We have compared electrical energy utilization to two series: industrial activity and civilian employment. We use industrial activity because we want a measure that reflects only the production side of the economy and intentionally leaves out services of all kinds. Conversely, we have used civilian employment because we want an overall measure of energy utilization. We want an answer to the question: How much energy assistance is received by every working member of the population?

By a comparison of the electrical energy utilization in industrial production with that of employment, we are able to get some sort of a check on the consistency of the relationships. What we mean is this: we cannot take just one series by itself because it may be misleading. We have to be able to check the findings in one relationship with the findings in another as meaningful relation. So we compare energy utliization in industrial activity with energy utilization in total employment. If they tell the same story we are OK. If not, we check further or reject.

3. The findings: Let us present our findings in two ways: first we compare energy utilization levels in industrial production and then in civilian employment.

Kilowatt-hours produced per point of industrial production indexes

Both these tabulations indicate the same things: the relative utilization of electrical energy is higher in the United States than in the Common Market and there is no material change taking place in the relative trend of U.S. consumption.

What do these tabulations mean to us? They mean that there is a solid basis for assuming a substantially higher productivity in the United States than in the Common Market. We can compete on a cost basis.

HOW DETROIT MET THE COMPETITION OF FOREIGN CARS TRANSPORTATION-
POINT AND COUNTERPOINT

1. There is a lot to be said for the case study approach: one real value is that you deal with everyday life and not with conjecture. Here we present a case study in foreign competition and the reaction of American industry to that competition (point and counterpoint).

This comparison is unusually interesting because it has all the earmarks of the worst situation that everyone mentions. It is a study in pricing competition, in product competition, and in styling competition.

What are we talking about? We are talking about the rise and demise of foreign car imports.

2. The background and the setting: The auto industry hit its heyday in 1955. In that year the industry assembled 7.9 million cars. Never had such a record been achieved before. Forecasters were startled by the figure because almost everyone had missed it. In fact, if you take your money back, you will remember that people were arguing that the early 1955 level of economic activity was unsustainable because the rate of auto production was supposed to be unsustainable. Such was not the case because the auto industry produced throughout the year at the early months' rate.

From this point almost everyone forecast fantastic levels of activity for autos in the 5 and 10 years to come. It was not uncommon to hear 10 million cars forecast for 1965.

And the cars got bigger and bigger, and the cost more and more. They cost more to buy and more to drive. As initial costs went up maintenance costs went right along.

With one exception, everyone concerned intimately with the auto industry was forecasting bigger cars and more expensive cars.

3. In the meantime foreign car imports began to rise. In 1955 we imported 57,000 cars. They were the bugs, the cheap little things that no American in his right mind would buy except for snob appeal.

But in 1957 it began to change. Those foreign cars were no longer being bought for snob appeal. If you went out and asked the foreign car buyer the basic reason he had bought he answered: "because of the low maintenance costs." The foreign car appeal had shifted from snobbishness to economic considerations.

In 1957 and in 1958 imports rose steadily. Plot the monthly figures on a chart and the line goes up and up. Then in 1959 the blow really came. We imported more than 665,000 foreign cars. The foreign cars had by then obtained more than 10 percent of the market.

But American industry had become aware of the challenge. They were getting ready to compete with the foreign cars. The American people wanted smaller and more efficient cars, OK, American industry would provide them. In 1959 we produced 755,000 compact cars. In 1960 we really went to town: we produced almost 2 million compact cars.

4. The rise and demise of imports: The American reaction clobbered the foreign car importers. We reacted late, but when we did react we beat the competition hands down. As we reacted, foreign car imports declined. We met the competition and we clobbered it.

5. Points to be Made: This very brief review of the way American industry reacted to foreign competition has some very interesting facets to it that should be realized by those who underestimate our ability or inclination to compete :

(1) The importation of foreign cars although marginal was threatening. At no time were foreign car imports more than 11 percent of total car registrations.

(2) Foreign cars sold at prices substantially lower than American cars. Pricing competition was a major factor.

(3) Maintenance costs of foreign cars were below American cars. They burned gasoline more efficiently and required less lubrication.

(4) There was little comparable to foreign cars on the domestic market. American Motors was the only organization producing a domestic compact American industry had to gear up in order to compete. It had to

car.

design from scratch, and produce from scratch. It had to put in place entirely new assembly lines. To put it simply, they had to make tremendous capital investments to compete. It made them.

(5) Exports of American cars fell from 1955 to 1959, but since 1959 have risen moderately. This is particularly noticeable in the face of the extremely high tariffs and other obstacles levied against American cars by foreign countries.

(6) This case study encompasses almost all those negative factors that people use to claim we can't compete with foreigners.

Mr. KING. The committee appreciates your giving us your testimony, Mr. Winton.

Are there any questions?

No questions.

Thank you again, Mr. Winton.

Mr. WINTON. Thank you, Mr. Chairman.

Mr. KING. Mr. Baldanzi?

STATEMENT OF GEORGE BALDANZI, INTERNATIONAL PRESIDENT, UNITED TEXTILE WORKERS OF AMERICA, AFL-CIO

Mr. CHAIRMAN. I have submitted a statement which is quite lengthy. If it is possible to insert it in the record, I appreciate the task before this committee and I will summarize certain phases of the statement. Mr. KING. Very well. Your entire statement will be included in the record, Mr. Baldanzi. You proceed with the summarization if you wish.

(Mr. Baldanzi's prepared statement follows:)

STATEMENTS OF GEORGE BALDANZI, INTERNATIONAL PRESIDENT, UNITED TEXTILE WORKERS OF AMERICA, AFL-CIO

My name is George Baldanzi and I am president of the United Textile Workers of America, a union affiliated with the AFL-CIO. The membership of the United Textile Workers is made up almost entirely of workers employed in the textile manufacturing industry. I am also a member of the Management-Labor Textile Advisory Committee which works with Government departments on textile trade problems.

It is no secret that textile workers are among the Nation's poorest paid. Their wages are considerably below the national manufacturing average. The textile industry, to a greater extent than most other industries, is vulnerable to wage competition at home and abroad. Were it not for the unions, textile workers would be exploited even worse than they are now.

The textile workers' story has been told so often that I am sure I need not repeat it here in detail. It is common knowledge that the industry fled South from New England for reasons other than access to natural resources. Cheap labor and attractive tax arrangements were often the chief inducement, with the result that the southern economy now suffers from a substandard wage pattern, while New England is pockmarked with textile ghost towns.

I do not come before this committee as a protectionist seeking to raise artificial barriers to trade in the name of some narrow interest. The stakes in freedom and survival are too great for any such narrow position. Our union is concerned, however, that America's trade policy shall not be such that the lowest-paid will be made to carry the heaviest burden, a burden that is already too great.

The United Textile Workers' delegation to the Fourth Constitutional Convention of the AFL-CIO supported the trade position of the federation. During the discussion on the resolution on international trade, we said: "We believe in reciprocal trade, but we do not consider reciprocal trade to mean that we will permit low-wage areas to destroy the economy of entire industries in this country."

We believe in competition based on labor efficiency, sound management, higher living standards, improved technology (in whose benefits both management and

workers share), and on expanded national development. We do not believe in competition based on continuing, unrelieved human misery. That is our position both with respect to regional competition in this country and to international competition.

There are those who believe in a protectionist policy aimed at sealing this country off behind an ever-rising tariff wall. They would have us believe that the alternative to their brand of protectionism is unrestricted free trade. But there is no absolutely free trade in the world today, nor will President Kennedy's program achieve it. We will achieve really free trade only when the American standard of living becomes the international standard.

Reciprocal trade implies a give-and-take relationship. It offers an opportunity to lower tariff walls so that goods from this country can enter other countries. But in pursuing this goal of reciprocity we must be sure that American workers are not called on to underwrite the exploitation of workers in other parts of the world whose wages are still inexcusably low.

The emergence of the European Economic Community, hailed as the most important economic and political development since the end of World War II, underscores the need for modernization of our own trade program. The Common Market offers great hope for a unified Western Europe better able to withstand the Communist threat. Its establishment may well mark the turning point in the struggle for the maintenance and expansion of freedom, and, we hope, an end to nationalistic German militarism.

It would be tragic if the Common Market resulted in less rather than more trade within the free world. We and Western Europe must remain partners, not become rivals, for that would give the Communists their easiest victory. We hope this is understood on both sides of the Atlantic.

An up-to-date trade program will mean some readjustment and inconvenience, but if proper safeguards are taken and fair rules established, they need not be more than temporary. Indeed, they must not be permitted to be anything

more.

As a recent publication on world trade issued by the AFL-CIO put the matter, "democracy cannot afford to sacrifice even a small group in its population on the theory that they are helping the common good, but neither should democracy give up the benfits to the many for the sake of a few."

Total free trade in 1960 was $112 billion, of which the American export share was $19.3 billion. Last year, U.S. exports rose another 2.5 percent; imports were about $14.5 billion. Exports of civilian goods exceeded imports by $5.5 billion, so we are not doing too badly.

We do need to increase exports because of our adverse balance of payments. But it must also be remembered that Britain, Japan, and Canada-to mention only some have actual adverse trade balances. The problem is to increase U.S. exports while permitting other nations to meet their obligations. The answer lies in higher world living standards and trade volume expansion. This will permit other nations to increase imports from the United States while selling more in world markets.

It is for this reason that we welcome higher wages in Western Europe and in Japan. In these countries, free labor unions are playing a key role in the development of a consumer economy. But these nations have far to go, and meanwhile the problem of trade competition based on unfair wage levels cannot be ignored.

We know that protectionism is not the answer. Many jobs in the textile industry depend in part on sales of U.S. goods and raw materials within the Common Market, as well as to the "Outer Seven", Canada and Japan, and to newly developing countries. The establishment of a powerful Communist bloc makes this trade more important than ever, since it excludes from normal trade areas populations totaling hundreds of millions. Obviously, we also need imports such raw materials as iron are, manganese, copper, tin—and others. A sharp decline in U.S. exports could have repercussions throughout our entire domestic economy. There is no point in quibbling about the number of U.S. jobs that depend upon the export trade. We agree it is significant. We also know that workers in the export trade are consumers of textile mill products. If they lose their jobs, textile workers will be affected. The problem is to reconcile a multiplicity of interests with the general welfare.

U.S. manufactured goods produce a favorable U.S. trade balance of about a billion dollars in the expanded Common Market area now in prospect. Agricultural exports account for another billion. A great deal of U.S. manu

factured goods competes successfully despite all the employer propaganda about the adverse effect of high wage levels here.

It is the high-wage industries in the United States that are competing most successfully at home and abroad. A study on "Labor Costs and International Trade" by Prof. N. Arnold Tolles of Cornell University, and trade economist Betti C. Goldwosser of Washington, D.C., found that high U.S. productivity and intensive capitalization in these industries more than compensate for higher wages. Actually, in many cases U.S. labor costs in these industries are lower than they are abroad.

In these industries, too, the United States has the advantage of a huge domestic market which makes mass production methods and low overhead feasible. It also often has advantages in lower-cost materials, more efficient retail distribution (France, for example, has only a hundred supermarkets), and, often, cheaper power and transportation costs. It is in the so-called “labor-intensive" industries that the problem of wage competition arises.

New York Times correspondent Edwin L. Dale, Jr., recently (Feb. 11, 1962) commented on wages and other conditions affecting trade with the Common Market area. Part of his comment will, I think, interest this committee. Mr. Dale's report dealt with the impact of the internal European tax structure on our export trade.

Here in the United States we rely on the income tax for Federal revenue. Our State and local sales taxes-retrogressive though they are usually range between 2 and 5 percent. In the Common Market, the sales tax is a chief source of government revenue.

American goods shipped to Europe are subjected to these turnover taxes, but when European goods are sold here, they escape the impact of this taxation. In Europe, according to Dale, sales taxes drive retail prices up as much as 25 percent.

"While taxes put up prices to the European producer, they are rebated on exports", Dale writes. This, plus a high tariff on U.S. automobiles, explains in part why U.S. cars cost so much more in Europe than at home. A 50-percent tariff cut in this case would favor U.S. cars, and, incidentally, U.S. textiles used · in their manufacture.

The trade problem poses a real question of management and government policy in one thus far neglected area. Britain has an export industry and so have other countries, but U.S. industry is aimed primarily at the domestic market. American cars-even compacts are gas-eaters in contrast to their small European counterparts. Even if they could compete in price within the Common Market, they would be at a serious disadvantage in countries where wages and salaries are low and gasoline costs are high.

What is true of automobiles is true of refrigerators and even of textile products. If America is to get its consumer goods into foreign markets, it will have to manufacture and package for those markets. We do well on heavy machinery; our weakness is in consumer goods.

It is time to use American ingenuity to meet the trade challenge, a challenge industry has thus far refused to accept. Government policy to encourage the creation of an export industry might be needed. Certainly here, as well as in the whole complex of tariffs, Congress ought to take a good look. We suggest that this might be a subject of congressional inquiry, to see what can be done.

American tax policy is another matter on which I should like to comment. Earlier in this statement I said that attractive tax arrangements were one reason the New England textile industry went Souh. An analogy could be drawn with respect to the flight of American capital overseas.

There was good reason for U.S. capital investment abroad after the war, and there is good reason for continuing to encourage it in newly developing countries, but it is to the industrialized countries that this investment now flows, because of the tax advantages and to get inside tariff walls.

Senator Albert Gore has charged that powerful interests are trying to protect present "tax loopholes" on profits earned abroad by "blackmail" aimed at the President's trade program. A look into this dark corner might be enlightening.

American tax policy must be changed, to help stem the needless flow of American capital abroad, as was the case when Ford Motors spent some $366 million in England in the midst of a U.S. gold crisis. Cuts in tariffs