PREPARED TESTIMONY OF VAUGHN BORDER, DIRECTOR OF MARKETING, Mr Chairman: My name is Vaughn Border. I am Director of Marketing for Cushman vehicles and am responsible for the sale of golf carts that are produced by Outboard Marine Corporation. We generally support the Trade Reform Act of 1973 and regard it as constructive legislation which will hopefully lead to a more open world economy. In my comments today, I would like to draw your attention to a practical problem that arises form trade with the state-controlled communist economies, the so-called non-market economy countries. Specifically, in training with those non-market economy countries, there is a potential for sales below fair market value in this country from which American manufacturers are not adequately protected by either the existing antidumping laws or the legislation pending before you. This problem is of particular concern to us at this time because the Trade Reform Act would give the President authority to grant many nonmarket economy countries Most-Favored-Nation (MFN) treatment which all such countries except Poland and Yugoslavia are now denied. The grant of MFN treatment to non-market economies such as the U.S.S.R., Czechoslovakia and Hungary will expand East-West trade and therefore increase the possibility of dumping from such countries. We are presently in the process of preparing and presenting to the Treasury Department a complaint alleging that golf carts manufactured in Poland are being sold in this country at "less than fair value." The problem which we confront in this action, however, is that there is no real market for golf carts in the world other than the United States and the only two significant golf carts manufacturing countries are the United States and Poland. Accordingly, the normal procedures used by the Treasury Department to ascertain whether or not "less than fair value" sales, or dumping, are occurring do not apply. The price that is generally used is the internal or external sales price in a noncontrolled economy where a similar product is produced. As I have just stated, however, we are in the position of having no other uncontrolled economy that produces significant numbers of golf carts to use as a referent. We are urging the Treasury Department to calculate a constructed value for golf carts in Poland, underthe present antidumping law, but this is an uncharted area and precedents are lacking. Nevertheless the problem is real. Let me give you an example of what has occurred under the present statutory framework. There has been a devastating market influx of golf carts from Poland into the United States in recent years. In 1970 no electric golf carts from Poland were exported to the United States. By 1973, at outrageously low prices that we believe are at "less than fair value," or dumbping prices, 6,087 golf carts were imported into the United States, accounting for 15 percent of the U.S. electric golf carts market. In other words, we believe that Poland has taken over 15 percent of the U.S. electric golf cart market through dumping. However, we are in a dilemma because antidumping laws does not clearly address the situation where a communist country and the United States are the only producing countries and the United States is the only true market in the world for the product in question. In order to improve the Trade Reform Act of 1973, and the administration of East-West trade relations after the enactment of the Act, we propose that three approaches to our trading problems with controlled economies be considered: 1. The first avenue of relief that might be considered when a controlled economy and the United States are the only producers of a product marketed solely in the United States and dumping is alleged, would be to base the home market price on the cost of producing the product involved in the United States plus the standard profit specified in the constructed value provisions of the antidumping law. This approach is suggested in S. 2374, introduced by Senator Curtis on September 5, 1973. Under the Curtis bill when the evidence is not available upon which to base a "foreign market value," the cost of producing a similar article at its place of manufacture in the United States would be ascertained by the Secretary of the Treasury, and would be used as the "value" for the purpose of calculating the antidumping duty. We feel that use of U.S. costs is justified in these circumstances simply because no other price is available unless a constructed value is calculated for the item in the communist country itself. 2. The second approach would be to provide the Department of Treasury with explicit authority to calculate a constructed value in the communist country itself when there is no true market for the product involved other than the United States. We believe that this should be an amendment to the Trade Reform Act of 1973, and would fit logically under the technical amendments to the Antidumping Act of 1921 in the trade bill. 3. The third approach that we suggest is consistent with the prior two and would greately strengthen the trade bill. We propose that the portion of Title IV that deals with "market disruption" as a result of community country imports be strengthened substantially. First, the system should apply to all non-market economies, and not just those granted MFN treatment under Title IV of the trade bill. Poland and Yugoslavia, which have already been given MFN treatment, would be exempted from the trade bill's East-West Trade "safeguard" system as it is presently written. This would obviously be inequitable, and we feel that this was merely a technical drafting mistake, but one that is serious and should be corrected. Our second criticism of the East-West Trade Safeguard system deals with the criteria of injury to domestic interests. Section 405 of the trade bill provides that the Tariff Commission can propose remedies if it finds both market disruption and material injury from communist country imports. Market disruption would be found to exist when imports are substantial, are increasing rapidly both absolutely and as a proportion of total domestic consumption, and are offered at prices substantially below those of comparable domestic articles. We believe that the market disruption test alone is sufficient, and that the "material injury" test is redundant and unnecessary. Accordingly the "material injury" test should be eliminated from the bill. If the test of "material injury" is not removed from the bill, U.S. industries might be in the position of not being able to obtain needed relief even if market disruption was proved if "material injury" is administratively defined in a way that is impossible to prove. As this Committee will recall, dumping cases in years past were very difficult to prove because the Tariff Commission applied a material injury test that has since been discarded. Therefore if the injury test is retained the injury required to be proved should be de minimis. As an alternative the concept of market disruption could be eliminated and the concept of "injury" retained. That injury, as stated above, should be de minimis in nature, and not material. Mr. Chairman, we have tried to address our comments to the trade bill itself, proposing changes to provide for the type of economic competition that I have described and which will be increased after Most-Favored-Nation treatment is granted to more non-market economies. Our country must have fair trade as well as free trade. Thank you very much for listening to my remarks today. I will be glad to try to answer any questions you might have. OMC-LINCOLN, Hon. ROBERT W. PACKWOOD, U.S. Senate, 6327 Dirksen Senate Office Building, Washington, D.C. DEAR SENATOR PACKWOOD: Please accept my thanks for taking time from your busy schedule to listen to my testimony regarding the dumping problem we are presently experiencing from Polish golf cars in the United States. You questioned an apparent discrepancy in my figures, and, at the moment, I couldn't account for it. Subsequent investigation cleared it up quickly, however. Polish golf cars presently constitute 15% of all the electric golf cars in the United States. We analyzed our statistics in that matter because the Polish presently manufacture only an electric golf car. We hear rumors, however, that they are presently working on a direct copy of a U.S. manufactured gasolinepowered golf car and that they will have it on the market within a few months. Whether they produce a gasoline-power golf car or not, we feel this unfair foreign competition is having a devastating effect on the domestic golf car manufacturing market, Senator Packwood, and it will undoubtedly get much worse rapidly, unless some legislative protection is provided by the Trade Bill. We support equitable world commerce, but certain safeguards from unconscionably low-priced foreign products must be provided. Attached is a complete set of figures for new golf car sales, both gasoline- and electric-powered for 1973 and unit and percent share-of-market figures for the Polish import. If you have any further questions, I will be happy to try to answer them. Thank you again, Senator Packwood, for your interest. Sincerely, VAUGHN E. BORDER, Source: National Golf Foundation, Department of Commerce-Polish golf car information. [Whereupon, at 11:40 a.m., the hearing recessed until 10 a.m., Fri day, April 29.] TRADE REFORM ACT OF 1973 FRIDAY, MARCH 29, 1974 U.S. SENATE, COMMITTEE ON FINANCE, Washington, D.C. The committee met, pursuant to recess, at 10 a.m. in room 2221, Dirksen Senate Office Building, the Honorable Vance Hartke presiding. Present: Senators Long (chairman), Hartke, Ribicoff, Packwood, and Roth. Senator HARTKE. Good morning. Today, we are going to resume hearings on H.R. 10710, the Trade Reform Act. Our first witness will be I. W. Abel, President of the United Steelworkers of America. Mr. Abel is appearing as head of his union and also on behalf of the Industrial Union Department of the AFL-CIO. Mr. Abel, the 5-minute rule will be in effect here in the first round. of interrogation. Let me say to you that I have a conflict this morning, as I have told you personally. I am chairman of the Veterans' Affairs Committee and I have hearings scheduled to begin immediately upstairs. We have a whole room full of people up there and I have mixed emotions. On the one hand, I want to be here listening to your testimony because you have been such a staunch supporter of trade principles which I think are very important and I support myself. On the other hand, I think that it is vital that my Veterans' Affairs Committee prod this administration into giving something other than rhetoric to the veterans of the Vietnam war. So, Mr. Abel, if you will proceed, we will be glad to hear from you. STATEMENT OF I. W. ABEL, PRESIDENT, UNITED STEELWORKERS OF AMERICA, AFL-CIO, ACCOMPANIED BY JACOB CLAYMAN, SECRETARY-TREASURER, INDUSTRIAL UNION DEPARTMENT AFL-CIO Mr. ABEL. Thank you, Mr. Chairman. I want to point out that accompanying me this morning is Mr. Jacob Clayman, secretarytreasurer of the industrial union department. I want you to know that we appreciate this opportunity to appear before this committee and express our views on this trade bill. Mr. Chairman, the development of an effective and constructive foreign trade policy is one of the most important and most difficult issues facing the Nation and the Congress today. I am grateful to this committee for the opportunity to testify today on this important sub(1329) ject on behalf of the United Steel workers of America, AFL-CIO, and the industrial union department of the AFL-CIO. I am particularly pleased because I think that in recent months the position of the labor movement in regard to foreign trade policy has often been misunderstood, or misinterpreted. We are not isolationists. We are certainly not against foreign trade, nor are we against international cooperation in the economic sphere as well as in the political arena. In the IUD, however, our first concern is to advance the interest of working men and women-and particularly to advance the interests of working men and women in the United States. For us, this means a primary emphasis on jobs and job security, but it also means that we are concerned with overall economic and social objectives in the United States. Our concern with foreign trade policy is directly related to our concern with the economic and social health of the United States. Therefore, we cannot support policies which seem to us to be detrimental to the economic and social well-being of this country even though they are wrapped in red, white, and blue bunting, or are tagged with the outworn labels and code words of another era. To a large extent, this is what has happened. en For the past 3 years or more we have consistently argued that our present foreign trade policy is not helping us to build a strong and healthy domestic economy, but in fact has had the opposite effect. Jobs are being lost to imports. U.S. industry is being couraged to invest overseas rather than in the United States because of tax incentives or other nation's discriminator trade practices, or both. The erosion of the U.S. industrial base continues. And our jobs, income, and even the quality of our life seems to be more and more dependent on the profit-motivated decisions of increasingly powerful multinational corporations whose activities are not subject to any kind of control. Under these circumstances, we believe our concern is justified. But I would like to speak to the legislation which you have before you. The Trade Reform Act is claimed by its supporters to provide the answers to the chief trade problems facing the United States. It is supposed to deal with the issues involving the elimination of barriers to the free movement of U.S. products in world trade, and the trade related disruptions that have severely affected some industries and workers. But that claim is a delusion. The Trade Reform Act does not provide the answers because it fails to attack the basic causes. In addition, since the time when the legislation was drafted and developed, the world of international trade and finance has been hit by a tidal wave of change-change which the present legislative proposal scarcely recognizes. As a result, the legislation, which was already inadequate, is now obsolete. We are left with a situation where the basic factors which lie behind our trade problems remain untouched the problems remain unresolved. U.S. products are still subject to discriminatory trade practices by other nations. These include such practices as the imposition of nontariff barriers, special tax levies, export subsidies, and preferential trading blocs. As a result, U.S. exports have been hampered, and U.S. companies acting in |