impact of 1948 import duty reduction on malleable iron pipefittings industry. Comment is also included as to why the existing conditions are a cause for national concern.

Significance of malleable iron pipefittings industry

Malleable iron pipefittings are used in new and maintenance construction, including shipbuilding, and as component parts for equipment and products in industry. Construction constitutes the major market.

Measured in pounds of malleable iron pipefittings for each 1,000 square feet of construction put in place, the consumption demand from year to year has been consistent, except during wartime periods, when such demand more than tripled. This was due to diversion of more critical materials, such as copper and brass, which are ordinarily competitive, to urgently needed wartime requirements.

Hence, availability and production of these pipefittings, of a quality and specification fully meeting domestic standards, is essential to the expansion and maintenance of the $50 billion annual domestic construction industry, to shipbuilding, and to national security, including shelter, health, and welfare of the citizens.

This industry has an importance to national security, and as an integral component of construction, greatly exceeding any relative quantity and value reference. For example, each dollar of volume in malleable iron pipefittings sustains 1,000 times its volume in the construction industry.

The majority of the 14 producers in this industry each have less than 500 employees. Eleven of the plants are located in communities having a population of less than 18,000. The majority of these producers have been in business more than 60 years.

Geographically, the plants of these 14 manufacturers are located: 4 in Pennsylvania, 2 in Ohio, 2 in Rhode Island, and 1 in each of the States of Alabama, California, Connecticut, Illinois, Michigan and Wisconsin.

The facilities comprising the over $40 million reproductive capital investment of the industry are largely special purpose, and cannot be, except in minor part, economically converted to other production uses.

The majority of the workers in the plants comprising this industry have a length of service of more than 15 years.

Impact of 1948 import duty reduction on malleable iron pipefittings industry

As has been shown, new and maintenance construction constitutes the preponderant market for malleable iron pipefittings. Based on U.S. Department of Commerce data, which is expressed in 1947-49 constant prices, the 1961 volume of construction averaged 171, compared with a base of 100 for the 1947-49 period. In contrast, and based upon millions of pounds, the annual average of malleable iron pipefittings shipped by domestic plants in 1961 averaged 67 compared with its 1947-49 base of 100. When compared with the current construction rate of 171, the 67 rate reflects a 61-percent loss in volume for pipefittings. Because employment bears a direct relationship to pounds produced, it is factual to state that employment has been reduced to 39 percent.

The major contributing factor to this 61-percent loss in jobs was imports, in terms of either quantity or price. Such imports were comprised of not only malleable iron pipefittings but also of their competitive products, such as copper and copper alloy pipe and tube, and certain cast brass plumbing products. Pipefittings are purchased only when there is a specific construction or component need. Unlike consumer goods, increased volume is not created by lower prices. Imports reduce the potential need for domestic produced fittings, and related employment, in direct proportion to the pounds of production lost.

The number of ports of importation increased from 5 in 1953 to 19 in 1961. Great Lakes-Seaway shipments are already creating further import competition. In terms of pounds shipped into the domestic market, imports of malleable iron pipefittings, by periods, have been as follows:

Period:

Imports as average annual percent of domestic market

1958 through 1952

1953-55.

1956-58

1959-61.

Less than 2 of 1 percent

Under 2 percent

4.5 percent

8.47 percent

As this summary shows, the rate of imports has doubled when each 3-year period is compared with the prior period. How long can any industry survive under such a trend?

Due to several internal conditions, including money and time needed to establish facilities, imports of this product from Japan were not an important factor until about 1956. Since that time over 95 percent of such imports have been from Japan.

That such export business is not vitally essential to the Japanese economy, or to Japanese-United States relations, is clearly proven by the fact that such exports have equalled less than 3 percent of the total production in Japan of all malleable cast iron products. This statement is based upon official data released by the Government of Japan.

The fittings imported from Japan have sold, and are currently selling, in the domestic wholesale market, at prices averaging more than 30-percent below the average price of domestic producers. In 1957, our industry filed, and prosecuted until denied in 1960, a claim for relief under the antidumping section of existing trade laws.

In this product approximately 75 percent of the total cost content is labor. Base rates paid by U.S. manufacturers average $2.52 per hour, exclusive of fringe benefits, which add an additional 60 cents per hour. Comparative labor costs in Japan are less than 15 percent of these domestic costs. For the most part foreign plants have been modernized. Variation in labor and labor related costs is the controlling element in costs as well as in price competition.

During the past 10 years there has been a steady and substantial increase in the import of copper and copper-alloy pipe and tube for plumbing and certain cast brass plumbing products. These products, which are competitive to pipe fittings, have further caused loss of domestic and export markets, and disruption of prices for such pipe fittings.

For example, for the years 1947-49 tube for plumbing imported averaged annually only 11,000 pounds. For the years 1958-60 this same product was imported at an annual average rate of 48.2 million pounds.

Compared with the export volume which was attained for the 4 years ended December 31, 1953, U.S. producers have now lost 85 percent of the average export market. Since U.S. producers cannot compete in the domestic market due to the labor cost advantages held by foreign producers, it is obvious that export markets cannot be retained in competition with these same foreign producers. What has been the result of this impact of the 1948 50-percent import duty reduction on productivity of U.S. producers of malleable iron pipe fittings?

(a) Sixty-one percent of the domestic market has been lost, with corresponding reduction in industry employment.

(b) Eighty-five percent of the U.S. export market has been lost.

(c) Manufacturers who were producing approximately 35 percent of the domestic production have discontinued such operations. This included two of the largest producers in the industry, each of whom had manufactured malleable iron pipe fittings for over 100 years.

(d) The major factor causing the foregoing impact has been imports of direct or competitive products, as to either quantity or price. Said imports were made possible by the 50-percent reduction in import duty on direct products and by varying reductions on other products.

A cause for national concern

If the trend of these imports is permitted to continue, it is clearly indicated that such imports will destroy the entire domestic market and export market for malleable iron pipe fittings.

When production facilities and production costs, exclusive of labor, are reasonably comparable, and when labor content is 75 percent, it is not realistic to allege that improved production efficiency could bridge a labor cost gap of 85 percent, as has been shown here.

Such preemption would weaken the industrial base of the United States for national security. It would move essential industrial capacity away from domestic locations. Domestic employment, on this product, would be entirely wiped out. In the event of war, such importers might be either unwilling or unable to remain a source of supply. Even if willing, air, missile, or submarine activity could prevent shipping, even if the ships were available.

Under such conditions, what then would sustain our vitally essential construction industry, an industry to which citizens must look for shelter, health, and welfare, not to mention defense?

Can the United States afford to create and permit this jeopardy to its national security?

Proposals contained in H.R. 9900 are opposed

Opposition to H.R. 9900, and the opinions herein expressed, are based, among other things, on the facts set forth in the detailed statement, and include an experience of 14 years operation under a 50-percent reduction in tariff rates, together with a knowledge of the administration of the relief sections under existing trade laws.

Among the reasons for opposition to H.R. 9900 are the following:

1. Title I, in addition to naming the bill and stating its effective date, describes its purposes.

Insofar as those stated purposes relate to the domestic economy, it is believed that such purposes will not, in substance, be achieved. Failure to attain such purposes in the domestic area will weaken the capabilities of the United States to carry out its stated purposes in other areas.

2. Title II grants to the President 5-year authority to eliminate any tariff of 5 percent or less, and to cut to a maximum of 50 percent any other tariff agreements negotiated with any foreign country. In addition special authority is granted to eliminate tariffs for three categories of products in agreements negotiated with the European Economic Community.

We are opposed to across-the-board or basket-type reductions. Rate changes, either up or down, should be based on product-by-product and industry-byindustry analysis, along with consideration of all pertinent factors both domestic and foreign. We oppose use of United Nations criteria.

For example, let's review a product factor.

It might be assumed that under the provisions of H.R. 9900 some new opportunity would be created for domestic manufacturers of malleable iron pipe fittings to export to the European Common Market areas. Likewise, the conclusion might be that increased imports of malleable iron pipe fittings might be received from the European Common Market countries.

Neither conclusion would be correct. The reason is that both the methods of manufacture and the product specifications are quite different in the United States from the European countries. The resultant products are neither comparable nor interchangeable, except to a nominal extent.

Hence, any lowering of tariffs under such circumstances would be without benefit to either party. However, under the most-favored-nation policy, we would be further delivering the U.S. market to those foreign countries who already have made such disastrous inroads in destroying domestic production capabilities and markets.

We do not believe that national policy with respect to the containment of communism or the assistance of underdeveloped areas, through foreign aid, or trade agreements, should be achieved by treating a basic domestic industry, such as the malleable iron pipe fittings industry, or any other, as expendable.

In the development of a national policy it should be a basic objective to make certain that the United States, as the primary arsenal of all free nations, shall have the industrial reserve it needs if war should come.

Neither the experience of veteran American employees, nor the capital which supports the jobs for those employees, should be sacrificed.

The national objective should be shared by the whole Nation, through appropriate broad measures, equitably applied.

3. Title III relates to "adjustment assistance."

Since H.R. 9900 devotes some 37 pages, out of a total of 61 pages, to this section, it would seem reasonable to conclude that the provisions contained therein are among the more important of the entire proposed bill.

We do not believe that either gross national product or job opportunities will be increased, nor will taxes be created to meet urgent present and accrued fiscal demands, out of training programs for unemployed, or from applying financial "oxygen" to defunct corporations.

The American way would seem to call for a program which would assure the survival of the industries involved, together with maintenance of the jobs, at known skills, for the workers.

We regret that the administration of relief provisions under existing trade and tariff acts does not lend confidence to equitable benefits being derived from the extensive changes now proposed.

The benefits or assistance proposed under H.R. 9900 are uncertain both as to determination and application.

A proposed trade policy in the national interest

Believing that is is more constructive to state not only what we oppose but also what we are for, there is attached hereto and made a part hereof, as exhibit A, a proposed trade policy in the national interest.

We suggest that the principles therein set forth would constitute a framework around which a sound and equitable trade policy could be established.

It is urged that any bill brought out by the Ways and Means Committee be under the open rule, to facilitate amendments and full discussion by both Houses of the Congress.

EXHIBIT A. A PROPOSED TRADE POLICY IN THE NATIONAL INTEREST

The strength of the U.S. ecnomy is basic to our national security, and that of the free world. Policy designed to promote growth in one sector of the economy must also insure against harm to other sectors.

Foreign economic policy is expressed initially by the Congress. It is developed, however, by the Executive under the authority of the trade agreements legislation. Without enforeceable safeguards to prevent harm to our internal economy, the development of policy to promote exports can exceed, and has exceeded, the limits intended by Congress. Excessive imports fostered by tariff concessions can weaken or destroy important sources of internal economic strength represented by investment, national income originating in production, and employment in domestic industries. The losses may exceed any gains realized by increased exports.

The safeguards previously specified by the Congress in the trade agreements legislation have proved to be unworkable because the executive department has not allowed them to work. "Peril point" findings are superifically made, because of the thousands of product categories placed on the proposed offer list, and often ignored; the "escape clause" is made impotent by executive frustration (relief in only 13 out of 130 cases), and the national security provision madea mockery (relief in only 1 out of 21 cases).

The administration has stated its intention of seeking an unprecedented grant of power from Congress to make sweeping tariff reductions. Its spokesmen have announced that this power, if granted, will be used to promote a growth in U.S. exports through negotiated across-the-board tariff reductions which they concede will injure some domestic industries and workers vulnerable to imports.

Instead of using the tariff-reducing authority selectively to bargain for increased export opportunities for American goods for industries which require such outlets, the Executive has made wholesale reductions in thousands of tariff classifications at a time in repeated negotiations under GATT to carry out political objectives, or to secure more favorable treatment for the industries of other countries, such as Japan, instead of American industry.

Since World War II the United States in five massive negotiating sessions under GATT has reduced its tariffs by 70 percent, ostensibly to secure reciprocal concessions from other countries. The increased access for U.S. exports paid for by these tariff concessions has been denied by other countries through discriminatory practices restricting the imports of U.S. goods. Provisions of U.S. law and trade agreements empowering the Executive to counteract such discrimination have not been invoked. Instead, the Executive is now asking for new tariff-reducing authority in order to pay once again for the same commitments by other countries to admit U.S. exports on terms as favorable as accorded other countries.

In view of the administration's frankly stated objectives, it is essential that any new trade agreements legislation enacted by Congress made clear the paramount importance of preserving and fostering growth in our internal economic strength. The cost of any program authorized by Congress for the accomplishment of political objectives, such as strengthening the economies of other countries against communism, must be borne by all, and not by certain U.S. industries and workers as "sacrificial lambs."

The following points are essential parts of any new trade legislation; they will provide the balance in national policy which the above considerations require:

1. Preserve U.S. internal economic strength by:

(a) retaining and perfecting the "escape clause" procedure so that existing customs treatment must be changed to remedy actual or threatened serious injury suffered by industries or workers in part from excessive imports when

there has occurred (i) a significant decline in the share of the domestic market supplied by domestic products in relation to a representative base period (taking into account a decline in order bookings of long leadtime industries) and, either (ii) a significant decline, actual or relative, in the domestic price level, or in the net earnings of the domestic industry, with respect to the products like or competitive with the imports, or (iii) a decline in employment, a loss in wages due to shortened work periods, or a decline in wage rates, either actual or relative to wages paid in other industries of the same general class.

When either of these criteria (that is, i plus ii, or i plus iii) for action is met, the Tariff Commission must recommend, as a minimum, an increase in duty equal to the difference between the landed cost of the imports and the wholesale price of the comparable domestic products, or to recommend an import quota which will restore the ratio of imports to domestic consumption existing during the base period. The Commission's recommendations shall take effect within 60 days unless either House by majority vote concurs in a recommendation by the President that for good cause shown they not be made effective.

(b) Retaining and perfecting the peril point procedure so that there will be excluded from the Executive's power to lower tariffs the products of U.S.. industries and workers who would be injured by such action, as determined by the Tariff Commission under criteria similar to those in the escape clause. described above.

2. Promote growth in the U.S. economy by—

(a) Requiring mandatory action by the Executive to accomplish by negotiation or by proclamation an adjustment of imports of products like or competitive with those of a domestic industry to the ratio to domestic consumption of such imports during a representative post-World War II base period when it is found by the Tariff Commission (on application by the affected industry) that coincident with an increase in imports above the base period ratio to domestic consumption, the domestic industry has suffered, in comparison with the base period, a decline in its rate of growth in investment, earnings, sales, employment, or wage payments due in part to the effect of the excessive imports on the industry;

(b) Excluding from the Executive's power to negotiate new tariff concessions products of U.S. industries which have suffered or would suffer a decline in rate of growth in investment, earnings, sales, employment, or wage payments if imports were to be increased by an amount exceeding the share of domestic consumption held by imports during the base period.

3. Promote U.S. exports by

(a) Enforcing U.S. rights under existing trade agreements to secure the full benefit of concessions previously bargained and paid for by U.S. tariff concessions but curtailed or nullified by exchange controls, imports license restrictions, quotas, bilateral agreements, or other devices;

(b) Mandatory action by the Executive under existing law and trade agreement provisions to secure the removal of foreign import barriers which in fact discriminate against U.S. goods whether the subject of trade agreement concessions or not;

(c) Negotiating new trade agreements with countries which impose no discriminatory barriers against U.S. exports, and which give the United States the full benefit of concessions previously granted;

(d) Suspending most-favored-nation treatment from nations imposing discriminatory barriers against U.S. exports, or denying to the United States the full benefit of concessions previously granted to the United States.

STATEMENT BY OLIVER WILLIAMS, NEW YORK, N.Y., IN FAVOR OF H.R. 9900, THE TRADE EXPANSION ACT

Summary

IMPORTS FOR NATIONAL GROWTH

This is written from the point of view of the public interest.

American capital is idled, instead of expanding employment of a high-wage character, because of tariffs. These prevent the exchange of high capital content goods for the high labor content goods made by our camparatively untooled oversea customers.