always be willing to be fair where others are fair to us, but do you gentlemen not feel that with the situation as it is today, and realizing that we will get back to a highly competitive market, not that we are not now a highly competitive market, we are in a shortage market today, and so things might look a little different, but I think it would be a false illusion to think that this is going to last beyond a certain period of time, and we would be back where we were before with the Japanese flooding our markets with different products just like they are flooding our markets today with the motor vehicle equipment. And I am very concerned about the number of cars coming into this country and of course, this does affect the steel industry, but they are coming in on a 3-percent tariff, not that we can compete in some of the other markets with our cars, but when we could have competed, the restrictions were so great and are today that we do not have the opportunity.

What do you recommend that we do, or do you feel that this must be an administration decision in regard to fighting for the rights of these countries with relationship to GATT?

Mr. LARRY. I just might observe before Mr. Ahlbrandt does, that there are a number of places in the testimony here which really go to the point you are making, Senator, in trying to bring about the situation that when a fact is found which calls for action, as for example, when the Tariff Commission finds injury, then executive movement is required instead of something which can just sit there. And the same thing with respect to the countervailing duty. There ought to be something which goes on the record to start the timeclock working so that you are sure somewhere down the way somebody is going to do something if they find the facts are as alleged.

Senator FANNIN. That was the idea of the legislation I introduced, was to bring it to a conclusion by a certain time.

Do you feel that that is the most essential action that we can take? Mr. LARRY. We do.

Mr. CORT. Well, there are a number of industries that have absolutely disappeared and died while they are trying to prove injury. Senator FANNIN. While they are trying to settle the cases that they have against a foreign competitor?

Mr. CORT. That is right, and I see a return of that with more competitive world situations.

Mr. AHLBRANDT. If I may, Mr. Chairman, I think your bill is a very realistic bill. I am not complimenting you because we are here today, but I mentioned that when I was in front of the Finance Committee before. But I would say this: I think that your bill recognizes the problem as well as I think the United States must recognize that we have to settle some of our import, our industry problems on an economic basis rather than on a foreign policy basis. We must recog nize that we are competing against cash flow or bloc economies, where cost is no object and profitability is certainly, if it is there, is only there as a word. We have to form our capital in order to get our investment resources, in order to build our economy; we have to do that on a profitmaking basis. And unless we change our way over here to a cash flow economy, we are never going to be competitive worldwide, even though costwise we are competitive. I know we are competitive in the specialty steel industry, but when they want to come over and

utilize our market to build their industries and capacities, they do it on a loss basis, generally speaking.

Senator FANNIN. I have heard the arguments, and they say the second phase of their production would lower the cost this amount so they can sell it this much cheaper in the United States, but they still retain the same price in Japan. I have noticed they use that argument second 100,000, I would say, of some particular product that is being made. And it certainly is not consistent with the intent of GATT nor is it consistent with a fair policy between our two countries. Now, we are speaking about the money market. We recently received testimony in our Financial Market Subcommittee hearings on the difficulty of raising equity capital to expand investment and production in basic industries in the United States, and an example was given and pointed out by Mr. Lyn Townsend, chairman of the Chrysler Corp., that McDonald's Hamburger Corp. has an aggregate market value of stock equal to the stock of the United Steel. McDonald's had a book value at the end of 1972 of $200 million, and recent stockmarket value of $2.1 billion. On the other hand, United Steel had a book value of $3.6 billion and recent market value of $2.2 billion. In other words, the market value of stocks on the exchanges do not reflect the real value of the assets, but only the institutional investors' assessment of the growth value of the stock.

Now, we were looking for suggestions, and one suggestion that I would like to place before you is a plan developed by Mr. Louis Kelso which would distribute widely the shares of the stock to the employees under employees stock benefit plan.

I know that many of you have stock ownership plans, but I wish you would, if you have not already looked at this plan-and I do not know what your thoughts are-but I would like for you to submit for the record your comments as to whether you feel it might help your corporation raise capital, to expand capacity, or if you have any other plans that you think might be appropriate that would be involved in our Finance Committee activities.

I feel that it is certainly incumbent upon us to try to work on programs that will be of assistance. We are all vitally concerned with what has happened today. We desire to make it more profitable for you to do business in order that you can be more competitive and produce more jobs, and we certainly realize that if the trend continues and they say, well, we can be a service nation, that it is in sight for us to maintain the economy that we have today, maintain the living standards that we have today.

So I think that the Congress of the United States is vitally concerned as to just what can be done in regard to placing you in a more competitive position and placing you in a position where you can raise the capital needed which would make it possible to do exactly that. I want to express the appreciation of the committee for your appearance here today. It has been very helpful. We will review the recommendations you have made very carefully because it has been brought out, some of these recommendations are in line with legislation we have previously considered, and that we will be considering in the future. So thank you gentlemen very much.

Mr. CORT. Thank you very much.

[The prepared statement of Mr. Cort follows:]

PREPARED STATEMENT OF STEWART S. CORT, CHAIRMAN, AMERICAN IRON

AND STEEL INSTITUTE

My name is Stewart Cort. I am appearing today as Chairman of the Ameri can Iron and Steel Institute. Our domestic member companies account for about 95 percent of the steel produced in this country and employ over 500,000 work ers. I have with me R. Heath Larry, Chairman of the Institute's Committee on International Trade and Vice Chairman of United States Steel Corporation, Roger S. Ahlbrandt, Chairman of Allegheny Ludlum Industries, and Mark T Anthony, Vice President and General Manager, Steel Division, Kaiser Steel Cor poration.

Mr. Chairman, in our appearance before the House Ways and Means Committee on this same subject, we indicated the minimal improvements needed to make the trade bill responsive to international conditions besetting American industry and labor. These proposed improvements were largely absent from the bill as it emerged from the House.

Today, less than a year since the House began consideration of the trade bill, the U.S. has moved into vastly different economic and political circumstances. These changed conditions confirm our view that the trade bill is not attuned to the world of today and, even less, to the world of tomorrow. Therefore, we cannot support H.R. 10710, the Trade Reform Act in its present form.

ANNEX A

Subject: Additional Amendments to H.R. 10710.

Certain additional amendments are recommended by Kaiser Steel Corporation in order to facilitate the provision by the President of import relief under Section 203 of the bill:

1. Section 203 (h)(2) which relates to the negotiation of orderly marketing agreements with foreign countries should be changed. The sentence beginning on line 18 of page 61 ("In addition . . .") should be struck and the following substituted:

"In addition, in order to carry out any agreement concluded under subsection (b) (4) with one or more countries accounting for a significant part of United States imports, including imports into a major geographic area of the United States, of the articles covered by such agreements, the President is authorized to issue regulations governing the entry or withdrawal from warehouse of the like articles which are the product of any country not party to such agreement." 2. In order to provide the President with more flexible authority, section 203 (b) should be amended to provide that the various measures of relief can be applied without regard to section 127 of the bill, which section sets forth the most-favored-nation principle.

The purpose of this amendment is to make it possible for the President to apply higher import duties only to those imports which are causing the injury to the industry in the major geographic area without the necessity for imposing higher duties on all imports irrespective of their country of origin. Thus, as can be expected, if specific imports from one identifiable country are causing the injury to the industry in the major geographic area, only those imports from that country would be subject to the provision of import relief by the President without the necessity of affecting all other imports. Countries whose exports to the United States would not be affected would certainly not have any basis for complaint Moreover, although the GATT appears to require that escape clause actions should be subject to the MFN provision, there is now serious discussion in the GATT of the need to negotiate a multilateral safeguard code as part of the proposed trade negotiations. Virtually all the discussions to date have indicated the desirability of permitting the non-MFN application of import relief under such a code. This proposed amendment would conform United States law to this approach and make it possible for the President, at his discretion, to apply import relief on a nonMFN basis as the multilateral safeguard code is expected to provide.

ANNEX B

[House of Representatives, Dec. 10, 1973]

Mr. PETTIS. Mr. Chairman, I would like to draw the distinguished acting chair man's attention to a provision of title II of the bill. I refer to the so-called escape clause provision under which the President is authorized to provide import relie after the Tariff Commission has made a finding of injury to a domestic industry

In section 202(c) certain considerations are set out which the President shall take into account in deciding whether to provide import relief. Included among these is "geographic concentration of imported products marketed in the United States." The fact that this consideration is explicitly set out in the legislation as a guide to the President indicates that the Congress is instructing the President to be mindful of the geographic concentration of imported products and their impact on domestic industry in that geographic area. Is my understanding correct in this regard?

Mr. ULLMAN. Mr. Chairman, if the gentleman will yield, the understanding of the gentleman from California is correct. The language which the gentleman has referred to in section 202 defines a congressional policy to guide the President in the exercise of his authority under title II.

Mr. PETTIS. Is not my further understanding correct that the Tariff Commission, in making its findings under the escape clause, would take into account and report to the President on considerations which apply to the exercise of Presidential authority? Thus, in the case I cited, the Tariff Commission, under section 201, would consider and report on the effects of the geographic concentration of imports on the affected industry in the particular geographic area.

Mr. ULLMAN. That is correct, and that information would be considered by the President.

ANNEX C

In the following determinations of injury under the Antidumping Act, the United States Tariff Commission defined "an industry in the United States" as being the industry in a geographic area of the United States. The relevant passage from the Commission's reports in these cases are listed below.

1. Cast iron soil pipe from the United Kingdom, Investigation No. 5, 1955

"The domestic industry to which the Commission's determination of injury relates was held to consist of the producers of cast iron soil pipe in the State of California".

2. Portland cement from Sweden, Investigation No. 16, 1961

"The imports of Swedish portland cement which are injuring the domestic. industry concerned are entering at the ports of Fall River, Mass., and Providence, R.I., and are being sold in a limited geographic area that is supplied with domestic portland cement by plants adjacent to the same area. This area, consisting of Rhode Island, eastern Massachusetts, and eastern Connecticut, is referred to herein as the 'competitive market area'. The domestic portland cement plants that have historically supplied such cement in that area and that have in recent years sold substantial quantities of such cement there, are considered to constitute 'an industry' for the purposes of the Antidumping Act."

3. Portland gray cement from Portugal, Investigation No. 22, 1961 Language similar to the above case.

4. Chromic aicd from Australia, Investigation No. 32, 1964

"For approximately one year (August 1962 to mid-July 1963) chromic acid from Australia was imported into the United States at less than fair value. Virtually all the chromic acid was sold on the West Coast, a market which accounts for about ten percent of the total domestic consumption. During this period, imports amounted to 14 percent of the chromic acid consumed on the West Coast and came in at an accelerated rate."

5. Steel reinforcing bars from Canada, Investigation No. 33, 1964

"However, in 1962 the importer concentrated most of his sales in the Northwest area of the United States (principally Oregon and Washington) which now constitutes the only major competitive market area in which the imported re-bars are sold. This area, except for imports, is served almost exclusively by three domestic mills located within that area. In recent years there have been only rare instances in which special circumstances have made it feasible for other domestic mills to ship re-bars into that competitive market area. This is principally because of the peculiar location of the market area and the higher shipping costs applicable to shipments of the other more distant mills."

6. Carbon steel bars and shapes from Canada, Investigation No. 39, 1964

"The bars and shapes involved in this case are heavy, elongated, low-value products subject to high transportation costs. Consequently, they are commonly

sold only within a comparatively restricted geographical area. Thus, it is not surprising that the three domestic producers in the Pacific Northwest-Oregon Steel Mills, Northwest Steel Rolling Mills, Inc., and the Bethlehem Steel Company-typically sell over 95 percent of their production of the relevant items in the Pacific Northwest. Furthermore, approximately 95 percent of the domestie steel bars and shapes of this type which are consumed in the area come from these three mills, and the bulk of their raw material originates in the same States. Their sales are made primarily in small lots. This factor, together with the high freight costs, isolates this group of producers."

7. Cast iron soil pipe from Poland, Investigation No. 50, 1967

"It is apparent that some of the imports have been sold in various sectors of the United States but that virtually all of the sales have been concentrated in two large competitive market areas of the United States, namely, the Los Angeles area and the northeastern area of the United States which consists of the territory situated around and between Philadelphia and New York City. These two markets constitute approximately one-fifth of the total United States market for cast iron soil pipe; the northeastern market is by far the greater of the two. Due to the bulk and relatively low unit value of cast iron soil pipe, transportation costs tend to limit the competitive market areas of producers."

8. Steel bars, reinforcing bars and shapes from Australia, Investigation No. 62, 1970

"Sales and offers of sales of the LTFV imports were concentrated in two separate competitive market areas: California and the northwestern states." A footnote at this point reads as follows:

"Both California and the northwestern states (Oregon and Washington) constitute separate competitive market areas because freight differentials limit sales of domestic steel products in such areas principally to the plants operating within the areas."

Comprehensive legislation dealing with trade under present conditions and those likely to exist in the future must contain the following basic provisions: 1. Sector negotiations for steel and other basic commodities essential to the proper functioning of the economy that would encompass all tariff and nontariff distortions affecting international trade flows in those commodities.

2. Authority to enter into orderly marketing agreements on a sector basis similar to the recently negotiated GATT multi-fiber textile arrangement which is aimed at preventing market disruption while moving nations ahead on a course of liberalized trade.

3. Provisions as to dumping, subsidies and other unfair trade practices that forcefully convey the intention of the United States to counteract such prac tices.

Unless the bill is substantially rewritten to incorporate the foregoing elements, its enactment will leave us worse off than we are today with the inadequate statutes and administrative procedures now in effect.

We are in a period of strong worldwide demand for steel, with foreign steel selling at prices well above the prices the Cost of Living Council allows us to charge in this country. It would be easy to conclude that the steel industry has no trade problems. Such a conclusion would be totally wrong. Even in 1973a record year for the domestic industry and one of worldwide steel shortagessteel imports totaled an astonishing 15 million tons, creating a negative trade balance of $1.8 billion. Import penetration for many products remains at a very high level, especially for some of the specialty steels, such as certain stainless steel products and tool steel.

Over 70 percent of the world's steel output is produced in facilities either government owned or controlled. Our foreign competitors still pursue a practice of exporting to our markets at prices below full cost whenever they have a capacity in any product line which exceeds the local demand. Despite general shortages of steel, this is still going on in certain product lines where potential supply exceeds current demand. Our current statutory safeguards as presently administered are incapable of preventing this practice.

We are in an unparalleled period of economic confusion. Yet H.R. 10710 would permit expansive but ill-defined negotiating initiatives along lines more suited to trade conditions existing in the past than to those we now face, and without coextensive safeguards against market disruption. In today's and tomorrow's world, market disruption is an ever-present danger. As just one example, the Japanese have announced their intention to expand steel exports even if that