to a present average of about 10 employees doing in excess of $400,000 per year. In other words, through imports the average dealer has been able to quadruple his size. Not only have imports allowed this kind of growth among our member firms, but we would like to emphasize that the real beneficiaries have been the consumers of our products, no longer completely dependent on the few dominant American suppliers. It is for these reasons that we are concerned with any measure which would unjustifiably impose restrictions on imports of business machinery. We note that the House, in section 202 (c) (4), "Presidential Action After Investigation," accepted the recommendation of the administration that in determining whether to provide import relief, after a finding of injury in an escape clause proceeding, the President shall take into account-and I quote: The effect of import relief on consumers, including the price and availability of the imported article and the like or directly competitive article produced in the United States, and on competition in the domestic markets for such articles, We urge the Finance Committee to retain this provision. In our opinion, however, it does not go far enough. We would strongly urge the committee to adopt a provision which would require the Tariff Commission, in an escape clause proceeding, to conduct its own investigation of the elements included within section 202 (c) (4), to hear testimony, to make findings thereon, and include such findings. together with supporting data, in its report to the President in any escape clause investigation. We further believe that the bill should be amended in a manner forbidding the President to impose import restrictions when the Commission finds that such restrictions will materially reduce competition in the U.S. market for the product under investigation. We further believe that the elements set forth in section 202 (c) (4) should be taken into account in the prenegotiation procedures set forth in chapter 3 of the bill. Turning to the excape clause itself, we believe that the Ways and Means Committee's version has gone too far in the protective direction. We specifically refer to the substitution of the words "substantial cause" for the administration's proposed "primary cause" in describing the necessary causal relationship between increased imports and serious injury. Import relief is a drastic remedy and one which in our view should be used sparingly. The committee should insure that such relief is not accorded except in those cases where increased imports are at least a more important cause than any other cause of serious injury to the domestic industry concerned. Other witnesses have dealt at length with the difficult question of countervailing duties. We recognize the importance of international rules governing governmental assistance to export industries. Since the United States maintains a number of export assistance measures such as the DISC, regional assistance programs, concessionary export financing, and others, we believe it important to work out an internationally accepted standard for Government subsidization. Until this is done, we do believe that the present discretion on the part of the Secretary of the Treasury should remain without the 1-year or 4-year termination provided in the bill. We think that the committee will find the business equipment field a perfect illustration of the advantages to the United States in an expanded, unfettered world trading order. The market for business machinery is rapidly expanding, with new products and new technology dominating sales. The United States clearly has the technological lead in many of the developments. In electronic computers produced in the United States by the American companies manufacturing office machines but not marketed through office machine dealers, the United States overwhelmingly dominates the world market. Altogether, including computers, the United States exported $2.1 billion in the business machine field in 1973. Imports of about $900 million resulted in a favorable trade balance of the United States in business machines of over $1.2 billion. There are particular areas and particular types of machines where there was an import imbalance against the United States, but we believe that isolating particular segments of the business machine industry distorts the overall picture. The United States has specialized in high technology big ticket items, which maximizes our competitive advantages. Imports are meeting other needs in the marketplace. Even in these areas, however, we feel that the situation is changing. Substantial adjustments in the dollar's parity with other currencies, coupled with the development of new technology and new products, has slowed the rate of import growth and clearly enhanced the export potential for U.S. manufacturers. Moreover, the Department of Commerce projects a substantial growth in U.S. production of business machines for the future. It is not only our concern that increased protectionism will make it impossible for our dealers to conduct their business, but that this will result in an intolerable aggravation of concentration and monopoly in the business machine industry. In the end, our consumers would pay a heavy price. We wish to express our general satisfaction with the bill as passed by the House of Representatives. We do believe that it generally balances competing interests and objectives of the United States, and will allow our negotiators to grapple with the serious problems which they will encounter in international trade negotiations. I wish to thank you on behalf of myself and the National Office Machine Dealers Association for the opportunity to appear before you and to present our views. Senator TALMADGE. Thank you, Mr. Palmeter, for your contribution. Are there any questions? [No response.] Mr. PALMETER. Thank you very much, sir. Senator TALMADGE. The next witness is Mr. Bernard H. Falk, president of the National Electrical Manufacturers Association. STATEMENT OF BERNARD H. FALK, PRESIDENT, THE NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION, ACCOMPANIED BY THEODORE CROLIUS Mr. FALK. Good morning, Mr. Chairman. Senator TALMADGE. Good morning, sir. Your entire statement will be inserted in the record, Mr. Falk, and you may summarize it. Mr. FALK. I would like to introducee Mr. Theodore Crolius. Mr. FALK. Mr. Chairman, my oral statement will deal with unfairness of worldwide trading in certain electrical products, and how this proposed legislation can help in resolving this problem. The National Electrical Manufacturers Association, NEMA, has historically supported U.S. trade policy aimed at expanded, liberalized international trade. That remains our position today, and, therefore, we endorse those provisions of H.R. 10710 which will carry U.S. policy forward toward realization of free, fair trade in world commerce. For NEMA members, this issue of free, fair trade is critical. Electrical manufacturing is a worldwide industry with worldwide markets. Virtually every nation has some electrical manufacturing, and the major industrial nations, without exception, have broadly diversified production capability and ever-increasing technological sophistication. Every nation of the world regards its electrical manufacturing capability as an essential national resource which underpins its economic strength and measures its potential for growth. Consequently, every industrialized nation, to one degree or another, and with the United States as a notable exception, has historically adopted policies to protect and encourage its own electrical equipment capability, in terms of research and development assistance, strict buy-national procurement policies, discriminatory standards regulations, and export aids and incentives. The buy-national procurement policies of electrical utilities owned or controlled by the governments of Western Europe, for example, have effectively foreclosed U.S. producers of heavy electrical equipment from competing in those foreign markets. At the same time, however, electrical machinery producers in those foreign countries, often supported by government export aids and incentives, have enjoyed relatively open access to the large U.S. market, subject only to a low tariff, and a 6-percent buy-American differential in the case of Federal procurement. As a result of this one-way flow of trade, U.S. electrical manufacturers have sold very little equipment in the other producer countries of the world, while hundreds of millions of dollars of foreignmade equipment are now in place throughout most major U.S. electric systems-investor-owned utilities as well as Federal and municipal power authorities. NEMA is gratified that the U.S. Government has tried to do something about the anticompetitive behavior of foreign governments and their government-owned or controlled electric utilities. In 1968, approximately 1 year after the Kennedy Round negotiations were concluded, U.S. trade authorities became convinced that restrictive nationalistic procurement in heavy electrical equipment had created clear conditions of unfairness in international trade. NEMA had made this point in many statements over the years, to the Congress and the executive branch. Seeking correction, U.S. officials initiated working party discussions within the Organization for Economic Cooperation and Development, the OECD, to try to develop an international code on government procurement. At the request of the Treasury Department and the Office of the Special Representative for Trade Negotiations, NEMA submitted a draft of a proposed international code for electrical equipment procurement, modeled on applicable U.S. Federal procurement regulations. We believe that since 1968, U.S. officials have worked diligently toward adoption of an international procurement code based, at least in part, on the NEMA draft. But now, in 1974, little tangible progress has been made, and we must conclude that there is scant interest among the other OECD members in facilitating broadened access for U.S. manufacturers to these members' own home markets. NEMA strongly endorses Section 102: Nontariff Barriers to and Other Distortions of Trade. This section, taken in conjunction with section 2 of the bill, provides the statutory basis for negotiating away the deeply rooted anticompetitive practices that inhibit world trade today. In particular, we endorse section 102(c)-the so-called sector amendment-which mandates utilization of a sector negotiation where that is the most likely means of achieving equality of access to markets and elimination of discriminatory restrictions affecting the entry into markets of a product line, whether such restrictions are tariffs or nontariff practices, or both. We further believe that the bill should clearly spell out the intent of the Congress in cases where the utilization of its broad new authorities does not result in achieving equivalent competitive opportunities for American industry. Where trade barriers are common to most, if not all countries, a mutual reduction of similar barriers may achieve equal access. However, where entry to some countries' markets is restricted more than entry to others, or restricted by dissimilar devices, competitive opportunities obviously cannot be equalized merely by mutual reductions of similar impediments. Where there are major restrictions to imports into some markets. whether by tariffs or nationalistic procurement or other impediments, but not into others, equality can be achieved either by all countries adopting similar restrictions or by each adopting similar rules of open competition applicable to all. Section 101 (c) (1) in our opinion provides all of the authority necessary to achieve equality. We urge, therefore, that the provisions of the bill be clarified to reflect the intent of Congress that in the case of persistent barriers to U.S. exports which have a long history of unsuccessful negotiations, and which cannot be removed during the forthcoming negotiations, U.S. negotiators shall be instructed to equalize competitive opportunities by employing the authority of section 101 (c) (1). This, to NEMA, is the only solution to years of no progress over the issue of discriminatory Government procurement practices because these practices are a prime example of flagrantly unfair practices not yet resolved through negotiations. Recognizing that U.S. negotiators need discretion as to how U.S. negotiating objectives and techniques will be structured and implemented, the foregoing considerations should constitute the criteria of the special representative in determining whether to negotiate by product sector in a relevant case. His procedure would be to define product sectors which may be appropriate for sector negotiations. He must assess all the trade barriers and distortions affecting any given product sector. And after he has determined that a product sector negotiation (a) will best achieve the objective of equivalent competitive opportunity, and (b) is feasible, he should then seek to negotiate by product sector. We think that this process will afford the special representative adequate flexibility to negotiate in the national interest and it will effectively serve the purposes set forth in section 2 of the bill. NEMA does not believe the sector amendment is intended to achieve only mutually beneficial sector agreements. To the contrary, it also and properly aims at equalizing competitive opportunity in sectors which are presently unequal and which, by definition, are not susceptible to mutually beneficial concessions. Among other things, this obviously sensible interpretation means that U.S. negotiators must certainly be prepared not to offer concessions in a product area where U.S. commerce is at a persistent, fundamental, and apparently nonnegotiable disadvantage. This instruction should apply to any U.S. concession whether it be for the sake of concessions in another product area, or as part of a broader offer of reciprocity. If the competitive disadvantage is acute, unreasonable and nonnegotiable, a different solution is the only answer. A successful negotiation, moreover, need not always be measured in terms of aggregate concessions. It can also be successful if the United States refrains from granting concessions which will widen the existing disadvantage in a given product sector. And it can be successful in a very real economic sense if, under the authority of section 101 (c) (1), it finally has to involve increasing duties to offset the disadvantage and equalize market access. Thus, section 102(c) should be clearly interpreted as an exception to the general proposition stated for the record by STR that, "tradeoffs of concessions between product sectors, including between agriculture and industry, are necessary to maximize negotiating results for all industries." We urge the committee to make it crystal clear that section 102 (c) should be interpreted as a congressional directive that certain product sectors unilaterally burdened by persistent and significant foreign nontariff barriers should not be further burdened in the name of maximizing overall results. We believe the high technology electrical equipment situation of now many years standing is a major example of this problem. We pledge every assistance to our negotiators in seeking a fair solution. But, if other countries in the end prove unwilling to make trade a meaningful two-way street, then |