For the GATT and the OTC are a concrete expression of the trade agreements program. They give force and effect to the only trade policy which is possible and practical if the best interest of the whole nation is to be served.

Those opposed to this bill, H. R. 5550, are well aware that their attack on OTC is in reality an attack on the trade agreements program and on the policy it represents. They are equally aware that defeat of H. R. 5550 would go far to cripple that program and that policyan accomplishment they have been unable to achieve by direct assault. Thus, however we, ourselves, may interpret either failure to approve, or a disapproval by Congress of our membership in the Organization for Trade Cooperation, we may be sure it will be interpreted by the rest of the free world as a definite swing away from the policy of cooperation we have followed in this field for a great many years and toward a policy characterized by less cooperation, less stability, and less concern for the welfare of our allies.

The Presidential messages this committee has received and the testimony it has heard from Cabinet officers, have emphasized in the strongest terms the importance of this issue to the United States and to our leadership in the free world.

The Congress is not being asked to break new ground in approving this bill. There is no request for the delegation to the Executive of new substantive authority. There is no reduction of tariff rates involved. Instead, the Congress is being asked to reconfirm its own policy by approving United States membership in an organization which will enable that trade policy to be carried out more effectively. Important though that action will be in a practical sense, it is even more important in a psychological sense. As nearly all who have testified in favor of this bill have said, the free world is waiting for this further affirmation by Congress of its belief and confidence in the program and policies it has been following, and of its desire to pursue trade cooperation rather than to return to the trade warfare of the era following the First World War.

We urge the committee to give careful attention to the views expressed by these witnesses testifying in behalf of H. R. 5550, to their essentially nonpartisan expression and to the practical unanimity with which they regard the consequences of a congressional failure to approve United States membership in OTC.

We would ask the committee to consider thoughtfully the grave implications of a rejection of this bill and to ask itself whether it is prepared to accept the responsibility of recommending such a course to the Congress.

Mr. Chairman, that finishes a brief statement of our position. Our General Counsel, Mr. Taft, will take up, as I said, questions which we feel have not, perhaps, been fully answered, and will answer any different questions the committee may have.

The CHAIRMAN. Does that complete your statement, Mr. Bell?
Mr. BELL. That does.

The CHAIRMAN. We thank you for your appearance, and the information given the committee.

Without objection, you just continue to sit there and we will now recognize Mr. Taft, since you gentlemen are appearing together.

Mr. Taft, we are very glad to welcome you to the committee, and ask you to follow the usual custom and please give your name, address and the capacity in which you appear, for the record.

75018-56-70

STATEMENT OF CHARLES P. TAFT, GENERAL COUNSEL, COMMITTEE FOR A NATIONAL TRADE POLICY, INC.

Mr. TAFT. My name is Charles P. Taft. I am the General Counsel for the Committee for a National Trade Policy.

The CHAIRMAN. I know you usually prefer to stand, so exercise your own preference; either stand or be seated, and you may proceed. Mr. TAFT. In view of Mr. Hale's statements, or at least what he quoted, I should like to offer for the record, without reading it, an article from Barron's, of February 20, 1956, which analyzes the profits and sales of the textile companies, quite a large group of them, including, I think, some from his area.

The CHAIRMAN. Without objection, it is so ordered. It will be included in the record.

(The article referred to is as follows:)

[From Barron's The Business Front]

TEXTILE COMEBACK- SALEs and ProfitS ARE THREADING THEIR WAY UPWARD

By Joseph V. Sherman

Textiles, long one of the chronic trouble-spots in the United States economy, seem to be continuing this year their good recovery of 1955. Production and more important, unfilled orders, are up; inventories are at reasonable levels; and prices are generally firm. Most producers expect this pleasant picture to continue at least through the first half of the year.

Overall industry figures released recently by the Securities and Exchange Commission point up the extent of the 1955 rebound in textiles. At the 9-month mark, sales of mill products were up sharply to $9,734 million from $8,472 million for the corresponding period of 1954. Net profits scored an even better advance, more than tripling, to $247 million. The latest Department of Commerce figures indicate that the improvement also continued into the fourth quarter of 1955. Textile sales in November were better than in October and well ahead of November, 1954, while inventories showed little change.

RESULTS NOT UNIFORM

Although all major divisions of the textile industry did better last year, the results were far from uniform. Cotton, the most important fiber, showed the smallest relative increase, while the new synthetics had the sharpest gain. The increases in 1955 consumption over 1954 were: cotton, 6.3 percent; wool, 9.5 percent; silk, 12.5 percent; rayon and acetate, 13.8 percent; and noncellulosic manmade fibers, 33 percent. Last year, for the first time, production of the new synthetic fibers passed wool consumption.

Recent months have seen a definite step-up in the tempo of cotton mill activity, a quickening of orders in most categories and a sounder ratio between mill stocks and unfilled orders. Distribution channels are said to be normal. The price structure, while still lagging, is considered stronger than a year ago, and mill margins have improved.

Cotton mills turned out an estimated 10,100 million yards of broad woven goods in 1955, against 9,763 million in 1954. Nevertheless, stocks of cotton broad woven goods at the end of November, 1955, were equivalent to only 3 weeks' supply, compared with 4 weeks' the year before. The backlog of unfilled orders at the close of last November was equivalent to 12.9 weeks' production, over 50 percent above the 8.5 weeks' of a year ago. Cotton trade circles consider 1956 prospects as "moderately" promising.

The wool people are also more optimistic. Production of wool apparel fabrics for 1955 is estimated at 305 million linear yards, a 20 percent increase from 255 million yards in 1954, which, incidentally, was one of the worst years in the wool business. Unfilled orders at the beginning of 1956 were up 35 percent from 12 months earlier, while inventories were 10 percent lower on the basis of a sample taken by the National Association of Wool Manufacturers, representing about half of the industry. Trade reports indicate that wool mills are sold up to the summer. The improved outlook stems from several factors, including a reduction in supply which has taken place in recent years, and better business in apparel. The prospects of wage increases in coming months also has caused some tendency to place orders in advance.

Production of rayon and acetate in 1955, including tire yarn, totaled 1,261 million pounds, up 16 percent over 1954, and only 21⁄2 percent below the all-time high of 1951. Total shipments of rayon and acetate by producers in 1955 were 1.2 million pounds greater than output, so that their stocks declined to 86.4 million pounds at the end of the year. Rayon yarn output increased 25 percent, acetate yarn was up 161⁄2 percent and rayon staple up 81⁄2 percent. Acetate staple, however, was down 14 percent.

Output of the newer manmade fibers, including nylon, the acrylics, polyester fiber, saran, and other chemically-made fibers, reached a new peak of over 457 million pounds last year. This included 78 million pounds of textile glass fiber, which was reported separately for the first time.

Reflecting the brighter industry-wide picture, the major textile companies not only report improved operating results, but most of them also look for the recent upturn to continue. These include such representati es of the various industry divisions as American Fnka Corp., American Viscose Corp., Bates Manufacturing Co., Beaunit Mills, Berkshire Hathaway, Burlington Industries, Celanese Corp. of America, Dan River Mills, M. Lowenstein & Sons, J. P. Ste ens & Co., United Merchants & Manufacturers and West Point Manufacturing Co.

For example, J. P. Stevens, one of the largest and most diversified of textile companies, enjoyed a 16 percent gain in sales and a 139 percent increase in earnings for its fiscal year ended October 29, 1955, over the previous 12 months.

Officials note that demand for textile products has increased and in many areas seems more nearly in balance with potential supply than it has been for a number of years, except for wartime and postwar booms. They point out, too, that productive capacity for cotton goods has been trimmed sharply over the past 30 years, with the number of spindles declining from 36 million in 1921 to 21 million today. There has been an even more drastic liquidation of facilities for the manufacture of woolen goods: since the war more than 150 woolen and worsted mills have gone out of business, while only a few new ones have been built. Stevens officials say that although competition is particularly tough in man-made fibers, there are still excellent opportunities in that field. The company is putting renewed emphasis on merchandising, and believes that it is in a stronger position than for several years past to share in the improvement in business.

FAVORABLE YEAR

Burlington Industries, Inc., the biggest company in the textile industry, with volume over $500 million in its past fiscal year, reported continued gains in sales and earnings in its first quarter, ended December 31, 1955. Sales of $179 million compared with $127 million a year previous, and net of $8.2 million, which included $3.7 million nonrecurring profits, was up from $4.2 million. Its forecast for the balance of the year is "reasonably favorable."

Burlington officials cite several reasons for their appraisal: the industry has been operating at close to capacity, on a three-shift basis, without building up too much inventory. Also, intensive competition within the industry has been eliminating marginal producers, and the poor return on investment in recent years has minimized new plant construction; in fact, there is 8 percent less textile machinery in place today than there was in 1942. Burlington, the largest manufacturer of fabrics from man-made fibers, also sees wider markets for its products from the chemical industry. New man-made fibers continue to be introduced and older ones strengthened and improved by dyes and finishes, which increase the variety and versatility of fabrics.

M. Lowenstein & Sons is another textile firm which has been making new records. Sales for the 10 months ended Oct. 31, 1955, were $266 million-the highest in its history; they compared with $225 million for the like months of 1954. Earnings of $3.68 per share of common shot up from $1.94. Lowenstein's unfilled orders are now at an all-time high, and management looks for increased sales and earnings in 1956.

At Dan River Mills, 1955 sales of $91.7 million were up almost $10 million from the previous year, and the highest since 1951, when the Korean war boosted textile demand to abnormally high levels. Net income of $3.8 million rose 35 percent above 1954. This company entered 1956 with a backlog of unfilled orders substantially above that of a year ago.

SALES INCREASE

Bates Manufacturing Co., which, like Dan River Mills, also does the major part of its business in cotton goods, estimates that its 1955 sales ran above $60.6 million, with earnings above $2 million, or over $1.13 a share. This would compare with sales of $53.9 million and net profit of $1.8 million, or 94 cents a share, in 1954. Unfilled orders at the beginning of 1956 were ahead of those for the same time last year. Despite a 12 percent increase in sales in 1955, inventories at the year-end were up only 5 percent from 1954. Sales for the first quarter of 1956 are showing some gains over the first quarter of 1955. Both sales and earnings for the full year 1956 are expected to be "moderately" ahead of 1955,

The largest rayon producer, American Viscose Corp., bounced back sharply last year from 1954, as sales approximated $260 million, against $217 million, and earnings more than doubled to about $4.65 a share. Company officials describe the current order situation as "good," and inventories in the hands of producers as "modest." There have been minor adjustments in prices recently, with staple shading off to meet import competition, and textile and tire varn moving up in response to costs. Prices appear to be firming, however, and the prospect for 1956, on balance is steady. American Viscose expects its physical volume to rise 5 percent, or slighlty more, over 1955. With the prospect of generally stable prices, dollar volume should follow suit.

American Enka Corp., a leading producer of rayon yarns, will also report fiscal 1955 sales and earnings considerably above 1954. Its current inventories of textile yarn are substantially below a year ago. It sees its sales to the textile industry in 1956 above 1955, but sales of tire yarn, although expected to be "very substantial," will depend to a large extent on what happens in Akron.

United Merchants & Manufacturers, Inc., manufacturers and distributors of textiles, had net earnings of $1.58 per share of common for the first 6 months ended December 31, 1955, compared with $1.33 a share for the corresponding period of 1954. A company spokesman termed business "satisfactory," but "extremely competitive." The situation in rayon and synthetic fabrics is less satisfactory than in cotton, he pointed out. Nevertheless, final results for the current fiscal year should compare favorably with last year.

In general, while the textile industry has shown a considerable improvement over the past year, there are both dark and bright factors in the outlook. Among the unfavorable ones stressed by a number of firms is the threat of increasing foreign competition, particularly from Japan; at the same time, exports have been declining. Balanced against those are such favorable factors as the drastic reduction in textile productive capacity over the past 3 decades, the steady growth in United States population, which is adding new textile customers at the rate of around 7,500 every day, and the development of new products for both consumer and industrial uses.

Mr. TAFT. I will review and discuss what seems to be the major questions that have arisen in the course of these hearings on OTC and the GATT that we believe have not been fully answered.

First, let me say that the issue before this committee in H. R. 5550 is not at all the old one of protection versus lower tariff policy. There is no tariff cut authorized or in any way resulting from the passage of this bill and its signature by the President. Even the major industries that opposed H. R. 1 should find considerable merit in this legislation.

It goes with saying, I would add parenthetically, that it would be totally inconsistent to vote for H. R. 1 last year, and refuse to vote for H. R. 5550 now.

There are two reasons why they should do so. First, a great many of the industry groups that oppose the Trade Agreements Act have substantial exports. In the following cases, their exports exceed by a significant amount the imports of competing products. In this group fall a majority of the opponents of OTC, including the chemical industry, textile industry, electrical machinery industry and the coal industry.

OTC, because it makes GATT more effective, will work for the reduction of non tariff restrictions that other countries impose against our exports, and particularly the exports of this group of industries. Each one of them has been faced in the past in foreign markets with quotas or other discriminatory restrictions against their exports. Why shouldn't they be for a bill like H. R. 5550 if they want more effective machinery to help remove these discriminatory restrictions against their business?

GATT has already done this for coal. Last year, through GATT, we got Belgium and Germany to reduce their restrictions against imports of American coal, and in 1955 American coal exports were 35 million tons, up from 15 million tons in 1954. This is a gain in one year comparable to the entire loss to residual oil since the peak production of 1947 in the United States.

A second reason why these groups should be supporting this bill, rather than opposing it, is that protectionists have always argued and at times with some slight justification-that the reciprocal trade agreements program was not as reciprocal as it might be, because of the fact that other countries used nontariff trade barriers against our exports. Well, that is what GATT tries to remove, and that is what OTC would help do even better than has been done up until now.