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Similarly, Roger M. Blough, chairman of the board, United States Steel Corp., has reported sharp increases in steel-barbed-wire imports at $40 per ton below comparable domestic wire.
Mr. Blough indicated that had this imported barbed wire some 64,000 tons—been made here it would have represented about $6 million additional in American steelworkers' pay envelopes.
In short, we would have had the wire, the pay, and the taxes and other collateral benefits, and the employed steelworkers would have been better customers for our industry just as our workers are better customers for the consumer products of these heavy industries if employed.
The General Electric Co. is reported to have come to the belief that rising imports of heavy electrical-power equipment pose a threat to national security and should be curbed under the national defense clause.
Gentlemen, we suggest these are but portents of more to come if we continue to expand the paradox of our domestic and foreign trade policies.
Further, we reject the proposition that the resolution of this paradox lies in so-called "trade adjustment” proposals which encompass some form of Government aid in retraining workers, in relocating industries, in modernizing plants or methods, or even direct subsidies. Such largesse by Government is not only in many ways undesirable and impracticable but also would be self-defeating. They serve only to highlight the basic contradition in our trade policies.
Who gains, for example, if we say to the world, “send us your wool textiles," cut our tariffs for this purpose, and then in turn subsidize our domestic wool textile industry so as not to be displaced by imports in our own market? Are we to believe our foreign friends will not see through, will not resent, this kind of sham? Of course they will. They have, in fact.
For example, there was immediate reaction to the administration's minerals subsidy plan—both abroad and at home. Said Britain's Mining Journal :
If the scheme offers a subsidy which is a potential threat to the trade of another country, it will almost certainly be a contravention of the General Agreement on Trade and Tariffs (GATT). At home, R. S. Reynolds, Jr., president of Reynolds Metals Co., asserted the metal-subsidy proposal discriminated against aluminum. Now, we understand, aluminum is to be included if the metals-subsidy plan goes through.
We must protect competitive American industries from unfair lowwage competition from abroad by more realistic tariff policies. If we continue to make insincere gestures toward free trade, in a world not. ready for free trade, cutting tariffs and then subsidizing affected industries, we will be forced to abandon our American enterprise system.
The United States has twice served as the arsenal of democracy. If we are to serve the cause of a just and lasting peace we must preserve our strength here. We cannot do this by exporting our essential industries.
Further, should we socialize these industries to preserve them, has not the battle already been lost?
General objections: This bill has not been clearly represented. It is referred to as a “5 year" extension. Actually, if I understand the language, the tariff reducing authority it would extend can be used up in 3 years. What then? If the past be prelude, then you will be confronted with demands for additional tariff-cutting authority prior to the end of the 5-year period when the bait is all gone.
On the other hand, should world events defer the immediate utilization of this tariff-cutting authority, the President could, immediately prior to June 30, 1963, enter into agreements that could have 5 years to run, making this measure potentially effective for 10 years. On both counts we deem this measure unwise.
Commencing July 8 before a special Senate Interstate and Foreign Commerce subcommittee it will be the Senate's purposeto conduct a full and complete study of all factors affecting commerce and production in the textile industry of the United States. In this connection Senator Norris Cotton of New Hampshire has said: As a Nation, we simply cannot afford to let this basic industry perish.
Senator John O. Pastore of Rhode Island has described the basic purpose of the investigation: to analyze the cause of the decline of the American textile industry and consider possible cures.
Further, Senator Cotton has said:
Gentlemen, the greatest malaise affecting the wool-textile industry in general is the lack of confidence in our foreign-trade policy as charted in the bill before you. Deal effectively with this measure by recapturing your constitutional authority over our foreign-trade policy; give us reasonable expectation of fair foreign competition, and the effect will be singular-and to the national benefit.
(Exhibits A, B, and Care as follows:)
EXHIBIT A JUNE 1958 DATA ON "50 PERCENT CONTRACTION IN THE WOOL TEXTILE INDUSTRY
DANGER AHEAD" Page 5. “Where the industry is located”: As of December 1957 the distribution is as follows: New England, 44 percent; South, 32 percent; Middle Atlantic, 18 percent; North Central, 5 percent; West, 1 percent.
Page 6. "Machinery loss over 50 percent since 1946": The 1946 and 19.5 figures as charted are repeated here with the addition of the years 1956 and 1957.
Page 7. “Cloth production, employment drop sharply": The 1946 and 1956 figures as charted are repeated here with the addition of 1957 :
linear yards 1946.
329 Production drops 46 percent.
Pages 8 and 9: “Wool textile imports hit United States from East and West". Page 8:
Pounds Yarn imports, 1957-----
2, 300,000 From Japan.--
700, 000 From Belgium--
500, 000 From Germany--
400,000 From France--
200, 000 From U. K.---
400,000 The footnote on Japan for 1957 should show : Wool yarn------
700,000 Wool knit items--
1,500,000 Page 9: "Imports of woven wool cloth jump 673 percent to 32,235,000 yards in 11 years. 1957 main sources
15, 600,000 Japan.
7, 800,000 Italy ------
1, 300,000 Page 10. Loss $26,836,000 in 1954. Page 11. "The threat to national security":
1957 broadlooms, 18,400; lost capacity, 20,600.
Office of the Director,
Washington, D. C., January 6, 1958. Mr. EDWIN WILKINSON, Executive Vice President, National Association of Wool Manufacturers,
New York, N. Y. DEAR MR. WILKINSON : On March 14, 1956, your association requested the Director of the Office of Defense Mobilization “to investigate or reappraise what the petitioners consider to be the threat to national security presented by wool textile imports, within the meaning of section 7 of the Trade Agreements Extension Act of 1955."
Accordingly, investigations were set in motion and included, on June 3-4, 1957, public hearings on your petition. Since that time, additional and more current information has been sought and obtained, other agencies of the Government have been consulted and an analysis has been made of all the evidence available. This review and analysis have been directed at the material presented, and at the various viewpoints expressed, as well as at other pertinent factual data.
It should be noted, however, in conformity with the legal responsibilities of the Director of the Office of Defense Mobilization, that our study has been confined to the national security implications of the imports in question in relation to the domestic wool textile industry.
We accept the general promise you stated that “past experience in national emergencies has established beyond reasonable doubt that an adequate wool tertile industry is essential to national security." At the same time, past mobili
zation experience is no longer an adequate guide to many specific current or potential national security decisions.
Thus, in the national security sense, even though we can concur in your general premise, we have been required to examine it in the light of current or projected mobilization requirements for wool textiles. On that basis, we have found that while the domestic wool textile industry will continue to be essential to effective national security it will represent a smaller factor in national defense planning and operations than in recent periods of mobilization.
Under these circumstances, we have investigated further your statement that "the wool textile industry has contracted severely since World War II to a point where there is grave doubt that it could meet mobilization requirements in a national emergency." In our judgment, based upon examination of the information available, your conclusion cannot be supported.
Fundamentally, our position rests upon the fact that military requirements for woolen and worsted fabrics under mobilization conditions are now drastically reduced from previous emergency levels. Although the figures are necessarily classified, an interim Department of Defense estimate shows that military mobilization needs, as computed currently, have dropped to levels less than half of those formerly indicated to be necessary in emergency.
Therefore, despite contractions in the wool textile industry since World War II (contractions caused by a variety of factors), the industry's current and foreseeable productive capacity remains several times greater than direct military requirements. Likewise, in a mobilization period permitting substantially full though allocated production, the industry's estimated productive capacity, both existing and new, appears to be more than sufficient to provide for all domestie and export requirements.
Finally, we have sought to discover the extent to which, as you put it, “imports have contributed to the industry's contraction and now stands as an effective bar to any expansion of industry capacity and one of the most important prospective factors in determining whether or not there shall be even further contraction in the dangerously low capacity level." We have found it impossible to concur fully in this statement, but neither can we discount it completely.
Many factors have clearly contributed to contraction in the domestic wool textile industry: a decline in consumption and demand since the peak postwar years, higher costs and prices, and the development of and shifts to synthetic fabrics, among others. No doubt the level of imports has also been a factor, although one having an uneven impact within the industry. In addition, the trend of imports is unquestionably an important element for some companies as they discuss decisions affecting contraction or expansion.
On balance, however, we have been unable to conclude that the level of imports of wool textiles has of itself caused severe contractions in the domestic wool textile industry. As a matter of fact, in 1955 and 1956, when imports of woolen and worsted goods had reached the highest annual levels, recorded, total domestic production actually reflected a 2-year net increase an increase which in total was larger than the total import volume for those 2 years. Wool textile imports have risen gradually in recent years but, on the basis of the most current figures available, still represent only about 7 percent of domestic wool textile production.
In view of these and related facts, I do not have reason to believe that the level of imports of wool textiles threatens to impair the national security. Sincerely yours,
GORDON GRAY, Director. нхивт с
NATIONAL ASSOCIATION OF WOOL MANUFACTURERS,
New York, January 14, 1958. Hon. GORDON GRAY,
Director, Office of Defense Mobilization, Washington, D.C. DEAR MR. GRAY: This relates to your letter of January 6, 1958, in response to our petition of March 14, 1956, by which you have advised us, and publicly announced, that you do not have reason to believe that the level of imports of wool textiles threatens to impair the national security.
No individual or group of individuals could be more anxious than we in hoping that your present conclusion is right, in the public interest. However, we note that your decision is fundamentally based on a classified interim esti. mate by the Department of Defense. Because this is an interim estimate we
presume it is subject to confirmation or revision. Meanwhile, because of the nature of this problem, we offer the following observations on other points raised by your letter.
I. FULL PRODUCTION Your conclusion is predicated, in part, on your belief that in a mobilization period we may rely on substantially full production on existing and new capacity through allocation and achieve all our domestic and export requirements for military and civilian use. This assumption, in our judgment, is open to question on the basis of past experience in war emergencies. The fact is that, with all the controls of manpower and materials in effect for World War II, at no point did the industry approach full production.
Because your premise involves substantially full production on existing productive capacity and, in addition, on new capacity of undisclosed size, we are unable to appreciate how you arrive at your conclusion.
In the past, textile machinery manufacturers were turned to the manufacture of military hardware and implements of war. It is our assumption they may well be recalled to these tasks. We, therefore, question the wisdom of relying upon these sources for new equipment virtually under a crash program, if that is contemplated.
II. FORESEEABLE CAPACITY
We make no claim to superior powers of prediction. Your prediction that the "foreseeable productive capacity remains several times greater than direct military requirements" is based, in part, on information not available to us. However, as respects the nonclassified data on which this assertion rests we believe we are, in modest measure, qualified to offer some words of caution. It is our considered judgment that the Government's action on the implementation of the tariff-rate quota (Geneva reservation) for 1958 and thereafter will have appreciable effect on the rate of industry contraction in the foreseeable future, as will the course of imports of wool textiles of all kinds. We observe an attitude of discouragement and frustration in the industry with respect to Government's disposition to deal effectively with these matters which, if not checked, may so accelerate the course of liquidation as to substantially change our capacity to produce and thus invalidate all predictions.
III. IMPACT OF IMPORTS
As you recognize, imports of wool textiles have an uneven impact within the industry. In 1957 the tariff-rate quota appears to have had the capacity to check the upward surge of overall wool cloth imports. It is, however, a limited remedy as it applies directly only to woven fabrics. Of itself it offers no solution to the problem posed by imports of apparel and knit items, yarns, and semimanufactures. Precently, various factors may have slowed the upward surge of imports of some of these latter items but we would point out that such deterrents may be temporary. Should they disappear or diminish there is now no effective, timely bar to keep them from resuming their alarming growth. Our reduced duties are inadequate to offset the vast wage gap advantage enjoyed by our foreign competitors.
Furthermore, as presently administered, the tariff-rate quota fails to take into account the uneven impact of imports in the area of woven wool cloths. It is our considered judgment that unless this fault is corrected in 1958 its capacity to alleviate the injurious foreign competition confronting many weaving mills, which are sources of military requirements, is doubtful.
IV. LEVEL OF IMPORTS
Implicit in the statement accompanying our 1956 petition and in our statement at the hearing in June 1957, is the thesis that increasing imports contribute to the contraction of our productive potential. In other words, we are not only concerned with the absolute volume of imports but also with their precipitous increase and their uneven impact on our mills.
This letter is written with the full concurrence of the members attending our executive committee meeting today. Because you accept our general premise that an adequate wool textile industry is essential to national security we urge ODM to keep under constant surveillance the effect of imports on the industry and hence on national security. To this end we will consider it our responsibility