shall be considered similar to, or competitive with, any imported article until a reasonable period (60-90 days) after the inclusion of such domestic article in the List of Benzenoid Chemicals or Products Manufactured or produced in the United States, or any Supplement thereto.

(b) (1) The Bureau of Customs shall publish a List of Non-Competitive Imports which shall contain any article provided for in this part that has been entered, or withdrawn from warehouse, for consumption in the two year period prior to enactment for which it has been determined that the most recent entry of such article was not similar to, or competitive with, an article manufactured or produced in the United States.

(2) Upon receipt of a claim and supporting evidence providing reasonable cause to believe that any article contained in the List of Non-Competitive Imports is similar to, or competitive with, an article manufactured or produced in the United States, the Bureau of Customs shall promptly publish a notice removing such article from the List of Non-Competitive Import effective within a reasonable period (60-90 days) after publication of such notice.

(3) The Bureau of Customs shall each month publish a supplement to the List of Non-Competitive Products which shall :

(1) add to the List of Non-Competitive Imports any article that has been entered, or withdrawn from warehouse, for consumption since the publication of such List or the most recent Supplement thereto for which it has been determined that such article was not similar to, or competitive with, an article manufactured or produced in the United States;

(2) add to the List of Non-Competitive Imports any article which the Commissioner of Customs has ruled to be non-competitive pursuant to the provisions of Section 16.10a of Title 19 of the Code of Federal Regulations; and

(3) list any article to be removed from the List of Non-Competitive Imports and the date such action shall become effective.

(4) For purposes of Headnote 5 to Part 1 of Schedule 4 of the Tariff Schedules of the United States, no article contained in the List of Non-Competitive Imports published by the Bureau of Customs pursuant to paragraph (b)(1) of this section shall be considered similar to, or competitive with, an article manufactured or produced in the United States.

(c) Advance Rulings-Section 16.10a of Title 19 of the Code of Federal Regulations relating to "Tariff Classification of Prospective Imports" is hereby amended to insert the words "(including, where applicable, its competitive status)" after the words "tariff classification" each time that they appear in such section. Tentative rulings as to the competitive status of an article shall be issued within 60 days after the application is filed and a final ruling shall be issued within 120 days after the application is filed.

(d) Effective Date-These regulations shall become effective 30 days after their publication in the Federal Register, except that:

(1) The List of Benzenoid Chemicals or Products Manufactured or Produced in the United States provided for in paragraph (a) (2) shall be published 90 days after the effective date of these regulations and shall be based upon the certification received by the Bureau in the first 60 days after the effective date. Section (a) (3) shall become effective 30 days after publication of the List of Benzenoid Chemicals or Products Manufactured or Produced in the United States; and

(2) The List of Non-Competitive Imports shall be published within 30 days after the effective date and Section (b) (4) shall become effective 90 days after the publication of the List of Non-Competitive Imports.

PREPARED STATEMENT OF THE MANUFACTURING CHEMISTS ASSOCIATION
PRESENTED BY RICHARD M. BRENNAN

INTRODUCTION

The Manufacturing Chemists Association is a nonprofit trade association having 176 United States members representing more than 90 percent of the production capacity of basic industrial chemicals within this country. The United States chemical industry has a substantial interest in international trade as is clearly indicated by the 1973 U.S. exports of chemical products of $5.785 billion, and imports of $2.437 billion.

The graph above demonstrates the strength as well as the stake of the chemical industry in U.S. foreign trade.

As the share of market graph above shows, the United States competitive share of the world trade in chemicals has declined from approximately 26.4 percent in 1962 to 18.3 percent in 1972, with indicated further decline to 18.0 percent in the first six months of 1973. During the 1962-1972 period, the shares enjoyed by West Germany and Japan have gained.

The current energy crisis and its resultant adverse impact on the supply of petrochemical feedstock is expected to have a major impact on the viability of this country's chemical industry in the years to come. Among the manufacturing industries, the chemical industry is unique in its heavy reliance on petroleum and petroleum-related materials in that it depends on oil, natural gas, and natural gas liquids for primary feedstocks.

The international economic and trade systems are so intertwined that individual countries cannot hope to be self-sufficient and still prosper. It would be extremely shortsighted to believe that the United States could unilaterally restrict exports of commodities vitally needed by and historically traded to its foreign trading partners without their retaliating by imposing reciprocal constraints in the form of export restrictions on raw materials not available in the United States in addition to imposing import restrictions on U.S. products. The resultant trade and balance of payments deficit and increased unemployment could have a staggering effect on our economy. The effectiveness of the OPEC cartel needs no elaboration. The formation of similar cartels controlling other needed materials would have disastrous effects.

We support, in principle, the concept proposed in Senator Mondale's amendment which would authorize the President to negotiate agreements which hopefully would insure an uninterrupted supply of raw materials, including food, to all who need them. We recommend, however, that the Committee consider providing appropriate direction that such authority be carefully exercised lest it initiate more severe sanctions from nations supplying raw materials.

BASIC AUTHORITY

The atmosphere today is substantially changed from 1962 when the Kennedy Round began serious incubation. The two devaluations of the U.S. dollar and currently unprecedented world-wide demand for chemicals have added new complications.

We were disappointed in the results of the Kennedy Round where tariffs were reduced 50 percent in the chemical sector while we only received a 20 percent reduction from the European Community and the United Kingdom. Consequently, we echo the remarks Senator Long made before this Committee on March 4, 1974 when he indicated he supports open and free trade so long as the United States receives equitable treatment.

During 1973, more than one-half of U.S. chemical imports entered duty free. Approximately another 20 percent were charged with duties equivalent to or less than 5 percent ad valorem, the products on which it is proposed to permit elimination of duties. The remaining nearly 30 percent of 1973 chemical imports are those that would be most affected under the tariff cutting program to be authorized in this legislation. We propose limiting that authority below the levels proposed in the bill because of the circumstances outlined below.

The chemical industry has been through an extended period of low profitability since 1967. At the very moment when the circumstances began to permit a change, price and profit controls were imposed and have been operative for more than two and one-half years. Meanwhile, there has been an extraordinary rise in demand for many chemical products, demand which the industry has been unable to meet in some instances. This is due in part to the controls and their tendency to discourage some needed expansions in capacity. On top of this essentially domestic economic problem, a crisis in raw material availability developed as the supply of petroleum products became insufficient to meet demands aggravated by the embargo of the Arab nations.

The chemical industry now faces severe feedstock supply questions and a great deal of doubt about the price level at which those supplies available may be obtained. Resolution of the uncertainty surrounding world oil prices is anticipated at levels significantly above where they were a year ago.

The United States depends upon imported oil to a far lesser extent than do Japan and our European trading partners. In all instances, petroleum requirements are bound to affect seriously the balance of payments position for those

who must purchase on the world market. Because of foreign exchange pressures, our trading partners must look to some combination of substantial export expansion and diminishing of imports. In the case of exports, this could easily lead to appreciable subsidization. In the case of imports, they may have no alternative to increasing restrictions thereon. Even before this crisis arose, our foreign trading partners were substantially dependent upon export sales. Therefore, the increasing exchange burden of future oil purchases can only emphasize the increased threat of subsidized exports. As the Congress considers this legislation to diminish trade barriers, it must be borne in mind that the United States would be seeking long-term commitments of relaxation in trade barriers, relaxations which our trading partners may be unable to meet.

Accordingly, we believe that the authority to reduce duties above 5 percent ad valorem should be limited to 50 percent. Duties over 25 percent ad valorem should not be reduced below 15 percent ad valorem. The breadth of authority within these limits above is substantial and should provide U.S. negotiators with ample discretion to negotiate successfully.

ADVICE FROM INDUSTRY

The public hearing procedures to develop advice within the government are quite helpful and necessary as far as they go. The Tariff Commission, the Trade Information Committee of the Office of the Spceial Trade Representative, and the efforts of the various Administrative agencies actively encourage views from the interested public. H.R. 10710 recognizes the importance of these procedures in sections 131-135. No better source of advice exists than that available from informed industry experts on the likely impact of proposed actions on their industry. We respectfully urge that this Committee retain section 135 which requires industry consultation throughout the entire negotiations procedure wherever such advice could be appropriately given. We believe that had this kind of liaison existed during the Kennedy Round, the chemical sector might have received more equitable treatment. We cannot stress too much how importantly we regard the utilization of this kind of advice.

Representatives of the chemical industry over the past several years have actively proposed a positive role for industry advisors, with substantial encouragement for the proposal from within the Administration wherever offered. Along with a number of other chemically-related trade associations, we have established an advisory structure for liaison with the Special Trade Representative, Ambassador Eberle, in conjunction with the GATT negotiations. We would endorse any language in the bill that encourages arrangements of this nature, especially in requiring two-way consultation on advice so developed.

CONGRESSIONAL ADVISORS

Section 161 of H.R. 10710 requires the delegation of congressional advisors to trade negotiations. We encourage a formal congressional advisory structure to take an active part in trade policy implementation, reporting on accomplishments to the Congress and recommending on the appropriate method of review for those matters requiring formal congressional attention.

RECIPROCITY WITHIN SECTORS

The inequities surrounding the Kennedy Round 50-20 deal on chemicals point up another matter which we regard as important-the maintenance of reciprocity within sectors during the negotiation process. Although restoration to a level equivalent with former status may not be practicable, nevertheless the repetition of any such patently one-sided arrangements in any sector should be avoided. Naturally, we within the chemical industry have registered complaint regarding such inequity.

As we look back on developments, it is interesting to note that our trading partners managed to establish new barriers to the flow of U.S. farm commodities, with the European Community playing a leading role in this regard. It makes little sense to overpose the products of industry for some illusory or disappearing advantage for agriculture. We recognize that complex trade negotiations cannot be strictly governed by a quid pro quo requirement. However, insofar as is reasonably possible, we urge that reciprocal benefits be sought on a sector-by-sector basis. We believe the House-passed bill deals fairly with this

issue, and we encourage the Committee to build on the appropriate language in section 102 of H.R. 10710 expanding the concept to embrace as much as possible each sector negotiated for tariff as well as nontariff barriers.

NONTARIFF BARRIERS

Section 102 of H.R. 10710 directs the President to seek arrangements for the removal of nontariff barriers. We feel this may be an extremely important issue for many U.S. exports. How nontariff barriers are defined and how broadly this authority may be exercised would determine its effectiveness in removing trade deterring effects. It seems appropriate generally for arrangements negotiated by the President to accomplish nontariff barrier removal, to be subject to prior review by this Committee and also by the Committee on Ways and Means and to subsequent review by Congress.

A major matter of interest to the chemical industry would be the potential elimination of the American Selling Price (ASP) provisions. We believe that elimination of ASP should provide the benzenoid sector with equivalency of protection. Any such agreement should, of course, be subject to the congressional review procedures. Any prospective shift from the present valuation system to that of the Brussels Tariff Nomenclature (BTN) similarly should require affirmative congressional approval. In both these instances of conversion, careful study is required to develop a program providing the necessary equivalency of protection. In the schedule proposed for the forthcoming round of GATT negotiations, there does not appear to be time for a sufficient examination by the Tariff Commission. In the current BTN investigation, haste would serve poorly the interests of those industries whose products are more intricately bound in complex tariff rates and classifications.

IMPORT RELIEF

Title II deals with import relief resulting from disruption due to fair foreign competition. MCA agrees with the easing of criteria for determination of eligiblity for import relief. The concept of relief envisioned by the Trade Expansion Act of 1962 has not been adequately tested for effectiveness because of what proved to be extremely limiting criteria determining qualification for relief. We agree that there should be no causative linkage between increased imports and past trade concessions as a required qualification for relief. We also agree that increased imports need not be the "major cause" of serious injury or threat thereof. The "major cause" of injury has been interpreted to mean the single cause greater than all other causes combined. This interpretation is unworkable conceptually and statistically. Its replacement by the criteria of "substantial cause" defined in section 201 as meaning a cause which is important and not less than any other cause will make available the relief provisions of the Act when they are legitimately required.

We agree that no specified numerical criteria are appropriate for triggering prescribed safeguard actions. Each case is unique in the competitive situation confronted as is the appropriate remedy. Each should be dealt with by a range of options such as provided for in the bill. We feel that under section 201, the Tariff Commission, whenever it reaches an affirmative finding of injury or threat thereof, should be required to make a further investigation as to the reasons for the increased injurious imports.

UNFAIR TRADE PRACTICES

Relief from unfair trade practices that reduce export markets may be expected to become an increasingly important need. An effective remedy for such actions will be difficult to find. Section 252 of the Trade Expansion Act provided authority to deal with these problems. But in the almost twelve years that this authority has been available, it has been used only once in the celebrated "chicken war." A unilateral authority may not provide the most effective way to resolve inequity. Instead, emphasis must be placed on appropriate international forums such as GATT for the arbitration of unfair trading practices.

To support this international effort, specific authorities should be available to the President, and we endorse the proposals included in section 301. We esperially commend the new direction to confront and deal with unfair practices of trading countries that place our trading position in third country markets at a disadvantage.