TABLE 6.-ORIGIN AND DESTINATION OF FOREIGN TRADE OF U.S. MANUFACTURING INDUSTRIES, 1970, 1971 AND 1972-28152B-SYNTHETIC ORGANIC DYES, PIGMENTS, LAKES, AND TONERS (INCLUDES 28153)

Total**

77, 536 43, 165 -34, 370 108, 413 44, 347 -64, 065 112, 524 53, 171 -59, 353

Source: Trade Relations Council of the United States, Inc., "Employment, Output, and Foreign Trade of U.S. Manufacturing Industries" (6th edition), 1974.

The steady increase in the balance of trade deficit of the United States in synthetic organic dyes and pigments, and the reduction which is occurring in our very small share of the world export market should indicate to the Committee that there are no compelling reasons for accommodating the insistent demand of the foreign producers for repeal of ASP. It is not a case where the foreigners are being shut out of our market; indeed, it is abundantly evident that they have succeeded with a dominant competitive power of virtually shutting us out of the world export market, while they enjoy a large and growing position in our market.

VI. THE REPEAL OF ASP AND THE SUBSTITUTION OF THE CONVERTED RATES BASED UPON THE FOREIGN SELLING PRICE WOULD GIVE THE CARTEL-LIKE EUROPEAN INDUSTRY THE MEANS FOR MAKING FURTHER REDUCTIONS IN THE ACTUAL DUTIES COLLECTED THROUGH CONCERTED PRICING ACTIONS

The European industry operates through a cartel-like arrangement. On July 24, 1969, the Commission of the European Economic Community conducted an investigation and entered its decree finding 10 European producers of dyes guilty of violating the antitrust provisions of the Treaty of Rome by repeatedly fixing prices for dyes sold in the Common Market through concerted action. The European producers are relatively free from competition from American producers in the European market. Where they have virtually complete domination of a market, it is their tendency to raise prices in concert to the detriment of the consumers served by that market.

The antitrust article of the Treaty of Rome, Article 85, applies only to practices which affect trade within the Common Market, and specifically exempts practices which affect the export trade of EEC producers. Consequently, the companies which have been found guilty of anticompetitive concerted action within the EEC are free to carry out such activities in their exports to the United States without fear of any prohibition by the EEC Commission.

If the independent dye producers in the United States are driven out of business by the tactics of the European industry, which the ASP has been an effective shield to prevent, you may expect anticompetitive activities in the American market similar to those which have been found by the Commission to be carried out in Europe.

The principal way in which the ASP serves as a shield against such possibilities is that the foreign producers who have the means and disposition to agree on prices are unable to affect the determination of U.S. import duties since they are based on the selling price of the U.S.-produced product rather than the selling price of the foreign-produced product. The repeal of ASP would base import duties on the selling price of the foreign product, which, of course, is under control of the foreign producer, and which he is in a position to set by way of concerted action with the other members of the European cartel. Through their U.S. affiliates, the European producers (Hoechst, Bayer, Badische, and Casella of Germany; Ciba-Geigy and Sandoz of Switzerland; and I.C.I. of England) are in a position quickly to dominate the American market through the U.S. production and distribution activities of their affiliates and their own foreign production for the American market—if they gain this type of leverage over the determination of U.S. duties applicable to their exports to the United States.

According to the Tariff Commission, through the combination of their U.S. affiliates and their export to the United States from Europe, the foreign producers had captured fully one-third of the American market by 1965.5 According to our trade estimates, the European producers have now increased this market share to more than 40%.

CONCLUSION

The foreign chemical industry and other advocates of ASP repeal base their case on the allegation that American producers can cut off imports by arbitrarily raising the duty on a product by raising the price. This argument conveniently ignores the reality of the market place where a price increase of $1 per pound would be required to raise the duty by 20¢ and would itself make the U.S. product noncompetitive, if it were not already so.

U.S. Tariff Commission, Report to the Special Representative for Trade Negotiations, July 25, 1966, p. 19.

The real crux of the matter is that the members of the foreign cartels wish to secure for themselves the power to reduce U.S. duties under a system in which dutiable value would be based upon their foreign export price. If ASP is repealed, the foreign cartels will be able to carry on a campaign under which for each 30¢ reduction in their foreign export price, the United States Government would contribute a further reduction in landed costs of 9.

By every test in the domain of results by which a liberal trade policy can be judged, there is no need to repeal ASP and thus sacrifice the independent American dyestuff industry: The growth rate of imports is several times the growth rate of American production. Furthermore, the rising import penetration of the domestic market in dyes is equal to that in textiles, a recognized symbol of excessive import competition. The manufacture of dyes is, moreover, equally or more labor intensive than the manufacture of textiles, the industry which the dye manufacturers exist primarily to serve and with whose fate the welfare of the dye industry is inextricably bound.

The decision before this Committee, therefore, turns essentially upon the concepts of justice, equity, and fair play. Our past trade agreement reductions in rates of duty have unquestionably granted more than equitable access to the foreign producers in the U.S. market. On the other hand, the side basis for the health and welfare of the U.S. dye industry and its employees lies in continued access for U.S.-produced dyes to the U.S. market. This access will be destroyed by the repeal of ASP.

In the name of justice and fair play, therefore, we call upon this Committee and the Congress to reject the proposal to repeal ASP as to dyes, pigments, and dye intermediates. We urge you to amend Section 102 (b) of Chapter 1, Title I, of H.R. 10710 by changing the period at the end of the subsection to a semicolon and adding the following: "Provided that, there is excluded from the authority contained in this section the existing methods of customs valuation applicable to synthetic organic dyes, lakes and toners, and dye intermediates subject to classification under Part 1, Schedule 4, Tariff Schedules of the United States." Thank you. This concludes my statement.

EXHIBIT 1

AD HOC COMMITTEE OF U.S. DYESTUFF PRODUCERS

American Color & Chemical Corp., Paterson, N.J.

Atlantic Chemical Corp., Nutley, N.J.

Benzenoid Organics, Inc., Bellingham, Mass.

Berncolors-Poughkeepsie, Inc., Poughkeepsie, N.Y.

Blackman Uhler Chemical Division, Synalloy Corp., Spartanburg, S.C.

Crompton & Knowles Corp., Dyes and Chemicals Division, Fair Lawn, N.J. Fabricolor Manufacturing Corp., Paterson, N.J.

Lakeway Chemicals, Inc., Muskegon, Mich.

Nyanza, Inc., Lawrence, Mass.

Pfister Chemical Works, Inc., Ridgefield, N.J.

Sodyeco, Division of Martin Marietta Corp., Charlotte, N.C.

Young Aniline Works, Inc., Baltimore, Md.

STATEMENT OF EUGENE L. STEWART, ESQ., ON BEHALF OF

FOUR DOMESTIC PRODUCERS OF FLAT GLASS

ASG Industries Inc., Kingsport, Tenn.

C-E Glass, a subsidiary of Combustion Engineering, Inc., Pennsauken, N.J. Libbey-Owens-Ford Co., Toledo, Ohio

PPG Industries, Inc., Pittsburgh, Pa.

INDEX

I. Recommendations for reform of the prenegotiating procedures based upon the domestic glass industry's experience in prior U.S. trade agreement negotiations.

II. Recommendations for reform of the tariff adjustment procedure based upon the domestic glass industry's experience in the use of the escape clause.

III. Recommendations for reform of the antidumping criteria and procedures based upon the domestic glass industry's experience in antidumping cases. Amendments to the Antidumping Act of 1921.

Countervailing duties.

Preferential tariff treatment for manufactured products imported from developing countries.

Trade relations with countries not enjoying most-favored-nation tariff treatment.

Conclusion.

Mr. Chairman and members of the Committee: I am Eugene L. Stewart, and I submit this statement in my capacity as counsel for four domestic producers of flat glass; namely:

ASG Industries Inc., Kingsport, Tenn.;

C-E Glass, a subsidiary of Combustion Engineering, Inc., Pennsauken, N.J.;

Libbey-Owens-Ford Co., Toledo, Ohio; and

PPG Industries, Inc., Pittsburgh, Pa.

During the past 10 years, these domestic producers have repeatedly invoked the escape clause of the trade agreements legislation seeking an adjustment in imports to eliminate the serious injury caused or threatened by increased imports, as well as the Antidumping Act in an attempt to correct the injury which they have sustained as a result of the use by their foreign competitors of the unfair method of competition known as dumping.

The experiences of these domestic producers in their efforts to secure the administration of the remedies provided by the Congress against import injury led them to believe that they can be useful to this Committee in its consideration of foreign trade legislation by presenting a concise description of the inadequacies of existing law as administered by the Executive Branch of the Government. To this end we present our testimony in five sections:

1. Based on the experience of the domestic producers of flat glass, the reforms which are required in the prenegotiating procedures incident to the use by the President of trade agreements authority;

2. Based on the experience of the domestic producers of flat glass, the reforms which are required in the post-trade agreement procedures for the adjustment of increased imports to correct serious injury caused or threatened to a domestic industry by imports stimulated by trade agreement concessions ;

3. Based on the extensive experience of these domestic producers, the reforms which are required in the anti-dumping and countervailing duty statutes and administration; and

4. Based on the number of developing countries which have an export surplus in their manufacture of flat glass, the improvement which is required in the specification of the conditions and procedures precedent to the grant of preferential tariff treatment to manufactured products imported from developing countries.

5. Based on the emergence of Communist countries as leading suppliers of U.S. imports of flat glass, the improvement which is required in the conditions precedent for the grant of Most Favored Nation tariff treatment to such countries.

The term "flat glass" as used in this statement refers to the following types of glass:

(a) Sheet glass, presently the least expensive category of flat glass, which is principally used in the glazing of windows and patio doors of residences; (b) Plate glass, a very high quality flat glass product which is chiefly used in the glazing of store fronts, office buildings, other institutional structures, and in high quality mirrors;

(c) Float glass, a comparatively new flat glass product made by a revolutionary technological process, interchangeable in quality with plate glass for most applications, which is less expensive to produce than plate glass but still more expensive than sheet glass used for the glazing of residences;

(d) Cast and rolled glass, which as patterned or obscure glass is principally used as the partitions in offices and other institutional structures, in the glazing of doors, and for such residential applications as shower doors;

(e) Polished wire glass, which is produced so that a wire grid of various designs is imbedded in the interior of the glass, and is chiefly used as safety glass in schools, factories, and other institutional buildings; and

(f) Tempered glass, produced by the controlled heating and cooling of sheet, float, or rolled glass, is principally used for the side and rear windows of automobiles, and for patio doors and the glazing of other openings in residences and office buildings to comply with state and municipal laws requiring the use of glass more resistant to breakage than ordinary glass which, upon breaking, fragments into small blunt particles, minimizing the risk of injury.

Historically, the technology for the production of sheet and plate glass, cast and rolled glass, and tempered glass originated in or was advanced to its current technological state in the United States. The most recent advance in the technology of flat glass manufacture, the float glass process, was developed by Pilkington Brothers, the British flat glass monopoly. All flat glass manufacturing technology is widely licensed throughout the world.

With the exception of float glass to which I shall make further reference in a moment, the manufacture of flat glass is highly labor intensive. The raw material for flat glass manufacture, silica sand, is widely distributed throughout the world. The energy resources required to operate the glass melting furnaces is also generally available throughout the world. The high skills required of production workers in the operation of the flat glass factory and the cutting edge treatment of the glass following manufacture result in comparatively high wages. In the United States, the average hourly wages paid production workers in the flat glass industry rank 10th out of 259 industries or groups of industries, as reported by the Trade Relations Council of the United States in its study, Employment, Output, and Foreign Trade of U.S. Manufacturing Industries, 1958–71 (Fifth Edition), 1973, Volume 3, p. 886.

The manufacture of plate glass was especially labor intensive because of the necessity of grinding and polishing the surfaces of the glass after it was formed and cooled. Float glass, by contrast, which is generally interchangeable on a commercial basis with plate glass, is significantly less labor intensive because of the elimination in that process of the necessity for grinding ad polishing the surfaces of the glass. Float glass is produced by pouring the molten glass on a bed of melted tin which as a stabilized liquid causes the surface of the glass resting against it to be smooth and free from distortion while the upper surface of the melted glass becomes equally stabilized by the pressure of the atmosphere against it, leaving it equally smooth and free from distortion.

Float glass manufacturing, however, is quite capital intensive in comparison with other types of flat glass. The capital investment per worker required for a float glass manufacturing plant is significantly greater than that required for other glass manufacturing plants of comparable capacity.

There has been a steady deterioration in the U.S. balance of trade in flat glass in recent years. While U.S. exports in significant volume are limited essentially to our shipments to Canada, U.S. imports originate in virtually every quarter of the world. This is shown by the data in the following table.