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III -Excerpts from the Summary and Analysis of HR 10710 The Trade Reform
Act of 1973 by the Senate Staff of the Committee on Finance. IV -Some recent trade trends. V -AFL-CIO analysis of the Administration's Trade Reform Act of 1973. VI -The Administration's "adjustment assistance" proposals. VII -Retallation and the right of America to self interest. VIII-Answering the argument that U.S. consumer would be hurt if imports
and exports were regulated. IX -Answering the argument that multinational firms' operations abroad spur
job growth here. X -Answering the argument that if the U.S. acts in its own behalf imports
and exports will be reduced and trade diminished. XI -Answering the claim that providing the President with options will answer
the U.S. trade problem.
U.S. Merchandise Trade.
STATEMENT BY THE AFL-CIO EXECUTIVE COUNCIL ON INTERNATIONAL TRADE AND
The international economic structure has been seriously shaken. Normal trade patterns are being shattered. National currencies are in disarray. Nations with once-comfortable trade balances are desperately seeking larger export markets to earn the price of oil for industrial survival.
Much of the blame can be laid to the staggering price increases levied by the oil-producing nations, which have further fueled a global inflation carrying with it the possibility of worldwide recession and unemployment of crushing proportions.
These events have made the Administration's so-called Trade Reform Act of 1973 totally obsolete. Its provisions bear no relation to the events of the day. Indeed, the bill passed by the House late last year and now pending before the Senate Finance ('ommittee is worse than no bill at all. A total reexamination of U.S. trade and investment needs is in order, utilizing the realities of the Seventies--particularly 1974—and abandoning the dead and unworkable dogmas of the past.
The energy crisis comes on the American economy at a time when it already is in deep distress, much of it traceable to the nation's misguided and misapplied foreign trade and investment policies. The American worker, consumer and businessman are all suffering from a deepening erosion of the 1'.s. industrial base. A tide of imports has wiped out more than a million jobs as products and whole industries have been engulfed. The export of technology and capital at reckless rates have funneled American production and productivity abroad, costing the t'.S. economy not only badly-needed new jobs and job opportunities but the benefits of more efficient production means. Multinational corporations, manipulating ('.s. tax laws, have transferred jobs and production overseas at the expense of the American economy, costing the nation badly-needed tax revenues.
The Administration's trade bill fails to address itself to these problems. In addition to granting the President unprecedented and sweeping new powers which he could use to permanently alter the structure of foreign trade and the structure of the U.S. economy, the bill contains these serious deficiencies:
It provides no specific machinery to regulate the suffocating flow of imports or to curb the export of materials in short supply at home.
It does not deal with the export of U.S. technology and capital to other parts of the world where corporations-mainly American-based multinationals-can maximize profits and minimize costs at the expense of U.S. jobs and production.
It does nothing to close the lucrative tax loopholes for multinationals which make it more profitable for them to locate and produce abroad.
It does nothing to repeal Items 806.30 and 807 of the Tariff Code, which encourage U.S. firms to locate abroad and take advantage of low-wage foreign production and a special low tariff rate on goods exported to the U.S.
It fails to assure action against unfair trade practices of other nations. It does not assure adequate U.S. responses against new and old barriers to U.S. products raised by other nations, particularly at a time when nations of the world are re-examining these barriers with an eye to greater self protection.
It encourages the entry of goods from low-wage nations of the world at special or zero tariffs.
It ensures the further heavy erosion or stunted growth of badly-hit U.S. industries such as steel, apparel, chemical and allied products, rubber, shoes, stone, clay and glass, autos, aircraft and electronics.
It ignores the fact that America's industrial base and productive strength have been weakened by current foreign trade and investment policies, and makes no provision for restoring the nation's critically needed industrial
health. For these reasons Congress should reject the bill now before it and write a new trade bill which will contain legislative provisions that are comprehensive, flexible and realistic. The new legislation should : 1. 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 t'.s.
Shortages of raw materials in the U.S. and new demands by countries which have those raw materials have led to new problems. Many raw material producers are requiring companies to use those raw materials within their borders. This interchange has led to a new threat to the American industrial system. As long as the U.S. has a policy of freedom of investment abroad and other countries have policies to seek their own rapid industrialization, the shortages of raw materials here will be used as an excuse to help industry to move abroad and further undermine production facilities within the U.S.
Interwoven into this problem is the recent change in the value of each nation's money. The value of the yen, the franc and other currencies have become lower. Many countries are competing to export as much as possible to improve their balance of trade and balance of payments. Imports from any part of the globe into the U.S. can shoot up very rapidly and the U.S. has no system to prepare for the rapid influx of any product from any part of the world.
2. 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. They use U.S. tax, trade and other laws in combination for their worldwide advantage. They export production facilities, money and jobs and juggle prices and credit to Inaximize their own worldwide company advantage. They license the newest technology for use abroad and combine in joint ventures with foreign companies and governments regardless of the impact on the U.S. need for jobs, production, or supplies.
3. Eliminate U.S. tax subsidies and other advantages for corporations investing abroad. Specifically, the tax laws should eliminate tax deferral of income Parned abroad and foreign tax credits. These provisions allow U.S. corporations to pay no income on the profits of their foreign subsidiaries until these profits are brought home if ever-and the foreign tax credit permits corporations to kredit taxes paid foreign governments, dollar for dollar. against their U.S. tax liability. These provisions contribute to the export of jobs, the erosion of the
U.S. industrial base, the denial of needed raw materials and components for U.S. production and job needs, and encourage foreign governments to change their rules to the disadvantage of the U.S. The present provision in the tax laws allowing the establishment of Domestic International Sales and Corporations (DISCs) should also be repealed. This provision now gives the largest multinational firms and banks windfall tax breaks on their exports.
The annual cost to the U.S. Treasury of these tax loopholes amounts to at least $3 billion in needed revenue.
4. Repeal flagrant incentives and subsidies to encourage U.S. firms to move or expand abroad. These are Items 806.30 and 807 of the Tariff Code, which encourage the foreign production and foreign assembly of goods for sale in the U.S. These provisions are used to shift production to cheap labor markets for the profits of the multinational corporations. Imports under these provisions have risen from $1 billion in 1967 to $3.4 billion in 1972; in the first ten months of 1973, imports under these provisions were 55 percent higher than in the like period of 1972.
5. Re-examine and limit the operations of the Export-Import Bank which provides loans at interest rates much lower than those paid by American businesses, consumers and home buyers. These loans help U.S.-based multinationals expand foreign branches and assist foreign governments, including the Soviet Union and other Communist countries, in getting America's newest production facilities. Particular emphasis should be given to the impact on U.S. jobs, and potential cost to the U.S. taxpayer.
6. Clear provisions should be written into new legislation to regulate exports of capital and new technology. Other nations are demanding only the newest kind of U.S. technological facilities and U.S. firms are licensing or producing America's newest inventions abroad with the help of U.S. and foreign governments.
7. Multilateral trade agreements with other nations, such as the textile multifiber agreements, should be administered in keeping with the flexible machinery devised to regulate imports and exports. This flexible machinery would be a safeguard against a misunderstanding of America's intent and assure continued U.S. sovereignty over its trade and other domestic laws.
8. Since almost any federal, state or local law can be considered a non-tariff barrier to trade, any legislative provision to authorize negotiation on non-tariff barriers should be limited and should require specific Congressional approval for the removal of any barrier, with full information about the products affected. U.S. tax laws, consumer protection laws and other social legislation, including occupational health and safety standards, should be barred from such negotiations.
9. New provisions are needed to speed and assure action against foreign dumping of products on the U.S. markets-the sale of these goods at a price artificially lower than in home countries or other subsidized imports into the U.S. These provisions should emphasize U.S. producer and worker needs and rights to participate in proceedings.
10. Clear labelling on imports of products and components to mark the country of origin of the product and the components within it is needed. Advertisers also should be required to designate the country of origin of products they handle. All consumer protection legislation should be strictly enforced on imports.
11. Trade with Communist countries should not be viewed as ordinary commercial exchange. The U.S. should end the extension of low-interest loans and insurance of private loans by U.S. government agencies to Communist countries. Senate legislation must contain the restrictions on Soviet trade written into the House bill over the opposition of the Adminisration.
12. The need for improved U.S. statistics on imports, exports and production has become urgent. Neither the U.S. government nor interested U.S. producers and workers can obtain adequate statistics in sufficient detail on the impact of imports or exports of industrial commodities. A comprehensive system of reporting on investment abroad, licensing of production and other technology flows is needed. Firms which operate within the U.S. should be required to segment their U.S. and foreign production in reporting to government agencies,
The energy crisis has demonstrated that over-dependency on foreign sources of any material can be costly and perhaps fatal. It also has 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. New trade legislation must recognize these factors.
By every test, the House-passed trade bill fails to relate to the realities of the Seventies. The Senate now has an opportunity and an obligation to fully reexamine U.S. trade and investment policies and write legislation that meets America's needs.
STATEMENT BY THE ASL-CIO EXECUTIVE COUNCIL ON THE 1972 U.S.-SOVIET TRADE
AGREEMENT At a time when Congress is considering trade legislation, the Nixon Administration, it has now been revealed, illegally implemented the October 1972 U.S.Soviet trade agreement. The Administration is extending long-term, low-interest loans to the Soviet Union under conditions not "less favorable than those usually extended to other purchasers in similar transactions."
Under U.S. law, the Case Act requires the Secretary of State to transmit to the Congress the text of any international agreement within 60 days after it is made effective. Senator Clifford B. Case of New Jersey has charged that the Administration has failed to comply with this law in granting Export-Import Bank credits to the U.S.S.R. Senator Case also wants disclosure as to whether the Soviet Union submitted the “necessary financial data" and justification for the Export-Import Bank making the loans. Senator Case has called for a full investigation before the Senate Foreign Relations Committee.
In December 1973, the House of Representatives voted against the unrestricted extension of credits to the Soviet Union. In the Senate, the same legislation is pending with 78 co-sponsors. Nevertheless, against this background, the ExportImport Bank has extended $160 million in credits to the Soviet Union at a 6% interest rate and has made preliminary commitments for over $100 million more.
The Export-Import Bank, a U.S. government agency, has made direct lowinterest, long-term loans to the Soviet Union for such projects as the huge Kama River truck plant, the construction of an iron ore pellet plant, two tableware plants and assembly facilities for the manufacture of pistons.
American workers, taxpayers and consumers are paying to export these productive facilities to the Soviet Union at bargain-basement interest rates and fire-sale prices. U.S. businessmen, consumers and homebuyers are paying much higher interest rates than those extended to the U.S.S.R. And, while America needs jobs and production, the U.S. government is helping to export equipment and know-how to build the competitive strength and military power of the Soviet L'nion.
Government agencies and private businesses have been spending an estimated $23 billion yearly to develop America's technology. Some U.S. government and business spokesmen have recently warned of the dangers and costs of these technology transfers to Communist countries. According to Business Week of January 12, 1974, Defense Department officials say the Communist countries are acquiring "U.S. technological know-how that has important military applications under what are supposed to be commercial agreements. The areas involved in the recent sales range from computers and communications to shipbuilding and aircraft."
Electronic News of February 4, 1974, reported that the President's trade negotiator, Ambassador William Eberle, and U.S. company officials were concerned that U.S. electronics firms might be "selling high technology rights at bargain basement prices',” They warned, “foreign customers, especially astute Communist bloc nations, are learning how to play one U.S. firm against another to auction off potential offers for American technology."
The AFI-CIO has repeatedly called attention to the fact that trade with the Soviet Union is not merely a commercial transaction. The implications of Senator Case's charges and the far-flung consequences of the 1972 U.S.-Soviet trade pact deserve close attention.
We urge the Congress to fully investigate the terms and implications of the 1972 U.S.-Soviet trade pact and its implementation.
EXCERPTS OF TESTIMONY OF I. W. ABEL, CHAIRMAN OF AFL-CIO ECONOMIC
POLICY COMMITTEE BEFORE THE HOUSE WAYS AND MEANS COMMITTEE
LABOR'S HISTORIC ROLE IN TRADE We of the AFL-CIO are no strangers to the world of foreign trade and investment. The workers we represent have long made the products which this nation exports. Our members have had first-hand experience disastrous experience in too many cases—with the effects of a policy which has left the door to the rich American market wide open to a flood of imports. This has turned America's reciprocal trade policy into a one-way street.
Starting in 1934 the trade union movement-the AFL and the CIO before merger and the AFL-CIO since-provided consistent and firm support to the United States' reciprocal trade policies and the expansion of world trade. We believed that this was the appropriate vehicle to achieve the goal of increasing employment and improving living standards both at home and abroad.
In the Thirties and Forties, when the world was recovering from first a global depression and then a global war, expansion of trade brought expansion of employment and benefits to the majority of the people not only of the U.S. but the world.
Starting in the Fifties, and accelerating during the Sixties and Seventies, new changes appeared on the world economic scene which significantly changed the world economy. These included:
The spread of managed national economies abroad which raised more and more direct and indirect barriers to imports, particularly from the U.S., while embracing a government policy of capturing a larger share of the world export market, particularly the vast American market;
The internationalization of technology ;
The skyrocketing rise of investments by U.S. companies in overseas subsidiaries as a substitute for American production, and the unchecked spread of U.S.-based multinational corporations under government policies which made the export of goods from plants abroad more profitable than domestic production ;
The U.S. share of the world's trade declined ; exports rose less rapidly and a tide of imports washed away first American jobs, parts of product lines. then full product lines, and finally entire industries. Persistent and growing deficits in U.S. balance of international payments in the Sixties have been followed by deficits in the balance of trade in the Seventies for the first time in this century. These events have been at the heart of the two devaluations of the dollars within a 14-month period and world confidence in the dollar continues to dwindle.
It should be alarming to every American-and particularly to those who are experts in trade-that this industrial giant is, for the first time in modern history, a net importer of manufactured goods. America's once clear world lead in technology and productivity is dwindling. When you go looking for reasons, it is incredible to discover that America is losing its lead because U.S. businessinen are sending abroad or are selling off abroad the capital and technology which is the nation's industrial base, and transferring this nation's high productivity to low-wage foreign countries where the profit bucks are bigger. America is the only nation in the world that is running a fire sale of its industrial capacityand the beneficiaries are the corporations, not the citizens and the government.
The AFICIO has sought to point out for some time what has been happening. but we have found few listeners. Since 1963, we have been calling attention to the need for action to stem the outflow of U.S. capital because of its devastating impact on the domestic economy. Since 1967 we have songht to turn the attention of the Congress and the Administration to the danger of maintaining special low tariff provisions which provide the excuse for American business to export plante and jobs. We have sought specific tax revisions to halt the aroidance or erasion of U.S. taxes on profits from foreign investment and production. We have sought government actions to meet the rising threat of imports and the growing dominance by multinational corporations of the orld economy.
We not only had few listeners, but those who did listen told us we were wrong, that the problems we were talking about didn't exist, and if they did exist they weren't doing any real damage.
Let me cite an example that shows we were not wrong. For some years now we have been saying American imports under Item 807 of the Tarif Code were