This decline has been caused by a trend toward hatlessness among women and competition of other hatmaking materials such as velvet and fur felt bodies, substantial quantities of which are imported.

Domestic producers have been unable to meet this competition with price reductions, as evidenced by table III, of manufacturing costs, based on a dozen 2ounce bodies, the unit of largest production. Today's net selling price for this type of body is $5.65, from which must be deducted selling and promotion costs. TABLE III.-Cost of producing one dozen 2-ounce hat bodies

Note particularly the high proportion of direct labor cost which must compete with drastically lower foreign wage costs, if tariffs are reduced through authority of H.R. 11970. Although total costs of producing this type of hat body in 1961 is the same as 1953, this is entirely due to the currently depressed price of wool noils, now selling for 0.0719 cent per ounce compared to 0.1042 cent in 1953. Steep and inexorable labor increases make our cost structure extremely vulnerable if and when the market price of wool noils returns to levels prevailing 10 years ago.

Note also that efficient management has maintained overhead and administrative expense at approximately the same per dozen as in 1953. On the other hand, labor expense is now 34 percent of total cost compared to 19 percent in 1953. Table IV provides average hourly wage rates for selected years.

TABLE IV.-Average hourly wage rates

1948.

1953.

1961...

$0.938 1.258

1.786

At the present time, and since World War II, imports of wool felt hats and bodies have not been substantial. Table V indicates these imports for recent years.

TABLE V.-Imports of wool felt hats and bodies, foreign value in dollars

There are, however, substantial reasons to believe that imports could readily become a serious threat to the domestic industry.

1. In the years prior to World War II, when imports were virtually cut off, imports enjoyed substantial portions of the domestic market ranging from 80 percent in 1929 to 40 percent in 1936.

2. The declining domestic millinery market has not been attractive to importers (see table I).

3. Volatile nature of domestic demand for specific weight, colors, sizes, shapes, and finishes have made importers reluctant to bring large amounts of foreign hats into the country, even though the landed cost prices might be lower. For this reason, imports are largely limited currently to the basic dark colors such as blue, black, and brown in standard shapes and finishes.

4. These staple colors, shapes, and finishes, however, comprise 60 to 65 percent of entire consumption of women's wool felt hat bodies, and the domestic

industry could not economically survive by supplying only the requirements for bodies of special color and design. If tariff reductions are made, millinery manufacturers will find the price differential so attractive that they will undoubtedly find ways to channel the whims of fashion into the readily available imported items.

5. European and Japanese manufacturers utilize the same types of machinery available in this country, thus canceling any opportunity to offset vastly higher labor costs in United States with more efficient production processes.

Basically, our industry must express its opposition to H.R. 11970 because of the probable disastrous effect of import competition. We recognize the beneficial intent of the legislation to retain and improve our world trade position. We do not believe, however, that it is the intention of Congress to legislate entire domestic industries out of existence, however small they may be. Based on the foregoing facts, it is our considered opinion that this will be the result of any increased foreign competition.

It has been stated by administration spokesmen for the bill that the trade adjustment features will provide relief to adversely affected industries. We submit that the proffered technical, financial, and tax assistance would be useless to an industry which, to qualify, must be already weakened to a point where it could not pay back loans, absorb technical assistance for an already efficiently operating manufacturing operation, or benefit from tax credits. The amount of Government control that would accompany the proffered aid is alien to our way of life, and could lead to Government encroachment on private enterprise.

We advocate these specific changes in H.R. 11970 as now written:

1. Eliminate the so-called trade adjustment features for industry.

2. Strengthen the escape clause to positively remove articles from the President's proposed negotiating list when the Tariff Commission finds a threat of serious injury to the domestic industry.

STATEMENT OF CARL H. DONNER, PRESIDENT OF THE HATTERS' FUR CUTTERS AssoCIATION OF THE U.S.A. AND PRESIDENT OF THE CHAPAL DONNER CORP., 29 CLOVER STREET, NEWARK, N.J.

I am president of our trade organization, the Hatters Fur Cutters Association of the U.S.A., and I am also president of the Chapal Donner Corp., which manufacturers fur for felt hats, using as its raw material principally the fur of rabbits and hares, the bulk of which is imported from foreign countries.

THE HATTERS' FUR INDUSTRY

I have been engaged in this business for over 40 of the 170 years that my family has been in the hatters' fur trade. In order to serve the men's and women's fur felt hat trade in this country, we have always been engaged in international trade. All of the members of this industry are thoroughly familiar with foreign business methods and factories, and many of us have established agents who act for us in such countries as Australia, France, Germany, Italy, and Great Britain. The reason for this is that few rabbits and hares are collected in the United States and we must, therefore, have well-established foreign connections. All of the raw rabbit and hareskins that we import are on the free list. Our interests naturally lie entirely with the hat trade of the United States, and the position of the entire hat industry in this country will be not only weakened but actually endangered if the provisions of bill H.R. 11970 are exercised.

UNI)UE TARIFF EXPERIENCE OF THE HATTERS' FUR INDUSTRY

Through most of its long life, this industry has been faced with low-cost foreign competition. We have had tariff protection which has fluctuated rather widely and the tariff laws have always been a matter of vital concern to us. The tariff on our product was successively reduced from 35 to 271⁄2 percent and finally to 15 percent. During and immediately following the war this made little difference. but since 1949 European firms were able to resume production and the rising tide of imports caused considerable harm to our industry. We appealed to the Tariff Commission, and in 1952 we were granted a measure of relief, which

tended to equalize the difference in wage costs between the European industry and that in this country. This modification worked very well inasmuch as it reduced imports to a tolerable level without, however, shutting them off entirely, so that competition with the European product continued. Neither we, nor, I am sure, any other industry in the United States, fear competition providing we are not asked to start with a severe cost handicap. Certainly, it has never been our desire to take refuge behind a tariff wall so high that all foreign competition would be excluded. By the same token it seems only fair that where a large cost differential exists because of the higher labor rates in this country, this cost differential should be equalized so that our own factories are not at a disadvantage. It was so in our industry from 1952 until 1958 when the Tariff Commission recommended the withdrawal of the modification, and we were again forced to operate under inadequate protection. The 3 years that have elapsed since the withdrawal of the modification have seen foreign imports expand to such a degree that this industry is suffering losses and is in greatest jeopardy.

TARIFF REDUCTIONS UNDER H.R. 11970

Our experience is unique because we have had both a carefully worked out tariff formula which was fair to both ourselves and our foreign competitors, and, during the last 3 years since the withdrawal of tariff relief, we have already undergone the same troubles that many other industries will suffer if H.R. 11970 is enacted. As far as our industry is concerned, any furthr tariff reductions under this bill will spell the end of the industry in this country. This will be the experience of many other U.S. industries if the tariff cutting powers of H.R. 11970 become effective. In fact it is acknowledged by the administration that such will be the case, and for that reason they have included in the bill some measures for assistance to firms and to workers, which unfortunately are rather inadequate. Our company and others in this industry have suffered through a number of years of inadequate tariff protection, and have made every possible effort at diversification and cutting of costs to meet foreign competition. We have been harmed not only by the increase of imports, but by the fact that in order to prevent our business from being taken over entirely by foreign suppliers, we have been selling below cost with resultant losses which cannot be indefinitely continued. In such a case, what value is it for us or for any industry similarly situated, to obtain tax relief or be permitted to borrow money from the Government? The bill presents no alternative but liquidation with the subsequent heavy losses on items such as special machinery and other costs of liquidation. There is no compensation for this included in the bill.

EFFECT OF TARIFF REDUCTIONS ON THE WORKERS

Similarly, people who have worked in this trade for so many years will be offered two-thirds of their former pay for the sacrifice that they are making. It is true that there is also a retraining program, but what good will this be if the gamble inherent in this bill fails and increased exports do not materialize? It simply means further unemployment. The greatest hardship produced by this bill will be the fact that the older workers, too old to retrain, will be permanently unemployed through no fault of their own. It is also true that bad effects of the bill will weigh most heavily on small enterprises and their workers.

DANGERS FORESEEN

We believe that the long experience of this trade with tariff matters qualifies us to give sound advice about the dangers of H.R. 11970. Not only have we always imported the bulk of our raw material, but many of us have had our skins partially manufactured in Europe under a special tariff definition which permitted goods manufactured up to a certain point to be imported duty free. We are therefore familiar not only with European business conditions but with many of their factories as well. We have watched the phenomenal rise of industry in the Common Market since the war. We are familiar with European wage scales and manufacturing methods. It is this knowledge which prompts us to give warning that the export goals expected to be achieved by the enactment of this bill are very unlikely to be realized. It is one thing for the Common Market countries to group together and reduce tariffs among themselves, since wage differentials between the European countries are relatively minor. It is quite

another thing to speak of reducing tariffs between these European countries and the United States. Whereas the differences between the Common Market countries can be measured in relatively small percentages, the levels in the United States are three, four, and five times higher than those of Europe. Were we dealing with backward nations without the essential skills which are at our command, even such a differential would not be a serious matter. In Europe. however, we are dealing with a group of people whose skills are equal to our own, and the only reason they have not overwhelmed us already is because there has not been time since the war. Given the opportunity presented by lower tariffs, it is simply a question of time before the European Economic Union is able to penetrate almost any of the items that we manufacture. There will be few industries which can overlook as big a differential of wage cost as exists between ourselves and Europe. In fact it is probable that if the tariff barriers were almost completely removed by the European Economic Union, our exports to that area would increase very little.

RECOMMENDATIONS

Everyone must, of course, agree that the objectives of H.R. 11970 are good. Unfortunately, the bill is based on theories that are not workable and will not produce the happy result of increasing exports by a much larger margin than the increase in imports. We believe that a bill could be drawn which would permit fair competition between ourselves and foreign countries without crippling a large segment of the U.S. industries. The basis of such a bill would have to be a moderate tariff which would level off the wage cost differential between the United States and other countries. This too would not be infallible, and it would be most important to retain both the escape clause and the peril point provisions of the present law.

We further believe that Congress should never again relinquish its control over tariff questions, as we have found that it is intolerable for any industry to live under the constant threat of tariff changes which are not based on actual conditions within the industry but are based on other international considerations. Through the deep cuts that have already been made in the levels of the U.S. tariff barrier, the value of the tariff in international negotiations has been largely dissipated.

The nations of the Common Market will well understand such an approach. They are even more familiar with methods of protecting their own industries than we are, and are much more ready to use them. They will not come to the bargaining table with any idea that our exports to them will be permitted to increase at the expense of their own industries. They are already taking from us the largest share of the trade with other nations of the world. With this too we have had our experience. At various times our trade has had profitable business with such countries as Argentina, Brazil, and Canada. All of these nations now depend almost entirely on Europe for their supplies since we cannot compete on an equal price basis due to our high labor costs.

Reduced to its fundamentals, the success or failure of H.R. 11970 depends entirely on the estimate that it will result in a greater increase in exports than in imports. Based on our own practical experience, we believe this to be a dangerous gamble with little chance of success. The harm that will be done to the United States will be hard to undo, and our prestige will suffer when necessity forces us to restore some of the tariff cuts in order to prevent disaster. Much more time is needed to study this complex problem and it would be much better to extend the present act until a sounder measure can be prepared.

The CHAIRMAN. The next witness is Mr. Kenneth M. Plaisted of the National Board of Fur Farm Organizations, Inc. Take a seat, sir, and proceed.

STATEMENT OF KENNETH M. PLAISTED, GENERAL COUNSEL, NATIONAL BOARD OF FUR FARM ORGANIZATIONS, INC.

Mr. PLAISTED. Mr. Chairman and members of the committee, my name is Kenneth M. Plaisted. I am appearing here today in the capacity of general counsel for the National Board of Fur Farm

Organizations with offices at 152 West Wisconsin Avenue, Milwaukee, Wis.

I might say it was originally the intention of Mr. Roy Harman from Christianburg, Ky., to be here with me this morning. However, his mother was taken ill and he was unable to join me.

This organization represents 49 State, regional, and marketing associations, the 6,000 members of which are engaged in the domestic raising of mink and fox, and who are now producing an annual crop of approximately 7 million mink pelts having a sale value in excess of $125 million.

Due to the brief time which has been allotted us to state the views of our industry with reference to the bill now before this committee, I will make no attempt to review in specifics the particular sections of the bill before the committee, nor will I embark on any general discussion of basic foreign trade philosophies.

These issues, I am certain, have been forcibly brought to the attention of this committee, and were thoroughly aired in the extensive hearings held by the Committee on Ways and Means of the House of Representatives.

As to our views regarding the broader provisions of the trade bill, I respectfully refer the committee to our testimony presented before the Committee on Ways and Means of the House of Representatives.

In view of the foregoing, therefore, my single purpose in appearing before this committee today, Mr. Chairman, is to emphasize the importance of retaining that provision of H.R. 11970 which extends the prohibition of the importation of mink and fox and certain other furs into the United States which are the product of the Union of Soviet Socialist Republics or of Communist China.

The specific provisions to which I refer is contained in the present provisions of section 11 of the Trade Agreements Extension Act of 1951, as amended, which section reads as follows:

SEC. 11. The President shall, as soon as practicable, take such measures as may be necessary to prevent the importation of ermine, fox, kolinsky, marten, mink, muskrat, and weasel furs and skins, dressed or undressed, which are the product of the Union of Soviet Socialist Republics or of Communist China.

The above-quoted section, Mr. Chairman, was, in effect, omitted in the original draft of H.R. 9900 (now renumbered H.R. 11970) as submitted by the President.

However, by action of the Committee on Ways and Means of the House of Representatives, the embargo provision was, again, in effect, restored by the House bill as the bill is now before this committee.

I use the term "in effect" because while the specific wording of section II of the Trade Agreements Extension Act of 1951, as amended, has not been directly inserted in H.R. 11970, the House amendment changed the repeal section (sec. 257) of the present bill, to allow for the continuance of the Russian fur embargo.

A repeal of the Communist fur embargo, which embargo has been in effect since 1951, would have serious psychological effects on the current delicate condition of the domestic mink market which is presently in a depressed state, as well as causing the very direct and tangible result of adding even greater quantities of mink skins to the domestic market which is already saturated with mink imports from friendly nations.