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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 AFL-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 submittéd 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 Union.

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 AFL-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.

APPENDIX II

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. businessmen 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 AFL-CIO 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 sought 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 plants and jobs. We have sought specific tax revisions to halt the avoidance or evasion 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 doul nance by multinational corporations of the world 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 Tariff Code were

directly causing a substantial loss of American jobs. Item 807 is the provision under which American firms export components for assembly outside the U.S. and then pay duty on the value added to the finished product when it is returned to the U.S. for sale in U.S. stores. In 1967, using this device, $146.6 million of goods were exported across U.S. borders. Subsequently, this $146.6 million was shipped back to the U.S. as part of finished products with a value of $931.6 million. By 1972, use of this device had grown so that the U.S. shipped out $681.6 million of components and they came back in products worth $3.1 billion. America had a reported increase in exports, all right, but a $2 billion increase in imports. Even the U.S. Tariff Commission, which seems reluctant to concede that the American worker suffers any damage from imports, reported that the use of Item 807 by U.S. firms had, by 1970, cost over 100,000 U.S. jobs. This is only one example. The losses in all segments of U.S. manufacturing-and parts of the service economy-have cost America many times more jobs.

We don't take any gratification in the fact that there is now wide recognition that the worsening trade situation we sought to alert the nation to does indeed exist.

We are concerned by the failure of the Administration to come to the realization that the entire new set of facts and forces facing the nation demands a complete change in thinking. The recycled phrases, concepts and cliches of the Thirties and Forties are still muddying the discussion.

It is time to get the terms "free trade" and "protectionism" out of the debate. They no longer apply. For the U.S. government to talk and act as though the nation lives in a world of free trade is to ignore the painful lessons of this world of the Seventies. It just isn't so.

The U.S. has marched along the free trade route before, only to find out that other nations are using a different road map. They are concerned-and rightly so with looking after their own interests. If U.S. interest and their conflict, there is no question and no hesitation for them about which comes first.

And it is time that the U.S. learned something from those nations which have managed to come to grips with their own trade problems and have put the primary interests of their own citizens first.

THE AMERICAN WORKER'S MISSION IMPOSSIBLE

Instead of getting the help needed to meet our problems, concerned Americans are getting harassment.

America can cure its problems, the nation is told, if the American workers will just try harder and be satisfied with less pay and if the American businessman will sell harder.

But, at the same time, the game is being rigged in favor of the overseas producer and the multinational corporations.

Americans are told to seek jobs and help themselves. But their jobs are being exported out from under them. A suffocating tide of imports is driving them out of work. The loss of export markets is resulting in a further loss of employment. American plants, technology and patents are being shipped overseas.

And the government does virtually nothing to help the Americans affected. Americans are asked to improve productivity at home to keep labor costs down and improve exports from the U.S. The U.S. worker is the most productive in the world. Government figures show productivity shot up at an annual rate of 3.2 percent in the period from 1947 to 1971, against a 2.2 percent yearly gain in the previous 28 years. A 1973 Tariff Commission report to Congress on the direct investments of some U.S.-based multinationals in seven nations in relation to overall U.S. productivity declares that "all firm data for the U.S. showed unit labor costs to be generally lower" than in five of the nations studied-the United Kingdom, Belgium-Luxembourg, France, West Germany and Canada.

But what affects the relationship of productivity, wage rates and unit labor costs, is the accelerating transfer abroad of U.S. technology. The effect of these transfers, through direct sale, through licensing, through the shipment of entire plants abroad, through patent agreements, and through the operation of U.S. subsidiaries overseas, is to transplant sophisticated American productivity capability into other nations. The result: Foreign nations are able to use American productivity not only to increase their own efficiency, but to compete more effectively with U.S.-produced goods. Thus the U.S. industrial base is not only eroded

by these transfers, but America's own technology and productivity are used against it. Under these conditions, it's no wonder that the U.S. productivity lead is being undermined.

Americans also are asked to reduce trade barriers for expanded trade. But other nations increasingly raise barriers to our goods, and U.S.-based multinationals, through their foreign affiliates, use these trade barriers to compete with domestic U.S. companies.

Americans are asked to understand that other nations have the right to curb U.S. investment in their country, to regulate the output of that investment and to require U.S. firms which have located there to export from the host country. But, if we or other Americans suggest that the U.S. should put a damper on imports and provide some regulation for the outflow of capital, we are told this would provoke retaliation and start a trade war. There's no logic in saying that what is good for nearly every other nation in the world is bad for the U.S.

Americans pay taxes to help develop new technology to support America's economic strength. But American business is shipping this technology abroad in wholesale lots to foreign subsidiaries and foreign companies. Not long ago, the AFL-CIO disclosed that the Thor-Delta launch rocket and its entire missile launch system is now in the process of being sold to the Japanese by McDonnellDouglas Corp., a multinational corporation.

The Thor-Delta system is considered by space experts to be this nation's most effective and reliable launch unit. The basic system was developed at taxpayer expense and cost millions of dollars in research and development funds; it has been a positive factor in the nation's balance of payments through contracts with other nations to provide them with satellite launch services. Now it is being sold to the Japanese at a fraction of its cost for the exclusive profit of McDonnellDouglas.

This is costing the U.S. the loss of a basic resource, while the Japanese are getting a sophisticated piece of technology-which it did not develop on its own— to add to its productive base. The sale of this technology means that the highlyskilled American workers who built and operated this system are out of work, with no assurance that further technology in this area will be developed.

In addition to Thor-Delta, much of the nation's military fighter aircraft, including the F-4 Phantom and much of the commercial aircraft program are being shipped abroad.

Since this is what's happening in our higher technology industries, what's going to be left to provide the jobs the nation has been assured would be available for those workers who have lost their jobs as a result of the export of lower technology industries?

Americans are paying more taxes to give tax breaks to U.S. firms to encourage them to stay at home and export. But the multinationals can and do take advantage of the tax breaks at home and still go abroad-and get further tax breaks for going abroad.

Americans are being told that the foreign operations of U.S.-based multinationals are creating jobs at home. Citing various studies, the government and the multinationals claim that the growth of employment among multinational concerns rose more over recent years than did employment in the U.S. as a whole. We're supposed to be persuaded by this that it is the multinationals' foreign operations which are responsible.

This is statistical quackery.

U.S. multinationals are among the largest of America's corporations. They are the largest employers, the largest defense contractors, largest government contrators, target manufacturers, largest financial institutions, as well as the major exporters and importers of products, technology, money and jobs. It is what happens in the American economy that affects their employment levels, not what happens as a result of their foreign operations. Just to show how vulnerable their statistics are, subtract their employment additions as a result of mergers and acquisitions and their gains will be about the same or lower than U.S. employment gain for all corporations.

There is a massive campaign to brainwash the public on this issue. Special business interests, such as the National Association of Manufacturers and the Chamber of Commerce and the American Importers Association are now posing as champions of the consumer, claiming that imports keep prices down. Restrict imports, and the consumer will have to pay more, they say. However, since 1962

foreign imports have tripled. Since 1968, imports just of manufactured goods have gone up from $21 billion to $38 billion. But prices have gone through the roof. The NAM and the Chamber of Commerce also claim that if the U.S. raises barriers to foreign goods, other nations will retaliate. Already, other nations have made a pretty regular business of putting up barriers to imports to safeguard their own industries and interests; they've been "retaliating" for years. These are the same organizations, along with the government "free trade" experts, who have been telling the country that even though the nation's trade position has been getting worse, it hasn't had a significant impact on jobs. When the AFL-CIO seeks data to substantiate this claim we are told that no precise information on the direct job loss from imports is available and that estimates of the job impact of exports are clouded.

Today, imports affect almost every manufacturing industry. These imports more and more are largely in goods which could be-and once were-produced in the U.S. The job losses are no longer the result of slight displacement, but of deep penetration of our markets, with the wholesale elimination of entire industries with no comparable job replacement.

The rapid expansion of manufactured imports in the Sixties and continuing into the Seventies was particularly great in several areas in which the U.S. had previously been the world leader: steel, autos, machinery, electrical products, including TV, radios and telecommunications equipment. Imports of these products joined with the continued rise of imports in other areas which had previously suffered import problems, such as shoes, textiles, clothing, glass and leather goods. Nine out of ten radios sold in America are now made abroad; one out of four cars; seven out of 10 sweaters; 19 out of 20 motorcycles, one out of two nails and staples, nine out of 10 baseball mitts. The roll call of decimated industries of high and low technology from imports is almost endless.

It is time the nation paid closer attention to what it is doing to itself. It is time to look at where present policies are taking the country. America's problems in the world economy are likely to get more difficult in the coming decade, particularly if the forecast of serious shortages of energy and raw materials come to pass.

If you want a sobering picture of what could be America's future, go into a community where the main or a major job-supplying industry has been shipped abroad, or overrun by imports. The jobs are gone; the payroll is gone; the tax base is eroded. What are these communities left with? A loss of local purchasing power, the loss of taxes to pay for the services that community once had and still needs. Other taxpayers must pick up the slack. Either that, or the community must cut the services, and its standard of living goes down.

How many more goods can this community buy from other communities when its taxpayers must support the burden of higher service costs, the burden of unemployed workers who once had a living wage but who must now live on unemployment insurance or welfare because there aren't any more jobs?

All of the above are added costs to America and must be shared by all. These are very real growing consumer costs of our present foreign trade policies. You won't find much consumer purchasing power in these communities once the industrial base is gone, but every American must pay the costs of the destruction left by the overrun industry or the moved-abroad firm.

The argument is made that America is losing only its unsophisticated industries, such as shoes, textile and apparel. But those are badly needed industries and mean jobs for millions of Americans. Further, the loss is in every industry, even the most sophisticated, such as aerospace and computers, where we are supposed to be dominant. It is most frightening when the Secretary of the Treasury, Secretary of State and the Administration's Executive Director of International Economic Policy agree before this Committee that our chief export five years from now will be agricultural products. Are we regressing to the status of a developing nation?

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