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I understand Mr. Trescher has relinquished his time temporarily to Mr. Charles H. Percy, Committee for a National Trade Policy, because of your urgent departure time.

STATEMENT OF CHARLES H. PERCY, PRESIDENT, BELL & HOWELL CO., CHICAGO, ILL., REPRESENTING THE COMMITTEE FOR A NATIONAL TRADE POLICY, INC.

Mr. PERCY. Mr. Chairman, I am appearing this morning on behalf of the Committee on National Trade Policy.

Would it be possible for me to submit this testimony in writing and use the few minutes that we have to just talk from my own experience and present practical examples of some of the problems we are facing in foreign competition and possible solutions for them. Also to report to you on the significance of two meetings I have attended this month? The first one was in Europe early this month.

Senator LONG. May I suggest the witness have a seat there?
Mr. PERCY. Yes. Thank you.

Senator LONG. May I ask, Mr. Chairman, that this statement be incorporated in the record so Mr. Percy may comment from it? Mr. PERCY. Thank you.

Senator FREAR. Without objection, the statement of the witness will be made a part of the record.

Mr. PERCY. The reasons that I feel that it might be more useful to report directly to you on these two meetings are their pertinence and the fact that the discussions embody most of the principles that have been talked about in this committee.

The first was a meeting in Europe early this month with the representatives, top industrialists, of 10 of the Atlantic Community countries, the American delegation being headed by Mr. David Rockefeller, and the European delegation by Dr. Fritz Berg, who is the chairman of the Council of European Industrial Federations.

The second meeting was early this week, 2 days ago, with 13 top Russian industrialists. I think it might be interesting to tell you of my observations made over a period of a day and a quarter of intensive questioning on both sides.

Senator FREAR. Where was that meeting?

Senator FLANDERS. Who did you say these industrialists were?

Mr. PERCY. These were 13 Russian industrialists who are on exchange visits, and Bell & Howell was 1 of 6 companies that the State Department asked to participate so as to enable industrialists from this country to go to Russia and see the counterpart type of plants over there.

The statement that I am submitting in writing this morning is made on behalf of the Committee for National Trade Policy. This committee has 29 directors and they represent the heads of such companies as National Cash Register, General Mills, Gillette Co., Jack McCloy, the chairman of the Chase Manhattan Bank; Tom Watson, president IBM; Ralph F. Straus, director of R. H. Macy. This is a committee of people interested in expanding the trade of this country and they represent a cross section of agriculture, industry, labor and 126 national organizations who believe in this expanded trade policy.

Senator LONG. May I just ask one question there?

Mr. PERCY. Yes.

Senator LONG. I do not mean to be critical but I keep seeing some of the same names appearing time and again.

Is there any limit to how many of these corporations can belong? Some companies appear to belong to all of them. Do you exclude anyone or do you accept everybody who wants to be on your committee?

Mr. PERCY. No, sir; these directors are elected by the committee on invitation of the board and they have agreed to serve for a period of a year or longer in their individual capacities.

These are representatives-they are perhaps not representing the point of view of their company but they are there as individuals. Senator LONG. Yes.

Mr. PERCY. And the membership of the board changes as it does in the board of a company from time to time.

The first examples I would like to present come from my own experience in the photographic industry. This is my 20th year in that industry which is traditionally a highly protected industry.

We have had high tariffs, and the industry point of view has favored high tariffs for the products coming into this country.

I have seen and been in most of the photographic plants of the world. I have been in photographic plants several times in Japan, and seen people making products comparable to ours and earning 30 cents an hour; in Germany, 45 cents an hour; in Switzerland, 70 cents an hour. It is very hard to name a country that does not today manufacture photographic products.

This year I was in a Swiss plant that is our largest competitor from abroad. They extended the courtesy to me in an exchange visit. They visited our plants and I visited theirs. It was very interesting when your committee talked about inflation earlier this morning to see one of the ways that Switzerland has been able to maintain a fairly sound Swiss franc.

In visiting this plant, which was 144 years old and our largest competitor abroad, I was quite surprised to see that of their three-quarters of a million square feet of manufacturing space no plant was older than 8 years, and that the machine tools within that plant were the most modern of any plants I have visited.

I asked them how a company of that size could possibly afford that type of equipment and all new plants. They said "We cannot afford not to. The Government encourages us to keep our equipment and our plants up to date through tax incentives. We are allowed to write off our plants at 15 percent a year and our machine tools 100 percent in the first year of their purchase. This is in contrast with tax laws in the United States that allow only a 212 percent amortization on buildings and 16 to 17 years for machine tools.

I think this is an important way to fight inflation. We can only fight inflation and increasing costs by capital investment and I think it is a sad commentary on this country and its tax system that we tax capital investment at a much higher rate than most other countries do.

As to how a company can meet such competition from abroad, I would like to turn to Bell & Howell's experience.

We have some 4,000 employees. We are the largest manufacturer in the world essentially devoting our efforts to motion-picture equipment. There are well-established industries in England, Switzerland, Austria, Germany, and Japan competing against us.

The first example is a camera with which I am quite familiar, because in this country we used to have low cost labor at one time and I was part of it. Twenty years ago, on the assembly lines at Bell & Howell, I assembled this camera.

I was paid the average wage of the time 40 cents an hour. This was an 8 millimeter movie camera that sold at $49.95, the cheapest price at which we were able to market that camera with 40-cent-anhour labor.

If we priced this camera out today at today's average labor rate in our plants of $2.25 an hour, it would cost better than $200.

This is what causes inflation, if we simply pass these cost increases onto the consuming public.

We recognized that at this rate we could not possibly meet the foreign competion and the competition of our own domestic industries who would do a better job after the war. The challenge issued to our engineering staff, our production engineers, our entire organization was that if we had to price this out, manufacture it and design it the same way we did before, we would be out of business.

So here is the camera that we introduced in 1952. It was introduced at that time with features superior to the features of the other camera, a finer lens, better viewfinder and so forth. With ingenuity of design, of tooling, and a tremendous capital investment and an average labor rate of over $2 an hour, we priced this out at $49.95, exactly the same price as the prewar camera.

Actually this camera today sells for $39.95 because again, not satisfied that we could maintain the market at that price, we constantly worked to decrease our costs by improving our methods.

Now it could be said, and it has been said, that many industries because of their very high labor content cannot compete. I have yet to find an industry that has any higher labor content than our own lens division. We manufacture many of our own lenses in our plant in Chicago.

We never produced them until World War II when we could not buy lenses from abroad and the United States Government asked our company, along with others, to get into the lens manufacturing busi

ness.

In lenses labor is the essential factor. I brought along a finished lens, which is typical, and the total raw material used in the manufacture of that lens.

This is a piece of optical glass, and this is a piece of aluminum bar stock.

We take this glass, mold it into blanks, grind the lenses, turn this aluminum on a screw machine to a mount, and this is the finished product that results.

The raw material costs less than a dollar. The finished lens sells at a retail price of $40.

So the difference is labor.

We recognize that we could not possibly compete with the highly proficient lens manufacturing industry in Japan and Germany, using the same methods that they use.

Therefore, we have used the threat of foreign competition with our own manufacturing executives and design engineers to ask them to develop designs that are ingenious, to have them develop tools that will back up the American worker, employing his abilities in the way an American worker earning over $2 an hour has to be employed, rather than the way he might be used abroad.

This is the only way we are able to compete, and our own lens division knows that we will buy freely from abroad, if they cannot compete, because the customer for the finished product does not care where the lens comes from.

He just wants the end result: pictures on the screen.

Competition from abroad has forced our own lens division (and our supervision admits this) into developing techniques that otherwise they never would have developed.

This is one solid answer that we have found to fight inflation. If we in this country believe in competition, we must then believe in it wholeheartedly, for it is competition that will keep down the cost levels of this country, and that will constantly allow us to increase our standard of living. It does not matter whether it is competition from within this country or from abroad.

In addition, we have just released a new electric eye movie camera that embodies every single feature that a customer would want. This is ingenuity of design at its height, I think.

Here you have no lens setting at all to make. The energy from light, whether it is artificial or sunlight, is converted to a minute particle of electricity, which regulates and runs a meter, which in turn controls the iris. The customer never has to worry about light. He simply shoots.

This camera-in the middle of a recession in an industry that ordinarily might be depressed at a time like this-is back-ordered. We simply can't make enough of them.

When we offer an ingenious product to the customer and the public, they have the money to buy it. Our own company sales in the midst of this recession are 20 percent ahead of last year's, attributable entirely to ingenious designs and our constant effort to keep our cost levels down, and our fighting this battle of inflation rather than simply passing on the costs to the customer.

Regarding the European meeting that I attended, the Europeans called this meeting at a private level. These were key industrialists from 10 European countries. They called it at a private level because they felt we could talk off the record, freely and frankly to each other and express our worries and concerns.

These were leading industrialists who have worked with our country for many years.

They were concerned about the American recession and whether it would spread to them. But their grave concern, the constant questions that came back to us were "Will this recession in American cause America to go isolationist, to raise their tariffs, to try to protect employment at home?

We assured them that this question was receiving every possible consideration by many groups in America, as well as by the Congress of the United States. We showed them that the reciprocal trade bill after all was put in in 1934, and in the testimony that I have read

in introducing that bill, it would appear that one of the major reasons was to counteract the retaliatory action taken against this country when the Smoot-Hawley tariff went in, in 1930.

This was a job creating bill that was passed in order to give the power to our administration to negotiate downward the high tariffs that were raised against our exports at a time when we raised our tariffs against the imports coming into this country. I was positive, I am positive today, that the policy of this country will not change its course drastically overnight, simply because we have a temporary pause in the growth of our economy in this country.

In fact, it would be disastrous to the employment in this country and the 42 million jobs that do depend on export-import trade if we were to raise our tariffs at the very time that others abroad are beginning to lower theirs on a dramatic scale.

The Europeans spent a great deal of time telling us what they intended to do in the Common Market.

These were the men really responsible for creating the Common Market, and they talked at great length about its potentials. If they were to reduce their tariffs in this Common Market on the products coming in from the United States will the American delegations have the authority over a long period of years to negotiate downward the tariffs in this country against the products that they would like to ship to us?

The extension time of 5 years is, in my opinion, on the minimum side. If it were shorter than that, power would be lost to our own delegations negotiating for reductions in tariffs over there. And, after all, we do ship to the common market countries each year, $3 billion worth of products from this country, representing some 500,000 jobs in the United States that certainly we would not wish to place in jeopardy at the very critical time that they have the authority to reduce tariffs over there, if we reduce them here.

I think we should also recognize that they have signed an agreement among themselves to reduce their tariffs to zero as against each country over a period of 12 to 15 years, and this is a far more dramatic step than we are taking in our 5-year extension.

It would almost seem if we had a shorter period of time that we would be in a hypocritical position. We believe in competition as long as it is not competitive with us. It would seem to me to be consistent with our beliefs in competition and free private enterprise. that we would be willing to go even longer.

The last comment I would like to make is in connection with the visit of the Russians. I must admit that we were somewhat skeptical as to whether we should even permit their visit to our plants. We debated it at some length.

In fact when the State Department asked us if we would grant permission to visit the plant, the chief of the Russian mission, who is the deputy chief of the state planning commission or the second in command in charge of all Russian production, was quite surprised that an American company would have the right to say to its Government. "We will or we will not allow you to come into our plant." I spent considerable time with this group of Russians trying to explain to them the concept of private property in this country and the sanctity of it: that if the President of the United States him

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