through this same experience with regard to developing foreign markets for our agricultural products. We succeeded a few years ago in getting a revision of the statutes_concerning our agricultural attachés. In connection with Public Law 480, we have had, I would say, considerable success in the improvement of the activities of our agricultural attachés and in providing more direct responsibility to the Department of Agriculture. I think this committee might very well consider having a similar arrangement for commercial attachés as well. I very well know the complaint that you, Mr. Roosevelt, have indicated; at times, these folks are not really dedicated or properly directing their efforts. It is just a passing or a secondary phase of their career.

The CHAIRMAN. In the main, Mr. Hotchkiss, you have found most of your contacts with our foreign representatives very helpful?

Mr. HOTCHKISS. Yes. Most of them are excellent. Some of them had done nothing and had a good excuse for it. For instance, the man in Paris had done nothing on the trade contact survey. He had had more time than anyone else, and when I arrived there, he said, well, that his budget had been cut and he had a pile of surveys to make like that [indicating], and they were just getting started on them.

Fortunately, he had a secretary who was really on the ball, and she did a lot of telephoning, and got me some appointments, and I had good appointments there but I still couldn't sell anything. My prices were too high.

But that happened in several places. That is, the work started on the so-called survey when I arrived there, rather than having done anything in advance. The man in Frankfurt had everything all written out. He had all the contacts. He had everything all set. I still didn't get any business, but he did the best he could for me.

The CHAIRMAN. Mr. Hotchkiss, we certainly appreciate your fine testimony. We thank you immensely for coming down and giving us the benefit of your views and experience. You sum it up by saying "There is no good substitute for personal contact."

Mr. HOTCHKISS. I believe that is true.

The CHAIRMMAN. And your experience has certainly been worthwhile and I think taking your wife along also helped you with your contacts. You recommend taking the wives along on these trips, too, don't you?

Mr. HOTCHKISS. Well, I think the revenue department ought to get into the picture there.

The CHAIRMAN. Mr. Hotchkiss, we are going to include, without objection, your entire statement. You have highlighted it for us, your experience, and we are going to include your entire statement in the record.

(The statement referred to follows:)

STATEMENT OF C. F. HOTCHKISS, PRESIDENT, STOW MANUFACTURING CO., BINGHAMTON, N.Y.

Mr. Chairman and members of the Select Committee on Small Business, my name is C. F. Hotchkiss. I am president of the Stow Manufacturing Co., a New York corporation established in 1875. We employ about 140 people and do an annual business of about $3 million. We qualify as small business in all respects except that we might be considered to dominate the field in one of our product lines-flexible shaft remote valve controls.

PRODUCTS

We manufacture flexible shafts for power drive and remote control used in machinery, aircraft, and ships; and powered equipment for making concrete including concrete vibrators, rotary trowels, screeding machines, and concrete grinders. The attached pamphlet printed in Spanish gives a bird's-eye view of our concrete products.

EXPORT BUSINESS

When I refer to export business I am excluding Canada since Canadian business has always been handled more or less the same as domestic business. Our salesmen who cover the States adjoining Canada also travel in Canada. Most of our export business is in the concrete equipment line.

We have been doing a certain amount of export business for many years. Up until 1953 this business was conducted almost entirely by mail. We did not have an export agent but we did use a forwarding agent who handled a great deal of the detail work.

In 1953 we employed an export manager at a commission of 10 percent of sales. This was very easy. He handled all the details. We billed him for all shipments and he paid his bills promptly. About this time we had been doing about $27,000 a year in export business. With the export manager, he increased the business to around $50,000 per year for the first 2 years, then it started to slip back until the year 1961 we were only doing $28,000 and we decided something should be done about it.

DEPARTMENT OF COMMERCE

Fortunately in June 1961 we were advised that the Department of Commerce would hold a clinic in Albany, N.Y., covering export trade so our sales manager, Mr. J. L. Dickinson, and I attended the clinic. They had an excellent panel of speakers at the clinic who discussed various methods for small business to enter the export field. They also explained the many services available to business by the Department of Commerce to aid them in their export business. We were surprised and pleased to know all the different things that the Department of Commerce can do to aid the businessman in developing foreign trade. result we decided to dispense with our export manager and try to set up our own lines of distribution in the foreign countries. Of course, we already had some distributors but they were not doing very much business. We also decided that the best thing to do was to take the bull by the horns and go abroad ourselves. We planned our trips very carefully in advance with the help of the Department of Commerce.

As a

TRADE CONTACT SURVEYS

This is a service of the Department of Commerce whereby for $10 per country they will have their commercial officer in the various foreign posts contact and interview prospective distributors. They like to have at least 3 months' advance notice for this service. We requested the surveys for 15 countries in Asia and Europe and 25 or 30 in Latin America. Six complete sets of literature on our products were sent with this request. We also advised the Department of Commerce that we were going to visit these various foreign posts abroad and a letter was written from the State Department over the signature of Secretary Rusk advising the date of arrival at the various posts.

WORLD TRADE REPORTS

These reports are similar to Dun & Bradstreet Reports in this country so that if you start planning far enough ahead before a trip you can know in advance who your prospects are as well as their financial responsibility.

TRIP AROUND THE WORLD

I left New York in late September and was gone about 14 weeks. I visited 17 foreign posts in Asia and Europe. On the trip I was able to set up six distributors for our products, all of them in Asia except one in Athens. The trip cost about $7,000 but since my wife accompanied me, I only charged about $3,000 to the company.

I won't cover the whole itinerary of my trip but here are a few highlights. My first stop was Hong Kong. A letter from Dick Kirby, the commercial attaché, was in the hotel room welcoming me to Hong Kong and asking me to call him as soon as possible. The next morning I called Mr. Kirby and he arranged a meeting with an architect, an engineer, a contractor, and several others to discuss the market possibilities of our products in Hong Kong. The general consensus of the meeting was that there should be a good market for our products. Mr. Kirby had also contacted several prospective distributors whom I called on in the afternoon. We selected William Jacks & Co. as our distributor and I sent home an order for stock amounting to about $6,000.

The next stop was Bangkok. Mr. Joseph O'Neil, Jr., the commercial attaché, had done a very thorough job of canvassing prospects and advised me there was only one good outfit for us, the Term Engineering Co. I was a little disappointed at first that I had no choice, but I was very pleased with the choice he had made and it turned out very well for us since. They have placed several orders since that time and Mr. Term, the president of the company, visited us in Binghamton about a month ago.

Up until this time things had run so smoothly I thought the whole trip was going to be a cinch.

The next stop was Bombay where things are quite different. To begin with they have so many rules and regulations on what can be imported and what can't, it is rather difficult to do business there. Three companies were anxious to get licenses to make flexible shafts. They seemed like good substantial companies and their World Trade Reports indicated they were solid, but on further investigation, I found there are so many restrictions on license agreements it is not too attractive.

Things got balled up a bit in Pakistan. A very good company in Lahore was very anxious to take on our line and willing to place a stock order. He said it would be necessary to check with their office in Karachi. Later when I arrived in Karachi, I found they had a competing line and couldn't take it on so I had wasted all my time up to that date. However, later as a result of the various calls I made, we did line up a very good distributor and have received two very nice orders; incidentally, getting back some of the U.S. dollars that are poured into Pakistan on foreign aid. I picked up a distributor in Istanbul and one in Athens. This is the only place I needed to have an interpreter on the whole trip.

After Athens I stopped at Rome, Milan, Frankfort, Copenhagen, Amsterdam, Brussels, Paris, and London. The weather was bad on this part of the trip and business was worse. A few companies expressed interest in our products but our prices were not competitive. Consequently, we have no distributors whatsoever in Europe.

We haven't given up Europe as a dead loss because we think there is a place where it would be profitable to license some Europan manufacturer to make our products for sale in Europe. We have employed a management consulting firm who specializes in European trade to help set up this arrangement. It is too soon to have any report on the results.

LATIN AMERICAN

Mr. Dickinson covered the Caribbean countries in about 14 days including five countries. He set up four new distributors and called on two old distributors. Shortly after this trip, he took another trip to South America which took 38 days, made 18 stops, set up 5 new distributors, and called on 9 old distributors. Early in 1962 he took another trip to Central America taking 19 days including seven stops, set up two new distributors and called on four old ones. The total cost of his three trips was about $2,800.

Mr. Dickinson didn't get the trade contact surveys until after he returned. He already had quite a few leads as a result of talking to the editor of one of the export magazines, Reporto Industrial. Also he used the phone books locally for prospects. He did not call on any of the foreign posts since he felt he had sufficient leads.

RESULTS

As mentioned previously, our export business excluding Canada for the year 1961 was $28,000. For the year 1962, it was about $119,000, and bookings through July 1963 are about $65,000 which would indicate that we will do as well this year if not better than last year.

Our investment in expenses totaled about $5,800 for which we have increased our business $90,000 and at the same time saved the 10 percent commission that we would have paid the export manager so that the saving in commission more than paid our expenses in 1 year.

It probably will be necessary to repeat these trips and we should be able to do a better job of it next time.

RECOMMENDATIONS

(1) I think the Department of Commerce should circularize small manufacturers with an attractive brochure preferably not more than four pages pointing out the services that they can render. This probably could be handled by the Small Business Administration. We feel they have been most helpful to us and could be to many other small manufacturers but they can't use the service if they don't know about it. I think the clinics are wonderful and should be continued. (2) I think more recognition should be given to the local employees of the foreign posts who are attached to the commercial department. Generally speaking, these fellows are responsible for either having a good commercial office or a relatively poor one. They can be of great assistance to American businessmen abroad because they speak the language and know the ropes.

(3) I think that the commercial officers should be required to stay in a post for at least 4 years instead of 2. A 2-year term hardly gives them time to know the score before they are moved on somewhere else.

(4) The Trade Contact Surveys are most helpful. I believe they have increased the price to $50 and they are still a bargain providing the commercial officer has done a good job. Special consideration should be given in cases where a businessman is going to visit the foreign post. I realize that frequently businessmen advise the commercial officers in the foreign posts that they will arrive at a certain time and never show up. Perhaps a deposit of $100 could be sent to the foreign post at the time the Trade Contact Survey is requested, to be returned to him when he arrives. This certainly should help correct this situation.

(5) Most important, I think it should be made as attractive as possible for an American businessman to go abroad to sell his products. There is no good substitute for personal contact. I found this particularly true in Asia and Mr. Dickinson found it so in South America. If the Government wants to improve our export business, they should not be picayune about expense accounts.

I believe the businessman should be allowed to deduct reasonable expenses for his wife. I am sure many businessmen would find it very hard to leave on a foreign trip without taking their wives, and if they can't afford to take them at their own expense, they would probably not go at all. Also, there probably would be a great many people who would abuse the expense account angle, but if you stack that up against the possibility of tripling export business as we were able to do in one year, it would seem as though it would be well worth taking the chance on abuses.

It has been a pleasure to appear before this committee.

The CHAIRMAN. Mr. Robison?

Mr. ROBISON. Mr. Hotchkiss told me in my office, earlier this morning, about taking wives on such trips, upon which the Internal Revenue Service frowns. At the same time, the Revenue Service has no objection to your taking a secretary along; that is a proper business expense. It might be that many businessmen's wives won't let them go with a secretary, but with the wife along and with a little more relaxed view of the business expense feature of such trips, maybe more people would follow Mr. Hotchkiss' example.

The CHAIRMAN. Mr. Hotchkiss, I am awfully pleased to greet a man from New York who also believes in the Cordell Hull reciprocal trade philosophy. Coming from Tennessee, I believe in the doctrine that trade is a two-way street and if we go after the business, Americans can receive their share of business-if they are determined to do so, as you have.

Thank you very much.

The committee will call next Mr. E. M. Lang, president of the Resources & Facilities Corp. of New York, N.Y.

Mr. Lang, you may be seated. The committee will be very pleased to hear you.

TESTIMONY OF EUGENE M. LANG, PRESIDENT, RESOURCES & FACILITIES CORP., NEW YORK, N.Y.

Mr. LANG. Mr. Chairman, after hearing the previous witnesses, it is a great temptation for me to digress a bit, because in the 15-odd years that I have been traveling to all five continents, representing the interests of American manufacturers, I find that many of the vignettes that they take from their experience intersects with many of the things we have run across. I would love to talk for a long time about the experiences we have had with our commercial departments abroad, with the work I have done with the Department of Commerce since 1955. I have been on five trade missions, and also am familiar with the attitudes of American manufacturers in the tools of the trade.

The CHAIRMAN. Mr. Lang, you may proceed as you wish. If you would like to include your entire statement in the record and just speak from your vast knowledge and reservoir of experience, we would be glad to hear you.

Mr. LANG. Actually I have tried to concede most of the problems that exist, and my purpose here today is respectfully to present a program that I think may be of interest to the committee, and I hope, at the risk of trying your patience, if I can just sort of go over some of the background of this, that I might be permitted to do so.

My name is Eugene M. Lang. I live in Queens, Long Island. My office is in Manhattan, but my constituency is the entire world representing the interests of the American manufacturers. Today there are more than 250,000 manufacturers in the United States, mostly classified as small business, who have no export objectives or program for developing oversea markets for their products or their product know-how. This is a matter of immediate and serious national concern for two reasons.

First, these companies could contribute more significantly to our economic growth if they were stimulated by profits, ideas, and technology that are provided by exposure to foreign markets.

Second, by developing oversea business, they could offer a large part of the answer to our balance-of-payments problem.

To encourage small business to take greater risks and accept more responsibility in developing a more favorable balance of payments, Federal legislation is needed now.

This legislation will insure the success of this problem without governmental financial assistance. Instead, it will provide the essentials that will encourage and even inspire small private industry to move out into foreign markets and create an accelerated flow of dollars back home.

Simple arithmetic underscores this thought. If only 10,000 of the above 250,000 manufacturers-only 1 out of 25-were each to launch an effort that would create a net dollar influx of $250,000, the resulting $2.5 billion would more than cover the $2.2 billion balance-of-payments deficit of 1962.