U.S. trade problems grow out of many causes. The most serious among them are the proliferation of the nontariff and other barriers which work to discriminate against U.S. goods in the world markets; the U.S. tax laws which make it more profitable for our companies to build plants and factories overseas than at home; the phenomenal development of the multinationals which operate freely throughout most of the world; and most recently, the fast changing relationships between nations which produce raw materials and those industrial countries which use them. Indeed the oil crunch makes its painfully clear that all of these problems will probably worsen, particularly since the industrial countries-our major competitors in the world markets will have to increase their own exports in order to earn the foreign exchange necessary to pay the higher prices for both oil and other raw materials. As a result, not only will there be increased pressure from imports on the United States and further pressure on U.S. jobs, but we can also look forward to increasing resistance to U.S. products in the world market, particularly, Mr. Chairman, in the European market for example, or in Japan. None of these problems is dealt with by the Trade Reform Act. At best, the proposed bill is inadequate medication for a misdiagnosed ailment. In the present situation, it is nothing more than quackery. What we need, Mr. Chairman, is a new look and a fresh start to meet the problems that face all of us in this country in the field of foreign trade.

Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Abel, you have made a very fine statement here. today. Between the statement that you have made and the statement that George Meany has made, a very strong case has been made against this bill, and we are going to have to reconsider our views about some of these matters.

Basically, what you are saying, as I see it, is that we had a lot of policies after World War II where aid and trade were regarded as being all the same thing.

Mr. ABEL. Right.

The CHAIRMAN. Those policies, in some instances, were developed for the benefit of the other guy. Now we are getting to the point where if we continue them in that fashion, we are going to be a bankrupt country. It is unfortunate that this bill does not appear to face up to that problem. That is what you are saying in your statement, basically. Mr. ABEL. Very much, sir.

The CHAIRMAN. We have done so much to help the other guy that we are either going to have to ask the other guy to help us or else we are going to have to have to do a lot more helping ourselves.

Mr. ABEL. Right.

Mr. Chairman, I would like to point out that the basic steel industry is one example.

The CHAIRMAN. Excuse me, Mr. Abel, I am just trying to find out why we are having an energy crisis in this room. We cannot seem to get any heat up at all.

Mr. CLAYMAN. They are putting some pressure on the Senate.

The CHAIRMAN. I really did not plan this. It was not my purpose to try to freeze you out, Mr. Abel. They are freezing us all out.

Mr. ABEL. I wanted to make an observation, Mr. Chairman, to the committee.

The CHAIRMAN. The coal miners are not on strike these days, are they?

Mr. ABEL. In our basic steel industry, I would remind you that it was primarily or largely responsible for our ability to meet the demands of the free world during World War II. It was the U.S. steel industry that provided the steel to build our industries, our ships, our tanks, all of the things necessary to meet the Nazi attacks, not only for ourselves but for our allies. And we were the real producing power in steel at that time. At the end of the war, the Japanese produced 5 million tons of steel. That was their capacity. Today, they have a capacity not only equal to ours in productivity but a much more modern basic steel industry.

In 1973, as an example, there was imported into our domestic market 19.300,000 tons of foreign-made steel, which represents the jobs of 108,000 steel workers. Now it has been reduced since that time to a little over 15 million tons last year. But again, that is almost, you see, 20 percent of our domestic capacity and market that has gone.

Not only have we lost the market, we have lost the jobs, but there is less inducement to invest and modernize the American steel industry today. If we ever face a world situation again, and God forbid that we do, that confronted us at the outset of World War II, this country can be in a very serious situation.

The CHAIRMAN. I am going to ask Senator Roth to take charge. I have been called to the telephone for a moment.

Senator ROTH [presiding]. Thank you, Mr. Chairman.

I have long awaited the opportunity of chairing this committee. I think we shall be able to get a lot of action this morning.

I want to express my appreciation to you, Mr. Abel, for your appearing and for your very fine statement. I would like to ask you first of all, as I understand your position, you do favor trade?

Mr. ABEL. Correct, sir.

Senator ROTH. As long as it is in the U.S. interest?
Mr. ABEL. Yes.

Senator ROTH. One of the things that has interested me, both Mr. Meany and particularly many of the management representatives who have been here seem to have the feeling that in our negiatations in the past, the primary purpose of our negotiators has not been to promote the interests of this country but to promote world trade. Do you consider that a fair assessment?

Mr. ABEL. I think very definitely, and using a misnomer, in my opinion, in using the term "free trade" we like to say that we are interested in fair trade. You just do not have free trade when our markets are opened to anybody that wants to ship in but we are forbidden for various reasons to trade in other countries or where we, as a capitalistic system or free enterprise system, if you will, have to compete with industries that are from socialized countries or industries that are subsidized by their governments. There is no such things as fair trade under those conditions.

Senator ROTH. I shall be frank with you, I am very much interested in promoting trade, but I still share this concern that has been expressed by a number of people. I think that this has been a problem with our negotiators in past.

Going down your testimony a little bit, one of the interesting points you raise is about the lack of adequate information, adequate data. As one who has been quite critical about the lack of adequate information on the oil companies, I think you make a very valid point. I think there are some industries where trade has actually helped increase jobs in this country, as I understand it. For example, I would say we had the chemical people here yesterday and probably that is one industry where the trade picture has meant more jobs in America not less. But others, such as steel, the contrary has been true. So I take it that what you are suggestion is that the Government ought to have more adequate information, that is collated and collected by itself

Mr. ABEL. That is correct.

Senator ROTH [continuing]. As a means of securing it.

Do you have any suggestions as to how this information should be secured? One of the problems I have found is that in the area of the oil companies, whether we like it or not, you have few experts on energy outside of the oil companies, so that you are almost forced to depend in large measure-although you could make some independent audits on their figures. How do you suggest that we proceed? Mr. ABEL. Well, I think one of the reasons we have this is we have just more or less relied on industry to operate their own business and develop their own facts and statistics to justify their operation, their expansion, and their relationships. So long as we have operated on this free enterprise theory, we have had the feeling that the less Government is involved, the better.

Well, it is proving now and has certainly been driven home with the energy crisis that this is not necessarily the proper thing or good for the country. So I think Congress itself has to spend some time analyzing this problem and the magnitude of it, and then developing ways to do it as we have done it in many instances in the Department of Labor.

The Bureau of Labor Statistics is an example. I think the Commerce Department and the State Department have some similar agencies whose responsibility it would be to compile these facts and this information. The Government then would be able to observe and somewhat oversee, if you please, the activities of business, not only domestically but in their foreign aspects.

Senator ROTH. You have made a number of suggestions with respect to tax treatment. One of the areas is the treatment of tax credits for foreign taxes. Would you agree that perhaps the situation with respect to oil companies is somewhat different than in other areas because of the fact that companies are negotiating directly with the oil producing countries themselves so that they are in a better position to exert influence on, for example, whether it is called a royalty or a tax, whereas generally speaking, the companies abroad probably do not have the opportunity to influence the nature of what they pay abroad?

Mr. ABEL. Well, I want first of all to plead guilty to the fact that I am not a tax expert. But second

Senator ROTH. I join you on that.

Mr. ABEL. Second, I think that the treatment that we give to the taxes or royalties or whatever they might be termed that companies pay other governments can be regulated here. As an example, the onefor-one tax credit offset that we permit American multinational corporations rather than reducing foreign taxes as a cost of doing business. That is the sort of thing that should be and could be corrected. Senator ROTH. Would you agree that it is in our Nation's interests to promote not only trade but perhaps investments abroad, so long as it is not moving jobs from here to other countries?

Mr. ABEL. Yes.

Senator ROTH. And I also feel very strongly the need of a manufacturing base here.

Mr. ABEL. And we are not against foreign imports, even that of manufactured goods, as long as we have some regulation and control so that it is not used to the detriment of the people of this country. There may well be times when we need the import of manufactured goods, too.

Senator ROTH. Let me play the devil's advocate for a moment, if I might, from the consumer's standpoint, and labor, as well as everybody else, are consumers as well as workers. One of the concerns, or one of the benefits, of trade is that, presumably, there are some countries who are in a better position to manufacture certain products than we are. I think we are all in agreement that this should not be based upon cheap labor and we are concerned about that. But what do you say to the consumer, why should we ask the consumer-let me put it that way-to pay higher prices?

Mr. ABEL. I think there may be various reasons. One, of course, and the overriding one, I think, is the maintenance of an American standard of life. Now, we can all compete, and I think there is no. question that the ultimate of so-called competition and free enterprise is self-destruction. If we wanted to have workers in this country work for 10 cents or 12 cents an hour as they do in Taiwan and otherplaces, we can compete with any country in the world in any kind. of industry, providing we adopt and accept their standards of life. We do not believe the American people want to do that. So as a result, we do have to pay higher prices for different things than we could probably get them from other countries.

Senator ROTH. If we adopted a harder bargaining stance, as you were talking about earlier, do you think that by doing a better job there, we could create new opportunities in international trade for the country?

Mr. ABEL. I do not think there is any question about it. I think our trade decisions perhaps have been influenced more by political considerations than they have economic considerations. There should be more consideration given to the economic aspects of it.

Mr. CLAYMAN. Senator Roth, I would like to respond quickly to your question relating to the consumer.

Senator ROTH. I think it is an important question, particularly with the problems we are having with inflation today.

Mr. CLAYMAN. There is a notion abroad that if we permit foreign merchandise, goods, to come to our shores, without any restraints,

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somehow, this will redound to the benefit of the ordinary consumer. I must say that that is very much a myth.

For example, Hong Kong silk-remember those lovely Hong Kong suits? And they were cheaper, and men rushed to them, women rushed to them. But as soon as they penetrated the American market, those prices became the same prices as the normal American trade price standard and this is true virtually of every item that comes to our shores, whether it is electronics or what have you. In the first instance, those companies offer some inducements; but when penetration has been made, the inducements dissolve.

So I think that any careful look at this question, a search of the basic facts, will demonstrate that the ordinary consumer in America does not find and get advantage from unrestrained trade from abroad. And this hard fact may very well deserve attention on the part of this committee.

Mr. ABEL. I think one more example that I live with on this in steel again. Three years ago, foreign steel was being sold in this country up to $100 less than domestic steel. Today, because there is a better market and because the American steel industry is still under price controls, foreign steel is receiving $100 to $150 a ton more than domestic-made steel. So you see, it is a regulated proposition again.

We have maintained all along that the Japanese will undersell the American steel market regardless. You can reduce prices and they will keep lowering it. And the same with-well Britain is an example. It is a subsidized industry so it makes no difference to them whether they make a profit or not.

Senator ROTH. One of the reasons given for our problems with inflation is, of course, shortages, not only in the area of agricultural products, but fertilizers and many other areas of manufactured products as well. The suggestion has been made that it might be desirable at this time to increase production capacity by providing special incentives. I think it was the chairman of the House Ways and Means Committee who suggested that perhaps we should provide a 5-year writeoff for new capital expansion programs. This would be a matter, it seems to me, of considerable interest to the steel industry.

At least one of--and I am no expert in this area, either-one of our concerns has been our plants are not as modernly equipped as those in Japan and other parts of the world. It has been suggested that this would not only come about by increasing capacity and, of course, increasing the supply, would help bring down prices, but it would also take up any slack in unemployment. I wonder if you have any comments on that proposal?

Mr. ABEL. Yes. We feel very definitely there should be consideration in these fields. We have in the past, as you probably are aware, supported the 7 percent accelerated depreciation, investment tax credit, and particularly, again, I have to say, being from steel, that steel has a real peculiar problem and a serious problem in the fact that it is a heavy capital industry. You do not build a steel mill for $1 million. It now runs $500 million to $1 billion to build a modern integrated steel mill. This is just an awful lot of capital to raise and to invest and, when there is the danger of foreign competition taking all the business from you, it is hard to raise that kind of money. I really think that our tax people are going to have to give consideration to special problems such as the steel industry.