costs. The tariff costs for our subsidiaries in the EEC hit an even higher 22 percent.

Consequently, we have something to gain by the reduction of these tariffs. However, elimination of tariffs alone will not necessarily result in expanded trade.

In addition to tariffs, most international companies have run into many other barriers to international trade. These include taxes, foreign exchange regulations, and protectionist measures, some of them for national security reasons.

Each of these is a roadblock to free trade; all will continue to be roadblocks even if existing tariff restrictions are lowered or eliminated.

COMMONSENSE IN THE COMMON MARKET

The appearance of the Common Market is potentially the most powerful trading block on the horizon of international commerce is very much in the minds of this country's business community. We are aware that we are dealing with a rejuvenated, aggressive competitor whose governments are favorably disposed toward business. The EEC is a competitor whose administrators have demonstrated their willingness and ability to assist business in every possible way. This we believe is commonsense in the Common Market. The Treaty of Rome recognizes that the elimination of internal tariffs alone will not bring about free trade between, and consequent benefits to, its members. But most important of all, the administrators of the EEC and its member governments recognize that enlightened cooperation between business and government is an absolute must for economic growth. Tax exemptions, anti-inflation steps and various fiscal measures have been undertaken by EEC governments in this spirit of understanding and cooperation.

Need we be surprised that business activity in the EEC is inspired by dynamic confidence?

On the other hand, our Government's attitude toward business has been puzzling and contradictory. From what we have seen of recent policies we are apprehensive that the nations which will benefit the most from passage of the Trade Expansion Act may not include our

own.

As an example, we would cite H.R. 10650, the administration's proposed discriminatory tax treatment of oversea subsidiaries.

INCONSISTENCIES BETWEEN H.R. 11970 AND H.R. 10650

If both H.R. 11970 and H.R. 10650 should become law, the prospect of achieving the objectives of the Trade Expansion Act will be severely limited, even to the point of making them impossible.

H.R. 10650 will drastically curtail the ability of all American companies to reinvest overseas in facilities to serve their markets effectively, while their oversea competitors are not only permitted but are encouraged by their governments to invest in new plants and equip

ment.

American companies would not, under the proposed tax bill, be able to compete with trading companies owned by European corporations and selling throughout the world.

In his statement submitted to this committee May 3, 1962, Mr. George R. Cain, chairman of the board and president of Abbott Laboratories said:

Abbott Laboratories and, I believe, most U.S. businesses are in favor of the concept of free trade. We welcome the chance to compete freely in world markets. We cannot live and prosper, however, in a situation where the hands of U.S. companies are bound and our foreign competitors are given free license to enter any and all markets, both abroad and here in the United States. This will be the situation if both H.R. 10650 and H.R. 9900 (H.R. 11970) became law.

RESERVATIONS ON ADJUSTMENT ASSISTANCE

Our company has serious reservations about the adjustment assistance features of the bill, both as to industry and labor.

(a) As to industry, we note that the bill has retained the main safeguard for prevention of hardship to American business which might be caused by increased imports to the United States. Thus no further palliatives are now needed.

One retained safeguard is the "escape clause." If properly administered, this should give sufficient protection to those segments of American industry adversely affected by increased imports to the domestic market.

Any additional "adjustment assistance" would amount to cumbersome interference with the laws of the marketplace and to the overall advancement of our economy.

(b) As to labor, we also oppose adjustment assistance. Existing unemployment legislation can do the job, at least until the need for further assistance is demonstrated.

(c) Moreover, we feel that if any additional aid is needed, the amount will not be known for several years. Would it not be preferable for a future session of Congress to legislate on the basis of fact rather than now on the basis of speculation?

Parenthetically, we would like to mention that under section 211 of this bill it would appear that the Tariff Commission has the exclusive power to determine which articles should be included in each category. The bill would not seem to offer any opportunity for those concerned to be heard on the classification before it is made final. If no hearing is provided by law, we believe this bill should correct such an important omission.

SUMMARY

To summarize, I wish to emphasize again that we at Abbott Labortories welcome free trade. It is absolutely essential, however, that the American business community stride into this new era of free trade with confidence—and on an equal basis. This we cannot do unless the unwise tax provisions dealing with foreign operations are eliminated from H.R. 10650.

This is not the time to experiment on two unknown fronts. Actual experience should be gained from such consequences as may follow the passage of the Trade Expansion Act before any changes are introduced in the tax rules now applicable to the oversea operations of American industry. We believe the future will show that tax laws i as an instrument of national policy, should be used to ease rather than to increase the burden of American industry doing business abroad.

Therefore, we respectfully submit that H.R. 11970 will not, in and of itself, bring about trade expansion for this Nation. Unless our Government radically revises its present attitude toward U.S. business overseas the only trade expansion resulting from this bill may accrue to other countries and not to our own.

Mr. Chairman, thank you for the opportunity to make this statement before your committee.

The CHAIRMAN. Thank you very much, Mr. Crawford.

Any questions?

Thank you very much, sir.

Mr. CRAWFORD. Thank you.

The CHAIRMAN. The next witness is Mr. Tom Morris, National Association of Mirror Manufacturers.

Take a seat, Mr. Morris and proceed.

STATEMENT OF THOMAS H. MORRIS, ON BEHALF OF THE NATIONAL ASSOCIATION OF MIRROR MANUFACTURERS

Mr. MORRIS. Mr. Chairman, my name is Thomas H. Morris, I am president of the American Mirror Co. of Galax, Va., and appear in behalf of the National Association of Mirror Manufacturers which is a national trade association whose members, located throughout the United States, are engaged in the manufacture of mirrors. With me here today is Mr. R. J. Helms, president of the Weaver Mirror Co. of Rocky Mount, Va.

Industry position on H.R. 11970: The National Association of Mirror Manufacturers is opposed to H.R. 11970 for a number of reasons but primarily because it would give the President power to eliminate entirely the import duty on mirrors.

The U.S. mirror industry and import competition: So that I may indicate to you the serious adverse effects which we are confident H.R. 11970 would have upon our industry, let me describe first the mirror industry in the United States. I am hopeful you will not consider me imprudent if I say that our industry is a highly efficient one. We are thoroughly automated and we have productive capacity several times the current U.S. market.

As a result, extreme competition pricewise occurs within the industry. In fact the cost of glass represents well over half the manufacturer's sale price for a mirror. There are approximately 30 major manufacturers of mirrors in the United States.

Although we do not have the exact figures, we estimate that about half of the mirrors in the Nation are produced either in Virginia or in North Carolina. Already foreign competition is a serious problem for us.

Many if not most of our companies are operating at a loss. With plants abroad now as fully automated as our plants, it has become possible for the price of imported mirrors to be continually lowered. The average foreign value of mirrors in 1962 according to the import statistics of the Bureau of the Census was only 60 cents per square foot and the average foreign value has been declining consistently in recent years from 82 cents in 1952.

Listed below is a table which indicates the decline in foreign value of imported mirrors.

87270-62-pt. 2—15

Average foreign value per square foot imports of mirrors over 144 square inches

Source: Bureau of the Census Commodity Classification 5230000, 5230005, 5230100. 5230105, 5230200, 5230205 combined.

With the depressed condition of the U.S. industry and the declining average value of imported mirrors you might well inquire: How can you operate at all under such condition? The answer is that at present the import duty on mirrors provides us with a measure of protection which partially equalizes our much higher costs of production than exist abroad. Mirrors which are imported measuring more than 144 square inches are dutiable under tariff paragraph 223 on a squarefoot basis but not less than 19 percent ad valorem.

This 19-percent duty is the effective rate of duty for all practical purposes and has been reduced from 45 percent ad valorem since 1947. Under tariff paragraph 224 an additional duty of 212 percent ad valorem is imposed on beveled and decorated mirrors, bringing the total to 2112 percent ad valorem in the case of such mirrors.

As you are aware, under the Custom Simplification Act which is expected to become effective January 1, 1963, there will be established a flat 20-percent ad valorem duty on all imported mirrors measuring more than 144 square inches.

It is this approximately 20-percent duty which maintains us in a near competitive position. If H.R. 11970 is enacted and the President eliminates entirely the import duty on mirrors which the bill authorizes, then the price of imported mirrors in the United States should decline approximately 20 percent of the declared average for eign value. We know this would be runious.

To illustrate my point an interesting but depressing dollar-andcents comparison may be made between domestic and foreign mirror prices when the two compete in the U.S. market. As I indicated previously, about half of U.S. mirrors are produced in Virginia and North Carolina.

U.S. manufacture of mirrors from a cost standpoint probably is more economical in these two States than elsewhere. However, even in the heart of our own mirror-producing industry it is possible for foreign-produced mirrors of like size, kind, and quality to be offered for substantially less. We have obtained the following price comparisons on mirrors delivered to furniture manufacturers in Virginia and North Carolina:

These prices make it apparent why the U.S. mirror industry is frightened beyond description at the prospect of H.R. 11970 being enacted. With the foreign prices at levels indicated above, even with the present rates of duty, the advantage which the foreign suppliers would acquire in the event the import duty should be further reduced or eliminated would be so great that the small advantage which domestic manufacturers now possess because of their reputation for reliability and in being able to make prompt delivery would be

overcome.

Glass duty increase: As you are aware, earlier this year the President increased the import duty on some of the types of glass used by mirror manufacturers. There was no compensating increase in the import duty on mirrors manufactured from the same types of glass. We do not oppose the increase in the import duty on the glass because we are convinced that the increase was justified. However, this does make more critical the import competition problem because frequently we find that imported mirrors are sold in the United States for little more than we are required to pay for the glass.

Automation and wages: Formerly many U.S. industries were able to meet foreign competition notwithstanding the much lower wages paid abroad because of higher U.S. productivity and advancement in automation. We are convinced that productivity today in the manufacture of mirrors in foreign countries is on a par with that existing in our domestic plants.

Just as U.S. mirror manufacturers are fully automated, so are our foreign competitors who have and use the same machinery as we use. Therefore, because of this stepped-up automation which has occurred abroad not only in the mirror industry but in other industries, wages paid both here and abroad should be entitled to increased weight in determining what should be an appropriate rate of import duty.

Most imports of mirrors measuring more than 1 square foot are imported from Belgium and most imports measuring less than 1 square foot are imported from Japan. The average hourly earnings in Belgium for nonmetallic mineral products is 60 cents. The average hourly earnings in Japan for nonmetallic mineral products is 35 cents. This compares with the U.S. average hourly earnings for nonmetallic mineral products of $3.28, according to the Yearbook of Labor Statistics for 1961 of the International Labor Office.

Recommendations concerning H.R. 11970: (1) Continue all provisions of the current trade agreements program until June 30, 1963. Although there is broad support for a revised trade program, we find little support for H.R. 11970 in its entirety. Many Members of the House who voted for the bill publicly stated that they did so because they did not have the opportunity to vote for something that they liked better even though expressing disapproval of many of the provisions

of the bill.

Truly, there has not and there could not be a proper evaluation of this far-reaching measure in so short a time. I understand that the committee received approximately 125 requests to testify and that because of the number of requests not more than 15 minutes could be allotted for oral testimony to any witness other than governmental witnesses.