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One of the most pernicious distortions of the truth concerning the impact of the multinationals on U.S. trade is the oft-repeated statement that they account for one-fourth of U.S. exports (thereby making the point that overseas investment helps U.S. export trade), while only 8 percent of the total sales of those affiliates comes back to the U.S. in the form of imports (thereby supposedly proving that these foreign affiliates do not displace domestically produced goods in the U.S. market). The figures are misleading on several accounts.

First, the comparison is between apples and oranges. The export figure relates to all U.S. nonagricultural exports (which does not exclude other crude materials) while the import figure relates only to manufactured goods. Second, the figures are for different time periods. The export figure is quoted from a Commerce Department estimate based on 1962-64 data. The import figure on the other hand relates to a Commerce Department study using 1965 data. Third, usually no reference is made to the data year. The impression is fostered that it is current. As a result, these figures have been used in juxtaposition not only by outside organizations-which must depend on the government for factual information, but by the government itself, in its supposedly impartial report on "The Multinational Corporation, Studies in Foreign Investment."

If one uses the more up-to-date data developed in the Commerce Department's survey of the 298 multinationals, the result is somewhat different. On the basis of that information, we find that in 1970 the exports of the 298 multinationals to their own affiliates accounted for only 20 percent of the total U.S. export trade. Imports of all products from majority-owned affiliates, on the other hand, amounted to 19 percent of all U.S. imports, and 16 percent of all imports of manufactured goods. In other words, the comparison is not between 25 percent exported to affiliates, and 8 percent imported from affiliates, but between 20 percent of total exports going to U.S. firms overseas and 19 percent of total U.S. imports coming in from U.S. firms overseas. Quite different conclusions can be drawn from this data.

THE WAGE ISSUE

The supporters of the multinationals have tried hard to show that generally lower wage levels in foreign countries have not been the primary factor in the corporate decision to invest in overseas facilities. To prove the point, innumerable questionnaires have been sent to U.S. corporations inviting them to explain the basis for their foreign investment decisions. The answers invariably relegate the wage issue to the bottom of the list with other factors such as the foreign country's tariff and nontariff barriers to U.S. exports, tax and profit incentives, and the ability to better serve the foreign market all coming first.

However, the fact is that wage levels in other countries are lower than in the U.S. and are scandalously inadequate in the less developed countries. The labor movement has never argued that the wage factor is the only determinant for foreign direct investment, but it seems unrealistic, if not hypocritical, for the multinationals to claim that wages are unimportant. Even though U.S. investment is frequently made in industrailized countries where wages are relatively high (and moving up), those wages are still lower than in the United States.

Senator ROTH. Next, we have a panel consisting of Mr. Richard D. Higgins, vice president, Bell and Howell Co.; Mr. Robert McLellan, vice president and manager of International Development, FMC Corp.; and Mr. Roper, executive director of International Executives Association, Inc.

On behalf of our chairman, gentlemen, I want to extend our appreciation for your appearing here today. You may either read your statement or, if you want to speak extemporaneously, we would be happy to include in the record your statements in full. I leave it up to you. Welcome.

30-229-74-pt. 4- -22

STATEMENTS OF RICHARD D. HIGGINS, VICE PRESIDENT, BELL & HOWELL CO., AND SECRETARY, INTERNATIONAL TRADE CLUB OF CHICAGO; ROBERT MCLELLAN, VICE PRESIDENT AND MANAGER OF INTERNATIONAL DEVELOPMENT, FMC CORP., AND CHAIRMAN, MID-AMERICA COUNCIL FOR INTERNATIONAL ECONOMIC POLICY; AND ROBERT L. ROPER, EXECUTIVE DIRECTOR, INTERNATIONAL EXECUTIVES ASSOCIATION, INC.

Statement of Richard D. Higgins

Mr. HIGGINS. Thank you, sir.

Senator Roth, I am Richard D. Higgins, secretary of the International Trade Club of Chicago, in whose behalf I appear here today. We appreciate this opportunity to express our views. Thank you, sir.

I might just mention that the International Trade Club of Chicago is the Nation's largest professional association of international trade executives, with a membership of some 800 people representing 650 firms throughout the Middle West and certain other areas of the country, engaged in international trade.

The International Trade Club of Chicago supports the intent and. in general, the provisions of the Trade Reform Act of 1973, with certain reservations that we want to point out a little later.

It is important, notwithstanding such reservations, that H.R. 10710 be enacted without delay. It is the bare minimum legislation required to promote freer international trade, to protect America's competitive position in world markets, notwithstanding previous comments, to insure the fullest possible employment of our Nation's workers.

This urgent need for action is further emphasized by the forthcoming negotiations under the general agreement on tariffs and trade. In these meetings, representatives of the United States of America must be provided with authority to speak officially and immediately on behalf of our country. The clearly defined trade policy which H.R. 10710 would establish would also afford greater credibility and leadership to the United States at the negotiating table.

Two, support of a liberal trade policy to create jobs for U.S. workers: We again affirm our conviction that liberal trade policies, multinational corporations and overseas investments, on balance, create additional jobs for American workers.

Now, there have been, and I am sure you are familiar with them, Senator Roth, numerous studies during the past several years by responsible organizations and agencies, including the Emergency Committee for American Trade, Business International, the Illinois State Chamber of Commerce, the National Association of Manufacturers, the U.S. Tariff Commission and the U.S. Department of Commerce, and others, and these have consistently shown that foreign direct investment increases domestic employment.

For instance, an Emergency Committee for American Trade study of 74 multinationals showed an expanded U.S. employment in these firms by 36.0 percent between 1960 and 1970, while during this period the domestic employment rate for all manufacturing increased only 15.3 percent.

A later study by Business International-I think you are familiar with that firm-covering 124 U.S. manufacturing companies found that net U.S. employment of U.S. multinationals rose 26.4 percent while manufacturing jobs as a whole in the country expanded by only 10.4 percent.

Speaking now specifically of exports, which are still the backbone of our balance-of-trade position, and upon which we must depend in order to purchase abroad the many commodities not available to us in our own country, I should like to cite my own State of Illinois.

Illinois has annual exports of agricultural and manufactured products of more than $5 billion. It is first in the sale abroad of farm products, representing 10 percent of total U.S. farm exports. (It is estimated that crops of one out of every 4 to 5 acres harvested in Illinois are exported. Export accounts for approximately 15 cents of the farmer's market dollar.)

Nearly 325,000 jobs in Illinois are directly related to exports. Add to this number the people whose work represents partial or indirect employment to support exporting, and the number of jobs soars to some 900.000 or 20 percent of Illinois workers.

In 1973 Illinois had a $1.2 billion "trade surplus" of exports over imports.

Briefly, may I cite the names and overseas activities of just a few Illinois firms whose names are known throughout the world, together with their level of U.S. employment and the percent of that employment dependent on farming trade.

These are such companies as Borg-Warner Corp. Employs 9,200 in 12 communities across the State of Illinois. Annual payroll in Illinois in excess of $9 million; one in every three of sales dollars comes from exports and sales to plants in 22 countries outside the United States. Employs 30,000 people in the United States, of which 4,000 depend for jobs on direct export sales. One in every seven and a half employees' jobs depend on export sales. Export sales equal $103 million; $25 million of domestic sales are to domestic customers for use in products they ship overseas; 1,000 jobs are created by pull-through effect of U.S. foreign investment.

Brunswick Corp. Employs 24,657: 2,585 or 11 percent of employees depend for their employment on foreign trade.

International Harvester Co. Employs 28,000 people in the State of Illinois; more than 1 of every 10 employees owes employment to exports.

Travenol Laboratories International. Sells over $30 million of goods abroad every year, which is about 13 percent of total production in the United States; 13 percent or over 1,300 employees in the United States owes employment directly to exports. Additionally, almost all of the equipment used in factories abroad is purchased in the United States; in the period 1971-73, over $6 million was spent on such capital equipment in the United States.

Sargent-Welch Scientific Co. In business in Chicago and its suburbs since 1852. Over 10 percent of total business is made up of exports to Canada and other parts of the world; at least 10 percent of over 1,800 employees are involved in export business.

Culligan International Co. Exported first products in 1958: today more than 40 percent of consolidated sales volume is derived from international sources.

FMC, 46,000 people, over 10 percent dependent on foreign trade. Bell and Howell, just under 14,000 people, 12 percent dependent on foreign trade.

There is, of course, a great list of other firms in Illinois, both large and small which can tell similar stories of their contributions to the business growth of our State and to the national economy through overseas trade.

Now, directly concerning the issues of the trade bill, if we might, the International Trade Club of Chicago supports the proposal of Senator Mondale of Minnesota to extend Presidential negotiating authority to cover international agreements aimed at unjustified use of export controls or any unfair trade practices in order to insure access to foreign sources of raw materials. The President of the United States should be empowered to act in countering unreasonable restrictions, quotas and embargoes on exports to the United States. In particular connection with titles II and III of the bill, we fully support the most flexible range of safeguards needed to protect American industry against unfair competition, as well as to assist U.S. workers and firms to adjust to new competitive conditions.

We must remember, however, that our economy depends on a healthy balance of imports and exports. Imports provide the purchasing power for foreign companies to procure U.S. products and consequently more jobs and higher earnings for American workers.

Now, we do oppose the provisions of title four of H.R. 10710 which deny most favored nation treatment and Export-Import Bank credits and other financing to countries which place immigrations restrictions on their citizens.

We feel, sir, that the policy of emigration is strictly an internal concern of any country. It is really not appropriately placed in a trade bill. We also feel you would agree that we as Americans would resent interference from another country in our internal political or social problems.

We believe that for the United States to embody penalties and punitive measures of this kind in an official trade policy position would imperil our relations with the U.S.S.R. and the détente which we have been striving so hard to maintain. We should point out that President Nixon only recently cited an increase in emigration of Jews from the U.S.S.R. from 400 per year a short time ago, to as many as 33,500 within the past year.

I might say, sir, I wonder if this is not a little like the analogy of the neighbor next door who has been a rather difficult man to get along with and we know he keeps a loaded shotgun in his basement. But we have been making some progress in communicating with him and we have been lending him our garden tools; he has been borrowing ours. Then we find he has had some trouble with his oldest daughter. She owes him some money and he will not let her out of the house until she pays him. So we suddenly decide he cannot borrow our lawnmower any more until he changes his internal family policies. I wonder if that does not more or less relate to this general situation we are facing! We feel otherwise that a denial of most favored nation treatment to the U.S.S.R. could well be ineffective and counterproductive. The trade which we seek will be welcome to others, and the United States in

turn will be denied access to products and resources not available without our own country.

The same considerations may also be applied in relation to ExportImport Bank credits and other financing assistance. If denied by us to the U.S.S.R., it will be available elsewhere, and the United States of America will be the loser.

Broadly, we recommend that the Trade Reform Act of 1973 not be complicated and confused by the inclusion of matters which do not have a direct bearing on the principal objectives of the act. We mention specifically taxes, energy-except for the effect on oil imports of the Mondale proposal-monetary reform, all of which are separate issues, already covered in other legislation now under consideration.

In conclusion, the International Trade Club of Chicago reiterates its historical position that a liberal foreign trade policy directed toward a free flow of exports and imports and international private investment creates employment in the United States; increases U.S. exports; contributes to the U.S. balance of payments; promotes proportionately more investment in plant and equipment in the United States; and contributes to the economic development of the host countries. Furthermore, the free flow of capital is equally as vital to worldwide economic development and well-being as is free trade.

Accordingly, the efficient use of economic resources through crossborder investments and multinational enterprise should be encouraged by all countries.

Thank you, sir, very much.

Senator ROTH. Thank you, Mr. Higgins.

Mr. McLellan?

Statement of Robert McLellan

Mr. MCLELLAN. Good morning, Senator Roth.

I appreciate the opportunity to appear before the committee concerning the Trade Reform Act of 1973, H.R. 10710. Consistent with your request, my testimony combines a variety of corporate, organizational and individual views, as follows:

I appear principally as chairman of the Mid-America Council for International Economic Policy. This organization consists of 25 midwestern firms concerned with international economic policy, list attached. Our membership includes medium sized as well as large firms with collective sales revenues of over $25 billion, excluding banking establishments, and all are significantly engaged in international business. I might add, that is a nonpaid job.

I also serve, however, as vice president for International Development of FMC Corp.; as chairman of a task force on international economic policy of the Manufacturing Chemists Association; and as a former U.S. Assistant Secretary of Commerce for Domestic and International Business, 1969-71.

I have been privileged to participate in international business affairs continuously since 1949. I have spent a large amount of time. overseas during that period and at one time or another have done business in most of the 95 countries I have visited, including the U.S.S.R. and other Eastern European nations.

The Mid-America Council is essentially a group of business firms and, as such, has self interest in trade reform. While these interests

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