expanding offshore operations. Parts and components plants producing the whole range of consumer, industrial and military electronics have ceased stateside production in favor of low wage areas around the globe.

When expanding, these firms show a marked preference for foreign locations over American communities. Texas Instruments, a leading manufacturer in the semiconductor field, has announced that it will open four new solid state products plants, three of which will be offshore-in Hiji, Japan; Kuala Lumpur, Malaysia, and Campinas, Brazil.

INADEQUACY OF EXISTING SAFEGUARDS

The workers of our industries have suffered from the inadequacy of existing safeguards in U.S. laws and regulations. While foreign imports have captured greater and greater shares of the market and thousands of our members have been thrown into unemployment, relief that should have been available has been nonexistent.

We have appealed in vain to government agencies for remedial action. Existing regulations under anti-dumping, countervailing duty and "escape clause" provisions have been essentially useless and unavailable.

Adjustment assistance, as provided under the Trade Act of 1962, has proved to be nothing more than an illusion. Petitions before the Tariff Commission for the unemployment compensation, retraining and relocation benefits intended by the Congress have been struck down by an unrealistic eligibility formula. Only an infinitesimal number of the thousands of victims of imports have qualified for the inferior benefits provided, and then only after frustrating delays.

None of these measures anticipated the phenomenal development of the multinational companies, their export overseas of our jobs and technology, and the vast amount of capital devoted to foreign investment.

A recent poll taken by the IAM with participation from two per cent of its membership indicates that many union members are extremely worried by the increasing volume of foreign imports and by the constant export of American capital and American technology by U.S. based multinational corporations.

The following are the questions asked with reference to world trade and the results: 1. Should Congress give the President authority to ease restrictions on imports in dealing with other nations?

14.1 percent, Yes; 72.2, No; 9.4, Undecided; No Reply, 4.1.

2. Should Congress direct the President to regulate the export of American capital and American technology in the national interest?

79.0 percent, Yes; 11.8, No; 5.4, Undecided; No Reply, 3.6.

3. Should Congress order the President to limit the export of food, petroleum products and other commodities when supply is short in the United States? 94.0 percent, Yes; 3.6, No; 0.8, Undecided; No Reply, 1.4.

4. Should Congress amend the laws to tax overseas profits of U.S. multinational corporations on the same basis as their profits on business done in the U.S.A.?

87.5 percent, Yes; 3.9, No; 5.9, Undecided; No Reply, 2.5.

We agree with the statement of the AFL-CIO Executive Council. The administration's so-called "Trade Reform Act of 1973" is totally obsolete. Its provisions bear no relation to the events of the day. Indeed, the bill passed by the House late last year is worse than no bill at all.

We urge the Senate to reject the bill before the Committee and to write a new trade bill that will contain more realistic legislative provisions that will prevent the abuses we have outlined above. We commend to your attention the statement of the Executive Council of the AFL-CIO attached hereto.

STATEMENT BY THE AFL-CIO EXECUTIVE COUNCIL ON INTERNATIONAL TRADE AND INVESTMENT

The international economic structure has been seriously shaken. Normal trade patterns are being shattered. National currencies are in disarray. Nations with once-comfortable trade balances are desperately seeking larger export markets to earn the price of oil for industrial survival.

Much of the blame can be laid to the staggering price increases levied by the oil-producing nations, which have further fueled a global inflation carrying with it the possibility of worldwide recession and unemployment of crushing proportions.

These events have made the Administration's so-called Trade Reform Act of 1973 totally obsolete. Its provisions bear no relation to the events of the day. Indeed, the bill passed by the House late last year and now pending before the Senate Finance Committee is worse than no bill at all. A total reexamination of U.S. trade and investment needs is in order, utilizing the realities of the Seventies particularly 1974-and abandoning the dead and unworkable dogmas of the past.

The energy crisis comes on the American economy at a time when it already is in deep distress, much of it traceable to the nation's misguided and misapplied foreign trade and investment policies. The American worker, consumer and businessman are all suffering from a deepening erosion of the U.S. industrial base. A tide of imports has wiped out more than a million jobs as products and whole industries have been engulfed. The export of technology and capital at reckless rates have funneled American production and productivity abroad, costing the U.S. economy not only badly-needed new jobs and job opportunities but the benefits of more efficient production means. Multinational corporations, manipulating U.S. tax laws, have transferred jobs and production overseas at the expense of the American economy, costing the nation badly-needed tax

revenues.

The Administration's trade bill fails to address itself to these problems. In addition to granting the President unprecedented and sweeping new powers which he could use to permanently alter the structure of foreign trade and the structure of the U.S. economy, the bill contains these serious deficiencies:

It provides no specific machinery to regulate the suffocating flow of imports or to curb the export of materials in short supply at home.

It does not deal with the export of U.S. technology and capital to other parts of the world where corporations mainly American-based multinationals-can maximize profits and minimize costs at the expense of U.S. jobs and production. It does nothing to close the lucrative tax loopholes for multinationals which make it more profitable for them to locate and produce abroad.

It does nothing to repeal Items 806.30 and 807 of the Tariff Code, which encourage U.S. firms to locate abroad and take advantage of low-wage foreign production and a special low tariff rate on goods exported to the U.S.

It fails to assure action against unfair trade practices of other nations. It does not assure adequate U.S. responses against new and old barriers to U.S. products raised by other nations, particularly at a time when nations of the world are re-examining these barriers with an eye to greater self protection.

It encourages the entry of goods from low-wage nations of the world at special or zero tariffs.

It ensures the further heavy erosion or stunted growth of badly-hit U.S. industries such as steel, apparel, chemical and allied products, rubber, shoes, stone, clay and glass, autos, aircraft and electronics.

It ignores the fact that America's industrial base and productive strength have been weakened by current foreign trade and investment policies, and makes no provision for restoring the nation's critically needed industrial health.

For these reasons Congress should reject the bill now before it and write a new trade bill which will contain legislative provisions that are comprehensive, flexible and realistic.

The new legislation should:

1. Regulate U.S. imports and exports as a means of establishing an orderly flow of international trade. Specific flexible legislative machinery is needed to control imports. This flexible mechanism should also be applied as a restraint on the excessive exports of farm goods, crucial raw materials and other products in short supply domestically. Exports, imports and U.S. production should be linked in relation to needs for supplies, production and job opportunities in the U.S.

Shortages of raw materials in the U.S. and new demands by countries which have those raw materials have led to new problems. Many raw material producers are requiring companies to use those raw materials within their borders. This interchange has led to a new threat to the American industrial

system. As long as the U.S. has a policy of freedom of investment abroad and other countries have policies to seek their own rapid industrialization, the shortages of raw materials here will be used as an excuse to help industry to move abroad and further undermine production facilities within the U.S.

Interwoven into this problem is the recent change in the value of each nation's money. The value of the yen, the franc and other currencies have become lower. Many countries are competing to export as much as possible to improve their balance of trade and balance of payments. Imports from any part of the globe into the U.S. can shoot up very rapidly and the U.S. has no system to prepare for the rapid influx of any product from any part of the world.

2. Modernize trade provisions and other U.S. laws to regulate the operations of multinational corporations. Regulation of multinational firms, including banks, is necessary because these concerns are the major exporters and importers of U.S. farm products, crude materials and manufactured products. They use U.S. tax, trade and other laws in combination for their worldwide advantage. They export production facilities, money and jobs and juggle prices and credit to maximize their own worldwide company advantage. They license the newest technology for use abroad and combine in joint ventures with foreign companies and governments regardless of the impact on the U.S. need for jobs, production or supplies.

3. Eliminate U.S. tax subsidies and other advantages for corporations investing abroad. Specifically, the tax laws should eliminate tax deferral of income earned abroad and foreign tax credits. These provisions allow U.S. corporations to pay no income on the profits of their foreign subsidiaries until these profits are brought home-if ever-and the foreign tax credit permits corporations to credit taxes paid foreign governments, dollar for dollar, against their U.S. tax liability. These provisions contribute to the export of jobs, the erosion of the U.S. industrial base, the denial of needed raw materials and components for U.S. production and job needs, and encourage foreign governments to change their rules to the disadvantage of the U.S. The present provision in the tax laws allowing the establishment of Domestic International Sales and Corporations (DISCS) should also be repealed. This provision now gives the largest multinational firms and banks windfall tax breaks on their exports.

The annual cost to the U.S. Treasury of these tax loopholes amounts to at least $3 billion in needed revenue.

4. Repeal flagrant incentives and subsidies to encourage U.S. firms to move or expand abroad. These are Items 806.30 and 807 of the Tariff Code, which encourage the foreign production and foreign assembly of goods for sale in the U.S. These provisions are used to shift production to cheap labor markets for the profits of the multinational corporations. Imports under these provisions have risen from $1 billion in 1967 to $3.4 billion in 1972; in the first ten months of 1973, imports under these provisions were 55 percent higher than in the like period of 1972.

5. Re-examine and limit the operations of the Export-Import Bank which provides loans at interest rates much lower than those paid by American businesses, consumers and home buyers. These loans help U.S.-based multinationals expand foreign branches and assist foreign governments, including the Soviet Union and other Communist countries, in getting America's newest production facilities. Particular emphasis should be given to the impact on U.S. jobs, and potential cost to the U.S. taxpayer.

6. Clear provisions should be written into new legislation to regulate exports of capital and new technology. Other nations are demanding only the newest kind of U.S. technological facilities and U.S. firms are licensing or producing America's newest inventions abroad with the help of U.S. and foreign governments.

7. Multilateral trade agreements with other nations, such as the textile multifiber agreements, should be administered in keeping with the flexible machinery devised to regulate imports and exports. This flexible machinery would be a safeguard against a misunderstanding of America's intent and assure continued U.S. sovereignty over its trade and other domestic laws.

8. Since almost any federal, state or local law can be considered a non-tariff barrier to trade, any legislative provision to authorize negotiation on non-tariff barriers should be limited and should require specific Congressional approval for the removal of any barrier, with full information about the products

affected. U.S. tax laws, consumer protection laws and other social legislation, including occupational health and safety standards, should be barred from such negotiations.

9. New provisions are needed to speed and assure action against foreign dumping of products on the U.S. market-the sale of these goods at a price artificially lower than in home countries or other subsidized imports into the U.S. These provisions should emphasize U.S. producer and worker needs and rights to participate in proceedings.

10. Clear labelling on imports of products and components to mark the country of origin of the product and the components within it is needed. Advertisers also should be required to designate the country of origin of products they handle. All consumer protection legislation should be strictly enforced on imports.

11. Trade with Communist countries should not be viewed as ordinary commercial exchange. The U.S. should end the extension of low-interest loans and insurance of private loans by U.S. government agencies to Communist countries. Senate legislation must contain the restrictions on Soviet trade written into the House bill over the opposition of the Administration.

12. The need for improved U.S. statistics on imports, exports and production has become urgent. Neither the U.S. government nor interested U.S. producers and workers can obtain adequate statistics in sufficient detail on the impact of imports or exports of industrial commodities. A comprehensive system of reporting on investment abroad, licensing of production and other technology flows is needed. Firms which operate within the U.S. should be required to segment their U.S. and foreign production in reporting to government agencies. The energy crisis has demonstrated that over-dependency on foreign sources of any material can be costly and perhaps fatal. It also has demonstrated that nations, when faced with a choice, are quick to act in their own self-interest. And it has graphically demonstrated that multinational corporations hold corporate allegiance above national allegiance. New trade legislation must recognize these factors.

By every test, the House-passed trade bill fails to relate to the realities of the Seventies. The Senate now has an opportunity and an obligation to fully reexamine U.S. trade and investment policies and write legislation that meets America's needs.

Senator FANNIN. The next witness will be Mr. Karl G. Harr, Jr., president, Aerospace Industries Association of America, Inc.

Mr. Harr, we welcome you this afternoon; we are very pleased to have you with us. You have furnished us with a summary of your testimony and also your testimony, and you may proceed as you desire. You know that the limitation is 10 minutes.

STATEMENT OF MR. KARL G. HARR, JR., PRESIDENT, AEROSPACE INDUSTRIES ASSOCIATION OF AMERICA, INC.

Mr. HARR. I thing in view of the fact that we have presented you with a statement and a summary of it, it might be more useful if I summarize our main points and perhaps address myself to the aerospace point of view on some of the issues that have been talked about this morning.

We of course support the bill in general, and we urge its prompt passage. I might say the aerospace industry, as has been testified to by several people this morning, is a large exporter. Over the five year period from 1969 to 1973, 61 percent of our civil aerospace production was exported. It came to a total of $14 billion. The total of military and civilian exports during that period was $19 billion, with a net aerospace trade surplus of about $17 billion.

Senator FANNIN. That was $17 billion in what period?

Mr. HARR. $17 billion net surplus in the 1969 to 1973 period. Senator FANNIN. 1969 to 1973. Do you have figures as to whether it has dropped off from 1969 to 1973?

Mr. HARR. It went up, it actually went up. The total sales of the industry went down because of domestic retrenchment, but the exports went up, and last year we exported in excess of $5 billion. About $3.8 billion was civil, and about $1.4 billion was military and military relatel.

We conservatively

Senator FANNIN. Is this equipment military related.

Mr. HARR. Yes, sold by us.

Senator FANNIN. Not sold to the U.S. Government?

Mr. HARR. No, sold abroad, exported. This $1.4 billion over that same period, which was the amount of civil aircraft material exported, accounted for 125,000 full time direct jobs and about 210,000 jobs in supporting industries and services, just to give you a rough yardstick. Our overall industry now has about 900,000 employees in the total work force, and I would say if you took military and civilian exports, it would come to about 200,000 direct jobs.

We have been successful in the past decade in dominating the free world civil aircraft market. The U.S. aerospace industry probably accounts for, as far as figures can be accurate, on the order of 80 percent of the free world aircraft, has done so, does so today, and will do so for the foreseeable future, notwithstanding the rising foreign capability and the rising foreign competition. The reasons for that, in oversimplified terms, are several. One, we get a great bonus from our intense domestic competition. The big market has always been the United States. The big producers of transport aircraft in this country have been furiously competitive, and the result has been products which have been very attractive, not only here, but also abroad. That is one clear element of our success.

Another has been the large domestic base. By this I mean not only the existence of a market here that is broadly based, but also the fact that because of the history of the post World War II period, there has been an injection into our high technology development of money, effort, attention, resources of all kinds that most other countries have not been able to match. We have had invaluable help in our export achievements from the Export-Import Bank. But having said all of these things, we also have to attribute a lot of our success to a relatively free and open trading environment abroad.

We have been able, with some pain and some effort and some frustration, to penetrate the world's aircraft market fairly comprehensively outside the Bloc countries.

Now, our basic position, again in oversimplified form, is that we believe that our Government should upgrade the status of trade and investment policies relative to other international policies. We think that the United States, for a lot of reasons, has been notoriously diffident about, and relatively laggardly in, giving its international trade and investment policies the kind of status they ought to have if we are to compete with the rest of the world and adequately protect our economic position.