In a number of industries there has been an absolute loss of jobs-fewer workers today than a few years ago. In women's apparel alone, the number of workers declines absolutely by more than 40,000 between 1956 and 1971. In electronics, there was a loss of 109,000 jobs between 1966 and 1972, according to Labor Department figures. In shoe manufacture, jobs declined from 233,000 to about 200,000 in the past five years. While the figures on job loss reveal part of the problem, they tend-by their impersonality-to conceal the human dimensions of the tragedy. The people employed in labor-intensive industries-the hardest hit-tend to be drawn largely from the nation's marginal populations: black, Hispanic, poor white, recent immigrant. To these people, the labor-intensive industry-with its openings for unskilled and semiskilled labor-was the gateway to the economy. As these plants collapse, the hopes of these people collapse. THE HARTKE SOLUTION To meet these problems of future deficits in the balance of payments and job, loss due to imports, I propose a system of quantitative import restrictions. Based on the relationship between imports and domestic production in the 1965-69 period, this measure would stabilize imports, preserve domestic industry and keep hundreds of thousands of jobs in America. Under my plan, imports would continue to grow in concert with domestic production, preserving the 1965-69 base period relationship. Our trading partners would be assured of a steadily expanding market while our domestic interests would be fully protected. Other countries make sure that their own markets are secure and protected. It is time we provided the same security for America. You have before you only a partial list of the quantitative restrictions perpetuated on foreign products by our trading partners. Take, for example, the case of Japan on page 3. They have an international tax of $150 to 220 percent on imported whiskey. Compare this with the fact that the United States, in 1972, suffered a 723.4 million dollar trade deficit in distilled alcohol alone. That amounts to 10.6 percent of the entire 6.8 billion U.S. trade deficit in 1972. In that year we exported a mere four million gallons of bourbon. What happens when a fifth reaches Japan. First. they put on the 35 percent GATT duty, then they add their landed costs (stevedoring, freight, insurance, etc.). If this total exceeds 16 dollars per bottle, they introduce another 220 percent duty. Below 16 dollars they add a 150 percent tax. This brings the price of a fifth of American bourbon to 20 dollars. What has happened in effect is that the Japanese non-tariff barriers have done to American spirits what Carry Nation with an ax and Bible could never have accomplished. This is not just an isolated example, but as you can see from this list, it is one of hundreds of non-tariff barriers which discriminate against American products. Many firms and whole industries have been lost to the sudden tide of imports that started in the late 1960's. The personal impact of recent trade figures can be found in high unemployment, lost pensions, and socially and economically weakened American communities. MULTINATIONAL CORPORATIONS The post-war era is the age of the giant international company. Today they do about 500 billion dollars of business annually in each other's territories, or about one-sixth of the world's gross product. That is more than the entire gross national product of Japan. These super-sized multinational corporations are characterized by a global strategy of investment, production and distribution. The multinational company is creating the outlines of a genuine global economy. Their rate of growth is truly phenomenal. It is double that of purely domestic companies. By 1975, nearly 35 percent of the Western world's non-U.S. production will be accounted for by American subsidiaries. The book value of direct investments by the U.S. based transnationals grew from 32 billion dollars in 1960 to 90 billion dollars in 1971-an increase of 280 percent. In addition, about 1.5 billion dollars a year has been added through reinvesting the profits from foreign subsidiaries. Foreign portfolio investment in securities is over 19 billion dollars. Together, U.S. foreign direct spending, reinvestment of profits, and portfolio investments amount to 120 billion dollars. From 1960 to 1970, plant and equipment expenditures by U.S. multinationals rose 60 percent faster than purely domestic firms. Responding in part to favorable tax treatment and America's old line free trade policies, more than 8,000 subsidiaries of American firms have been established overseas. Following this flow of capital and firms is American technology and superior know-how. Frequently developed at the great expense of American tax dollars, this technology fuels economies of foreign lands at domestic expense. Foreign direct investment by U.S. companies has been increasing at a rate of 15 percent. On the basis of present trends this figure will rise to over 20 percent by 1980. By contrast, the GNP of the world's principal industrialized countries will increase at between 3 and 5 percent. If a corporation's sales were to be equated with a nation's output of goods and services, then 54 of the world's 100 biggest money powers would be multinational corporations and only 46 would be countries. General Motors, for example, with a yearly turnover of more than 24 billion dollars, was in 15th place on this list, just behind Spain, Sweden and Holland and just before Belgium, Argentina and Switzerland. Exxon and Ford each made more money than the GNP of Pakistan, Denmark or Austria. I am not against bigness per se, but I am vigorously opposed to unregulated bigness that adversely affects the United States' trading position in the world. Multinational firms export American jobs by the hundreds of thousands, as they move their operations abroad in search of cheaper labor, non-union shops and tax holidays. Because of the protean character of multinationalism, the official figures on the amount of imports coming back into this country from U.S. multinational corporations are necessarily a gross understatement. For instance, a Department of Commerce figure of 1968 that sets imports from multinationals at 14 percent of total U.S. imports, omits purchases from joint ventures, from foreign firms with sizable American corporate investments, from overseas producers who are contractors for U.S. companies, and from plants operating under U.S. franchises, licenses or rentals. There is clear evidence, however, that even the strictly defined multinational corporations are stepping up their exports from overseas back to the United States. A 1972 special survey of the Department of Commerce, covering 298 U.S. multinationals shows that exports to the United States are outpacing sales to the host country. Thus, between 1966 and 1970, these overseas subsidiaries with a 60 percent rise in world sales showed only a 52.9 percent rise in the country of location but a whopping 129.4 percent rise in sales back to the United States. One section of the present tariff code actually encourages American multinationals to do their manufacturing in other countries precisely in order to bring the finished product back into the United States. Item 807 provides that American firms that export components for assembly outside the United States may then bring the finished commodity back into the United States while paying duty only on value added. In 1967, under this provision, $14.6 million of components were exported and $931.6 million of finished products imported; by 1972, the exports had grown to $691.6 million and the imports to $3.1 billion. The multinationals engaged in this operation could boast in 1972 that they had greatly expanded our nation's exports, but they were also responsible for the disastrous inflow of the multi-billion dollar imports that, the Tariff Commission concedes, had by 1970 cost this country more than 100,000 jobs. (In the case of Mexico, for example, Item 807 corporations are not allowed to sell their products in the host country; they must bring them back into the United States.) RUNAWAY MULTINATIONAL FIRMS In industry after industry plants have folded up in the United States as multinational corporations simultaneously opened plants in other countries. In the electronic trade, for instance, the Standard Kolman Company closed its plant in Oskosh, Wisconsin, with 1,100 employees, and shifted the jobs to Mexico in 1970. Emerson closed a plant of several thousand employees and set up shop in Taiwan. Bendix deserted 600 employees in York, Pennsylvania and Long Island, New York, to open a plant in Mexico. Warwick Electronics transferred 1,600 jobs from Zion, Illinois, to Mexico and Japan. General Instrument recently closed down two plants in New England although it employes 12,000 Taiwanese to make televesion parts. RCA transferred an operation from Cincinnati (2,000 workers) to Belgium and Taiwan. One of the most painful stories, related by Paul Jennings, president of the International Union of Electrical, Radio and Machine Workers, is about an RCA plant of 4,000 employees in Memphis, Tennessee. In 1966, Robert Sarnoff, RCA president, boasted that this plant "was destined for a key role in the unfolding story of RCA." The installation was already providing meaningful employment to people living in the ghettos of Memphis. Four years later (1970) RCA closed down the plant. Two thousand machinists lost their jobs in the General Electric plant at Utica, New York, between 1966 and 1972 as the company phased this operation out of the United States and into its subsidiary in Singapore where labor works for 18 cents an hour. In 1971, International Silver exported more than 1000 steelworkers' jobs from their plant in Meriden-Wallingford, Connecticut to Taiwan. The stainless steel flatware formerly made in Connecticut is now imported from International Silver's affiliate in Nationalist China. More than 19,000 shoe workers in Massachusetts lost their jobs in the 1960's as American Footwear Industries succumbed to cheaper imports and large conglomerate multinationals like Interco and Genesco which began producing shoes in France, Belgium, England, Italy and South America. Spain alone exported 280 million dollars in shoes last year and the U.S. purchased 210 million dollars, or three-fourths of them. THE HARTKE SOLUTION As long as America's tax policy makes it more profitable to invest abroad than at home, plants will continue to move abroad and the foreign export market will be increasingly supplied from foreign based plants instead of from domestic-based industry. The Hartke trade proposals provide dramatic new tools 'for meeting this challenge. Tax advantages for investing abroad would be removed so that domestic investment would be on an equal economic footing. THE EXPORT OF AMERICAN TECHNOLOGY Although most countries strictly regulate and protect their own technology, America has left this matter largely to the discretion of private business. According to the U.S. Tariff Commission's study of multinational firms, these supercompanies dominate the development of new domestic technology. The exports of this technology from multinational corporations outweight imports by a factor of more than 10 to 1. These industries have been prominent generators of high technology exports from the United States. One example of this practice is McDonnell-Douglas' sale of the Thor-Delta Launch system to the Japanese. The sophisticated technology which went into the construction of this system cost the American taxpayers millions of dollars in research and development funds. American taxpayers want a fair chance to reap the benefits of their tax dollars spent on American technology. But as fast as the technology for space or electronic equipment is developed and the patent is received, that technology is often transferred abroad with the help of U.S. tax laws. THE HARTKE SOLUTION Under present law, U.S. corporations are relieved of paying taxes on any incoming arising from the firm's transfer of a patent or similar right to foreign companies. This encourages U.S. firms to export their technology. The Hartke approach would repeal the tax-free treatment for U.S. companies' incomes from licensing and transferring patents to foreign companies. Also, under my approach, the President would have the discretionary power to limit the export of technology. He could control the granting of licenses to produce a product abroad. Specifically, the President could prohibit any holder of a U.S. patent from producing the patented product abroad or from licensing someone else to produce it overseas. The penalty for violating the statute or regulations issued under it would be to make the patent unenforceable in the United States Courts. This would permit other producers to make and sell the product in the United States without paying royalties. CONCLUSION We cannot ignore nor fail to correct the growing power of these giant multinational concerns. They feel no allegiance to any national entity. They support no government on ideological grounds. They have no qualms about investing in democratic or totalitarian, capitalistic or socialistic, civilian or military governments as long as their profit goals can be realized. Let me conclude with a reference to public opinion. Sentiment against multinationals runs so high, that the public-by a margin of almost two to one-currently thinks that the Federal government should discourage, rather than encourage, the international expansion of U.S. companies. Many more simply do not buy the idea that corporate growth abroad has increased employment at home. Seven Americans out of ten are convinced that the main reason U.S. firms go abroad is "to take advantage of cheap foreign labor and that this costs jobs here." Here are the results of a nationwide public opinion survey conducted by the Opinion Research Corporation for businessmen. Forty-two percent of total public opinion is strongly opposed to expansion of U.S. companies abroad. Even a majority of the managers are opposed to expansion (37 percent opposed against only 30 percent in favor of expansion). Perhaps most surprising are the results when broken down by party preference. Even the majority of Republican voters are on my side in this controversy. Republicans strongly oppose expansion 40 percent opposed to 30 percent in favor. The Foreign Trade and Investment Act of 1973 is designed to put our industry on an even footing with foreign competition and make domestic investment just as attractive as investment abroad. By controlling predatory trade practices and regulating the American based transnational firm, the Hartke approach to trade policy will put America back on the path to a world of free and fair trade. |