Apparel ranks third in America's personal consumption expenditures, remaining at a fixed rate of about 12 percent of all consumer spending. Cotton constitutes 64.8 percent of raw materials used in apparel manufacture. Wool is 10.8 percent, rayon-acetate 14.2 percent, and other manmade fibers and materials amount to 10.2 percent. The dollar value of imported apparel has set a new alltime high for every one of the last 15 months except for the first month of 1963, which was still the second highest January in history. Nevertheless, January 1963 was a month in which dollar value of apparel imports were 33% percent greater than January 1959, just 4 years earlier. In the short term agreement year, which ended last September 30, 16 of 20 categories of apparel imports exceeded base year quotas and some were flagrantly in excess. In the first 6 months of the long-term agreement, through March 1963, 10 categories of apparel have been imported at a rate which, if continued, will be even greater than imports in the same categories during the short term agreement year. There are indications that there has been improvement in most areas of the Commerce Department's administration with respect to apparel import control. It is to be devoutly hoped that there will be continued improvement along these lines. Manufacturers of sport shirts, dress shirts, raincoats, other coats, dresses, and several different categories of underwear need the protection of adequate restraints against excessive import competition. It is absolutely necessary that this trend toward more restrained apparel imports be continued in the maximum possible degree if the American apparel manufacturing industry is to survive. Only one other manufacturing industry operates at a lower profit percentage than does the apparel industry. Only one other manufacturing industry experienced a higher number of failures between 1955 and 1961 than did the textile apparel manufacturing industry. Those apparel manufacturers remaining in business, and especially those operating at a reasonable profit, are tributes to American business ingenuity and operating efficiency at their very best. Imported apparel competing with American manufacturers is offered for sale at significant price advantages. These advantages are made possible by many circumstances completely outside the American manufacturers' ability to compete or to make compensating adjustments. Except to the extent they can automate (and this is only a limited possibility), apparel manufacturers, whose pay scales are already among the lowest in the manufacturing industry, cannot come close to wage rates paid in those countries sending apparel into the U.S. market. Neither can the American manufacturer make reasonable compensation in his operations to offset the higher prices he has to pay for cotton than is required of his foreign competitors. And there is the chain reaction that results from the offering of imported apparel at lower prices than can be offered by American manufacturers. For example, foreign producers have found the United States to be a lucrative market for men's dress shirts and sport shirts. In the first 6 months of the long-term agreement, dress shirt imports are already 68 percent of the quota for the entire year; sport shirts are at the 53 percent level. American producers make the deepest possible cuts in their prices to meet this competition. The effect of such cuts extend into every line that such manufacturers make. America's apparel manufacturers generally understand what their Government is trying to do in its foreign trade program. They also understand the tax demands upon them for all of our foreign aid programs, including the cost of teaching foreign competitors and their labor the art of manufacturing apparel to be sent to the American market to compete with domestically produced apparel. Apparel manufacturers understand the objective with respect to American production for the export market. They recognize that America must provide a market for foreign goods in order that there may be dollars abroad for purchasing America's products. However, the export market for Americanmade apparel is relatively limited. Our apparel manufacturers find themselves in the position of yielding a disproportionate share of their market to foreignproduced materials in order that other American manufacturers may have a market for their products on other shores, where our apparel has an extremely limited, if any, market at all. The apparel-manufacturing industry finds itself about to be sacrificed at the altar of our foreign trade program. America cannot afford to lose an industry that ranks as importantly as does apparel manu facturing. This committee offers our industry one of our last hopes for reasonable U.S. import policies and for the rigid enforcement of such policies and agreements to the extent that the apparel manufacturing industry does not pass from the American scene. While improvements have been noted in the past few months with respect to holding apparel imports to levels agreed upon in the Geneva agreements and the separate agreement with Japan, it is abundantly demonstrable that America's apparel industry has been extensively damaged in the past few years by excessive apparel imports. We urge this committee to use its considerable influence to the end that the present trend toward improved enforcement of import policies be continued. APPAREL INDUSTRY COMMITTEE ON IMPORTS, WASHINGTON, D.C. Lawrence S. Phillips, chairman (executive vice president, Phillips-Van Heusen Co.) Arthur Garson, secretary-treasurer (executive vice president, Lovable Brassiere Co.) Constituent associations: The Corset and Brassiere Association of America International Association of Garment Manufacturers Trouser Institute of America The Elastic Fabric Manufacturers Institute Boys' Apparel & Accessories Manufacturers' Association Senator PASTORE. The next witness will be Mr. Stitt. STATEMENT OF NELSON A. STITT, WASHINGTON, D.C., ON BEHALF OF WOOLENS DIVISION OF THE JAPANESE CHAMBER OF COMMERCE OF NEW YORK, AND THE JAPAN WOOLEN AND LINEN TEXTILE EXPORTERS' ASSOCIATION OF OSAKA, JAPAN Mr. STITT. Mr. Chairman, I hope I will be able to boil this down a bit, so I won't take your time in reading the entire statement. I would like the privilege of having the entire statement incorporated into the record. Senator PASTORE. All right. Without objection, it is so ordered. Mr. STITT. And also the table attached to it. Senator PASTORE. Without objection, it is so ordered. (The statement follows:) TESTIMONY OF NELSON A. STITT, ON BEHALF OF THE WOOL TEXTILES DIVISION, JAPANESE CHAMBER OF COMMERCE OF NEW YORK, INC., AND THE JAPAN WOOLEN AND LINEN TEXTILE EXPORTER'S ASSOCIATION I am Nelson A. Stitt of the law firm of Stitt and Hemmendinger of this city. I appear on behalf of the Wool Textiles Division of the Japanese Chamber of Commerce of New York, Inc., and the Japan Woolen and Linen Textiles Exporters' Association of Osaka, Japan; in effect, for the Japanese woolens industry. We understand, of course, that you are concerned with the interest of this country only. I might suggest, however, that the U.S. national interest has broad implications. We are here because we believe we may have some contribution to make to these hearings. In recent months, discussion of the woolens import situation have focused upon the issue whether or not the United States should exercise its influence upon other governments to achieve a multilateral agreement on woolen textiles, similar to the Geneva Cotton Textiles Agreement. There have been intimations that foreign woolens industries might not be averse to such an arrangement. In this connection, I think the subcommittee should be made aware of the fact that the associations, which we represent, are firmly opposed to this idea. Although, of course, we cannot speak for the Government of Japan, our best information indicates that its views reflect that of the industry. Experience under the cotton textiles agreement has strengthened Japanese opposition to an international agreement on woolens. Furthermore, we have been advised on good authority that all the other major-supplying countries of U.S. woolens imports entertain similar sentiments. Mr. Chairman, the United States is now asking the rest of the free world to enter into negotiations to reduce tariffs by 50 percent across the board. A request at this time to control world trade, in a major item such as woolen textiles, would not be understood abroad. Moreover, any unilateral imposition of quotas or other import restrictions by the United States could go far toward scuttling the entire "Kennedy round." As we all know, Mr. Herter already is experiencing considerable difficulty in obtaining international concurrence with the U.S. position on the future of world trade. Tariff reduction will be particularly difficult for Japan, given its present state of economic development. Nevertheless, we have every reason to expect that Japan will participate fully in the forthcoming tariff negotiations if it can be assured of continuing access to world markets. A limitation on woolen exports would be a major economic and political issue in Japan; bound to have implications for Japanese participation in the Kennedy round. The Japanese market is of major importance for the United States. Japan is America's second-best customer (following Canada) for all commodities and is by far the leading foreign purchaser of U.S. agricultural products. The rate of growth in the export trade to Japan has outstripped all others and there is every reason to expect that this growth will continue. Japan is in the process of scrapping its foreign exchange controls and this, coupled with anticipated tariff cuts during the Kennedy round, should give some assurance for the future. Roughly one-third of all Japanese imports are from the United States; it should not be surprising, therefore, to discover that about one-third of all Japanese exports are to the United States. The sale of Japanese woolen products in this market provides a significant share of the dollars Japan needs to be able to purchase American machinery, electronic equipment, cotton, coal, and a myriad of other products of U.S. farms and factories. Parenthetically, Senator Pastore, you may be interested to learn that 42 percent of all exports cleared through the customs district of Rhode Island in 1962 were bound for Japan. Aside from the international implications, there is little economic justification for increased restrictions on woolen imports. Tariffs on woolen and worsted fabrics are already at an extremely high level, compared with the average U.S. duty of about 12 percent on all dutiable imports. The attached table shows that the 1962 duty incidence on fabrics valued at not over $1.25 per pound was 106.6 percent; on fabrics valued at over $1.25 but not over $2, it was 66.5 percent; and on fabrics valued at over $2, it was 46.6 percent. The industry received additional protection as recently as January 1, 1961, as a result of the changeover from the tariff quota system. As the table shows, there was a 30-percent increase in the duty incidence in the lowest value bracket; an increase of 1.5 percent in the middle value bracket; and an increase of 7 percent in the high value bracket. In the face of the existing high duty structure on woolen fabrics and the recent rate increase, further restrictions do not seem justified. The U.S. wool industry has complained bitterly of rising imports of woolen and worsted fabrics. However, import statistics over the past 4 years show no startling trends. The year 1960 represented a peak, with a sharp falloff in 1961 and a recovery to slightly above the 1959 level in 1962: The National Association of Wool Manufacturers has emphasized the high level of imports in the first few months of 1963 as compared to the same period in 1962. It is impossible on the basis of the experience in the first quarter of any given year to make any sound prediction of total performance for the year. Total first quarter imports of woolen and worsted fabrics were higher this year than last but were below those for 1961, yet total imports for 1961 were below total imports for 1962: U.S. imports of woolen and worsted apparel fabrics [1,000 linear yards] 1st quarter, 1961Total, 1961___. 1st quarter, 1962_. 9, 751 Total, 1962. 28, 584 1st quarter, 1963_. The same relation holds for fabrics imported from Japan alone: 1st quarter, 1961. Total, 1961__ 1st quarter, 1962 4, 495 Total, 1962. 9,980 1st quarter, 1963_ 33, 641 8, 207 13, 693 4, 467 There is every indication that the level of imports from Japan will drop off for the remainder of the year. According to the Japan Woolen & Linen Textile Exporter's Association, in April contracts for export of woolen and worsted fabrics to the United States were about half of the abnormally high figure for February. The other side of the picture is the performance of the domestic industry. The year 1962 was a good year for U.S. wool manufacturers. U.S. mill consumption of apparel wool of 279.1 million pounds was higher than any year since 1956. Production of woven apparel fabrics (297.3 million linear yards) was topped only four times in the preceding 10 years; during 1952, 1955, 1956, and 1959. Employment held relatively constant in spite of rapidly increasing productivity per production worker. Wages were up. The BLS wholesale price index for wool products has continued to rise. While it is impossible to isolate from published figures the sales and profits of woolen and worsted mills, 1962 sales of the textile mill products industry as a whole were at unprecedented levels and profits were second only to 1959, in recent years. Here again a short-run slippage from the peak performance in the first half of 1962 has been cited by the National Association of Wool Manufacturers as a portent of impending doom for the U.S. industry. But the dropoff has, in their own words, been "slight." Furthermore, there are indications that production will increase, both from trade reports on orders and from the current fiber consumption statistics, which appear to presage future high production. Present mill inventories are not burdensome and unfilled order remain at comfortable levels. With respect to apparel of wool, it is again impossible to segregate this segment from the total apparel industry. According to the Securities and Exchange Commission and the Federal Trade Commission, apparels as an aggregate industry realized recordbreaking sales and profits in 1962, with net profit after taxes representing over 9 percent of net worth (stockholders' equity). Employment and wages in this industry are up. Mr. Chairman, much has been made of mill closings, allegedly as a result of imports. We have not been able to investigate completely the list of 13 mills recently issued by the woolen industry. These charges are not new, however. At the last hearings of this subcommittee, it was alleged by various witnesses that 15 to 17 mills had been closed due to import competition. In May of 1962, we engaged Economic Associates, of Washington, D.C., to do a study of 17 mill closures which had been reported to have taken place in 1961 or early 1962. Economic Associates was an independent economic consulting firm, chosen because it had previously been selected by the Department of Commerce to do similar studies of cotton mill closures. The following were the more interesting highlights of the study (dated May 1962): 1. Of the 17 mills reported to be closed, 6 mills were still operating, either under the same or new management. Six mills were closed, with their operations relocated or consolidated under the same ownership or management. Four mills were completely closed and the original owners were out of business. The remaining mill was closed and production discontinued, while the parent corporation continued to operate at other mills. 2. Reasons assigned for mill closures were varied and overlapping. In frequency of mention, and roughly in order of importance, these were: obsolescence of plant and equipment, coupled with the high cost of maintaining technological parity; conflicts between management and labor, fre quently dealing with the adequacy of workloads; changing styles and patterns of use for textiles, with the trend always toward lighter-weight fabrics; the industry pattern of consolidation of smaller mills into the large and growing integrated textile companies and the movement to the South; managerial deficiencies, characterized by resistance to change, lack of imagination, inadequate market and product research and development, and failure to conserve capital for modernization; and, finally, intensified competition in textile markets, provided by both the large integrated textile firms and foreign suppliers. 3. Contrary to popular impression-with two exceptions (Burlington's Peerless Mill in Georgia and Ames' Richmond Mill in Maine)-these mill closings had created very little economic dislocation in their communities. In fact, a shortage of skilled textile workers was reported in New England, with operating mills competing for skilled hands laid off as a result of the closings. In summary, the Economic Associates study did not bear out the frequent assertion that import competition in woolen and worsted fabrics was one of the major causes for wool mill liquidations in this country. Other and more compelling reasons were set forth. We do have some information on the 13 mills recently alleged by the National Association of Wool Manufacturers to have been closed due to import competition. The closing of the Marland Plant of the J. P. Stevens Co., was allegedly due to competition from Japanese fabrics, selling, it was stated, at a price 40 cents below that of the Marland fabrics. So far as we have been able to determine, this mill produced flannels. If this is so, the allegations cannot be accurate. Japanese flannels actually sell at a higher price than domestic flannels because they are so different in weight, quality, color, and yarn count. Furthermore, Japanese exports of flannels to the United States are so small that they could have made no measurable impact on the market for these fabrics. In 1961, only 78,000 linear yards of worsted flannels were exported to the United States from Japan. In 1962, 238,700 yards were exported, and in the first quarter of 1963, 53,000 linear yards: Woolen flannels exports were insignificant ***. In 1961, a total of 17,000 linear yards; in 1962, 7,500 linear yards; with no shipments in the first quarter of 1963. We suspect, although only a thorough investigation can determine, that the Marland mill was closed by J. P. Stevens as part of its pattern of consolidation, modernization, and movement to the south. We commissioned Economic Associates to look into several of the mills referred to in the most recent statement of the National Association of Wool Manufacturers. We picked the Mapleville plant of the Stillwater Worsted Mills, and the Yorkshire Worsted Mill because it was indicated that they produced worsted fabrics, which predominate in the Japanese imports. We also selected the Bonin Spinning Co., because it was on the previous list. The following quotes are extracted from these reports. "The Mapleville plant of Stillwater Worsted Mills, reportedly closed in January 1963, is continuing in operation following a reorganization in which the weaving plant has been leased to a new company, Mapleville Worsted Co., Inc. When visited on May 15, 1963, the Mapleville plant was weaving the same lines of good quality men's worsted fabrics formerly produced by Stillwater. The new management reported that production levels are being maintained or increased, and the number of workers employed at the plant has increased since January. The entire output of the Mapleville plant continues to go to Stillwater." Mr. Chairman, a reorganization and a lease to a new company is not a "mill closing." "The Bonin Co., a specialty wool yarn spinning mill, closed its plant in Woonsocket, R.I., in November-December 1962, following an extended period of readjustment during which ownership passed from an estate to a new corporation, involving litigation over control of stockholdings, and continuous labor relations problems arising from disputes over workloads. Competition from southern mills or from foreign imports is not regarded by management as a primary or major cause of the shutdown. The company is being offered for sale, and several prospective purchasers are currently reported (May 1963) to be interested in taking over the plant. The mill and machinery are in good condition, and none of the equipment has been stripped or offered for sale except as part of a deal for purchase of the entire plant. The plant appears to be in shape to resume operations. Some of those interviewed in Woonsocket believe |