means reducing domestic supply to help them pay the rising bill for Middle Eastern oil. There is little doubt that a substantial part of that increase will be sent to the most accessible and largest market-the United States.

Finally, and most important, in order to justify the massive long-term investments needed to expand capacity in step with increased demand, we must have adequate safeguards against floods of imports coming in at very low prices supported by other governments to further their own political and economic policies.

We support the concept of multi-lateral trade negotiations for the purpose of stimulating healthy and beneficial international trade. But we contend there must be a clear indication of national objectives and not merely negotiations for the sake of negotiating. International negotiations are necessary to the steel industry and can serve the economy in three ways that will encourage the continuing development of adequate and reliable supplies of steel:

1. To achieve access to vital raw materials through trade with any country that can provide such resources except where overriding national defense of national economic security issues are involved;

2. To achieve a maximum degree of understanding as to what constitutes fair terms of trade in steel; and

3. To achieve a well-designed orderly marketing and safeguard system that, in the event of actual or threatened disruption from imports, will permit prompt, adequate limitation on imports for a temporary period until the disruption has abated.

Viewed in terms of what we consider essential elements of a trade bill and in terms of negotiating objectives for our industry, H.R. 10710 is seriously deficient legislation. It is quite inadequate as a policy for the trade challenges that will confront us during the decade ahead.

Our government has recently exhibited concern as to what might happen to forms of domestic energy production which have become economically viable in recent months because of the higher prices imposed by foreign oil-producing nations-if those producers use their leverage at a later date to reduce prices as they have recently raised them.

It should ask the same kind of question in connection with steel. Under conditions of less than capacity demand for steel, foreign producers have repeatedly shifted their pricing policies dramatically, quoting prices below their full costs of production and rapidly increasing their exports. This has had the effect of sustaining operations and employment in foreign countries at the expense of domestic production in this country. Obviously, this destroys the ability of domestic producers to finance new steel producing capacity.

On the other hand, during the current period of strong steel demand, producers of other nations have withdrawn many of their products from our markets. And when they have stayed in the market, they have raised their prices far above those domestic manufacturers have been permitted to charge under price controls. Thus, the price advantages inherent in the present strong market have been going in the main to encourage expansion abroad rather than in this country where it is clearly needed. The American steel industry has been faced with the worst of all possible worlds in every phase of the steel demand cycle. The country is now suffering the results of having permitted this to occur in the past. I will now turn to specific sections of the bill.

Negotiating authority: sector negotiations

Conditions have changed dramatically since the legislative proposals for H.R. 10710 were first formulated.

There have been major realignments of exchange rates that are still going on. The U.S. balance of payments has improved, at least for the time being. Monetary negotiations are stalled. Energy issues are emerging as possibly one of the most Significant trade-influencing factors of the decade. Agricultural shortages, inflation and serious concern about a world recession are all part of the changed environment.

It is these, and not simply tariffs or traditionally discussed non-tariff barriers, which affect international competition and, therefore, international trade flows in steel today. Yet there is scant indication in H.R. 10710 that U.S. negotiators would be able to consider these issues as coming within the scope of non-tariff trade barriers.

Clearly the old across-the-board or linear negotiating formula, now in title I of H.R. 10710, needs to be reexamined. For a few important industries, in-depth sector negotiations are absolutely essential.

For the steel sector, only negotiations covering all types of non-tariff distor tions of trade, as well as tariffs, have a chance to produce meaningful results. As Ambassador Eberle noted in his testimony before this Committee on March 4th, "We need to ensure that the overall problems of certain key industries and agricultural sectors be covered in an internal manner, relating tariffs, NTB's, government policies, future world supply, and pace of adjustment considerations." We operate in a world market where over 70 percent of the output is produced in facilities which are government owned or controlled. Their output and sales are heavily influenced by political and economic policies of those governments designed to attain high levels of employment, improved international payments balances and adequate supplies of essential materials. As a consequence, foreign steel industries generally benefit from special aids under national planning and industrial development schemes in which they are important integral factors. And these aids have a marked influence on their trade policies. The practical way to deal with the trade distortions and disruptions which emanate from those policies is international negotiation. Accordingly, we urge that negotiating authorities in title I be amended:

To require sector negotiations for essential basic commodities covering tariffs and all other factors influencing international trade in those commodities; and

To define the terms "barriers to" and "disruptions of" international trade to include as within the scope of such negotiations-the effect on trade arising from national balance of payments problems, export controls, material policies, tax policies, pollution abatement programs, government ownership or control of industries, subsidies and other non-tariff distortions.

Safeguards

The import relief provisions of title II are a serious disappointment. Lessons of the 1960's have gone unheeded. The prospect of heavy market penetration by imports at uneconomically low prices continues to be a serious deterrent to new domestic steel investment, just as it was during the 1960's. Government controlled or subsidized steel industries in both developed and developing countries are rapidly expanding capacity and targeting a major portion of output for export markets. Export drives in steel will be further stimulated by payment imbalances confronting most nations as a result of increased energy costs and by the strong desire of developing countries to increase foreign exchange earnings by exporting more finished and semi-finished products rather than basic raw materials.

Current political and economic uncertainties, therefore, impel creation of escape clause and unfair trade practice mechanisms that enjoy governmental backing, inspire confidence, and can be put in motion promptly whenever needed. Title II fails on all counts.

We frankly doubt that adoption of "subsantial cause" and other revisions will amount to much more than a change in semantics. We have only to look to the disposition of escape clause cases since 1962. Additionally, section 202 of the bill still empowers the President to disregard Tariff Commission findings and recommendations if he chooses to do so.

Section 203 of H.R. 1010 lists in order of preference four types of import relief for application once there is affirmative finding of injury by the Tariff Commission. Orderly marketing agreements are at the bottom of the list, after even unilateral imposition of tariffs and quotas. Thus, it appears to encourage unilateral action, rather than international negotiation and cooperation.

The recently negotiated multi-fiber textile arrangement, to which the United States is a party, stresses "orderly and equitable” development of textile trade as being a basic objective of the arrangement. The House-passed bill would adopt directly contrary policies as to all other commodities. This is not the way to encourage more equitable trade.

We recommended that the legislation clearly recognize that orderly marketing arrangements are legitimate instruments of trade policy, particularly as to commodities essential to the operation of the economy and requiring heavy, long-term capital investment in productive facilities.

We urge that the bill incorporate the definition of "market disruption." the import restraint formulae, the consultative procedures, and other essential fea tures of the safeguard measures embodied in the recently negotiated GATT multifiber textile arrangement.

Unfair trade practices

Despite some improvements in title III, the bill still falls far short of minimally acceptable changes. The provisions in section 301 relating to foreign subsidies provide the President with a greater redressive capability and should be retained. But, there are other provisions which are totally incomprehensible or inadequate.

To cite one, under the antidumping provisions of section 321, a domestic manufacturer who has been hurt by dumped goods and has brought a complaint would have to prove his right to appear at any hearing conducted by the Secretary of the Treasury or the Tariff Commission while the party accused of dumping would have the right to take full part in the proceedings.

Indeed judicial review of antidumping proceedings would be a hollow proceeding for an American company which was denied the right of full participation in making the record before Treasury or the Tariff Commission, when the record is the exclusive basis for the judicial review.

Industry experience with enforcement of the antidumping statute reflects a serious need for the statute to contain adequate definitions of "industry" and "injury" so that there can be more precisely mandated standards to assure that the intent of Congress is being carried out in the administration of the antidumping statute. We have specific proposals on these definitional points which will be submitted for the record.

In the countervailing duty provisions of the bill in section 331, there are worthwhile amendments dealing with time limitations for decisions, judicial review of countervailing duty decisions, and expansion of the statute to cover duty-free merchandise. In each of those areas there is some need for further clarification and expansion. The trigger of time limits should be made more certain, and the same definition for "industry" and "injury" that we are proposing in the antidumping provisions should apply to duty-free items where an injury determination is required. Imposition of countervailing duties on goods entering the country should be analogous to the withholding of appraisement provisions of the antidumping statute.

The 4-year moratorium on imposition of countervailing duties defies logical explanation. To us it simply confirms long-standing reluctance to confront the issue of foreign subsidies. It also evidences unwillingness or reluctance to tackle tough questions of foreign government ownership or control insofar as this issue affects competition with American goods. Far from hampering international trade negotiations, the imposition of countervailing duties where justified is more likely to accelerate them and make their results more meaningful.

We urge that the antidumping and countervailing duty provision be amended: To permit all parties to an antidumping case to have equal rights to be heard;

To eliminate the moratorium on application of countervailing duties;
To define the terms "industry" and "injury"; and

To require that the Secretary of the Treasury publish a notice within 30 days after receipt of a complaint so that the triggering mechanisms on the running of time limitations become fixed.

The changes we are recommending would make the difference between realistic and unrealistic legislation. They are minimal changes. Yet, they are of such critical importance to us and, I am sure, to many other segments of our economy as to make the difference between an acceptable bill and an unacceptable one. We cannot support a trade bill which in our judgment, despite some of its favorable changes, weakens or destroys effective enforcement of the fair trade laws, continues ineffective safeguard procedures, and provides unconstrained negotiating authority.

Mr. Chairman, thank you for affording us this opportunity to appear before this distinguished committee.

Senator FANNIN. The next witnesses will be Mr. Seymour Graubard and Alfred R. McCauley, the American Institute for Imported Steel, Inc., and Prof. Walter Adams and Prof. Joel Dirlam.

The ones now are Mr. Seymour Graubard and Mr. Alfred R. McCauley, and if you would identify the gentlemen with you. We appreciate having you with us here today. You may handle your testimony as you see best. If you have prepared statements, if you

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could either review them or give them in full, the limitation is as you heard, 10 minutes, and I do not know how many of you have prepared statements, but if you could at this time identify the members of your panel that will be speaking and the members that are present with you.

STATEMENT OF SEYMOUR GRAUBARD AND ALFRED R. MCCAULEY; GRAUBARD, MOSKOVITZ & MCCAULEY, COUNSEL, AMERICAN INSTITUTE FOR IMPORTED STEEL, INC., ACCOMPANIED BY ERNEST WIMPFHEIMER, PAST PRESIDENT AND DIRECTOR, AMERICAN INSTITUTE FOR IMPORTED STEEL, INC.

Mr. GRAUBARD. Thank you, Mr. Chairman.

My name is Seymour Graubard, and I appear here today as counsel to the American Institute for Imported Steel. This is a trade association which consists of the leading importers of steel in the United States.

With me, on my left is Mr. Ernest Wimpheimer, a past president and director of the institute, a man who has been engaged in the steel trade for more than a quarter of a century, and who is particularly able to answer questions concerning the steel trade that you may care to direct to him.

On my right is my partner, Mr. Alfred R. McCauley of Washington, D.C., who is likewise skilled in international steel trade, but largely from the point of view of the legal aspects as they are brought out by the various laws concerning trade.

I will take the privilege of introducing at this time Prof. Walter Adams of Michigan State University and Prof. Joel Dirlam of Rhode Island State University. It is my understanding that Professors Adam and Dirlam have a written statement which has been submitted for the institute. We have also submitted a written statement which I understand will be a matter of record, and I will therefore devote my remarks just to certain aspects of that statement.

Senator FANNIN. The full statements will be made a part of the record, and your 10 minutes will start now so that you will have the full advantage of the time after introducing your colleagues. I feel you should have the full time.

Mr. GRAUBARD. Thank you, sir. I have a prepared statement which has been submitted to the committee which I would like to have inserted in the record.

Mr. Wimpfheimer and Mr. McCauley will not make any formal statements to this Committee. They may desire to comment in regard to certain statements concerning imported steel that were the subject of discussion with the previous witnesses.

Senator FANNIN. The committee will appreciate their comments. Mr. GRAUBARD. May I state with regard to the previous testimony, sir, that there is one surprising bit of news that came out of that testimony: The domestic steel industry and the importers agree that the present bill before this committee requires substantial revision. There is a stale bit of news that accompanies this, however, and that is as in the past, we disagree fundamentally in regard to the objectives and the means of preparing suitable legislation which is good for the welfare of our nation.

I think that this will become apparent in the course of our testimony. The members of this committee have pointed out that future developments in international trade will be markedly affected by the oil shortage, by higher prices for all types of energy, and by the changing balance of payments. We believe that these considerations are not adequately reflected in the pending legislation which was largely drafted before the current energy crisis was upon us. With its wealth of energy resources, our Nation will be less affected by the OPEC oil demands than will be other industrial nations.

The comparatively small percentage of oil imports required by the United States inevitably means that U.S. production costs, both for industry and agriculture, will rise less steeply than will those for western Europe and for Japan. Thus, the prices charged for foreign manufactured goods will be comparatively higher in the future than

our own.

Additionally, we have all noted that in most countries the cost of living curve, largely reflecting higher wages, is rising at a much higher rate than in the United States. Such higher costs are putting the sales prices of foreign manufacturers at the higher levels and are inching above our own domestic prices. And in saying this, I acknowledge the existence of our somewhat more modest inflation and the rise in the cost of living.

Based upon such costs and prices, a free international market would gain for United States products a higher portion of exports than would be the case of any of our foreign competitors.

Looking forward, Congress and the executive branch of Government should take the initiative in advocating the fewest amount of trade barriers that is possible. We should set the example of making it more difficult to stop the free interchange of goods on the international markets. Yet we note that the revisions to the antidumping act, the escape clause and the countervailing duty provisions of the statute proposed by H.R. 10710 are more restrictive, rather than less restrictive, than the existing legislation.

An example of the effect of looking at past history rather than looking forward to the future is found in the case of steel. As your constituents have undoubtedly told you, many types of steel are difficult to buy, and steel prices have soared in the United States and elsewhere in the world during the past 15 months. Yet we still have in effect an import quota for steel which discourages foreign mills from seeking markets in the United States, despite the great need for such imports by our steel consumers.

Let us remember that the example set by the United States in forcing such import quotas upon the world may be emulated next year or thereafter by other nations, particularly in view of the economic changes that we can now confidently predict in the world international markets. We should now take the lead to make certain that such quotas are eliminated. Yet, this pending legislation ignores the wisdom of eliminating quotas.

We recognize the fact that every segment of our electorate has the right to ask its representatives to obtain special benefits for particular manufacturers or agricultural regions or products. Yet for every person benefited by such restrictive trade practices, there are many, many more who are injured. Where the elimination of restrictions on free