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thing possible, and just ask for a short respite in order to accomplish their goals.
We desperately need the help of Congress to implement this. | Thank you.
[The prepared statement follows:]
STATEMENT OF MORTON COOPER
SUMMARY Passage of H. Con. Res. 383 is essential to the workers and manufacturers of the U.S. leather apparel industry. Without it, the industry will have been denied a fair chance to compete against imports which have severely injured the industry in recent years. Imports have had a devastating impact on the U.S. industry and its workers:
Imports rose from 4 million units in 1975 to an estimated 6.7 million units in 1979.
Import penetration of the U.S. market rose from 62 percent in 1975 to 79 percent in 1979.
U.S. production of leather apparel during this same period fell from 2.5 million units to an estimated 1.9 million units, despite an increase in total U.S. consumption from 6.5 million units to 8.6 million units.
Imports are responsible for the precipitous drop in employment in the U.S. industry from 11,100 workers in 1974 to an estimated 5,500 in 1979. Layoffs have continued in the industry in 1980.
After a unanimous finding of injury and a unanimous recommendation of an increase in tariffs by the ITC, the President stunned the industry by rejecting the ITC's recommendation.
With a period of effective import relief, this industry can and will improve its competitive position. Cooper Sportswear's efforts illustrate the will of the industry to get back on its feet: increases in the size of the design department, engineering staff, and sales force; upgrading machinery and equipment; compụterizing data systems for management analysis in an effort to re-position rapidly in response to changing market conditions; and arranging for technical assistance from the ACTWƯ engineering department and the Trade Adjustment Assistance Center of the New Jersey Economic Development Authority.
Despite these problems, effective import relief has not been forthcoming. H. Con. Res. 383 represents the last chance for the industry to get back on its feet.
STATEMENT I am Morton Cooper, President of Cooper Sportswear Manufacturing Co., Inc. which produces leather apparel. I am currently co-chairman of the Import Action Committee of the National Outerwear and Sportswear Association (NOSA), which represents domestic manufacturers of leather apparel, and have served as past Chairman and President of that Association. NOSA was one of the petitioners to the U.S. International Trade Commission in the recent investigation on leather apparel.
My appearance today is the ninth in the last several years before a government body in furtherance of our industry's efforts to obtain effective import relief from the difficulties being encountered by our firms and workers as a result of increasingly severe import competition.
There are those who may ask why our small industry keeps on doggedly pursuing what seems thus far to have been only an illusory goal to obtain redress of its legitimate import grievances. The answer is that our workers and managers reject any suggestion that America is no longer the country of opportunity for small business. As I have insisted on past occasions, we do not intend to just fade away as old soldiers do. My firm is one of the oldest in the leather apparel industry. It was started by my father and I have soldiered in it for many years. I owe it to my father, to my family, and to the hundreds of my workers to maintain my firm's economic viability. I can safely say my views are similarly shared by every executive officer of every other firm in this industry. My appearance today is a continuation of the latest battle in that stuggle.
Today I would first like to review briefly the critical features of the trends in the industry over the last few years which vividly illustrate the need of the firms and workers for effective import relief. I will then recount the past history of the industry's fight to obtain recognition of our import problem. Finally, I would like to share with you the comprehensive plans of my firm to use the period of import
relief to innovate and improve our competitive position so that we will stand in a much stronger position against imports when relief is terminated.
According to the most recent data available from the U.S. International Trade Commission and estimates calculated from these data, domestic production of leather apparel fell from 2.5 million units in 1975 to an estimated 1.9 million units in 1979, despite an increase in total U.S. consumption of leather apparel from 6.5 million units to an estimated 8.6 million units over the same period. The industry reports that domestic production has registered further declines in 1980. Consequently, capacity utilization in the industry has plummeted, particularly in the last two years, while many workers have lost their jobs and many firms have folded.
Over the same period, U.S. imports rose from 4 million units in 1975 to an estimated 6.7 million units in 1979. As a result of these massive increases, imports in 1979 garnered 79 percent of the quantity of the U.S. market. This level of import penetration is well above the 62 percent in quantity registered in 1975.
I should not fail to note the devastating peak year for imports in 1978, when nearly ten million units of leather apparel were imported. The U.S. industry is still reeling from that surge which overwhelmed the U.S. market unlike ever before and increased import penetration rates in terms of quantity to 82 percent.
The impact on employment has been tremendous. Our industry supported the jobs of 11,100 workers in 1974, while by 1979, the work force had dropped to an estimated 5,500. Even many of these remaining workers are being employed at reduced hours. We have been forced to continue to lay off workers in 1980. Thus, while most of the U.S. economy has experienced a serious recession only in 1980, we in the leather apparel industry have been in a recession as a result of imports for several years.
The U.S. industry, its firms and workers, have not stood idly by during this loss of our market to imports. In addition to constant efforts to become more efficient and improve productivity, we have taken many actions to deal directly with the import problem.
One effort, which stretched over three years, where we finally prevailed was the long battle with the Office of the U.S. Trade Representative to remove leather apparel from the list of articles eligible for duty-free treatment under the Generalized System of Preferences, or GSP. Despite the obvious and injurious progression of imports during recent years, it was not until March 1979, 38 months after we filed our initial petition, that leather apparel was finally removed from the GSP list. Although the industry won a small and belated victory in its struggle with the import problem, the removal of leather apparel from the preference list has not solved the problem of injurious imports.
Because of the devastation of the great surge in 1978 and the precipitous decline in production in 1979, the industry embarked on a major effort to force acknowledgement of, and to obtain relief from, the very severe import problem that was destroying the industry more rapidly than ever before. A petition filed jointly by the National Outerwear and Sportswear Association, the Amalgamated Clothing and Textile Workers Union, the International Ladies' Garment Workers' Union, the United Food and Commercial Workers Union, and the Tanner's Council of America was submitted to the ITC under the Escape Clause (Section 201) of the Trade Act of 1974 just 13 month ago.
As is now well known, the ITC conducted a comprehensive investigation and found unanimously that the U.S. industry had been injured by import relief and unanimously recommended an increase in the tariff on imports of leather coats and jackets. However, the stunning negative decision by the Executive Branch once again prevented the appropriate redress of our industry's legitimate import grievances. We now appear before you, who represent in many respects the last chance for our industry to be heard by the U.S. Government. I cannot emphasize strongly enough how critical your affirmative vote on H. Con. Res. 383 will be to the firm and workers in our industry.
I am aware that some who are not predisposed to granting temporary import relief to injured U.S. industries may wonder what the U.S. leather apparel industry will do to really improve its competitive position against imports if import relief is granted. Let me assure you that Cooper Sportswear, one of the industry's leaders, will be doing everything possible. Members of the subcommittee must realize that much of what my firm, as well as other firms in the industry, will do during an import relief program will be a natural extension of plans for improvement and investment which we have already begun or would like to begin. Effective import relief will actually enable us to implement our plans fully and to carry them to fruition, something which has simply been impossible for most firms over the last few years as a result of the overwhelming disruption of our market caused by
imports. With this in mind, I would like to recount what will be possible for our firm to do with effective import relief.
Cooper Sportswear has been making every possible effort to remain competitive. We are in the process of increasing the size of our design department, our engineering staff, and our sales force. We will upgrade our machinery and other equipment; we have even installed a computer system to improve the collection of data for management analysis. These data enable us to spot trends in the market as they occur and to make adjustments in ordering certain supplies, in producing different styles or types of leather garments, and in targeting our sales force more effectively. Thus, we constantly maintain our operations in prime competitive condition, attempting to survive the onslaught of imports and to take advantage of any change for the better in market conditions.
While we anticipate good results from these efforts to improve, our chances will be slim in the absence of import relief. With the upcoming establishment of a permanent in-house engineering department, we can be much more successful and efficient in matching changes in production with fashion and style trends. In addition, we will be enhancing and expanding our level of cooperation with the engineering department of the Amalgamated Clothing and Textile Workers Union, which has a great deal of experience and expertise.
Our efforts in market research will be focused on expanding sales through the development of new channels of distribution. We are also exploring the possibility of adding new product lines to supplement our current production.
So that we leave no stone unturned, we have arranged through the Trade Adjustment Assistance Center of the New Jersey Economic Development Authority for diagnostic technical assistance which will identify all possible avenues, large and small, for increasing the efficiency of our plants and the productivity of our workers. The diagnostic study will look at production planning, the assignment of stylemixing among plans, industrial engineering needs, quality control, plus storage and materials utilization.
To bring these plans to fruition, however, requires that we have a market to sell to. Only by obtaining the respite provided by the temporary import relief program recommended by the ITC can we realistically get from where we are now to where we want to be. Many of the things we have in process, as well as what we plan to do in the future, are becoming less and less economically justifiable as the import problem worsens. Make no mistake—we are an efficient producer with many highly productive workers. But we can do better.
The Government, in deciding to aid the U.S. leather apparel industry in its efforts to compete with imports, has every right to assurances that U.S. firms will make every attempt to improve. Likewise, those of us on the firing line who must make the day-to-day management decisions necessary to survive need the full and restrained backing of Government. H. Con. Res. 383 offers a perfect opportunity for the Government and an important U.S. industry which supplies valuable employment opportunities for thousands of American workers to work hand in hand toward an objective we all deserve—a healthy U.S. industry making an important contribution to the U.S. economy.
Mr. GIBBONS. Mr. Swann, do you want to be heard next, or Mr.
CONSULTING SERVICES, INC., CONSULTANTS TO AMALGA-
For the record, I am Stanley Nehmer, president of Economic Consulting Services. We are economic consultants to both the Amalgamated Clothing & Textile Workers Union and the National Outerwear & Sportswear Association. My comments will be brief; they will be really on three key points:
One, I do want to follow up on some of the comments made with regard to the hide export problem which, as Mr. Cooper pointed out, has been tossed into this, and we think it is really a red herring, as it were; second, the inflation question; and, third, can the industry adjust during a 3-year period of import relief?
In Ms. Hughes' statement this morning she quotes an unknown Department of Agriculture analyst who estimates that restrictions on U.S. imports of leather wearing apparel would lead to a reduction of U.S. exports of at least $15
to $18 million, which is a pretty wide range.
What this does not say, however, is that if there is no import relief for the domestic leather wearing apparel industry, the sales of hides in the form of U.S. hides in the form of U.S. leather to the domestic industry will decline by a much greater amount than even this $50 to $80 million that has been put forward by this Department of Agriculture analyst. The annual shipments of leather wearing apparel are running about $225 million, and 54 percent of that is in the form of leather.
You would have not only in the absence of import relief hardly any domestic industry to sell to it, but if there were import relief, hopefully there could be increased sales of hides in the form of leather to the domestic industry.
Ms. Hughes in her statement said, “We can't say 'sell us your hides but don't sell us your garments.
It is not a question of the United States importing hides from Argentina, Brazil
, or Uruguay. We have our supply of hides and skins. We are the lowest cost producer of hides in the world. We are not importing these hides from these three countries.
It is perhaps dramatic, but unfortunately not accurate.
The question of retaliation or compensation was raised, and as Mr. Finley pointed out, there have been eight industries which have received import relief to date. There has not been any retaliation or compensation for any of those import restrictions that were imposed.
Now, what is it that a Korea or a Taiwan or a Hong Kong, for example, could request of the United States in the form
of compensation? Hong Kong is going to put restrictions on imports into its free port. It is one of the major suppliers of leather wearing apparel to the United States, Korea and Taiwan, with their restrictions on imports of products from the United States, I would like to think in the case of those countries and others that are involved that our United States negotiators in Geneva would also like to examine with them and the other members of GATT the trade restrictions these other countries have on U.S. products which adversely affect U.S. exports.
On the question of inflation, which was stated in the President's decision of March 24 of this year, leather wearing apparel is not included in the Consumer Price Index, and even if it were included in the Consumer Price Index, we are talking about a factor based upon the value of domestic consumption of leather wearing apparel compared to total personal consumption expenditures in the United States; we are talking about a factor of three one-hundredths of 1 percent, and as we have said time and again and the executive branch agencies knew what this number was—this is not even a blip in the CPI screen if it were included in the CPI.
We also say that with regard to inflation that there is no need for there to be any extensive or other than a modest increase, if that much, in the price of the finished product if the tariff were to be increased.
Everybody knows—and the panel that will follow, I am sure, will confirm this for you because in their testimony to the International Trade Subcommittee of the Senate Finance Committee their testimony certainly did—that retailers take at least a threefold markup on the import value of leather wearing apparel, as they do on many other goods.
There is a very substantial markup on the imported goods which is in itself the incentive for imports, and yet these same products, the imported products, may sell for roughly the same price as the domestically produced product.
Finally, Mr. Chairman, with regard to whether or not import relief can help this industry, I think there are some very important factors that we should note:
The International Trade Commission has the authority, which Congress gave it, to recommend an increase in the tariff of up to 50 percentage points for up to 5 years. They chose to recommend a tariff increase of half of that, and that was for only 1 year, with a decline from that 25 percentage increase in the second year, and a further decline in the third year.
In the opinion of the ITC, they said that this modest tariff increase would be sufficient "to equalize more nearly prices between imports and domestically produced articles.”
They judged 3 years to be an adequate time for the industry to make adjustments based upon the proposed plans discussed before the Commission.
In the presentation made by Mr. William Frye, the supervisory investigator of the ITC in this case, he advised the Commission during a public briefing that 3 or 4 years would be necessary to implement the kind of plans that the industry had in mind, and thus the judgment of the International Trade Commission, which certainly studied this case for 6 months, was that 3 years would be sufficient and that import relief as they recommended it—of 25, 20, and 15 percent-would be adequate to do the job.
Now, while this case was pending in the 60 days before the executive branch, we were asked by different agencies for specifics on what the adjustment plans would be of this industry; and our firm made a confidential survey, where we collected business confidential information from leather wearing apparel firms. In great detail we presented that information—the results are shown in my testimony-we presented that to the executive branch. We were told by STR, by Commerce and by the Labor Department that the adjustment plans of this industry were certainly adequate for this industry to adjust in 3 years, and these three agencies recommended to the President that import relief be provided for this industry.
We would be very glad to furnish for the record a somewhat sanitized, without the business confidential information, version of what it is we presented to the executive branch.
Mr. GIBBONS. Mr. Nehmer, how much time would you need?
Mr. NEHMER. We can give you a copy for circulation to the committee.
Mr. GIBBONS. Well, we will keep the record open for a reasonable length of time.
Mr. NEHMER. We can do that this afternoon.
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