tariff walls in order to do so. If these tariff walls are brought down as new markets open, our export trade will flourish to an even greater degree, and the U.S. commercial economy-which is my first concern-will be correspondingly stimulated. Most adjustments to changing pattern of international competition will be made by private enterprise without Government assistance. These adjustments will be easier and more feasible if our economy as a whole is functioning at top efficiency and output, and with the flexibility that we seek. Where import competition is causing problems, an economy that is running under a full head of steam will provide alternative opportunities readily. We are working to have such an economy. ABILITY OF U.S. PRODUCERS TO COMPETE AT HOME I should like to turn now to the critical topic of the competitive impact of foreign imports into the United States. As a former businessman, and now as a Government official, I am fully alive to this problem. And I am resolved that the Government shall take no action in the field of tariff policy that will work undue hardship to U.S. industry, workers, and farmers through unfair foreign competition. The topic is a complex one and one charged with understandable and deeply held emotions. I would like to treat it under two separate headings. First, the extent of the problem and the ability of the U.S. producers to meet it, and second, the legal safeguards built into the Trade Expansion Act. It is essential that the problem of import competition be put into perspective. I am afraid that often this is not done. In the first place, we must bear in mind that the Trade Expansion Rec Act is no more than an authorizing statute. In itself it reduces no tariffs. Any tariff reductions made under it will be the product of hard negotiation in which concessions will not be made except in return for concessions of equal or greater value to the United States. I have heard some irresponsible suggestions that passage of the act will in some way automatically reduce our barriers unilaterally and open the trade gates in only one direction. This is simply not the case. It will take some time to negotiate reductions and they will be made only for mutual benefits.7 Tariff reductions on goods that are competitive with those produced in the United States, do not pose a threat in cases where U.S. producers have the strength, efficiency, and flexibility to meet the competition, as they are now doing successfully in so many fields. The question is: Is U.S. industry generally able to meet this competition successfully? Every indication is that in the vast majority of situations the U.S. economy has shown and will continue to show an ability to compete with success. From my own experience of more than 30 years in a highly competitive industry, I have seen again and again that companies that are strong, vigorous, and well managed, can meet import competition successfully. This happened time and again in my own business. It also happens in others. Let me give some examples. 81843-62-pt. 1-9 compete Consumer merchandise One of the Nation's very large consumer merchandising organizations, handling thousands of items, began importing items for sale about 1950. The volume of imported items grew steadily until 1960, with specially large increases in 1959 and 1960. But in 1961 imports dropped dramatically. And in 1962 a further drop is expected. This organization followed a policy of trying to stimulate and actually help domestic suppliers to compete with imported merchandise. But, being in a highly competitive field, it could not afford to buy domestically at any cost. They found, however, that when challenged, U.S. suppliers can compete in many ranges of products and price lines-not only without driving wages down, but with an expansion of output and employment. Transistor radios About a year ago a U.S. company was quoted a price from Japan for a shirt-pocket-sized transistor radio. It was about $2 lower than the best U.S. price. But the company worked with a U.S. supplier to improve facilities and designs. Now the U.S. supplier competes effectively on both price and quality, and is making a satisfactory profit. Tennis oxfords In 1958, one merchandiser found that the Japanese price for tennis oxfords was about $1, compared to a U.S. price of $1.27. One U.S. supplier, however, agreed to meet the Japanese price on the basis of a quantity order. After 4 years, this U.S. supplier is still meeting the Japanese price, is making a reasonable profit, and no longer requires quantity longterm orders. Women's slippers A west coast manufacturer of sandal-type slippers found that he was being driven out of the U.S. market by lower cost Japanese products. The company investigated the market and decided it could make a slightly higher quality, higher styled scuff. It did so, and soon began to expand its own domestic market. Before long a Japanese importer approached the firm with an offer to import Americanmade "scuffies" into Japan and this is now being done. Boys' slacks One clothing merchandiser recently offered a boy's sateen slack imported from Hong Kong at a highly competitive price. It was found, however, that style changes would be necessary, and the line of communication with the manufacturer was difficult. A domestic supplier was sought out. With a highly mechanized operation, he met the Hong Kong price and got the business. Since then, the business has proved so profitable the U.S. supplier has been able to lower his price and by doing so increased his sales. These are not isolated examples, they are illustrative cases of what happens when our producers are determined to meet competition. The general statistics on U.S. imports and exports show beyond question another interesting point. Trade is a two-way street-not only on a national basis, but even industry by industry. Frequently, articles in the same industrial line appear both as imports and as exports. For example, the United States imports machine tools—and at the same time it exports machine tools. In chart 13 it shows that we shipped out nearly $4.5 billion of machinery total against three-quarters of a billion imported. This is broken down by various kinds of machinery-industrial, office and printing machinery, radio and TV, and so forth. Charts 14 and 15 illustrate the same thing happening in the case of automobiles, steel products, chemicals, and other products. You will notice the amount we shipped abroad. On new automobiles, we hope that will even out soon, but on parts exports we are way ahead. On motortrucks, busses, and chassis, it is nearly 300 million as against 13 million. These examples indicate the competitive strength of U.S. industry. They also demonstrate the complexity and sublety of trade relations and the great variety of the factors that determine the actual patterns of import and export. (Charts Nos. 13, 14 and 15 referred to follow :) CHART 13 US XP vs. MP in compet U.S. EXPORTS EXCEED IMPORTS IN COMPETITIVE CHART 14 U.S.EXPORTS EXCEED IMPORTS IN COMPETITIVE COMMODITY GROUPS-AUTOMOBILES, PARTS AND ACCESSORIES U.S. EXPORTS EXCEED IMPORTS IN COMPETITIVE Wage Secretary HODGES. Most often the problem of foreign import com- d parity petition is discussed in terms of the disparity between the high wage levels of the United States and the lower wage levels of other countries. It is, of course, true that wage levels in the United States are far above those of the rest of the world. This is but another way of saying that our standard of living is higher than that of any other country. Our relatively high wage levels are, from most perspectives, an enormous asset. Nonetheless, it is true that low wages overseas do tend to gain the competitive advantage if all other things are equal. The fact is, however, that all other things are almost never equal. What counts for exports, as for any other competitive selling, are the unit costs costs of material, capital, transportation, and labor per factors unit output-effective salesmanship, quality, packaging, repairs, certainty and speed of delivery, and many other considerations in addition to wage costs. These are the very things in which our business community has again and again demonstrated its excellence. In considering complaints that insist that foreign lower wage imports will ruin our business economy, I think you should recall the following facts: The United States is the largest exporter in the world. Our most successful export industries are also those that pay relatively high wages. (See chart 2.) Besides the United States, the next most successful exporting H countries are the United Kingdom and West Germany with the other highest wage levels in Europe; they are followed by Japan with XPorter the highest wage level in the Far East. Since the end of World War II, about 3,000 tariffs on separate items have been affected by our trade negotiations. During this period only 35 industries have been able to show to the satisfaction of the Tariff Commission in escape-clause proceedings a sufficient injury resulting from tariff concessions to warrant tariff relief. This was out of a total of some 129 escape-clause investigations. Tarif The industries involved in these 35 instances accounted for less than one-ninth of 1 percent of our gross national product, and employed less than 65,000 workers. SAFEGUARDS The purpose of the safeguards contained in the Trade Expansion Act is to anticipate before negotiations begin where problems might arise as the result of reduced tariffs; to cushion the effects of reductions; to have in reserve where warranted the remedy of tariff relief for industries through the escape clause; and, most important, to help firms and workers adjust more readily and successfully to new conditions than could be accomplished through tariff relief. The statute provides a box of legal tools much more varied and refined than those we have tried to work with in the past. (A:ས |