TABLE 7.-U.S. MACHINE TOOL IMPORTS AS A PERCENTAGE OF U.S. MACHINE TOOL CONSUMPTION, BY TYPES (BASED ON DOLLAR VALUE 1) 1964-73

Sources: U.S. Department of Commerce: Shipments- Current industrial reports, metalworking machinery (M35W); Exports-M35W, Bureau of the Census; Imports-FT 135, Bureau of the Census.

TABLE 8.-WORLD MACHINE TOOL CONSUMPTION (EXCLUDING U.S. CONSUMPTION); U.S. MACHINE TOOL EXPORTS

TABLE 9.-ALL MACHINE TOOLS (EXCLUDING PARTS AND ATTACHMENTS), IMPORTS INTO THE UNITED STATES, BY COUNTRY OF ORIGIN, 1964-73

Senator TALMADGE. The next witness is Mr. Robert M. Woletz; cochairman, legislative committee, National Office Machine Dealers Association. Your entire statement will be inserted in the record, Mr. Woletz, and you may summarize.

STATEMENT OF ROBERT M. WOLETZ, CHAIRMAN, LEGISLATIVE COMMITTEE, THE NATIONAL OFFICE MACHINE DEALERS ASSOCIATION, PRESENTED BY DAVID PALMETER

Mr. PALMETER. I am sorry, Mr. Chairman. My name is David Palmeter. And Mr. Woletz was called away because of a death in his family, and asks that I be permitted to present his statement in summary form.

The National Office Machine Dealers Association is a national organization of independent businessmen and is the recognized spokesman for over 10,000 office machine dealers and distributors. We are small businesses, selling and servicing a wide variety of business machines including typewriters, adding machines, calculators, bookkeeping machines, dictating machines, photocopy machines, duplicating machines, cash registers and data products.

The industry estimates that over 80 percent of the products sold by independent dealers are manufactured abroad. Over 100,000 workers are employed by independent dealers. We, therefore, have a vital stake in the legislative proposals under consideration by this committee. It is no exaggeration to state that the independent office machine dealer owes his very existence to imports. Typically, the large office machine manufacturers in the United States are vertically integrated monopolies with their own sales and distribution outlets. Over the years most have refused to sell through independent office machine. dealers. In the years past, the independent office machine dealer was forced to sell only used machinery, and to make a substantial part of his living in repairing and servicing machines.

To give the committee a few examples of the dominant position occupied by the giants, NOMDA estimates that National Cash Register accounts for approximately 70 percent of the U.S. cash register market, and International Business Machines has over 80 percent of the heavy-duty office electric typewriter market. Another example is Xerox, which totally dominates the commercial copying market.

IBM, NCR and Xerox have over the years flatly refused to market new cash registers, new electric typewriters and new copies through independent dealers. One hundred percent of NCR's new cash registers, IBM's new typewriters, and Xerox products are sold through their wholly owned branches. It has only been in the last 5 years that the dealer has had a nonprinting calculator to sell to his customers as a new machine.

The availability of imports allowed the independent dealer to some extent to market new office machinery. This introduced a needed but still inadequate element of competition into the marketplace. Imports have allowed our dealers to grow from establishments employing an average of 4 people and doing an average of about $100,000 annually

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to a present average of about 10 employees doing in excess of $400,000 per year. In other words, through imports the average dealer has been able to quadruple his size.

Not only have imports allowed this kind of growth among our member firms, but we would like to emphasize that the real beneficiaries have been the consumers of our products, no longer completely dependent on the few dominant American suppliers.

It is for these reasons that we are concerned with any measure which would unjustifiably impose restrictions on imports of business machinery.

We note that the House, in section 202 (c) (4), "Presidential Action After Investigation," accepted the recommendation of the administration that in determining whether to provide import relief, after a finding of injury in an escape clause proceeding, the President shall take into account-and I quote:

The effect of import relief on consumers, including the price and availability of the imported article and the like or directly competitive article produced in the United States, and on competition in the domestic markets for such articles.

We urge the Finance Committee to retain this provision. In our opinion, however, it does not go far enough. We would strongly urge the committee to adopt a provision which would require the Tariff Commission, in an escape clause proceeding, to conduct its own investigation of the elements included within section 202(c)(4), to hear testimony, to make findings thereon, and include such findings, together with supporting data, in its report to the President in any escape clause investigation.

We further believe that the bill should be amended in a manner forbidding the President to impose import restrictions when the Commission finds that such restrictions will materially reduce competition in the U.S. market for the product under investigation.

We further believe that the elements set forth in section 202 (c) (4) should be taken into account in the prenegotiation procedures set forth in chapter 3 of the bill.

Turning to the excape clause itself, we believe that the Ways and Means Committee's version has gone too far in the protective direction. We specifically refer to the substitution of the words "substantial cause" for the administration's proposed "primary cause" in describing the necessary causal relationship between increased imports and serious injury. Import relief is a drastic remedy and one which in our view should be used sparingly. The committee should insure that such relief is not accorded except in those cases where increased imports are at least a more important cause than any other cause of serious injury to the domestic industry concerned.

Other witnesses have dealt at length with the difficult question of countervailing duties. We recognize the importance of international rules governing governmental assistance to export industries. Since the United States maintains a number of export assistance measures such as the DISC, regional assistance programs, concessionary export financing, and others, we believe it important to work out an internationally accepted standard for Government subsidization.

Until this is done, we do believe that the present discretion on the part of the Secretary of the Treasury should remain without the 1-year or 4-year termination provided in the bill.

We think that the committee will find the business equipment field a perfect illustration of the advantages to the United States in an expanded, unfettered world trading order. The market for business machinery is rapidly expanding, with new products and new technology dominating sales. The United States clearly has the technological lead in many of the developments.

In electronic computers produced in the United States by the American companies manufacturing office machines but not marketed through office machine dealers, the United States overwhelmingly dominates the world market. Altogether, including computers, the United States exported $2.1 billion in the business machine field in 1973. Imports of about $900 million resulted in a favorable trade balance of the United States in business machines of over $1.2 billion. There are particular areas and particular types of machines where there was an import imbalance against the United States, but we believe that isolating particular segments of the business machine industry distorts the overall picture. The United States has specialized in high technology big ticket items, which maximizes our competitive advantages. Imports are meeting other needs in the marketplace.

Even in these areas, however, we feel that the situation is changing. Substantial adjustments in the dollar's parity with other currencies, coupled with the development of new technology and new products, has slowed the rate of import growth and clearly enhanced the export potential for U.S. manufacturers.

Moreover, the Department of Commerce projects a substantial growth in U.S. production of business machines for the future.

It is not only our concern that increased protectionism will make it impossible for our dealers to conduct their business, but that this will result in an intolerable aggravation of concentration and monopoly in the business machine industry. In the end, our consumers would pay a heavy price.

We wish to express our general satisfaction with the bill as passed by the House of Representatives. We do believe that it generally balances competing interests and objectives of the United States, and will allow our negotiators to grapple with the serious problems which they will encounter in international trade negotiations.

I wish to thank you on behalf of myself and the National Office Machine Dealers Association for the opportunity to appear before you and to present our views.

Senator TALMADGE. Thank you, Mr. Palmeter, for your contribution. Are there any questions?

[No response.]

Mr. PALMETER. Thank you very much, sir.

Senator TALMADGE. The next witness is Mr. Bernard H. Falk, president of the National Electrical Manufacturers Association.

STATEMENT OF BERNARD H. FALK, PRESIDENT, THE NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION, ACCOMPANIED BY THEODORE CROLIUS

Mr. FALK. Good morning, Mr. Chairman.

Senator TALMADGE. Good morning, sir. Your entire statement will be inserted in the record, Mr. Falk, and you may summarize it. Mr. FALK. I would like to introducee Mr. Theodore Crolius. Mr. CROLIUS. C-r-o-l-i-u-s.

Mr. FALK. Mr. Chairman, my oral statement will deal with unfairness of worldwide trading in certain electrical products, and how this proposed legislation can help in resolving this problem.

The National Electrical Manufacturers Association, NEMA, has historically supported U.S. trade policy aimed at expanded, liberalized international trade. That remains our position today, and, therefore, we endorse those provisions of H.R. 10710 which will carry U.S. policy forward toward realization of free, fair trade in world

commerce.

For NEMA members, this issue of free, fair trade is critical. Electrical manufacturing is a worldwide industry with worldwide markets. Virtually every nation has some electrical manufacturing, and the major industrial nations, without exception, have broadly diversified production capability and ever-increasing technological sophistication.

Every nation of the world regards its electrical manufacturing capability as an essential national resource which underpins its economic strength and measures its potential for growth. Consequently, every industrialized nation, to one degree or another, and with the United States as a notable exception, has historically adopted policies to protect and encourage its own electrical equipment capability, in terms of research and development assistance, strict buy-national procurement policies, discriminatory standards regulations, and export aids and incentives.

The buy-national procurement policies of electrical utilities owned or controlled by the governments of Western Europe, for example, have effectively foreclosed U.S. producers of heavy electrical equipment from competing in those foreign markets. At the same time, however, electrical machinery producers in those foreign countries, often supported by government export aids and incentives, have enjoyed relatively open access to the large U.S. market, subject only to a low tariff, and a 6-percent buy-American differential in the case of Federal procurement.

As a result of this one-way flow of trade, U.S. electrical manufacturers have sold very little equipment in the other producer countries of the world, while hundreds of millions of dollars of foreignmade equipment are now in place throughout most major U.S. electric systems-investor-owned utilities as well as Federal and municipal power authorities.

NEMA is gratified that the U.S. Government has tried to do something about the anticompetitive behavior of foreign governments and their government-owned or controlled electric utilities. In 1968,