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Mr. MARTIN. In Japan and Germany the American Government has financed and directed the building up of chinaware production and channeled it to the United States market to get dollars to offset against occupation costs. Then in Japan, in direct conflict with article 26 (1) of the proposed ITO "No member shall grant, directly or indirectly, any subsidy on the export of any product"-it has subsidized this export by giving a special exchange rate to foreign buyers of china: 600 yen to the dollar as compared with only 350 yen to the dollar granted on general products.

As will be seen in this chart, the American importer taking general products gets 350 yen worth for $1; but if he takes chinaware, he is given not only 350 yen worth but also an extra 250 yen worth for his dollar. In other words, he gets the normal dollar's worth for 58 cents, with a free bonus of 42 cents' worth thrown in.

The tariff law is perfectly clear on countervailing duties on subsidized exports to the United States. We made application to the Bureau of the Customs on this last September 13; 5 months later we have still had no definitive action. Meanwhile, imports from Japan have more than doubled. Imagine what the delay would be if this were an escape-clause application involving a sliding scale of invisible peril points, consideration of whether or not other countries had satisfactory alternative markets and the conduct of negotiations with other countries, instead of an unilateral application of existing law.

I might point out in that connection that my first application to the Bureau of the Customs got the brush-off.

Senator CONNALLY. The usual brush-off?

Mr. MARTIN. Yes, sir.

Senator CONNALLY. Did they brush all of you off?
Mr. MARTIN. I am getting accustomed to this.

Senator CONNALLY. The usual brush-off?

Mr. MARTIN. Yes. The reply stated that the collectors of customs at the port had received no documents showing that the imported chinaware was receiving a subsidy in Japan. Therefore there was no basis for action. "You are out."

Of course, I went back and pointed out that section 303 of the Tariff Act of 1930 did not require that the collectors of customs receive evidence that a subsidy was being paid on exports from another country to the United States, before the countervailing duty provisions, whether the subsidy were direct or indirect, was to become effective.

I presented evidence: articles that had appeared in the New York Times and such information as I had been able to get from the Department of Commerce, and was told then that nothing could be done until the Bureau of Customs could obtain a complete report on just how the system was being operated from General MacArthur's office in Japan. I do not know whether General MacArthur cares to report on that to the Bureau of Customs or not. Meanwhile, an express provision of the law of the United States is not being enforced.

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Mr. MARTIN. Our American Government, engaged in building up our foreign low-wage competition, then resorted to a twisting of the trade-agreements program to facilitate its competition with us. The State Department, which works hand in glove with the American military governments abroad, negotiated tariff reductions on chinaware, in violation of Mr. Hull's announced policy, with the minor suppliers, Czechoslovakia and France, so that their Japanese and German china (this china is stamped on the back "U. S. Zone Germany" and

"Occupied Japan") would get tariff reductions. The American Government was in effect negotiating with itself for the major benefits of these concessions.

I would like to let you see a sample of the way ware is being marked by the American Government abroad, to assure the consumer it is an American Government sponsored product.

Senator MILLIKIN. Is there any documentation of your allegation that this was a trick in order to give Japan the benefit of these concessions?

Mr. MARTIN. I have concluded this from the fact that there could be no other justification for it. When we made the agreement with Czechoslovakia, that country was going behind the iron curtain and we knew it. The State Department itself was in doubt as to whether or not we ought to proceed. But after our agreement had been ratified by most other countries, Czechoslovakia did ratify, and we gave her the concessions.

There is no point in giving Czechoslovakia a concession when it is supplying under 5 percent of our imports of this china. There is nothing that Czechoslovakia would give us knowing that 95 percent of the benefit was going to other countries.

Senator MILLIKIN. Which countries are the principal suppliers?

Mr. MARTIN. Germany and Japan, and we did not negotiate with either country, of course.

So no claim can be made in this case that, well, there were other considerations that were received from other participants in the Geneva agreements which justified our giving a concession here, because others were also giving us something in return. The principal suppliers were not at Geneva.

Senator MILLIKIN. They had nothing to give in return.
Mr. MARTIN. Thay nothing to give in return.

Incidentally, because of the export subsidy in Japan, almost 90 percent of our imports from that country do not now qualify under the reduced rates. If we are successful in our efforts to have the countervailing duty law enforced and the subsidy is then removed, the proportion of imports from the countries with which we negotiated would most likely drop to about half of the 16 percent shown in

this chart.

As I listened to the representative of the State Department here last Thursday reply "Not necessarily" to so many statements of practices usually followed by his Department, I was reminded of the following exchange nearly 2 years ago in the Ways and Means Committee hearings:

Mr. MILLS. You say we are not importing from Germany and Japan because the war is not over and the treaties have not been signed?

Mr. MARTIN. Yes.

Mr. MILLS. But, as soon as we complete our treaties with Germany and Japan, can be expect a great increase?

Mr. MARTIN. Yes.

Mr. MILLS. Where are we going to get it? Where is it going to come from? Mr. MARTIN. From Germany and Japan. The military government in Japan reported that the china industry in Japan was very little affected by the war. Mr. MILLS. Have we negotiated a trade agreement to reduce our tariff on German and Japanese products?

Mr. MARTIN. We do not need to. We are negotiating with the United Kingdom and Czechoslovakia in this group, and these considerations will automatically be given to Germany and Japan when the peace treaties are signed.

86697-49-pt. 1-28

Mr. MILLS. Not necessarily. That will not come about until they become members of the International Trade Organization.

Well, notwithstanding "not necessarily," the State Department extended our concessions to the negotiating countries, also to Germany and Japan the instant they were proclaimed-even before private trading was resumed.

I might comment in connection with chart III that the other country involved was France, not the United Kingdom, and France was then also supplying at the time less than 5 percent of the imports.

Senator MILLIKIN. What is the peculiar characteristic of this china dish which you have presented for examination by the committee? Mr. MARTIN. The characteristic that I want to call your attention to is the fact that on the backstamp you will find in rather large type "U. S. Zone" and in rather small type "Germany," which illustrates the point that I am making that the American Government wants it to be clear even to American consumers that this is a United States Government-backed product.

Senator MILLIKIN. Is it the kind of chinaware that we are importing

Mr. MARTIN. From Germany.

Senator MILLIKIN. That we make in this country?
Mr. MARTIN. Yes.

Senator MILLIKIN. This is in competition with us?

Mr. MARTIN. Yes; it is in direct competition with us.

In the case of Japan, the backstamp is marked "Occupied Japan. Chart IV shows that imports of chinaware under all this American planning and assistance have been increasing by leaps and bounds and are already by value four times prewar, and in dozens rose above prewar in December.

(The chart appears on p. 427.)

Mr. MARTIN. In both dozens and dollars, imports have now surpassed domestic production in the United States, and they continue to increase. We are already receiving order cancellations. I anticipate that we shall have unemployment before the latter part of this year. Senator MILLIKIN. Is the percentage of labor cost roughly the same in all of these countries.

Mr. MARTIN. Roughly; yes. In household china in this country, it is actually about 75 percent, rather than the two-thirds I have given here, but for comparative purposes, since I could get data only for the entire pottery industry in other countries, I used the entire pottery industry in this country which is about two-thirds.

Senator MILLIKIN. I notice under your chart that Japanese labor gets 9 cents an hour; German labor, 30 cents an hour; and United States labor, $1.30 an hour. Is that right?

Mr. MARTIN. That is as of 1947 and 1948 on a comparative basis. That is correct. Our wage, and I presume the wages abroad, have gone up since then. Ours is now $1.42 an hour.

Senator MILLIKIN. Have you made any requests for escape clause procedure?

Mr. MARTIN. Not yet because of the provisions in the Tariff Commission regulations which require us to show a whole series of items on which I have not yet been able to get the data together. As a matter of fact, we do not want to make a questionable inquiry or

CHART 4

U.S. IMPORTS OF CHINA TABLEWARE

BY COUNTRY OF ORIGIN, QUARTERLY AVERAGE 1938, 1947

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application, and we plan to wait until we actually are threatened with unemployment. This means taking a chance because, as you can see here, within 5 months after we applied for a countervailing duty, the imports from Japan doubled. I do not know what will develop in the interim while the Tariff Commission goes through all of the proceedings and the State Department negotiates with other countries before a decision can be made. But I am afraid that, if we go in

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