Mr. WIMPFHEIMER. Most of it they hope to sell in the Far East and other underdeveloped countries.

Senator HARTKE. Not the United States?

Mr. WIMPFHEIMER. No sir.

Senator HARTKE. Why not just keep the restrictions on if they do not plan to increase their sales to the United States, and we will just keep it at the present level?

Mr. WIMPFHEIMER. As far as restrictions are concerned, I think we have said before that this is a two-way street.

Senator HARTKE. That is right; I agree with you.

Mr. WIMPFHEIMER. And as long as the Japanese want to voluntarily sell in other markets, why put restrictions on them?

Senator HARTKE. If they do not intend to export any more to the United States and they are perfectly content, let us just go ahead and make it mandatory at that level. If you really do not expect to import any more from them, then there should be no fear of going ahead and adopting a mandatory provision.

Mr. WIMPFHEIMER. If you want to make anything mandatory, you of course have to expect that they make things mandatory on the other side of the ocean.

Senator HARTKE. Let me say that I have no illusions that I am going to convince you to change your mind, because I know whereas and wherefore the interests lie, and I respect you for making your case. Mr. GRAUBARD. May I point one thing out, Senator Hartke?

It was made abundantly clear to this committee that there is a worldwide shortage of steel. We should be concentrating our efforts now to feed steel to the steel-hungry consumers of our Nation. Anybody who has been the subject of as many pleas as I have for baling wire, for example, for wire rods, for other products in great shortage in our country, understands that our economy is drastically and adversely affected by the present worldwide steel shortage. I think under these circumstances for us to discuss a limitation on imports as being good for our economy is looking backward to a time when there was an oversupply of steel. Our leaders in the steel industry predict that for the next decade there will be a considerable shortage of steel. Let us concentrate, therefore, on doing a job for what our economy needs rather than trying to increase profits for a particular segment of the economy at the expense of the others.

Senator HARTKE. If you want to help the economy, you will support my bill. There is going to be a shortage of jobs in the United States of America. And who is going to provide those jobs for those people and give them those paychecks?

The jobbers will soon find themselves on welfare. We have got 16 million now. We have got 40 million Americans who are on the edge of poverty, making no contribution to a productive society. Ultimately, that conflict is going to threaten even your little household. Mr. GRAUBARD. Senator Hartke, are you relating the job situation to the shortage of steel in this country?

Senator HARTKE. I certainly am.

Mr. GRAUBARD. I do not understand it, then, because the steel mills have had so much difficulty in recruiting sufficient labor to man their plants that they are using women in jobs that traditionally have required the strength of men.

Senator HARTKE. That is a false argument. There were 271,037 steelworkers in 1957. There are 184,794 in 1973. Now, that decline has been occasioned, not by the fact that the steel industry itself is not trying to keep up full production, but it is due to the fact that we shifted all of those jobs overseas. We built the plants overseas, we financed them overseas, we gave them special consideration, special tax breaks, and the American worker paid the bill in jobs lost.

In my own testimony, I revealed the very meager contributions a lot of people like the oil companies are really making to the American society and still taking the protection of the American flag with them. abroad. There would have been an expansion of the American steel industry if they had not gone overseas and built those plants with American capital. The expansion of the American steel industry has been prevented by the sheer number of imports and the fact that that import penetration was moving at such a rapid pace.

In 1959 there was only 1 million tons of steel imported to the United States. Now it is about 18 million.

Mr. GRAUBARD. 15 million.

Senator HARTKE. The mix has changed, too. You are talking about tonnage, and they went over to the specialized steel, to the high-priced steel, and they moved on out from under the voluntary restraints. In order to change and still get their dollar return, they moved over from the so-called conventional items and moved back into the high-priced specialty items so that they could get the same dollar return or even a bigger dollar return.

The opportunity for the American steel industry to expand has been so limited by the influx of this foreign steel that the Alaskan pipeline is going to be built completely with Japanese steel. What a tragedy for the United States that we must turn to the Japanese because there is not a steel mill in the United States that could build the size pipe needed for this project. You can say that is due to the great Japanese enterprise. But I think the American worker is just as productive as anyone. But he cannot produce when you grant special tax bonanzas of $6 billion to the foreign operations of gigantic U.S.-based multinational firms.

Mr. GRAUBARD. First, Senator, I think unintentionally you are demeaning the efficiency of our steel industrialists.

Senator HARTKE. I am not demeaning the efficiency. I are demeaning the fact that they cannot compete against a special tax subsidy to produce abroad. Compounding this, the governments of these foreign countries go ahead and give special benefits to these other companies.

Mr. GRAUBARD. May I explain, sir?

Senator HARTKE. We are productive. But these foreigners cannot. be productive if they do not have the capital to expand. The constant penetration of our market indicates that we are not going to need the capacity here.

Mr. GRAUBARD. May I explain, sir?

Senator HARTKE. Go ahead, sir. I am not demeaning anybody except those people who want to rape the United States of America. Mr. GRAUBARD. The American steel mills, despite their tardiness, as

Professors Adams and Dirlam have pointed out, in adopting innovations and new techniques in the production of steel, nevertheless have increased efficiency in the steel mills to the point where one man in the steel mill now does the work that several men previously did. You have had an attrition in the labor force because of the greater efficiency and economy of operations of our steel mills. The fact is, that these economies in the utilization of labor would have been still greater if the prior generation of steel leadership-I am specifically not addressing this comment to the present executives of the steel mills-if the prior generation had been more imaginative, more courageous, if they had devoted more money to research and development.

You must be aware, Senator, of course, of the fact that among all the industries in the United States the steel industry, in research and development, traditionally has been second from the lowest in the ratio of expenditures for research and development. Now, when you talk about steel mills abroad taking away jobs from American citizens, I can merely say to you, sir, that that assumption is not borne out by the facts. I have read a number of articles in regard to the utilization of labor and the need for labor in our steel mills, and if you wish we can supply such articles to you. They will indicate, I think, conclusively that the assumption that foreign steel takes jobs away from the American steel mills is wrong.

In any event, your remarks are addressed to the past, and what has been past is not going to be true for the future. It is not true today and according to our same steel industrialists it will not be true for the decade to come.

Mr. WIMPFHEIMER. Only in connection with your remark about the Alaska pipeline. It is correct that the initial supply of pipe originated in Japan because at the time that it was required no American mill was able to furnish the diameter needed. There is reason to believe, however, that both American and Canadian mills have meanwhile built up their capabilities to furnish the large diameter pipe required to complete the project.

Senator HARTKE. I am sorry, but your time has expired. Thank you for joining us.

Senator FANNIN [presiding]. Gentlemen, we appreciate very much your being with us today.

Do you have any further questions, Senator Hansen?

Senator HANSEN. No, thank you.

Senator FANNIN. We will carefully analyze your recommendations. There certainly has been some agreement and some disagreement. That is always expected. Certainly we greatly appreciate your being with

us.

Senator HANSEN. Mr. Chairman, may I add that without objection I should think any additional comments that any of you would like to make could be written and submitted to the staff and we will be happy to incorporate them in the record.

Mr. GRAUBARD. Thank you very much.

Dr. ADAMS. Thank you very much.

Senator FANNIN. Thank you.

[The prepared statements of Mr. Graubard and Drs. Adams and Dirlam follow. [Hearing continues on p. 1121.]

PREPARED STATEMENT OF SEYMOUR Graubard on Behalf OF THE AMERICAN INSTITUTE FOR IMPORTED STEEL, INC.

I am Seymour Graubard of the firm of Graubard, Moskovitz & McCauley, 1629 K Street, N.W., Washington, D.C. 20006. I appear today as counsel to the American Institute for Imported Steel, Inc. ("Institute") of 420 Lexington Avenue, New York, New York. The Institute is a trade association composed of more than 40 United States companies engaged in the international trade in commodities. The Institute's primary purpose and objective is to foster mutually beneficial U.S. trade in steel products.

Our membership accounts for over 80% of U.S. imports of steel from the Common Market, and, directly or indirectly, for a substantial portion of the steel imports from other steel producing areas of the world. They also take pride in having participated in the rebirth and current expansion of the U.S. steel export trade. Moreover, an ever increasing number of Institute members handle a variety of other internationally traded commodities as well. Institute members also manufacture and distribute steel products in the U.S. market.

Thus, because of the nature of their businesses, the Institute's member companies are acutely aware of the importance of strengthening the structure of our increasingly interdependent world economic system, and of modernizing the rules which govern trade, to lay the groundwork for further liberalization and expansion of international commerce.

An international trade negotiations act for the new economic era of the 1970's The Institute shares the view expressed by members of the Committee on Finance during the current hearings, and well stated in the introduction to the Committee staff's "Summary and Analysis of H.R. 10710-The Trade Reform Act of 1973":

Traditional trade problems have usually been associated with rising imports and their effect on industries, firms and jobs. Such "traditional" problems often were caused by oversupply. Current trade problems are more typically due to shortages-food and fiber, energy, metals and many others. We have moved into an era of resource scarcity and accelerated inflation-an era in which producing countries are increasingly tempted to withhold supplies for economic or political reasons. It's a totally new ball game, which was not envisaged in the planning and conception of the Trade Reform Act.

Trade expansion is an essential of U.S. policy in an era of scarcity

The Institute supported the underlying thrust toward trade liberalization of the Trade Reform Act in its testimony before the Ways and Means Committee of the House of Representatives last June. Over the past twenty years, in appearances before this Committee and others, the Institute has consistently advocated the liberalization and expansion of trade. In this new era, such a policy becomes not merely a useful policy for the U.S. to pursue, but rather an imperative for this nation.

During the past three decades, international trade has been, and continues to represent, a relatively small percentage of our Gross National Productconsiderably less than that of our principal trading partners, Europe and Japan. However, the current energy crisis has pointed up just how important that trade can be to our economic well being. As we all know, oil is not the only imported commodity required by our industries to function and expand. The U.S. must import other raw materials; and, according to authoritative estimates, including those of the U.S. steel industry, we can expect a scarcity of supply of semi-manufactured products, such as steel mill products, during the next decade as well. Self sufficiency or a "beggar-thy-neighbor" policy is no longer practical nor wise in this increasingly interdependent world.

In our own self interest, maintenance of orderly and normal trade relations and the expansion of international trade is literally a matter of survival of our way of life. There is an understandable temptation to strike out at real (or fancied) culprits outside our borders for causing shortages and inflation. However, negotiation-not confrontation-is the only viable policy. International cooperation, engendered by international rules of conduct, agreed to with the other members of GATT, and also eventually the socialist states as well, is the only salvation of the U.S. and its European and Far-Eastern allies.

The Trade Reform Act is trade-restrictionist oriented

This is where the conception of the bill before this Committee is out of tune with the new era of international scarcity rather than oversupply. The Administration witnesses who appeared before the Committee two weeks ago talked of trade liberalization. At the same time, they supported an omnibus package in which the immediate trade restrictive proposals come perilously close to outweighing the obvious benefits of authorizing the Executive, in cooperation with the Congress, to negotiate further reduction and elimination of tariff barriers and new and improved codes of conduct in international trade.

H.R. 10710 in large measure is a melange of piecemeal amendments to existing trade regulatory provisions, most of a protectionist nature. It constitutes unilateral trade "reform" in advance of the negotiations rather than invitation to negotiate international trade reform. These amendments might suggest to other nations that they must raise their barriers to international trade.

The concept of the bill does not take adequate account of the fact that the U.S. energy position and inflation rate relative to the other major industrialized nations have once again made this country competitively the preeminent trading power in the world. Nor does it adequately recognize that only with the expanded trade which further trade liberalization will bring can the U.S. pay for the increasingly expensive raw materials and energy resources necessary to maintain and improve our standard of living.

As in so many areas of this fast moving world, the proponents of the recently heralded New Protectionism, to which the Administration appears to have catered in order to secure basic negotiating authority, also have fallen victim to "future shock". They simply refuse to face the new facts of international economic life.

Thus, despite the already restrictionist bias of the Trade Reform Act, the AFL-CIO expresses unhappiness with it and still presses for automatic quotas. That organization fails to recognize and grasp the opportunities for American workers-new jobs and higher wages-which this new era portends if only the "fair" foreign competition phantom is exorcised.

Equally oblivious to the new economic exigencies and to the opportunity for new and expanded markets and higher profits are a number of U.S. industrialists, many of them notables in the U.S. steel industry. Despite the domestic steel shortage and the worldwide scarcity of which this is but one symptom, the industry continues to call for quota protection, rather than putting its primary focus on expanding production and reestablishing U.S. steel abroad.

Trade reform legislation should be trade expansionist oriented

In speaking to the legislation before the Committee, the Institute is faced with a dilemma, one with which other witnesses have struggled. We strongly favor an adequate grant of negotiating authority to the Executive, adequately supervised by the Congress, to permit the U.S. to participate meaningfully in the current GATT negotiations-an International Trade Negotiations Act for the New Economic Era of the 1970s.

However, we strongly oppose the perniciously trade restrictive portions of H.R. 10710, which may well make the negotiating authority illusory by freezing positions and impeding meaningful agreements on such enormously complex subjects as escape clause or "safeguard" provisions, antidumping and countervailing duties, and the appropriate use of tariffs and other trade restrictive devices to deal with balance-of-payments and domestic inflation problems.

In sum, this Committee should streamline H.R. 10710 to its essentials, Titles I and IV. It should give careful consideration to ways of making the negotiating anthority more flexible and less sector-by-sector oriented, while ensuring close oversight of the process by the Congress. It should put aside Title II-except possibly for Chapters 2 and 3 which are an improvement over present adjustment assistance and Title III to await comprehensive negotiations on codes of fair international trade practices, and the elimination of NTBs.

The focus of the legislation which emerges from this Committee should be on negotiating expansion of U.S. trade, not restricting it.

The steel trade is a lesson in retrospect for the economic era of scarcity of the 19708

The Institute's misgivings concerning the trade restrictive provisions of H.R. 10710 are reinforced by our membership's experience under so-called "voluntary"