trade causes particular injury, we advocate that provision be made for compensation to the industry and aid to the employees of such industry. This would be a far less expensive cost to our Nation than the granting of special privileges by way of trade restrictions on favored elements of our Nation.

We urge, therefore, a further review of pending legislation to aim toward the ultimate greater benefits to be received by all of our Nation through the freeing of international trade to the greatest extent possible from current governmental impediments.

I thank you.

Senator FANNIN. Thank you, Mr. Graubard.

The next witness-we will hear all the witnesses and then we will go to questions.

Mr. MCCAULEY. Senator, that is the end of Mr. Graubard's statement. There are no other prepared comments.

I would just like to add a commentary on the previous testimony, particularly the allegation that imports were the problem of the independent wire drawers of the United States in years past. Indeed, I think the record before the Tariff Commission in the 1963 wire rod dumping investigation will show that imports were the salvation of the independent wire drawers. At the time of the proceeding before the Commission, the independent U.S. wire drawers were in a price squeeze. Domestic steel mills were offering wire rods to the independent wire drawers at prices which did not permit the independent wire drawers to draw the wire and make a profit, and I think without exception the wire drawers opposed any restrictions on imported wire rod. I do not believe that situation has changed at all since those days. Second, I note one of the statements having to do with the west coast steel producers and the alleged problems with imports, I call attention to the current issue of Business Week. In a small article on page 86, it is pointed out that there are serious shortages of steel on the west coast because of a strong demand, because nine mills are exporting nearly all of their production, and last, that eastern mills, saddled with shortages all over the country, and I quote, "are quietly abandoning the western market."

I would hope that the users of steel on the west coast who need steel would continue to have access to foreign supplies of steel; or else I do not know where they are going to get them.

Thank you, sir.

Senator FANNIN. Thank you, gentlemen.

Does anyone else have any comments?

The next witnesses are Dr. Walter Adams and Dr. Joel B. Dirlam.. Dr. ADAMS. Mr. Chairman, I am Walter Adams. We have a prepared statement drafted in conjunction with Professor Joel B. Dirlam of the University of Rhode Island. We would like to submit that for the record at this point.

Senator FANNIN. The complete statement will be made a part of the record.

Dr. DIRLAM. Could we have our 10 minutes now?

Senator FANNIN. Yes. The basis upon which I understood we were going to handle the panel was, first of all, I thought you were going to be separate, and if you do want to testify together, then we will have you testify now.

Otherwise, we could put the questions to the other panelists.

Which would you desire?

Dr. ADAMS. Whichever you prefer, Senator. We just want to make it clear that Dirlam and I speak only for ourselves, but our position might be examined by the committee in conjunction with the gentlemen who have preceded us.

Senator FANNIN. Do you feel, in giving your testimony at this time, that you may answer some of the questions that could arise as a result of the testimony that has been given?

Dr. ADAMS. Right.

Senator FANNIN. Then, if you will proceed, I think it would be helpful.

STATEMENT OF DR. WALTER ADAMS, MICHIGAN STATE UNIVERSITY, AND DR. JOEL B. DIRLAM, UNIVERSITY OF RHODE ISLAND

Dr. ADAMS. Mr. Chairman, we oppose the bill before this committee, and most especially title II, chapter 1, and section 601. We oppose this bill because we are basically opposed to Government protectionism, pampering, and permissiveness. We believe that such a policy is neither in the best interests of the American steel industry, nor the best interest of American steel labor, nor the best interests of the American economy.

Our point of departure is an essentially radical position. We believe in the efficacy of free enterprise, competitive free enterprise, as the cornerstone of Government policy toward industry. We note that the steel industry demands what it calls an orderly marketing system. Now, stripped of its euphemisms, Senator, this means a worldwide cartel in which markets are shared among producers, in which prices reflect full costs, and in which technology is anesthetized. The industry wants a cartel, not only on an industrywide basis, but on a productby-product basis. In other words, it wants total regulation and control by this private group over the world market in steel.

Now, it is interesting to us, Mr. Chairman, the flexible footwork that the industry does in coming to the same conclusion regardless of the state of the economy. We respectfully invite your attention to the fact that in October of 1967 before this selfsame committee, Mr. John P. Roche, the president of the American Iron and Steel Institute, defended quotas as necessary because of the alleged chronic excess capacity in the world steel industry.

At that time, he said:

It has been estimated that steelmaking capacity abroad now exceeds demand by more than 55 million tons. Countries which formerly relied on imports for their steel requirements have tended more and more to develop their own steel industries and to protect them against imported steel. Home markets of some longestablished steel producers have grown less rapidly than expected. These producers have, therefore, taken increasingly to invading the markets of other producers, especially that of the United States.

Mr. John P. Moloney of the United Steel Workers, incidentally, presented parallel testimony o this Finance Committee. The justification for import restrictions at that time was a chronic excess supply in world steel markets.

Now, contrast that position with the industry's current rationale for protectionism. By 1980, says Father William Hogan, a sympathetic

observer of the industry and a consistent advocate of import quotas, the annual steel demand will require worldwide capacity of 1.1 billion raw tons as compared with today's capacity of only 780 million tons. "Blazes, that is a shortfall, with new and replacement needs of 600 million tons."

Thus, what was considered only a few short years ago chronic world steel surplus has suddenly become an endemic world steel shortage, and the way to cure it, so runs the argument, is by higher prices and higher profits, which would make additional investment in steel capacity attractive. This, in turn, would require-almost as a sine qua nona so-called normalization of world trade in steel, an orderly marketing system, meaning strict regulation of steel imports and the sterilization of their impact on domestic steel prices.

In short, the steel industry has shown a fascinating talent for using contradictory arguments in support of its inflexible position, in boom and bust alike, it persists in its demands for governmental protection from import competition.

Now, Mr. Chairman, as we read the history of the steel industry, Professor Dirlam and I find that the industry's pricing is a classic textbook illustration of monopoly and oligopoly. The only breath of competition in this industry has come from abroad. It has been import competition. Import competition has been the main control mechanism at our disposal for limiting the oligopolistic tendency for constant price escalation in the domestic steel industry.

Moreover, import competition has had an additional beneficial effect on the American economy, and that is, it has stimulated a somnolent, lethargic, technologically unprogressive industry like steel to make the innovations that are necessary to bring the industry into a more competitive position.

We note that managements of monopolies or closely-knit oligopolies do not search for ways of reducing costs with continuing, dedicated, unwavering intensity. One of the advantages of being a monopolist, to a monopolist, is that he can lead a more agreeable life, in which tensions can be relaxed, bureaucracies become entrenched, and promotions are given as the reward for long service.

The big steel companies would be the first to insist that at an accelerated pace during the last 15 years, they have overhauled their organization, eliminated some fat, and prepared to compete on a more equal basis with their foreign rivals.

Now, Mr. Chairman, if you think that this is just an academic diagnosis, may I respectfully invite your attention to an article which appeared in Business Week on March 9, 1974. It is on page 155. And there it is noted, with respect to the reorganization plan currently introduced by President Speer of United States Steel, and I quote:

All of Speer's moves were designed to attack problems that critics both in and out of the company had been citing for year. United States Steel was too slow to make decisions, too slow to respond to changing conditions, and too slow to make thrusts into profitable new markets. The company, which several years ago lost its dominant pricing leadership in the industry, rarely was among the first to modernize plants, to respond to imports, or to attack its pollution problems. I skip now. The article continues:

Some competitors and even some managers inside the company wonder how much of a dent Speer's tactics can really make in USS traditions. The company is so big that its executives have tended to think of United States Steel as a special

kind of institution, rather than just another corporation. Thinking has become institutionalized, and United States Steel has wallowed in needless redtape and empire-building that will be hard to eradicate.

I skip now. The article continues: "Some competitors and even some managers inside the company wonder how much of a dent Speer's tactics can really make in USS traditions. The company is so big that its executives have tended to think of United States Steel as a special kind of institution, rather than just another corporation. Thinking has become institutionalized, and United States Steel has wallowed in needless redtape and empire-building that will be hard to eradicate."

In short, Mr. Chairman, we respectfully submit that what this industry needs is not a Government-legitimized cartel. It does not need governmentally imposed protection from competition. What it needs is more competition rather than less competition in its own interests and the interests of the national economy.

Thank you very much, Mr. Chairman.
Senator FANNIN. Thank you, gentlemen.

Are there any other-does Dr. Dirlam have anything to say?
Dr. DIRLAM. This is a joint statement.

Dr. ADAMS. The joint statement of Adams and Dirlam, which should be distinguished from the joint statement which Mr. Graubard submitted.

Senator FANNIN. I thank you very much, gentlemen.

I do think we should favor the free enterprise system, and I certainly am a firm believer in expanded foreign trade. However, if we adopt the recommendations prior to a multinational agreement, multilateral agreement, which will take several years, this country will see a flow of imports from our foreign partners to pay for their energy requirements. We have talked about that earlier this morning.

Why should we not have any protection against unfair trade practices, since you are aware that the antidumping and countervailing duties taxes have, by and large, been ineffective?

We have talked about that earlier, too, and I have been very concerned about the ineffectiveness of the antidumping and countervailing duty provisions.

Mr. MCCAULEY. Sir, I would like to comment on the ineffectiveness of the antidumping statute. I think that the record will bear me out. I do not believe there has been, in the 50 years or more of antidumping legislation on the U.S. books, more activity and more relief, if that is the word you want to use, under that statute than has occurred in the last 5 years. It has to exceed all of what occurred in the previous 45 years.

Now, maybe it is like popcorn, the more you eat the more you want to eat. But it certainly is working, sir.

Senator FANNIN. Well, there has been more activity, but has it been working, and what has been accomplished?

Mr. MCCAULEY. I have been a participant in several dumping proceedings before the Tariff Commission. I do not have the scorecard in front of me, but I know that there are outstanding dumping orders today that number in the dozens. And I believe the specialty steel people have been recipients of at least two dumping orders. Dr. DIRLAM. Could I comment?

Senator FANNIN. Yes, please.

Dr. DIRLAM. As an economist, in reading the decisions of the Tariff Commission, and in looking at their definitions of injury and industry, it seems to me they are designed or interpreted in such a fashion as to make it very difficult to show that an industry has not been injured in terms of the Tariff Commission's definition.

In other words, the way in which the statute is being interpreted now seems to me very much to favor the domestic producers rather than the importers, so that it is not easy for an importer to show that an import has not affected in some way or other the domestic producers.

The difficulty with the bill as we see it is that it seems to move against fair competition, not merely dumping, but import competition which is sold here at fair prices and not at discriminatory prices.

Senator FANNIN. The prices that I have had illustrated to me from the standpoint of the consumer have been fair, because they have been below the prices that are being sold in Japan, for instance. I have had it brought to my attention very forcefully by one of the electronic companies whereby they cannot get their products into Japan. They have just absolutely been fighting and fighting for years.

Now, this is another subject. So they are complaining, though, very bitterly, because they have been suffering from the vast imports of the Japanese products that are in competition with what they are trying to import in Japan, so they are looking at it from the standpoint of, well, let us have fair play.

But you state that foreign steel competition breathes life into a noncompetitive situation. I am sure you are familiar with the cooperation between business and government in Japan, why do you want to substitute one monopoly for another?

In other words, in Japan they say Japan, Incorporated. Apparently you do not feel it is that way. Or do you?

Dr. ADAMS. Mr. Chairman, we do not comment on the industrial organization of Japan. Japan can survive only by being competitive in the world markets, so no matter how much Japanese home markets are rigged, they can survive only if they compete effectively in the markets of the world. In other words, there is not

Senator FANNIN. They are an exporter. That is right.

Dr. ADAMS. There is a discipline imposed, an export discipline imposed on the cartelization tendencies that may exist within the Japanese economy.

We also remind you very respectfully, Senator, we do not want to make a special plea for the Japanese by any means, because they have had a deplorable restrictionist policy with regard to our exports to Japan. But please note that the Japanese steel industry suffers from very serious competitive disadvantages. Japan has no coal; Japan has no iron ore. All of these things have to be imported over great distances, and after this steel is produced it then, again, at great cost, has to be exported to the markets of the world. So there is a built-in protectionism right there for the American steel producers.

Senator FANNIN. From what I have observed, there are not any tears in my eyes as far as the Japanese are concerned in the steel industry or any other industry. When we realize that we take about 35 percent of all of their exports and the European Economic Community takes about, what, 5 percent of their exports, and, so something is wrong