same period, our U.S. negotiators will be making long-term commitments, giving full consideration to the significance of the above-mentioned uncertainties.

We believe that utilization of the extensive tariff-cutting authority provided in the bill could lead to arrangements which might not be in the best long-range interest of this industry. Duty reductions in excess of 50 percent would surely be harmful to the domestic production of a number of complex chemicals and plastics.

In addition, we believe a limit to 50 percent in tariff cutting not only matches the widely heralded authority of the Kennedy round, but also would match, if not surpass, the authority granted by the governments of our principal trading partners. More importantly, we are not aware of any compelling reasons which would require authority in excess of 50 percent, particularly if the forthcoming negotiations are to concentrate on nontariff barrier removal.

We believe that this is a time for restraint and caution-a time when the Nation should consider keeping some of its negotiating options open. Accordingly, we believe the tariff-cutting authority provided in H.R. 10710 is excessive.

Now, Mr. Chairman, I would like to comment on the role of industry advisers during the course of these negotiations.

As you know, the chemical industry has for a long time had a deep interest in international trade negotiations, an interest greatly increased by the unfortunate consequences of the Kennedy round negotiations on the industry. The chemical industry is not only large, but very complex. Alternative processes and raw materials make it extremely difficult to attain the detailed understanding of the industry required to forecast the future impact of changing trading conditions. As I have already indicated, this difficulty is compounded under present-day conditions.

Recognizing that it would be extremely difficult for our negotiators to have detailed knowledge of all of the various facets of the chemical industry, we have developed an organization for the communication of that knowledge-the Office of the Chemical Industry Trade Adviser. In support of the Office, the leaders of the chemical industry have made a major commitment of manpower in executive talent for policy direction and in scores of experts for the technical task group backup.

We are pleased that the use of advice from industry in the negotiations has been given prominence in H.R. 10710. We urge strongly that the Congress, especially the "official advisers" of the Congress provided for in section 161, assure themselves regularly that advice from industry is sought and utilized effectively.

We believe that the Congress should encourage the formation of industry advisory structures such as the chemical industry has organized. We seek only to achieve the same degree of close coordination between businessmen and their government negotiators that we have witnessed in the practice of our trading partners abroad.

We believe the U.S. chemical industry is well organized in this regard. But we stand ready and willing to work with our negotiators and the Congress.

Mr. Chairman, that concludes my remarks. Mr. Barnard, I think, would like to cover two other subjects.

Statement of Robert C. Barnard

Mr. BARNARD. Mr. Chairman, my name is Robert C. Barnard. I am counsel to the Synthetic Organic Chemical Manufacturers Association, and the Dry Color Manufacturers Association. I appear here today for Mr. Harold C. Whittemore, who is president of the Synthetic Organic Chemical Manufacturers Association. He asked me to convey his regrets to the committee that, because of an illness in the family, he is unable to be here today. We appreciate the opportunity as part of this chemical industry panel to discuss the effect of the proposed trade bill on our industry and to make two recommendations for changes.

First, the special provisions in the bill relating to benzenoid chemicals subject to the American selling price, ASP, method of valuation should be amended. We believe it is essential that Congress retain the right to review and approve any trade agreement changing the American selling price method of valuation, and we urge the elimination of the discriminatory multiple reduction in import protection which the bill authorizes only with respect to products to which ASP is applicable.

Second, we believe that act should make sector-by-sector reciprocity the principal objective in any trade negotiations not just in negotiations on nontariff barriers.

A word about the benzenoid sector of the chemical industry: In 1973 benzenoid chemical sales alone exceeded $6 billion and created jobs for 130,000. Benzenoid chemicals include such important products as dyes, pigments, medicinal chemicals, flavor and perfume materials, pesticides, and some plastics and resins.

ASP and the trade bill: The bill originally proposed by the administration, H.R. No. 6767, would have granted the President advance authority to change methods of customs valuation embodied in the statutory law of the United States. The Ways and Means Committee wisely declined to grant the Executive such sweeping powers.

However, the bill it reported out, and which is now before you, does not provide for meaningful congressional review of any agreement made on ASP, and it subjects manufacturers of benzenoid chemicals and rubber soled footwear to a significantly greater reduction in import protection than all other industries.

I will not debate the merits of ASP, but there are four points worth noting:

One, ASP-based duty rates apply to United States rather than foreign values. Thus the tariff protection it provides is constantly updated; it increases as U.S. prices increase and decreases as U.S. prices decrease.

Two, the basic reasons ASP was originally selected for benzenoid products are still valid. Benzenoid products are produced in the Common Market and in Japan by a relatively few large companies which are rationalized-with or without government supervisionand which are capable of "disciplining" an industry by dumping. The U.S. antidumping laws do not provide an effective remedy for an industry in which reliable foreign price data is rarely obtainable. ASP does provide automatic partial protection against dumping since the dumper does not receive the benefit of reduced duties when he offers products at dumping prices.

Three, ASP has not prevented a steady increase in the foreign import penetration of the U.S. market. Chemical imports have increased an average of 16 percent per year during the last 6 years. During the period 1967-72, benzenoid imports increased an average of 23 percent per year.

Four, the administration of ASP has been subject to criticism, some of which, we are confident, may be justifiable, and we have repeatedly but unsuccessfully urged our Government to make the necessary administrative changes. We believe that the adoption of such changes would largely remove the inflammatory characteristics of ASP in the minds of our foreign competitors and their governments.

The industry's position on ASP negotiations: (A), congressinoal review. Under this bill the administration has said it may well bring back an agreement dealing not only with ASP but many nontariff barriers. Congress will then have 90 days within which to veto it. Meaningful review of the ASP agreement would be impossible if it is one of many agreements and the veto applies to the whole package, not just the ASP agreement.

On the basis of the Kennedy round experience where a nonreciprocal deal on ASP was negotiated as part of the famous 50/20 chemical agreement, we urge that any trade agreement on items as basic as U.S. methods of valuation should be submitted to the Congress as a separate agreement for affirmative approval through the regular legislative process.

The bill's 90-day veto procedure does not in our opinion give the Congress an adequate opportunity to review a complex trade agree ment making a basic change in valuation standards mixed in with agreements on other matters.

(B), the discriminatory multiple reduction in protection on benzenoid products. Section 102 as presently drafted permits a greater reduction in protection for benzenoid products and rubber soled footwear than for any other products.

First, the bill authorizes the elimination of the benefits afforded by ASP. This is a reduction in protection since the Tariff Commission has found that other methods of valuation do not provide equivalent protection.

Second, the bill, in addition, authorizes a double tariff cut: One, the elimination of the so-called "tariff equivalent" of ASF; and two, a cut under section 101 in the remaining level of protection.

Let me illustrate the double duty cut. Assume the statutory rate of a product is 20 percent but that ASP valuation today results in tariff protection equivalent to 35 percent on the basis of export value. The double cut arises because section 102(g) authorizes: One, the immediate elimination of the difference between 35 percent and 20 percentthe 15 percentage points of effective tariff protection attributable to ASP and referred to as the tariff equivalent; two, as if that were not enough, it permits the 20 percent statutory rate to be subject to the full reduction under the section 101 tariff-cutting authority applicable to all products.

In our example, the 20 percent could be reduced to 8 percent. Thus, the tariff protection could be reduced from an effective rate of 35 percent to 8 percent, a cut of 77 percent.

Because of this double cut, the tariff rates in major benzenoid basket categories will be subject to reductions of from 76 percent to 81 percent compared to 60-75 percent on all other products.

There is no valid justification, in our view, for subjecting benzenoid chemical manufacturers and their workers to the abrupt loss of ASP plus the double cut in effective tariff protection.

We therefore urge this committee to require conversion under section 102(g) if ASP is to be negotiated and to require that the tariffcutting limitations, including the staging requirements in section 101, apply to the new converted rates not to the old statutory rates.

I would now like to turn my attention to the matter of reciprocity by sectors. Reciprocity within sectors is essential unless trade negotiations are to become a means of deciding which industries shall flourish and which languish or die.

We are gratified to note the concept of sectoral negotiations and reciprocity in section 102 (c), but for some inexplicable reason this provision is only made applicable to NTB agreements. It is equally, if not more, important for tariff negotiations to be conducted on a sectorby-sector basis. We urge that this provision be made applicable to both sections 101 and 102.

It has been obvious for many years that we have not achieved reciprocity in past trade negotiations. By directing sectoral negotiations with firm directions to achieve reciprocity, perhaps we can avoid deals like the famous Kennedy round chemical agreement where we got only a 20-percent cut from the EEC in exchange for our 50-percent cut and like the nonreciprocal separate package deal on ASP. We believe that Congress should instruct our negotiators in the present bill that reciprocity by sectors is a prime negotiating objective.

We subscribe to the staff analysis of H.R. 10710 that the border taxexport rebate device used by many of our trading partners gives them a tremendous commercial advantage. In fact, increases in the border tax have effectively nullified most of the trade concessions we have received from them in the past.

We therefore applaud the provision in the bill, section 121 (a) (5) directing the President to seek reform of the GATT to rectify the adverse impact of border taxes on our trade. However, we believe that this provision should be strengthened by making any future trade agreements contingent upon a fair resolution of this problem. Otherwise, the reciprocal benefits we obtain in this round of negotiations can also be eliminated by increases in the border tax on our trade. We urge the committee to make clear that the forthcoming negotiations on tariffs and NTB's shall be by sector with the firm objective of genuine reciprocity.

In our written statement, which we have filed with the committee, we have elaborated on these points and other points of interest to the industry. We will also submit suggested amendments to carry out the changes in the trade bill we have proposed.

Mr. Chairman, this concludes the statement by the panel.

Senator CURTIS [presiding]. On behalf of the chairman. I want to thank you for your contribution here. I have one or two questions that I would like to ask.

How do you define a sector of our economy or business community?

Mr. BARNARD. We assume that this would have to be done by the administration, giving due consideration to what are the proper boundaries for sectoral negotiations. We recognize that the boundaries may not be as sharp as one would like to have them drawn, but nonetheless there are characteristics of certain parts of the industry.

The chemical industry has certain characteristics which are matched by the chemical industries of other countries, and we believe it is fully appropriate and proper for the administration to set about to draw those boundaries, and, within those boundaries as drawn, to conduct the negotiations.

Senator CURTIS. In other words, you are saying that we should not take a single segment of our economy and negotiate it away for what might appear as a larger benefit to some totally unrelated and larger, what might be a larger segment of our economy ?

Mr. BARNARD. Yes, Mr. Chairman. We regard these as trade negotiations, not a negotiation to decide which industry shall live and which industry shall die. We believe that if the negotiators' objective is to find equivalent benefits for an industry, then we will have achieved a reciprocity, and we will not be engaging in a shifting of the industrial structure under the guise of trade negotiations.

Senator CURTIS. I agree to the concept very much. What do you think is the best way for the Government, particularly the negotiators, to make effective use of the knowledge and expertise that the private citizens have in the field of manufacturing, agriculture, all the aspects of our economy?

Mr. DAWSON. I think that if industry-and I can speak knowledgeably only of industry-were encouraged, they could easily set up devices of the sort we have attempted, and which some other industry groups have also attempted, which would allow periodic consultation between the negotiators and industry people in the course, first, of the preparation for the negotiations, second, in determining what offers should be made, and, third, in the course of the negotiations proper. Here our adversaries on the other side of the table are also submitting proposals, and an attempt should be made to balance these. But in the Kennedy round, of which I think we are knowledgeable of industry's viewpoint, we found that this procedure was being undertaken only by our adversaries, whose negotiators would consult on a day-to-day basis with industry representatives.

Industry representatives of our adversaries were not participating at the negotiating table, but there were sufficient consultations between them that they were were able to interpret the result in the industry of concessions which their negotiators might make in a way that you simply could not expect a government negotiator to achieve.

We have said before and we submit it as a fact that during the Kennedy round, some of our people who were in Geneva, including myself, were informed of offers made by our negotiators by foreign industrial representatives, when we were not informed of these by our own government people.

Senator CURTIS. I think these things are very important.

Senator Packwood?

Senator PACKWOOD. On this sector-by-sector issue, do you envision the manufacturing chemical industry as a sector in toto, or do you break it down further within that?