Now, there has been a great deal of discussion about these countries wanting to establish petrochemical industries. I wonder if any consideration has been given by your industry to the possible impact of title V on the industry, if these Arab States do realize their goal of petrochemical industries and if they get preferential treatment?

Mr. DAWSON. Dick, do you have a point of view on that?

Mr. BRENNAN. My reaction, Senator, is, first of all, probably in the pretty near future they will not be developing countries any longer with the amount of moneys they are collecting in their treasuries. But really, you are just pointing out a dilemma that does face us on the one hand, particularly with other developing countries, where you have this fantastic population growth, and some hope for them, if you will, by granting them preferential treatment; and on the other hand, the other side of the dilemma, the fact that particularly in the Arab sector, these countries building up facilities and so onwhich then would have a competitive advantage from the standpoint of raw material, and we would be further granting tariff preferences to them-it is a very difficult kind of thing to work out.

I think probably, when we look at the population aspect of it, you really have to go for-and this is my own personal opinion any waygiving the developing countries in toto some sort of preferential treatment.

Mr. BARNARD. Senator, may I supplement that?

In our written statement, we have suggested that the provisions on the developing nations should be tightened somewhat, so they do not become simply transshipment points for developing nations to put products in the United States. We recognize that there needs to be development in developing countries.

On the other hand. if we adopt a program which is much more. to use a loose word "liberal" then the Common Market adopts. then we are likely to become, again, the target for shipments from those countries or industries established with the United States as the target exporting point.

We would urge, therefore, that the committee look at the EEC type of preference and see whether that is not preferable to the provisions that are now in the bill, and whether it does not provide a greater guarantee against the developing nations simply becoming transshipment points.

This is not to restrict in any way their desires to be developed; it is simply to prevent an abuse.

Senator ROTH. I was going to suggest that there are certain safeguards written into the legislation. Whether or not they are adequate

Mr. BARNARD. We have suggested that they be tightened up. Senator.

Senator ROTH. There have been a number of criticisms made in the hearings about multinational corporations. In your opening statement. Dr. Dawson, you mention the favorable balance of payments contributed by the petrochemical industry.

I wonder if you could give us any figures or statistics as to the impact on jobs in America? The basic criticism has been in many industries that they have exported plants abroad to take advantage of cheap labor.

I know this has been true of some industries. I must say it gives me considerable concern. I wonder if you have any figures?

Mr. DAWSON. I think the only thing we can do is make some indirect computations, Senator. In 1973, our favorable balance was $3.3 billion; we were a $66 billion industry. So I think you can safely say that roughly 5 percent of our million employees were involved in supplying our favorable balance of trade, which is what?-50,000 employees.

I do not know that there is any better figure than that, except many individual companies in the industry have studied the impact of their foreign manufacturing operations on jobs, and there is not any question that if you could have manufactured that product here instead of in Europe and sold it, you would have added jobs here.

On the other hand, most of us are convinced that this is not the case, that if you had not built in Europe, you would not have developed the market, and you would not have manufactured here and supplied jobs.

At the same time as a result of operations in Europe, most companies, my own included, are convinced that they have added jobs here, because as a result of an operation over there, they are able to sell other products associated with it in that market to an extent that they would not have been able to do had they been run out of the market by the local manufacturer.

Senator ROTH. One of the other criticisms in this area, and there have been a number of recent statements, is that the multinational corporation does not necessarily, if it is an American company, have loyalty to this country. I wonder if you would care to comment on that?

Mr. DAWSON. Yes, I would, because I take a dim view of the assumption that a multinational company is a creature, and they are all the same, because they obviously are not. We have heard it said, of course, that some automobile manufacturers say they are not an American company any more.

I think that any multinational company in the chemical industry would say that this is not true of their company, but they are an American company with manufacturing operations abroad. And certainly in the case of my own company, and in the case of all larger American companies, multinational companies in the chemical industry, they have maintained headquarters here; they have maintained the bulk of their research here; they have used American people to head up foreign operations to a large extent. They have remained basically American companies operating in America and operating separate operations abroad to supply the markets there.

Senator ROTH. But their loyalty is first here.

Mr. DAWSON. Their loyalties are, to me, primarily those of the American operation where they started.

And let me say that the multinational companies which have come into our industry from Europe particularly have, for the most part, maintained their European character. The Swiss and the Germans and the English, who are active multinational companies are still primarily English, German, and Swiss companies.

Senator ROTH. Do you think it would be helpful for Congress to try to adopt some legislative statute or industry code of conduct for multinational corporations?

Mr. DAWSON. I think it would be helpful but difficult.

Senator ROTH. One final question. I wonder if there are any specific foreign non-tariff barriers in the chemical field that have a significant impact on U.S. imports?

Mr. DAWSON. Well, we are working industriously on that thing, Senator. We do not have a satisfactory answer. You can say, I think, without any question that the way the Japanese run their industry and government is a nontariff barrier and it is a huge barrier, which has been very effective in keeping out American industry from that country.

You can say that value added taxes, although this is a debated area, certainly add to our cost of doing business in export trade. You can certainly say that there are cases where Government administration, with or without the consent of law, in the Common Market is very effective in keeping out certain commodities, certain products within the chemical industry.

We are not prepared yet to tell the Government what the impact of all this is, and their relative importance, but we would hope to be in that position in another 3, or 4, or 5 months.

Senator ROTH. I would like to thank all three of you gentlemen for your testimony. I would just make the final observation that I think it is very important that in the future negotiations both industry and labor be there, and have the opportunity to comment as negotiations are carried on. I am impressed by the foreign visitors, who have said that this is true in their own countries, and I think we have handicapped our own industry by not doing so.

Senator CURTIS. Senator Packwood?

Senator PACKWOOD. I have a few more questions, Mr. Chairman: if you want to go ahead first.

Senator CURTIS. No. Proceed.

Senator PACKWOOD. When the AFL-CIO was testifying, Mr. Meany indicated several times that despite the fact that we may or may not have a favorable balance of trade from time to time, we have an unfavorable balance in manufactured goods. I do not know if he included the chemical industry.

He said no nation should be in that position. In fact, we cannot use our agriculture exports and count that; even if it is a financially favorable balance of trade, it is unfavorable diplomatically and militarily.

Is that a fair statement?

Mr. DAWSON. I would certainly agree with him. You mean he distinguished manufactured goods from raw materials?

Senator PACKWOOD. I would think so. He did not indicate what it was, but I would assume that is what he meant.

Mr. DAWSON. What has happened in the last 5 or 10 years has been the relative loss of the U.S. world position in manufacturing goods as distinguished from raw materials and agriculture.

Senator PACKWOOD. Now, after the hearing, I talked with one of the AFL-CIO lobbyists about the so-called runaway plants. I recall the testimony we had from IBM and a number of other multinationals a year or so ago to the effect that very little of what they produce overseas is exported back to this country; that that is not the point of going overseas.

The gentleman from the AFL-CIO said that may be true, but the multinationals are moving into third country exports and sell to the third countries from these foreign plants, where they otherwise would sell to them from plants in this country.

Is that true, or not?

Mr. DAWSON. I am sure there is some of that, and it depends entirely upon what your cost picture is. If you have a plant with capacity in Germany to supply Africa, and you have one in the United States of America and you have available capacity in both plants, it is going to be determined by the cost picture.

On the other hand, I do not think that many people in the chemical industry are building plants in Europe or Japan to supply third country markets.

Senator PACKWOOD. Are you building them in third world markets? Mr. DAWSON. We are building some in third world markets.

Senator PACKWOOD. Let me go back to this American selling price. It seems to me it must have sneaked in as a sleeper 50 years ago. I can understand your adverse feeling with regard to a sudden wrenching of this.

But I cannot believe that the chemical industry and then the rubber-soled shoe industry overseas is so arcane as to be completely distinguishable from all other industries, and that there is a reason for your ASP that would not apply to other industries.

Mr. BARNARD. I think there are other industries that have suggested from time to time that ASP would be applicable and appropriate for them, too. I think we should make clear our position.

We are not here today suggesting that the Senate should forbid the negotiation of ASP in the forthcoming negotiations. What we are here today saying is that in a negotiation, we believe that there ought to be one standard that is applicable to all products including products subject to ASP. We should not be subject to greater tariff cuts than are others subject to.

And if there is to be a negotiation on ASP, it ought to be logical, conducted in a logical way. The rates first should be converted so we know what rates we are talking about under the terms of the statute.

Second, the staging provisions under the limits of the tariff cuts ought to be equally applicable.

Third, we would also urge that it be considered in the light of the reciprocity for this industry or the chemical industry, whichever is the appropriate sector.

Finally, we believe based on our experience in the Kennedy round that in order to be assured that these standards are obeyed, we think any agreement on ASP should be a separate agreement and submitted to the Congress for its approval, rather than a part of the great big package.

Senator PACKWOOD. What you want is affirmative approval from the Congress rather than a veto?

Mr. BARNARD. Yes, sir. We think this is appropriate because, in fact, what you are doing is changing the valuation laws of the United States, not just a tariff rate.

Senator PACKWOOD. I am not sure that the whole veto procedure we have on the nontariff side is really a viable procedure anyway. Whether it comes in a lump or not, I think anything that is agreed to

is unlikely to be vetoed. But I am not sure that ASP should be treated differently. Although, I should add that I think you have a point about being able to convert and take your basis from your actual price, if you are going to convert it, rather than knocking off ASP this month and then

Mr. DAWSON. Congress might not veto it under either condition, but they would have greater freedom to exercise intelligent judgment.

Senator PACKWOOD. Unless there is a change, we are unlikely to act affirmatively, either. My experience is we are unlikely to act, affirmatively or negatively. If we have to act negatively to stop something, that is a whole lot different from acting affirmatively to stop or approve something.

I think if we have to act affirmatively to approve an ASP change, there would be no change; you would keep your system. But I do not want to pursue this, because I can talk with you privately.

Yesterday, Mr. Meany talked about American technology. He pointed out that technology is easily transferable, and that our great advantage in technology is all going overseas to cheaper markets. Surely, of all industries that exist in the chemical industry, there must be foreign patents and devices that we are buying and using in this country? Technology is not a one-way flow, is it?

Mr. DAWSON. Not at all. It is becoming a two-way flow particularly between industrialized nations and Japan. There has not been much flow from behind the Iron Curtain. Consequently I think the Iron Curtain countries are desirous of getting American technology or European technology.

One point there I would like to make, which I think is perhaps contrary to what I understand Mr. Meany said. Some industries may be selling to the Iron Curtain countries technology which represents the latest advance. To my knowledge, the chemical industry has not done that. The chemical industry generally has refused to sell technology which is not also available from, for the most part, Europe or Japan. And if it is indeed advanced beyond the position of our European competitors and our Japanese competitors, we some companies, I know, and many companies, I believe will not sell behind the Iron Curtain, have not, and do not intend to. So that you do not really advance the level of Communist technology beyond the level which is generally freely available at a price.

Senator PACKWOOD. I was not thinking of the Communist technology so much, nor was he when he made that statement.

Mr. DAWSON. I see.

Senator PACKWOOD. He was thinking more of the fact that we perfect a good technique here in America and you take it to Formosa because the labor there is cheaper. I think over the years, there must be some other things like the Mazda rotary engine, that people in other countries have invented and which we have thought is a good idea. It seems to me if you

Mr. BRENNAN. I have a brief comment on that. That is in the chemical industry area, there are many major chemicals now being produced in this country that are based on European patents, have been for many years. Polyethylene is one.