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(The statement referred to is as follows:)

STATEMENT BY IRVIN LECHLITER, EXECUTIVE DIRECTOR OF THE AMERICAN VETERANS

COMMITTEE

This testimony is presented by the American Veterans Committee in support of a 5-year extension of the Reciprocal Trade Act because AVC members believe that, as citizens as well as veterans, they have an obligation to support a responsible foreign policy. We base our advocacy of extension of the Reciprocal Trade Act until June 30, 1963, on the following premises :

1. For the most part today's free nations, including America, have consistently underestimated the potential of Russia in the cold war struggle for world supremacy. We have underestimated this potential not only in the technological field but we have underestimated the Soviet Union's economic potential as well. Months ago Khrushchev announced the Soviet objective of gaining control of the world by "peaceful” economic penetration, particularly in uncommitted areas. While this offensive is economic in base, it is, of course, politically motivated Khrushchev recognized that many of today's underdeveloped nations are almost entirely dependent for their existence on trade with other nations. If this is not available with nations of the free world the only alternative is trade with the Communist world. Out of such situations will the Soviet Government gain political control over nations that become economically dependent on the Communist bloc simply because they can't trade with us and other free nations. We need no more dramatic illustration of this than the current political repecussions resulting from the extension to Egypt by Russia of a market for Egypt's cotton.

2. However, there are reasons for the continuation of reciprocal trade equally as pragmatic as those related to our economic competition with the Communist bloc. Consider these two facts: (1) at least 4,500,000 American workers are dependent on America's world trade for their jobs; (2) the United States exports about four times, in terms of dollars, more than it imports. By our failure to renew the Reciprocal Trade Act, we should vastly diminish the ability of foreign nations to sell to us and thus accumulate dollars with which to pay for commodities we have for sale to them. This is "loss of nose to spite face" with a vengeance. By extending the Reciprocal Trade Act for another 5 years we shall be recognizing today's economic fact of life: the importance of foreign trade as a segment of our national economy.

3. Something also needs to be said in support of extending the Reciprocal Trade Act for a full period of 5 years—not 3 years, or 2 years, or 1 year—but 5 years. I am sure there has been, or will be, other testimony before this committee on the importance of a 5-year extension in light of the problems with which this Government will be confronted vis-a-vis the negotiations in 1962 of trade agreements with the six Europeans nations adhering to the common market. Let me only say, then, that AVC considers it unthinkable that the President of the United States should face the prospect of those negotiations without reliance upon the authority (and the time for adequate preparation) which only a 5-year extension of this legislation can give him.

In addition to this immediate and compelling need for extending the act for 5 years, AVC believes that such extension will serve an even longer range purpose. The reciprocal trade policy of this Government originated in 1934 and the wisdom of the policy has since been 10 times reaffirmed by the Congress. We believe that reciprocal trade has thus established itself as a long-range adjunct of our foreign policy. In view of the fluid and complex international situation which faces our Nation for the foreseeable future, America urgently needs the stability in its tariff and trade policies which a 5-year extension of this legislation will afford.

Finally, AVC is not unmindful of certain displacement of some industries and the resultant impact on labor employed in those few industries that arise from the implementation of the Reciprocal Trade Act. However, we think that the escape-clause procedure and peril-point procedure of present legislation as it would be amended by the new legislation provides a considerable number of safegaurds in such instances. In any event, we do not believe that the solution to the competitive stresses of the world market lies in the multiplication of importing restrictions by this Government. Rather we believe that the solution is to be found in shifts of both capital and labor, where necessary, into more productive channels and we shall support at the appropriate time an adequate trade adjustment proposal toward this end. Fortunately, at least two such proposals have in the past few days been submitted to the Congress for consideration.

In conclusion, the American Veterans Committee urges a favorable report by the Senate Finance Committee of a 5-year extension of the Reciprocal Trade Act because

(1) The legislation is vital to America's strength in the economic struggle with the Communist bloc for the continued freedom of the uncommitted areas of the world.

(2) The continuation of the Reciprocal Trade Act is necessary to an expanded American foreign trade which is today an increasingly important segment of our economy.

(3) It will lend greater stability to American foreign policy. Mr. LECHLITER. We make three points in support of a continuation of the program for a period of 5 years. Our point No. 1 is that we believe the continuation of the legislation is necessary in order to combat the Soviet economic penetration in many uncommitted areas of the world.

Underdeveloped nations, particularly, have to trade for their existence, and if they can't trade with the United States, they are inevitably going to turn to trade with the Soviet bloc. That economic penetration by the Soviet bloc will, of course, result in political control, and we believe that an extension of the Reciprocal Trade Act affords the best possibility of avoiding that catastrophe.

No. 2, we believe that foreign trade is a most important segment of our national economy. We know that 412 million workers in the United States depend on foreign trade for their employment.

Also, the more goods we import from foreign countries, the more foreign nations have dollars to buy goods that we sell. And so we think that as a matter of sound economy the act should be continued.

Thirdly, we would urge a continuation for the full 5-year period as the bill, H. R. 12591 passed the House. I shall not say anything more about the problems involved in the Common Market negotiations, but I should like to add that the American Veterans Committee believes that extending the act for a period of 5 years is a good step forward in stabilizing our trade policy as an integral part of our foreign policy.

We think that it is advantageous to have a long-range period in which to carry out any segment of foreign policy and the Trade Agreements Act is certainly an important part of our foreign policy.

With that, I shall close, urging that a favorable report be made by this committee to the Senate on extension of the act for a period of 5 years.

TIAIRMAN. Thank you very much, Mr. Lechliter. The next witness is Mr. George F. Kohn.

STATEMENT OF GEORGE F. KOHN, PRESIDENT, PRECISION

GRINDING WHEEL CO., INC., PHILADELPHIA, PA. Mr. Kohn. First, I would like to thank you for the privilege of coming here, and to say before I give this presentation that I am fully conversent with the difficulties involved in making decisions regarding this vast project. Some are matters of fact and some are matters of opinion, and I am happy to say that we still have that freedom of difference of opinion here.

I am president of the Precision Grinding Wheel Co., Inc., of Philadelphia, Pa., a manufacturer of grinding wheels.

I come here as a private citizen interested in the extension of the Reciprocal Trade Agreement Act.

27629—58-pt. 1— 37

The act has little effect upon the business of the company I head. We have a very limited export business and our domestic business is negligibly influenced by the import of foreign wheels, even though the tariffs on them are nominal. Our methods of production and our technology give us an advantage which is not adversely affected by foreign competition.

American industries generally, subject to reasonable protections, have successfully withstood the impact of foreign competition, and I believe will continue to do so as long as our economy remains dynamic.

In any consideration of the extension of our reciprocal trade agreements, it is today impossible to divorce the international factors from the domestic. But it is my sincere belief that the factors of both are favorable and positive. Many persons have already appeared before you. I am certain that everything I shall present has been said before. I trust, however, that the weight of quantity in conjunction with qualitative factors will influence Congress to give approval to the Administration's request for a minimum 5 years' extension of the

act.

We all know that Russia is employing every available means, short of a hot war, to defeat us. They are making trade concessions, particularly in areas where political indecisiveness prevails. Their aim is to ally as many countries as possible on their side and extend their sphere of political and economic influence as far and as wide as possible. They would weaken the unity of the free world and divide whenever and wherever possible. One of their most effective weapons is that of economic attrition. If successful they could gain increasing world control and power without a shot being fired or a bomb being dropped. And may I parenthetically, a propos of what General Collins said, say that was a statement which was made directly by Khrushchev in different language.

A trade policy of the United States which permits a continuing freer exchange of goods throughout normal trading areas can do much to circumvent Russian efforts. Not only our natural allies but many so-called neutralist countries will be normally and economically strengthened by an extension of our Reciprocal Trade Act. They need at this time tangible evidence of a cooperative and helpful attitude on the part of the United States. As direct aid is reduced the slack needs to be taken up by increased trade. Many of our friends depend upon trade for their very existence. They must seek it where they can. If our doors are closed to them, either actually or practically, they must turn elsewhere and Russia is willing and waiting.

Already there are tangible signs of attempts to become less dependent on the United States. The European Economic Community became a reality on January 1 of this year. We have supported and encouraged the move. As this Western group works toward the reduction of trade barriers among themselves, it is important that we be in a position to negotiate favorably with them. Only by so doing will we be in a position to keep them from becoming restrictive rather than inclusive.

Though much more could be said on the international aspects of the situation, I think the facts thereon are generally well known and accepted by a large majority of our citizenry. There seems to be much more difference of opinion on the domestic economic facts.

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May I state unequivocally at this point that I am not advocating free trade. What I do urge is the enactment of a bill that will not basically alter that which has been extant since 1934. During the 23 years that have intervened we have given, through democratic processes, privileges to our President to negotiate reciprocal trade agreements. These agreements have always been subject to legislative limitations and congressional action. They should be. But this is no time to revoke them. To those who are better equipped than I, I defer in matters of detail. I only urge that the act, which I trust will be continued, will be no more restrictive—no less liberal—than the present. I hope our present economic recession will not be unwisely used as an excuse to weaken the act. It would be economically, as well as securitywise, an error to do so.

From the standpoint of our domestic economy, leaving aside entirely the international-political factors, what is the situation?

Some 412 million of our workforce depend upon exports for their livelihood. Were these exports suddenly to stop, it requires no great imagination to visualize the impact upon our economy. These exports represent need. They are not the results of an altruistic attitude on the part of the purchasers. If these purchasers cannot find an outlet for their goods in the United States, they must seek markets elsewhere. They cannot buy from us unless they have markets here. They are practically estopped from buying from us except through trade balances. Other media are available but not sufficient.

In 1957 our exports exceeded our imports by about $8 billions; $20 billions versus $12 billions. Certainly not an inconsiderable figure contributing substantially to employment. But even if the balance was less favorable, the fact remains that we must buy extensively in the foreign markets if our economy is to continue. Though we have been liberally blessed with great material resources, many of the manufactured goods we take for granted in our daily lives are dependent upon raw materials unavailable there. Many of the alloys used in our metal manufacturing come from other countries and are a sine qua non of our economy. It is axiomatic that the export of goods and foodstuffs is an economic cushion for us, offsetting the costs of indispensible imports. Closing the doors to the import of other goods and materials will inevitably raise barriers for our exports and weaken us both economically and in our spheres of influence.

It is frequently stated that lowering tariff barriers and encouraging imports work hardships on certain industries and segments thereof. That labor dislocations concurrently occur. There have been protections against this. They should be continued on a sound and reasonable basis. But not to the point of establishing the equivalent of subsidies for marginal operators. I know of no subsidies that protect my company against domestic competition, if competitors can produce and distribute grinding wheels more cheaply than we. Yet I would surely recommend the protection of efficient industries against foreign competition. I would protect individual companies with an industry, irrespective of their marginal nature, where the national security is involved. This could readily be accomplished in the writing of the Reciprocal Trade Act, and I think has been accomplished in the writing of it by the House.

But I would caution against the act being so written that, irrespective of consideration of National Security, every company in every industry be protected against the impact of foreign goods. I repeat—the wording of the legislation I would leave in the hands of you competent gentlemen.

I am sure that proper provision can be made for those few instances where individual hardships occur. Bills are presently pending to take care of them. Special considerations on geographical reallocation, on unemployment compensation, on loans, and so forth, can and should be made.

Statistics show the numbers involved are nominal compared with those whose welfare lies in the continuation of large volume export. It is these latter who are the many—the others the few—who need special treatment.

In closing I urge most earnestly favorable action on the continuation of our Reciprocal Trade Act. I urge a minimum of 5 years be included in the bill. Fewer than 5 years will fail to assure ourselves and our international friends that we are truly dedicated to the principles of liberalized trade and may indeed bring to pass a psychology almost as negative as failure to extend the act. We need our international friends. They desperately need our leadership and cooperation at this time. And most of all, and selfishly, we need the continuation and the expansion of our foreign markets. Only through reenactment of our Reciprocal Trade Act can this be assured.

The CHAIRMAN. Thank you very much, Mr. Kohn. Are there any questions?

The next witness is Mr. J.F. Mersereau. STATEMENT OF J. F. MERSEREAU, FOSTER WHEELER CORP. Mr. MERSEREAU. My name is James F. Mersereau. I am vice president of Foster Wheeler Corp. I wish to thank the Senate Finance Committee for this opportunity to appear before it in support of H. R. 12591, the Trade Agreements Extension Act of 1958, and to present certain points resulting from the experience of my company in foreign business which may be of interest in connection with the bill now before your committee for consideration.

Our company is essentially an engineering and manufacturing concern. We are engaged in the engineering, design, and construction of petroleum refineries, petrochemical and related plants, and other industrial installations. We design and fabricate marine boilers and condensers for merchant marines and navies, as well as large stationary steam-generating equipment for public utilities and industry. We also design and fabricate heat exchangers, evaporators, pressure vessels, and cooling towers. We supply certain control equipment and are engaged in the nuclear energy field, mainly in the supply of components. Our principal office is in New York City, and we have manufacturing plants at Dansville, N. Y., Carteret, N. J., Mountaintop (Wilkes-Barre), Pa., and Arcata, Calif. We employ approximately 5,000 in this country, apart from our construction business, where our employment figures will range from 1,000 to 3,000 men in this country, and approximately 1,000 on construction jobs abroad.

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