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I think through education we can counter this perfectly ridiculous oss leaders" type of thing that the Russians are engaging in now, ic ultimate purpose of which is perfectly transparent. .Senator Long. You realize you cannot keep them from pinpointi» certain markets and selling below us if they want to take a loss, her can do this because it is a Government-operated proposition. They do not even have to account to their people for their costs. Thank you. Mr. Percy. Yes, sir. Senator Frear. Senator Carlson? Senator Carlson. I do not want to have any questions. It is encouraging to have a young man come in as one of the busiest executives of this Nation and make a statement that he has made ire: and, as Senator Flanders suggested, I wish many members of ns committee, more members and the Senate and House, could hear i« testimony.

During our 182 years as an independent Nation, we have been lessed because we have had men of vision and courage to build a real industrial plant and to build a great Nation; and sometimes liose of us who sit around this committee hear a lot of testimony bwt what the future looks like; that it looks so bleak. So it is enwraging to get some young man in who not only has vision but he is the courage to go out and act, and I do personally appreciate very iwh your testimony this morning.

You stressed one thing that I think if this committee and this
bngress does not do something about it we have been a little negli-
Bit in this session, and that is on accelerated depreciation.
Mr. Percy. That is right.

Senator Carlson. We are short back of this year about $5 billion i the construction of new plants and new equipment in this Nation, w11 do not believe we are going to be able to compete in this world aless we make some sort of provision to reduce this period of defwiation.

We had a splendid witness here from the University of Virginia, to too long ago, a Dr. Abbott, and I know he made a great impreson on me and on the committee, and I think you rendered a service • only in your statement with respect to competition but in the tax lid.

Mr. Pnicr. You might be interested in the Russian's attitude to

»f<l decreciation, sir.

Senator Carlson. I would like to have it.

Mr. Percy. The concept I had was that they are running a system

''ate capitalism. All productive capacity is owned by the state,

W they recognize the value of capital investment and it is very sim

I? why they are growing at a rate twice the growth of the gross

"tional product of this country, which is a disturbing and alarming

tt,

The Russians told us that the state planning commission recog

*s a socialistic incentive which we would call a profit, though they

not like to use that word. Every plant manager is allowed to

wldjip a reserve for plant and equipment, for plant at the rate of

to 7 percent a year, which is more than double ours. He is able to build up a 100 percent reserve for equipment in 5 years, which 3 times ours.

They take 30 percent of their gross national product and reinv* it back in capital formation.

This country now is down from 20 percent a few years a^ro to 14 percent. And at this rate, the gap is closing very rapidly indeed.

This problem, if we look at the long-range picture, is the thing think this committee should really be concerned with: How can i finance capital formation in this country and provide, incentive business to invest in capital equipment, to fight inflation and anfw other problems we have mentioned today? We really have the an all job of figuring out how we can resist the prevailing: trend of h: tory, because no nation in history to my knowledge has ever mai tained a position of leadership over a sustained length of time, ai no nation has ever been faced with a power that is politically ai bitious and as willing to use its entire economic resources to repla us as Russia is today in the international field.

The Russians told us, in 1972 Russia will be the biggest ami great* productive nation on earth, according to their next two 7-year plar They have a zeal and a determination to reach this goal. Look their approach to the problem of capital formation, in contrast wii the triple tax in this country on capital formation and income fro capital.

Senator Carlson. As I study present tax structure, I do not kn« or cannot see of anything that would be inuch greater boost to <v entire economy at the present time than making some changes in 01 depreciation structure.

Mr. Percy. Thank you.

Senator Frear. Senator Bennett?

Senator Bennett. No questions.

Senator Frear. I will not ask your political affiliation, Mr. Pen but it is quite obvious you must be a Democrat. [Laughter.]

We would have difficulty in getting you down here in the Treasi Department to emphasize the fact of more rapid amortization of whi< some of the men on the side over here, like Senator Carlson and Sen tor Bennett, are in favor of as well as some Democrats.

I want to commeiul you for the testimony you have given.

We are sorry we have taken up so much of your time, but I o assure you it has been most interesting.

Mr. Pf.roy. Thank you, Mr. Chairman.

(Mr. Percy's complete statement is as follows:)

Statement Of The Committee Fob A National Trade Policy, Submitted Charles H. Percy, President, Bell & Howf.ll Co., Chicago

The Committee for a National Trade Policy welcomes this opportunity express to the Finance Committee of the United States Senate support tor 5-year extension of the Trade Agreements Act as approved by the House Representatives through the passage of H. R. 1250].

We support the extension of the reciprocal trade program for 5 years a* tJ minimum necessity, and would have preferred a much longer extension. Sin Its inception in 1934. this program has proved its worth by increasing our tni with other nations, by providing markets for American goods and hence pr<'iri Ing Jobs and income for American business, agriculture, and labor. The trs< program has served tho national interest, and served It well. Onr trade propr* has been a keystone of American foreign policy. Channels of trade have l>« channels of friendship between the United States and the other nations of the free world.

There have been 10 extensions of the Trade Agreements Act since 1934, of periods ranging from 1 to 3 years. In this 24-year period, the reciprocal trade program has proved its worth so well that there should now be little if any objection to a long-term extension of the act on the merits of the program alone. Moreover, there are several new factors which make a longer extension imperative at this time. Uppermost among these new factors are the development of the European Common Market; Soviet economic penetration into American free world markets and trade overtures to underdeveloped nations; the need for stability of "rules of the road" in our trade relations; and the need for a continuation of trade expansion to aid us in combating recession at home and preventing it from becoming an American export.

The United States is the world's greatest trading nation. Certainly when our leadership is being challenged, or doubted, in other fields, we do not want to allow our free enterprise system to take second prize in the free world trade race. There is no second prize in a race with the Soviet Union.

The United States has long pressed for the firm establishment of a world multilateral system of trade with a minimum of restriction against the products of any nation. We have believed, in this country, that it is only through such a system of trade that the full benefits of international competition can accrue to the economies and the prosperity of nil nations. It has been the purpose of the trade agreements program, during its 24-year history, to achieve that kind of a world. Our committee believes that is the kind of world the American people want, and we further believe that H. R. 12591 can provide the firm basis upon which we can continue to maintain our leadership in this field and our influence upon further developments.

We are all aware, of course, of the recent movements toward regional economic integration, most notably in Western Europe but also in Latin America and other parts of the world. It has been United States policy to encourage such regional economic integration, particularly in Western Europe where the high degree of industrialization and economic development provide the optimum basis for such integration. The European Economic Community is today a fact

These regional movements need not, in any respect, be inconsistent with our objective of a multilateral system provided the external trade of those groupings is conducted on a nondiscriminatory basis and that there is renewed devotion to the reduction of trade barriers all over the world.

Six nations of Western Europe are confidently planning a tariff and trade policy not for 2 years, not for 3 years, not even for 5 years. Their goal is completely free trade among themselves within a period of 12-15 years. The spirit behind that kind of planning—that kind of confidence—is something the United States played an important part in developing. A 5-year extension of our own trade-policy legislation is itself a barely adequate reflection of the example our economy and our economic vitality have set for Western Europe.

The European Economic Community is today at a crossroads. The direction it will go—whether inward upon itself in regional autarchy and self-sufficiency or outward toward increasingly closer relations with the rest of the free world—■ will depend, in a very real sense, upon the trade policy which the United States Congress adopts this year.

Western Europe is our most important foreign market. Should the Community turn inward, our exports would face increasing competitive difficulties within that market as the internal trade barriers were reduced and removed. To minimize the effect of these developments, we have the opportunity of negotiating downward the Community's external tariff, and thus reducing materially the difficulties our exports would otherwise face.

As a practical matter, we can do this only if we have an adequate Trade Agreements Extension Act. The extension must be for 5 years. There must he a tariff-reducing authority of 25 percent. With anything less we simply cannot do the job. A 3-year extension would expire exactly when the United States was in the middle of its negotiations with the European Community and the other nations which are parties to the General Agreement on Tariffs and Trade.

The Committee for a National Trade Policy would have preferred a bill somewhat more ambitious than H. R. 12591. We would have preferred a bill which would have enabled us to move forward toward freer trade at u somewhat more rapid pace than this hill permits. Nevertheless, the major provisions of H. R. 12591 provide the essentials for reasonable progress by the United States in the next 5 years.

It has been suggested that a commission be formed by the Congress to undertake a study, over the next 3 years, of United States trade policy and the position of United States trade in the world. We would heartily support this proposal as providing the opportunity for a major contribution to the national understanding of this issue and to the search for new methods and new ideas for expanding international trade. The world Is moving rapidly and it Is urgent that we explore thoroughly any possible improvements in our trade policy for the future. Under no circumstances, however, would we consider that such a commission or such studies as it might make could affect in any way the imperative reasons which demand a 5-year extension of the reciprocal trade program this year. As we have indicated, this is an essential with or without the proposed commission.

We have dwelt upon the challenge which faces us as a result of the newlyformed European Economic Community. Quite aside from this development and quite aside from the obvious benefits to our own economic growth and wellbeing which the reciprocal trade agreements program has brought and will bring in the future, we are now facing one of the most ominous threats iu our history. This is the Soviet economic offensive which has been so vastly intensified in the last year or 2. It represents a major challenge to our foreign trade policy and our foreign economic j>olley. Soviet offers of long-term contracts, technical aid and barter deals, designed to reorient the trade and economies of other countries toward the Soviet bloc, are appearing almost daily in the capitals of those countries. Under their populations' burning drive for economic growth and higher standards of living, governments cannot but entertain these offers unless they can have confidence that the United States is prepared to cooperate fully in their efforts toward satisfaction of their needs. A liberal trade policy on the part of the United States, a policy which offers stability and continuity, is one of the most Important contributions we can make to that confidence. This kind of confidence is equally essential for the private businessman in the United States and abroad in his forward planning which is so necessary in free economies. It would be unthinkable for the United States, by its actions this year in the matter of trade policy, to desert this field and leave it, for all intents and purposes, to the Soviets and their system. Yet, that is precisely what a failure to pass this bill, or its passage in a restricted form, would mean.

Your committee has been told many times that H. R. 12501 does not provide proper protection for the American economy or for particular American industries. This is in spite of the fact that the bill encompasses all of the provisions affording particular protection which the legislation has ever had, and several more besides. The peril point, the escape clause, are retained intact, and the national security amendment has been strengthened in this bill before the committee. It has been our view that these provisions afford more than adequate protection for any industry which can establish the fact of injury resulting from increased imports if it is in the total national interest that relief be provided in the form of higher tariffs or other import barriers. That the national interest must necessarily be the controlling consideration of the imposition of these tariffs and import barriers there can be little doubt.

The best sources of labor statistics in the United States Government showthat about 4.5 million American jobs are provided by our export and import trade at present levels of world trade. If there is need for protection in trade matters. It is certain that this large number of Americans should receive their fair share of protection, also. Admittedly, a trade program designed to serve the national interest may result in damage to the minority because of import competition. The Committee for a National Trade Policy has always supported proposals for a trade-adjustment program to aid the adjustment or ease the transition difficulties of companies, communities, and individuals who are injured by imports. Such an adjustment program is not a dole or a permanent crutch for the segments of our economy which are unable to maintain a competitive position. A trade-adjustment program is the small cost we should he willing to pay to those few who may suffer in order that the entire Nation may prosper. We urge that the Congress give due consideration to the several bills pending which offer proposals for such an adjustment program.

The Committee for a National Trade Policy calls attention to the fact that the Trade Act of 1934 was passed by the Congress partly as an instrument for recovery from the depths of a worldwide depression. A trade program which helped to provide jobs for American workers and markets for American products in the thirties helped our national recovery. A long-term continuation of this program is certainly essential now, at a time of national recession. Ten percent of all the movable goods produced in the United States goes into our export trade. Any move now which could result in curtailing or crippling this trade program would certainly add a threatening new factor to our recession problems.

In conclusion may we reiterate our profound conviction that this bill, H. R. 12591, is in the interest of the United States, in the interest of its whole economy, in the interest of its security and of its general welfare. More than that, it is in the vital interest of the whole free world. We strongly urge the Senate Committee on Finance to recommend this bill favorably, without amendment. The Committee for a National Trade Policy is a bipartisan committee of businessmen created in 1953 to promote greater public understanding of the issues oar country faces in its trade relations with the rest of the world, and of the importance of expanded two-way trade to the sustained, sound growth of the American economy.

The committee draws its support from all sections of the United States and all levels of American business. It enjoys the support of representatives of most sectors of American economic life, and it has worked in close cooperation with many national and local organizations representing business, agriculture, labor, the consumer, and civic interests. It officers and board of directors are—

Sidney A. Swensrud, chairman, Pittsburgh, Pa.

S. C. Allyn, chairman, the National Cash Register Co., Dayton Ohio

William L. Batt, secretary, Philadelphia, Pa.

S. D. Bechtel, president, Bechtel Corp., San Francisco, Calif.

George L. Bell, president, Committee for a National Trade Policy, Washington, D.C.

Barry, Bingham, editor in chief, Courier-Journal and Louisville Times, Louisville, Ky.

I. M. Boniba, vice president, Sehieffelin & Co., New York, N. Y.

Harry A. Bullis, vice chairman, chairman, General Mills, Inc., Minneapolis, Minn.

Thomas D. Cabot, president, Godfrey L. Cabot, Inc., Boston, Mass.

Philip Cortney, president, Coty, Inc., New York, N. Y.

John F. Fennelly, Glore, Forgan & Co., Chicago, 111.

Lamar Fleming, Jr., chairman, Anderson, Clayton & Co., Houston, Tex.

Carl J. Gilbert, chairman, the Gillette Co., Boston, Mass.

J. Peter Grace, president, W. R. Grace & Co., New York, N. Y.

Charles D. Hilles, Jr., executive vice president, International Telephone & Telegraph Corp., New York, N. Y.

Edward Littlejohn, director of public relations, Burroughs Corp., Detroit, Mich.

John J. McCloy, chairman, the Chase Manhattan Bank, New York, N. Y.

John A. McCone, president, Joshua Hendy Corp., Los Angeles, Calif.

Alien W. Merrell, assistant to president, Ford Motor Co., Dearborn, Mich.

Charles H. Percy, president, Bell & Howell Co., Chicago, 111.

Elmer F. Pierson, chairman, the Vendo Co., Kansas City, Mo.

B. E. Richmond, executive vice president, Richmond-Chase Co., San Jose, Calif.

James S. Schramm, executive vice president, J. S. Schramm Co., Burlington, Iowa.

Russell G. Smith, executive vice president, Bank of America, San Francisco, Calif.

Ralph I. Straus, treasurer, director, R. H. Macy & Co., Inc., New York, N. Y.

Charles P. Taft, general counsel, Headley, Sibbald & Taft, Cincinnati, Ohio.

Thomas J. Watson, Jr., president, International Business Machines Corp., New York, N. Y.

W. H. Wheeler, Jr., president, Pitney-Bowes, Inc., Stamford, Conn.

Brayton Wilbur, president, Wilbur-Ellis Co., San Francisco, Calif.

Senator Frear. Mr. Robert L. Trescher, Chamber of Commerce of Greater Philadelphia.

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