But I would caution against the act being so written that, irrespective of consideration of National Security, every company in every industry be protected against the impact of foreign goods. I repeat-the wording of the legislation I would leave in the hands of you competent gentlemen.

I am sure that proper provision can be made for those few instances where individual hardships occur. Bills are presently pending to take care of them. Special considerations on geographical reallocation, on unemployment compensation, on loans, and so forth, can and should be made.

Statistics show the numbers involved are nominal compared with those whose welfare lies in the continuation of large volume export. It is these latter who are the many-the others the few-who need special treatment.

In closing I urge most earnestly favorable action on the continuation of our Reciprocal Trade Act. I urge a minimum of 5 years be included in the bill. Fewer than 5 years will fail to assure ourselves and our international friends that we are truly dedicated to the principles of liberalized trade and may indeed bring to pass a psychology almost as negative as failure to extend the act. We need our international friends. They desperately need our leadership and cooperation at this time. And most of all, and selfishly, we need the continuation and the expansion of our foreign markets. Only through reenactment of our Reciprocal Trade Act can this be assured.

The CHAIRMAN. Thank you very much, Mr. Kohn. Are there any questions?

The next witness is Mr. J. F. Mersereau.

STATEMENT OF J. F. MERSEREAU, FOSTER WHEELER CORP.

Mr. MERSEREAU. My name is James F. Mersereau. I am vice president of Foster Wheeler Corp. I wish to thank the Senate Finance Committee for this opportunity to appear before it in support of H. R. 12591, the Trade Agreements Extension Act of 1958, and to present certain points resulting from the experience of my company in foreign business which may be of interest in connection with the bill now before your committee for consideration.

Our company is essentially an engineering and manufacturing concern. We are engaged in the engineering, design, and construction of petroleum refineries, petrochemical and related plants, and other industrial installations. We design and fabricate marine boilers and condensers for merchant marines and navies, as well as large stationary steam-generating equipment for public utilities and industry. We also design and fabricate heat exchangers, evaporators, pressure vessels, and cooling towers. We supply certain control equipment and are engaged in the nuclear energy field, mainly in the supply of components. Our principal office is in New York City, and we have manufacturing plants at Dansville, N. Y., Carteret, N. J., Mountaintop (Wilkes-Barre), Pa., and Arcata, Calif. We employ approximately 5,000 in this country, apart from our construction business, where our employment figures will range from 1,000 to 3,000 men in this country, and approximately 1,000 on construction jobs abroad.

In connection with our foreign business, we have a wholly owned Canadian subsidiary, Foster Wheeler, Ltd., with a manufacturing plant at St. Catherines, near Hamilton. This subsidiary is engaged in substantially the same business as the parent company and employs about 1,000 people. We also have a wholly owned subsidiary in England, Foster Wheeler, Ltd., London, which is engaged in the same kind of business we are, principally in the sterling area, and employs approximately 4,500 people. Our French subsidiary, Societe Foster Wheeler Francaise, is primarily engaged in engineering, employes about 500 people, but has no manufacturing facilities. Our German company is not active, but can be expanded for engineering work at the proper time. Our English company has recently formed an Italian subsidiary, which is engaged in engineering and procurement in Italy. We have organized a Japanese company, Ishikawajima-Foster Wheeler, in association with our Japanese licensees, which provides engineering services for petroleum refineries and petrochemical plants in Japan. We have licensing agreements for our engineering and designs in France, Germany, Holland, Japan and other countries.

Our subsidiaries are primarily engaged in furnishing services and equipment to the areas served by the respective subsidiary. Through each of the subsidiaries we are able to provide United States engineering techniques and know-how. Further, our subsidiaries have enabled us to obtain business and furnish equipment for currencies other than dollars in areas where the customer would not be in a position to purchase for dollars. At no time have we supplied foreign services or equipment to United States customers in the United States, except for certain specialized items which are not available or manufactured here.

I have taken the committee's time in describing our activities to demonstrate the scope of our work and to show that we are in a position to supply our services, designs, and equipment from foreign sources as well as from the United States. Our primary emphasis has been upon dollar business both at home and abroad. However, our operations are flexible, and we are in a position to supply our services and equipment for foreign currencies where the lack of dollars makes it necessary to do so.

Almost invariably recent inquiries from local or government entitles abroad for petroleum refineries or chemical plants now stipulate that dollar costs be held to a minimum and that financing terms would be desirable. This is understandable, in view of the fact that the installations we supply run into millions of dollars. Because of the shortage of dollars and the tendency of European banking groups to be more liberal with their credits to support their exports to certain areas, including South America, our foreign customers frequently look to Europe, although they would prefer the engineering techniques, materials, and equipment offered from the United States. On our part, we would prefer to supply equipment from the United States, for by so doing we can do a more rapid and efficient job, have reasonable assurances that the equipment will perform according to our duty requirements, and can count on the steady availability of replacement parts. Almost without exception our customers in Latin America prefer United States services and equipment, even to the

extent of paying a premium price in some instances, but the lack of dollar exchange many times forces them to look elsewhere.

With respect to comparative costs, the varied types of equipment going into petroleum refineries and petrochemical plants show little : difference in overall equipment cost between the total equipment as supplied to the foreign customer from the United States or from European or other sources. There is some differential in the cost of engineering services, and in certain items of equipment, where the United States prices are higher than the foreign price, due to our wage rates and overhead, but this is frequently offset by earlier deliveries and the customers recognition of United States quality. We have also noticed that recent wage increases in Europe are comparatively at a higher percentage than here and there may be a much smaller wage differential in the future. This will have the tendency to bring costs more in line.

The projects in which we are interested are designed to meet urgent local needs, will represent an effective and substantial dollar exchange savings in the countries involved, and make an effective contribution to their industrial development. A petroleum refinery through the processing of the crude oil by local labor would represent a saving equivalent to the difference between the cost of crude oil and the cost of the products which would otherwise have to be imported into the foreign country. With respect to a fertilizer plan using local raw materials, the exchange saving is the equivalent to the price of the product which would otherwise have to be imported. Such projects, involving substantial capital costs, provide a large market for United States services and equipment and represent an important element in our export trade. They provide employment to thousands of skilled workers in this country and constitute the potential for our further industrial development. In addition, such projects are important in the development of the foreign country and make it possible for it to increase its own production, thereby contributing greatly to its industrial resources and improvement in the standard of living of its people.

This, in turn, results in further and increased trade and the creation of new markets for our products. In order to permit the participation of our own industries in these markets, it is essential that the foreign countries be placed in a position where they can obtain the dollars to pay for the services, goods, and equipment supplied by the United States. It is obvious that this cannot be a one-way street, and that we must place our foreign customers in a position to obtain dollars for otherwise we cannot possibly sell to them for dollars.

We have seen many instances where, because of lack of dollars, our foreign customers in markets heretofore mainly supplied by the United States have turned to other sources for the materials and equipment they require. We have just completed an ammonia fertilizer plant in South America where a substantial portion of the services and practically all of the equipment was furnished from France on long-term credits. Several large petroleum refineries in the same area recently completed, or in the course of construction, have been furnished by United States engineering firms with European equipment. The Petrobras Refinery at Rio de Janeiro, for which we have the contract, will undoubtedly look to Europe for most of its equipment.

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These projects represent a loss of many millions of dollars worth of business to our United States industries; business which would have been ours if dollars had been available. Other projects in Argentina, Chile, and Colombia, to mention a few, have developed and are developing along similar lines. The Indian Government has projected a large petroleum refinery at Baurani and a large fertilizer plant at Neyveli, both jobs representing millions of dollars in equipment, and will probably have to look to Europe for equipment supply due to shortage of dollars and the attractive financing and credit terms offered by European vendors.

In view of the position of my company worldwide, we have not had much occasion to get into the details of the Smoot-Hawley Tariff Act, or for that matter, the reciprocal trade agreement. I for one am not conversant with the specific provisions of this legislation. Consequently, I lack the background and the knowledge to answer questions of this committee regarding the specific provisions of H. R. 12591. Nevertheless, my company is vitally interested in maintaining our markets for the benefit of our United States operations, and for the supply of our equipment and the equipment of our many vendors from the United States to our customers in Latin America and elsewhere.

The two biggest problems we have confronting us in this respect are the problems of exchange and the problem of credits. As I stated before, these problems are problems for our customers, but obviously, unless our customers obtain the necessary dollar exchange and unless they are able to arrange the requisite financing, where credit terms are necessary, with reasonable assurances of improving their dollar position to repay such dollar credits and financing at their maturity dates, we are not in a position to supply United States services or equipment and must necessarily look to our subsidiaries and to our vendors abroad if we want the job.

It is, therefore, to our interest to support any procedure or action which may be taken by our Government to make available more dollars abroad and in this manner to make it possible for us to take more jobs to provide work for our engineering offices here, to provide work for our plants and employment for our people and to help the many vendors in the United States to provide equipment from their plants here to our jobs abroad, which would otherwise be supplied from foreign sources. We believe that H. R. 12591 would result generally in an increase in our export trade and would assist in preserving to the United States markets for services and equipment which under a restrictionist policy would surely be lost.

It may interest this committee that in my own company's case the expansion of our business abroad has been reflected by a comparable expansion of our business and employment at home. It has similarly contributed to greater business for the many United States companies who furnish us with the varied types of equipment needed for our installations.

At this point I might say that we have not encountered serious competition from the Soviet bloc up to the present time. There have been instances where the Iron Curtain has been active and has offered to furnish our foreign government customers with substanital supplies of equipment on extended credit terms. We understand that Russia,

through Rumania, is supplying a moderately sized refinery in India and has made offers of long-term credits and the supply of services and equipment for a fertilizer plant. We have heard of several similar offers to several of the countries in South America, where, in each instance coming to our attention, there has been an expressed reluctance on the part of the customer to consider the Russian offers. We may be witnessing part of the first phase of the projected Russian economic penetration in Latin America and elsewhere.

This may become more serious in the near future unless we take the action necessary to preserve our markets abroad and make it possible for customers of those markets to purchase from us in ever-increasing quantities the services and materials they prefer to those from other sources. It is obvious to most of us that economic relations and the facilitation of exports and imports and the exchange of commodities between the United States and other countries abroad is essential to maintain not only our close business ties but also our political and military ties for our mutual development and the defense of our way of life.

As your committee may have gathered, our engineering business is closely related to the petroleum industry in the United States. At the risk of repetition of some of the statements made above, and with the permission of the Texas Co., we would like to bring to the committee's attention the statement of Mr. Augustus C. Long, chairman of the board of the Texas Co., which he made to his stockholders recently where he said the following:

The tendency of nations in modern times frequently has been to try, by means of trade barriers, to enjoy the benefits of being sellers without being customers themselves. This is obviously unsound; one nation obtains the money to buy products from another nation only by selling its own products. It is therefore a form of economic suicide to shut out a wide range of imports by means of excessive tariffs and quota restrictions. The purpose of the Trade Agreements Act extension now before the Congress is to avoid doing this.

There are two main aspects to the case for renewal of the act. The first represents the simple dollars-and-cents approach: It is good for the American people in material terms to have this act renewed. Many American firms and workers are dependent on foreign sales of the goods they produce. Some 4.5 million American workers gain their livelihood from foreign trade activity. Since we cannot sell if we do not buy, firms and workers engaged in these activites will suffer if the United States should now abandon its policy of reducing trade barriers.

The second part of the case relates to the leadership position of the United States in the free world. If the Trade Agreements Act is not renewed, or is renewed with excessive protectionist provisions, there inevitably would be a trend toward economic nationalism the world over. American exports would be shut out from many foreign markets. The general posture of the free world as opposed to the Soviet bloc would be weakened.

We believe that stability in our trade policy is essential to the forward planning of all business engaged directly or indirectly in foreign trade. We certainly find this true in our case. This stability is dependent upon the length of time of the Trade Agreements Act extenYour committee has had many presentations with respect to the European Common Market, the European free-trade area, and doubtless much learned discussion of the importance of time with respect to the extension of the Trade Agreements Act. It is submitted that to be effective, the reciprocal trade agreement should be extended for a minimum of 5 years. Without such a 5-year period within which to develop the procedures and to carry out the negotiations to