with the escape clause, which requires a link to prior tariff conces sions as the reason for increased imports into the United States. This is an impossible condition to prove. You cannot prove that the increased imports are due in major part to tariff concessions. And you certainly cannot prove that the harm involved is related to the most recent set of tariff concessions, as opposed to the aggregation of all prior tariff concessions. It has been nearly impossible to establish this link to prior tariff concessions, which has resulted in negative determinations of 18 out of 25 escape clause cases. This link to prior trade concessions should be eliminated from the trade bill.

Finally, we believe that a trade bill should address the problem of access to foreign supplies. Now, the boating industry, which manufactures boats of fiberglass-reinforced plastic, or FRP, which is composed primarily of polyester resins, is in deep trouble because of the critical shortage of petrochemical feedstocks and finished chemicals required for the fabrication of the resins. In short, we cannot get the petrochemicals that we need to make our fiberglass boats.

Our parent trade associations, the Boating Industries Association, and the National Association of Engine and Boat Manufacturers, have informed us that over 49 percent of their members have had trouble getting resins. They cannot get adequate supplies. Forty percent of those answering their surveys have had layoffs or shutdowns as the result of raw material shortages. Domestically, we feel that a new set of policies should be pursued, such as allocation of end uses of available petroleum and petrochemicals. On the export side, the trade bill should look to this problem of access to foreign supplies as well.

In summary, we hope that the trade bill will assist in obtaining access to foreign markets, containing excessive imports of foreign products into the United States, and insuring access to needed supplies for the United States. If it does these things, it will be a good bill and will serve the national interests of the United States. Thank you very much.

Senator HANSEN. Mr. Fisher, thank you very much for your testimony. As I am certain you already have been advised, your entire statement will be printed in the record.

[The prepared statement of Thomas H. Boggs and Bart S. Fisher follows:]

SUMMARY OF TESTIMONY OF INTERNATIONAL MARINE EXPOSITIONS, INC.

1. International Marine Expositions, Inc.. generally supports the Trade Reform Act of 1973 as drafted by the House Ways and Means Committee.

2. Title I of the Trade Reform Act of 1973 should be amended to clarify the negotiating powers of the President with respect to nontariff barriers to trade. Specifically, the President should be empowered to negotiate agreements on nontariff barriers to trade on a nonmultilateral basis that do not apply to the products of all foreign countries. The Trade Reform Act of 1973 should recognize that the Most-Favored-Nation principle, while useful in the area of tariff negotiating authority, may not be useful in negotiating on nontariff trade barriers. Many nontariff trade barrier agreements, including those on safety standards, should not confer benefits on countries who do not undertake the obligations of the agreement.

3. International Marine Expositions, Inc. supports the negotiation within the General Agreement on Tariffs and Trade (GATT) of an agreement on safety

standards. An agreement based on the general principles of national treatment, harmonization of safety standards, recognition of the tests of other countries, and liability management should be negotiated. Agreements on specific products should be added to the general agreement as annexes.

4. International Marine Expositions, Inc. supports Title II, which deals with fairly-priced foreign imports. A viable "safeguard" system, based on the causation and injury criteria drafted by the House Ways and Means Committee, should be adopted.

5. There should be equality of tariff treatment for boat imports in the United States and Canada, as opposed to the burdensome tariffs presently levied on pleasure boats by the Canadian government. There is equality of tariff treatment for automobiles and snowmobiles under the United States-Canadian Automotive Products Agreement of 1965. We feel that there is no rational basis on which to make a distinction between boats which are not covered and other transportation equipment which is covered by the accord.

TESTIMONY OF INTERNATIONAL MARINE EXPOSITIONS, INC.

Mr. Chairman; my name is Thomas H. Boggs, and I am appearing today as Counsel for International Marine Expositions, Inc., a corporation composed of over 600 manufacturers of recreational boats, marine engines and marine accessories. I am accompanied by Bart S. Fisher, an associate in my law firm in Washington, D.C. We appreciate the opportunity to testify on behalf of the recreational marine industry in favor of the general provisions and objectives of the Trade Reform Act of 1973 (TRA). Our industry has a major stake in the world economy. In 1971, $3.6 billion was spent by Americans for marine equipment and services; 9 million recreational boats were in use of American waters; and 45 million Americans went boating. In 1971, 495,000 outboard motors were sold in the United States, with a retail value of $362.3 million, and 278,000 outboard boats were sold, representing retail dollar sales of $189 million. The exports of pleasure boats in 1970 were almost $28 million, and imports of pleasure boats into the United States were over $35 million.

International Marine Expositions, Inc., supports the Trade Reform Act of 1973. It comes before this Committee as part of an industry that has been hampered by the presence of tariff and nontariff barriers abroad. While we appreciate the recent concern of the Committee with the problem of access to scarce supplies for the United States, we view the TRA as a vehicle that may assist in obtaining greater access to foreign markets for the products that we would like to export. We wish to make it clear that we believe the marine industry would benefit from a more open and equitable world trading economy. On the other hand, we believe that a strong "safeguard" system should accompany further liberalization of imports for the United States. Thus, we will direct our comments on the TRA to Title I, which deals with authority for new trade negotiations, and Title II, which deals with relief from disruption caused by fairly priced foreign imports (the "safeguard" system). Secondly, we believe that there should be equality of tariff treatment for boat imports in the United States and Canada, as opposed to the burdensome tariffs presently levied on pleasure boats by the Canadian government. There is equality of tariff treatment for automobiles and snowmobiles under the United StatesCanadian Automotive Products Agreement of 1965. We feel that there is no rational basis on which to make a distinction between boats which are not covered and other transportation equipment which is covered by the accord.

AUTHORITY FOR NEW TRADE NEGOTIATIONS: TITLE I OF THE TRADE REFORM ACT

International Marine Expositions, Inc. believes that the negotiating authority for a new round of trade talks within the General Agreement on Tariffs and Trade (GATT) is the most important part of the trade bill for the Administration. We recognize that the tariff-cutting authority of the President expired on June 30, 1967, and that no meaningful round of trade talks can be carried on by the United States without a new delegation of negotiatinga uthority by the Congress. Accordingly, we support the concept of a five-year delegation of authority from the Congress to the President to enter into trade agreements

with foreign countries. We believe that the Executive should have the authority to modify tariffs downward as he determines to be necessary, and upward to levels not above 50 percent of tariff levels presently prevailing. Most importantly, the delegation of negotiating authority in Title I should cover nontari ffbarriers to trade (NTB's). Our industry, like many others, has discovered that the key barriers to trade now that tariffs have been reduced in many markets are NTB's such as discriminatory taxes, customs entry procedures, and discriminatory standards procedures.

Let us give you an example of the type of NTB that has limited our ability to sell in foreign markets, the problem of standards for safety for pleasure craft. In the United States, the burdens that apply for boat safety are no different for a domestic or a foreign manfuacture of pleasure craft, either in design or in the implementation of our laws. In other words, under the terminology of the GATT, the United States provides effective "national" treatment by treating foreigners selling into our market in the same manner as U.S. citizens selling into the domestic market. In Japan, where our industry has had a difficult time gaining entry to the local market, a far different situation exists. In order to import boat hulls or engines into Japan, a preliminary inspection system is applied, which entails the inspection of a prototype of the engine desired to be imported into the country. In practice, the Japanese Government requires the submission of plans and specifications of the boat equipment imported into Japan. The inspection of the prototype and blueprints of equipment involves turning over to the Japanese Government proprietary trade secrets which, understandly, many U.S. manufacturers are reluctant to do. As a result, several U.S. boat manufacturers have decided to not export to Japan rather than divulge such information. Japanese boat manufacturers must also submit prototypes for model approval by the Government, but, in view of the extremely close relationship that exists between Japanese business and the Japanese Government, it is not unreasonable to assume that domestic proprietary information is treated more carefully than such information from U.S. exporters. A second part of the preliminary inspection system in Japan is the uncrating of U.S. engines and application of tank tests before such engines may be placed in the flow of Japanese commerce. Several U.S. manufacturers have complained about the delays that are frequently encountered in obtaining inspectors to perform such tests expeditiously in Japan, and the extra cost (about $50 per unit) of such tests.

Partially as a result of the discriminatory design and application of Japanese boat safety standards, and partially as a result of the 7.5 percent tariff coupled with a 40 percent commodity tax on pleasure boats over 20 feet in length, U.S. sales of pleasure boats into Japan's market have been miniscule. In 1971, the United States exported only 558 units of pleasure craft to Japan, valued at $808,497. This is a particularly small sum in view of the fact that Japanese dealers freely state that American motor-boats have the best sales potential in Japan. Despite somewhat higher prices, American boats appeal to Japanese consumers because of their appearance and performance, and are small enough to transport overland and to house in their multistoried facilities at local marinas.

What can be done about standards in the forthcoming round of trade negotiations under the TRA? Quite a lot, we believe. We recommend a fourpoint GATT code on safety standards to complement the current treaty framework of the organization.

1. National Treatment

Present Article -X of the GATT provides only that safety standards may not be applied in a manner that would be arbitrary or unjustifiable in terms of discriminating against imported products, or a disguised restriction on international trade. In other words, safety standards affecting foreigners are permissible where the restrictions do not hurt trade more than is necessary to achieve the desired domestic goal. A tighter definition of national treatment is needed in the new GATT standards code. It must be made clear that imported goods are to be treated in the same manner as domestic goods. The new GATT code should provide that, after a transition period, no nation shall directly or indirectly impose health, safety, or standardization requirements on imported goods that are more severe than those imposed on domestically-produced goods.

2. Harmonization of Standards

A new international organization should be established to negotiate product and process standard harmonization, by unanimity or by qualified majority. The institution should also be empowered to establish minimum standards for environmental and safety protection during the manufacturing process and permit the application of specified trade adjustments to compensate for manufactures that fail to meet such minimum standards. The approach of withdrawal of trade concessions suggested by the Administration with respect to the denial of scarce foreign supplies should also be considered in the safety standards area, which, in the long run, may be as great a deterrent to free trade as self-denying restraints on trade.

Harmonization of standards is important for two reasons. First, it would tend to eliminate the multiplicity of standards that plagues the international trading system. Volkswagen, for example, must manufacture ten different models to satisfy national safety requirements. Secondly, harmonization of standards would tend to eliminate the problem of domestic in-process testing. For example, all compressed gas cylinders transported in the United States must be testing during the course of manufacture in the United States, a requirement that is obviously impossible for foreigners to comply with. France has a similar in-process testing requirement for pharmaceutical products. To the degree that harmonization of standards is present, it can be seen that the problem of domestic in-process testing becomes more of a non-issue. If all countries have the same standards for testing, there is less justification in demanding that such in-process testing take place domestically. It should be possible to use expert panels, or members of the code organization to formulate desirable testing standards.

While an indentity of national safety standards will probably be impossible in some areas, a waiver system accepting "comparability" of standards could be established. The code should provide that national standards in the safety field should be promulgated with adequate publicity, that public consultation procedures be available, and that a reasonable delay period be allowed to permit citizen input.

3. Recognition of National Testing

The code should provide for recognition of in-process tests and chemical analyses performed in all countries. The code should make it clear that products tested and approved during the course of manufacture in one country should be accepted without further testing by another country. Certificates granted for the successful completion of tests and chemical analyses would be accepted without reservation by the importing country.

Compliance with in-process testing standards should be monitored by international inspectors supplied by the GATT or a "neutral" international organization; the monitoring organization could check compliance by testing samples provided by the manufacturer, or inspecting the manufacturer's operations during the course of manufacture. It would not seem prudent to leave the task of monitoring to national authorities, who might have a vested interest in encouraging the exportation of their nation's products to improve the balance of payments or for other reasons.

4. Liability Management

A sophisticated system of liability management should be provided in the code to insure that all citizen losses resulting from defective foreign products are compensated as rapidly as losses from domestic product defects.

5. The GATT Standards Code and the Trade Reform Act of 1973

We have gone into some detail on our view of the desirable shape of a GATT code on standards in order to suggest some refinements in the Trade Reform Act of 1973. Our view is that any GATT standards code would have two parts. The first part would be general provisions containing the principles described above of national treatment, harmonization of standards, recognition of national testing, and liability management. The second part would be annexes for each product covered under the pact. Boat safety provisions would, then, be an annex to the more general pact, as would, e.g., pharmaceuticals.

When each annex is negotiated, it would seem that the more nations that are involved, the more successful such a pact would be. Nevertheless, even a two

member pact could be successful, and the TRA should be altered to take account of that possibility. The nontariff barrier negotiating authority granted in section 102 of the TRA is written in the traditional terminology of multilateral trade negotiations, and the Ways and Means Committee report explicitly states that: "The authority granted in section 102 is not intended to be an additional grant of authority for the President to extend the benefits of trade agreements on less than a nondiscriminatory basis." We believe that the TRA should be "opened up" to provide for a cross-network of bilateral standards negotiations, in addition to the overall negotiation on the general principles themselves.

Upon reflection, it can be seen that the additional bilateral authority suggested would expand the possibilities for meaningful negotiations on standards. A series of discussions, each dealing with one annex to the pact, could simultaneously be conducted in order to obtain the maximum mileage in terms of trade-offs. The United States, for example, could agree to give up its requirements on in-process testing for compressed gas cylinders in return for concessions by Japan on boat safety.

In addition to specific bilateral authorities, it may be useful for the Committee to provide guidance for our trade negotiators in a Committee Report on which NTB's should be given priority in negotiations, and what procedures such NTB agreements should establish.

We recognize that working out a formula for Congressional oversight in the area of negotiation on non-tariff barrier accords is both essential and inordinately difficult. The President must have a mandate to negotiate, and the Congress must have an opportunity to check on the results of its delegation. We believe that the TRA has an adequate oversight process in Title I. The need for an accommodation on Congressional oversight is imperative, due to the fact that the number of NTB's is so vast that it would probably be impossible to frame a delegation with adequate standards in advance.

THE SAFEGUARD SYSTEM: TITLE II OF THE TRADE REFORM ACT

International Marine Expositions, Inc. also supports Title II of the TRA, which deals with relief caused by disruption from sudden surges in foreign imports. We believe that the other side of the coin from liberalization of world trade barriers is the ability to moderate difficult adjustment to foreign imports through a viable "safeguard" system. The pleasure boat industry itself has experienced difficulty in containing the growth in foreign boat imports into the U.S. market. The ratio of foreign imports to apparent consumption in the pleasure boat market in the United States has risen from seven percent in 1968 to nineteen percent in 1972 (based on value). Accordingly, we support a permanent delegation of authority to the President to protect U.S. industries from foreign imports that are a "substantial" cause of "serious" injury or threat thereof. We support the major changes which have been effected in the criteria for import relief in the safeguard system, especially the elimination of the link to prior tariff concessions as the required cause for the increased foreign imports. This change is justified because it is difficult to separate out the reason for an increase in foreign imports. Also, it was never clear whether it was equitable to accumulate very old tariff concessions, or, merely to look at the most recent set of tariff concessions. At present escape clause relief is practically non-existent, largely because of the difficult causation criteriachanges to "open up" the import relief mechanism for U.S. producers should be enacted to ease the adjustment difficulties of import-impacted industries. Economic Factors in the United States-Canadian Boat Market

We recognize that the focus of these hearings is the Trade Reform Act of 1973 and other bills relating thereto. We believe that this may, however, be an appropriate forum to express our views on certain economic factors in the United States-Canadian boat market. Our basic view is that pleasure boats should be granted more favorable treatment by Canada. There are three reasons for our position. First, it is conceptually impossible to distinguish between on-the-road transportation vehicles which have tariff equality under the United States-Canadian Automotive Agreement and off-the-road transportation such as boats. All transportation vehicles should be treated in the same manner. Secondly, equality of tariff treatments by Canada would substantially