In connection with our foreign business, we have a wholly owned Canadian subsidiary, Foster Wheeler, Ltd., with a manufacturing plant at St. Catherines, near Hamilton. This subsidiary is engaged in substantially the same business as the parent company and employs about 1,000 people. We also have a wholly owned subsidiary in England, Foster Wheeler, Ltd., London, which is engaged in the same kind of business we are, principally in the sterling area, and employs approximately 4,500 people. Our French subsidiary, Societe Foster Wheeler Francaise, is primarily engaged in engineering, employes about 500 people, but has no manufacturing facilities. Our German company is not active, but can be expanded for engineering work at the proper time. Our English company has recently formed an Italian subsidiary, which is engaged in engineering and procurement in Italy. We have organized a Japanese company, Ishikawajima-Foster Wheeler, in association with our Japanese licensees, which provides engineering services for petroleum refineries and petrochemical plants in Japan. We have licensing agreements for our engineering and designs in France, Germany, Holland, Japan and other countries.

Our subsidiaries are primarily engaged in furnishing services and equipment to the areas served by the respective subsidiary. Through each of the subsidiaries we are able to provide United States engineering techniques and know-how. Further, our subsidiaries have enabled us to obtain business and furnish equipment for currencies other than dollars in areas where the customer would not be in a position to purchase for dollars. At no time have we supplied foreign services or equipment to United States customers in the United States, except for certain specialized items which are not available or manufactured here.

I have taken the committee's time in describing our activities to demonstrate the scope of our work and to show that we are in a position to supply our services, designs, and equipment from foreign sources as well as from the United States. Our primary emphasis has been upon dollar business both at home and abroad. However, our operations are flexible, and we are in a position to supply our services and equipment for foreign currencies where the lack of dollars makes it necessary to do so.

Almost invariably recent inquiries from local or government entitles abroad for petroleum refineries or chemical plants now stipulate that dollar costs be held to a minimum and that financing terms would be desirable. This is understandable, in view of the fact that the installations we supply run into millions of dollars. Because of the shortage of dollars and the tendency of European banking groups to be more liberal with their credits to support their exports to certain areas, including South America, our foreign customers frequently look to Europe, although they would prefer the engineering techniques, materials, and equipment offered from the United States. On our part, we would prefer to supply equipment from the United States, for by so doing we can do a more rapid and efficient job, have reasonable assurances that the equipment will perform according to our duty requirements, and can count on the steady availability of replacement parts. Almost without exception our customers in Latin America prefer United States services and equipment, even to the

extent of paying a premium price in some instances, but the lack of dollar exchange many times forces them to look elsewhere.

With respect to comparative costs, the varied types of equipment going into petroleum refineries and petrochemical plants show little difference in overall equipment cost between the total equipment as supplied to the foreign customer from the United States or from European or other sources. There is some differential in the cost of engineering services, and in certain items of equipment, where the United States prices are higher than the foreign price, due to our wage rates and overhead, but this is frequently offset by earlier deliveries and the customers recognition of United States quality. We have also noticed that recent wage increases in Europe are comparatively at a higher percentage than here and there may be a much smaller wage differential in the future. This will have the tendency to bring costs more in line.

The projects in which we are interested are designed to meet urgent local needs, will represent an effective and substantial dollar exchange savings in the countries involved, and make an effective contribution to their industrial development. A petroleum refinery through the processing of the crude oil by local labor would represent a saving equivalent to the difference between the cost of crude oil and the cost of the products which would otherwise have to be imported into the foreign country. With respect to a fertilizer plan using local raw materials, the exchange saving is the equivalent to the price of the product which would otherwise have to be imported. Such projects, involving substantial capital costs, provide a large market for United States services and equipment and represent an important element in our export trade. They provide employment to thousands of skilled workers in this country and constitute the potential for our further industrial development. In addition, such projects are important in the development of the foreign country and make it possible for it to increase its own production, thereby contributing greatly to its industrial resources and improvement in the standard of living of its people.

This, in turn, results in further and increased trade and the creation of new markets for our products. In order to permit the participation of our own industries in these markets, it is essential that the foreign countries be placed in a position where they can obtain the dollars to pay for the services, goods, and equipment supplied by the United States. It is obvious that this cannot be a one-way street, and that we must place our foreign customers in a position to obtain dollars for otherwise we cannot possibly sell to them for dollars.

We have seen many instances where, because of lack of dollars, our foreign customers in markets heretofore mainly supplied by the United States have turned to other sources for the materials and equipment they require. We have just completed an ammonia fertilizer plant in South America where a substantial portion of the services and practically all of the equipment was furnished from France on long-term credits. Several large petroleum refineries in the same area recently completed, or in the course of construction, have been furnished by United States engineering firms with European equipment. The Petrobras Refinery at Rio de Janeiro, for which we have the contract, will undoubtedly look to Europe for most of its equipment.

These projects represent a loss of many millions of dollars worth of business to our United States industries; business which would have been ours if dollars had been available. Other projects in Argentina, Chile, and Colombia, to mention a few, have developed and are developing along similar lines. The Indian Government has projected a large petroleum refinery at Baurani and a large fertilizer plant at Neyveli, both jobs representing millions of dollars in equipment, and will probably have to look to Europe for equipment supply due to shortage of dollars and the attractive financing and credit terms offered by European vendors.

In view of the position of my company worldwide, we have not had much occasion to get into the details of the Smoot-Hawley Tariff Act, or for that matter, the reciprocal trade agreement. I for one am not conversant with the specific provisions of this legislation. Consequently, I lack the background and the knowledge to answer questions of this committee regarding the specific provisions of H. R. 12591. Nevertheless, my company is vitally interested in maintaining our markets for the benefit of our United States operations, and for the supply of our equipment and the equipment of our many vendors from the United States to our customers in Latin America and elsewhere.

The two biggest problems we have confronting us in this respect are the problems of exchange and the problem of credits. As I stated before, these problems are problems for our customers, but obviously, unless our customers obtain the necessary dollar exchange and unless they are able to arrange the requisite financing, where credit terms are necessary, with reasonable assurances of improving their dollar position to repay such dollar credits and financing at their maturity dates, we are not in a position to supply United States services or equipment and must necessarily look to our subsidiaries and to our vendors abroad if we want the job.

It is, therefore, to our interest to support any procedure or action which may be taken by be taken by our Government to make available more dollars abroad and in this manner to make it possible for us to take more jobs to provide work for our engineering offices here, to provide work for our plants and employment for our people and to help the many vendors in the United States to provide equipment from their plants here to our jobs abroad, which would otherwise be supplied from foreign sources. We believe that H. R. 12591 would result generally in an increase in our export trade and would assist in preserving to the United States markets for services and equipment which under a restrictionist policy would surely be lost.

It may interest this committee that in my own company's case the expansion of our business abroad has been reflected by a comparable expansion of our business and employment at home. It has similarly contributed to greater business for the many United States companies who furnish us with the varied types of equipment needed for our installations.

At this point I might say that we have not encountered serious competition from the Soviet bloc up to the present time. There have been instances where the Iron Curtain has been active and has offered to furnish our foreign government customers with substanital supplies of equipment on extended credit terms. We understand that Russia,

through Rumania, is supplying a moderately sized refinery in India and has made offers of long-term credits and the supply of services and equipment for a fertilizer plant. We have heard of several similar offers to several of the countries in South America, where, in each instance coming to our attention, there has been an expressed reluctance on the part of the customer to consider the Russian offers. We may be witnessing part of the first phase of the projected Russian economic penetration in Latin America and elsewhere.

This may become more serious in the near future unless we take the action necessary to preserve our markets abroad and make it possible for customers of those markets to purchase from us in ever-increasing quantities the services and materials they prefer to those from other sources. It is obvious to most of us that economic relations and the facilitation of exports and imports and the exchange of commodities between the United States and other countries abroad is essential to maintain not only our close business ties but also our political and military ties for our mutual development and the defense of our way of life.

As your committee may have gathered, our engineering business is closely related to the petroleum industry in the United States. At the risk of repetition of some of the statements made above, and with the permission of the Texas Co., we would like to bring to the committee's attention the statement of Mr. Augustus C. Long, chairman of the board of the Texas Co., which he made to his stockholders recently where he said the following:

The tendency of nations in modern times frequently has been to try, by means of trade barriers, to enjoy the benefits of being sellers without being customers themselves. This is obviously unsound; one nation obtains the money to buy products from another nation only by selling its own products. It is therefore a form of economic suicide to shut out a wide range of imports by means of excessive tariffs and quota restrictions. The purpose of the Trade Agreements Act extension now before the Congress is to avoid doing this.

There are two main aspects to the case for renewal of the act. The first represents the simple dollars-and-cents approach: It is good for the American people in material terms to have this act renewed. Many American firms and workers are dependent on foreign sales of the goods they produce. Some 4.5 million American workers gain their livelihood from foreign trade activity. Since we cannot sell if we do not buy, firms and workers engaged in these activites will suffer if the United States should now abandon its policy of reducing trade barriers.

The second part of the case relates to the leadership position of the United States in the free world. If the Trade Agreements Act is not renewed, or is renewed with excessive protectionist provisions, there inevitably would be a trend toward economic nationalism the world over. American exports would be shut out from many foreign markets. The general posture of the free world as opposed to the Soviet bloc would be weakened.

We believe that stability in our trade policy is essential to the forward planning of all business engaged directly or indirectly in foreign trade. We certainly find this true in our case. This stability is dependent upon the length of time of the Trade Agreements Act extension. Your committee has had many presentations with respect to the European Common Market, the European free-trade area, and doubtless much learned discussion of the importance of time with respect to the extension of the Trade Agreements Act. It is submitted that to be effective, the reciprocal trade agreement should be extended for a minimum of 5 years. Without such a 5-year period within which to develop the procedures and to carry out the negotiations to

make the act effective, it would lose much of its force and benefit and would certainly deprive the appropriate departments of our Government of a basis to carry out their negotiations in an effective manner. We are all aware that as countries develop economically they become better customers for our exports. Our foreign investments and the credits made available through the Export-Import Bank, the Development Loan Fund, and other entities of the United States Government, and through the comparatively short-term credits made available through our commercial banks, are greatly contributing to this economic growth and are making their contributions to expanding the markets for our exports. This contribution would be lost and a great potential in our markets abroad for the maintenance, development, and expansion of our own industries would be seriously affected if there should be no extension of the Trade Agreements Act. It is my opinion that H. R. 12591 as passed by the House is an adequate extension of this act, and it should be to the interest of everyone in this country, whether or not directly connected with foreign trade, to support this bill and to exert every effort toward its adoption as law. The only other verbal comment I have to make is the fact that we feel there are certain important points in our own business and certain examples which I have brought to the attention of this committee from our actual experience, which indicate the desirability of taking action in the production of more dollars abroad.

You have heard General Collins and others here before you mention the Russian encouragement in the economic fields abroad and in Latin America. We have run into some of that, but actually our foreign customers aren't particularly interested in giving full consideration to that phase at the present time.

Nevertheless we feel that this is an important aspect in the background, and we must look out for it. We are in a position as you know to supply our services and equipment from abroad, and we have been obliged in many cases to take advantage of that in order to get the job.

We have in Brazil, for example, built a large ammonia plant involving approximately $18 million, which we had to furnish primarily from France due to the fact that Brazil was short of dollars, and the fact that the French banking groups are very much more liberal in extending credits. That represented lost business to our industries here. You must remember too, if I may call this to your attention, that in all of our installations such as refineries and fertilizer plants, we buy from thousands of vendors in this country.

We buy large items of equipment from heavy industries such as General Electric, Westinghouse, A. O. Smith, and concerns of that sort as well as a great number of miscellaneous parts. In each of our jobs where we had to look to Europe to supply equipment because of dollar shortages, we then had to supply that equipment from European vendors, which is lost business here.

Furthermore, the credit feature is important too because it seems that our European friends are far more liberal in their credits than are our own banking groups or, for that matter, Government groups here.

Consequently, even though the foreign customer would prefer the equipment to be bought from here, for obvious reasons, nevertheless