As the share of market graph above shows, the United States competitive share of the world trade in chemicals has declined from approximately 26.4 percent in 1962 to 18.3 percent in 1972, with indicated further decline to 18.0 percent in the first six months of 1973. During the 1962-1972 period, the shares enjoyed by West Germany and Japan have gained.

The current energy crisis and its resultant adverse impact on the supply of petrochemical feedstock is expected to have a major impact on the viability of this country's chemical industry in the years to come. Among the manufacturing industries, the chemical industry is unique in its heavy reliance on petroleum and petroleum-related materials in that it depends on oil, natural gas, and natural gas liquids for primary feedstocks.

The international economic and trade systems are so intertwined that individual countries cannot hope to be self-sufficient and still prosper. It would be extremely shortsighted to believe that the United States could unilaterally restrict exports of commodities vitally needed by and historically traded to its foreign trading partners without their retaliating by imposing reciprocal constraints in the form of export restrictions on raw materials not available in the United States in addition to imposing import restrictions on U.S. products. The resultant trade and balance of payments deficit and increased unemployment could have a staggering effect on our economy. The effectiveness of the OPEC cartel needs no elaboration. The formation of similar cartels controlling other needed materials would have disastrous effects.

We support, in principle, the concept proposed in Senator Mondale's amendment which would authorize the President to negotiate agreements which hopefully would insure an uninterrupted supply of raw materials, including food, to all who need them. We recommend, however, that the Committee consider providing appropriate direction that such authority be carefully exercised lest it initiate more severe sanctions from nations supplying raw materials.

BASIC AUTHORITY

The atmosphere today is substantially changed from 1962 when the Kennedy Round began serious incubation. The two devaluations of the U.S. dollar and currently unprecedented world-wide demand for chemicals have added new complications.

We were disappointed in the results of the Kennedy Round where tariffs were reduced 50 percent in the chemical sector while we only received a 20 percent reduction from the European Community and the United Kingdom. Consequently, we echo the remarks Senator Long made before this Committee on March 4, 1974 when he indicated he supports open and free trade so long as the United States receives equitable treatment.

During 1973, more than one-half of U.S. chemical imports entered duty free. Approximately another 20 percent were charged with duties equivalent to or less than 5 percent ad valorem, the products on which it is proposed to permit elimination of duties. The remaining nearly 30 percent of 1973 chemical im ports are those that would be most affected under the tariff cutting program to be authorized in this legislation. We propose limiting that authority below the levels proposed in the bill because of the circumstances outlined below.

The chemical industry has been through an extended period of low profitability since 1967. At the very moment when the circumstances began to permit a change, price and profit controls were imposed and have been operative for more than two and one-half years. Meanwhile, there has been an extraordinary rise in demand for many chemical products, demand which the industry has been unable to meet in some instances. This is due in part to the controls and their tendency to discourage some needed expansions in capacity. On top of this essentially domestic economic problem, a crisis in raw material availability developed as the supply of petroleum products became insufficient to meet demands aggravated by the embargo of the Arab nations.

The chemical industry now faces severe feedstock supply questions and a great deal of doubt about the price level at which those supplies available may be obtained. Resolution of the uncertainty surrounding world oil prices is antici pated at levels significantly above where they were a year ago.

The United States depends upon imported oil to a far lesser extent than do Japan and our European trading partners. In all instances, petroleum requirements are bound to affect seriously the balance of payments position for those

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who must purchase on the world market. Because of foreign exchange pressures, our trading partners must look to some combination of substantial export expansion and diminishing of imports. In the case of exports, this could easily lead to appreciable subsidization. In the case of imports, they may have no alternative to increasing restrictions thereon. Even before this crisis arose, our foreign trading partners were substantially dependent upon export sales. Therefore, the increasing exchange burden of future oil purchases can only emphasize the increased threat of subsidized exports. As the Congress considers this legislation to diminish trade barriers, it must be borne in mind that the United States would be seeking long-term commitments of relaxation in trade barriers, relaxations which our trading partners may be unable to meet.

Accordingly, we believe that the authority to reduce duties above 5 percent ad valorem should be limited to 50 percent. Duties over 25 percent ad valorem should not be reduced below 15 percent ad valorem. The breadth of authority within these limits above is substantial and should provide U.S. negotiators with ample discretion to negotiate successfully.

ADVICE FROM INDUSTRY

The public hearing procedures to develop advice within the government are quite helpful and necessary as far as they go. The Tariff Commission, the Trade Information Committee of the Office of the Spceial Trade Representative, and the efforts of the various Administrative agencies actively encourage views from the interested public. H.R. 10710 recognizes the importance of these procedures in sections 131-135. No better source of advice exists than that available from informed industry experts on the likely impact of proposed actions on their industry. We respectfully urge that this Committee retain section 135 which requires industry consultation throughout the entire negotiations procedure wherever such advice could be appropriately given. We believe that had this kind of liaison existed during the Kennedy Round, the chemical sector might have received more equitable treatment. We cannot stress too much how importantly we regard the utilization of this kind of advice.

Representatives of the chemical industry over the past several years have actively proposed a positive role for industry advisors, with substantial encouragement for the proposal from within the Administration wherever offered. Along with a number of other chemically-related trade associations, we have established an advisory structure for liaison with the Special Trade Representative, Ambassador Eberle, in conjunction with the GATT negotiations. We would endorse any language in the bill that encourages arrangements of this nature, especially in requiring two-way consultation on advice so developed.

CONGRESSIONAL ADVISORS

Section 161 of H.R. 10710 requires the delegation of congressional advisors to trade negotiations. We encourage a formal congressional advisory structure to take an active part in trade policy implementation, reporting on accomplishments to the Congress and recommending on the appropriate method of review for those matters requiring formal congressional attention.

RECIPROCITY WITHIN SECTORS

The inequities surrounding the Kennedy Round 50-20 deal on chemicals point up another matter which we regard as important-the maintenance of reciprocity within sectors during the negotiation process. Although restoration to a level equivalent with former status may not be practicable, nevertheless the repetition of any such patently one-sided arrangements in any sector should be avoided. Naturally, we within the chemical industry have registered complaint regarding such inequity.

As we look back on developments, it is interesting to note that our trading partners managed to establish new barriers to the flow of U.S. farm commodities, with the European Community playing a leading role in this regard. It makes little sense to overpose the products of industry for some illusory or disappearing advantage for agriculture. We recognize that complex trade negotiations cannot be strictly governed by a quid pro quo requirement. However, insofar as is reasonably possible, we urge that reciprocal benefits be sought on a sector-by-sector basis. We believe the House-passed bill deals fairly with this

issue, and we encourage the Committee to build on the appropriate language in section 102 of H.R. 10710 expanding the concept to embrace as much as possible each sector negotiated for tariff as well as nontariff barriers.

NONTARIFF BARRIERS

Section 102 of H.R. 10710 directs the President to seek arrangements for the removal of nontariff barriers. We feel this may be an extremely important issue for many U.S. exports. How nontariff barriers are defined and how broadly this authority may be exercised would determine its effectiveness in removing trade deterring effects. It seems appropriate generally for arrangements negotiated by the President to accomplish nontariff barrier removal, to be subject to prior review by this Committee and also by the Committee on Ways and Means and to subsequent review by Congress.

A major matter of interest to the chemical industry would be the potential elimination of the American Selling Price (ASP) provisions. We believe that elimination of ASP should provide the benzenoid sector with equivalency of protection. Any such agreement should, of course, be subject to the congressional review procedures. Any prospective shift from the present valuation system to that of the Brussels Tariff Nomenclature (BTN) similarly should require affirmative congressional approval. In both these instances of conversion, careful study is required to develop a program providing the necessary equivalency of protection. In the schedule proposed for the forthcoming round of GATT negotiations, there does not appear to be time for a sufficient examination by the Tariff Commission. In the current BTN investigation, haste would serve poorly the interests of those industries whose products are more intricately bound in com. plex tariff rates and classifications.

IMPORT RELIEF

Title II deals with import relief resulting from disruption due to fair foreign competition. MCA agrees with the easing of criteria for determination of eligiblity for import relief. The concept of relief envisioned by the Trade Expansion Act of 1962 has not been adequately tested for effectiveness because of what proved to be extremely limiting criteria determining qualification for relief. We agree that there should be no causative linkage between increased imports and past trade concessions as a required qualification for relief. We also agree that increased imports need not be the "major cause" of serious injury or threat thereof. The "major cause" of injury has been interpreted to mean the single cause greater than all other causes combined. This interpretation is unworkable conceptually and statistically. Its replacement by the criteria of "substantial cause" defined in section 201 as meaning a cause which is important and not less than any other cause will make available the relief provisions of the Act when they are legiti mately required.

We agree that no specified numerical criteria are appropriate for triggering prescribed safeguard actions. Each case is unique in the competitive situation confronted as is the appropriate remedy. Each should be dealt with by a range of options such as provided for in the bill. We feel that under section 201, the Tariff Commission, whenever it reaches an affirmative finding of injury or threat thereof, should be required to make a further investigation as to the reasons for the increased injurious imports.

UNFAIR TRADE PRACTICES

Relief from unfair trade practices that reduce export markets may be expected to become an increasingly important need. An effective remedy for such actions will be difficult to find. Section 252 of the Trade Expansion Act provided authority to deal with these problems. But in the almost twelve years that this authority has been available, it has been used only once in the celebrated "chicken war." A unilateral authority may not provide the most effective way to resolve inequity. Instead, emphasis must be placed on appropriate international forums such as GATT for the arbitration of unfair trading practices.

To support this international effort, specific authorities should be available to the President, and we endorse the proposals included in section 301. We espe rially commend the new direction to confront and deal with unfair practices of trading countries that place our trading position in third country markets at a disadvantage.

Both congressional and industry liaison with the executive branch authorities will be an important part of any effective program to deal with this area of trade discrimination.

ANTIDUMPING AND COUNTERVAILING

We support the procedural changes to the Antidumping Act in chapter 2 of title III and the strengthening of the countervailing duty statute in chapter 3. We also support section 341's proposed limitation of section 337 of the Tariff Act of 1930 to patent infringement cases with an appropriate review forum in the Court of Customs and Patent Appeals.

BALANCE OF PAYMENTS AUTHORITY

Despite two devaluations in the last several years, the U.S. dollar remains in an uncertain condition. Department of Commerce reports have indicated an optimistic turnaround in the U.S. foreign trade statistics for late 1973, and more time will be needed to see the solution of our national payments problems as well as to meet expanded petroleum requirements at elevated price levels. This state of affairs highlights the need for the President to have standby emergency authority to deal with payments crises where action in the trade sector may be in order. This is favorably provided for in section 122 in terms limiting the use of this authority as well as requiring continuing review to determine when a crisis has passed.

"HOUSEKEEPING" AND COMPENSATION AUTHORITY

In the administration of any continuing trade program, there are bound to be Individual agreement problems cropping up from time to time which will require minor negotiating adjustments. It makes little sense to allow such to lead to major upheavals or realignments because of the absence of some standby authority for dealing with them. Chapter 2 of title I addresses this problem by providing the President with a continuing discretion for such adjustments. Section 124 delegates to the President authority to decrease duties by 30 percent for dealing with import relief problems. Consistent with the dimensions of "housekeeping" authority sought in section 125, we believe a 20 percent limit on such reductions to be adequate.

INFLATION AUTHORITY

In section 123, H.R. 10710 proposed temporary reduction of import barriers by the President to restrain inflation. While an action under this section is limited to not more than 150 days' duration, it could affect up to 30 percent of U.S. imports. Despite the bill's admonition that the President take such actions only where they would not be harmful to some segment of the economy or to the national security, the potential impact of this authority could be substantial. This legislation is designed to promote U.S. trade, and insertion of this nontrade matter appears inappropriate. Accordingly, we recommend deletion of section 123. We recognize the importance of dealing with inflation, but believe that it should be taken up as a matter of separate concern by this Committee.

TITLE I. CHAPTER 3-HEARINGS AND ADVICE

Section 133 requires the President to hold public hearings for actions under chapter 1 and sections 124 and 125 in this title. Absent is any requirement for hearings on proposed actions under the balance of payments authority in section 122 or the inflation authority of section 123. We hope that section 123 will be deleted. In any event, we do recommend that not only should hearings be held for all actions proposed under this title, but that the requirements for hearings and advice be the same as required in chapter 3 of title I.

EAST-WEST TRADE

H.R. 10710 proposes in title IV to authorize the President to extend mostfavored-nation treatment to countries now denied same if, in his judgment, such action would promote the purposes of the Act and serve the national interest. Utilization of this authority could make the products of Communist nations eligible for the lower most-favored-nation tariffs on entry into the United States. We in the chemical industry can visualize significant market opportunities this would provide for the export of our products. We believe that the attention the

President must give national security considerations, together with the market disruption provisions of section 405, should adequately deal with any real problems domestic producers might encounter due to the domestic market impact of goods from those countries. Section 405 may be needed since the general provisions for relief from import disruptions might not be adequate in dealing with the state trading organizations of the socialized nations.

However, the House has decided to preclude utilizaton of this title for those countries which restrict the emigration of their citizens. We feel this issue merits individual attention outside the scope of any trade legislation.

PREFERENCES FOR LESS DEVELOPED COUNTRIES

The generalized system of preferences for less developed countries as proposed in title V merits support. We agree that the extension of such preferences should be contingent upon a comparable effort on the part of other major developed countries, and that receipient countries must not accord preferential treatment to the products of other developed countries. We agree with the exclusion from preference eligibility of sensitive products which are subject to import relief actions as provided in section 203 of this Act and in section 351 of the Trade Expansion Act of 1972. The ten-year commitment of section 505(a) appears excessive. Preferable would be a three-year commitment similar to the reduced tariff commitments under the General Agreement with extension thereafter automatic unless cancelled upon six months' notice. Instead of a Presidential review and report to the Congress after five years, the President should report to the Congress after three years, and perhaps annually thereafter, on the effect of these preferences on the domestic economy and on the degree to which our trading partners are adhering to their obligations in this area of joint international cooperation.

Senator CURTIS. Our next witness is Mr. Vaughn Border of Outboard Marine Corporation.

Mr. Border, we welcome you here. Will you give the reporter your full name and where you reside and your business connection, and then we shall have your two associates identify themselves.

STATEMENT OF VAUGHN E. BORDER, DIRECTOR OF MARKETING, OUTBOARD MARINE CORP., ACCOMPANIED BY CHARLES O. VERRILL AND BART S. FISHER, COUNSEL

Mr. BORDER. My name is Vaughn Border. I am director of marketing of OMC Lincoln, a division of Outboard Marine Corp. We are manufacturers of Cushman golf cars.

Mr. VERRILL. My name is Charles Verrill with the firm of Batten, Boggs, and Blow. We are counsel to Outboard Marine Corp.

Mr. FISHER. My name is Bart Fisher. I am also with Batten, Boggs, and Blow.

Senator CURTIS. Mr. Border, we in Nebraska are very happy with the long record of Cushman Motor Works and products which appear in all parts of the United States, and are in sympathy with the problems they face in the field of international trade. We are very happy to have you here to present your statement.

You may proceed.

Mr. BORDER. Thank you, Senator Curtis. We appreciate your

concern.

I would like to state at the outset that Outboard Marine Corp., in essence, supports the trade bill, and that we are in favor of such legislation. We do, however, in the golf car industry have a peculiar problem which we would like to explain to you and answer any questions you may have.