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"IN SUMMARY

“This assembly advocates balanced, expanding programs of international aid and trade to the end that in this interdependent world its various peoples, all created and cared for by God, may have a more abundant life, with more wellbeing, knowledge, justice, freedom and peace.”

Mr. Blough. What happens is that there is a department of international affairs which has a general committee of about 120 men and women from various walks of life, employers, employees, farmers, economists, professional people, clergymen and so on, and they hammer out problems which involve moral responsibility on the part of the churches, and come up with statements regarding those matters on which they believe a stand should be taken.

These statements then, if they can get virtually unanimous support, with very little dissenting opinion—and that was true in this case-go up to the executive committee of a higher body, the division of Christian life and work, where the statement is considered, and if it is passed there it goes either to the general board or the general assembly of the National Council of Churches, which represents about 38 million members of 33 Protestant and eastern Orthodox communions.

Among the national council statements over the past 7 years favoring a liberalized trade policy, the one I particularly wish to mention was passed by the general assembly last December at St. Louis by a virtually unanimous vote on the part of the 504 delegates. There was only a very small scattering of negative votes.

Now there are two paragraphs from this statement which I would like to read, Mr. Chairman, if I may.

Senator Long. Go ahead.
Mr. Blough. They are as follows:

Trade-in goods and services as a cooperative effort benefits both buyer and seller. On the basis of the principle of mutuality, in our own interest and in that of our neighbors, our economic foreign policies should seek expansion of trade. We believe that encouragement should be given industry to expand its international trade by constructive governmental policies. As a means of lowering barriers to trade, we support the principle of reciprocal trade agreements. We hope this program will be extended for at least another 5 years without weakening amendments. We urge that in its provision and operation there be less emphasis on reinforcing trade barriers and more on expanding trade.

Further, we endorse United States participation in the international machinery necessary for efficient and orderly administration of the reciprocal trade agreements system such as is planned for in the proposed Organization for Trade Cooperation.

While advocating the strengthening and extension of the reciprocal-trade system, we are aware that some agreements may have certain local adverse effects. We hold, therefore, that as our Government adopts measures to strengthen international' trade it should also approve programs of special assistance to areas, industries, and people adversely affected, to aid them in adjusting to the new conditions brought about in efforts for the larger good in an interdependent world.

It is important not only that trade among nations be expanded, but also that it be stable. Any significant decline in United States business activity would have serious repercussions abroad as well as at home. There will be specific benefit to our national economy because of policies which will increase trade, but even more, we urge such policies because they can be of much greater benefit to other countries more dependent on trade.

Most of all we support those policies because they represent an important element in the construction of international cooperation which is so essential to building a world of more justice, brotherhood, and peace.

I will let the rest of the statement go into the record, Mr. Chairman. Senator Long. Fine. I would like to get something of your view, and I assume in some instances it will be your personal view, but you are a well versed witness on this question, with regard to one or two of the aspects of foreign imports.

It would seem to me some people are in a very good position to look at this problem from a statesmanlike point of view. I have noticed that our automobile exports are four times as large in dollar volume as our imports.

Our chemical exports are seven times as large as our imports of chemicals, but one chemical industry wants protection.

Our exports of some types of electrical machinery, printing equipment and office supplies are nine times as large as our imports.

I think that those industries can very well take a statesmanlike point of view. They can afford to be in favor of expanded foreign trade even if it means more imports, can't they?

Mr. Blough. Yes, sir, I think they should be able to.

Senator Long. Although many automobiles are now being imported, our automobile industry is currently gaining more business than it is losing.

What is your view about the situation in which a foreign producer, because of our technical and material aid, is in the position of producing at a lower price than the American producer?

Do you believe we should simply make arrangements for the American producer to go out of business or do you think we should work out an arrangement whereby at a particular level we would protect the market of the American producer? .

Mr. Blough. Well, this is, of course, a very central question—and I am now speaking as an individual and not representing the National Council of Churches.

Senator LONG. Yes. Mr. Blough. The export trade of the United States is closely linked to the import trade of the United States, because if it were not for our imports our exporters would not be able to sell abroad.

In a very real sense the competition from foreign producers is at bottom really competition from our export industries. Our export industries have shown that they are relatively more efficient, in comparison with foreign producers, than are the industries unable to meet foreign competition. They pay American wages and still undersell their foreign competitors.

The United States exports those kinds of goods on which our comparative costs are low and imports those kinds of goods on which our comparative costs are high.

In this country we have in general felt that competition is in the national interest, even though some businesses are driven out by competition. Every day we have many business concerns that go out of business, not because of foreign competition but because of domestic competition.

My point is that in foreign trade our exporters, the ones who can sell more cheaply and produce more cheaply than foreign producers, are in competition with our domestic producers in the import industries, although superficially it does not appear that way.

If we cut down on our imports, our exports will fall; if we increase our imports, we have every reason to believe that our exports will

rise. In view of the situation I would say, that from the viewpoint of the national economy, while I hate to see anybody hurt, we must expect some people to be hurt.

We should not forget that the industries which are protected by tariffs or quotas have been bolstered by Government intervention. They are the beneficiaries of special Government interference in the market.

However, they have been built up under that intervention, and they have gone on for many years, and we must recognize that they have developed an expectation that the intervention will continue. Some injustice results from reducing it or taking it away.

But at the same time, we know that there are many injustices inherent in any economic system, including the American economic system. I am afraid that we simply will have to consider that the particular interests of some people must give way to the larger interests of consumers and of national economic strength.

An export industry from the viewpoint of justice is no more deserving than an industry that is subject to import competition. Neither is more important than the other essentially, but in case we have freer trade and are able to buy abroad at lower prices, we benefit the general consuming public and the national economy, while, as between groups, we are benefiting the export industries and are permitting difficulties and perhaps harm to come to industries which are subject to import competition.

Senator Long. This thought occurs to me.

The petroleum and the automobile industries are essential in commerce.

The automobile is not as essential to the national defense as the products to which the automobile industry can convert in the event of a national emergency. Moreover, the heavy industries that exist by supplying components to the automobile manufacturers are essential to America.

Foreign producers have approximately 25 percent of the petroleum market, while, in 1957, 337 million gallons were imported and i billion 300 million exported from the United States.

The automobile exports are four times as great in dollar volume as the imports.

I should think the statesmanlike thing to do would be to say, "What is the tariff on automobiles?”

Take it off automobiles and give petroleum a little more protection.
I wonder how this idea appeals to you.
Mr. Blough. I do not quite get the point.
Senator Long. What is the tariff on automobiles?
Mr. Blough. I do not recall.
Senator MALONE. Ten percent.
Senator Long. It has been reduced to 7.
Senator MALONE. Seven and a half.
Senator Long. I understand it has been reduced to 774 from 10.

What would be your reaction to further reducing the tariff on foreign-produced automobiles? Our automobile industry does not seem to need protection, while possibly our oil industry could use this protection.

Mr. Blough. I would have no objection to taking the tariff off automobiles, as far as that is concerned. But on petroleum I think

the statesmanlike thing to do is to see to it that 25 or 50 years from now we still have some petroleum, and that the best way to have some petroleum in 25 or 50 years is to meet a substantial part of our needs by imports.

Senator Long. Let me ask you this: Suppose a war actually broke out and we were producing at 60 or 70 percent or even 50 percent, of our present capacity to supply our market. How long do you think it would take us to produce at full capacity if our foreign suppliers from Saudi Arabia and Venezuela were cut off by Russian submarines?

Mr. Blough. This would depend of course on what had happened to our wells in the meantime.

Senator Long. Do you expect any industry to maintain a capacity of 100 percent greater than its production without a very heavy subsidy from the taxpayers?

Mr. Blough. It would depend on the circumstances whether they could afford to do it.

The chances are we would not have as extensive a research and development program as we have had.

Senator LONG. Well, does not capacity tend to come into line with the volume sales of almost any industry? Mr. BLOUGH. Over the long run that is certainly true, of course.

Senator LONG. If we were producing half of our domestic requirements and suddenly found ourselves at war with 500 to a 1,000 Russian submarines cutting off our shipping lanes, how long do you estimate it would take us to produce the necessary supply of petroleum ?

Mr. Blough. If, in the case you are giving, the wells in the United States had been operating at full capacity, and the war then cut us off from imports, it would of course take a long time, at least 5 years.

Senator Long. It might take a lot longer than that, might it not? Mr. Blough. Yes. Senator LONG. If we had to ration steel? Mr. Blough. Yes. If, on the other hand, our wells were operating at 50 percent or less of capacity, we could expand the production to meet the need virtually overnight. So there is some advantage in having an industry which is running at substantially less than full capacity.

Senator Long. You realize that the reason the capacity at the present time far exceeds production is because you have been cutting back on the production of the industry in the last few years.

At the time of Suez, however, you were asking for the production of all the oil you could pull out of the ground.

Now the industry is being required to cut back to about 50 percent of capacity. If you keep production there it seems logical That they are not going to drill or develop as many wells as they would otherwise. This is particularly true because most of the major companies produce oil in Saudi Arabia as well as in this country.

They would much prefer bringing in cheap oil from Saudi Arabia rather than producing as much of it in America.

Mr. BLOUGH. They would bring in oil from where they could make the most money on it.

Senator Long. If they can produce it at half the cost in Saudi Arabia would not they rather produce it there and bring it to America?

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Mr. Blough. If they could land it here, considering the cost of transportation, yes, of course.

Senator Long. Have you any experience as to what the transportation costs are?

Mr. Blough. My recollection is that we are not getting a great deal of Saudi-Arabian oil here. I think what has happened more is that the petroleum from the Middle East has been going largely to Europe, and our market has been considerably reduced in Europe on account of that.

We have been getting Venezuelan oil mostly.
We may have been getting some oil from the Middle East.

Senator LONG. Are you making that statement with regard to products as well?

Mr. Blough. No, I would not make that, in fact the statement is one based on memory.

Senator LONG. Guesswork?
Mr. Blough. No, not guesswork. I am trying to remember.
Senator Long. On present-day facts?
Mr. Blough. I am trying to remember.
Senator Long. Remember from when?

Mr. Blough. I looked into this 3 or 4 years ago. I am not prepared to say that my memory is correct. But

Senator Long. What is your estimate of the cost of hauling oil here from Saudi Arabia?

Mr. Blough. I would not want to guess.
Senator Long. Would 5 cents a barrel sound reasonable?
Mr. Blough. No, sir.
Senator Long. How far out of line would that be?

Mr. Blough. Well, now, if you are going to push me into showing that my memory for figures is bad, I would say that the cost is very much higher than that, many times 5 cents. But I would not want to say how much.

Senator Long. If 5 cents a barrel were the approximate cost on a $3 barrel of oil, you can see that would be a very small fraction of the total cost.

Mr. Blough. That is correct, assuming the 5 cents.

Senator Long. The cost of producing oil in Saudi Arabia is only a fraction of what it is in the United States because the oil is near the surface. The profits are fantastic as compared to those arising from operations on the small strata of oil sand in most American wells.

Mr. Blough. That is correct. I would say with respect to the American petroleum industry that the problems of the very short run, of the middle run, and of the long run are somewhat different.

Senator Long. Do you think it fair for the chemical manufacturers who are exporting seven times as much dollarwise as they are importing, to expand foreign trade at the expense of other industries?

Would it not be fair for them to say, "Senators, cut our tariff. We have more protection than we need; let's bring more chemicals into America and let the people who are getting hurt have a little protection.” Would that sound fair to you?

Mr. Blough. Of course the so-called chemical industry, as in the case of most industries, is not a single, homogeneous industry.

The chemical industry is made up of a lot of firms making a lot of different chemicals, and not all of these firms are making chemicals on which they have an export market.

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