but the way the provision is included in the House bill is an empty gesture. In order for both Houses of Congress to be assured of an opportunity to vote on affirming a Tariff Commission recommendation not accepted by the President within the time limit provided, such action should be authorized to be taken by means of a privileged resolution. Certainly if the Tariff Commission has made a finding of injury to the domestic industry and the President has not accepted that finding, all Members of Congress should have an opportunity to vote on the matter. As now provided in the House bill, I consider the procedure comparable to a congressional authorization which is not followed by a congressional appropriation.

3. COMMON MARKET RECIPROCITY SHOULD BE REQUIRED

It is recognized that the announced objective of H.R. 11970 is the obtaining by the United States of reduced or eliminated tariffs from the Common Market countries in return for reduction and elimination of duties which the United States might grant. However, there is no provision guaranteeing that we obtain genuine reciprocity. For example, the existing Common Market duty on confectionery is 30 percent ad valorem. The U.S. import duty on confectionery is 14 percent ad valorem. We think that before the President should be allowed to negotiate downward further our own low 14 percent duty a required prerequisite should be the reduction of the existing 30 percent Common Market duty on confectionery to 14 percent. Of course, the same principle should apply to all commodities and not just confectionery. In short, in the case of categories or commodities wherein the Common Market duty is higher than the duty the United States imposes on comparable products, we urge the committee to require the Common Market or other country with which negotiations are to be commenced to lower its duty to the U.S. level on the same commodity before negotiations may even commence. What could be a fairer request?

4. ANY TARIFF REDUCTION AUTHORITY SHOULD BE LIMITED TO

20 PERCENT

Actually we believe that in the case of most commodities, the United States already has reduced its tariffs to dangerously low if not critical levels and that there are few commodities in the tariff schedule on which a lower tariff is justified. However, if the several suggestions we have recommended under items 1, 2, and 3 all are approved, we feel that the Congress could authorize additional tariff reductions not to exceed 20 percent. Over the years when Congress has authorized tariff reductions they have been in amounts approximating 20 percent. Certainly the broad 50-percent reduction urged by the President and the complete elimination of certain tariffs should not be approved and we see no basis why authority should be granted for a reduction of tariffs of more than 20 percent of the rate in effect on July 1, 1962, now that many tariffs already are at dangerously low levels.

5. ELIMINATE THE "MOST-FAVORED-NATION" PRINCIPLE

Of all of our international tariff policies, I believe that the mostfavored-nation principle is one of the most unsound. As you know,

under this principle when the United States negotiates a tariff reduction with any country in the world, we are required to give the benefit of the reduction to every other country in the world other than Iron Curtain countries. To us this neither makes good sense nor is good business. Earlier in my testimony, I illustrated how this works in the case of Mexico. Here we have a country with whom we do much trading. Mexico is not a member of the General Agreement on Tariffs and Trade but nevertheless gets the benefits of all of our concessions to any other country and is not required to grant anything in return. The most-favored-nation principle may be sound as to those countries which are members of GATT even though we are not completely convinced that it is sound. Certainly it is not sound in the case of the many other countries of the world who are not members of GATT but who obtain the benefits which the United States and other countries grant to countries which are members of GATT.

6. THE ADJUSTMENT ASSISTANCE PROVISIONS OF THE BILL SHOULD BE

ELIMINATED

About one-third of H.R. 11970 deals with tariffs and trade. The other two-thirds pertains to providing special assistance and benefits to workers and industries injured by this legislation. It is not conceivable that the U.S. Government should want to develop and place into effect a plan which it knows, recognizes, and admits is going to seriously injure American workmen and industry and then to provide crutches for the injured workers and industry. The entire adjustment assistance provisions of the bill should be deleted and the relief to injured industries and workmen should be in the form of increased tariff protection or import quotas.

7. EXTENSION OF THE ACT SHOULD BE LIMITED TO 2 YEARS

If Congress is to give the President broad power in the field of tariffs and not fully assume its constitutional responsibility, the exercise of this power should be reviewed at least every 2 years to determine whether it is being used judiciously and discreetly and in the interest of the United States and to determine whether or not the granting of the power should be continued. A 5-year extension as provided in the bill is too long.

8. The bill should specifically prohibit further tariff reductions on items on which it is apparent that the import duty either already is too low or should not be further reduced.

Items on which it is apparent that there should be no further reduction should not be left to the discretion of administrative officials. Instead import duty reductions on these items should be prohibited specifically. Confectionery definitely is one such item.

We know that there are many other such items, although, of course, it is not our function to speak for other industries. It would seem that it would be sensible to list all such items in one amendment. I cannot overemphasize how important we consider this last recommendation. When it is apparent that the duty on confectionery and other items should not be further reduced, we are opposed to administrative discretion but instead urge legislative direction.

87270-62-pt. 2

CONCLUSION

Let me restate that we think the sensible solution to the problem is an extension of the current program until June 30, 1963, primarily because of the hurried consideration and general lack of understanding of the broad provisions of the bill. For example when the matter was considered on the floor of the House, we found that many of the Members of the House did not understand the difference between the peril-point provision of the law which prevents the lowering of duties and the escape clause provision which is a means of providing relief in the form of increased duties to industries which have been injured. Likewise we found that many Members of the House did not recognize the difference between the peril-point provision of the current program and the proposed new provisions of H.R. 11970. Under the current program, the peril-point provisions do provide some protection to the domestic industry. Under H.R. 11970 the proceedings, although similar in nature, are entirely advisory without any binding effect.

Finally, we believe that Government officials have not adequately represented U.S. business interests in international tariff negotiations. We feel our country has more often than not given more than it has received and as a consequence the United States has been the loser. Therefore, good judgment dictates withdrawal of present authority and certainly not the granting of vastly increased authority as called for in H.R. 11970.

The CHAIRMAN. Thank you very much.

Senator CURTIS. Mr. Chairman; how many people are engaged in the confectionery industry, Mr. Steinberg?

Mr. STEINBERG. As indicated here, sir, we have 79,800 employees, which was an average in 1961.

Senator CURTIS. I know it is very important. I believe that the candymaking industry is the largest employer in the city of Lincoln, Nebr.

Mr. STEINBERG. Yes, sir.

Senator CURTIS. And I know by exhibit 8, the average wage paid, according to your table, is $2.18 an hour and there isn't a foreign country that pays as much as a dollar.

Mr. STEINBERG. That is right, sir.

Senator CURTIs. All of the ingredients used by your industry are agricultural?

Mr. STEINBERG. That is correct. We are one of the largest users of agricultural commodities, dairy products, of any industry in the country.

Senator CURTIS. That is all, Mr. Chairman.

The CHAIRMAN. Any further questions?

Senator WILLIAMS. Mr. Steinberg, I merely want to say you have done an excellent job in condensing your recommendations and they certainly will be considered by the committee.

As I understand it the peril point should be retained and strengthened?

Mr. STEINBERG. Yes, sir.

Senator WILLIAMS. And you are recommending the act be extended for 2 years, rather, than the 5 years by the administration?

Mr. STEINBERG. Yes, sir.

The CHAIRMAN. Those points mentioned by Senator Williams are your main recommendations or amendments to the present bill?

Mr. STEINBERG. Our prime recommendation would be that the present law be extended until June 30, 1963, but if the committee in its judgment feels that this bill should be put forth then we believe these recommendations would strengthen the legislation.

The CHAIRMAN. I am sorry to interrupt, but we have a schedule here we have to adhere to.

Thank you very much, sir.
Mr. STEINBERG. Yes, sir.

The CHAIRMAN. The next witness is Mr. L. Russell Cook, Chocolate Manufacturers Association of the United States.

Will you take a seat, sir, and proceed.

STATEMENT OF L. RUSSELL COOK, VICE PRESIDENT, CHOCOLATE MANUFACTURERS ASSOCIATION OF THE UNITED STATES

Mr. Cook. Mr. Chairman, may I thank you for this opportunity of presenting our views.

My name is L. Russell Cook. I am president of the Ambrosia Chocolate Co. in Milwaukee, Wis.; vice president and chairman of the executive committee of the Hooton Chocolate Co., in Newark, N.J.; vice president of the Chocolate Manufacturers Association of the United States, and appear before you today as chairman of that organization's tariff committee.

The Chocolate Manufacturers Association is a national trade association composed of chocolate manufacturers responsible for the production of an estimated 80 percent of all the chocolate manufactured in this country.

The purpose of my appearance is to tell you some of the reasons that lie behind our strenuous opposition to the trade expansion bill, H.R. 11970. We are certainly not at odds with the basic objective of stimulating trade and the general economic health of our Nation. We do not disagree with the broader objective of joining the free world to the economic advantage of all of its members. Neither do we quarrel with the hopeful objective of drawing the relatively underdeveloped countries of the world into the advantages to be gained through stimulated international trade. We do object to H.R. 11970 as a means of reaching these universally desired goals because we do not believe it can serve as a vehicle in their direction.

We believe this bill to be discriminatory to some segments of our industrial complex and self-consuming to our country as a whole. We believe, also, that it would represent an abdication of its responsibilities by the Congress.

Since many have come and will yet come before you with arguments as to the effect of this bill on the general welfare of our Nation, I would like to defer the broad question without deemphasizing it, and risk the acquisition of selfish interest by first telling you wherein our industry would be damaged by passage of H.R. 11970.

We do not believe that we are greatly different from other members of the vital U.S. food industry, but specific illustrations in our own backyard will serve to point up an area of sensitive danger to the manufacturers of all foods and to the farmers of this country who raise most of the ingredients these manufacturers use.

Among the laws of our country is one which says, in effect, that it is wrong for a supplier to sell the same product at a different price to each of two customers who in turn compete with each other, if such price differential will lessen competition or will threaten to do so.

For instance, a sugar refiner would be violating the law if he were to sell sugar to one chocolate manufacturer at 8 cents per pound and to a competing chocolate manufacturer at 9 cents.

The reason is obvious: It just isn't moral or fair. It is discriminatory and therefore is justifiably outlawed.

Yet our Government not only allows us to face this identical situation from foreign competition, but aids and abets it by lack of compensating tariff protection. As a result of legislated sugar controls we pay more than twice the price at which sugar is available to the rest of the world.

Illustratively, the New York Journal of Commerce quoted sugar in the United States on February 28, 1962, at $9.40 per hundredweight. On February 24, 1962, the London Public Ledger quoted a London price of $3.69 per hundredweight. What does this mean in making chocolate?

Chocolate formulas contain on the average of 45 percent to 50 percent sugar, so it is easy to figure that U.S. manufacturers have a higher cost by $2.56 to $2.85 per hundredweight than their British and European counterparts.

Gentlemen, my company specializes in manufacturing chocolate coatings and similar products for the manufacturers of confectionery, biscuits, and ice cream, and we would lose any customer on our books if we were high in price by only 20 percent of that difference. Nor is

that all.

Almost two-thirds of all the chocolate made in this country is milk chocolate, and a similar situation exists in milk-another product whose price is artificially raised to us as a result of subsidies. Illnstratively, the Daily Dairy Market Report of the Agricultural Marketing Service of the U.S. Department of Agriculture quoted 28 percent butterfat dry milk solids (the kind we use in milk chocolate) at 37 cents per pound on February 23, 1962.

On February 28, 1962, the Danish export price reported in the trade was 23.3 cents per pound. What is the effect of this difference on chocolate costs?

FDA standards for milk chocolate require a minimum of 12 percent whole milk solids, and average milk chocolate will run from this level up to 15 percent and higher. Using these two levels, our milk chocolate costs are from $1.64 to $2.05 per hundredweight higher than our foreign counterparts as a result of our subsidized milk prices.

If you add together just these sugar and milk penalties that we pay as a result of current laws, our costs of milk chocolate are from $4.20 to $4.90 per hundredweight higher than those of our foreign competitors. This difference compares with a total current cost of from 27 to 32 cents per pound of this type of chocolate, 15 percent of it, in other words.

Gentlemen, is this what you'd call fair competition? Certainly if such a situation existed among our own manufacturers, someone would quickly land in jail.