Senator HARTKE. Under the circumstances that agreement was executed without any request of or authority or without consultation with the members of this committee or of the Ways and Means Committee, is that not true?

Mr. EBERLE. I do not know. I did not participate in it.
Senator HARTKE. Yes; I will tell you that is true.

Do you remember the Moynihan agreement. Pat Moynihan is from Jefferson, Ind., just for the record. I was talking with Dr. Moynihan recently and he told me that the administration just wiped out $2.4 billion in commodity credit loans which had been granted to India. That was completely eliminated without congressional authority. The Byrd amendment would have prohibited both of those actions, and would have required you to come to the Congress.

The administration has not acted in good faith on these matters. How can we expect the administration to act properly if we grant them all this authority.

RIGHT TO EMIGRATE AMENDMENT

Let me give you another example. The Jackson-Vanik amendment was passed in the House, right?

Mr. EBERLE. Right.

Senator HARTKE. It prohibits credit to a country which discriminates against citizens desiring to emigrate.

Since the House acted, $120.8 million in Export-Import Bank credit to the U.S.S.R. has been approved. There are currently pending credits of $211 million for the Soviet Union-$180 million of which will directly aid Occidental Petroleum. It seems to me that this administration has had an attitude of near contempt for the Congress. Given these facts, the chances of eliminating the Jackson-Vanik amendment are probably minuscule. It is obvious that the Executive is paying absolutely no attention to the action in favor of the amendment taken by the House of Representatives. There are 80 sponsors of the Jackson amendment in the Senate.

POSSIBLE PRESIDENTIAL VETO OF BILL

Let me ask you this question: Would the President veto the bill with the Jackson-Vanik amendment in it?

Mr. EBERLE. I think you have to take a look at that at the particular time. He certainly has indicated on several occasions that at this point this would be a very serious matter for him, and one could certainly not discount a veto.

Senator HARTKE. The President publicly stated that he would veto the trade bill with the amendment. Can we believe him?

Mr. EBERLE. I think you can, yes.

Senator HARTKE. If this is true, then we ought to call a halt to these hearings right now. We have 150 witnesses to hear from and if the President intends to veto, the Finance Committee is simply performing an exercise in futility. Don't you agree Mr. Ambassador? Mr. EBERLE. Well, let me give two responses. First of all, I think we have talked with Congress on a number of these and I can tell you the Eximbank, as I tried to explain, made most of these on a very preliminary commitment basis and is very cognizant of Con

gress concern over this, and, two, as I tried to say, and Secretary Shultz has said, we think there can be some reformulation which could bring about a resolution of the Jackson-Vanik amendment that would be acceptable.

Therefore, I would not be here if I did not think that we need this bill for the United States, and Congress needs it to participate in international trade negotiations and that if we do not participate in these international negotiations the people who are going to suffer are the workers and your constituents right back at home because that means jobs if we lose exports.

EQUITABLE TRADE TREATMENT NEEDED

Senator HARTKE. All of us agree that we need more world trade. It would be preferable to get it on an equitable basis. Even previous administrations have not done this. During President Johnson's administration, the Canadian automobile agreement was put into effect without consulting Congress. President Johnson tried to buy Canada's participation in the Vietnam war by making economic concessions to them which were very damaging to our balance of payments.

The Kennedy round too was merely a propaganda victory at best. Is that fair?

Mr. EBERLE. I think there was some real legitimate progress.

Senator HARTKE. If you examine the negotiations in detail and I have, you will note that nothing was done until 30 days before the final report had to be filed. They finally agreed that some progress had to be made, so they eliminated all the consideration of nontariff barriers which are at this moment much more effective barriers to trade in the international marketplace than tariffs. Only tariffs were reduced. As one of the members indicated here, we reduced tariffs on products which were not being shipped. The delegation to trade negotiating authority bore sparce results. Now you want the same authority. Little progress was made then, how can we expect a better showing from this administration?

Mr. EBERLE. I would like to come back and simply say that I concur that there were a lot of problems in the prior negotiations that I cannot speak to other than to what my office is doing. We are committed to this kind of cooperation, I think we have proven it in the textile agreement, working with Congress and with industry. I think we have been able to come up here and say, "You tell us how you want to work with us," and that is an open ended challenge.

Senator HARTKE. I tried to tell you but you would not follow my advice.

Mr. EBERLE. This is how to work with you, not how to draft a bill. Senator HARTKE. I just thought that effecting legislation was my job.

Mr. EBERLE. Well, certainly.

Senator HARTKE. From 1971 until last year, the Hartke-Burke bill was the only trade legislation before Congress. I still think it is the only comprehensive bill which treats the major problems confronting the working men and women in this country.

You pointed out the tremendous skills we have in the aerospace industry and how this has contributed to our balance of payments. Selling airplanes abroad has been favorable to our balance of trade and

balance of payments. Yet, at this moment jobs in aerospace are 33 percent under the 1968 peak and are expected to fall another 3 percent by June 1974. Jobs totaled 949,000 in June 1973 and there will be 32,000 fewer in June 1974. Scientists and engineers have been the hardest hit. Is that not right?

Mr. EBERLE. Yes, sir.

Senator HARTKE. And no relief is being provided for them under the Adjustment Assistance Act.

Mr. EBERLE. Well, there is no import competition either. The import adjustment assistance would come in through import competition. Senator HARTKE. You call this a great success for adjustment assistance when there is so much unemployment and so little aid to these people?

Mr. EBERLE. There are $4 billion a year in experts.

Senator HARTKE. The question is American jobs. $4 billion dollars in experts evidently is not creating jobs.

Mr. EBERLE. But without exports the unemployment would be a great deal higher if you eliminate $4 billion.

Senator HARTKE. That is the argument of the multinational corporations. They raised a $1 million fund to defeat my bill. They don't agree with me, and I don't agree with them.

In 1972 the largest 500 industrial multinational firms employed 136,960 fewer workers than in 1969 and even though in 1972 they had $113.1 more in sales than in 1969. The real question is whether this Government is going to be a government of the people or a government of the giant multinational corporations and that is the question which concerns me very deeply.

1974 BALANCE TRADE FORECAST

Mr. Ambassador, what is the anticipated trade surplus or deficit for 1974, excluding oil?

Mr. EBERLE. One's crystal ball at this time of the year is never very good. I think one could anticipate-on a CIF basis-the positive balance in our trade in 1974.

Senator HARTKE. What is the forecast?

Mr. EBERLE. At this game, you know it is too early

Senator HARTKE. A calculated guess then. I mean you have to have some type of forecast. You do have economists who formulate these kinds of projections?

Mr. EBERLE. I think the best thing to say is that it would be a positive balance on a CIF basis.

Senator HARTKE. I didn't hear you. Did you give a dollar value? Mr. EBERLE. As I say, I am not in the projecting business. I will defer that to Secretary Dent tomorrow.

Senator HARTKE. I intend to ask him tomorrow. Would you agree that Mr. Walter Levy is a leading authority on oil?

Mr. EBERLE. Yes, sir.

Senator HARTKE. According to him the projected deficit would come to about $14 billion in 1974 because of the increased cost of oil. Mr. EBERLE. For the United States?

Senator HARTKE. For the United States, $14 billion.

Mr. EBERLE. I would simply have to say to you that that number seems high based on my knowledge, but I would defer that to Mr. Simon. I can find out for you.

Senator HARTKE. I am going to read to you, Mr. Ambassador, from Mr. Walter Levy's study of exploding world oil costs, of January 4, in which he says in Item 11:

For the United States total exports are estimated at about $70 billion in 1973, total imports about $69 billion for a net trade surplus of $1 billion. United States oil imports FOB in 1973 are estimated at some $7 billion. United States oil imports costs amount to $21 billion in 1974.

Now, Item 12, which is the conclusion which I have just given you: The indicated 1974 level of U.S. oil import costs represented a $14 billion increase over 1973. This would be equal to 20 percent of total imports last year. An expansion of imports of this magnitude would be enough to swing the United States trade balance from a surplus of $1 billion to a deficit of $13 billion, in other words a $14 billion loss. Such a deficit would exceed the United States gold and foreign exchange holding of $4 billion as of October 1973.

And that is why I say to you that some place along the line somebody had better get their hands on the trade handle and start worrying about putting this country back on its feet.

Mr. EBERLE. That is the very thing we are trying to do. That impact-assuming that it is right, and he is more of an expect than I am, but the numbers I have seen do not go that high-he omits, Senator, the fact that some of that money is going to come back into the United States and the impact will not be of that magnitude. As a matter of fact, the numbers that the OECD protected for 24 countries, if their increased costs as Senator Ribicoff indicated this morning, $40, $50, $60 billion, come out to a net to those countries, including the United States, of $25 billion, because of the reflow of funds.

The point I want to come back to here is that if we don't have the kind of international institutions that can work on these problems on the trade side the United States then will have to decide on its own what it is gong to do and that could be a very painful kind of a process where we do not have the kind of opportunity to continue to build up our exports to help pay for this in the long run and that is going to impact an awful lot of jobs.

TAXATION OF FOREIGN INCOME

Senator HARTKE. But you see that takes you over into another field which my bill addresses itself to and yours does not, and that is the question of taxation. You cannot approach trade matters without considering the tax structure applicable to foreign income.

Let me ask you, if you would agree with the following statement: Since the multinational oil producers have convinced some of the oil exporting countries to charge them a tax in place of a royalty, they are benefiting via our present tax laws? For example, the greater their costs, the more substantial the tax break they receive.

Mr. EBERLE. Well, I have no doubt that there will be some changes, as Secretary Shultz has indicated, in this area, that he has recommended some changes. As you know, there were some specific tax provisions submitted along with the trade bill when it went up last April. The House decided that it would handle that as a separate matter and, as of today, we think that is the proper way. There are some of these issues that should be addressed.

Senator HARTKE. Frankly, I think the President has adopted part of the Burke-Hartke bill provisions on foreign taxation in his energy message. If the oil companies should have to, why isn't it right to go ahead and apply it to all the manufacturing industry? As much as I decry the oil companies bleeding the U.S. consumer white while we are sitting in line trying to get gasoline, I think it is just as fair to complain about ITT which paid in 1972 an effective corporate tax rate of 1 percent according to Congressman Vanik's statistics. (ITT argues their tax rate was 9.5 percent-hardly a spectacular amount.) General Motors, afraid of antitrust suits, paid an effective rate of 44 percent in 1972. I am not giving General Motors any special accolade but somebody has got to make up the difference and I think it is high time that the multinational corporations paid their fair share of taxes.

General Motors is a manufacturing company, and the corporation. paid a 44.6-percent effective tax rate in 1972. Juxtaposed to this are the oil companies, Texaco, Mobil, Exxon, and so forth, and they averaged an effective rate of 2 to 4 percent. If you are going to deal with trade correctly I would hope that you would somehow get your fingers: into those things which heretofore have been sticky with oil.

Mr. EBERLE. We do get our fingers in a lot of these issues but I also know when you try to get as complicated a bill when you keep adding everything into it you will never get it through because it does cover so many subjects.

Second of all, I don't want to duck the tax question but I am not a tax expert. But I would call your attention that we do have a lot of tax treaties and that there are some very important things that can be solved in this area and again it is part of the world of international negotiations and we ought to have more of these so that the country can be treated on a more equal basis. If there is no tax treaty there can be more inequities.

On the other hand, you can also get to the point where you can tax at 110 percent.

Senator HARTKE. I understand that. I am not interested in overtaxing people. I just want fair taxation. I do have another quick question. With the two devaluations the United States is supposed to be more competitive. West Germany today has a higher wage rate than the United States and as a result of their revaluation of their mark and our two devaluations of the dollar, and still their No. 1 export is manufactured goods. Our primary exports are, like a developing country, agricultural products and raw materials. Why don't we have a comparative advantage in manufactured products?

It is late, and I do want to let you go. Thank you very much for joining us today and discussing with us the vital issues of internationali trade.

Mr. EBERLE. Thank you.

[Mr. Eberle's prepared statement follows:]

30-229-74-pt. 1—18