Source: Statement by Albert Pezzati, secretary-treasurer, International Union of Mine, Mill, and Smelter Workers. MUSHROOM GROWERS COOPERATIVE ASSOCIATION OF PENNSYLVANIA, Re: Trade Agreements Extension. Hon HARRY F. BYRD, Chairman, Finance Committee, Kennett Square, Pa., June 23, 1958. United States Senate, Washington, D. C. DEAR SENATOR BYRD: In order to conserve the time of the Finance Committee, by not requesting the privilege of making a personal appearance, this statement is offered for inclusion in the hearings record, and for consideration of the committee in making amendments to H. R. 12591. This statement is authorized by the board of directors of this association whose members produce more than half the mushrooms grown in the United States. Since annual imports of canned and dried mushrooms into the United States represent, when in their fresh state, an amount equal to at least 10 percent of the domestic annual production of fresh mushrooms, the price to the farmer has been subject to many drastic declines. This situation is further aggravated in times of economic recession. This cooperative was formed at a time when farm prices were depressed. Knowing full well the impact of low-priced imported mushrooms on the welfare of the American producer, it has represented their position before the Congress on many occasions, starting with the Tariff Act of 1930. Rates of import duty established in 1930 saved the industry from collapse during the early years of the great depression. However with the enactment of the Reciprocal Trade Agreement Act of 1934 and the 1935 bilateral negotiations for a trade agreement with France resulting in a drastic tariff reduction, any sustained stability in the industry was rudely upset. Until World War II came along, financial distress among mushroom growers was the rule rather than the exception. As the extension of the Reciprocal Trade Agreements Act came along the use of "reciprocal" became somewhat obsolete; bilateral agreements became multi lateral; the "most favored nations" became beneficiaries of what had been at one time intended as bilateral dealings. GATT (General Agreement on Tariffs and Trade) became the agency deciding the fate of the United States mushroom farmer and continues to do so. "Peril points" were provided, but few domestic businesses were successful in averting the damage done as a result of the actions taken under the Trade Agreements Act by the United States delegation to GATT. In at least one case, where the United States raised the tariff to protect an American industry and the skills of workmen engaged in it, "compensatory" duties were adjusted downward on certain other items of export by that country. The administration of the Trade Agreement Act has put many small businesses to a great economic disadvantage. As administered small business has suffered, and being relatively small has been unable to receive the consideration it believes it is entitled to at the hands of our own Government. Canned mushroom tariff rate adjustments downward were made as follows: 1930 act.. 1936 trade agreement. 1948 GATT_ 1951 GATT_ 45 percent ad valorem plus 10 cents per pound We urge the Congress, if the act is to be extended, to give consideration to amending it along the following lines: (1) An extension of less than 5 years as specified in the House bill. With the building up of many industries in foreign countries through our technical assistance program and United States financial aid coupled with the low-wage rates in these countries, a long-term enactment could deprive American businesses of quick relief from low-priced foreign competition. (2) Provide the United States Tariff Commission with ratemaking power. Since tariffs are, or originally were, based on the economic needs of American producers, not originally designed as a political weapon, it seems they should be administered by a factfinding body responsible to the Congress. If the Interstate Commerce Commission has the right to govern transportation rates, which it has, then it would seem to be equally reasonable for tariffmaking powers to be entrusted to the Tariff Commission. (3) The right to impose quotas on imports of any commodity. Certain foreign agricultural products have been subjected to the imposition of drastic quotas under another act of Congress; oil imports are at present restricted to protect domestic companies in their explorations; our State Department, for 2 years, has made what is termed "an arrangement" with Japan restricting the quantity of women's blouses to be imported lest domestic manufacturers do battle to have a substantial tariff increase made. This is one case in which it is charged to be entirely without the realm of the Trade Agreements Act. (4) Eliminate authority for any further tariff reductions, but retain the right for increases where warranted. As a result of several tariff-cutting sessions, it would seem that bottom has been reached, and any additional concessions would be close to total free trade. We finally urge upon the committee that every consideration be given to the reestablishment of proper safeguards for American businesses. Our foreignaid program has been of great assistance to those countries helped. Under it they have established many industries which now supply goods formerly exported by the United States. As our scale of living has advanced, our costs have increased to the point where we have priced ourselves out of some foreign markets. Respectfully submitted. By WALTER W. MAULE, Secretary. The CHAIRMAN, COMMITTEE ON FINANCE, PURPOSE OF STATEMENT It is the purpose of this statement to present the viewpoint of the lead pencil manufacturing industry relative to pending legislation which would permit further possible reductions in lead-pencil tariff rates. This statement is submitted by the Lead Pencil Manufacturers Association, Inc., 60 East 42d Street, New York, N. Y., on behalf of the 18 lead pencil manufacturing companies of the United States, comprising 13 association member companies and 5 nonmember companies which have specifically approved of this statement. A full list of the participating companies is attached to this statement as exhibit A. Nature of product BACKGROUND OF INDUSTRY The lead pencil manufacturing industry is approximately 100 years old in the United States. During this period, the lead pencil has been the basic writing instrument of education and industry at an economic, consistently low cost to users, in striking contrast to the general price inflation seen in other consumer products. The lead pencil is a precision-made instrument, composed of up to 40 ingredients which are put through more than 125 operations to bring to the public the writing tool with which it is so familiar. Among the better known ingredients are California incense cedar, sheet brass, crude and synthetic rubber, graphite, clay, waxes, adhesives, pigments, lacquers, and packaging materials. The industry is a substantial contributor, relative to its size, to the import trade through its foreign purchase of clay, graphite, rubber, waxes, and other raw materials. Makeup of industry The lead pencil manufacturing industry is a small industry. The 18 manufacturers, who account for the entire production, range in size from firms employing less than 50 persons to those having upward of 500 employees devoted to pencil making. In total, the industry employed more than 5,000 persons as of January 1, 1958, and its payroll amounted to almost $18 million in 1957, representing 54.8 percent of the industry's $32,800,000 sales during that year. The 18 manufacturers of lead pencils in the United States have an investment in land, buildings, production equipment, and inventories in excess of $75 million. In 1957, the industry paid taxes of more than $2 million to Federal, State, and local agencies, aside from the taxes paid by its employees. It should be noted that manufacturers of lead pencils and components thereof are important local employers in scattered areas of the United States. In Connecticut, New Jersey, Pennsylvania, New York, Georgia, Tennessee, West Virginia, Kentucky, Missouri, and central California there are local communities heavily dependent upon this industry. ESSENTIALITY OF PRODUCT With the development of modern industry and industrial methods, and regardless of the creation of newer types of writing instruments and writing machines, the lead pencil has shown no decline in its essential importance to our national life. Pencils are indispensable operating supplies for every branch of American life, and are essential to the maintenance of practically all functions and operations of cooperative life and business. They are required for the entire student population. They are indispensable in the pursuit of all trade and commerce, for the use of financial and insurance organizations, for the operation of all transportation and communication services and systems and for public utilities, and by all operating departments of the Federal, State, and local governments. Because production of all machines, machine products, and construction of every type starts on the drawing boards, the lead pencil is a basic tool of the designer and draftsman in preparing his original sketches, finished drawings and blueprints. The products of the industry are used not only in offices and drafting rooms, but black lead pencils, colored and copying pencils of many types are used in all factories for planning, supervising, and directing production, and for recording production data on which workers are rated and compensated. The wood-cased pencil is a product which meets all of the standards of essentiality laid down by the War Manpower Commission in World War II, except that it is not directly utilized for combat purposes. In a large measure, it is almost like a machine tool; neither is used directly in combat, but both are essential to the manufacture of combat materials. Actually, huge quantities of pencils go into combat areas along with other small but indispensable items. A review of lead pencil import figures during the past 50 years will show clearly that in 1914 and 1940 this country and its allies were abruptly cut off from all foreign supplies of lead pencils. Had not American manufacturers been able to fill the critical need for general and special pencils required by all civilian, military and industrial elements, a truly serious situation would have resulted. Maintenance of the pencil industry and its skills on a standby basis, to be activated only in time of war, is impossible. Competitive industry CURRENT INDUSTRY CONDITIONS The lead pencil manufacturing industry in the United States is a highly competitive, low-profit industry. It is almost wholly dependent upon the domestic market, since it is today effectively shut out of almost all of its former export markets. In addition, domestic manufacturers are unable to compete, pricewise, in the few export markets still open to them because of the substantially lower cost advantages enjoyed by foreign producers. Rising costs Industry costs for both material and wages have continued to rise through the years, 1955, 1956, and 1957. A recent survey shows industry costs over the past 25 years to have increased on an average of almost 200 percent. These cost increases from 1933 to the present time have far exceeded the 1933 tariff rate on imported lead pencils. The industry has barely managed to survive by improvement of its processes and equipment to the maximum possible extent. Export and imports Our industry is now more than ever vulnerable to foreign competition, in both export and domestic markets. Because of the industry's difficulties, caused by keen competition, low price levels, a production overcapacity, and the fact that exports have been drastically reduced, the industry continues at the “perilpoint," or below, under present tariff rates. Any further reduction of lead pencil tariff rates would greatly increase pencil imports and destroy the domestic industry. Even under present rates, foreign manufacturers continue to increase their share of the American market. They do not need lower tariff rates to be effectively competitive in a normal, peacetime economy. The reasons for this are clear. Our domestic pencil products have no important differences in appearance or performance to shield them from being displaced by closely comparable imports. Foreign manufacturers are equally mechanized and have equivalent productive skill. Their production per manhours is equal to ours. However, according to official Government figures, the average hourly earnings for individual workers in the United States is $2.08 while in Japan it is $0.22, and in Germany it is $0.55, and this substantial wage gap will probably increase as higher wage rates come into effect. The effect of this tremendous disparity in wage rates can be judged by the fact that payroll represents over 54 percent of the industry's dollar volume. Since the close of World War II, the grossage of imported lead pencils has increased substantially with each passing year. In 1955, the increase over the preceding year was 33 percent; in 1956, it amounted to 47 percent; while in 1957 (the first 10 months), the increase was 19 percent. Since 1945, import duties on lead pencils have been cut by 50 percent. To reduce further these tariff rates would cause dire hardship to all facets of the American lead pencil manufacturing industry. CONCLUSIONS The lead pencil manufacturing industry of the United States earnestly opposes legislative provisions that permit further reductions in import duties on pencils or pencil leads. The lead pencil industry is already at the peril point, and must have for survival at least the present tariff protection for the following reasons: 1. The import duties in all important classifications of lead pencils have already been reduced a full 50 percent as permitted under earlier trade act amendments. In addition, it should be recalled that the effectiveness of the remaining specific duty has been greatly weakened through years of monetary inflation. 2. The industry's products are articles of prime essentiality and of strategic necessity. 3. Since the industry continues in serious difficulty because of rising costs, loss of exports, and intense domestic competition, it is clear that a large influx of foreign pencils, which would inevitably follow a further reduction in duty, would be fatal to American manufacturers. 4. The American pencil industry cannot convert its main productive facilities into the manufacture of any other product: its machinery can be used only to make pencils. 5. The total dollar volume of the American pencil industry is so small that if foreign-made pencils captured the entire domestic market the resulting benefit to international trade would be insignificant, yet American workers would lose wages in excess of $18 million each year, government would lose annual industry taxes of more than $2 million, and a century-old industry, essential to the nation in time of war and peace, would be destroyed. JUNE 24, 1958. LEAD PENCIL MANUFACTURERS ASSOCIATION, INC., Chairman, Foreign Trade and Tariff Committee. EXHIBIT A LEAD PENCIL MANUFACTURERS IN THE UNITED STATES American Pencil Co.,1 Lewisburg, Tenn. Richard Best Pencil Co.,' 211 Mountain Avenue, Springfield, N. J. 1 Commonwealth Cedar Company, Inc., Shelbyville, Tenn. Joseph Dixon Crucible Co.,1 167 Wayne Street, Jersey City, N. J. Empire Pencil Co.,1 Shelbyville, Tenn. Eberhard Faber Pencil Co.,' Crestwood, Wilkes-Barre, Pa. L. & C. Hardtmuth Co.,1 Bloombury, N. J. Mallard Pencil Co., Georgetown, Ky. National Pencil Co., Shelbyville, Tenn. The Red Cedar Pencil Co., Inc.,1 215 Second Avenue, Lewisburg, Tenn. UNITED STATES SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Re amendment 6-23-58-E. Hon. HARRY FLOOD BYRD, Chairman, Committee on Finance, United States Senate, Washington, D. C. June 24, 1958. DEAR MR. CHAIRMAN: It is with a sense of great urgency that I appeal to you and your committee to give favorable consideration to an amendment I have introduced to H. R. 12591, the Trade Agreements Extension Act of 1958, which the Committee on Finance is presently considering. The amendment introduced on June 23, 1958, is a simple one. It would apply the present tariff quota on woven woolen fabrics on a fabric category basis rather than on a total and overall import basis which is now the case. As you know, Mr. Chairman, the present tariff quota was applied in 1956 and resulted from the havoc which unrestrained woolen imports had caused the domestic woolen and worsted industry. Such imports had largely brought about a 61-percent decline in the domestic industry's employment between 1947 and 1956. During that same period the production capacity of our woolen industry declined accordingly-looms by more than 50 percent, woolen spindles by 47 percent, and worsted spindles by 56 percent. Since 1947, 132 woolen mills have been liquidated and in excess of 100,000 wool textile jobs have been lost. It was this tragic decline of a former strong American industry which brought about the tariff quota of 1956. Under the terms of this quota, however, all the 14.2 million pounds of wool fabrics allowed to enter the country at a low rate of duty can be concentrated in one of a few types of woolen goods. In other words, the quota is on total imports and not on each type or weight of wool imports. It fails to make any provision against the concentration of imports in different categories of fabrics. 1 Members, Lead Pencil Manufacturers Association, Inc., 60 East 42d Street, New York, N. Y. |