for vociferous demands from all sides for further restrictions upon United States trade and further undermining of a United States trade policy already seriously weakened by protectionist inroads in the past 10 years. Today we would like to direct the committee's attention to an aspect of United States trade with Japan which must be weighed against the cries of alarm emanating from industries whose difficulties, upon close examination, often have little to do with import competition. This aspect is the stake of American industry, mining and agriculture in the Japanese market for United States exports. The United States-Japan Trade Council has just published a study, prepared by an independent firm of economic consultants, distributing 1957 United States exports to Japan by commodity by State and region of origin. Facts previously not well known or documented were brought to light, adding up to two outstanding conclusions: 1. Every State and region of the United States has profited from exports to Japan; and 2. Every major segment of the United States economy has a stake in maintaining and increasing exports to Japan. American exports to Japan in 1957 totaled $1,226,600,000 which made Japan our best customer after Canada. Over the past 5 years Japan has purchased more of our farm products than any other country, and was our foremost export customer for cotton, wheat, barley, and soybeans. Agricultural shipments in 1957 exceeded $455 million including $217,300,000 in raw cotton and linters, $114,300,000 in grains, $63 million in soybeans and other oilseeds, $19,700,000 in inedible animal oils, $15,700,000 in raw hides and skins, and $9,600,000 in dairy products. Turning to industrial products, Japan in 1957 bought from the United States $240,400,000 worth of iron and steel products, $163,300,000 worth of machinery and vehicles, $61,700,000 worth of petroleum products, $54 million worth of bituminous coal, and $84,100,000 in chemical and related products. The table attached to this statement distributes United States 1957 exports to Japan by State. Led by Texas, 7 States had exports of $50 million to $105 million; 10 States had $20 million to $49 million; 20 States had $10 million to $19 million; and the balance had less than $10 million. These latter, upon examination, prove generally to be States with relatively small populations, where exports were undoubtedly significant on a per capita basis. For your information, Mr. Chairman, the State of Virginia in 1957 exported over $12 million worth of Virginia products to Japan including chemicals, coal, wood, pulp, iron, and steel products and synthetic fibers. 120, 810, 000 108, 603, 000 West North Central: Minnesota, Iowa, South Atlantic: Delaware, Maryland, Dis- East South Central: Kentucky, Tennessee, West South Central: Arkansas, Louisiana, Mountain: Montana, Idaho, Wyoming, Pacific: Washington, Oregon, and California. 104, 978,000 174, 247, 000 73, 949,000 85,991, 000 Main commodities Industrial machinery, iron and steel prod- Iron and steel products, industrial machin- Wheat, soybeans, inedible animal products, iron and steel products. Cotton, chemicals, coal, wood pulp, iron and steel products. Cotton, coal, iron and steel products, and synthetic fibers. Cotton, petroleum products, chemicals, and machinery. Wheat, copper ingots, fertilizer, materials, cotton, and barley. Cotton, wheat, copper ingots, petroleum products, and machinery. The United States Departmentof Labor has estimated that about 3,100,000 American workers are engaged in producing and moving goods for export. On this basis, approximately 175,000 production workers are directly employed in production of commodities destined for Japan. These workers can approximately be distributed by regions as follows: Comparison of employment of this magnitude with total employment in industries competing with imported products from Japan reveals the stake American labor and American farmers have in the trade with Japan. Unfortunately, the voices of those benefiting from foreign trade are seldom heard in the Halls of Congress during trade policy debates. The Japanese market for American goods has expanded dramatically in recent years exports in 1957 exceeded 1950 exports by almost exactly 200 percent. This spectacular increase was not confined to only 1 or 2 products. Over the same years exports to Japan of agricultural products increased by 30 percent. Industrial raw materials increased 29 times; coal and oil 30 times; machinery and vehicles 15 times; and chemicals 4 times. The growth in Japan's market has not ended. The Japanese Economic Planning Board has predicted an annual growth in gross national product of about 612 percent per year over the next 5 years. This means that Japan will require more and more of our products and materials to sustain the growth of its economy. These projections are of course predicated upon the ability of Japan to increase its exports. Without adequate foreign exchange, Japan cannot increase purchases from the United States. I would like to review briefly Japan's problems in this regard. I shall not do so in great detail. In our testimony before the House Ways and Means Committee, a rather complete picture of Japan's trade position was set forth. The committee is referred to these hearings at page 927 for this material. The most striking feature of United States-Japan trade is the gross imbalance, unfavorable to Japan. In 1957 total United States exports to Japan were $1,226,600,000 whereas total imports from Japan were only $602,200,000, making a deficit in commodity trade of $624,400,000. In other words, Japan bought over twice as much from us as we bought from Japan. In the past this deficit has been made up by special dollar expenditures, such as payments for the maintenance of United States troops and offshore procurement by ICA. In 1957, however, the special payments were not enough to cover the dollar gap, and United States defense policies call for further reductions of forces stationed in Japan and hence a decrease in special dollar expenditures. Japan must in the long run look to commodity trade as a means of earning necessary foreign exchange. Trade figures also reveal that trade with the United States is dominant in the overall Japanese trade picture. The overwhelming portion of Japan's deficit was with the United States. These figures demonstrate clearly that if the United States is to continue to maintain present levels of exports to Japan and to increase these exports, we must be prepared to import more goods from Japan, always provided, of course, that these goods find buyers in the American market place. Restrictions upon Japan's ability to export to the United States will have inevitable and serious repercussions upon the earnings of American industry, agriculture, and mining, dependent in part upon exports to Japan. Let me now refer briefly to the political stake of the United States in the health of Japan's economy. Japan is the workshop of Asia. It is also the major American naval and airbase in the Far East. A strong Japan is the keystone of the free world position in Asia. To be strong, Japan must be economically viable. And economic strength, for an island nation poor in resources, means trade and more trade-with all markets, including the United States. Thus for Japan-and for all of us whose business depends upon the Japanese trade the need for liberal United States trade policies is imperative. With this background in mind, the council would like to comment. specifically upon the legislation before the committee. We appear in general support of H. R. 12591, although it contains several provisions which we feel tend to restrict trade and which we urge the committee to drop. We are in favor of the extension for 5 years. Secretary of State Dulles and Secretary of Commerce Weeks both eloquently testified to the necessity of a 5-year period to facilitate negotiations with the European Common Market. The formation of the Market has implications for Japan's trade as well. In 1956 Western Europe absorbed about 10 percent of Japan's exports. The direction which the Common Market will take is as yet unclear. On the one hand, it could develop into a protective union which would exclude goods from outside nations. On the other hand with 27629-58-pt. 1- -32 the increased economic strength gained from cooperation among themselves, the western European nations could develop into an expanding market for imports from other countries. Which direction the market will take is in large measure dependent upon negotiation with the United States, the only other aggregate of economic power capable of bargaining with Europe on equal terms. Japan looks to the United States, as do other nations not members of economic blocs, for leadership in trade negotiations with the Common Market. We also endorse the grant of authority to the President to reduce present tariff rates by 25 percent, together with allied provisions, over the next 5 years in return for reciprocal concessions from other nations. This authority has been wisely used in the past to the benefit of all Americans; we believe it will continue to be so used in the future. Our third specific observation relates not to the reduction of existing barriers, but to the possibility of erecting new ones. It is ironic that the escape clause has come to be as important or more important in public and legislative consideration than the authority to enter into trade agreements. The attention of the members of the United States-Japan Trade Council is inevitably focused much more on the escape clause than on any possibility of further reduction of tariffs. It is difficult to exaggerate the concern generated by this sword of Damocles in international trading circles. In the opinion of the United States-Japan Trade Council it is unfortunate that the administration has seen fit to recommend measures tending to tighten the escape clause. We would hope that it would be changed rather to make it less severe. In particular, the council submits that the segmentation of industry provision has no justification in reason or policy. The escape clause, as it now reads, defines industries in a completely theoretical way that has nothing to do with real workers or real plants and equipment. If a particular commodity meets serious import competition, relief can be granted under the escape clause, even though every company making it had done well in its total production and no workers had suffered loss of pay or jobs. Indeed, the escape clause itself is hardly reconcilable with the theory and purposes of the reciprocal-trade program, or of our free competitive system. We want our industries to meet the challenge of competition by greater efficiency or by diversifying to lines of production where they enjoy greater comparative advantage. Hence, the emphasis on adjustment found in the Douglas and Humphrey bills, with which we are in sympathy. If help to industries affected by foreign competition is needed, assistance to adjust seems clearly the best method. The escape clause, on the other hand, tends to protect the unprogressive and unimaginative industries which do not move with the times. We are not urging repeal of the escape clause, because we recognize that there may be situations where temporary tariff relief to grant time for adjustment is justified. We do urge rejection of the provision which would permit increase of duties based upon the 1934 rather than the 1945 rates. This is a step backward in tariff philosophy, unjustified by any developments of which we are aware. And, for the reasons just indicated, we strongly oppose efforts to deprive the President of discretion to look at the entire national interest, not just the narrow issue of injury to a few producers, in passing upon escape-clause cases. The decrease in time from 9 months to 6 months for escape-clause investigations should be carefully scrutinized by this committee. Past experience would indicate that 6 months is not always enough time to make a thorough investigation. If the committee decides to retain this feature, serious thought should be given to an increase in staff and appropriations for the Tariff Com mission. We fully support the grant of explicit subpena power to the Tariff Commission. We believe this will be of material aid to the Commission in carrying out its investigations, and will tend to insure that its finding are based on complete data. This provision permitting duty increases up to 50 percent ad valorem on duty-free items is a break with the traditional separation between. items on the dutiable list and on the free list. We oppose this on the ground that deletion of commodities from the free list is a matter important enough to require legislative rather than administrative action. It should be considered that most free-list items are raw materials for the use of American industry, or foods not produced in the United States. While we are somewhat dubious, in the light of modern developments in the waging of total war, about the need for the national-defense provision, we have no specific objection thereto. It seems, nevertheless, that the Executive has, or should be provided with, other authority that would be more effective and appropriate than tariff manipulation to support lagging defense industries, if their continued capacity is considered vital. Certainly, the procedural changes in H. R. 12591 are an improvement over the vague language of the present act. It is sincerely hoped that abuse of the national-defense section will not be permitted. This feature of the law should not be used as a substitute for, or an appeal from, escape-clause proceedings. Because of the imperative need for United States leadership in liberalizing and expanding world trade, we trust and believe that this committee, in its wisdom, will confine its attention to improvement in the bill now under consideration, refusing to be distracted by demands to inject protectionist devices into its provisions. The United States-Japan Trade Council appreciates this opportunity to convey its views on this important matter to the Senate Finance Committee. I, personally, thank all of you for your kind and courteous attention. |