The situation as it relates to trade legislation is well put in the recent summary and analysis of the Trade Reform Act by the staff of this committee.

And I quote, "It's a totally new ball game which was not envisaged in the planning and conception of the Trade Reform Act."

The fact that it is now a totally new ball game has made the administration's so-called Trade Reform Act totally obsolete. Its provisions bear no connection with the events of the day. Indeed, it is worse than no bill at all.

We find it incredible, in the light of all that has happened and is still happening in the world, that administration officials could come before this committee and present the same, barren arguments as they did when it was first proposed last May.

We urge this committee to give the House-passed bill a quick burial, and turn its time and attention to the writing of new trade legislation which will be comprehensive, flexible, and realistic, and which will meet the complex needs demanded by today's world.

What America needs urgently is not just a revision of trade policies but an entire restructuring based on the recognition that the concept of free trade versus protectionism which dominated the thinking of the thirties and forties is badly out of phase with today.

America needs a positive policy that will put the well-being of the United States and its people above all else. What it doesn't need is a nonpolicy which, in the hands of this administration, puts the Nation and its people last.

Every other nation has built-in protection for their national selfinterest. The recent events in the Middle East and Europe, Japan, Latin America, and the Soviet Union all reinforce this fact. Certainly it is not out of place for the United States to assert its selfinterest.

The United States needs a policy that will assure American taxpayers, consumers, workers, and businessmen a fair and up-to-date set of laws so that the United States can conduct mutually fair and beneficial trade with other nations.

As a necessary condition to this, however, the United States needs a healthy and expanding economy, providing diverse jobs for Americans with a wide range of skills, an economy which will afford its people a decent and rising standard of living and provide a strong industrial base from which the United States can carry out the mutually beneficial trade we seek with the rest of the world.

Unfortunately, this Nation's economy of today falls far short of meeting this requirement.

The United States is clearly in a recession. At the same time, the American people are the victims of a rampant inflation which in part has been brought on by this administration's misapplication of present foreign trade and investment policies. The achievement of the $1.7 billion 1973 trade surplus, about which the administration is so boastful, came at the expense of the consumer. Much of the gain in the trade accounts was the result of heavy exports of farm goods and critical raw materials. And it was exports of these commodities which caused sharp domestic shortages and brought on the rapid acceleration of inflation.

What the United States has done is to put the nations of the world in competition with the American consumer for the food he buys. The New York Times, in a recent page 1 article, said, and I quote:

Agricultural and economics experts agreed in interviews over the last three weeks that a major reason for some of the sharp increases in food prices in recent years had been the sudden and vast expansion of agricultural exports from the United States.

And there is no sign of letup in this competition which is pushing food prices up so rapidly. The same article in the Times noted that:

In the fiscal year ending June 30, 1972, the total value of American agricultural exports was $8 billion. For the year ending this June 30, the Government is estimating total agricultural sales abroad of $20 billion, 21⁄2 times as much. The administration takes refuge of sorts in the fact that inflation. in this Nation has been less severe than in many other nations of the world. But we have no such consolation. America's rate of inflation is now surpassing that of many other nations. The Wall Street Journal, on March 13, recently noted that there are 7 other countries in Western Europe, plus another 11 in other parts of the globe, where prices are rising at a more moderate rate than in the United States. A year ago, the Journal noted, the consumer price rise in the United States was 4.7 percent, well below the countries of Austria, Belgium, France, West Germany, the Netherlands, Norway, and Sweden. In the last 12 months, however, the Consumer Price Index in the United States has risen 9.4 percent.

And I would like to point out, Mr. Chairman, that that is for calendar 1973. Take off January 1973, and bring the 12 months from February 1, 1973 to the end of February 1974, and the rate is 10.2 percent, so that the rate has not only got up to double figures but it bas accelerated each month: it is going up a little higher. So the prospect, I would say, is not for 12 percent this year. The prospect is something maybe close to 14 percent. And there is very little comfort in that for the American consumer.

The rate of infiation has accelerated in every country, but the Journal said that "the U.S. speedup has been by far the sharpest." Only Britain, Italy, and Switzerland within industrial Western Europe now have steeper inflation rates than America.

In addition to being inflationary, the trade surplus is a dangerous illusion. America still faces basic and painfully serious trade problems. Imports continue to flood the U.S. market, wiping out jobs by the hundreds of thousands and sweeping away segments of industries. The 1973 total of manufactured imports was $44.8 billion-an increase of 18 percent over the previous year. These imports continue to curtail American production in electronics, shoes, apparel, steel, autos, and a wide range of industries. Two official devaluations of the U.S. dollar have made these imports more expensive for American consumers, thus adding to the inflationary pressures of the American pocketbook. In many cases, the consumer, because of the elimination of American production by the inundation of imports--for example, black and white TV sets, tape recorders, even baseball mitts-has no other choice than to buy these imports, whatever their price tag.

In spite of the dollar devaluations, there was no surplus of manufacturing exports over imports; these exports in 1973 totaled $44.7 billion. Furthermore, the exports of America are now increasingly the

entire production process-jobs, technology, and capital. We are sending our businesses abroad as well as our products.

What's more disturbing is that the technology America is sending abroad is sophisticated technology, the job-generators of the future. Where U.S. exports were once plants which produced shoes, apparel and textiles, the United States is now sending abroad technology for electronics, computers, aircraft, aerospace equipment-areas in which we were once predominant in the world, thus giving up America's clear competitive lead. This transfer of technology can take place in many ways-by direct transfer, by licensing, by patent agreement and other methods. But the sum total of it is an erosion of America's industrial base.

The volume of this transfer of technology is difficult to detail from the official trade statistics: the figures are either vague or nonexistent. However, the fees for actual licensing and patent transfer of knowhow show a 10-to-1 disadvantage for the United States. The royalties and fees paid to the United States totaled $3.5 billion in 1973 while payments to foreigners for their technology in these forms were only $300 million.

While there is a small flow of technology to this country from abroad-oxygen furnaces and radial tires, for example-the overwhelming flow is the other way. If that flow were more balanced, we wouldn't be here raising these arguments.

The employment impact of these developments are difficult to determine. Unfortunately, the foreign trade experts show little interest and even less knowledge about measuring this impact. However, the Government not long ago made some rough calculations indicating the net loss of some 500,000 jobs and job opportunities in the period 1966 to 1969. The AFL-CIO, employing the same methods of calculation, has determined that the further deterioration in the U.S. position in the world trade through 1973 has brought the total loss to over 1 million jobs and that's probably conservative.

We have attached to this testimony the resolution on foreign trade and investment passed by the AFL-CIO Executive Council at its meeting in February, which details our legislative recommendations.* To highlight these recommendations, we believe that new legislation should regulate U.S. imports and exports as a means of establishing an orderly flow of international trade. Specific flexible legislative machinery is needed to control imports. This flexible mechanism should also be applied as a restraint on the excessive exports of farm goods, crucial raw materials and other products in short supply domestically. Exports, imports and U.S. production should be linked in relation to needs for supplies, production and job opportunities in the United States.

We should modernize trade provisions and other U.S. laws to regulate the operations of multinational corporations. Regulation of multinational firms, including banks, is necessary because these concerns are the major exporters and importers of U.S. farm products, crude materials, and manufactured products.

We should eliminate U.S. tax advantages and other subsidies for corporations investing abroad. Specifically, the tax laws should eliminate tax deferral of income earned abroad and foreign tax credits.

*See page 1168.

Clear provisions should be written into new legislation to regulate exports of capital and new technology.

The energy crisis has demonstrated that overdependency on foreign sources of any material can be costly and perhaps fatal. It has also demonstrated that nations, when faced with a choice, are quick to act in their own self-interest. And it has graphically demonstrated that multinational corporations hold corporate allegiance above national allegiance.

The energy crisis has also revealed the price America has paid for not curbing the activities of the multinational corporations. The United States might not be facing so severe an energy problem if it had not been made so profitable for the major oil companies to locate new refinery capacity abroad in recent years instead of in the United States.

The AFL-CIO has long been concerned over the devastating impact. of the activities of U.S. multinational corporations on the economic health of the United States and its people.

In industry after industry, we have watched plant after plant close and jobs disappear-only to see the same plants and the same jobs appear overseas as the multinationals moved production facilities to Taiwan, Singapore, South Korea, Brazil, Spain, France, England, Germany, Mexico, Portugal, Tanzania, and a host of other countries. Not only have we watched the jobs and production go abroad, but we have watched goods come back from the overseas plants of multinationals as imports, competing with domestically-produced goods and making further inroads into U.S. employment. Faced with such pressure, the domestic producer either sells out or, more likely, joins the crowd and relocates abroad.

These massive operations are taking a heavy toll among American families and American communities from coast to coast.

The shutdown of manufacturing operations here and their relocation abroad, where low-cost operations are more profitable, depress the whole American economy by the loss of domestic jobs, payrolls, domestic corporate revenues, local purchasing power, local taxesand has a "ripple out" effect on the local service economy from the loss of an industrial base. Hard-hit communities face empty factories, slackened businesses, unemployed workers and heavy revenue losses. The multinationals operate as supranational entities. Each makes decisions solely on its own interests. These are decisions which have major consequences for the America of today and of the future.

The multinationals are, or they would like to be, stateless in their operations, freed of any responsibilities except to themselves.

Robert Stevenson, when he was in charge of Ford Motor Co.'s international operations, expressed what they have in mind. and I quote: "It is our goal to be in every single country there is: Iron Curtain countries. Russia, China. We at Ford look at the world map without any boundaries. We don't consider ourselves basically an American company. We are a multinational company. And when we approach a government that doesn't like the United States, we always say 'who do you like? Britain? Germany? We carry a lot of flags. We export from every country.'"

Nor do the multinationals let national interest stand in the way when corporate interest is at stake. Just how the multinationals feel

with respect to their role in relation to American interests was stated quite simply in a recent CBS television show in which William Martin, then president of Phillips Petroleum, was being interviewed. He was asked whether the corporation should be expected to serve the national interests of the United States by accepting less profit here than it could obtain abroad. "I don't think we should be expected to," Mr. Martin replied. And when asked whether a U.S. international corporation should be expected to hold the national interests of the United States above the interests of other countries where that corporation does business, he replied: "I think not. If we were expected to do that, we couldn't operate in those foreign countries. I think it's just that simple."

The Arab oil embargo put the multinational oil corporations in a position where, as Leonard Silk pointed out recently in the New York Times, and I quote: "They must obediently respond to the commands of such governments as Saudi Arabia and Kuwait, over which they have much less influence than over the Government of the United States, even if this means helping the Arab countries to levy economic warfare against the United States."

Mr. Silk points out that the multinational corporations "would like to be world citizens, but since there is no world government, no world community to which they are responsible, they must feign loyalty to every country where they do business, concealing the flag under which they really sail-the old Jolly Roger emblazoned with the motto, "short-run profit maximization.””

What helps to make it so profitable for the multinational to locate and produce abroad is the U.S. tax code. Through loopholes available to these corporations, the U.S. taxpayer subsidizes their foreign operations.

The result is that American workers not only lose their jobs, the economy loses part of its industrial base and the Federal Government loses revenues and the American taxpayer picks up the tab for the whole bit.

John Nolan, formerly this administrations Deputy Assistant Secretary of the Treasury for Tax Policy, told the President's Commission on International Trade and Investment, and I quote: "There is a clear-cut bias in our existing tax structure favoring the manufacture of goods abroad through foreign subsidiaries as opposed to exporting, in order to benefit from the deferral of U.S. taxes. The distortion in our tax system simply makes no sense at a time when the United States has substantial balance-of-payments deficits."

As long as America's tax policy makes it more profitable to invest abroad than at home, the foreign export market will be increasingly supplied from foreign-based plants instead of from domestic-based industry, and the domestic industrial base on which the economy depends will continue to erode.

Two tax loopholes are the most significant in discriminating against American production and American jobs. One, the deferral provision, which permits U.S. corporations to pay no income taxes at all on the profits of their foreign subsidiaries until such profits are brought back home-which may be never; and two, the foreign tax credit which permits taxes paid to foreign governments to be subtracted, dollar for dollar, from the parent company's tax liability.