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(Table entitled "Exports to Japan in 1957, by States" is as follows:)

Exports to Japan in 1957, by States (in order of magnitude)

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The CHAIRMAN. Thank you, Mr. Stitt.
Any questions?

Mr. CARLSON. Only this, Mr. Chairman. I had the pleasure of visiting Japan and several Far East countries last fall, and I agree with you regarding the importance of Japan as far as it being what you say it is, a keystone of the entire free world in that area.

I think what happens to Japan and India will affect that entire section.

Mr. STITT. I am in complete agreement with you, sir.

The CHAIRMAN. The committee then will recess until 10 o'clock tomorrow morning.

(By direction of the chairman the following is made a part of the record :)

GALLARD-SCHLESINGER CHEMICAL MANUFACTURING Corp.,
Long Island City, N. Y., June 25, 1958.

Re Trade Agreements Act of 1958.

Hon. HARRY F. BRYD,

Chairman, Committee on Finance,

United States Senate, Washington, D. C.

DEAR MR. SENATOR: This company is engaged in both the manufacture and import of chemicals and, in this dual role, we would like to express our opinion of the Trade Agreements Act of 1958.

We

The benefits to be obtained from reciprocal trade in terms of international understanding and international prosperity, have been stated before you many times, by people more qualified than ourselves. All we can do at this point, is to reiterate that this is not merely a theory but is actually the case. cannot continually export merchandise to the various countries of the world without giving them an opportunity to sell some of their merchandise in this country. It is still very significant to us that, in most areas of the world, the United States still sells more than it buys. It is also true that a very large portion of the things we import are commodities which are just not available in this country; such as coffee, cocoa, etc., etc.

In the chemical industry, it is true that imports have grown during the last few years. However, even at this point, imports are insignificant as compared with the overall chemical industry. Imports have done a very constructive job in reestablishing competition where very little existed. We keep reading in the newspapers about the high cost of vitamins and antibiotics. Imports have helped to bring the price for these raw materials to a more realistic level, which can only benefit the ultimate consumer.

Some of the most vociferous opponents of reciprocal trade only object to imports insofar as these imports compete with items that they, themselves, produce. The president of one of our largest chemical companies, who has been most outspoken in his desire to have imports curtailed, has been the largest importer of Russian benzol. As a matter of fact, not only have they been importing this benzol from behind the Iron Curtain, but they have been bringing it in by the tankerload. The fact that they have been encouraging the Communist economy and taking unfair advantage of their fellow producers, has not disturbed them in the least. However, the minute importations of chemicals that compete with his company, he finds to be very distressing.

We believe that the partisan approach to this problem is not the proper one. We must consider the worldwide implications of our actions and, in this regard, we feel that we either cooperate with our allies throughout the world or, we will find ourselves alone and shunned. We will then be concerned about what has happened to our friends and where we are going to sell our machinery, our automobiles, our chemicals, and the products of our farms.

We recommend Senate approval of H. R. 12591 in its present form, without amendments to debilitate its intent and its workability.

Yours respectfully,

F. E. GALLARD.

NEW ORLEANS COTTON EXCHANGE,
New Orleans, June 26, 1958.

Hon. HARRY F. BYRD,

Chairman, Senate Finance Committee,

Washington, D. C.

DEAR SENATOR: Throughout its long history of service to the cotton trade, the New Orleans Cotton Exchange has always been mindful of the welfare of the producer. Believing that a renewal of the Reciprocal Trade Agreements Act would assist the cotton farmer particularly in disposing of his surplus, the exchange, on October 9, 1957, adopted the enclosed preamble and resolutions, for which we now bespeak your favorable consideration.

H. R. 12591, authorizing the President to renew these agreements is now before the Senate Finance Committee. We are convinced that a renewal of these agreements will greatly benefit the producers of cotton and assist materially in solving the present cotton problem.

We therefore earnestly urge that H. R. 12591 be reported without amendment, and sincerely request your strong endeavors to prevent crippling amendments on the Senate floor.

Thanking you in advance for your kind cooperation, I am,

Sincerely yours,

WM. J. LODWICK, President.

COPY OF PREAMBLE AND RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF THE NEW ORLEANS COTTON EXCHANGE OCTOBER 9, 1957

Whereas the reciprocal trade agreements program, inaugurated in 1934, has been successful in promoting international trade throughout the world and has resulted in progress and prosperity in our own and all friendly foreign nations; and

Whereas cotton is a surplus commodity and for many years has been an important part of trade between the United States and foreign nations; and Whereas in order that the purchasers of American cotton in foreign countries may be able to buy our cotton surplus, it is necessary for the citizens of these countries to be able to sell their products to the people of the United States; and

Whereas this board is of opinion that the reciprocal trade agreements program is therefore of great benefit to the cotton producers of the United States

and should be renewed beyond its present expiration date, namely, June 30, 1958: Be it

Resolved, That the board of directors of the New Orleans Cotton Exchange respectfully request that Congress approve the renewal of this program for a substantial period by or before its expiration date;

Resolved further, That a copy of this preamble and resolutions be sent to the Senators and Representatives in Congress from Louisiana with an earnest request for their cooperation.

TESTIMONY ON BEHALF OF CATERPILLAR TRACTOR CO. TO THE FINANCE COMMITTEE OF THE UNITED STATES SENATE ON THE RECIPROCAL TRADE AGREEMENTS PROGRAM

The facts and opinions which we shall offer will, we believe, clearly indicate why it is to the particular interest of Caterpillar Tractor Co. and its people to favor freer international trade-more imports as a means to more exports. It is not, however, sufficient to appraise a matter of such importance only in the narrow context of the well-being of one company plus all who in one way or another are favorably affected by its operations. The major consideration must be the welfare and security of the United States as a whole. Insofar as it relates to the affairs of Caterpillar, our presentation should, accordingly, be regarded as more in the nature of a case study than an appeal for direct help by one concern. The facts we cite are believed to be of general application to many other concerns and industries.

In its years of formation, Caterpillar had 2 small plants and employed 2,500 people. Today the Caterpillar organization, which encompasses the United States parent and 9 wholly owned subsidiaries, has 7 domestic plants, located at Peoria, Joliet, and Decatur, Ill.; Davenport, Iowa; Milwaukee, Wis.; San Leandro, Calif.; and York, Pa. Two more plants are under construction, one near Peoria and the other at Aurora, Ill. Four major parts warehouses and 10 emergency parts depots are strategically located throughout the United States. Five other plants are located in Australia, Brazil, and Great Britain. A small subsidiary operates an emergency parts depot in Canada.

At the peak of business in 1957 employment in the entire organization reached a total of 41,500, of which 38,700 were engaged within the United States. Now, in June 1958, this domestic employment has shrunk by 13,800, of which 12,900 were laid off because of decline in business (the balance being attributable to normal attrition).

Worldwide sales have ranged from a low of $13 million in 1932 to a high of $686 million in 1956. In 1957 they were $650 million. For the present purpose however, the more significant aspect of this growth is the extent to which it has been derived from increasing foreign business. In 1956 sales to foreign countries were 37 percent of the total. For 1957 the percentage climbed to nearly 42 percent, and in the last quarter of that year, when a rapid business decline had set in, foreign business exceeded 50 percent of the total. Whereas domestic United States sales fell 13 percent for 1957 as a whole, foreign business increased 9 percent.

Impressive as these figures may be, they do not tell the whole story. In the early part of 1957 our manufacturing capacity was inadequate to meet all demands, and machines were being rationed to dealers. Beyond that, dealers and customers in many foreign countries were, as they still are, unable even to place orders because of exchange controls and other forms of import limitations imposed by their own governments. The major cause of such restrictions is the lack of United States dollars in the hands of countries which need and want the products of American industry. Without such limitations and with a climate more favorable to international trade, the volume of our exports would certainly be substantially higher in amount and larger in proportion to our total business than it was in 1957.

Now, what does this mean to Caterpillar-to those who are related to it as employees, dealers, customers, suppliers, shareholders-to our plant communities to the United States?

Without its export business, Caterpillar would not need the valuable services of at least 40 percent of its people employed in the United States. At the peak of 1957, this would have meant about 15,500 people. Perhaps even more currently important: had exports not held up better than domestic sales during the

latter part of 1957, we would have been obliged to lay off about 4,000 more people or to place more people on a 4-day week for a longer period of time.

Using a 40 percent ratio as a rough approximation of that proportion of our United States production attributable to sales outside the United States, it may also be estimated that, without such business, our domestic payroll for 1957 would have been about $75 million less than it was. Without inclusion of the many supplementary benefits, this payroll totaled $189 million.

The people we employ directly are, however, only a part of the total employment created by the Caterpillar enterprise. In each of our plant locations the needs and purchasing power of our people call for all the usual services which go into the existence and support of a balanced social community. And our purchases of the goods and services of others are a source of major employment in the plants and plant areas of our 5,400 suppliers, most of which would be identified as "small business." The magnitude of this extended effect is indicated only roughly by the volume of our noncapital domestic purchases which in 1957 totaled more than $350 million. Of this amount, for example, $67 million went to the purchase of 434,000 tons of steel in various forms. To the best of our information, this tonnage would require the employment of about 3,500 people in the steel industry. If further examples were to be quoted for other commodities obtained from many smaller industries, the proportion to which some are dependent upon our business would be impressively great.

Accordingly, while some of our suppliers-and many of their supporting industries and services-may not themselves be exporters, we, in effect, are either directly or indirectly exporters for them. And so it is with everything we consume in the processes of production, including the facilities for production. Were it not for our export business, we would not require that 40 percent of our purchased materials, supplies, and services. Neither would we or our suppliers need the additional productive capacity which we and they have been building in order to meet prospective long-term demands.

All of this points to the fact that the jobs of millions of Americans are "protected" not by tariffs designed to obstruct the inflow of foreign goods but by the ability of companies like ours to export. The old days of the walled fortress are gone forever. If we are to help our country by helping ourselves, we need more opportunity to export, not less.

The record of our own company, and that reported for United States exporters as a whole, shows very substantial gain in foreign business in recent years, and we have mentioned how this had to be obtained in spite of a number of unfavorable factors. In more propitious circumstances most of us could have done better, meaning we could have used more United States materials, employed more American labor, made more sales, earned more profit, and paid more taxes. Now we are all facing further handicaps which will affect exports adversely for, at least, three reasons:

(1) The current business downturn in the United States is having a related depressing effect upon the economies of a number of other countries;

(2) The need for imported raw materials and other goods has declined because of reduced consumption within the United States; and

(3) The monetary amounts which are earned by foreign countries through their sales into this country have declined because of the compounding of the lower volume at the lower prices induced by the lessened demand.

Now, deliberately to restrict imports beyond the unavoidably natural causes would not only harm friendly foreign countries, it would operate almost directly to increase the decline in United States exports. And within the United States, it would also lead to prices higher than would otherwise be the case. That, in fact, is usually the very basic purpose of "protection" from imports. As we think in matters of this kind, the test of validity of principle would certainly seem to lie in the effect upon the consumer-upon the great mass of all the people. Obviously, from the viewpoint of the consumer, lower prices are preferable to higher prices-and this is especially so in times like the present.

When a tariff protects an industry by keeping out foreign competition, it may keep people at work in that industry. But at the same time, it prevents the foreign country from earning dollars and thereby prevents it from buying the product of some other American company. Just as many people are kept out of work elsewhere as are kept in work in the protected industry, and the net effect is no gain in national employment-merely a shift. But the unprotected who are injured are not readily identifiable and are not always themselves directly aware of how much they are losing. Theirs is a case which calls for

an understanding Congress able to appraise the clamor of the few against the silence of the many.

We realize that much of what we have said represents an oversimplification of a fairly complex matter, but the basic fact remains: If both United States exports and foreign investments are to be sustained and expanded, there must be more, not less, opportunity for foreign countries to sell whatever they may have to offer to the United States markets. The one and only sound way for any country to obtain dollars is the same outside as it is inside the United States: earn them in the process of creating wealth-by providing goods or services for which the American people will pay dollars.

It is, accordingly, fitting that international trade be made a matter of national policy-aided by a system of law and order which places first importance upon the security of the United States. But total security is made up of many parts, and two of these at least must be considered only in a manner which recognizes their necessary mutuality: military security and economic security. The two are or should be made complementary, and it is sometimes difficult to distinguish between them. They must be consistently coordinated if action on the one is not to impair or defeat action on the other.

Thus, we understand it to be the policy and purpose of the United States to wage peace with all of the means available. Among these are the various activities carried out under the mutual security program: direct military aid, defense support, technical and economic assistance, and others. Accordingly, if we, on the one hand, find it appropraite to extend this kind of aid to any country-building it up so that it may be stronger as an ally or as a customer-there would seem to be little point, on the other hand, of tearing it down under a weakening of the reciprocal trade program.

We also understand that, in one way or another, several friendly foreign countries were induced to start or to increase production of certain metals or other commodities when these were needed for our national security purposes. For the moment that need has passed. But is that really a good or honorable reason why we should now turn on our friends and add to their already growing balance-of-payments difficulties by imposing the additional handicap of higher traiffs, lower quotas, or some other form of restraint upon their opportunities to help themselves?

And won't we need these sources again? Of course we will. But will we be able to regain access? That remains to be seen. Other countries are not going to stand still just because we are having a recession. If they cannot sell to us, they will sell elsewhere. And if they cannot sell to friendly countries, they will sell wherever they can. The Soviet Union is waiting for just such opportunities— has said so and is grasping at them wherever they occur. It seeks to wage its fight for power through every means available and is fully cognizant of the role which international trade can play in world affairs-in alliances and in enmities— in war and in peace. And the Sino-Soviet bloc does not ply its trade on the basis of the principles of western private enterprise. It has larger immediate objectives than the pursuit of profit or the creation of capital. Under the Soviet system, money has a different significance than it does in the free world. Trade loans are being offered at a 2-percent interest rate, terms of repayment are extended beyond what we would consider normal prudent practice; and where mere money interferes, barter is an acceptable way of accomplishing desired ends. The less-developed countries with disposable surpluses are certainly going to have difficulty resisting Soviet offers to exchange these for wanted goods.

This is all part of a declared and mounting Soviet offensive to beat us, not with intercontinental missiles but with intercontinental trade. Soviet technology and industrialization have been advancing more than has been generally realized. Now the weapons of trade and aid are being brought up to the front. And we are losing ground-right now. If the outcome of congressional action is not hard practice more compatible with our ideological talk about international security and freer trade, we stand to lose even more heavily in many ways.

The Soviet Union and its satellites are not, however, the only threat. If we curtail the ability of foreign countries to buy from us, they will turn to other countries for their requirements. Britain, Germany, Italy, and Japan are friendly to us, but that is not going to stop them from being effective competitors for our business in third-party markets. The seriousness of this kind of threat can perhaps be understood only by those who know what it means to lose a market and then try to recapture. It is at best a long, hard struggle. Sometimes it cannot be done at all.

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