the increased economic strength gained from cooperation among themselves, the western European nations could develop into an expanding market for imports from other countries. Which direction the market will take is in large measure dependent upon negotiation with the United States, the only other aggregate of economic power capable of bargaining with Europe on equal terms. Japan looks to the United States, as do other nations not members of economic blocs, for leadership in trade negotiations with the Common Market. We also endorse the grant of authority to the President to reduce present tariff rates by 25 percent, together with allied provisions, over the next 5 years in return for reciprocal concessions from other nations. This authority has been wisely used in the past to the benefit of all Americans; we believe it will continue to be so used in the future. Our third specific observation relates not to the reduction of existing barriers, but to the possibility of erecting new ones. It is ironic that the escape clause has come to be as important or more important in public and legislative consideration than the authority to enter into trade agreements. The attention of the members of the United States-Japan Trade Council is inevitably focused much more on the escape clause than on any possibility of further reduction of tariffs. It is difficult to exaggerate the concern generated by this sword of Damocles in international trading circles. In the opinion of the United States-Japan Trade Council it is unfortunate that the administration has seen fit to recommend measures tending to tighten the escape clause. We would hope that it would be changed rather to make it less severe. In particular, the council submits that the segmentation of industry provision has no justification in reason or policy. The escape clause, as it now reads, defines industries in a completely theoretical way that has nothing to do with real workers or real plants and equipment. If a particular commodity meets serious import competition, relief can be granted under the escape clause, even though every company making it had done well in its total production and no workers had suffered loss of pay or jobs. Indeed, the escape clause itself is hardly reconcilable with the theory and purposes of the reciprocal-trade program, or of our free competitive system. We want our industries to meet the challenge of competition by greater efficiency or by diversifying to lines of production where they enjoy greater comparative advantage. Hence, the emphasis on adjustment found in the Douglas and Humphrey bills, with which we are in sympathy. If help to industries affected by foreign competition is needed, assistance to adjust seems clearly the best method. The escape clause, on the other hand, tends to protect the unprogressive and unimaginative industries which do not move with the times. We are not urging repeal of the escape clause, because we recognize that there may be situations where temporary tariff relief to grant time for adjustment is justified. We do urge rejection of the provision which would permit increase of duties based upon the 1934 rather than the 1945 rates. This is a step backward in tariff philosophy, unjustified by any developments of which we are aware. And, for the reasons just indicated, we strongly oppose efforts to deprive the President of discretion to look at the entire national interest, not just the narrow issue of injury to a few producers, in passing upon escape-clause cases. The decrease in time from 9 months to 6 months for escape-clause investigations should be carefully scrutinized by this committee. Past experience would indicate that 6 months is not always enough time to make a thorough investigation. If the committee decides to retain this feature, serious thought should be given to an increase in staff and appropriations for the Tariff Commission. We fully support the grant of explicit subpena power to the Tariff Commission. We believe this will be of material aid to the Commission in carrying out its investigations, and will tend to insure that its finding are based on complete data. This provision permitting duty increases up to 50 percent ad valorem on duty-free items is a break with the traditional separation between items on the dutiable list and on the free list. We oppose this on the ground that deletion of commodities from the free list is a matter important enough to require legislative rather than administrative action. It should be considered that most free-list items are raw materials for the use of American industry, or foods not produced in the United States. While we are somewhat dubious, in the light of modern developments in the waging of total war, about the need for the national-defense provision, we have no specific objection thereto. It seems, nevertheless, that the Executive has, or should be provided with, other authority that would be more effective and appropriate than tariff manipulation to support lagging defense industries, if their continued capacity is considered vital. Certainly, the procedural changes in H. R. 12591 are an improvement over the vague language of the present act. It is sincerely hoped that abuse of the national-defense section will not be permitted. This feature of the law should not be used as a substitute for, or an appeal from, escape-clause proceedings. Because of the imperative need for United States leadership in liberalizing and expanding world trade, we trust and believe that this committee, in its wisdom, will confine its attention to improvement in the bill now under consideration, refusing to be distracted by demands to inject protectionist devices into its provisions. The United States-Japan Trade Council appreciates this opportunity to convey its views on this important matter to the Senate Finance Committee. I, personally, thank all of you for your kind and courteous attention. (Table entitled "Exports to Japan in 1957, by States" is as follows:) Exports to Japan in 1957, by States (in order of magnitude) 1. Texas. 2. Ohio. 3. Illinois_ 4. Pennsylvania. 5. California. 6. New York. 7. Michigan_. 8. Indiana_ 9. New Jersey. 10. Mississippi 11. Alabama.. 12. Arkansas. 13. Missouri..... 14. Minnesota. 15. West Virginia_ 16. Louisiana. 17. Tennessee_ 18. Georgia. 19. Kansas_. 20. Massachusetts.. 21. Washington... 22. Wisconsin_. 23. Arizona 24. Iowa- 25. Kentucky. $105, 330,000 | 27. Oklahoma.. 95, 357, 000 28. North Carolina....... 23, 166, 000 41. South Dakota_ 18, 944, 000 | 45. Wyoming___ 18, 668, 000 46. New Hampshire- 18, 370, 000 47. Vermont___ 18, 353, 000 48. Nevada__ 17, 497, 000 49. District of Columbia $14, 960, 000 14, 868, 000 14, 846, 000 12, 941, 000 12, 621,000 12, 565, 000 12, 332, 000 12, 244, 000 11, 826, 000 10,787, 000 10, 485,000 6,954,000 6,593, 000 4,995, 000 3,900, 000 3,782,000 2, 814, 000 2, 194, 000 1,743, 000 1, 606, 000 1,382, 000 1, 263, 000 159, 000 1, 221, 355, 000 The CHAIRMAN. Thank you, Mr. Stitt. Mr. CARLSON. Only this, Mr. Chairman. I had the pleasure of visiting Japan and several Far East countries last fall, and I agree with you regarding the importance of Japan as far as it being what you say it is, a keystone of the entire free world in that area. I think what happens to Japan and India will affect that entire section. Mr. STITT. I am in complete agreement with you, sir. The CHAIRMAN. The committee then will recess until 10 o'clock tomorrow morning. (By direction of the chairman the following is made a part of the record:) GALLARD-SCHLESINGER CHEMICAL MANUFACTURING Corp., Re Trade Agreements Act of 1958. Hon. HARRY F. BRYD, Chairman, Committee on Finance, United States Senate, Washington, D. C. DEAR MR. SENATOR: This company is engaged in both the manufacture and import of chemicals and, in this dual role, we would like to express our opinion of the Trade Agreements Act of 1958. The benefits to be obtained from reciprocal trade in terms of international understanding and international prosperity, have been stated before you many times, by people more qualified than ourselves. All we can do at this point, is to reiterate that this is not merely a theory but is actually the case. We cannot continually export merchandise to the various countries of the world without giving them an opportunity to sell some of their merchandise in this country. It is still very significant to us that, in most areas of the world, the United States still sells more than it buys. It is also true that a very large portion of the things we import are commodities which are just not available in this country; such as coffee, cocoa, etc., etc. In the chemical industry, it is true that imports have grown during the last few years. However, even at this point, imports are insignificant as compared with the overall chemical industry. Imports have done a very constructive job in reestablishing competition where very little existed. We keep reading in the newspapers about the high cost of vitamins and antibiotics. Imports have helped to bring the price for these raw materials to a more realistic level, which can only benefit the ultimate consumer. Some of the most vociferous opponents of reciprocal trade only object to imports insofar as these imports compete with items that they, themselves, produce. The president of one of our largest chemical companies, who has been most outspoken in his desire to have imports curtailed, has been the largest importer of Russian benzol. As a matter of fact, not only have they been importing this benzol from behind the Iron Curtain, but they have been bringing it in by the tankerload. The fact that they have been encouraging the Communist economy and taking unfair advantage of their fellow producers, has not disturbed them in the least. However, the minute importations of chemicals that compete with his company, he finds to be very distressing. We believe that the partisan approach to this problem is not the proper one. We must consider the worldwide implications of our actions and, in this regard, we feel that we either cooperate with our allies throughout the world or, we will find ourselves alone and shunned. We will then be concerned about what has happened to our friends and where we are going to sell our machinery, our automobiles, our chemicals, and the products of our farms. We recommend Senate approval of H. R. 12591 in its present form, without amendments to debilitate its intent and its workability. Yours respectfully, F. E. GALLARD. NEW ORLEANS COTTON EXCHANGE, Hon. HARRY F. BYRD, Chairman, Senate Finance Committee, Washington, D. C. DEAR SENATOR: Throughout its long history of service to the cotton trade, the New Orleans Cotton Exchange has always been mindful of the welfare of the producer. Believing that a renewal of the Reciprocal Trade Agreements Act would assist the cotton farmer particularly in disposing of his surplus, the exchange, on October 9, 1957, adopted the enclosed preamble and resolutions, for which we now bespeak your favorable consideration. H. R. 12591, authorizing the President to renew these agreements is now before the Senate Finance Committee. We are convinced that a renewal of these agreements will greatly benefit the producers of cotton and assist materially in solving the present cotton problem. We therefore earnestly urge that H. R. 12591 be reported without amendment, and sincerely request your strong endeavors to prevent crippling amendments on the Senate floor. Thanking you in advance for your kind cooperation, I am, Sincerely yours, WM. J. LODWICK, President. COPY OF PREAMBLE AND RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF THE NEW ORLEANS COTTON EXCHANGE OCTOBER 9, 1957 Whereas the reciprocal trade agreements program, inaugurated in 1934, has been successful in promoting international trade throughout the world and has resulted in progress and prosperity in our own and all friendly foreign nations; and Whereas cotton is a surplus commodity and for many years has been an important part of trade between the United States and foreign nations; and Whereas in order that the purchasers of American cotton in foreign countries may be able to buy our cotton surplus, it is necessary for the citizens of these countries to be able to sell their products to the people of the United States: and Whereas this board is of opinion that the reciprocal trade agreements program is therefore of great benefit to the cotton producers of the United States and should be renewed beyond its present expiration date, namely, June 30, 1958: Be it Resolved, That the board of directors of the New Orleans Cotton Exchange respectfully request that Congress approve the renewal of this program for a substantial period by or before its expiration date; Resolved further, That a copy of this preamble and resolutions be sent to the Senators and Representatives in Congress from Louisiana with an earnest request for their cooperation. TESTIMONY ON BEHALF OF CATERPILLAR TRACTOR CO. TO THE FINANCE COMMITTEE OF THE UNITED STATES SENATE ON THE RECIPROCAL TRADE AGREEMENTS PROGRAM The facts and opinions which we shall offer will, we believe, clearly indicate why it is to the particular interest of Caterpillar Tractor Co. and its people to favor freer international trade-more imports as a means to more exports. It is not, however, sufficient to appraise a matter of such importance only in the narrow context of the well-being of one company plus all who in one way or another are favorably affected by its operations. The major consideration must be the welfare and security of the United States as a whole. Insofar as it relates to the affairs of Caterpillar, our presentation should, accordingly, be regarded as more in the nature of a case study than an appeal for direct help by one concern. The facts we cite are believed to be of general application to many other concerns and industries. In its years of formation, Caterpillar had 2 small plants and employed 2,500 people. Today the Caterpillar organization, which encompasses the United States parent and 9 wholly owned subsidiaries, has 7 domestic plants, located at Peoria, Joliet, and Decatur, Ill.; Davenport, Iowa; Milwaukee, Wis.; San Leandro, Calif.; and York, Pa. Two more plants are under construction, one near Peoria and the other at Aurora, Ill. Four major parts warehouses and 10 emergency parts depots are strategically located throughout the United States. Five other plants are located in Australia, Brazil, and Great Britain. A small subsidiary operates an emergency parts depot in Canada. At the peak of business in 1957 employment in the entire organization reached a total of 41,500, of which 38,700 were engaged within the United States. Now, in June 1958, this domestic employment has shrunk by 13,800, of which 12,900 were laid off because of decline in business (the balance being attributable to normal attrition). Worldwide sales have ranged from a low of $13 million in 1932 to a high of $686 million in 1956. In 1957 they were $650 million. For the present purpose however, the more significant aspect of this growth is the extent to which it has been derived from increasing foreign business. In 1956 sales to foreign countries were 37 percent of the total. For 1957 the percentage climbed to nearly 42 percent, and in the last quarter of that year, when a rapid business decline had set in, foreign business exceeded 50 percent of the total. Whereas domestic United States sales fell 13 percent for 1957 as a whole, foreign business increased 9 percent. Impressive as these figures may be, they do not tell the whole story. In the early part of 1957 our manufacturing capacity was inadequate to meet all demands, and machines were being rationed to dealers. Beyond that, dealers and customers in many foreign countries were, as they still are, unable even to place orders because of exchange controls and other forms of import limitations imposed by their own governments. The major cause of such restrictions is the lack of United States dollars in the hands of countries which need and want the products of American industry. Without such limitations and with a climate more favorable to international trade, the volume of our exports would certainly be substantially higher in amount and larger in proportion to our total business than it was in 1957. Now, what does this mean to Caterpillar-to those who are related to it as employees, dealers, customers, suppliers, shareholders-to our plant communities to the United States? Without its export business, Caterpillar would not need the valuable services of at least 40 percent of its people employed in the United States. At the peak of 1957, this would have meant about 15,500 people. Perhaps even more currently important: had exports not held up better than domestic sales during the |