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each engine. In Japan, if they do this off the assembly line, they do not pay that sum; there is not, then, effective national treatment in Japan. As a result of this kind of harassment of U.S. exporters trying to sell boats to Japan, we have only exported, in the year 1971, 558 units of pleasure craft to Japan, which is valued at $800,000. This is obviously a miniscule sum, and not nearly commensurate to what we ought to be moving into the market in Japan.

So, we think that what trade negotiations should do is negotiate access to foreign markets by moving on this problem of safety standards, as an example; and that we should, in this round of trade talks, negotiate a code on safety standards. It would be based on the principles of national treatment, harmonization of standards, recognition of foreign tests, and a sophisticated system of liability management that would insure that you could sue one or more of the people making defective products moving into your country. And we think that separate negotiations should take place for each product; therefore, for boats, for example, you would have one annex to a general code on standards; for pharmaceuticals another.

Needless to say, this is a very complicated arrangement. I am going into it in some detail in order to relate it to the trade bill, because this is what you are going to have to deal with. The trade bill, as it is written, grants nontariff trade barrier negotiating authority in the familiar vernacular of multilateral negotiations, based on the most-favored-nation principle. Under the most-favored-nation principle, if you give a tariff cut to country A, all other countries obtain the benefit of this reduction. We believe this is highly inappropriate for some nontariff trade barrier agreements. It just does not work in areas such as safety standards and government procurement, and should not apply. The benefits of these agreements should not apply to those countries that do not accept the obligations of that arrangement; and, the way the trade bill is presently written, you do not have the nontariff trade barrier negotiating authority not to make the benefits available to everybody.

Now, the House Ways and Means Committee report makes it clear that only the most-favored-nation kind of application is meant by the bill. This is a fundamental mistake, and Professor Gardner alluded to it this morning. He was not sure of the bill's draft. I have gone through it carefully with the STR's office, and they agree that this is a problem. So, I think that this should be remedied when you draft the bill.

Having said that we want this kind of non-MFN negotiating power with respect to nontariff trale barriers, let me reiterate our support for the sector principle of trade negotiations. We believe that substantial progress can be made within the sector approach.

Our second major concern is with the excessive importation of foreign products into the United States, or the safeguard system in title II of the trade bill. We believe that there should be a viable safeguard system designed to move against excessive foreign imports. We have had a serious problem with respect to excessive imports in the boat industry. Japan in 1968 had 7 percent of the U.S. boat market. Now it has 19 percent of the market. So we have experienced this problem. We have experienced difficulty in trying to get relief

with the escape clause, which requires a link to prior tariff conces sions as the reason for increased imports into the United States. This is an impossible condition to prove. You cannot prove that the increased imports are due in major part to tariff concessions. And you certainly cannot prove that the harm involved is related to the most recent set of tariff concessions, as opposed to the aggregation of all prior tariff concessions. It has been nearly impossible to establish this link to prior tariff concessions, which has resulted in negative determinations of 18 out of 25 escape clause cases. This link to prior trade concessions should be eliminated from the trade bill.

Finally, we believe that a trade bill should address the problem of access to foreign supplies. Now, the boating industry, which manufactures boats of fiberglass-reinforced plastic, or FRP, which is composed primarily of polyester resins, is in deep trouble because of the critical shortage of petrochemical feedstocks and finished chemicals required for the fabrication of the resins. In short, we cannot get the petrochemicals that we need to make our fiberglass boats.

Our parent trade associations, the Boating Industries Association, and the National Association of Engine and Boat Manufacturers, have informed us that over 49 percent of their members have had trouble getting resins. They cannot get adequate supplies. Forty percent of those answering their surveys have had layoffs or shutdowns as the result of raw material shortages. Domestically, we feel that a new set of policies should be pursued, such as allocation of end uses of available petroleum and petrochemicals. On the export side, the trade bill should look to this problem of access to foreign supplies as well.

In summary, we hope that the trade bill will assist in obtaining access to foreign markets, containing excessive imports of foreign products into the United States, and insuring access to needed supplies for the United States. If it does these things, it will be a good bill and will serve the national interests of the United States. Thank you very much.

Senator HANSEN. Mr. Fisher, thank you very much for your testimony. As I am certain you already have been advised, your entire statement will be printed in the record.

[The prepared statement of Thomas H. Boggs and Bart S. Fisher follows:]

SUMMARY OF TESTIMONY OF INTERNATIONAL MARINE EXPOSITIONS, INC.

1. International Marine Expositions, Inc., generally supports the Trade Reform Act of 1973 as drafted by the House Ways and Means Committee.

2. Title I of the Trade Reform Act of 1973 should be amended to clarify the negotiating powers of the President with respect to nontariff barriers to trade. Specifically, the President should be empowered to negotiate agreements on nontariff barriers to trade on a nonmultilateral basis that do not apply to the products of all foreign countries. The Trade Reform Act of 1973 should recognize that the Most-Favored-Nation principle, while useful in the area of tariff negotiating authority, may not be useful in negotiating on nontariff trade barriers. Many nontariff trade barrier agreements, including those on safety standards, should not confer benefits on countries who do not undertake the obligations of the agreement.

3. International Marine Expositions, Inc. supports the negotiation within the General Agreement on Tariffs and Trade (GATT) of an agreement on safety

standards. An agreement based on the general principles of national treatment, harmonization of safety standards, recognition of the tests of other countries, and liability management should be negotiated. Agreements on specific products should be added to the general agreement as annexes.

4. International Marine Expositions, Inc. supports Title II, which deals with fairly-priced foreign imports. A viable "safeguard” system, based on the causation and injury criteria drafted by the House Ways and Means Committee, should be adopted.

5. There should be equality of tariff treatment for boat imports in the United States and Canada, as opposed to the burdensome tariffs presently levied on pleasure boats by the Canadian government. There is equality of tariff treatment for automobiles and snowmobiles under the United States-Canadian Automotive Products Agreement of 1965. We feel that there is no rational basis on which to make a distinction between boats which are not covered and other transportation equipment which is covered by the accord.

TESTIMONY OF INTERNATIONAL MARINE EXPOSITIONS, INC.

Mr. Chairman; my name is Thomas H. Boggs, and I am appearing today as Counsel for International Marine Expositions, Inc., a corporation composed of over 600 manufacturers of recreational boats, marine engines and marine accessories. I am accompanied by Bart S. Fisher, an associate in my law firm in Washington, D.C. We appreciate the opportunity to testify on behalf of the recreational marine industry in favor of the general provisions and objectives of the Trade Reform Act of 1973 (TRA). Our industry has a major stake in the world economy. In 1971, $3.6 billion was spent by Americans for marine equipment and services; 9 million recreational boats were in use of American waters; and 45 million Americans went boating. In 1971, 495,000 outboard motors were sold in the United States, with a retail value of $362.3 million, and 278,000 outboard boats were sold, representing retail dollar sales of $189 million. The exports of pleasure boats in 1970 were almost $28 million, and imports of pleasure boats into the United States were over $35 million.

International Marine Expositions, Inc., supports the Trade Reform Act of 1973. It comes before this Committee as part of an industry that has been hampered by the presence of tariff and nontariff barriers abroad. While we appreciate the recent concern of the Committee with the problem of access to scarce supplies for the United States, we view the TRA as a vehicle that may assist in obtaining greater access to foreign markets for the products that we would like to export. We wish to make it clear that we believe the marine industry would benefit from a more open and equitable world trading economy. On the other hand, we believe that a strong "safeguard" system should accompany further liberalization of imports for the United States. Thus, we will direct our comments on the TRA to Title I, which deals with authority for new trade negotiations, and Title II, which deals with relief from disruption caused by fairly priced foreign imports (the "safeguard" system). Secondly, we believe that there should be equality of tariff treatment for boat imports in the United States and Canada, as opposed to the burdensome tariffs presently levied on pleasure boats by the Canadian government. There is equality of tariff treatment for automobiles and snowmobiles under the United StatesCanadian Automotive Products Agreement of 1965. We feel that there is no rational basis on which to make a distinction between boats which are not covered and other transportation equipment which is covered by the accord.

AUTHORITY FOR NEW TRADE NEGOTIATIONS: TITLE I OF THE TRADE REFORM ACT

International Marine Expositions, Inc. believes that the negotiating authority for a new round of trade talks within the General Agreement on Tariffs and Trade (GATT) is the most important part of the trade bill for the Administration. We recognize that the tariff-cutting authority of the President expired on June 30, 1967, and that no meaningful round of trade talks can be carried on by the United States without a new delegation of negotiatinga uthority by the Congress. Accordingly, we support the concept of a five-year delegation of authority from the Congress to the President to enter into trade agreements

with foreign countries. We believe that the Executive should have the authority to modify tariffs downward as he determines to be necessary, and upward to levels not above 50 percent of tariff levels presently prevailing. Most importantly, the delegation of negotiating authority in Title I should cover nontari ffbarriers to trade (NTB's). Our industry, like many others, has discovered that the key barriers to trade now that tariffs have been reduced in many markets are NTB's such as discriminatory taxes, customs entry procedures, and discriminatory standards procedures.

Let us give you an example of the type of NTB that has limited our ability to sell in foreign markets, the problem of standards for safety for pleasure craft. In the United States, the burdens that apply for boat safety are no different for a domestic or a foreign manfuacture of pleasure craft, either in design or in the implementation of our laws. In other words, under the terminology of the GATT, the United States provides effective "national” treatment by treating foreigners selling into our market in the same manner as U.S. citizens selling into the domestic market. In Japan, where our industry has had a difficult time gaining entry to the local market, a far different situation exists. In order to import boat hulls or engines into Japan, a preliminary inspection system is applied, which entails the inspection of a prototype of the engine desired to be imported into the country. In practice, the Japanese Government requires the submission of plans and specifications of the boat equipment imported into Japan. The inspection of the prototype and blueprints of equipment involves turning over to the Japanese Government proprietary trade secrets which, understandly, many U.S. manufacturers are reluctant to do. As a result, several U.S. boat manufacturers have decided to not export to Japan rather than divulge such information. Japanese boat manufacturers must also submit prototypes for model approval by the Government, but, in view of the extremely close relationship that exists between Japanese business and the Japanese Government, it is not unreasonable to assume that domestic proprietary information is treated more carefully than such information from U.S. exporters. A second part of the preliminary inspection system in Japan is the uncrating of U.S. engines and application of tank tests before such engines may be placed in the flow of Japanese commerce. Several U.S. manufacturers have complained about the delays that are frequently encountered in obtaining inspectors to perform such tests expeditiously in Japan, and the extra cost (about $50 per unit) of such tests.

Partially as a result of the discriminatory design and application of Japanese boat safety standards, and partially as a result of the 7.5 percent tariff coupled with a 40 percent commodity tax on pleasure boats over 20 feet in length, U.S. sales of pleasure boats into Japan's market have been miniscule. In 1971, the United States exported only 558 units of pleasure craft to Japan, valued at $808,497. This is a particularly small sum in view of the fact that Japanese dealers freely state that American motor-boats have the best sales potential in Japan. Despite somewhat higher prices, American boats appeal to Japanese consumers because of their appearance and performance, and are small enough to transport overland and to house in their multistoried facilities at local marinas.

What can be done about standards in the forthcoming round of trade negotiations under the TRA? Quite a lot, we believe. We recommend a fourpoint GATT code on safety standards to complement the current treaty framework of the organization.

1. National Treatment

Present Article -X

of the GATT provides only that safety standards may not be applied in a manner that would be arbitrary or unjustifiable in terms of discriminating against imported products, or a disguised restriction on international trade. In other words, safety standards affecting foreigners are permissible where the restrictions do not hurt trade more than is necessary to achieve the desired domestic goal. A tighter definition of national treatment is needed in the new GATT standards code. It must be made clear that imported goods are to be treated in the same manner as domestic goods. The new GATT code should provide that, after a transition period, no nation shall directly or indirectly impose health, safety, or standardization requirements on imported goods that are more severe than those imposed on domestically-produced goods.

2. Harmonization of Standards

A new international organization should be established to negotiate product and process standard harmonization, by unanimity or by qualified majority. The institution should also be empowered to establish minimum standards for environmental and safety protection during the manufacturing process and permit the application of specified trade adjustments to compensate for manufactures that fail to meet such minimum standards. The approach of withdrawal of trade concessions suggested by the Administration with respect to the denial of scarce foreign supplies should also be considered in the safety standards area, which, in the long run, may be as great a deterrent to free trade as self-denying restraints on trade.

Harmonization of standards is important for two reasons. First, it would tend to eliminate the multiplicity of standards that plagues the international trading system. Volkswagen, for example, must manufacture ten different models to satisfy national safety requirements. Secondly, harmonization of standards would tend to eliminate the problem of domestic in-process testing. For example, all compressed gas cylinders transported in the United States must be testing during the course of manufacture in the United States, a requirement that is obviously impossible for foreigners to comply with. France has a similar in-process testing requirement for pharmaceutical products. To the degree that harmonization of standards is present, it can be seen that the problem of domestic in-process testing becomes more of a non-issue. If all countries have the same standards for testing, there is less justification in demanding that such in-process testing take place domestically. It should be possible to use expert panels, or members of the code organization to formulate desirable testing standards.

While an indentity of national safety standards will probably be impossible in some areas, a waiver system accepting "comparability" of standards could be established. The code should provide that national standards in the safety field should be promulgated with adequate publicity, that public consultation procedures be available, and that a reasonable delay period be allowed to permit citizen input.

3. Recognition of National Testing

The code should provide for recognition of in-process tests and chemical analyses performed in all countries. The code should make it clear that products tested and approved during the course of manufacture in one country should be accepted without further testing by another country. Certificates granted for the successful completion of tests and chemical analyses would be accepted without reservation by the importing country.

Compliance with in-process testing standards should be monitored by international inspectors supplied by the GATT or a "neutral" international organization; the monitoring organization could check compliance by testing samples provided by the manufacturer, or inspecting the manufacturer's operations during the course of manufacture. It would not seem prudent to leave the task of monitoring to national authorities, who might have a vested interest in encouraging the exportation of their nation's products to improve the balance of payments or for other reasons.

4. Liability Management

A sophisticated system of liability management should be provided in the code to insure that all citizen losses resulting from defective foreign products are compensated as rapidly as losses from domestic product defects.

5. The GATT Standards Code and the Trade Reform Act of 1973

We have gone into some detail on our view of the desirable shape of a GATT code on standards in order to suggest some refinements in the Trade Reform Act of 1973. Our view is that any GATT standards code would have two parts. The first part would be general provisions containing the principles described above of national treatment, harmonization of standards, recognition of national testing, and liability management. The second part would be annexes for each product covered under the pact. Boat safety provisions would, then, be an annex to the more general pact, as would, e.g., pharmaceuticals.

When each annex is negotiated, it would seem that the more nations that are involved, the more successful such a pact would be. Nevertheless, even a two

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