The values reported are much smaller than for Item 807-although they are accelerating rapidly, particularly from less developed countries. For example, in 1969 (first data available) $192.6 million was imported, with $103.2 million in U.S. content. In 1972 the total was $317.5 million with $130.2 million in U.S. content. In the first ten months of 1973, the total was $396 million with $183 million in U.S. content. From developing countries in 1969 the total value imported was $26.7 million of which $9.1 million was "U.S." content. In 1972, the total was $108.2 million with $65.6 million in U.S. content.

The AFL-CIO effort to get Congressional repeal of this kind of lubricant for the expansion of multinational firms abroad repealed has not been answered by any study. After several years of study by the Executive Branch, President Nixon directed the Tariff Commission to study the impact of 807 and 806.30 in August of 1969. In 1970 the Commission report found:

U.S. employment related to trade-both 806.30 and 807-was 37,000 and foreign employment was 121,000 (p. 163).

No other country had an identical provision in its tariffs. The removal of the items would not impair any U.S. trade agreements, even though there would be more duty collected.

The amount of trade in this item was large among subsidiaries of U.S.-based multinational firms by 1969-40% of the imports (by value) in 807 and 85% of the 806.30 imports.

When Congress passed 803.30 its Congressional sponsor believed, "there is no possibility that these particular products would ever be shipped to such countries as Belgium, Spain, Portgual and so forth, because of high transportation costs."

The Tariff Commission had opposed the adoption of Item 807 in 1963.

"A large part of the trade (in Item 807) is by U.S. firms and their foreign affiliates that operate and transfer goods on a manufacturing cost basis rather than on the basis of values established in the market place" and therefore most of the values are estimated.

Because much of the trade is not in arms-length transactions (that is, the "trade" is mainly a shipment from one branch of a multinational firm to another) Treasury and Customs did not require much reporting of these items.

"Ascertainment of the relevant facts is almost wholly dependent upon extrinsic paper proof rather than physical examination of imports by customs officers. By reason of the large volume of trade under these provisions and the intricacy and mass of detailed information involved in each transaction, customs officers are, in particular obliged to accept entries as submitted with only a limited opportunity for verification of their factual content."

Duties-saved would decrease from developed countries as tariffs were reduced from an estimated $13 million in 1969 to $8.6 million in 1972.

Labor payments by companies (wages plus supplementary compensation) were the only reports made by the Tariff Commission. Foreign workers' actual earnings were not reported. However, for labor payments, in most instances, U.S. payments were "many times higher than the hourly earnings of foreign workers engaged in comparable assembling or processing operations." The smallest differential was with Canada! The largest with Taiwan. Variations in product groups were quite large. Some examples: U.S. wages were 1.1 times the level of those in Canada and 18.2 times those of Taiwan. Average hourly earnings (wages plus compensation) were 14 cents in Taiwan and $3.50 in Canada. In office machinery, earnings in countries not located in Western Europe varied with a narrow range from 28 cents in Korea to 48 cents in Mexico.

Thus the Tariff Commission, in 1970, despite its failure to examine the labor issue in detail and its lack of competence in labor-related problems, found that there were more jobs abroad, at lower wages, that production abroad was rising and that the U.S.-based multinationals were the largest beneficiaries of Items 807 and 806.30.

Since then, the problem has grown rapidly and the value of imports both under these items and under the Tariff Schedules themselves have shot forward. Labor rates in some of the countries, like Haiti and the Dominican Republic

30-229-74-pt. 4- -12

are reportedly even lower. Countries with highly sophisticated exports to the U.S. and the world, such as Brazil, have begun larger uses of Items 807 and 806.30. Communist countries are beginning to have the advantage of the use of these items.

2 No tariffs were charged to this amount.

3 Data on 806.30 for 1969 are estimated; they were compiled from an analysis of entry documents supplied by the Department of Commerce and responses to U.S. Tariff Commission questionnaires.

Source: Compiled from official statistics of the U.S. Department of Commerce, except as noted.

Note: Because of rounding, the figures may not add to the totals shown.

U.S. IMPORTS FROM INDUSTRIALLY DEVELOPED AND LESS DEVELOPED COUNTRIES, 1969-72, ITEMS 806.30 AND 807

1 Data for 1969 are estimated; they were compiled from an analysis of entry documents supplied by the Department of Commerce and responses to U.S. Tariff Commission questionnaires.

Source: Compiled from official statistics of the U.S. Department of Commerce, except as noted.

Note: Data in table on item 807 have been adjusted to exclude imports erroneously reported as having been entered under TSUS ite.n 807. Due to rounding, figures may no add to totals show n.

APPENDIX XIV

TRANSFER OF TECHNOLOGY

The AFL-CIO urges that clear provisions should be written into new trade legislation to regulate exports of capital and new technology. Other nations are demanding 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 the U.S. and foreign governments.

"We're interested in one, your technology, and two, your markets,' '" said the Saudi Arabian oil minister Yamani, quoted in The Wall Street Journal on January 7, 1974. It summarizes the view of most nations.

The same desire has been expressed by the Soviet Union and Communist bloc countries and has led to the expressions of concern by the Department of Defense. the Office of the Special Representative for Trade Negotiations and even private business concerns who are worried that America is losing its prominence and exporting technology at fire-sale prices. The AFL-CIO Executive Council noted extensions of credit to the Soviet Union on February 22, 1973. It stated:

"American workers, taxpayers and consumers are paying to export these productive facilities to the Soviet Union at bargain-basement interest rates and firesale 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."

But most countries, unlike Saudi Arabia, want and receive U.S. credits for buying the technology. Thus the U.S. citizen pays and pays and pays.

Nation after nation has long followed policies of attracting new technology and improving technology within its borders. In 1971 AFL-CIO President George Meany called attention to this problem in his statement before the Subcommittee on Multinational Trade. In 1973, Andrew J. Biemiller, director of the AFL-CIO Department of Legislation, appeared before the Subcommittee on International Trade to reveal that the plans and technology for a number of modern weapons systems as well as non-military technology-were being exported to a number of foreign countries. We noted the regulations of other countries to attract technology and develop it. So this is not a new problem for the AFL-CIO.

In 1973, for example, we pointed out that one-time sales that benefit the balance of payments will adversely affect the U.S. balance of payments for years to come. We said that the aerospace industry-America's newest-was accelerating its export of technology. Our worst fears have been verified. America's taxpayers support research and the benefits are exported.

Since then, of course, nation after nation has adopted even more careful prac tices to assure their prominence and their industrial and technological strength. (1214)

Taiwan recently announced it no longer welcomes investment except in advanced equipment. As of February 1974, however, the United States still had no policy and emphasized the need to "consider the benefits the United States derives from technology transfer." (International Economic Report of the President. February 1974, p. 70.) Thus even in 1974, the U.S. does not recognize that action by the U.S. would be a first step toward neutrality in a world where the technology transfer has been assisted by foreign government policies to attract technology and U.S. government policy to help its "free" flow.

Though America now imports technology, the "balance" is uneven. The only measures of actual licensing and patent and transfer of know-how in the form of fees shows a better than 10 to 1 advantage for the United States. Royalties and fees paid to the U.S. totaled $3.5 billion, while payments to the foreigners for their technology in these forms were $300 million in 1973,

But the measure of this form of technology transfer ignores the accelerating pace of the measure of basic and best known transfers of technology-the direct investment abroad of U.S. firms. The AFL-CIO has clearly urged effective supervision and restraints on this outflow since 1963. U.S. long-term capital flows for direct investment have shown a steady and rising pattern from 1950 to 1973. In the early 1950s, the range was -$600 million to $800 million yearly; in the late 1950s and early 1960s, it stepped up to $1 billion to $2 billion yearly. In 1965 to 1973 the range was between -$3 billion and -$4 billion yearly, according to the President's International Economic Report for 1974 (table, page 95). The AFL-CIO has emphasized the fact that plant and equipment outlays abroad have shown a similar annual rise from about $3.8 billion in 1960 to $15.4 billion in 1973. Now the Commerce Department has revised the data, so that only majority-owned affiliates of U.S. firms' operations are surveyed. These data show that between 1966 and 1974 the rise has been from $8.7 billion to an expected $21.4 billion in 1974-with the growth from the 1968 level of $10.2 billion doubling by 1973's $21.4 billion.

The United States has in effect exported its capital, its know-how, and its most sophisticated industrial production to every nation on earth. Where new production develops, new technology will develop. And as each nation adopts more and more restrictive and self-interested policies, the response from the Administration and from the proponents of the status quo is that other nations will retaliate if the U.S. takes any steps at all or that it is "counterproductive” for the U.S. to act.

The Wall Street Journal of January 1, 1974 stated: "Many U.S. corporations, unable to get enough fuel for their factories, are planning to build factories where the fuel is in the Mideast.

"Given the delicate political situation in the Mideast, however, few companies are eager to discuss their plans. . ." The Journal continued, "But the State Department had seen 30 proposals for joint-venture projects in the Mideast. (The Arab governments insist that any projects be jointly-owned.)"

Thus U.S. foreign direct investment abroad held a new meaning, made clearly evident with sharp attention focused after the energy crisis-for the United States and for its foreign direct investors.

In the face of this massive transfer, the United States Administration merely warns against U.S. policy or action that would inhibit even the outflow of direct investment. Instead of acting to regulate the flow, the U.S. government frees direct investment, as it had already freed technology. Instead of recognizing the fact that other nation's overall policies already assure the inflow of technology, the United States continues theoretical and short-sighted analysis geared to the private interests of private corporations' perceived advantage wherever in the world they might wish to locate. But the health of America and the jobs of Americans today and tomorrow depend on action by the Congress.

FOREIGN DIRECT INVESTMENT IN THE UNITED STATES

Reverse flows of investment into the U.S. have been emphasized in many recent reports. The latest government estimates presented to the Congress by the President's International Economic Report of 1974 show that by 1972, some $14.4 billion was invested in the U.S. for foreign direct investors-as uneven as the technology transfers through licensing. U.S. investments abroad totaled $94.0 billion in 1972. Investment inflows in 1973 were estimated at $1.9 billion (page 61).