Today, twelve years later, it is clear not only that the U.S. exports its technology almost as fast as it is developed, but that we no longer export more than we import. Moreover, the availability of high technology jobs to take up the slack is seriously jeopardized as the nation's economy shifts increasingly to the provision of services instead of the production of goods. Experience is a good teacher, and the labor movement has learned its lessons. There is no reason to continue a wrong policy just for the sake of consistency.

Adjustment assistance is the wrong policy. And as long as people continue to look to adjustment assistance for practical solutions, it will be part of the problem.

THE U.S. BRAIN DRAIN

EXPORTS OF TECHNOLOGY COST JOBS

American businessmen are understandably cautions about giving away their trade secrets to competing businessmen. Their profits, in the accepted success formula of free enterprise, are based on their ability to turn out a better and less expensive product than their rivals.

But where these same businessmen may jealously guard their industrial processes from their U.S. counterparts, this reluctance to share technological knowledge does not apply when it comes to providing trade secrets to business operations abroad. Exporting of U.S. technology has become an accepted and highlyprofitable practice among American-based companies. The recipients are either foreign producers or foreign affiliates of the U.S. multinational companies operating abroad.

Either way, the U.S. company gains a fat profit through direct sale or license of patents of industrial procedures, or the sharing of business expertise, to foreign companies or its own affiliated companies. The U.S. company profits either from fees for the technology it furnishes or from the products produced abroad by that technology.

The practice of selling technological knowledge can be of benefit to consumers of the products developed by the new technology. Research and development, on whatever side of the ocean it is successfully processed, can add to the well-being of citizens of any nation that shares in its fruits. The U.S. is no exception.

To be sure, the United States has shared the benefits of such foreign technology as the jet engine, the Wankel rotary engine, insulin and penicillin, magnetic tape, and polyethylene.

Obviously, it would not be in the best interests of the United States to put an embargo on the transfer of technology. But it should be a two-way street.

To be beneficial, the exchange should be relatively equal. This is far from the case today. The export of technology from the United States is so far out of balance with incoming technology that it is virtually a one-way street.

The consequence of this outpouring of U.S. technology is an expansion of foreign-produced goods utilizing U.S.-developed techniques. This foreign expansion is often accompanied by a curb on U.S. production and facilities.

The end result is the loss of work opportunities in the United States and developing unemployment among U.S. workers. This has been the trend since the 1960's and it is ever-widening.

The International Economic Report of the President in 1973 detailed the uneven technological flow. Measuring the transfer of technology by the royalty and license fee transfer payments, the report shows the income to U.S. companies "has consistently and widely outstripped the payments by U.S. companies to foreign firms."

LITTLE TECHNOLOGY IS IMPORTED

Between 1960 and 1971, U.S. firms received almost $20 billion in payments. Of this total, U.S. multi-nationals received $15.2 billion in royalty and fee payments from firms with which they were affiliated. The remainder of the $20 billion was collected from independent foreign producers.

Technology coming in from abroad was only one-tenth of this amount, or less than $2 billion. And the gap is growing. The President's report notes that for 1972 alone, "the net royalty and fee earnings were in surplus by $2.8 billion," with that much more in technology leaving the U.S., compared to what was coming in.

While U.S. multinationals were registering sizable financial gain from the sale of technology, the process has proved damaging to this nation's industrial leadership and to the employment prospects of its workers.

The techniques that are sent abroad are funneled into the productive channels of other nations. The transferred technology helps to boost the productivity of foreign companies and the products that result end up in worldwide markets in competition with U.S. goods.

American workers are the victims of this technological sale. They have lost their jobs to foreign production sources that use U.S.-developed technology. They have been left stranded by the U.S. corporations that once utilized their services but now find the benefits that go with foreign production more in keeping with their search for profits.

They have assured that this foreign production will be effectively competitive by furnishing foreign plants with the technology developed in the United States. And they have collected a price for this technology, despite the cost to U.S. employment.

The practice of exporting technological developments has been growing since the 1960's. In 1960, fees and royalties paid for U.S. technology amounted to $840 million. By 1972, revenues from this source had increased to $3 billion. In the year 1968 alone, some 800 corporations reported income from royalties and license fees paid by independent foreign companies while another 900 corporations reported similar income from their own foreign branches or subsidiaries.

The expanded technological transfer has helped to create a mushrooming of manufactured imports. As the outflow of technology grew, so did the import of a wide variety of products that had been manufactured primarily in the United States. Imports of steel, autos, machinery, electrical products and communications equipment were added to these products already filling the ship holdsthe imported shoes, textiles, clothing, glass and leather goods.

THE CORPORATION BENEFITS SEVERAL WAYS

Today, the export of technology is enveloping increasingly sophisticated equipment. Within the aerospace industry, some of the latest innovations in air and space technology have been made available to foreign markets almost from the time they left the drawing boards of the U.S. engineers.

And when the U.S. multinationals collect their technological fees, they pocket profits from sale of a product that was financed in good part by U.S. taxpayers. The government supports research and development in the aerospace industry to the tune of billions of dollars. The product that results reverts to the exclusive domain of the U.S. corporation, which first collects profits from production within this country, then collects additional profits from aboard when the technology is sold.

Business Week magazine recently reported on developing technological exchanges between U.S. aerospace firms and the Soviet Union. It reports on concerns expressed by Pentagon officials over the effort by these aerospace companies to sell goods and technology that have military as well as civilian application. Discussions between Soviet leaders and U.S. firms have included a sales range from computers and communications to shipbuilding and aircraft. "What the Soviets really want to buy, apprehensive Pentagon spokesmen claim, is not planes but the knowledge that would allow them to build their own production facilities-complete with all the systems and quality control that are the hallmarks of U.S. defense plants." Business Week reports.

Defense Department officials are concerned about the military aspects of the technological transfers. For aerospace industry workers, the implications of trading away technological and production knowhow are obvious: the U.S. would not be the source of these products that would be produced in foreign countries, and the need for aerospace workers would be further diminished. These new technological trade discussions with the Soviet are an extension of already-existing agreements between that nation and U.S. multinationals. As an example, General Electric Co. last year worked out an accord for the mutual exchange of technology with the Soviet Union, leading to the licensing arrangements for the manufacture of GE products in that nation.

Nor is the shipment of aerospace technology abroad new to this nation's trade patterns. Last year, the AFL-CIO reported on the sale by the McDonnell-Douglas

Corporation of the Thor-Delta launch rocket and its entire missile launch system to Japan. This system, considered to be the nation's most dependable launch unit, was developed from millions of dollars in research paid for by U.S. taxpayers. Multinational McDonnell-Douglas was due to pocket the entire profit from the sale.

U.S. WORKERS LOST JOBS

From this exchange, the Japanese stood to gain a sensitive and critical piece of technology, McDonnell-Douglas stood to gain a high profit and U.S. aerospace workers stood to gain-nothing. In effect, their jobs were sold along with the technology, with no indication that further technology will be developed requiring such highly skilled labor.

These single corporate examples are magnified many-fold in a number of U.S. industries. Among those trading heavily in the licensing and patent sharing arrangements with foreign nations are the electrical-electronics and communications industries. Together they provide a graphic picture of the damage to this nation's economy and the workers in those industries from technological transfer.

Research and development in these industries is a major cost exceeding $2.5 billion annually. This massive expenditure is financed in good part by the U.S. taxpayer, since the U.S. government provides more than half the development funds.

Utilizing these funds, technological development in electronic-electrical devices and systems has become far advanced in the United States, performing in a variety of fields including communications, transport, manufacturing, aerospace, government, banking, retailing, and education. Their influence in the industrial and service processes are widespread.

American firms have readily shared this technology with foreign competitors through licensing arrangements and joint ventures. Their private profit, however, has been made at the expense of this nation's technological advantage. The foreign competitors who have paid for the technology are reaping their own rewards in product development. And so are the U.S. multinationals using the technology to produce abroad.

What the U.S. multinationals have sold in the way of licenses, patents, and through investments in foreign firms has been returned to this country as product imports. These products have taken the place of U.S. produced goods, and the American worker has lost out.

Between 1969 and 1972, this U.S. industry has lost many thousands of jobs. The International Union of Electrical Workers estimates a loss of 450 thousand jobs in the industry sectors where it has members. These included 57,300 jobs in electronic components and accessories; 98,500 in communications equipment; 30,700 in office and computing machines and 17,700 in radio and T.V. receiving equipment.

Japan is one of the biggest competitors to the U.S. in production of electronic products. It is also one of the biggest importers of U.S. technology.

U.S. electronic and communications firms, between 1960 and 1970, made 516 patent licensing agreements in Japan. These included agreements by such multinational firms as RCA (817); GE (80); Western Electric (61) and IBM (28). In that decade, there was a six-fold increase in the number of agreements. In 1970 alone, the returns on technological sales brought U.S. firms an estimated $2.2 billion.

U.S. CAPITAL FOLLOWS TECHNOLOGY

The extent of Japan's use of U.S. technology is cited by Lester Brown of the Overseas Development Council in this book, World Without Borders. He points out that Japan "has the largest technological balance of payments deficit of any country... the United States has the largest surplus . . ." which is another way of saying that Japan buys the most foreign technology, the U.S. sells the most technology.

These same multinationals, when not selling new technology abroad, have gone another route to utilize foreign production processes. Along with technology, they have exported U.S. capital to invest in plant and equipment overseas. Commerce Department figures indicate the growth of plant and investment expenditures abroad. Between 1950 and 1970, such investment increased more than six times, from $12 billion to $78 billion. By the end of 1971, direct investment abroad had climbed to $86 billion and through 1972 it had risen further to

$94 billion, including a one-year record $3.8 billion invested in manufacturing abroad. Indicative of the heavy foreign investment, between 1969 and 1971, the gain in U.S. direct investment abroad was 31.5% while a comparable percentage of U.S. capital spending in the U.S. amounted to only 7.4%.

Using capital from the United States, these foreign production facilities— operated or shared by US. multinationals-produce goods not only in the country where their factory is located but for markets around the world, including the U.S. They are competitive not only with U.S. exports, but in domestic U.S. markets as well.

The International Report of the President put the amount of U.S. foreign investments in manufacturing and assembling at $35.5 billion by the end of 1971. The lure for U.S. investments primarily has been the low-wage labor available in foreign countries. Where the United States could effectively compete in production and marketing processes, the wide disparity in wages along with the other benefits allotted U.S. multinationals have been instrumental in foreign products underselling U.S.-made goods.

Investment by U.S. firms in low-wage countries has also been instrumental in perpetuating these low wages. American firms operating in Japan, Taiwan, Korea, Mexico, Malaysia, Jamaica, the Philippines and elsewhere have encouraged sub-standard wages as part of their willingness to do business in those areas.

Heavy investments by U.S. multinationals in foreign production has helped to force U.S. electronic products off the market. Domestic production of home radios has been almost eliminated. Imports of television sets, first from Japan and now from Taiwan and Mexico, has forced the shutdown of many U.S. production facilities. Taiwan is now the largest exporter of TV sets, having passed Japan two years ago.

Other private employers who have trimmed or closed down U.S. facilities in favor of foreign operations, include Philco-Ford operating in Taiwan and Brazil; Admiral Corporation in Taiwan; Texas Instruments in Hiji, Japan, Kuala Lumpur, Malaysia, and Campinas, Brazil. Other major U.S. electrical manufacturers are also expanding operations in these low-wage areas.

As these U.S. multinationals extend their operations abroad, they withdraw from U.S. production and, as the process increases, the number of American jobs declines.

NO REMEDY IS PROPOSED

This trend has gone unchecked, and despite the damaging impact on U.S. jobs, there is no remedy in the Trade Reform Act before Congress.

Without effective regulation, the productive capacity of this nation will continue to dissipate. The competitive advantages held by the U.S. are increasingly shortlived and the gap in productivity grows narrower as companies producing in foreign lands utilize U.S. technology to catch up and even surpass U.S. companies. Such trends need to be checked to prevent the U.S. from becoming a second class manufacturing nation, with a veritable army of unemployed manufacturing workers.

The solution is to apply the necessary restraints on the outflow of technology and capital. The authority to institute such restraints should be placed in the hands of the executive branch, granting it the discretionary power to limit the export of technology. This could be done through control of licenses to produce a product abroad. A holder of a U.S. patent could be prohibited from producing the patented product abroad or licensing someone else to do so.

The executive branch should also be empowered to regulate the outflow of funds to other countries for private investment by American citizens or corporations. U.S. capital expenditures abroad could be restricted under such authority, if it was determined that such expenditures would lead to employment decreases in the United States.

The export of technology and capital should not be prohibited. There should continue to be an exchange between the U.S. and foreign nations so that the benefits of research and development, along with the necessary investment capital, can be shared by citizens of all nations.

However, this process should not be allowed to continue unrestricted where it damages the productive capacity of the United States and causes continuing losses in employment opportunities for U.S. workers.

TRADE REFORM PROPOSALS

THE ADMINISTRATION LOOKS TO THE PAST

To deal with the problem of international trade, the Administration has proposed a bulky new legislative program, all wrapped up in the so-called Trade Reform Act of 1973. This legislation was passed by the House of Representatives last October. The Senate Finance Committee began public hearings on the bill early in March.

However, even when it was first proposed, the Trade Reform Act was a pale substitute for a constructive trade policy, offering inadequate if not downright improper answers to current problems of international trade and finance. Today the bill is totally obsolete.

The fast-breaking events on the international economic scene, starting with the energy crisis and including wild currency fluctuations, swift changes in national balance of payments accounts, growing shortages of fuel and other vital raw materials and even of foodstuffs, and the troublesome and increasingly severe worldwide inflation have changed the picture so rapidly that in the words of the AFL-CIO Executive Council "a total re-examination of U.S. trade and investment need is in order."

Not only are the provisions of the present bill under consideration by the Senate completely irrelevant to the real problem, but some of these problems are not dealt with at all. Here are some of the inadequate and improper provisions of the Administration's Trade Reform Act:

1. The proposed legislation would give to the President authority to reduce to zero any tariffs currently at 5 percent or below. Any tariff of from 5 to 25 percent could be reduced by three-fifths and any tariffs above 25 percent could be reduced by three-fourths. All of this authority-unchecked by Congress or the publicwould be for five years. The President could also raise tariffs, but no one expects that such authority would be used. It hardly needs saying that this is no time to be giving the President such unrestricted authority.

2. The President would also have authority to reduce nontariff barriers or to convert them into tariffs. Any change in a non-tariff barrier could be vetoed by either House of Congress within ninety days after it was announced. The bill requires the establishment of labor and business advisory groups for each major industry sector where the elimination of nontariff barriers was being considered, font the President could ignore their advice and the chances are that he would. The bill does nothing to tie the reduction of U.S. nontariff barriers to a similar reduction by other nations although it is not the U.S. nontariff barriers which restrict trade-it is the barriers erected by other nations against the U.S. Since nothing is done to reduce those barriers the problems will remain unresolved. 3. The legislation contains provisions which would make it possible for the President to temporarily impose import surcharges or quotas (for 150 days) if necessary to correct persistent balance of payments distortions. Along the same line, he could also reduce duties or ease import quotas on a temporary basis on items in short supply in order to restrain inflation. But in neither case, is the remedy appropriate to the problem. At the time the legislation was drafted, the major disruptions in national trade and investment balances, and the acute world shortages of raw materials had not been foreseen or even dreamed of. As a result. the kind of temporary tinkering envisaged by the Trade Reform Act is hardly worth serious consideration.

4. The Trade Reform Act purports to provide import relief to domestic industries injured by rising imports. It would do this by changing the definition of injury; authorizing relief if imports contribute "substantially" to injury rather than requiring that they be a "major" factor, as at present. The change in definition is helpful as far as it goes, but unfortunately it does not go very far. The relief is to be in the form of first, increased duties, second tariff-rate quotas, and finally direct quotas and voluntary agreements. By the time each of the priority alternatives had been tried in turn, and proved unsuccessful, the original injury will have developed into a terminal disease.

5. The new legislation also purports to solve the problems of workers who lose their jobs because of increased imports by "improving adjustment assistance." In fact, of course, the bill does not improve the situation for these workersonly making it possible for more persons to qualify for less help.