An international agreement of the importance of the one that would be implemented by H.R. 9042 should have been negotiated as a treaty or a convention rather than signed, as it were, in a cow pasture by two heads of government, as an executive agreement.

There is great danger that an undesirable precedent will be established if this executive agreement is implemented by simple legislation as proposed here. The area of executive agreements would be widened and the constitutional advice and consent of the Senate to international agreements, requiring two-thirds vote for approval, would be greatly diluted.

It is unfortunate that this agreement which otherwise may have. fewer objections than would lie against similar agreements with other countries, for which it would provide a precedent, should take the course mapped out for it from the beginning; namely, the easy way. In other words, it is much easier to make an executive agreement than to negotiate a treaty or even to go through the procedures of a trade agreement under the trade agreements legislation.

In addition to that, there has been what appears to me to be undue haste. I, personally, except by fortuitous circumstance, received no notice of the hearings. They were evidently called on extremely short notice, contrary to the honored and accepted practice of this committee. It seems to me that great harm may be done to due process if this bill is passed under these circumstances.

Beyond these objections there is the further one of discrimination in behalf of a particular private group with respect to a remedy against possible injury that might result from operation of the agreement. This legislation would establish a separate form of treatment for the automotive industry, much more favorable than that provided for in the Trade Expansion Act of 1962 which would continue to apply to all other industries.

Thus would be established a pernicious form of favoritism. The Tariff Commission would be bypassed and the President would make the determination of injury and remedy. Thus would the power of Congress to regulate the foreign commerce of the United States be further concentrated in the hands of the executive branch of the Government. The Tariff Commission is an agency of Congress, created by Congress, to help Congress do its work. Shifting of an important aspect of the Tariff Commission's function to the President, as this legislation would do, would weaken the control of the Congress over a responsibility placed specifically in its hands by the Constitution.

Mr. Chairman, as I have indicated, the economic conditions that might justify free trade between the United States and other countries are present in much greater degree between the United States and Canada than between this country and any other countries. Labor costs, while lower in Canada than here, are nevertheless much nearer the levels prevailing in this country than in any other country of the world.

Nevertheless, this fact does not justify the methods used in seeking free trade in automotive products. These products have no special character that places them in a privileged position; nor does the apparently light opposition to the agreement justify using the executive agreement as the means of bringing about free trade. The establish

ment of precedents should always be considered with a degree of caution that appears to be lacking in this instance.

There would be nothing to stop a similar agreement with any other country if some favored interest should think it desirable. The easy way is certainly not always the best way, and in some instances may be the worst, and I believe in this instance it is.

This, in my judgment, is the case in the present instance.

The procedure might be extended to other products in our trade with Canada, or it might be extended to other countries with respect to automotive products or to other countries with respect to other products.

Mr. Chairman, we would be circumventing almost completely, or at least the way would be open to circumventing almost completely, the machinery which has been established for the negotiation of trade agreements.

If this course were followed, it would open the door to a series of ad hoc executive agreements free from even the mild control that Congress exercises over regularly negotiated trade agreements. Mr. Chairman, that concludes my statement.

I say it is based entirely on the precedent that we fear would be established if this legislation were adopted implementing this agreement.

Senator LONG. Thank you very much, Mr. Strackbein.

I believe this concludes this morning's hearing. They will be adjourned to 10 o'clock Monday morning.

(The following communications were made a part of the record of the hearings at the direction of the Chair:)

RUBBER MANUFACTURERS ASSOCIATION,
New York, N.Y., September 10, 1965.

Subject: H.R. 9042, the Proposed Automotive Products Trade Act of 1965.
Hon. HARRY F. BYRD,

Chairman, Committee on Finance,

U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: Attached is a statement prepared by the Molded and Extruded Products Division of the Rubber Manufacturers Association concerning H.R. 9042, the proposed Automotive Trade Act of 1965.

In submitting this statement for inclusion in the permanent record of the Senate Finance Committee's hearings on the subject legislation, the Molded and Extruded Products Division sets forth its opposition to H.R. 9042, principally the tariff modification provisions of the measure.

The Molded and Extruded Products Division is composed of 80 American rubber companies engaged in the manufacture of various rubber products used as automobile components. Most of these companies are small businesses without Canadian production facilities. As such, they would suffer serious injury if H.R. 9042 were to be enacted in its present form.

We therefore urge your support of the division's recommendations—namely, an exemption for molded and extruded rubber products from the tariff modification provisions of the bill-that are set forth in the attached statement. Favorable action by the Finance Committee on these recommendations will allow American independent rubber parts manufacturers to maintain a viable position with their Canadian competitors in the sale of these products.

Sincerely,

GEORGE A. WHITE,

Secretary, Molded and Extruded Products Division.

STATEMENT OF THE MOLDED AND EXTRUDED PRODUCTS DIVISION OF THE RUBBER MANUFACTURERS ASSOCIATION

The Molded and Extruded Products Division of the Rubber Manufacturers Association is composed of 80 American rubber companies, most of which are engaged in the manufacture of various products used as motor vehicle components. Among the motor vehicle parts produced by these manufacturers are motor mounts, bushings, brake cups, window channeling, body mounts, and accelerator and brake pedal pads.

As independent motor vehicle parts producers, the members of this division are greatly concerned over the effect that H.R. 9042, if enacted, would have on their businesses.

The main purpose of H.R. 9042 is to implement the original agreement between the United States and Canada proposing the integration of automotive production facilities in North America.

It has been claimed that both immediate and long-range benefits are to be realized from the enactment of H.R. 9042 by American independent parts manufacturers due to the "projected increase in total vehicle sales in the North American market." Supposedly, this new business would provide increased domestic sales opportunities as well as open up new export markets in Canada for U.S. independent parts manufacturers.

According to the U.S. Department of Commerce, more immediate benefits will be realized to the American parts manufacturers by termination of the Canadian duty remission scheme and by termination of the duty itself which formerly ran as high as 25 percent ad valorem for automotive parts. These actions will supposedly allow American independent parts manufacturers to compete more effectively with "less efficiently produced Canadian parts."

In its report on this measure, the House Ways and Means Committee stated its belief that "over the long run, the absence of duties, the removal of the former rigid Commonwealth content requirement, the rapid growth of the Canadian markets, and the anticipated reduction of prices of cars to the Canadian consumer will lead to increasing sales for U.S. parts manufacturers."

This industry loudly applauds the attainment of these expanded sales opportunities as are viewed by proponents of H.R. 9042 and would lend its strong support to any means of attaining them.

We fear, however, notwithstanding the assurance of the Department of Commerce that "the independent parts industry will not be adversely affected," that American molded and extruded rubber parts manufacturers will indeed suffer injury if H.R. 9042 is enacted in its present form.

The basis for this fear is simple and well founded. Contrary to what may be true concerning Canadian manufacturers of other types of automotive parts, the Canadian manufacturer of molded and extruded rubber products is not inefficient and he is not unable to compete with his American counterpart.

Quite the opposite is true. American molded and extruded parts manufacturers having no Canadian production facility are admittedly unable to compete with Canadian manufacturers in sales of these products in Canada. Moreover, removal of the 8%-percent American duty on imported auto parts will ease the establishment of new markets in the United States for products of Canadian manufacture, which can only work to the serious disadvantage of the independent American rubber parts manufacturer. We believe this danger to the American rubber industry was in part recognized when tires and tubes were exempted in the original agreement.

In addition, we believe that the great disparity in labor costs favoring the Canadian manufacturer is such that even removal of the 25-percent Canadian duty on imported auto parts would not grant American manufacturers a viable position regarding sales of their products in Canada.

The increase in sales potential that enactment of H.R. 9042 would provide for molded and extruded rubber parts of Canadian manufacture would result in substantial production increases to meet this demand. The increased production, moreover, would provide greater economies of scale to Canadian manufacturers, thus enhancing their ability to compete in the overall North American market. Another obvious factor contributing to their economic well-being is that American auto manufacturers and their Canadian subsidiaries-in order to honor their commitment to the Canadian Government concerning "Canadian value added" in the production of vehicles and parts-will seek expanded Canadian sources of vehicular parts, perhaps even suffering a slight price differential in doing so.

It is already becoming apparent that purchases of vehicular parts are being diverted to Canadian manufacturers at the expense of their American counterparts. It is quite likely that this trend will increase.

The great majority of members of this division are small businesses not having the necessary capital to invest in a production facility in Canada. Granted that if they were able to do so the probability of injury from H.R. 9042 would be lessened, the simple fact is that their size does not permit such an expansion of facilities.

SUMMARY OF OBJECTIONS

From the above, it can be readily seen that H.R. 9042, rather than enhance the sale of American-made molded and extruded rubber products, would serve the opposite end and would—

1. Reduce the domestic sales potential of molded and extruded rubber parts to be installed in American-built motor vehicles because of the increased availability of low-priced imports from Canada occasioned by their lower labor cost;

2. Dampen the opportunity for growth by American molded and extruded rubber parts manufacturers, the net result of which would be the exportation of jobs to Canada; and

3. Diminish export opportunities to independent American manufacturers. Possibly indicative of the effect of this bill on the overall molded and extruded rubber parts industry is an estimate of one of our member companies whose present volume of sales is approximately $22 million per year. Based upon the stated intent of one auto manufacturer to divert his company's purchase of automotive parts to Canada, this particular rubber company will be denied more than $2 million in increased sales potential in just the first year after enactment of H.R. 9042. As soon as the full effect of the bill would be realized, such a loss would undoubtedly be even greater.

RECOMMENDATIONS

Having related to the Finance Committee the probable effects of H.R. 9042 upon this industry, we now request that certain action be taken.

In full respect of the extent of injury that H.R. 9042 poses to American producers of molded and extruded rubber products, we ask that the Finance Committee amend this measure by providing a specific exemption from its tariff modification provisions to products of this class, similar to the exemption already granted to tires and tubes. Specifically we seek such an exemption for the following product lines:

It is our understanding that many products of this industry, such as those described in the first paragraph of this statement, would be covered by other TSUS item numbers which are rather general in nature. These include the

In view of the fact that the above three categories are so comprehensive in nature, we ask that a specific verbal instruction be included in H.R. 9042 prescribing that for the purpose of tariff modification provided for in the bill, "molded and extruded rubber parts for automotive purposes" are to be specifically exempted from tariff modification as it affects any of the above three classes of products.

If in the judgment of the Finance Committee such an exemption cannot be granted, we then request the formal commitments be obtained from American motor vehicle manufacturers stating that-in future production runs-there

will be no reduction below the present ratio of the value of domestically produced rubber parts used in American-made vehicles.

In other words, recognizing that the Canadian Government was given certain guarantees by the auto manufacturers, we believe that American parts producers should in all equity also be afforded assurances that their domestic markets will not be unduly disturbed.

Another matter which we pose for consideration of the Finance Committee is the fact that H.R. 9042 proposes a broadening of the tariff-modification authority of the President, allowing him to subject to congressional veto eliminate duties on replacement parts as well as on original equipment parts and allowing him to eliminate both classes of duties applicable to trade between the United States and other countries with which it is engaged in trade.

If this broadened authority were to be granted, it could further deteriorate the American independent parts manufacturers' growth potential through the introduction of parts into America by countries with even lower labor and manufacturing costs than Canada.

Bearing in mind that the full economic impact of this proposed agreement between the United States and Canada is yet to be realized, and with the attendant dangers to certain domestic industries that apparently lie within it even in its present form, it is in our judgment extremely hazardous and premature to grant this additional authority. Thus, we feel and strongly urge the Finance Committee that these provisions should be deleted from the bill.

This division expresses the gratitude of its members to the Finance Committee for its recognition of the problem we have related within this statement and for whatever action the committee may seek to undertake to provide the necessary relief to these manufacturers.

(See also supplemental statement p. 369.)

CASTLE RUBBER CO.,

East Butler, Pa., August 31, 1965.

Subject: Bill H.R. 9042.

Hon. HARRY FLOOD BYRD,

U.S. Senate, Washington, D.C.

MY DEAR SENATOR BYRD: Since we are a small operating company with approximately 400 people and have found it necessary to be involved with all of the current problems of business, including a rubber workers' union shop, we feel it imperative to raise objection to the existing conditions permitting import of rubber products which we currently make for the automotive industry.

Certainly one cannot live in the world today and be at all openminded without realizing that all peoples of all lands seek something better. We, naturally, are privileged to live in this country, even though at times conditions arise which make it seem that other ways out might be much better than the immediate solution which is adopted.

We are aware that the labor rate of our Canadian neighbors represents a substantial savings over the rates which we are forced to pay if we are to operate our business. In addition, they, no doubt, have other material benefits from their so-called mother country in the imports of natural rubber from their various possession affiliates. Likewise, we note there is an exemption covering the production of tires and tubes which, it seems, is quite apropos.

We can't quite understand why our Government has seen fit to favor the few; and again, small companies such as ours in the industrial rubber production division, should suffer lack of protection and, in all probability, lose much of our current automotive parts business to our good neighbors on the north.

Further, it would seem to us that the companies who are presently better able to pay these prices (the auto manufacturer), or the differential in parts produced for local consumption, will be able to circumvent and not be required to buy locally due to the price differential.

Unless there are other concessions which should benefit small industrial rubber parts producers such as ourselves, of which we are not aware, unquestionably, allowing the above act to stand in its present form will work a great hardship on many of us.

Would like to offer also for your consideration, the fact that we are already forced to sell at really low prices due to competition and the many available sources—with whom we must compete within the entire U.S. manufacturing orbit. The rubber molded business has been priced much to close for years. Putting into practice the act referred to above certainly will make it worse and