx OF MEMBERS EXPANDED SHALE, CLAY & SLATE INSTITUTE Alabama: Vulcan Materials Co. P.O. Box 7324-A Birmingham Arkansas: Arkansas Lightweight Aggregate Corp. P.O. Box 99 England California: Basalt Rock Co., Inc. 8th and River Streets Napa The McNear Co. P.O. Box 1380, McNear Point San Rafael Lightweight Processing Co. 650 South Grand Avenue Los Angeles (three plants in Los Angeles area) Port Costa Clay Products Co. P.O. Box 5 Port Costa Kaiser Industries Corporation Sand and Gravel Division 300 Lakeside Drive Oakland Colorado: The IDEALITE Co. 821 Seventeenth Street Denver Florida: Florida Solite Co. 1114 SOL Building Jacksonville Georgia: Georgia Lightweight Aggregate Co. P.O. Box 19781, Station "N" Atlanta Illinois: Material Service Division of General Dynamics Corp. 300 W. Washington Street Chicago Indiana: Hydraulic Press Brick Co. Brooklyn Iowa: Carter-Waters Corp. Centérville Kansas: Buildex, Inc. P.O. Box 15 Ottawa Buildex, Inc. Marquette Kentucky: Kenlite 129 River Road Louisville 95-159 O-68-pt. 8-25 Louisiana: Louisiana Lightweight Aggregate Co. P.O. Box 5472 Aiexandria Big River Industries P.O. Box 66377, Central City Station Baton Rouge Minnesota: Acolite, Inc. Springfield Mississippi: Jackson Ready-Mix Concrete P.O. Box 1292 Jackson Missouri: Carter-Waters Corp. 2440 Pennway Kansas City Hydraulic Press Brick Co. 705 Olive Street St. Louis Montana: Treasure State Industries, Inc. P.O. Box 2750 Great Falls Nehraska: Western Aggregate & Brick Co. P.O. Box 268 Lincoln New York: Buffalo Haydite Division of J. P. Bur- roughs & Son P.O. Box 29 West galls Hudson Valley Lightweight Aggre- gate Corp. 1967 Thrnbull Avenue Bronx Northern Lightweight Aggregate, Inc. 028 5. Saratoga Street Cohoes Nytralite Aggregate Division of Lone Star Cement Corp. 162 Old Mill Road West Nyack North Carolina: Carolina Solite Corp. 4425 Randolph Road Charlotte North Dakota: Baukol-Noonan, Inc. P.O. Box223 Mandan Baukol-Noonan, Inc. Noonan Ohio: Hydraulic Press Brick Co. P.O. Box 7786 Cleveland PAGENO="0382" 3818 ROSTER OF MEMBERS-Continued EXPANDED SHALE, CLAY & SLATE INSTITUTE-continued Oklahoma: Texas: Ohandlei~ Materials Co. Dallas Lightweight Aggregate Co. 1723 South Boston P.O. Box 400 Tulsa Arlington Chandler Materials Co. Texas Lightweight Aggregate Co. Choctaw Division P.O. Box 400 P.O. Box 158 Arlington Choctaw Texas Lightweight Aggregate Co. Oregon: 3111 MeKinney Avenue Empire Building Material Co. Houston 9255 N. E. Halsey Street Utah: Portland Utelite Corp. Puerto Rico: Goalville Diaslite Inc. Box 2588 G.P.O. Virginia: `Clinchfiekl Goal Go. San Juan Dante South Dakota: Solite Corp. Light Aggregates, Inc. P.O. Box 9138 P.O. Box 1922 Richmond Rapid City Virginia Solite Go. Tennessee: P.O. Box 2015 Tennlite, Inc. Arlington P.O. Box336 Greenbriar LIGHTWEIGHT AGGREGATE PRODUCERS ASSOCIATION PRODUCER MEMBERS Illinois: New York: Illinois Brick Co. Onondaga Lightweight 228 N. LaSalle St. Aggregate Corp. Chicago, Ill. 60601 Peck Road Waylite Co. Warners, N.Y. 20 N. Wacker Drive Pennsylvania: Chicago, Ill. G. & W. H. Corson, Inc. Massachusetts: Plymouth Meeting, Pa. Freeport Brick Co. Masslite, Inc. Freeport, Pa. 16229 P.O. Box 1747 Plainville, Mass. 02762 Bylite Corporation P.O. Box 1628 Michigan: North End Station Light Weight Aggregate Corp. Wilkes-Barre, Pa. 12720 Farmington Road Tennessee: Livonia, Mich. John A. Denie's Sons Co. 373 Adams Ave. Minnesota: Memphis, Tenn. North Central Lightweight Shalite Corporation Aggregate Company P.O. Box 441 4901 W. Medicine Lake Drive Knoxville, Tenn. 37901 Minneapolis, Minn. Virginia: New Jersey: Weblite Corporation Sayre & Fisher Brick Co. P.O. Box 270 Sayreville, N.J. Roanoke, Va. PAGENO="0383" Alabama: U.S. Pipe & Foundry Company 3300 First Avenue, North Birmingham, Alabama 35202 Vulcan Materials Company P.O. Box `7497 Birmingham, Alabama 35223 California: Fontana Slag Division Brown Bros. Contractors, Inc. P.O. Box 1010 .Fontana, California 92335 Michigan: Edw. C. Levy Company 8800 Dix Avenue Detroit, Michigan 48209 Ohio: American Materials Corporation P.O. Box 291 Hamilton, Ohio 45012 The Standard Slag Company 1200 Stambaugh Building Youngstown, Ohio 44501 Pennsylvania: Bethlehem Steel Corporation 701 East Third Street Bethlehem, Pennsylvania 18016 Duquesne Slag Products Co. Frick Annex Bldg., 16th Floor 429 Forbes Avenue Pittsburgh, Pennsylvania 15219 United States Steel Corporation 525 William Penn Place Pittsburgh, Pennsylvania 15230 STATEMENT OF J. RAYMOND Paicu, EXECUTIVE SECRETARY OF GLASS CRAFTS OF AMERICA, ON BEHALF OF THE AMERICAN HAND-MADE GLASSWARE INDUSTRY GLASS CRAFTS OF AMERICA MEMBERSHIP 1. Blenko Glass Company, Milton, West Virginia 25541. 2. Fenton Art Glass Company, Williamstown, West Virginia 26187. 3. Fostoria Glass Company, Moundsville, West Virginia 26041. 4. Imperial Glass Corporation, Bellaire, Ohio 43906. 5. Lenox Crystal, Inc., Mount Pleasant, Pennsylvania 15666. 6. Morgantown Glassware Guild, Morgantown, West Virginia 26505. 7. Pilgrim Glass Corporation, Ceredo, West Virginia 25507. 8. Rainbow Art Glass Company, Huntington, West Virginia 25704. 9. Seneca Glass Company, Morgantown, West Virginia 26505. 10. L. B. Smith Glass Company, Mount Pleasant, Pennsylvania 15666. 11. Tiffin Glass Company, Inc., Puffin, Ohio 44883. 12. Viking Glass Company, New Martinsville, West Virginia 26155. 13. Westmoreland Glass Company, Grapeville, Pennsylvania 15634. 14. West Virginia Glass Specialty Company, Weston, West Virginia 26452. IDENTIFICATION AND QUALIFICATION OF THE WITNESS Mr. Chairman and Gentlemen of the Committee, My name is J. Raymond Price. I am Executive Secretary of GLASS CRAFTS OF AMERICA, an organization comprised of fourteen U.S. companies engaged in the production of hand pressed and hand blown glassware. I am also Executive Secretary of the Illuminating and Allied Glassware Manufacturers Association, an organization of seven U.S. companies engaged in the production of hand-made glassware products for illuminating, industrial and allied purposes. In addition to these two Association groups of glassware manufacturers I also represent, on an individual basis, twelve additional companies producing a general line of hand-made glassware. 3819 ROSTER OF MEMBERS-Continued MEMBER COMPANIES OF THE NATIONAL SLAG ASSOCIATION PAGENO="0384" 3820 This presentation is made on behalf of all these companies who are desirous of lending their support to H.R. 16936 as introduced in the House of Representatives by Mr. Herlong, May 1, 1968. The companies that I represent maufacture approxi- mately 90 to 95 percent of all the hand-made glassware made in the U.S.A. In each of their respective locations they contribute substantially to the total inthis- trial payroll and, in some instances, almost 100 percent of the total industrial payroll in the community. It is the earnest desire of the American Hand-Crafted Glassware industry to cooperate with, and to assist in every way possible, this Committee in the discharge of its responsibilities in conducting these trade legislation hearings. We feel that we can best do this by conveying to the Committee some of the problems experienced by this industry under past and present tariff policies. The ever-increasing influx of imports and Hand-Made glassware over the past twenty years has brought about a very serious erosion of the domestic industry. The story of this industry, in this respect, has been ~x~ld many times before, but it will bear repetition, in essence, here because there has been no change, except for further and continuing deterioration. To illustrate briefly the reasons for, and the intensity of, our interest, I should like to point out that, in 1950, wage and employment surveys conducted for this industry and through my office, covered 39 companies operating 40 plants. Those 39 companies included all of the major producers of hand-made glassware in America. The surveys included the collection of such data as the number of workers employed, total hours those employees worked, total earnings, average rates per hour, etc. Ten years later, in 1961, we reviewed the happenings of the 1950-1960 decade. As of January 1, 1961, 15 of the companies which were operating in 1950 were out of production. Those 15 companies alone, in 1950, had employed 3,080 workmen as compared to the total employment of 4,644 hourly-paid workmen in the com- panies which remained in operation when the 1961 survey was taken. The loss of those companies represented a loss of approximately 41/2 million manhours of work per year, and a loss of approximately 42 percent of America's oldest and one of its most vital industries. The primary reason for the loss of these companies was the inability of their respective management to compete with low-wage products from abroad. This same problem continues with greater intensity today. In 1965 we had 23 companies reporting a total of 4,690 employees who worked a total of 7,738,141 hours. This means that we have regained only 46 in the number employed during these past five years. Moreover, those employees worked almost one-half million fewer hours in 1965 than in 1961. This is not too difficult to understand when we consider that imports of table and art glassware have increased in each of the past five years, reaching record levels in 1965 and indicating new higher levels in this current year. According to a report issued by the Business and Defense Services Administration of the U.S. Department of Commerce in February of 1966, it was estimated that im- ports of table and art glassware alone would reach 20.5 million dollars in 1965 (imports were valued at 51/2 million dollars in 1950 and 111/2 million in 1960), and this estimate is based on foreign value, country of origin, and does not include U.S. import duties, ocean freight and marine insurance. The first six months of 1966, according to the U.S.. Department of Commerce data on imports of Table and Art Glassware, indicated that the trend continued upward with a foreign value, country of origin, of 23.7 million as compared to 20.5 million in 1965. The first six months of 1967 compared to the first six months of 1966 show the following gains: Total imports $11,525,890, or a gain of 6.5 percent over the January to June period of 1966. Typical of the gains shown by the leading exporters to this country would be Italy with a 10 percent gain in 1965, West Germany 25.4 percent, and Japan 30 percent. Other countries indicating a sizeable increase (although somewhat lower volume than the first three named above) are the United Kingdom up 45.2 per- cent and Ireland up 46.4 percent. Hand-made glassware was the principal 1965 glass import and supplied more than 50 percent of the domestic market. Imports from Soviet-bloc countries accounted for 11 percent of the total (2.1 million dollars-an increase of 25 percent in the first eleven months of 1965). PAGENO="0385" 3821 As of May 31, 1966, over fourteen countries have increased the value and quantities of shipments of glassware to the United States. Korea, with a 330 percent increase, leads the parade followed by: Percent Percent Spain +94.7 Belgium 21.1 Ireland ~ 41. 5 Italy 10. 7 Denmark 28.0 East Germany 8. 8 Bulgaria 24.0 Czechoslovakia 8.5 Japan 22.1 Rumania 1.0 West Germany 21. 8 The above data, released by the Consumer Durable Goods Division of the U.S. Department of Commerce, indicate a 10.4 percent increase in total value of table and art glassware for the period ending May 31, 1966. Shipments were valued at $8,892,023 or $835,891.00 more than for the same period in 1965. Early in 1968 the industry was informed that it must gird for greater on- slaughts, particularly from Japan which supplied 27.7 percent of the total imports last year. A glass industry publication recently reported: "A sweeping invasion of 8000 units of glassware consisting primarily of tumblers and brandy glasses valued at approximately $16,700 is now being spear- headed at the American market. Nippon Toki Company, Ltd., producers of Non- take China, has already started state-side export of its newly added crystal glass- ware line. The firm began production of the line some five years ago, with this being the first overseas shipment . . . ." (Note: This ware is already on the American market.) Since the preliminary work on this report was outlined in March of this year, we have received the data for the first quarter of 1968 from the U.S. Department of Commerce, Durable Goods Division. (See Exhibit 1 attached.) As we have already indicated, the drastic decline of the domestic hand-made glassware industry has been brought about primarily because it has been im- possible for American manufacturers to compete in their own market with similar products made in foreign countries which enjoy an overwhelming ad- vantage in labor costs. The average hourly rate paid to Skilled glassworkers in America today is $3.39 per hour. Add to this figure current fringe benefits and the total cost to the employer is somewhere around $3.93 per hour. To the supporting or so-called Miscellaneous help in the Glass industry, the average rate is $2.43 per hour. Add to this fringe benefits currently in effect and we come up with a wage of $2.82 per hour. (Approximately sixty to seventy-five cents of every cost dollar goes to labor). The enormity of the task facing the American manufacturer of hand-crafted glassware is well illustrated by a comparison with his Japanese competitor. The domestic manufacturer using the same tools, techniques and equipment must, in this case, overcome wage cost differentials of about twenty to thirty times the wage cost of the Japanese manufacturer. For example: The average monthly wage1 paid to a Middle School (equivalent to U.S. High School) gradu- ate in Japan in 1967 was 13,820 yen (1 yen equals about three-tenths of one U.S. cent). Thus, that Japanese worker's wage equals about $13.89 per month as compared to approximately $467.00 now paid to a similar worker in the Hand- Crafted Glassware industry in the U.S.A. The Hand-Crafted Glassware industry is of vital importance to our national defense in times of war or other national emergency, yet these factories cannot be maintained nor can the irreplaceable skills of the men and women who work in the industry be preserved on a war-time or emergency-need basis. Their ability to rapidly convert to the production of such items as glass for ships, planes, airports, ordnance use, signal glass, sonar, radar and television bulbs has been fully dempnstrated in World Wars I and II and in the Korean situa- tion, and there is no reliable source of supply outside our nation's borders to replace them in time of war. This reservoir of facilities, technical personnel and skilled craftsmen cannot be tossed into the discard. However, these com- panies cannot exist unless we can find some way to preserve for them a fair share of the domestic market for the ordinary household glassware, giftwares, 11J.S. Department of Labor, BLS. PAGENO="0386" 3822 glass for household and business illumination purposes, etc.-their "Bread and Butter" items as it were-in times of peace. In order that there be no misunderstanding of our position, the American manufacturer is fully cognizant of the necessity for maintaining trade with foreign nations. We do not seek to create tariff barriers for the sole purpose of eliminating competition. All we ask is that the American manufacturer be given an opportunity, by whatever means may be found just and equitable, to sell his wares, made by AMERICAN workmen at AMERICAN labor rates, equal to the opportunies afforded foreign manufacturers whose employees are paid much lower rates. In his recent appearance before this (Jomniittee, Secretary of State, the Honorable Mr. Dean Rusk, said that the position of the United States as the largest single trading nation "underlines our special responsibility to insure that our trade policy promotes a continued growth of our own2 and the world economy." We believe that H.R. 16936 undergirds this philosophy in that it specifically allows for growth and in fact it does not propose, generally, any reduction in the current level of imports. Quotas would come into being only if and when pre- scribed "ceilings" have been penetrated. Moreover, it will allow imports to be increased in equal proportion to the growth of the American market. Section 5 of H.R. 16936 establishes certain criteria through which equitable ceilings on imports may be imposed. We would not presume to say that in all phases of their application these criteria are 100 percent accurate, but we do hold that the principle is sound. We hold, further, that certainly it is more equit- able, and the principle reasonably defensible, when, after an appraisal of all factors set forth under this and related sections of H.R. 16936, reasonable ground rules are thus enunciated for the implementation of our tariff policy. For far too many years we, in the Hand-Crafted Glassware industry, have felt that the interests of domestic manufacturers were being dealt with solely on the whim or arbitrary judgment of persons who cared little about the preserva- tion of the best interests of our own U.S. industries. This, we think, has been justifiable in view of the fact that over the past score of years directly com- petitive imports have taken, and now continue to hold, more than 50 percent of the domestic market in hand-made glassware. The writer can well recall an appearance before the Committee on Ways and Means prior to the passage of the Tariff Revision Act of 1962. On that occasion, we warned that the relief provisions of the then-pending legislation were cynical and meaningless. The experience of those industrial firms which later sought relief under the applicable provisions of the Act during these intervening years has proven, beyond any question, the accuracy of that appraisaL According to our best information, not one single measure of relief has ever been granted. It is our hope that the members of this Committee will lend their support to a re-direction of U.S. Foreign Trade Policy in order to bring about some measure of equitable treatment for domestic industry. We believe that the enactment of H.R. 16936 would extend the principle of quota limits under specific criteria- 2 Italic supplied. PAGENO="0387" w o ~ ~ a: 3 3: D ~ :~: ~` C,, 0 r) 3 0 ~ 0,' -4 ~ :::::: 0 0. ~ (/) 0 0 COC~ 0 ~ I -. 0 0 0 N) N) C,) N) N) - N) ~0) ~ - Q~ N) -~ r~ ~ 3 r~ W 0~- .JC,)~N)(O 0 0 ~ -~°: ` ~ !~. ~ ~: 0 () Q 0 r~, -~ ~ C/) 0) ~ ~ C/) ~ )Q OQ~ > 0 < -u o C,) -- -- (flC,) ~ C C0~-J~ )D 0 m ON)' ON)0)~0N) F - Cu~C~00Ui~ 0 O(icu~0o0)C)o)o.~- ~U) :u D - N) C,) C,) ~ U) -C) ~ -l C.) +1+ + ,,``,,,`,`,,,`,,,,,(,,,,```` 100+0 - ~O(0C,) N) ~ ON) U) ~ N) 0 PAGENO="0388" 3824 TABLE AND ART GLASSWARE: U.S. IMPORTS FOR CONSUMPTION, BY KIND, FOR JANUARY-MARCH 1967, AND 1968 [Quantity in number; foreign value in U.S. dollars] 1968 January-March Quantity Value Articles chiefly used for preparing, serving or storing food or beverages; smokers' articles, art and orva- mental: Valued not over $1 each Valued over $1, not over $3 each Valued over $3 each Glassware (Venetian type) valued not over $1 each: Smokers' articles Other Valued over $1 each Bubble glassware Glassware pressed and toughened Other glassware, smokers' articles: Valued not over $1 each Valued over $1, not over $3 Valued over $3 each: Cut or engraved Other Perfume bottles fitted with ground glass stoppers: Valued not over $1 each Valued over $1, not over $3 each Valued over $3 each: Cut or engraved Other Other: Valued not over 30 cents each 10, 020,892 2, 078,975 Valued over 30 cents, not over $1 Valued over $1, not over $3 each (1) Valued over $3 each: Cut or engraved Other 1 Formerly No. 546.5300 2 Formerly No. 546.5500 3 Formerly No. 546.5700: Total 15, 001, 889 5,969,472 15, 188, 303 6,251,919 Source: U.S. Department of Commerce official statistics prepared in Consumer Durables Division, May 1968. STATEMENT OF HARRY W. BAUGUMAN, JR., NATIONAL PRESIDENT, WINDow GLASS CUTTERS LEAGUE OF AMERICA TSUSA No. Description 1967 January-March Quantity Value 546.11 546.13 546. 17 546.21 546.23 546.25 546.35 546.38 546.40 546.42 546.43 546. 44 546.46 546.48 546.49 546.50 546.52 546.54 546.56 546. 58 546.59 138,058 60,034 295,049 146,153 283,219 515,833 420,753 750,329 86, 067 479, 057 92,978 529, 690 58, 443 25, 345 36, 244 17,982 13,945 7,205 42,510 10,297 59, 689 95, 266 99, 390 147, 060 2,594,918 815,973 2,505,107 908,914 435, 969 47, 842 465, 382 59,700 411,825 136,381 578,022 146,416 (1) 32, 899 52,674 (2) 1,848 7,678 (3) 2,785 12,107 72, 887 22, 138 52,692 18,426 (1) 10,384 15,281 (2) 1,102 4,800 (3) 353 2,079 8, 145, 816 1, 079, 129 1,682,574 883,105 624,750 926,781 (2) 57,671 293,177 (3) 39,994 240,141 706, 595 1, 040, 168 83, 426 425,679 35,956 219, 576 Mr. Chairman and Members of the Committee, My name is Harry W. Baugh- man, Jr. I am National President of the Window Glass Cutters League of America, a labor organization representing approximately 750 members employed in the manufacturing of window glass. Our Union consists of twelve (12) locals located in West Virginia, Pennsylvania, Ohio, Indiana, Arkansas, Oklahoma and Louisiana. We have been chartered in the AFL-CIO since 1928 as: The Window Glass Cutters League of America 1078 South High Street Columbus, Ohio 43206 In this Hearing we are direcbly concerned with the manufacturing of window glass or sheet glass, whichever you prefer. We strongly oppose the present low tariff rates which allow the foreign producers the world over to further pene- trate the already crippled industry. We respectfully submit our reasons for strongly supporting the Herlong "Fair International Trade" bill, H. R. 16936. EFFECT ON APPALACHIA Six of our twelve existing locals are located in the heart of Appalachia. Four in West Virginia and two in western Pennsylvania. One local located in Arnold, Pennsylvania, has been completely shut down since December, 1967 with no. indication that it will ever be re-opened. This resulted in the loss of employment PAGENO="0389" 3825 for 90 of our members. Since `the average age of our. members is 46.10 years, you can readily see the almost impossible task of securing other employment. The other five locals located within Appalachia are experiencing drastic loss of wages caused by curtailed production brought on by the closing of melting fur- naces. The locals where the existing facilities are in operation (three of the six locals in Appalachia) have embarked on an almost complete stocking program both in finished and unfinished ware because of non-existing customer orders. Prior to 1960 the six aforementioned locals made up approximately 750, or one-half of our then 1500 total membership. True, automation contributed par- tially to these declining numbers. Presently there are approximately 450 mem- bers that make up the six Appalachia locals. These remaining 450 members are for the most part working on a curtailed or pro-rata basis as per negotiated contract obligations. As late as May 7 I have reliable information that even further cubacks in production is a reality within the six locals. The further cutbacks as predicted in the already recognized depressed region can only worsen the plight of workers and their families in Appalachia. THE EFFECT OF FOREIGN IMPORTS IN OTHER AREAS The May 20th issue of the Wall Street Journal reported that housing starts for the month of April, 1968 reached a four year high. If this is a true statement, and we have to assume it is, one would also assume that employment within the window glass industry would also be at a higher level than it was four years ago. However, this is not the case. Two window glass factories previously referred to, one located in Okmulgee, Oklahoma and the other located in Shreve- port, Louisiana, started drastic cutbacks in production during the month of April. Despite housing starts at a four year high, not one of our laid off members has been recalled, nor has any of the already idle facilities been started back into production. One factory, located at Henryetta, Oklahoma, has been operating at a 50% of capacity since March, 1967. At this plant alone, 36 of a total member- ship of 96 were laid off 15 months ago. Those remaining 60 members have been working at drastically reduced hours and wages for 15 months. The over-all window glass industry is at the present time operating at only 57% of capacity. On May 7, 1968, Mr. Robert Wingerter, President of Libbey- Owens-Ford Glass Company, stated to Special Representatives of the President that his company facilities must operate at a minimum of 60% of capacity before they could even hope to reach a break even point. The same should hold true with all companies within the industry. By the same token, it is easily recognized why employees also must work above a 57% of capacity so they, too, can reach a break even point During the month of April, I made an extended trip to the southwestern region to visit with four locals located in that area. I had the opportunity to speak with members of the Building and Construction Trades while in Oklahoma. As you no doubt know, building and construction in the Southwest is also at an all time high, particularly in Texas. In a three state area surrounding Texas, namely Arkansas, Oklahoma and Louisiana, there are four window glass plants. Despite this fact, members of the Building and Construction Trades stated to me that almost without exception all window glass being used in these enormous projects is of a foreign origin. Even with freight and shipping rates at a minimum in such a confined area, the foreign producers have, as they have in the past, demonstrated their ability to penetrate the United States market. Are we to continue the exportation of our jobs to low wage foreign countries on such a ridiculous basis? I don't believe so. EFFECT ON EMPLOYMENT In early 1960 our total membership was 1,500 members. At the present time our membership is just half that figure-750 members. As of May 24, 1968, 212 employees, or a little above 25% of our membership, was on lay-off status. It seems iromc that the ratio of imports to consumption is also 25%. At the Charles- ton, West Virginia local, 39 of our members have been on lay-off status for eight years without any hope of ever being recalled. This again amounted to approxi- mately 25% of the local membership. We become alarmed when we realize the number of employees being lost through attrition. Prior to 1960 it was normal procedure to hire new employees or replace those employees lost through death or retirements. Under normal operating conditions this must be done to maintain a status quo, regardless of PAGENO="0390" 3826 the product being manufactured. At the Charleston, West Virginia plant alone, 30 employees retired and 5 have died for a total of 35 employees lost through attrition. The same would hold true on a comparable basis for all 12 locals. In the two window glass plants of Libby-Owens-Ford, at Charleston, West Virginia, and Shreveport, Louisiana, the youngest seniority date is February 10, 1956. At the present time Libbey-Owens-Ford Glass Company has 162 employees represented by the Window Glass Cutters League of America, employed in their two platas. This figure, prior to 1960, was approximately 360 employees. If it were not because of contractual obligations, the remaining 162 employees would be reduced to less than 100. Company officials have stated to me on numerous occasions that they would invest enormous amounts of capital to modernize their existing facilities and place back into operation their idle furnaces if there was any indication they would be able to share in the growing window glass market in the United States. However, with the present tariff structure and non-existing import ceilings, they are not willing to make such investments. I respectfully submit on behalf of the employees in the window glass industry represented by the Window Glass Cutters League of America, that our employ- ment within the already crippled industry be given great consideration and that you will give full support to the Herlong "Fair International Trade" bill, HR. 16936. Thank you for this opportunity to present our position. STATEMENT OF HUBERTA M. PATTERSON, SECIuCTARY, WEsT VIRGINIA LEAGUE, IN BEHALr OF WEST VIRGINIA, PENNSYLVANIA, OHIO, AND INDIANA GI~ASs WORKERS' PROTECTIVE LEAGUES The Glass Workers' Protective Leagues whose members are affiliated with the American Flint Glass Workers Union, have over the years suffered severe setbacks due to ever increasing imports of all types of glass. While some people argue that the production of glass may not be as important a segment of the national economy as some more basic industries, the great variety of glass products and its multiplicity of uses give it a most important place In our economy. Lets look more closely at the relationship between protective tariffs and the American glassware industry in general, but particularly the band-blown seg- ment, offers a good example of the problems arising from increasing imports into the United States. The burden of this importation falls heavily on the workers and owners of `the American glass ware industry. As recently as 19643, about 2 out of every 5 workers who produced tableware or artware or industrial glass specialties or lighting fixtures was laid off his regular job. It is important to consider not just the lost jobs, but the impact of this unemployment on local communities. Since 1950 some fifteen (15) hand glass plants have closed, plants which in the late 1940's provided more than 2,500 jobs. Most of these companies and the ones in production today are located in communities of less than 25,000 population. In areas of chronic unemployment where each lay-off compounds an already great problem, these glass companies are usually the dominent and in many cases the only manufacturing firms in the towns. The key factor in the failure of glass plants was not poor management and inefficiency. Low wage foreign iniports were. It has been said that the automatic machine segment of the industry is the important factor in the closing of hand-made glass plants. Statistics show that is not the main factor, for low wage imports are causing great concern to the automatic machine plants as well. The average hourly rate paid to skilled glassworkers in this Country today is $3.93 per hour including fringe benefits. The rate for the supporting industrial help in the glass industry is $2.82 per hour including fringe benefits. Approxi- mately sixty (60) to seventy (70) percent of every cost dollar goes to labor. If the hand-made glass industry in America is forced out of business due to imports, there would be a loss of skilled workers who played such an important role in producing wares for the national defense in past wars and other national emergencies. We hope that there is no misunderstanding of our position. The American glassworker is aware of the necessity of maintaining trade with foreign coun- tries. We are not asking for tariff barriers in order to eliminate competition. PAGENO="0391" 3827 We want to see that our manufacturers are given the opportunity to sell the glass, made by us, the American glassworker, receiving American labor wages, the same a.s given foreign manufacturers, who pay such low wages. We respectfully urge the Ways and Means Committee to give every considera- tion to legislation that will preserve the glass industry, the first industry in America. STATEMENT OF CLINTON M. HESTER, ArPORNEY, ON BEHALF OF Cooas PORCELAIN COMPANY Coons PORCELAIN COMPANY, GOLDEN, COLORADO CHEMICAL PORCELAIN It is esthnated that 40% of Coors chemical porcelain production goes to edu- cational institutions, 15% into Government laboratories and the remaining 45% to industrial laboratories. In all perhaps 10%, or approximately $130,000 at Coors sales value, is used directly for National Defense. In the atomic energy field it is used in a great deal of analytical chemistry including the preparation and analysis of special nuclear metals. A list of AEC users includes: Dow Ohemical Company, Rocky Flats, Colorado Oak Ridge National Laboratories Savannah River Laboratories Hanford Los Alamos Sandia Oorporation Argonne National Laboratories Lawrence Radiation Laboratories Brookhaven Laboratories In the area of missiles and munitions it is used at the following places in ad- dition to many not listed: Redstone Arsenal Water Arsenal NASA Langley Research Center Wright Patterson Air Force Base Vandenberg Air Force Base Naval Ordnance Laboratory Air Force Missile Test Center, Patrick Air Force Base Other Government laboratories include: National Institutes of Health National Center for Atmospheric Research U.S. Navy, Army and Air Force Medical Services Veterans Administration Hospitals Bureau of Standards Federal Bureau of Investigation Laboratories U.S. Food and Drug Administration Laboratories Bureau of Mines U.S. Geological Survey Department of Agriculture Laboratories National Cancer Institute Use of chemical porcelain in teaching of science Under Title 3 of the National Defense Education Act a document was pre- pared by the Board of Directors of the Council of Chief State School Officers en- titled "Purchase Guide for Programs in Science, Mathmetics and Modern Languages", Ginn .& Company, 1959 Rev. This Guide is for use in the purchase of economical, modern and necessary apparatus and equipment for elementary and secondary schools. Laboratory porcelain items are listed as basic items in: Basic, Standard and Advanced Biology; Basic, Standard and Advanced Chem- istry; Standard and Advanced Elementary Science; Basic and Standard General Science; and Basic and Standard Physics. The National Science Teachers Association of Washington, D.C. in 1947 pub- lished a volume entitled "Science Course Content and Teaching Apparatus Used in Schools and Colleges of the United States." This book was prepared at the re- quest of the Department of State in 1946 particularly for the use of Ministers of PAGENO="0392" 3828 Education of the devastated countries of the United Nations. In this listing, chemical porcelain (specifically Coors) is specified for courses in Elementary School Science; Secondary School Chemistry; College Botany; General Chemis- try; Organic Chemistry; Qualitative Analysis; Quantitative Analysis; Physical Chemistry; Biochemistry; General. Geology; Mineralogy; College Physics; and College Zoology. What is chemical porcelain? Chemical porcelain is a ceramic product similar in appearance to chinaware but of much higher quality. It is dead white impervious material, covered over most of its surface with a hard white glaze. It is composed, formed and fired to produce maximum resistance to the attack of many chemicals. These properties are vital to the stringent use it receives and the rigorous treatment to which it is subjected in the great variety of uses constantly performed in control and re- search laboratories. As a product, chemical porcelain is highly specialized and well known only to chemists and scientists who use it in all industrial and edu- cational laboratories, hospitals and governmental laboratories of all kinds. There is certainly not a laboratory in the United States which does not in some way use Coors chemical and scientific porcelain ware. The photographs on the next pages illustrate the type and wide variety of products which are included in this line. In many essential control and research analyses there is no known substitute for chemical porcelain and the work which uses this product could not be carried out if these items were not available. Chemical porcelain as it is made today is strictly utilitarian in design. These designs are standard throughout the world, having originally been developed in Germany before the time that Coors Porcelain Company started this business in 1915. Although a number of items have been added to the line, there have been no basic changes in design of the fundamental items and actually there is a strong resistance on the part of the chemists to any design changes that are proposed. Position of Coors in industry Coors Porcelain Company is the only manufacturer of chemical porcelain in the Western Hemisphere. This situation does not exist because of any patents or restriccive agreemenls of any kind. This field is certainly open to anybody who desires to get into it. The fact that Coors is the only manufacturer results PAGENO="0393" 3829 CHEMICAL PORCELAIN COORS U.S.A. from the complexity of the line, the requirements for extremely high quality, and the relatively limited sales volume. It evidently has not appeared to others to be an attractive enough business to justify their making the necessary invest- ment to get into it. Location of Coors The only factory of the Coors Porcelain Company is located in the city of Golden, Colorado, which has an estimated population of 8,000. This company along with its parent company, the Adolph Coors Company, manufacturer of PAGENO="0394" 3830 beer, constitute the major industries in this locality. Golden is located twelve miles due west of Denver. Foreign m~anufacturers There are a number of manufacturers of chemical porcelain throughout the rest of the world. Those which have been indicated to us to be of the best quality are Haldenwanger and Royal Berlin, both from Germany. Rosenthal in Germany also produces this type of product as does a Czechoslovakian firm with whose name we are not familiar; Weta in Holland; and several in England, includ- ing K. L. G., Limited and Royal Worcester. There is also a Japanese firm known to us as SPC, which has entered the field during the past five years, who offer chemical porcelain but not of the highest quality at the present time. Except for the mention of the Czechoslovakian product, we know nothing of the activities in this area behind the Iron Curtain. At the present time, the sale of Coors porce- lain are limited to the United States, Canada and Mexico with other manufac- turers covering the remainder of the world. This situation exists because of price and competitive situations which will be discussed later. Distribntion Our method of distribution of chemical porcelain is entirely through dealers. These dealers are laboratory supply houses who carry a general line of scientific apparatus which is required in research and control laboratories. They have distribudon in all of the United States, plus Puerto Rico, Canada and Mexico. These dealers actually have main offices or branches in 36 of the United States plus the District of Columbia and Puerto Rico. A number of companies have their own branches in Canada and we have one strictly Canadian owned dealer. These dealers have our porcelain listed in their general catalogs and sell through the use of these catalogs plus direct sales forces. A list of these dealers is attached to this brief as Exhibit A. ~S'ales volume trends The volume of sales of chemical porcelain by Coors Porcelain Company was $1,600,000 in 1967. This was the net value to Coors and accordingly, with our discount to dealers averaging approximately 47% of the list price, the sales volume of our dealers was approximately $3,000,000. The total number of pieces sold during 1967 was 2,557,000 and this is an increase of only 38% over the aver- age number of 1,850,000 pieces sold during the period of 1940 to 1949. Although there has been a gradual and continual growth in volume since the concept of its manufacture in 1916, the actual usage has not increased anywhere nearly as fast as the growth of scientific endeavor in this country. Over the past twenty to thirty years there have been a number of competitive items of other materials which have tended to displace the use of chemical porcelain. Some of these are glassware which was particularly damaging with the advent of Pyrex; plastics such as polyethylene; and some of the better stainless steels which have been introduced and which are capable of replacing porcelain in some of its less severe applications. There has also been the growth of the electronic analytical equipment which has changed the methods in many laboratories over the past fifteen years particularly and has antiquated some of the older techniques which employed chemical porcelain. Since the unit costs of chemical porcelain are necessarily rather high compared to materials such as glass and plastics, and since the costs of chemists and chemical technicials are ever increasing, it certanly can be concluded that there will be continual inroads into the usage of chemical porelain from these other areas, and particularly from the more modern automated electronic analytical devices. Prieing trends On the following page is a chart showing the prices which have been charged for chemical porcelain by Coors Porcelain Company from the year 1916 through 1963. Although the actual prices for this product have increased significantly since 1946, the real prices have only gone up 20% in 53 years of operation. These real prices are the actual prices adjusted for the increase in the cost of living as provided by the Consumer Price Index of the U.S. Bureau of Labor Statistics. There has been practically no real price increase during the past fifteen years. This performance has been possible because of technological im- provements in methods of manufacture, but also has been forced to a certain extent by the continual threat of foreign competition at lower prices. PAGENO="0395" PERCENT . ----- r~, ~ tx)- r~) r~, (~J rs, .~ c~ ~ 0 r~) .~ o~ w o ~ ~ C) W 0 1916 . * ~ : :0~ 0 °.~: :0 ~ 0 , 0 ~ ~ 0 0* , 0 ~ 0 * 0 0 , 1c~ : 918 -- -I- ~2~° I- ~_ _ - 920 ~ ~ ~ - . ,. . ~.I, 1922 . . . ~ ~ ... . ... :: ~ ~:~*". ~ . - - rT~mv) - - .:: ;or?~ 924 I ~ ~ . . . : ~ . * . ..~. ~ . . . . .... :: . . *--1 ~ .: ,.*. ..-, --- --,. (I) ~;...~:::: :-*~-----=-~ 926 ~ ~ 928 ~ --- - ... ...~. . . .. ~ , ~ .. .: I .~`j~*~1 . . --~, i.....: ,: - ~:o - - - (~)O 932 ~ : j ~ :: ..: :~. :: . :~ ~ S... *:-~-- ; ~ : . :: ~ ~ ri-i ~ 1934 ~ .. . . . . ..l ~ !. ~ . ... . 93E or- 0 93E - - 940 ~t7S»=rri -I~I ~ 1942 ..~ ~ . .. . .... I94~ ~ . ~ Jo 194E ~ . ~ .. . . . . . - - - I 948 __f -- -- 1950 ~ ~ I---r--~-~ ~ . ..:.~ . .._ -.-~ J952_~c* t~- ~ -~ ~2 - --- c~ -- ~c1 -- . z ~ ~. . . . . Z~cz ...... ... . I954-czc~ ~. ... .: I ..~. . ~~r- . . . , I c: . . ... I. ~r~' ~ ~ . ~ I956i--~~.: Iltil!):! H.C(J) ~ ,. ;~-nI_ ~ 1958'-~~ H*; ~ .~*-:T:I~L. ~ ii ~ ~ -;~ ~1~c) :~___ T888 PAGENO="0396" 3832 Employment The total number of employees at Coors Porcelain Company as of December 31, 1967, was 1,316. Of these, 105 are directly connected with the daily operations of the chemiCal porcelain plant and a num'ber of others are indirectly involved through staff functions. Many of these people have been working on chemical porcelain for more than 25 years and they know no other skills. Their jobs would be seriously endangered by any reduction in the protective tariff of chemical porcelain. Variety of product Counting all of the shapes and sizes, there are 459 separate items of chemidal porcelain in our catalog. In addition to those items which are listed in the catalog and therefore stocked for immediate delivery, about 300 custom made `specialties are also made. Some sixty to seventy of these are made for U.S. Government agencies. A listing of the total numbers of these 459 catalog items which were sold in 1967 is shown in Appendix B. it is of value to note the small numhers that are said of many of the items. There were less than 10 pieces sold during the year of eleven different items. The largest quantity was for a small crucible, our Number 23005, which sold 265,736. A listing is given below of the number of various items which were sold and the quantity breakdowns: Number of items: Number of pieces of each item sold 12 0 to 9. 47 10 to 49. 45 50 to 99. 132 100 to 499. 40 500 to 999. 141 1,000 to 9,999. 36 10,000 to 99,999. 6 100,000 or more. Consideration of mechanization aind automation Because of the low volume of a large number of items which are produced, automation is impractical in most cases. A great deal of development effort has been spent in the past 22 years since World War II to mechanize as many of the production lines as possible. New equipment ha's been installed and new techniques tested out and put into use where feasible. Also, a tremendous amount of improvement has been made in the area of efficiency as measured by the percentage of losses of the various items which are made. Losses which ranged from 30% to 50% fifteen years ago have been reduced to the area of less thou 10% and in many cases only 3% to `5%. Because of this situation there is very little room left for improvement in either the methods or the efficiencies of operations although considerable effort is still being expended in this direction. For the above reasons there remains a great deal of hand labor involved in the manufacture of chemical porcelain. Approximately 27% of our cost of manu- facture is in direct labor and another 26% is involved in indirect payroll. In other words, a total of 53% of all costs is paid out in wages. For this reason, it is quite apparent that comparative wage rates with manufacturers in foreign lands are of extreme importance in the analysi's of the competitive picture. This factor will be dealt with in more detail later. During the past several years our developmental work has produced a new line of high purity alumina ceramic laboratory ware. This is a new laboratory advuncement but is not a substitute `for chemical porcelain-it is rather a sup~ plement for a number of sepcialty uses. The ~colume of this line is still rather small in comparison with the standard chemical porcelain. Other Coors products In addition to the manufacture of `chemical porcelain, the Coors Porcelain Company is in the `business of making and selling a good num'ber of other prod- ucts. The largest volume is alumina ceramics for electrical and electronic in- dustries as `we'll as for many mechanical application's. Beryllia ceramics are also produced, as are pyrometer and combustion tubes, grinding media and brick linings for ball mill grinders, and other wear resist'ant products, ceramic coatings, metal-to-ceramic assemblies, nuclear fuel elements and aluminum metal PAGENO="0397" 3833 cans and lids. Our total volume of sales during 1967 was approximately $15,- 000,000 and accordingly, the chemical porcelain is slightly more than 10%. This figure compares to our situation in 1946 just after the end of World War II when our business was 90% in chemical porcelain. Through extensive research and development efforts and the plowing back of earnings into the business, new items have been added from time to time so that even with its continual, slow growth, the percentage of chemical porcelain has steadily declined over the years. Profitability Throughout this period of growth, however, the chemical porcelain phase of the business has remained profitable and returns approximately 9% of its own sales volume. Because of the continuing introduction of new products, the profit- ability of the company as a whole has not been this good and although it varies rather widely from year to year because of the developmental nature of some of the projects which are undertaken, the average for the last ten years has been less than 3% after taxes on over-all ~aleLs. This picture would certainly not allow for any reductions in prices of chemical porcelain to meet foreign competition in the case that protective tariffs were lowered. Fiscal policies The Coors Porcelain Company is a wholly-owned subsidiary of the Adolph Coors Company, also of Golden, Colorado. The latter is a family owned and con- trolled corporation which has met the cash needs of its stockholders and its own expansion program from its own operation. Accordingly, it has not been the prac- tice of the Coors Porcelain Company to declare dividends and none has been declared during the past twenty years. Any earnings that have been made are put back into the business in the way of expansion of facilities and research and development effort. Our research and development expenditures are undoubtedly as high or higher than any comparable type of operation, running at the present time at a rate of almost $800,000 per year. This effort is aimed both at improving the operations which we have at the present tme, including those of chemical porcelain, as well as in finding new products and new processes which will be of long range advantage to this company. History The Coors Porcelain Company was given its real start in life at the beginning of World War I when the Allied blockade of Germany stopped the importation into the United States of chemical porcelain along with all other kinds of scien- tific apparatus. This occurred in 1915 and up until that time, all of the chemical porcelain used in this country was imported from Germany. This importation was stopped so completely that work in all chemical laboratories, governmental, educational and industrial, was disastrously affected. The situation was so serious that the United States Government made an appeal to any factories pro- ducing chinaware at that time to undertake the manufacture of chemical porce- lain. This company, along with approximately twenty-six others, started small scale operations to attempt to learn how to produce these items. Sticking to the goals of the highest quality standards, Coors soon established itself as one of the outstanding manufacturers of chemical porcelain in the world, and as men- tioned above, is at the present time the only manufacturer left in the Western Hemisphere. During the 1930's when German industry was again on the rise and imports started to flow back into this country, it was only possible for this company to survive as the result of the high protective tariffs. If they had not beeii in existence at that time, the Coors Porcelain Company would undoubtedly have been forced out of the manufacture of chemical porcelain and the United States would have again been left at the beginning of World War II with no supply of this valuable scientific product. The threat of imports is again becoming more and more present as we see manufacturers in both Europe and Japan concen- trating on this line of endeavor. Again tariffs will play an extremely important part in keeping this operation alive to maintain a continuing supply of chemical porcelain to the scientists of this country in case of some international conflict in the future. In view of the previous two major wars and the world conditions today, it would be difficult for any of us to assume with any degree of reality that such a conflict could not possibly occur. 95-159 O-68--pt. 8-26 PAGENO="0398" 3834 Foreign sales The sales of chemical porcelain to foreign countries direct from Coors Porcelain Company were $126,000 in 1007, or slightly less than 8% of the total. In addi- tion to this, it is estimated that our dealers sold approximately $70,000 to foreign consumers directly. Of this amount, some 86% went into Canada and only about $9,600 or some 14% of this total to Mexico. It is not possible for us to get completely accurate figures from all of our dealers as to their shipments direct to consumers in Canada and Mexico. Although the amount of Coors chemical porcelain shipped into Canada is probably a fairly large percentage of their total usage, the reason for our success in being able to penetrate this market despite adverse foreign price situations is that all but one of the Canadian scientific apparatus dealers are branches of U. S. owned companies. For this reason it is more natural for them to purchase this type of item from the United States and in many cases the purchasing arrangements are actually handled through offices in the United States. The Canadian duty is 22% on the majority of chemical porcelain items. The Mexican duties range from 12.7% to 41.6%, depending on the nature of the item. Competitive price picture In order to evaluate the effect of tariffs on the marketing of chemical porce- lain, it is important to look at the competitive price situation. The table which is attached as Appendix C shows the prices of several German products a~ well as the Japanese products and those of Coors Porcelain Company before the duty was reduced from 60% to 54%. These figures indicate quite clearly that in some of the more popular items, such as crucibles and evaporating dishes, which in many cases were the only ones where foreign prices were available to us, the Coors list price is often double that of the list price of the imports. The column showing Labco is for Japanese ware delivered in the U.S. and duty paid. These are the list prices for which this product is offered to the ultimate consumer and compare with Coors list price. Even with the present 54% tariff, this material is available at a price ranging from 25% to 40% less than ours. The only rea- son that this has not made inroads into our business is that the ware is of relatively poor quality and also is not supplied in all of the items which are re- quired. It is this kind of pricing, however, which is made available by reduction of our tariff to 30% and if used with the type of quality which is. available from one or two of the top European producers, would provide such serious competi- tion that it would be difficult to maintain our position as a supplier in this field. Comparative wage rates As mentioned previously, approximately 50% of the cost of our product comes either from direct or indirect labor. For this reason then, it is also important to compare competitive labor rates. The latest rates which we have for foreign coun- tries are for the year 1961 and were compiled by the Business and Defense Serv- ices Administration of the Department of Commerce. These `show that the average wage rate in the pottery industry is 35~ per hour in Japan, 61~ per hour in West Germany, and 480 per hour for women and 97~ per hour for men in the United Kingdom. In our manufacture of chemical porcelain, approximately 75% of the jobs are carried out by female operators and the remainder by male operators. The average for these classifications in the jobs involved at the Coors Porcelain Company is $1.93 for female operators and $2.51 for male operators at the pres- ent time. In the case of Coors figures, fringe benefits which average in the neigh- borhood of 50ç~ per hour are not included and it is presumed that fringe bene- fits are not included in the figures for the `foreign countries either. In any case, assuming a 10% increase per year in these foreign countries, it can easily be seen that the average wage rates at Coors are two and one-half to three times higher than those* in Europe and as much as five times higher than those in Japan. Although wage rates are rising faster in these countries than they are in the United States at the present time, the disparity is still a vast one and cannot be compensated for to any large extent by productivity. Until wage rates and the corresponding costs of living tend to equalize in the various countries of the world, it will not be possible to manufacture high labor cost items such as chemical porcelain in this country on a competitive basis with these foreign coun- tries Protective tariffs are therefore absolutely necessary if this industiv is gofng~to be preserved in the near future. PAGENO="0399" 3835 Problems in foreign competition To help substantiate the problems of competing with foreign products with the extreme price differential, we are attaching as Exhibit D a letter from a dealer in Holland and as Exhibit E a letter from a scientific ap- paratus dealer in England. The significant factors in the letter from Holland are: "We know from experience that your quality is the best of all to be obtained in the world since at the end of the war we have sold your porcelain-but later on we have been compelled to drop your porcelain as soon as the German factcries were getting again at the market, supplying satisfactory qualities and much cheaper than yours." The significant part of the English letter is: "We feel sure you will appreciate that this makes the position of marketing your lines, partic- ularly with regard to import duties, etc., extremely uncompetitive." In other words, it has proven completely impossible to `sell in European markets even with what is considered by many to be a superior product, with the wide disparity of prices. This same situation would occur in the United States if the tariffs were to be dropped to the point that the same competitive disadvantage existed for our product. Foreign imports The large increase in imports under tariff item 535 2100 of 1965-66 indicates that more serious inroads into the domestic market can be expected. Rising costs in both labor and materials make competition even more difficult. Vital to national defense Although no mention has previously been made of this fact, chemical porcelain plays an extremely important part in our over-all defense effort. This informa- tion has been established so thoroughly over the past years that in the U.S. Tariff Commission's "Summaries of Tariff Information", Volume II, Part 1, Para- graph 212, Page 178, last published in 1948, the statement is made "Chemical porcelain is vital in national defense." In this same respect, there is attached as Exhibit F, copies of a letter from the late Senator Eugene Millikeri of Colorado addressed to the Chairman of the Interdepartmental Committee on Trade Agreements of the Department of State. This letter was written in 1950 and states "I am utterly astonished that chemical porcelain, which is widely recognized as absolutely essential to national defense and which is produced by only one eompany in the United States, would be placed on this list." He was referring at that time to the list of commodities on which the United States was considering negotiating tariff reductions. Effect of tariff reduction There is little question that if the protective tariff against `the importation of chemical porcelain were to be removed, this segment of our business at Coors Porcelain `Company would be destroyed. Of great concern if this were to happen is that the entire Western Hemisphere would be left without a single supplier of chemical porcelain. This was distastrous to our budding young chemical in~ dustry in World War I. It certainly would have been disastrous to our entire war effort if it had happened in World War II, and there is surely no one who can claim that it would not be disastrous to the research and development effort required if this country were to again face a worid conflict. It was pointed out above that chemical porcelain of somewhat inferior quality is already available in this country at more than 25% below Coors prices. We have been able to retain our present market only because our consistent quality, ready availability and progressive attitude have convinced the searching scien- tists that the use `of this material would cost him more in unreliable results and costly delays than he would gain by the price advantage. This would certainly not be true if the quality differential did not exist or if the price `advantage was such that it could be compensated for. It is quite certain that such a condition would exist if the existing tariffs on chemical porcelain were cut in half. In view `of all that has been presented above, it must certainly be conctuded that it would be td the disadvantage of the United States to reduce the tariff on chemical porcelain in such a way that it would destroy an industry which is vital to all the chemical and physical laboratories of this country. Accordingly, we strongly urge that there be no further reduction in the tariffs on chemical per- celain, but on the contrary that import quotas be imposed or tariffs be increased on chemical porcelain. PAGENO="0400" 3836 This supplemental statement is submitt~d for the purpose of providing informa- tion regarding the oon~petitive conditions in Canada and Mexico affecting the Coors Porcelain Company. CANADA Laboratory porcelain is imported into Canada under two Canadian classifica- tions. The first is Item No. 288A. which illcludes "chemical porcelain specially compounded to resist acids." This class comprises laboratory chemical porcelain as manufactured by the Coors Porcelain Company as well as chemical stoneware used for laboratory sinks, chemical processing equipment, furnace combustion tubes, jar mills for grinding and some other miscellaneous ceramic products. Some of these items are supplied by a number of firms in the United States. Canadian customs Item No. 300 encompasses "crucibles and covers" and in- cludes laboratory chemical porcelain crucibles and covers and in addition, cm- cibles and covers of refractory ceramics, assay crucibles of fire clay and miscel- laneous ceramic compositions The duty rate under Item 228A is 171/2% ad vaiorem to most favored nations, United Kingdom free. Educational institutions and government agencies import duty-free. The duty rate under Item 300 is 15% ad valorem to most favored nations, United Kingdom free. Educational institutions and government agencies import duty-free. It is customary to add about 5% to the price to the consumer in addition to the duty to cover brokers costs on items imported from the United States. The Canadian market for laboratory equipment is less than 10% of the United States market. There are considerably fewer laboratories and relatively little chemical industry. At this time one Canadian laboratory supply dealer (The Johns Company) is offering English laboratory porcelain (Royal Worcester). This dealer is not a large company and does not handle Coors Canadian imports from England under Item 288A and 300 amount about 8% of the imports from the United States under the same custom items. There are several reasons why Coors has successfully competed in Canada against English porcelain available at a lower figure: 1. Coors has been able to supply the Canadian market without interruption since 1917. Canadians have become accustomed to our product. 2. Prompt delivery is offered through ample stocks in Canada. 3. Of six major supply houses in Canada, five of which handle Coors, four are American-owned. Three of these do over 70% of the volume in laboratory porcelain and all are American-owned. One Canadian-owned company sells Coors and one sells English porcelain. 4. The large laboratory dealer catalog, listing 12,000 to 18,000 laboratory items, is a major selling tool in the United States and Canada. Five of these catalogs list Coors and one lists Worcester (English). Several of the dealers use the same catalog in both the United States and Canada. 5. Coors porcelain has been advertised in Canadian magazines and has been exhibited at numerous trade shows in Canada. 6. Much of the Canadian market is in laboratories of American-owned companies and many of the technicians have been trained in laboratories in the United States or have been exposed to the U.S. product. TABLE I The following table shows the current comparison in consumer list prices in Canada of. Royal Worcester and Coors porcelain. The items listed comprise a typical assortment for a general laboratory. Twelve per cent has been added to the English price for freight and five per cent for handling. Five per cent has been added to the American price for handling. PAGENO="0401" 3837 Coors catalog Description No. English duty-free price 1 laid down Canadian Doty on Coors porcelain (percent) Duty-free Coors price2 plus 5 percent plus 8 percent Duty-paid Coors price3 plus 5 percent plus 8 percent 180 size 1 Casserole 180 size 2 do 180 size 3 do 180 size 5 do 230 size 0 Crucible $0.75 1.25 1. 70 3. 81 .21 173/~ 173/i 173/3 173/i 15 $1.71 1. 78 2. 01 6. 90 $1.93 2. 02 2. 27 7. 80 23Osizel do .39 15 .49 23Osize2 do 53 15 .91 .80 240 size F Crucible cover 12 15 32 240 sizeG do - .12 15 . . 36 24Osizel do .19 15 .42 .32 270 size 3 Gooch crucible 66 15 1. 28 .45 430 size 005 Evaporating dish 430 size 2 do . - 43 70 173~ 173/3 - 57 1. 07 1. 42 - 65 430 size 4A do - 1. 15 173/~ 1. 50 1.21 490 size 1 Buchner funnel 490 size 2A do 490 size 4 do 510 size 4/0 Hirsch funnel 522 size 2/0 Mortar and pestle 522 size 3 do 1.33 2. 95 3. 90 1. 07 1. 22 2. 71 173/i 173/3 173/3 173/3 173/~ 173/i 3.00 6.40 12. 00 1.97 1. 58 3. 06 1.70 3.40 7. 22 13. 60 2.22 1. 79 3. 46 1 List price plus 12 percent for handling. 2 List price plus 5 percent for handling plus 8 percent for exchange. 3 List price plus 5 percent for handling plus 8 percent for exchange plus duty. TABLE 11.-IMPORTS BY CANADA (In UJ~. dollars) Chemical porcelain specially compounded to resist acid Tariff Item No. 288A-Import Statistical No. 7048: From United States $208, 699 From United Kingdom 20,699 From West Germany 2,006 Total 231,421 Most favored nation rate-17%'%; United Kingdom-free (Jrucibles and covers Tariff Item No. 300-Import Statistical No. 7053: From United States $117, 151 From Republic of South Africa 9,952 From United Kingdom 6,420 From India 2,010 Total 135, 653 Most favored nation rate-15%; United Kingdom-free Source: U.S. Department of Commerce-American Republics Division MEXICO The market in Mexico for chemical porcelain and stoneware is quite limited. The total dollar value of chemical porcelain and stoneware purchase in Mexico during 1967 was not substantial, nor were exports of Coors porcelain to Mexico. The tariff classifications into Mexico do not correspond with Canadian classifi- PAGENO="0402" 3838 cations either in type of product or in method of assessing duty. Mexican customs duties are based on three types of rates. For example: In many cases an official price per gross or legal kilogram is set as a minimum duty per customs item entered. This is expressed in Mexican pesos. Also a rate of centavos per kilogram is set and the weight duty calculated according to the weight of items entered. Whichever is higher (the official minimum or the duty by weight) is assessed, plus a duty in percent based upon the ad valorem invoice value. To this is added 3% of the duty. The ad valorem rates vary from 8% to 40%. Nearly all laboratory porcelain is imported under Tariff Item 880 which includes scientific equipment of all kinds. This item is subdivided into various paragraphs. The paragraphs of principal interest and the rates are listed below: 880:02:00 Miscellaneous manufactured article of faience or porcelain for pharmacists, chemists and laboratories. Mortars. Duty: Official Price 13.00 pesos (minimum or 0.05 pesos per gross kilo- gram plus 25% ad valorem plus 3% of the duty. 880:02:03 Crucibles and capsules of faience and porcelain. Duty: Official Price 15.00 pesos (minimum) or 0.02 pesos per gross kilo- gram plus 8% ad valorem plus 3% of the duty. 880:02:07 Pill tiles of all types (glass, porcelain, etc.) Duty: Official Price 72.00 pesos (minimum) or 0.05 pesos per kilogram plus 25% ad valorem plus 3% of the duty. 880:02:13 Apparatus and utensils of faience or porcelain or in which such materials predominate by weight and solely intended for use in laboratories other than those failing within 880 :02 :00, :04, :05, :06, :08, :09, :10, :11 Duty: No official price. 0.50 pesos per gross kilogram plus 35% ad valorem plus 3% of the duty. 718:08:00 Refractory crucibles and muffles. (Note: This would include fire- clay, refractory crucibles, possibly graphite and other ceramic materials. Probably no porcelain entered under this item.) Duty: Official Price 3.70 pesos minimum or 0.02 pesos per gross kilogram plus 7% ad valorem plus 3% of the duty. TABLE Ill-IMPORTS INTO MEXICO Customs Country of origin Pounds Value in Duty rate Remarks (added by Coors) item U.S. dollars 718:08:00 United States 154, 169 38, 723. 36 .02 pesos per gross kilogram Mainly clay fireclay, and Belgium 14, 065 1,632. 48 +7 percent ad valorem refractories; probably no United Kingdom 546 285. 60 (3.70 pesos minimum + porcelain included. Republic of Germany_ 24,750 5,156.00 3 percent of duty.) Total 193,530 45,797.44 880:02:00 United States 458 1, 831. 36 0.05 pesos per gross kilogram Note: Value per pound Republic of Germany_ 6,409 2,482. 40 +25 percent ad valorem from the U.S. is $3.97 Japan 13 52. 80 +3 percent of the duty. but from Germany is United Kingdom 2 . 80 (13.00 pesos minimum) $0387. Total 6, 882 4,367. 36 880:02:03 United States 16, 025 22,456. 64 0.02 pesos per gross kilogram Probably as much as United Kingdom 2, 259 2, 599. 28 +8 percent ad valorem possible is imported Republic of Germany 7, 779 9, 389. 60 +3 percent of the duty. under this class because (15.00 pesos minimum) of the low rate. Total 26, 063 34, 445. 52 880:02:07 United States 94 338.96 0.05 pesos per gross kilogram Pill tiles of all sorts prob- +25 percent ad valorem ably mainly glass or + 3 percent of the duty. plastic. (72.00 pesos minimum) 880:02:13 United States 1,289 12, 507.60 0.50 pesos per gross kilogram Bahamas 22 310. 32 +35 percent ad valorem United Kingdom +3 percent of the duty. Republic of Germany 754 3,809. 12 Switzerland 2 56.96 Total 2, 067 16,684. 00 Source: U. S. Department of Commerce-American Republics Division. PAGENO="0403" 3839 The Mexican customs item descriptions are somewhat complicated and it appears that the classifications may not be strictly adhered to. For example, Class 880:02:00 is more inclusive thain 880 :02:03 but more has been imported under 880 :02:03 in 1962, probably because the ad valorem rate is 8% rather than 25% under 880:02:00. It is very interesting that the value per pound of product imported under 880:02 :00 from the United States is $3.97 but from Germany is $0.387. Under Item 880 :02:03 the value per pound from the United States is $1.40, United Kingdom $1.16 and Germany $1.21. It appears that some clerical errors may have been made and any conclusions should be made only after considerable study and research. As a matter of interest, the value per pound varies widely. At Coors net prices (list less dealer discount) 180 Size 1 casseroles are $8.50/pound; 230 Size 0 crucibles are $6.00/pound; while 522 Size 1 mortars and pestles are $0.50/ pound. There is a relatively small amount of sophisticated industrial activity in Mexico at this time but more is developing. At present the main customers would be the universities, some high schools, the mining and smelting industry and the petroleum industry. Many of the technicians in Mexico have been trained in Europe. Germany has been particularly active in selling many products to the Mexican market. Many technical persons desiring to emigrate into the United States reside in Mexico until they can enter the United States and thus are accustomed to German products. The table of comparative prices (Table IV) shows prices F.O.B. Mexican port including freight and handling but not duty since it is not known what exact duty would be applied nor the weight of the shipment. Since Coors and the German porcelain would presumably be entered on an equal duty basis, the prices are on a comparable basis. TABLE IV.-PRICES IN MEXICO WITHOUT DUTY (TYPICAL ITEMS) Coors list plus 10 percent Coors catalog No. Description freight and handling Haldenwanger (German) plus 20 percent freight and handling l8Osizel Casserole $1.66 $0.49 180 size 2 do 1.73 .58 l8Osize3 do 1.96 .83 l8Osize5 do 6.71 2.22 23OsizeO Crucible .42 .17 23Osizel do .69 .22 23Osize2 do .88 .25 240 size F Crucible cover' .31 .12 24OsizeG do' .32 .13 24Osizel do' .41 .14 27Osize3 Gooch crucible 1.25 .36 430 size OOA Evaporating dish .55 .40 43Osize2 do 1.05 .47 43Osize4A do 1.46 .65 49Osizel Buchnerfunnel 2.92 1.37 49Osize2A do 6.26 2.27 49Osize4 do 11.67 5.18 5lOsize4/0 Hirsch funnel 1.91 .79 522 size 2/0 Motar and pestle 1.54 .86 522 size 3 do 2.98 1.56 `Crucible cover for 230 crucibles. ExHIBIT A AUGUST 1, 1967. ALABAMA Central Scientific Company, 3232 11th Avenue North, Birmingham 4 W. H. Curtin & Company, 1210 South 20th Street, Birmingham E. H. Sargent & Company, 3125 Seventh Avenue North, Birmingham 4 - ALASKA Van Waters & Rogers, 1415 East First Avenue, Anchorage PAGENO="0404" 3840 ARIZONA Clico Laboratory Supply Company, P.O. Box 6009, 1841 N. 23rd Avenue, Phoenix Van Waters & Rogers, 2930 West Osborn Road, Phoenix Van Waters & Rogers, 2430 East Grant Road, Pucson 85711 CALIFORNIA A. S. Aloe Company, 1150 South Flower Street, Los Angeles 15 A. S. Aloe Company, 140 Beacon Avenue, South San Francisco Central Scientific Company, 6446 Telegraph Road, Los Angeles 22 Central Scientific Company of California, 1040 Martin Avenue, Santa Clara W. H. Curtin, 15215 Marquardt Ave., Santa Fe Springs, California A. Daigger & Company, 210 South Los Angeles Street, Los Angeles 12 A. Daigger & Company, 10 Tenth Street, Richmond Adolph Frese Corp., 1430 Grande Vista Avenue, Los Angeles 23 Gentec Hospital Supply Co., 2285 Arden Way, Sacramento, California La Pine Scientific Company, 920 Parker Street, Berkeley Los Angeles Chemical Company, 4545 Ardine Street, South Gate, Los Angeles 21 Matheson ScIentific, Inc., 5922 Triumph Street, Los Angeles Matheson Scientific, Inc., 24800 Industrial Boulevard, Hayward Nurnberg Scientific Company, 2127 Fourth Street, Berkeley E. H. Sargent & Company, 1617 E. Ball Road, Anaheim Scientific Apparatus Corp., 1801 via Burton, Fullerton Scientific Products, Div. of American Hospital Supply Corp., 150 Jefferson Drive, Menlo Park Scientific Products, Div. of American Hospital Supply Corp., 3815 Valhalla Drive, Burbank Standard Scientific Supply Corp., 601 Rodier Drive, Glendale Standard Scientific Supply Corp., 336 Harbor Way, South San Francisco Van Waters & Rogers, Inc., P.O. Box 1391, San Diego Van Waters & Rogers, Inc., P.O. Box 3200, Rincon Annex, San Francisco Van Waters & Rogers, Inc., P.O. Box 2062, Terminal Annex, Los Angeles 54 Van Waters & Rogers, Inc., 850 South River Road, West Sacramento Westlab Scientific, 557 South Douglas Street, El Segundo Westlab Scientific, 707 18th Street, Bakersfield Westlab Scientific, 820 Corey Way, South San Francisco COLORADO A. S. Aloe Company, 3800 N. Dahlia Street, Denver 7 E. H. Sargent & Company, 3800 Race Street, Denver 16 Van Waters & Rogers, Inc., P.O. Box 5287,4300 Holly Street, Denver 16 CONNECTICUT Macalaster-Bicknell Company, Inc., 181 Henry Street, New Haven 11 DISTRICT OF COLUMBIA Scientific Products, Div. of American Hospital Supply Corp., 3175 V St. NE, Washington 18 FLORIDA W. H. Curtin and Company, 388 Minorca Avenue, Coral Gables (Miami) W. H. Curtin and Company, P.O. Box 606, 2335 Market Street, Jacksonville 1 Fisher Scientific Co., 1393 S. W. 1st Street, Miami Scientific Products, Delaware Parkway at 20th, Miami 35 Surgical Supply Company, 1050 West Adams Street, Jacksonville Tech Scientific Supply Company, 36 Northwest 29th Street, Miami PAGENO="0405" 3841 GEORGIA A. S. Aloe Company, 5180 Peachtree Road, Chamblee, (Atlanta) W. H. Curtin Company, P.O. Box 2122, 1782 Marietta Building N.W., Atlanta Estes Surgical Supply Company, 56 Auburn Avenue NE, Atlanta 3 Fisher Scientific Company, 690 Miami Circle, NE, Atlanta 5 IPCO Hospital Supply Corp., P.O. Box 13797 Station K, Atlanta Scientific Laboratory Supply Company, 139 Forrest Avenue, NE, Atlanta Scientific Products, 5056 Peachtree Road, Chamblee (Atlanta) Will Corporation of Georgia, Box 20155, Station N, 890 Chattahoochee Avenue NW, Atlanta HAWAII Hawaii Chemical Company, P.O. Box 3616, Honolulu Van Waters & Rogers, Inc., B-K-H Division, 313 Kamakee Street, Honolulu ILLINOIS A. E. Aloe Co., 9556 River Street West, Schiller Park Central Scientific Company, 26005. Kostner Avenue, Chicago 23 A. Daigger & Company, 159 West Kinzie Street, Chicago 10 Fisher Scientific Company, 1458 North Lamon Avenue, Chicago 51 General Biological Supply House, 82005. Hoyne Avenue, Chicago La Pine Scientific Oompany, 6001 South Knox Avenue, Chicago 29 Matheson Scientific, Inc., 1850 Greenleaf Ave., Elk Grove Village National Biological Supply Company, Inc., 2325 5. Michigan Avenue, Chicago Rascher & Betzold, Inc., 730 North Franklin Street, Chicago 10 E. H. Sargent & Company, 4647 West Foster Avenue, Chicago 30 Schaar Scientific Company, 7300 West Montrose Avenue, Chicago 34 Scientific Glass Apparatus Co., P.O. Box 67, 2375 Pratt Boulevard, Elk Grove Village Scientific Products, 4700W. Chase Avenue, Chicago Soiltest, Inc., 2205 Lee Street, Evanston, Illinois Stansi Scientific Company, 1231-41 North Honore Street, Chicago 22 Welch Scientific Company, 7300 N. Linder Avenue, Skokie Wilkens-Anderson Company, 4525 West Division Street, Chicago 51 INDIANA La Pine Scientific Company, 83 Bennet Road, Carmel (Indianapolis) KANSAS Fisher Scientific Company, 2200 West 75th Street, Shawnee-Mission, Kansas City Southwest Scientific Corp., 1301 South Handley, Wichita 13 KENTUCKY Ace Glass, Inc., P.O. Box 996, 639 South Hancock Street, Louisville Preiser Scientific, Inc., 1500 Algonquin Parkway, Louisville 3 LOUISIANA A. S. Aloe Company, 1425 Tulane Avenue, New Orleans 12 W. H. Curtin and Company, P.O. Box 53387, 621 Celeste Street, New Orleans 50 Fi~her Scientific Company, 4543 North Boulevard, Baton Rouge Mathe'~on Scientific, Inc., 3160 Florida St., Doherty Bldg., Rm. 103, Baton Rouge 6 Scientific Products, 4408 Catherine Avenue, Metairie Surgical Selling Company, Inc., 732 Atherton Drive, Metairie PAGENO="0406" 3842 MAEYLAND A. S. Aloe Company, 12201 New Columbia Pike, Silver Spring W. H. Curtin & Co., 12340 Parkiawn Drive, Rockville Fisher Scientific Company, 7722 Fenton Street, Silver Spring Matheson Scientific, Inc., 10727 Tucker Avenue, Beltsville Phipps & Bird, Inc., 8055 13th Street, Silver Spring Preiser Scientific, Inc., Room 1000 Montgomery Bldg., 4720 Montgomery Lane, Bethesda E. H. Sargent & Company, 10558 Metropolitan Avenue, Kensington Will Corporation, 5-31 North Haven Street, P.O. Box 5195, Baltimore 24 MASSACHUSE~JY~S Ace Glass, Inc., 221 Stafford Street, Springfield Aloe Div. of Brunswick, 1550 Soldiers Field Road, Boston 35 Combosco Scientific Company, 37 Antwerp Street, Boston 35 Central Scientific Company, 100 Washington Street, Somerville Fisher Scientific Company, 401 Riverside Avenue, Medford 55 Howe and French, Inc., 99 Broad Street, Boston 10 Macalaster-Bicknell Company, Inc., 243 Broadway, Cambridge 39 Macalaster-Bicknell Corp., 00 Arsenal Street, Watertown E. F. Mahady Company, 851 Boylston Street, Boston 10 Scientific Products, 101 Third Avenue, Waltham (Boston 54) MICHIGAN Will Scientific Inc., 200 East Liberty Street, Ann Arbor Fisher Scientific Co., 149 Michigan Avenue, Detroit 48220 Matheson Scientific, Inc., 1000 Howard St., Detroit 28 E. H. Sargent & Company, 8500 West Chicago Avenue, Detroit 4 Scientific Products, Div. of American Hospital Supply Corp., 17150 Southfield Rd., Allen Park MINNESOTA A. S. Aloe Company, 3501 Raleigh Avenue, Minneapolis 16 Fisher Scientific Company, 700 Second Avenue South, Minneapolis 3 Physicians & Hospital Supply Company, 1400 Harmon Place, Minneapolis 3 Scientific Products Div. of American Hospital Supply Corp., 3846 Washington Ave. N, Minneapolis 12 George T. Walker and Company, 2218 University Avenue SE, Minneapolis 14 MISSOURI Aloe Scientific Div., 5300 East 59th Street, Kansas City 30 Aloe Scientific Div. of Aloe Co., P.O. Box 186, Main Post Office, St. Louis 66 Fisher Scientific Company, 1241 Ambassador Boulevard, St. Louis 63132 Matheson Scientific, Inc., P.O. Box 343, 3160 Terrace Street, Kansas City Scientific Products Div. ef American Hospital Supply Ooa~p., P2th & Gentry Street N, Kansas City Taylor Chemical Company, St. Vincent & Sutherland, St. Louis NEW HAMPSHIRE Macalaster Scientific Corp., Route 111 and Everett Turnpike, Nashua PAGENO="0407" 3843 NEW JERSEY Ace Glass, Inc., 1938 North West Boulevard, Vineland Ace Scientific Company, 1420 East Linden Avenue, Linden Aloe Division of Brunswick, 610 Industrial Avenue, Paramus J & H Berge, Inc., 4111 So. Clinton Avenue, South Plainfield Central Scientific Company, 237 Sheffield Street, Mountainside W. H. Curtin & Co., 438 Pompton Road, Wayne Fisher Scientific Company, 52 Fadem Road, Springfield I\Iacalaster-Bicknell Company, North and Depot Streets, Millville E. H. Sargent Company, 35 Stern Avenue, Springfield Scientific Glass Apparatus Company, 753 Board Street, Bloomfield Scientific Products, 100 Raritan Center Parkway, Edison NEW MEXICO W. H. Curtin Company, 311A Washington Street, SE, Albuquerque New Mexico Chemical Surgical Company, P.O. Box 255, 1407 Univ. Boulevard NE, Aubuquerque Van Waters & Rogers, Inc., P.O. Box 617GB, 324 Industrial Avenue NE, Albuquerque NEW YORK Biological Supply Co., 1176 Mt. Hope Avenue, Rochester Fisher Scientific Company, 120 Bldg., 120 Delaware Avenue, Buffalo 2 The Greiner Scientific Corp., 22 North Moore Street, New York 13 Gottlieb Greiner Company, 50 Dey Street, New York 7 LaPine Scientific Company, South Buckout Street, Irvington-on-Hudson Macalaster-Bicknell Company, P.O. Box 5, Eastwood Station, New Court Avenue at East Bourne Drive, Syracuse 6 New York Laboratory Supply Company, Inc., 76 Varick Street, New York 13 Science Kit, Inc., 2299 Military Road, TonaWanda Scientific Products, 40-00 170th Street, Flushing 58 Standard Scientific Supply Corp., 808 Broadway, New York 3 Welch Scientific Company, 331 East 38th Street, New York 16 Will-Buffalo, Inc., 82-90 Chenango Street, P.O. Box 448, Buffalo 5 Will Corporation, P.O. Box 1050, 39 Russell Street, Rochester 3 Will-New York, Box 23, High Bridge Station, New York NORTH CAROLINA Cardinal Products, Inc., P.O. Box 1611, Durham Carolina Biological Supply Company, Burlington Scientific Products, 3713 North Davidson Street, Charlotte OHIO Fisher Scientific Company, 26401 Miles Avenue, Cleveland Fisher Scientific Company, 3537 Epley Road, Cincinnati 39 Inland Chemical Corp., 1120 Bush Street, Toledo Will Scientific Company, 230 North Front Street, Columbus 16 Matheson Scientific, Inc., 12101 Centron Place, Cincinnati Matheson Scientific, Inc., 4540 Willow Parkway, Cuyahoga Heights (Cleveland) Preiser Scientific, Inc., 9974 Springfield Park, Woodlawn, Cincinnati E. H. Sargent & Company, 10400 Taconic Terrace, Cincinnati Scientific Products, 1586 Frebis Lane, Columbus 6 PAGENO="0408" 3844 OKLAHOMA W. H. Curtin and Company, P.O. Box 747, 514 East 2nd Street, Tulsa Labco Scientific Division, 20 West Main Street, Oklahoma City 1 The Refinery Supply Company, 6901 East 12th Street, Tulsa 12 OREGON Nurnberg Scientific Div., 3237 N. Williams Avenue, Portland 12 Scientific Supplies Company, 3950 Northwest Yeon Avenue, Portland 5 PENNSYLVANIA A. S. Aloe, 250 Seco Drive, Monroeville Burrell Corp., 2223 Fifth Avenue, Pittsburgh 19 Fisher Scientific Company, 711 Forbes Avenue, Pittsburgh 19 Fisher Scientific Company, Gulph Road (Route 23) King of Prussia Matheson Scientific, Inc., Jackson and Swanson Streets, Philadelphia 48 Arthur H. Thomas Company, Third and Vine Streets, Philadelphia 5 Williams, Brown & Earle, Inc., 904-906 Chestnut Street, Philadelphia 7 RHODE ISLAND Eastern Scientific Company, 267 Plain Street, Providence TENNESSEE A. S. Aloe Company, Norris Avenue and Armory Drive, Nashville 4 W. H. Curtin Company, 750 Adams Building, Memphis 5 TEXAS A. S. Aloe Company, 8900 Ambassador Row, Dallas Central Scientific, 6610 Stillwell Street, Houston W. H. Curtin and Company, P.O. Box 1546, 4220 Jefferson Avenue, Houston W. H. Curtin and Company, P.O. Box 5304, 1103-07 Slocum Street, Dallas 22 W. H. Curtin and Company, 519 South Water Street, Corpus Christi W. H. Curtin and Company, 719 South St. Mary's Street, San Antonio 5 Fisher Scientific Company, 5407 Andrews Highway, Odessa Fisher Scientific Company, El Patio Building, W., Room 108, 600 Avenue H East, Arlington Fisher Scientific Company, 4102 Greenbriar Drive, Houston 6 .Matheson Scientific, Inc., P.O. Box 9387, 6622 Supply Row, Houston The Refinery Supply Company, 6610 Stillwell Street, Houston 32 E. H. Sargent & Company, 5915 Peeler Street, Dallas Scientific Products, 9020 Directors Row, Dallas 35 Surgical Selling Company, Inc., 7307 Ardmore Street, Houston 21 Thermal Scientific Company, P.O. Box 884, West 27th Street & Westover, Odessa Van Waters & Rogers, Inc., P.O. Box 9247, El Paso UTAH E. H. Sargent & Company, 375 West 21st South Street, Salt Lake City 10 Van Waters & Rogers, 650 West 8th South, Salt Lake City 6 Wasatch Chemical Company, 2225 South Fifth East, Salt Lake City 6 VIRGINIA Fisher Scientific Company, 3820 Augusta Ave., Teal Bldg., Richmond Phipps & Bird, Inc., 303 South Sixth Street, Richmond 5 PAGENO="0409" 3845 WASHINGTON A. S. Aloe Company, 1818 East Madison Street, Seattle 22 Nurnberg Scientific Div., 3910 5. 12th Street, Tacoma 5 Scientific Products, 14850 N.E. 36th Street, Bellevue Sherwin Scientific Company, N. 1112 Ruby, Spokane Van Waters & Rogers, Inc., Scientific Supplies Company, 600 South Spokane Street, Seattle 4 WEST VIRGINIA Fisher Scientific Company, 1033 Quarrier Street Bldg., Room 501, Charleston 1 Preiser Scientific, Inc., P.O. Box 551, 900 MacCorkle Avenue, SW, Charleston 22 Surgical Selling Company, Inc., 1705 ~Fefferson Street, Bluefield Will Scientific, Inc., Box 9277, Springhill Station, South Charleston 3 WISCONSIN Gentec Hospital Supply Co., Div. of McKesson & Robbins, 250 North Water Street, Milwaukee Nasco, Inc., Fort Atkinson CANADA ALBERTA Fisher Scientific Company, 14730 115A Avenue, Edmonton BRITISH COLUMBIA Central Scientific Company, 1206 Homer Street, Vancouver Fisher Scientific Company, 194 W. Third Avenue, Vancouver 10 Canadian Laboratory Supplies, 1449 Hornby Street, Vancouver ONTARIO Canadian Laboratory Supplies, 80 Jutland Road, Toronto Central Scientific Company, 2200 So. Sheridan Way, Clarkson, Ontario Fisher Scientific Company, 184 Railside Road, Don Mills Mines Assay Supplies, Ltd., Kirkland Lake .E. H. Sargent & Company, 9 Milvan Drive, Weston Welch Scientific, 16 Rivalda Road, Weston QUEBEC Canadian Laboratory Supplies, 8766 Delmeade Road, Town of Mount Royal Central Scientific Company, 104 Gun Street, Point Claire Fisher Scientific Company, 8505 Devonshire Road, Montreal MEXICAN DEALERS Casa Rocas, S. A., Arpartado Postal #233, Monterrey, N. L.Mexico Hoffman-Pinther & Bosworth, Apartado Postal 101-BIS, Mexico City, Mexico Curtin de Mexico, S. A. de C. V., Apartado Postal 26265, Antonio Maura #29, Mexico City 13, D. V., Mexico PAGENO="0410" 3846 EXHIBIT B CHEMICAL PORCELAIN SALES QUANTITY OF ITEMS Catalog Number 02101-3 /8 02102-1/2 02103-5 / 8 02104-3/4 02106-1 02401- 04001-2 04002-3 04003-3A 04004-4 04005-5 06001-2 06002-3 06003 -4 07001-2 07002-3 11001-5/0 11002 -4/0 11003-2/0 11004 -1 11005-2 11006-4 11007 -6 11008-6A 11009 -8 11010-13 12001-1 12 002-2 12 003-4 12 004-6 12 005-8 13001-1 Quantity 18 59 705 63 2, 583 168 117 12 44 16 146 372 469 63 56 4, 021 1, 188 1, 044 822 8, 686 4, 404 2, 921 4, 536 4, 121 2, 039 36 222 51 37 44 132 1967 Catalog Number 13002-2 16001-0 16002-1 16003-2 16004-3 17Q01-2 17002-3 17003-3A 17004-4 18001-2/0 18002-0 18003 -1 18004 -2 18005 -3 18006 -C'3A 18007 -4 18008-04A 18009-5 18010-6 18011-7 18102-1 18103-1 18105 -2 18106 -2 18108-2A 18109-2A 18111-3 18112-3 18114- 3A 18115- 3A 18117-4 18118 -4 Quantity 134 1, 273 3, 167 467 1, 197 1, 796 6, 588 5, 338 1, 643 3, 837 12, 510 6, 384 7, 032 10,923 6, 445 7, 426 2, 528 863 660 176 103 69 48 352 3, 408 3, 336 460 338 568 312 80 156 PAGENO="0411" 3847 Catalog Number - - 1812 0-4A 1812 l-4A 18123-5 18124-5 18201-4 19101-3A 19102 -4 22 001-1 22 101-2 22102-3 22 103-4 222 01-1 222 02-2 22 301-1 22 302-2 2 3001-5/0 2 3002-4/0 2 3003-3/0 23004-2/0 2 3005-0 23006- OA 2 3007-1 23008-lA 2 3009-2 2 3010-3 2 3011-4 2 3012-5 2 3013-4/0 23014-3/0 2 3015-2/0 2 3016-0 23017 -OA 2 3018-1 24001 -AA 24002 -A 24003-B 24004-D 24005-F 24006-G Quantity 25 13 7 7 136 942 274 41 282 132 43 9,288 3, 902 2, 847 954 6,217 4, 584 46, 008 148, 241 265, 736 12, 400 179, 499 42, 887 54, 570 23, 111 5, 079 4, 134 54 252 284 219 96 1, 167 1, 045 1, 829 15, 915 58, 404 131, 367 96, 468 Catalog Number - 24007-I 24008 -J 24009-K 24010-L 24011-M 25001-6/0 25002 -5/0 2 5003-4/0 2 5004-3/0 25005-2/0 25006-0 2 5007-1 2 5008-2 25009 -3 2 5010-4 25011-5 25013-2/0 25014 -0 2 5015-1 27 001-1 27002-2 27003-2A 27004-3 27005 -3A 27006-3B 27007-4 27008 -4A 27009-5 2 9001-2 29002-3 29101-1 29102-2 29103 -3 30001-0 30002 -1 30003 -3 31101-0 31102-1 32 001-1 Quantity 25, 954 8, 095 2, 602 1,220 590 957 543 1, 639 16, 524 38,290 54, 062 57, 348 24, 336 13, 516 5, 028 2, 087 142 312 176 896 3, 296 3,209 45, 324 2, 164 2, 940 27, 666 3, 300 360 552 3, 152 60 144 233 648 296 2, 990 53 528 504 PAGENO="0412" 3848 catalog Number 32002-2 320033. 330011 33 002 -2 330033 35001-2 360013 39 001 -1 400010 - 40002 -1 410010 420014 42 002 -2 422 010 422024 422 03-2 422 04-3 42301-2/0 42 302-0 42303-4 42304-2 42305-3 423064 42307-5 42308-6 42309 -6A 42 310-7 42401-1 43001 -4 /0 43002 -3 /0 43003-A 43004-0 43005 -1 43006r~2 43007-3 43008 -4A 43009-5 43010 -6 43011- 6A Catalog Quantity Number 1,068 43012-7 2,860 43013-8 216 43014-8A 240 43015-9 379 43016-10 6,266 43017-11 960 43018-12 846 43019-13 1,075 43021-3/0 152 43O22-OOA 2,294 43023-0 48 43024-1 116 43025-2 226 43026-3 72 43101 -1 360 43102-2 612 43103-3 111 4400111 216 44002-12 774 44003-12A 784 44004-13 4,135 44005-14 3,241 45001-3/0 45002 -1 277 45003-2 36 54004-3 222 45005-4 2, 742 45006-5 6,632 45007-6 113,657 45008-7 116,931 47001-15 62,361 49001-4/0 24,161 49002 -0 37,088 49003-4 24, 414 49004-1A 14,731 49005-2 8,668 490062~ 6,546 49007-3 3,215 49008-4 .Quantity 2, 847 2, 340 1, 0~9 1, 163 702 106 256 12 144 92 21 108 114 16 864 814 146 137 43 21. 2, 652 2, 989 3, 752 3, 622 1, 659 972 1, 322 659 31 3, 138 20, 556 25, 617 4, 512 15, 614 10, 448 7, 158 4, 690 PAGENO="0413" 3849 Catalog Number 49009- 4A 49010 -5 49011-6 49012-7 49102-3 49103 -3 49105 -4 49106 -4 49108 -4A 49109-4A 49111-5 49112 -5 49114-6 49115~6 492 01-4A 49202-5 492 03-6 492 04-7 49205-A 492 06-3 492 07-4 49501 -0 49502-1 49503 -2 49504-2A 49505-3 49506 -4 49507 -4A 49508-5 49509 -6 49701-1 49702 -2A 49703 -3 49704 -4 49705 -5 49706 -6 49707-7 49802-3 49804-4 Quantity 2, 879 2, 114 1,107 145 79 207 46 134 59 126 92 92 29 162 736 338 338 266 154 48 55 273 155 244 163 35 81 54 22 24 152 129 186 107 127 136 9 32 Catalog Number 49806 -4A 49808 -5 49810-6 49812-7 49816 -7 51001-5/0 51002 -4/0 51003-3/0 51004-3 OA 51005-2/0 51006 -0 51007-OC 51008-1 51009 -2 51101 -2 51501-1 52 002-0 52 003-0 52005- OA 52006-OA 52 008-1 52 009-1 52 011-2 52012-2 52014-3 52015-3 / 52017-4 52018-4 5202 0-5 52 02 1-5 5202 3-6 52024-6 52202-3/0 522 03-3 /0 52205-2/0 52206-2/0 52208-1 - 522 09-1 522 11-3 Quantity 32 33 123 150 165 8, 504 12, 796 2, 950 744 1, 453 1, 128 32 161 19 52 21 7, 449 8, 322 3, 179 3, 145 9.683 9, 523 3, 282 3, 369 1, 892 2,270 1, 168 1, 196 346 395 69 102 22, 318 22, 017 20, 720 22, 576 16, 324 16, 201 4, 960 95-159 0 - 68 - pt. 8 - 27 PAGENO="0414" 3850 Catalog Number 52212-3 522 14-4 52215-4 522 17-6 522 18-6 52220-8 5222 1-8 52302-1 52 303-1 52 305-2 52 306-2 52 308-3 52 309-3 52 311-4 52 312-4 52314-5 52 315-5 52 317-6 52 318-6 52 32 0-7 52 32 1-7 52402-2 52403~2 52405 -4 52 406-4 52408-5 52409 -5 52411-6A 52412 -6A 52 601-7 52 602-7 53102 -4/0 53103-4/0 53105-3/0 53106-3 /0 53108-2/0 53109-2/0 53111-0 53112 -0 Quantity 4, 342 2, 057 2, 273 670 732 469 470 1, 073 1, 119 623 637 341 401 275 303 73 85 216 178 92 87 221 238 98 96 101 93 68 69 2 2~ 395 414 88 99 1, 008 942 133 199 Catalog Number 53114-1 53115 -1 53117 -2 5 3118-2 5312 0-3 5312 1-3 5 312 3-4 5312 4-4 5312 6-5 5312 7-5 5312 9-7 5 3130-7 53132 -9 53133-9 53135-12 53136 -12 53501-1 53502-4 55001-4/0 55002 -3/0 55003-2/0 55004-0 55005 -1 55006 -2 55007-3 55008-4 55101 -4 /0 55102 -3 /0 55103-2/0 55104 -0 55105 -1 56001-1 56002 -1A 56003 -2 56004-4 56005 -6. 57001-0 57002-1 57 003-2 Quantity 1, 112 1, 194 354 358 681 841 74 107 415 378 242 242 45 67 27 96 30 207 3, 327 4, 600 8, 373 1,256 4, 905 466 72 168 423 84 237 200 475 229 50 340 32 24 147 1, 565 1,938 PAGENO="0415" 3851. Catalog Number 57004 -3 57005-3A 57006 -4 57007 -5 58001 -4* 58002-5 59001-4 59002-5 60001-3 60002-4 60003 -5 61001-1 61002-2 61003 -3 61004 -5 62401-1 63001-1 63002 -3 63003 -5 63004-6 64001-1 64002 -2 64003 -3 64004-4 65001-1 65002-lA 65003 -2 65004 -3 65005 -4 65006 -4A 65007-5 65801-2/0 65802 -0 65803- OA 65804-lA 65805-iC 68801-1 69001-~0 70001-1 7 0002 -z 70003-2A Quantity 3, 317 2, 184 1,283 1, 485 347 691 839 1, 644 5, 666 3, 314 6,283 3, 492 1, 988 472 1, 504 1, 275 159 604 293 57 1, 675 2,166 1, 448 848 3, 985 6, 235 2, 953 2, 792 754 329 407 239 249 282 76 215 115 412 6, 883 264 10, 390 Catalog Number Quantity 70004-4 7,926 700055 1,956 70006-6 48 70007-7 400 70008-8 320 70009-11 36 71001-5 136 71002-8A 102 73001-1 44 75001-0 1,510 75002-1 1,239 75003-2 640 75004-4 1,018 76001-2/0 1,003 76002-1 3,306 76003-lA 375 76004-2 2,169 76201 72 76202-P/3 327 76203-PlO 90 76204-P16 24 76301- * 32 76302-P /3 74 76304-P16 16 76401- 16 76402-P/3 42 76403-PlO 120 76404-P16 16 76501-5/0 6 76502-3 1,130 76503-4 306 76701-5/0 42 76702 -3 2, 517 76703-4 488 76901-5/0 28 76902-3 3,610 76903-4 497 77501-5/0 133 80201-1 288 GRAND TOTAL 2, 556, 513 PAGENO="0416" 3852 PAGENO="0417" 3853 CHEMICAL PORCELAIN COORS U.S.A. PAGENO="0418" PERCENT ~---~ N~ ~ f') N~ t~ r'~ .c~ c~ ~ 0 N) A 0) O~ 0 r~' A C) O~ 0 916 ~ ~ 0 0 0 c~ 0 0 0 ~ 0 0:0 : 1918 . . ~ . . . . .-.-...--, . ..: ~ (o~O ~ _...:~... . . : ~ : ~ ~: . 920 ~ ~ ~ . ~ . . . . . ,,.. ~ ~ ~ ~ : ~ ~ . ~ . ~ . ,: ~* ~ ~ 922 . . -1~ . ~ : . i ~. . ~tnrfl ~ ~ . . ~1 ~ . -r-- . *-- rr) r!~ ~ . . .~I 924 . , . . (4) (4)-~~ - . 926 I, .` ` ,` , * ` : , . 928 ,. I. ~ , . -.-i-.... :~. ~-.- , . . ,,, .-,~ , C) -- . I ~ C)0 932 * , , ` . : , . .. . : . ., 1934 . ` `1. . , ` . , : `1':" ` 936 . `. : .., . . . . ` ` .! ` O1~ o 1938 --,.~ 1940 , ` : ``~::` ..~. . . , * * . :`. -I * `. . * *. ** *.. *,*. ,. 942 , , :.. :` * . * * ** `I * `. , . . , * , . . * `944 946 ` : *. ` *,* , ` , :: * C) 00.~~. 948' * , *: `, *` ` , * * * . 950, . * ~. , , . : , .L J952~~~c* , , * * : ` . -~ - * *., - , l954'~G) ` . ,; .~ * ç~ .~ * . *-~ *_i :--- mo *` .. ~ l956r--~~ I CQ) ` /~-nr- " * * I °~- . ~-` . , I ` l958--~ * * ,* .~CJ) * , `.`I. l960~-o~, ---j . * * , , * _..,..~ 4... , --**,-.~-., -. I * *. .: I962r~ *~ `i .j:~ . .` :. * 964 * . I.. ` ~ 966 - - - - - ~ ~"`~ I'.) ~ ~ 0 r~ ~ A o~ 0 0~0 0 0 0 0 0 0 0 0 0 0 0 0 PAGENO="0419" ~) C) W ~ ~ -*~ : : a: 0 ~ll ~ h ~ ~C) -4 -~ C,) - - NN~4?'$~ ~ (~ ~. - ~ - : - -~ ~ ~ ~ ~. ~"C) : ~ r~pp-p~~~ s": PN ~ ~ ~ ~: ~ 2 ::::::: ::::::: ::::: :`` ~ ~ ::: ::::: .64:::::::::: C_) - C~) 00 N) C) N) PAGENO="0420" 3856 We would now report that we have made consideilable investigation regarding the possible marketing of these items in this country, but unfortunately, due to the fact that a very similar line of speciality item is being manufactured here by an English finn-Messrs. K.L.G. Ltd.-we feel sure you will appreciate that this makes the position of marketing your lines, particularly with regard to Import duties etc., extremely uncompetitive, and most certainly would have a very limited affect upon the possible sales of your items. We do trust that under the circumstances you will appreciate the position. Yours sincerely, D. F. HAYDON, General Sales Manager. EXHIBIT E P. M. TAMSON N.Y., INSTRUMENTEN, Den Haag, Holland, July 7, 1Q61. Mr. CHARLES `S. RYLAND, Esq., St. Ermin's Hotel, London, W.C. 1. DEAR Sin: We were very much pleased to receive your letter dated June 30, 1961. Mr. James Fisher asked us what porcelain was sold by us and we enclose a catalogue with pricelist in Dutch guilders. This is WETA-porcelain, a reason- able good quality, to `be compared with Haldenwanger and Berliner, in our opinion `better than Rosenthal, and much better than Czec!hoslovakian and such kinds of porcelain. We know from experience that your quality is the best of all to be obtained in the world, since at the end of the war we have sold your porcelain (we refer to the invoices enclosed of Messrs. Arthur H. Thomas Company, Philadelphia). At that tline no other makes were available, but later on we have been compelled to drop your porcelain as soon as the German factories were getting again at the market, supplying satisfactory qualities `and much cheaper than yours. Now we `learned from Mr. James Fisher, that at present you are manufacturing fully-automatic `and perhaps this would enable you to supply us again at com- petitive prices. As we told you before we are delighted at the very fine quality of your make and if anyhow possible, we should be glad to take up again the sale of your porcelain. For your guidance we may state that import duties would be about 17%. It will be a pleasure to us to meet you at The Hague at the end of this month and we shall be glad to make an exact appointment `Looking forward to your further news, we remain, Dear Sir, Yours very truly, J. A. Psw HAVE. EXHIBIT F THE CHAIRMAN, Interdepartm~ental Committee on TradeAgreements, Department of State, Washington, D.C. DEAR Mn. CHAIRMAN: It has come to my attention that there is included in the list of commodities on which the United States may consider nego'tiating tariff reductions at the forthcoming meeting of the signatories to the General Agreement on Tariffs and Trade, chemical and scientific porcelain (Par. 212). I am utterly astonished that chemical porcelain, which is widely recognized as absolutely essential to national defense and which is produced by only one company in the United States, would be placed on this list. The Tariff Commission itself has stated that "Chemical porcelain is vital in national defense". The one company in this country which produces chemical porcelain is the Coors Porcelain Company of Golden, Colorado. In addition to being the only United States concern producing chemical porcelain, this company is regarded in industry circles as being the producer of the finest chemical porcelain in the world. Mr. H. W. Ryland, vice president and manager of the Coors Company, testi- fied on October 31 before the Tariff Commission and the Committee for Reciprocity Information in opposition to any reduction in the tariff on chemical porcelain. At tha't time he presented vigorous, documented case against reducing PAGENO="0421" 3857 this tariff: There is, however, an additional factor to be considered in the case of the Coors Company. It is that this company is engaged in production of certain porcelain items of highly secret nature for the Atomic Energy Commis- sion, the Army, the Navy, and the Air Force, which cannot be secured by these defense agencies from any other source. The nature of these items of course could not be satisfactorily discussed by Mr. Ryland at the public hearings at which he testified. Indeed, some of the items produced by the Coors Company, especially for the Atomic Energy Commission, cannot be discussed with any person who has not received the highest security clearance from the Commission. I cannot conceive that any serious consideration will be given to a reduction in the tariff on chemical porcelain. However, because of the peculiar essen- tiality of the Coors Porcelain Company in our national defense picture, I request that if by any chance serious consideration would be given to a reduction in the chemical porcelain tariff, you communicate promptly with me in order that Mr. Ryland can meet with you and arrange a method of demonstration to you and other appropriate officials, within the limits of existing security regulations, his company's essentiality to national defense. Sincerely, EUGuNE MILLIKIN. Mr. FULTON. The next witness is Mr. IJecker. We are pleased to have you appear before the committee. Will you identify yourself for the record? STATEMENT OF WILLIAM F. UECKER, Wflfl)OW SHADE MANUFAQ~ TURERS ASSOCIATION Mr. UECKER. Mr. Chairman and members of the committee, I am William F. TJecker, general sales manager of Joanna Western Mills Co., which is one of the member companies of the Window Shade Manufacturers Association. Mr. Chairman, we have prepared a printed statement here. Perhaps in the interests of time we can submit this for the record. Mr. FULTON. Without objection, so ordered. Mr. UECKER. Our position is stated in this printed statement, and I would try to briefly summarize and answer any questions you might have. First of all, I would like to describe the article in question, as I am aware that it is variously described here in this country as window shades, window blinds, curtains, and so forth. The article that I am talking about is what is known as window shades. It is commonly a piece of material made out of treated cotton cloth or vinyl plastic sheeting. It is cut and hemmed at the bottom, and it is attached to a wooden roll~r having a spring-powered mecha~ nism that rolls it up and down at the window. This provides for easy and efficient and economical privacy and light control. A recent survey indicated that window shades were used on one or more windows on more than 80 percent of the homes in the United States. Mr. Chairman, the window shade product is an American invention. The industry itself started here in the United States in the mid-1800's. Our own company has been in operation since 1897. Interestingly enough, currently, window shades are largely indige- nous to the North American Continent, with some use in Western European countries. PAGENO="0422" 3858 Now, window shades being a staple item, and particularly the low end plastic shades in question, are strictly a price article. Currently the principal exporting country to the United States is Formosa, and this has caused great difficulties, because we cannot compete pricewise, due to the very low wages that prevail in Formosa. Moreover, the threat of an avalanche of further imported low-price competition has a depressing and detrimental effect on the entire industry. We feel that the present rate of duty is wholly inadequate. I might point out that right at the moment, there is a case on behalf of the Window Shade Manufacturers Association pending in the U.S. Customs Court. Here the Customs authority, through administra- tive practice, changed the classification of imported window shades, so that the rate of duty was reduced from 17 percent to the present 11 percent. As a result, we believe that imports are increasing. However, we have no specific statistics available, inasmuch as there are only two large importers here in the States, and we are advised that with so few importers, this is considered confidential information, and is not available to us. However, I believe that these statistics would be available to the committee. Again, we feel that aid to the companies or to the workers is not the answer. It just doesn't do any good to drive the industry out of business, and then start retraining workers or giving them other forms of relief. We want to meet competition in the marketplace, and over the years we have met competition from Canada and Western European coun- tries; but the low wage rates that prevail in Formosa are another matter. We believe that relief should be provided in an escape clause pro- cedure for industries. Our last point is that in addition to completed window shades entering the United States, there is also component parts presently in the form of vinyl plastic sheeting. The Federal Trade Commission has ruled in several instances that such articles finished in the United States from imported parts must indicate the country of origin of such parts, and we believe that this should apply universally, as in the case of window shades. Mr. Chairman and members of the committee, I thank you very much for your kind attention, and I would be happy to answer any questions you might have. (Mr. Uecker's prepared statement follows:) STATEMENT OF WILLIAM F. UEOKER, WINDOW SHADE MANUFACTURERS ASSOCIATION My name is William F. Tlecker and I am General Sales Manager of Joanna Western Mills Company, located at 2141 South Jefferson Street, Chicago, Illinois. The Window Shade Manufacturers Association is an association made up of domestic manufacturers of all types and kinds of window shades. However, for the purposes of this brief the matter will relate only to' the manufacture and sale of plastic window shades. These shades are manufactured from a sheet of plastic or vinyl and then attached to a roller having a spring mechanism. The shade is raised or lowered by increasing or decreasing tension on the spring mechanism and the plastic is wound or unwound around the roller. The present active mem- bers are: Breneman, Inc., Cincinnati, Ohio, 45210; Illinois Shade Division of PAGENO="0423" 3859 Slick Industrial Company, Chicago Heights, Illinois, 60411; Stauffer Chemical Company, Newburgh, New York, 12550; Joanna Western Mills Company, Chicago, Illinois; The Western Shade Division of William Volker and Company of Los Angeles, Los Angeles, California, 90023. THE PRESIDENT SHOULD NOT BE GIVEN FURTHER AUTHORITY TO BEDUCE DUTIES Under the proposed Trade Expansion Act of 1968 (H.R. 17551) the President is seeking further authority to reduce duties. Under the Trade Expansion Act of 1962 the President was given authority to reduce the rates of duty on imported merchandise to 50 per cent of the rates which existed on July 1, 1962. The authority/expired on June 30, 1967. Under the auspices of the so'-cafled Kennedy Round of negotiations most of the authority granted to the President to reduce rates of duty was used. It is believed that the reductions in the rate of duty applying to imports into the United States were predicated not so much on the concessions we received from the negotiating parties of GATT, but took into account the domestic industry involved in its relation to the country, its relation to the community, the protec- tion needed (if any) from competitive imports, capital invested, number of employees, etc. If it is a fact that those factors were taken into account, then the reductions in duty under the Kennedy Round were probably the maximum reductions possible, even if less than the full 50 per cent permitted. Therefore, to permit the President to have authority to further reduce duties for any reason would be imposing an undue hardship by the mere threat of further reductions on those domestic industries subject thereto. The results of the Kennedy Round have hardly been realized and the mere authority to further reduce duties could result in a mass exodus of domestic industries to low wage countries. For example, the domestic window shade industry is one that is economically operated with the most modern techniques, up-to-date machinery and the best quality of plastic sheeting produced. The most competitive single country is Formosa and despite all the American know-how, etc., it is virtually impossible to compete due to the low cost of foreign labor. Plastic window shades are strictly a price item and the American housewife is concerned only with the price when shopping for the article. Assuming (but certainly not admitting) that Japan or Formosa produces a comparable window shade, the cost of the imported window shade is so' much lower, including the present reduced rate of duty, that the domestic industry may find it necessary to resort to legislative relief to stay in business. When the full effect of the Kennedy Round reductions is felt by this industry, it may become very difficult to continue to manufacture plastic window shades in this country. No one is disadvantaged if the President is denied at the present time the authority to further reduce duties. If in a specific instance, for a specific purpose it is necessary, Congress can authorize such authority. Blanket authority to the President at this time can only be detrimental to domestic industries. TO LIBERALIZE ADJUSTMENT ASSISTANCE CRITERIA PROCEDURES FOR FIRMS AND WORKERS WITHOUT LIBERALIZING THE ESCAPE CLAUSE FOR DOMESTIC INDUSTRIES WOULD BE LESS THAN A NULLITY A. History Of The Escape Clause From the beginning of the Trade Agreements Program there has been concern that as a result of a decrease in import restrictions there would be such an in- crease in imports as to seriously injure or to threaten serious injury to domestic manufacturers. When the President was given authority in 1934 to reduce im- port restrictions he committed himself to use the authority in such manner as not to injure sound and important American industries. However, in administering the Trade Agreements Act it soon became apparent that some domestic indus- tries would be seriously injured. An "escape clause" was, therefore, included in trade agreements which permitted the United States to withdraw a conces- sion under certain conditions. The Trade Agreements Extension Act of 1951 for the first time had an "escape caluse" procedure provided for by statute (Sec. 7). This provision in substance held that the Tariff Commission should investigate all escape clause applica- tions; imposed a time limit for the investigation; and allowed an actual as well as a relative increase in imports to satisfy the procedural criteria. The Tariff Commission pursuant to the investigation then had to determine if as a result PAGENO="0424" 3860 in whole or in part of concessions granted, imports of the article under investi- gation were being imported into the United States in such increased quantities, either actual or relative, as to cause, or threaten, serious injury to the domestic industry producing like or directly competitive products. Section 7 of the Trade Extension Act of 1951 was re-enacted in 1955 and 1958. It lasted until 1962. B. Application Of The Escape Clause Under Section 7 of the Trade Extension Act of 1951 (and its re-enactment) 113 investigations were completed by the Tariff Commission. Of that number of investigations the Tariff Commission found that in 33 investigations the criteria for injury was met by the domestic industry and recommended to the President that relief be granted; in 8 investigations the Tariff Commissioners were divid- ed as to their findings and therefore, the cases had to be referred to the Presi- dent for disposition; and 72 cases were dismissed by the Tariff Commission on the grounds that the domestic industries did not meet the criteria set up by Congress for relief. Of the 41 investigations referred to the President, 15 were granted relief pursuant to the statute and 26 were denied relief. C. Changes Made in The Present Act (Trade Ecopansion Act of 1962). From ~$ection 7 Of The Trade Agreement Ecotension Act of 1951 In the Trade Expansion Act of 1962 Congress enacted a sweeping reorganiza- tion of safeguard procedure which among other things made a form of relief available to groups not covered by earlier acts, such as individual firms and employees of injured industries. Under the 1962 Act the President could provide relief in. cases of injury to an industry, firm or workers by withdrawing, or modifying the concession or he may grant trade adjustment assistance such as loans, tax relief and technical assistance. During the debates in Congress on the 1962 legislation it was held out to labor as an inducement for the passage of the Act that individual groups of workers, not provided for under previous legisla- tion could obtain trade adjustment assistance. However, in addition to the attempted beneficial changes made by the 1962 Act, the criteria for "injury" was changed which change made it impossible for domestic industries, firms or individuals to get any trade adjustment assistance. Before the Commission can make an affirmative finding under section 301(b) (1) of the Trade Expansion Act of 1962, it must determine (1) that the imports in question are entering the United States in increased quantities; (2) that the increased imports are a result in major part of trade agreement con- cessions; and (3) that such increased imports have been the major factor in causing or threatening to cause, serious injury to the domestic industry con- cerned. If the Commission finds in the negative with respect to any one of these three requisites, it is foreclosed from making an affirmative finding for the industry. D. Impossibility of Qualifying For Belief Under Present Criteria Since the drastic change made by Congress in the Act of 1962 in determining the criteria for injury to be found by the Tariff Commission before relief can be secured by an industry, firm or individual, not one petition was found to have met that criteria. From the enactment of the 1962 Trade Expansion Act to date, domestic industries have filed 10 petitions with the Tariff Commission for investigation and trade adjustment assistance; domestic firms have filed 6 peti- tions and workers have filed 5 petitions. In all, 21 petitions have been filed and as previously stated the Tariff Commission has not made an affirmative finding in any. E. The Proposed Liberalization Of The Tariff Adjustment Provisions Of The Trade Ecepansion Act of 1962 By The Trade Ecopansion Act of 1968 (Hi?. 17551) For The Benefit Of Firms And Workers Will Help Those Classes Little If At All Unless There Is A Chance In The Criteria For Injury Applying To Domestic Industries As above stated, when Congress changed the criteria for relief to domestic industries injured as a result of increased imports due to a trade concession from the escape clause provisions contained in the Section 7 of the Trade Exten- sion Act of 1951 to the provisions contained in the present act (Trade Expansion Act of 1962) and included also therein for the first time tariff assistance to injured firms and workers, not one petition on behalf of domestic industries, firms or workers qualified. The criteria for securing relief in the present law PAGENO="0425" 3861 (Trade Expansion. Act of 1962) is the same for domestic industries, individual firms or workers. The Administration recognizing that whereas the escape clause provisions of the Trade Extension Act of 1951 were successfully applied by several domestic industries which qualified thereunder, the changes made for securing relief by injured industries, individual firms or workers under the Trade Expansion Act of 1962, proved to be a complete nullity, is now suggesting amendments to the latter Act through the proposed "Trade Expansion Act of 1968" (H.R. 17551). However, the proposed changes in H.R. 17551 apply merely to individual firms and workers and does not apply to domestic industries. In other words the pro- posed new Act will make it easier for individual firms and workers to secure relief from loss of jobs or loss of income due to increased ruinous imports, but the domestic industry which contains the individual firms and employs the workers will still be handicapped by the criteria under the Trade Expansion Act of 1962, which criteria has been impossible to meet up to the present time. The President in requesting Congress to liberalize the previous impossible restrictions placed on those industries, firms and individuals seeking justifiable relief from imports, very studiously limited the proposed changes to apply only to firms and workers. He stated: "Some firms, however, have difficulty in meeting foreign competition, and need time and help to make the adjustment. "Since international trade strengthens the nation as a whole, it is only fair that the government assist those businessmen and workers who face serious problems as a result of increased imports. "The Congress recognized this need-in the Trade Expansion Act of 1962-by establishing a program of trade adjustment assistance to businessmen and workers adversely affected by imports." It is respectfully pointed out that to offer relief to firms and workers and not to the domestic industry involved is absolutely worthless. . . . What can it possibly benefit a firm if it receives tax assistance or a loan or other adjustment, if the industry is forced out of the business of producing the article because of low cost foreign competition? What can it possibly benefit a worker in the long run if he gets extra unemployment benefits or training or relocation, if the indus- try in which he was employed transfers its manufacturing ability and know- how to low wage countries because of imports from similar low wage countries? If the proposed "Trade Expansion Act of 1968" (H.R. 17551) is passed in the present form as related to escape clause provisions for domestic industries and tariff adjustment provisions as relates to individual firms and workers, it is possi- ble that a firm or worker could qualify for relief under the new provisions but the domestic industry could not qualify even though petitions could be filed by all three categories at the same time and the same evidence adduced by the Tariff Commission in its investigation. The domestic window shade industry would benefit nothing if under the pro- posed criteria through the Trade Expansion Act of 1968, an individual firm or window shade worker were granted some of the relief outlined in the act, but the domestic industry itself gives up production. In order to meet the foreign competition in the American market place, it would be necessary to put the domes- tic industry on a competitive basis through the remedies offered under the escape clause of the Expansion Act of 1962 with the criteria for such relief changed in the same manner, that the proposed Trade Expansion Act of 1968 intends to change the criteria for individual firms and workers. It is strongly urged that the criteria for relief proposed by the new Act (H.R. 17551) be changed so that it would be identical for domestic industries, individual firms workers. AN OMNIBUS QUOTA BILL SHOULD BE PASSED SO THAT ANY DOMESTIC INDUSTRY THAT IS INJURED ANI) QUALIFIES UNDER AN ANNOUNCED CRITERIA ~~ULD BE ABLE TO GET RELIEF FROM RUINOUS IMPORTS Congress is well aware of the many quota bills presently pending and covering many imported articles. There is no doubt that at least some are meritorious and are deserving of Congressional action. Obviously, some of them are merely put into the hopper by Congressmen in order to appease constituents. In order to reduce the work load of Congress in this connection and to remove the doubt as to whether or not a domestic industry is entitled to relief from im- ports by limiting the amount of such imports, an omnibus quota bill should be PAGENO="0426" 3862 passed. The criteria for qualifying for relief under such a bill could be spelled out by Congress and would require an overt act on the part of such industry to seek relief. Therefore, even if a particular industry may be entitled to relief under such a bill, the relief would not be forthcoming automatically, but it would be necessary for the industry to petition for the relief necessary. Again using the domestic plastic window shade industry as an example, we can see the need for an omnibus quota bill. Imported plastic window shades are not specifically provided for under the United States Tariff Schedules. At the present time they are provided for under the provision for "curtains, drapes, etc." under Item No. 772.35, and assessed with duty (Kennedy Round) at the rate of 11% ad valorem. The present classification and rate of duty on imported plastic window shades is the result of a ruling of the Bureau of Customs rendered on January 8, 1966. This ruling changed the classification of imported plastic window shades and rate of duty from 17 percent ad valorem to its present rate of duty. It is the contention of the domestic plastic window shade industry that the present classification and rate of duty on imported plastic window shades is wrong. It therefore, instituted an American manufacturer's protest procedure, under Section 516(b) of the Tariff Act of 1930 protesting against the action of the Bureau of Customs. This procedure was commenced well over a year ago and after many delays and set backs, the matter was finally brought before the United States Customs Court. On February 7, 1968 a trial was had before the Court (Joanna Western Mills Company vs. United States) where the issues were liti- gated. A decision has not yet been rendered. During this period and continuing, it is believed that imports have been in- creasing drastically. Because imported plastic window shades are provided for under a catch-all provision of the Tariff Schedules, and since there are 2 large importers at the present time, no statistics are available to the domestic industry. Nevertheless, the articles are seen in the market place of this commodity in increasing amounts and the competition is keener due to the low cost of the imported article. Should the pending Court case be lost by the domestic plastic window shade industry, it may be necessary to seek Congressional relief. However, an onmibus quota bifi would probably cover a situation presently encountered by this indus- try and permit it to qualify for relief under a defined criteria. It would not then be necessary for this industry to seek Congressional relief. CLOSER COOPERATION SHOULD BE MAINTAINED BETWEEN THE CUSTOMS BUREAU AND THE FEDERAL TRADE COMMISSION IN APPRAISING THE ULTIMATE CONSUMER OF THE COUNTRY OF ORIGIN OF IMPORTED ARTICLES Under Section 304 of the Tariff Act of 1930, as amended, generally, all imported articles capable of being marked, must be marked with the country of origin. This marking must be legibily, indelibly, and permanently written in the English language, and in a conspicuous place. There are several exceptions to this general rule. One such exception is that where an article is imported to be manufactured into another article and the country of origin is known to the manufacturer of the article in this country, then marking on the article itself is not necessary. Imported plastic sheeting for manufacture into window shades is an article as above described. The sheeting itself is not marked with the country of origin. After importation, it is cut to size and mounted on rollers having spring mechanisms, and a plastic window shade is produced. The finished article has no marking on it with the country of origin and the article itself is passed off as 100% produced American window shade. The imported plastic which has no marking with the country of origin is permitted entry because it complies with the Custom laws. After importation the Customs authorities lose control over the importation. However, the ultimate consumer of the window shade should be apprised of the country of origin of the plastic material. In order to apprise the ultimate consumer of the country of origin of the plastic material, it is urged that the Federal Trade Commission order the shade manufacturer to attach a tag thereto showing that the completed shade is made from imported plastic sheeting. It is a relatively simple matter for the Custom authorities to notify the Federal Trade Commission to advise the manufacturer to affix the tag. If the ultimate consumer still wants to purchase such a shade, the choice is entirely his. PAGENO="0427" 3863 BALANCE OF TRADE PAYMENTS Our balance of trade payments are linked with and tied up with our trade balances relative to imports and exports. For years it has been the theory that we are a solvent country as reflected in at least one instance by our favorable balance of trade. As a result of this fiction we were advised that in order to keep up our favorable balance of trade, and in fact increase it, we would have to reduce tariffs so that other nations could sell their exports to us before they could buy our exports. This concept was stressed even if it meant the extermi- nation of some domestic industries which were economically operated and turn over the production of that article to foreign countries. As of several weeks ago we no longer have a favorable balance of trade. Our exports, even including government-financed exports, did not exceed our im- ports. As recently as May 20, 1968 there appeared in the New York Times a state- ment made by a Vice President of the overseas division of a very large bank, who said: "If Government-financed exports are left out of account, the commercial trade balance this year may show a deficit of $1.5 to $2.5 billion, compared with a small commercial surplus last year of $250 million." Since our export statistics when stripped of government financed shipments will show an unfavorable balance of trade it reduces considerably the argument of those who claim that duties must be reduced at any cost in order to be able to export. We now have an unfavorable balance of trade and practically free trade. Perhaps it is time to take a hard look at the entire picture of world trade with a view to domestic industries sharing in it. Mr. BURKE (presiding). Thank you. Are there any questions? There being no questions, we thank you for your testimony. Is Dr. DePodwin here? Dr. DePodwin? Without objection, there being no further witnesses, the committee will adjourn until 10 a.m. tomorrow. (Whereupon, at 4:30 p.m., the committee adjourned, to reconvene at 10 a.m., Wednesday, June 26, 1968.) 0 PAGENO="0428"