A. This statement reflects the need for international efforts to make it possible for all nations to have access to world markets by improving labor standards in all countries.

(1) By expanding trade among both developing and developed nations. (a) Western industrial nations face some problems caused by a few specific large-scale imports from low-price, low-wage areas, but also need to continue trade and expand markets in those areas for sales of goods made in industrial countries.

(b) Less industrial nations need access to markets in the industrial countries to boost their own chances to have economic growth through diversification. Otherwise, they are condemned to economic stagnation, because (1) they must earn foreign exchange to buy their own needs, and (2) their own markets are not large enough to absorb rising production and cannot grow unless production continues to rise.

(c) These two contrasting sides of the international trade problem call for a practical mechanism, in addition to other trade policies and actions, that provides many-nation consultations on many-sided problems.

B. By insuring that unfair labor standards will not be the basis for trade competition.

(a) No nation has the right to base its competition on exploitation of labor.

(b) Western-developed nations will have mounting pressures to restrict, instead of expand, trade until some means of solving the problems caused by some specific low-wage imports is developed.

(c) An international fair labor standards mechanism could both improve living standards in all countries and prevent flooding markets in developed countries with sweatshops produced goods from developing countries. While this may not happen often, it should not happen at all.

C. U.S. trade policy has long recognized that simple, one-sided solutions fail. and America's competitive advantage has become very strong since the time wher the policy was changed. Efforts to make fair labor standards internationally useful have continued for 15 years.

(1) In 1934, United States changed to reciprocal trade, instead of traditional one-sided, high-tariff walls, justified previously as necessary to protect U.S. workers from unfair low-wage competition. Such "protection" resulted in tariff hikes before 1934, retaliation abroad, and deepened world depression at home and abroad. Competitive advantage since then has grown unti now when it is very strong. (See fact sheet on High U.S. Wages Have Not Priced United States Out of World Markets.)

(2) In 1947, U.S. labor movement proposed fair labor standards clause as part of International Trade Organization Charter, but the organization failed to come into being.

(3) In 1953, U.S. Government raised the issue in an informal proposal to include such a clause in the General Agreements on Tariffs and Trade.

(4) Recently, labor standards influence has been recognized in connection with multination considerations of the problem of market disruption (ie., sudden flooding of one nation's markets by large-scale, low-wage imports from another country.)

(5) 1960 Republican and Democratic platforms supported this concept: Republican. "We should also encourage the development of fair labor standards in exporting countries in the interest of fair competion in international trade."

Democratic.-"The new Democratic administration will seek international agreements to assure fair competition and fair standards to protect our own workers and to improve the lot of workers elsewhere."

II. The theory and standard of international fair labor standards must be gen eral, the practice and mechanism must be quite specific, based on fact finding. A. Fair labor standards are not equal labor standards, because different countries have different economies, different stages of economic growth, different productivity changes, and, in short, different "personalities."

For example, the economy of Brazil is obviously different from the US. economy. Therefore, it can be expected not to have different labor standardsboth for the country as a whole and within particular industries. Until Brazil becomes a developed instead of a developing country, extreme dissimilarities may occur. But even now a Brazil's business, despite these differences, may be exploiting Brazil's workers, even by Brazil's standards-either for that industry

for the whole Brazilian economy. Such exploitation must not be the basis of ernational competition. It would be impossible to find a precise formula to cide what is exploitation in Brazil, but it is possible to set up a mechanism to d out in specific instances whether a Brazilian employer, for example, is ually exploiting workers, refusing to share increasing productivity and then ding the goods, produced by exploited workers, into world markets. Such a chanism could examine (1) individual cases of this kind, (2) general aspects the sharing of workers in a country's overall economic growth and productivity reases. Action after the mechanism had determined whether the conditions re fair or unfair could (1) force the exporting industry or country to improve standards of those workers, (2) improve the overall living standards of that ntry. Continued improvement among various nations can gradually narrow gap between the standards and wages of developing and developed countries. e standard would, in theory, be general, but in practice quite specific for a cific problem.

3. While standards, say, in Chile, must reflect productivity and economy wth, Chilean goods need to go into world markets. Yet developed nations o have a need to make sure that differences among nations do not undercut the ndards of their own workers. In the few cases where goods from low-wage, -standard countries are flooding or disrupting a given industry's market in a eloped country, some mechanism must be found to make sure that even if the ndard is fair for the exporting country, the imports of goods made under those ndards will not be unfair to the importing country. Probably the most effece way to take care of this problem, too, is by international consultation and eement, so that no one nation's markets will be disrupted by flooding of lowge goods, while developing nation's sales can be spread among many developed ions.

. The unit labor cost, not the wage rate can be prima facie evidence of unfair petition, but other conditions in the exporting industry and exporting country st be considered both specifically and generally.

(1) Wage rates are not a reasonable measure of fair standards, because they do not accurately reflect productivity. High U.S. wages traditionally have not interfered with U.S. competitive prowess because of higher U.S. productivity and other advantages. (See fact sheet on High U.S. Wages Have Not Priced United States out of the World Market.)

(2) Where there are substantial differences in unit labor costs, there may be basic evidence of unfair labor standards.

(a) Other factors, such as raw material, transportation and power costs, however, may offset the advantage, and prevent wage increases. Test may come in profit advantage of the employer.

(b) Comparisons may be necessary with standards of other firms in the same industry of the country, of other industries, and the economy as a whole, because considerations of even a highly efficient, highprofit industry cannot be completely divorced from consideration of overall economic development of the country.

(c) Generally, wages of workers in exporting industries with both high efficiency and high profits should be raised when such industries' unit labor costs are substantially lower than those of foreign competitors.

(3) The test, therefore, must remain general, but the examination and the action must apply to the specific cases within a specific industry in relation to that industry and that country.

II. Fair labor standards should be part of U.S. national trade policy. This be accomplished by inclusion in the new trade legislation of—

. A general statement that achievement of fair labor standards in internaal trade is a major objective of U.S. trade policy. Language including this ciple should be included in the bill.

. U.S. tariff negotiators should make improving labor standards a key conration in agreement to tariff concessions. For example, in negotiating the ted States could grant tariff concessions on products of an exporting indusfrom another country on conditions that labor standards would have to imve by a certain amount over a specific number of years or the concession ld be withdrawn.

U.S. participants in the General Agreements on Tariffs and Trade meetings ild have authorization to consider furthering proposals that would provide hanisms for international fair labor standards through international con

sultations in international bodies, such as the GATT and ILO.
For example,
there are two proposals for working out the international fair Labor standards
through GATT.

(1) Annual review procedure: GATT would require an annual report to be filed by each member nation. The report would state what that nation had done in the previous year to better wages and working conditions in industries where tariff concessions had been granted. All interested parties could review this report and discuss its implications, get and give recommendations.

(2) Complaint procedure: This would make available GATT complaint machinery to industry and labor in member nations, although the action would be taken through their governments. If a union and/or firm in one country through unfair competition was based on unfair labor standards, the complaint mechanism would permit that government to bring a complaint to the GATT. Direct confrontation of the government's representa tives with the government representatives of the nation whose standards were alleged to cause unfair competition would occur in front of many nations, rather than merely the two nations concerned. Agreements or recom mendations could be reached that might involve (a) voluntary quotas (imposed by exporting country) or an export tax or some other short-run action; (b) decisions to improve wage levels and working conditions in the exporting country; or (3) both of these plus other short- and long-run solutions. If such agreements could not be reached, then the complaining party might bring the question before the next regular GATT session and GATT might recommend appropriate action.

IV. International fair labor standards is one of many necessary devices to improve worldwide trade, while solving problems resulting from trade. Its present form is quite fluid, subject to the need for practical attempts to put it into operation on a worldwide scale. It is suggested as a goal necessary to help ac complish the aims this Nation seeks: improvement of wages and working condi tions plus the improvement of living standards in those nations whose goods are prduced under different standards from our own. Otherwise, even relatively few incidents of disruption from them might enhance the strength of restrictive pressures against expanding trade at a time when trade expansion is essential to the national interest and the needs of our friends around the world.

[Fact sheet]

FOREIGN TRADE EMPLOYMENT

All exports make U.S. jobs: Export-related jobs totaled at least 3.1 million 1960, according to a recent U.S. Department of Labor report. This total includes 2,140,000 non-Government, nonfarm jobs, or 5 percent of all such employment; 940,000 farm jobs, or 13 percent of all farm employment.

The same study shows that large percentages of employment in major US industry are export dependent-12.7 percent in mining, 7.7 percent in manufac turing (including 12.8 percent in tobacco manufactures, 14.4 percent in chemicals and allied products, 14.4 percent in primary metals industries, 15.5 percent in nonelectrical machinery, and 10.2 percent of employment in professional, scientific, and controlling instruments). Also, 13.2 percent of U.S. farm employment is export related.

High export industries are also high wage industries. Average hourly earn ings in such manufacturing industries are predominantly higher than U.S. aver age in all manufacturing.

All imports make U.S. jobs: Processing, transporting, and distributing imports creates employment. The Labor Department's estimate of the total jobs is 0.9

to 1 million.

Total trade-created jobs: The Labor Department estimates number some million. Some imports cost U.S. jobs: Despite job creation from import handling and processing, certain imports have caused joblessness. How much is hard to gage. Based on careful studies of impact, the number is probably less than 400,000. No one denies the importance of helping those hurt by trade. But such help should not be allowed to endanger the 10 times as many trade-created jobs.

1

All U.S. employment is trade related in the broadest sense: The operation and expansion of U.S. industry require both imports and exports. Since no steel can be made without certain imports, no automobiles without certain imports, and since money gained from exports creates more jobs, the job balance understates the extent of trade-related employment.

Job lesses in import-affected industries are not necessarily import caused: Facts cannot be found to prove that because imports go up a amount, employment will go down at all or by any given amount. Several import-affected industries have shown employment gains during the last several years, despite sharp rises in imports. Increased technological improvement has caused more job losses than imports in many cases.

The jobs to be gained far outweigh possible losses; failure to increase trade can have disastrous economic impact here at home.

ALL EXPORTS MAKE U.S. JOBS

Nonfarm and farm employment needed to produce goods and components of goods for export account for at least 3.1 million jobs according to a 1960 Labor Department estimate. Foreign sales of U.S. exporting firms mean profits or losses for business which, in turn, can mean employment or unemployment of many U.S. workers.

The 3.1 million jobs described in Labor Department's study of "Domestic Employment Attributable to U.S. Exports 1960" included 2,140,000 nonfarm wage and salary workers (excluding Government) and 940,000 farmworkers (including farm operators and unpaid family workers). About 6 percent of all U.S. jobs on farms and in private (non-Government) nonfarm jobs (wage and salary occupations) were export related. Five percent of all private nonfarm jobs were export related. Thirteen percent of all farm jobs were export related. This included 1.5 million employed directly to make, manufacture, and transport the exported product, and 1.6 million employed indirectly, that is, to produce, transport, and sell the raw materials, parts, and components in the exported product. A significant percentage of employment in U.S. farms, mines, and factories were export related (13.2 percent of farm, 12.7 percent of mining employment, and 7.7 percent of U.S. manufacturing employment):

Wages in some of these industries are higher than average U.S. manufacturing wages. For example, the following industries had high export-related employment and higher average wages than the $2.29 average hourly wage in U.S. manufacturing in 1960:

Export-related employment in these five industries comprised almost one-fourth of total United States-export-related employment.

ALL IMPORTS MAKE U.S. JOBS

(1) Noncompetitive.-Most U.S. imports-60 to 70 percent-do not compete with U.S. production, but provide necessary raw materials, foodstuffs, semimanufactured and manufactured goods-necessary either because the United States does not have such goods or because it lacks large enough quantities of them to meet the economy's needs. These imports, therefore, create U.S. jobs. (2) Competitive.-Even competitive imports are handled, shipped, sold, and often packaged, etc., in the United States and thus create employment.

In 1960, the Labor Department estimates, 900,000 to 1 million U.S. jobs were created by transportation, distribution, and processing of imports.

The total of 4 million trade-created jobs is thus a conservative figure. It does not discount or deny the fact that competitive imports cost jobs of some U.S. workers. In 1960, the Labor Department estimates, if all competitive imports had been made by U.S. workers, and if this had no effect on demand, domestic or foreign. 800,000 to 900,000 jobs would have been involved. This, of course. does not represent lost jobs, because the United States could not cut off all such imports and maintain trade relations. Furthermore, most of the goods purchased would not have been produced here.

Moreover, if we reduced our imports, exports would also fall off; neither foreign nor domestic demand would remain the same. Thus, the Labor Depart ment figure is a theoretical estimate based on admittedly unrealistic assumptions. Careful economic surveys by Salant and Vaccara, "Import Liberalization and Employment," Brookings Institution, 1961, estimate a net loss of 86,000 jobs per $1 billion rise in imports. Imports have risen $4 billion since 1954. Using the figure of 86,000 jobs per billion rise perhaps 387,000 to 400,000 jobs have been erased. Thus, easily 10 times more jobs are created than are destroyed by trade. All U.S. employment is trade related in the broadest sense. While trade accounts for only about 7 percent of this $521 billion economy's total GNP, no steel and no autos are made without imports. Manganese, tin, and industrial diamonds are major imports.

Not only is most U.S. industry trade dependent because imports are essential. but U.S. sales here and abroad create more economic activity, mean the use of more imports to make such goods, and more jobs.

Job losses in import-affected industries are not necessarily import caused. Job gains have occurred in many import-affected industries.

(1) Of 25 import-affected industries, not one showed a drop in domestic output between 1954 and 1959, although imports more than doubled in this period. The overall value of domestic shipments rose over $5 billion, about 10 times the value rise in imports-up about $550 million during this period.

Domestic shipments rose 41 percent, but employment rose only 2 percent, showing that productivity was a major factor in the employment picture. This 2 per cent rise, in fact, for such industries from 1954-59 was higher than the overall 1 percent rise in all U.S. manufacturing employment during the same period. This was a period of rising efficiency and technology, which cost many U.S. jobs.

(2) Employment declined in 10 of 25 of these import-affected industries, but employment rises occurred in many others, such as pottery products, typewriters rubber footwear, abrasive products, veneer and plywood, pressed and molded pulp goods, glass and glass products.

In 10 import-affected industries the variation in import increases, domestic shipments rises and employment changes disproves the cause-and-effect relationship between import rises and employment drops. For example, in veneer and plywood, imports rose 181 percent between 1954 and 59, domestic shipments went up 76 percent, and employment rose 29 percent.

In sewing machines, where imports rose 88 percent, domestic shipments went up 17 percent but employment dropped 21 percent. In glass and glass products despite an over 200 percent rise in imports, a 44 percent rise in domestic ship ments still produced a 10 percent rise in employment. Rubber footwear imports rose 9.272 percent, domestic shipments rose 42 percent, but employment rose 20

percent.

None of these figures show that competitive imports cannot cause job losses. Instead they show (1) no simple cause-and-effect relationship between import rises and employment changes exists (2) productivity, and other factors are of more importance to employment changes than import rises.