Mrs. GRIFFITHS. Could the taxpayers of the United States subsidize an industry that was being injured and thus make it competitive? Secretary HODGES. If Congress authorized it, it could.

Mrs. GRIFFITHS. If Congress authorized it, they can?
Secretary HODGES. Yes.

Mrs. GRIFFITHS. This also could be done abroad, is that not true?
Secretary HODGES. By the governments abroad?

Mrs. GRIFFITHS. Yes.

Secretary HODGES. Yes.

Mrs. GRIFFITHS. Then is not a lower tax in another nation which competes with us in reality a subsidy?

Secretary HODGES. Well, it is not a subsidy, because I do not think it was done for that premeditated purpose. I think that some nations can get along with a lower tax than some other nations, and they treat the entire national problem rather than just the trade problem. Mrs. GRIFFITHS. If an American manufacturer manufactures in this country and in a foreign country, is there anything to keep him from making a division of the market himself without asking for any relief under this bill?

Secretary HODGES. I did not get the middle of that question.

Mrs. GRIFFITHS. If an American manufacturer manufactures in this country and in country X, in Europe, and he divides the market to suit himself, internationally, is there any relief under this bill for any people affected?

Secretary HODGES. No, I think that that is a theoretical question because I don't think a single manufacturer with a single subsidiary

could divide a market like that.

Mrs. GRIFFITHS. If he manufactured one type of item in this country and another type in Europe, and then started selling to Africa and Asia, and South America, he could refuse to manufacture the most salable item in this country, could not he?

Secretary HODGES. Well, whatever effect it had on him, whatever relief he got, must come from import effect rather than anything else. Mrs. GRIFFITHS. There is nothing in this bill that prohibits him from doing it, there is no relief for anybody affected?

Secretary HODGES. I would not want to speak for the Justice Department in the intimations that you are making, that he controlled the markets. I would not know what that would be. But he would not get any relief in this country.

Mrs. GRIFFITHS. Thank you very much.

Thank you, Mr. Chairman.

Mr. KING (presiding). Mr. Knox will inquire, Mr. Secretary. Mr. KNOX. Mr. Secretary, I have been very interested in the questions propounded to you today. I will not keep you much longer as the hour is getting late. But there has been mention, of course, of GATT and if this new program is enacted into law and the conflict that may result from it. It brings to my attention that in 1959 the meeting of GATT was held in Japan. At that meeting, Japan and France agreed to remove some of the restrictions and barriers which they had set up against the U.S. imports. May I ask you this question: Have the agreements been fully or partially implemented as far as the agreements were concerned in Japan?

Secretary HODGES. Yes, they have. They have not brought Japan completely into the GATT. As you know, we have urged that they do it, but some of them have not implemented the agreements. They still use article XXXV.

Mr. KNOX. But Japan had representatives at GATT although they were not a member of GATT, and also entered into the negotiations as far as the barriers and restrictions which they had set up against the U.S. exports going into their respective countries. But there has been progress made in that field?

Secretary HODGES. Yes, that is right.

Mr. Knox. My next question would be, If this legislation as introduced were enacted, how would it affect or would it have an effect on combining the American and Canadian automobile industry inasmuch as it is my understanding from the statements made here today that the United States now has a 6.5-percent duty on automobiles that are exported into this country from friendly nations? Of course, we then have to take a look at the tariff that other countries charge against the U.S. automobiles going in. We have this question in Canada, which is a very friendly country, neighbors just across the border, and especially from the city of Detroit, and my hometown, Sault Ste. Marie, the sister city of Windsor to Detroit. In Canada, we have facing us a 17.5-percent duty. The President requested all of those duties that are 5 percent and less go down to zero, and others may be cut back by 50 percent. Of course, if we cut back by 50 percent on the tariff for automobiles, at 612 percent, we get it down to practically zero.

Secretary HODGES. Three and a quarter.

Mr. KNOX. But if Canada then should say, "We will cut ours by 50 percent," we will still have a barrier of 8 or 9 percent on the tariff that we still have to pay. What is your comment?

Secretary HODGES. That is a part of this whole proposition, that you have 50 percent authority, and theoretically you will come out as well as you are now, and will probably sponsor a very great deal more trade through competition.

Mr. KNOX. Would you comment on this: Would this legislation have any effect of combining the American-Canadian automobile industry?

Secretary HODGES. I do not see that it would, sir. That question has come up many times, about Canada and the United States joining on this and that. Knowing the Canadian people pretty well, including my counterpart up there, I think they have no idea of joining the United States on anything like a customs union. I think they are going to look after themselves pretty well.

Mr. Knox. Do you think it would be a good idea if they did or did not?

Secretary HODGES. That is getting into a political field that I do not believe I am competent to discuss.

Mr. KNOX. How will the U.S. aircraft workers benefit from complete removal of tariff under the plus 80-percent provision, or even the lowering of duties when exports to a very large measure go to State-owned or subsidized foreign airlines who pay no tariffs. Reciprocal U.S. reductions would only permit greater foreign roads in the U.S. markets; is that true?

Secretary HODGES. That is a good question. My own reaction to it is that the aircraft people would do very well on any reduction. I think that the evidence of the airlines throughout the world, the various foreign airlines, using American planes, is proof that we can continue to sell competitively.

Mr. KNOX. Is it not true that we also use British planes to a great extent?

US aircraft cre

Secretary HODGES. Some British planes and some of the new French Caravelle. Our own planes are far and beyond in volume and quality and everything else from the standpoint of the market as a whole. I would not worry about the aircraft people on that one. I think they will take care of themselves.

Mr. Knox. Mr. Secretary, could you furnish the committee with a list of the items exported from the United States and the dollar value that go to state industries or state purchasing agencies?

Secretary HODGES. We would certainly try to do so. I do not know whether such a figure is available or whether it could be, but we can try it, sir.

Mr. KNOX. I think it would be well to have that figure.
Secretary HODGES. All right, sir, if possible.

wages may Mr. Knox. Now, my last question, as far as wages are concerned:be more Assuming that in the more developed industrial nations of the world, industrial efficiency would tend more and more to become equal, then wages assume even greater importance as a factor in competition, do they not?

Secretary HODGES. That is right.

(The information requested is as follows:)

Under the laws of the Soviet bloc countries, Yugoslavia, and Cuba, foreign, trade may be carried on only by agencies or corporations of the state.

future

exports in 1961 to the Soviet bloc, Yugoslavia, and Cuba amounted to $301 mil- US XP

lion, or about 1.5 percent of total U.S. exports.

Information on the principal groups of commodities exported to the Soviet bloc countries, Yugoslavia, and Cuba is shown in the Bureau of Census Report FT 420, copy of which is on file with the committee. The annual figures for 1961 will be available in published form about May 1, 1962.

U.S. trade statistics are not tabulated to show exports to the Government (1.e., state) sector of free world countries.

In order to determine the proportion of U.S. exports destined to state trading enterprises in countries of the free world, it would be necessary to make an analysis of the export declarations, since no statistics are tabulated on this basis or have been so tabulated in the past.

In order to make an invoice analysis, it would first be necessary to have the names of all of the state trading enterprises or agencies of foreign governments to whom U.S. exports are or might be shipped or consigned. Unfortunately no such list is available. Moreover, if a list of state trading enterprises were available, we estimate that an analysis of export declarations for 1 month would involve the examination of at least 300,000 documents (estimated on the basis of 1 month's total sum of export declarations amounting to about 700,000 and subtracting from that a roughly estimated figure representing the documents relating to exports to the Soviet bloc and Yugoslavia and also excluding invoices relating to shipments of low value-under $100).

Finally, if an analysis were made of export declarations for a given period to determine the volume of shipments to state trading enterprises in the countries of destination, the results would still be incomplete in that they would fail to show shipments moving through intermediaries to state trading enterprises. Mr. KNOX. Our foreign competition has already acquired more modern industrial facilities than ours and having reached somewhat of an equal level of industrial efficiency. I want to cite an instance that I had the opportunity to observe myself. In Japan, I went up to Nagoya for the sole reason of going into the industrial area. Î went into the plywood industry, and now the foreign imports of plywood have assumed over 50 percent of our domestic market, and, of course, has caused great concern on the part of plywood industry.

I happen to represent an area where woodworking facilities are practically the main factor because the raw materials are there, and.

Japan

relict

therefore, they are trying to utilize them, but they are having a difficult time in marketing their finished product with the imports coming in in the form of plywood.

The efficiency of the industry, the modernization, in Japan is most outstanding. In fact, I have been in many plywood industries here in the United States that do not compare with the automation and the efficiency with which the Japanese can produce their very fine mahogany plywood that comes into this country in direct competition with our hardwood plywood. Of course, the fact remains that in Japan the average hourly rate for Japanese workers in the plywood industry runs somewhere around 11 to 14 cents an hour. Of course, our average here is $1.71 an hour plus the fringe benefits, as of a couple of years ago. Of course, if we are going to delegate the power, and, of course, we now get back into the agricultural picture because the raw material that is produced is one grown from the soil, what is your opinion as to how much effect this bill would have, possibly, on the now greatly disturbed plywood industry, the domestic ply wood industry?

Secretary HODGES. I do not know the history of what the plywood industry has done under the present law. Do you know whether they have brought an escape clause action?

I would think they would, if they were in the condition to which you refer, and they would have the same opportunity under this bill. We would have recommendations to the President to do something about it.

Mr. KNOX. I am unable to say whether they have or not appealed to the Tariff Commission under the escape clause. They may have. But the fact remains that our country has negotiated with the country of Japan, through reciprocal trade agreements, by which this plywood is coming in as part of the agreements.

Secretary HODGES. Do you mean as regards a tariff agreement, but not the quantity that came in?

Mr. KNOX. There has been no quota put on. In fact, I have legislation introduced which would put a quota on the imports of plywood in an endeavor to try to preserve the plywood industry here

for the domestic market.

Secretary HODGES. Mr. Congressman, I know enough about the plywood industry to know that it has had a difficult time and is still having a difficult time. I would say that they could get some relief under it if they are injured by imports along the lines that you are talking about. I would like to see them bring some kind of action if they are severely injured by imports. Under the new law they can bring it directly to the President or the Department of Commerce, and we may find that certain segments of the industry can go ahead and live, whereas certain firms may need some relief.

Mr. KNOX. I have been informed that they applied twice and have been turned down twice, and at the same time the domestic market is furnished over 50 percent with foreign imports.

Secretary HODGES. It is a rather difficult thing to understand, not knowing the details of it, how it could be turned down, if it is as bad as you indicate. If the Tariff Commission did turn it down, it is hard to understand why.

Mr. KNOX. It disturbs me, I think, that we are going to enter now into the delegation of power to the Executive, which may possible

enter into this field, which will further aggravate the plywood industry's condition here in the United States.

Secretary HODGES. I do not know who will actually administer if it goes to the President, but if I were in that place, I would not let it be further aggravated. If it has been aggravated 50 percent, it needs attention.

Mr. KNOX. I appreciate your statement on it, Mr. Secretary, to a great degree. However, I readily see that if we are going to permit wood products to flow freely great damage would result.

Secretary HODGES. This new act should not hurt any beyond what it has hurt.

Mr. Knox. I think we ought to take a direct look at the impact that this is having, not upon only the plywood industry, but upon the utilization of our wood products. In other words, we have timber that matures in a period of 60 years, and when it matures most of it is harvested. The Federal Government is greatly involved in it because of the large holdings of timber property in the State of Michigan, along with the State conservation department. But if they don't have some outlet for these wood products, to be manufactured into products to go on to the consuming market, naturally we are going to lose it.

Secretary HODGES. Mr. Congressman, let me say this about plywood, with full appreciation of what your problem is. Under this new, proposed bill, it does not qualify under the 80 percent authority so you would only have it under the 50 percent, and the President does not have to move 1 inch on that. He does not have to reduce it any

more.

Mr. KNOX. There is nothing to restrict him from moving in the field, though.

Secretary HODGES. If the escape clause action that you refer to that was turned down had been approved by the President, he would be prohibited from doing anything to reduce the tariff. The fact that it was turned down means he is not prohibited. Therefore, you would be delegating him the authority to do as he pleases subject to the provisions of the bill. But I would think with the Tariff Commission, the Department of Commerce, and others looking into the facts that you intimate, we ought to be able to persuade the Chief Executive not to do anything more to hurt this industry.

Mr. Knox. I certainly do not want to give any such power to the administration that is going to further aggravate the condition that now exists as far as the plywood industry is concerned. I have had two of the largest plywood industries in my district close up. They were both owned by the Atlas Plywood Co. They closed because of the fact that they just could not compete.

More alis

Secretary HODGES. I will say again, sir, that this new setup of assistance ought to help firms for relief which we cannot now do under We act

the present act.

Mr. KNOX. I have one other question to ask you. Would not this bill by lowering trade barriers and increasing import competition, be an indirect if not a direct means whereby the President could place an effective ceiling on wages and prices?

Secretary HODGES. Do you mean here in this country?

Mr. KNOX. Yes, sir; I certainly do mean right here.

Secretary HODGES. No, I do not think that the President or the administration would be put in the position of putting a ceiling on

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