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names.

Mr. GIBBONS. Mr. Frenzel?
Mr. FRENZEL. I have no questions. Thank you.
Mr. GIBBONS. And I feel the same way. Thank you very much.

Our next panel is composed of Mr. Richard W. Wilcke, Mr. DeLaney, Mr. Wilson, Mr. Berman-I regret I didn't call all your

Our first witness, according to the list, is for the Council for a Competitive Economy, Mr. Richard Wilcke. We will put your statement in the record, and I would urge you to summarize it as briefly as you can, because, as you can see, we are running way behind today, and we don't have much time. We have a roomfull of witnesses. We don't want to cut anybody off, but try not to be repetitious, if you can. STATEMENT OF RICHARD W. WILCKE, PRESIDENT, COUNCIL

FOR A COMPETITIVE ECONOMY Mr. WILCKE. I can appreciate that. I will summarize my comments. We have put the full testimony from our organization in the file, and also a written attachment from one of our members, Mr. Bill Law of Cudahy Tanning Co.

We appreciate this opportunity to comment on this question of import duties on leather jackets and coats. I am Richard Wilcke, president of the Council for a Competitive Economy. We are a fairly young organization, comprised of nearly 1,500 corporations of all sizes and all kinds in all 50 States.

Our council was formed in large part because its founders realized that the greatest enemies of the market economy over the years have often been business groups that have subverted it by trying to use the powers of Government in their own behalf. Import protection has been one of the most common antimarket acts supported by the business community, often with the labor unions' support.

The leather goods industry's current request for higher tariffs and more shelter from foreign competition is all too typical of the attitude of the business community.

I should say our organization opposes not only regulations which violate the rights of producers and consumers, but also privilege, which we define as gains that can only be obtained coercively outside the market process, meaning with the help of Government.

I am here today not only to oppose the ITC's proposed increase of the duties on leather coats and jackets, but to say that the ideal situation would be removal of the duty that now exists, and in fact all duties and restrictions on free world trade.

We think that the supporters of import restrictions would never dream of asking the local police to interfere if their customers wanted to buy cheaper products from their competition, yet they manage to rationalize interference in this case because their competitors live on the other side of political boundaries.

We submit that trade is trade whether or not it transcends political borders. Granted, many economic arguments can be made against these import duties. They force consumers to pay higher prices; they hurt some businessmen, such as importers and exporters; they hurt the employees of these firms; and they subsidize some businesses.

But these are really side issues in our view. The main issue is freedom, and that means freedom for consumers, for importers, for hide exporters and for foreign producers. All of these people should have a right to trade with each other freely.

The supporters of protectionist devices, whether tariffs or duties or whatever they might be, propose to use Government's power to trample with calloused disregard on these rights.

Regarding House Resolution 383, you can easily get bogged down in issues specific to the leather industry, but in our view, Mr. Chairman, we are not really talking about leather; we are talking about freedom and the necessary condition for free trade.

The United States can scarcely have a claim to being a free country if its citizens can't perform such a simple act as buying a Taiwanese leather coat without interference or a higher price due to the action of the U.S. Government.

We think this idea of whether or not the American leather goods industry as a whole is judged to be injured by imports is really irrelevant. There is always a wide variance in success to failure in any industry, including the leather goods industry; and to lump the industry together and say we have judged them to be injured by imports is really beside the point. Especially since because even if it were, there would be no justification for nullifying the rights of other Americans to trade freely.

In closing, I would say it is certainly true that American products can suffer in the world market because of the irresponsible regulatory or monetary policies of the Government, but if Government mismanagement of money is our primary problem in the world trade issues, then we should not solve it or try to get around it by trade restrictions.

Finally, I can't stress enough the grave harm that we believe is inflicted on the American people by trade barriers. Each time we make it more cumbersome for foreigners to sell to us, we make it more difficult for them to buy from us. The Japanese, whom the industry and many of the so-called neomercantilists of today like to paint as villains, export so much because they need to import so much. We cannot block or hamper their exports without cutting their imports.

We think exports and imports are two sides of the same coin. Imports we see as the benefits, and exports we see as the payment.

The opposite view is mercantilism. Human freedom and prosperity depend on our understanding this, so that governments everywhere will once again work to unleash the creativity and productivity that results from the international division of labor and free trade.

I appreciate the opportunity to be here.
[The prepared statement and attachment follow:]

STATEMENT OF RICHARD W. WILCKE, PRESIDENT, COUNCIL FOR A COMPETITIVE

ECONOMY Mr. Chairman, members of the subcommittee on trade, thank you for this opportunity to comment on the question of import duties on leather jackets and coats. I am Richard W. Wilcke, president of the Council for a Competitive Economy, a national membership organization of over 1,000 businesses and individuals dedicated to a free, competitive economy, unhampered by regulation, subsidy, protection from imports or other special privilege. Attached to my written comments for the record

is a statement by Mr. William Law, president of Cudahy Tanning Company of Cudahy, Wisconsin, and a Council member.

The Council was formed in large part because its founders realized that the greatest enemies of the market economy over the years have been business groups that have subverted it by seeking to use the powers of government in their own behalf. Import protection has been one of the most common anti-market acts supported by the business community. As a matter of fact, the very first act of the first Congress was the passage of a tariff

. The leather industry's current request for shelter from foreign competition is tragically typical of the business community.

The business people who founded our organization believe in the free market down the line. We oppose not only regulations, which violate the rights of producers and consumers, but ALL privilege. We define privilege as gains that can only be obtained coercively outside the market process, which means with the help of government.

We port the free market not simply because it works, but because it relies on voluntarism and so respects the rights of all participants, whether producers or consumers. These were the founding principles of the United States, and precisely the principles that are undermined by import restrictions, regardless of the so-called "practical" or "real-world” rationalizations put forth.

I am here today not only to oppose the International Trade Commissions proposed increase in the duties on leather coats and jackets, but to call for removal of the sixpercent duty that now exists and ALL duties and restrictions on free world trade.

I wonder how many of the supporters of import restrictions have really thought about what it is they are asking for. They would never dream of asking the police to interfere if their customers want to buy cheaper products from their competitors down the street. Yet they've rationalized interference in this case simply because their competitors live on the other side of a political boundary. I submit that trade is trade, whether or not it transcends political boundaries. Two parties to a trade expect to benefit or they don't enter the transaction. There is no moral right by which any third party, using the powers of the United States Congress, may interfere with the private economic activities of free Americans.

There are many economic arguments that can be made against these import duties. They force consumers to pay higher prices for what they obviously regard as less-desirable products. They hurt hide producers and exporters and their employees, who may find sales contracting if leather goods imports are curtailed. They hurt American importers and their employees. They subsidize domestic producers of leather goods and producers of imitation leather and other leather substitutes.

But these are side issues. The main issue is freedomfreedom for American consumers, for importers, for hide exporters and for foreign producers. All of these people have an unalienable RIGHT to trade with each other freely. The supporters of duties propose to use the government's power to trammel with callous disregard on their rights.

In discussing House Resolution 376, one can easily get bogged down in issues specific to the leather industry. But we are not really talking about leather. We are talking about freedom and its necessary condition, free trade. What claim can the United States make to being a free country if its citizens cannot perform such a simple act as buying a Taiwanese leather coat without interference by the U.S. government? This is what's at stake. It is irrelevant whether or not the American leather-goods industry is judged to be injured by imports. Because even if it were, this would be no justification for nullifying the rights of other Americans to trade freely with whomever they choose.

The principle must apply regardless of the goods in question . . . steel, automobiles, trucks, etc., and regardless of the exporting nation (Japan, Germany or Korea, etc.).

Virtually everyone knows intuitively that the right to trade freely is a basic human right. Very few would challenge it openly, so those who need to oppose it to gain special privilege look for ways to confuse the issue. Trade statistics is one of their favorite methods. We can't let individuals trade as they please, they say, because the aggregate trade statistics don't look good. Economists have long known the problems with trade statistics. For instance, they are based on arbitrary groupings of people in 12-months periods and don't, and can't, measure what really matters, the subjective satisfaction of individual consumers. But such objections aside, ought the members of Congress be sacrificing the freedom of their constituents on the advice of trade statisticians? The market economy exists only to serve consumers, not the other way around.

Concern with trade deficits and balances is wasteful preoccupation. When two parties trade, each wants what the other has more than what he is willing to give. Each then achieves a surplus or "favorable" balance. This doesn't change just

because the seller lives in Taiwan or Korea. If we could examine each individual transaction between Americans and foreign sellers, we'd see that in every case, the buyer and the seller each preferred what he was getting to what he was giving up.

To lump all of these individual transactions together and talk about the trade position of the United States versus, say Japan is meaningless. Nations do not trade. They have no trade positions. And statistics designed to illustrate them are misleading nonsense. But it is dangerous nonsense, because it serves to justify usurpation and interference with the peaceful activities of the American people.

Now, it is certainly true that American products can suffer in the world market because of the irresponsible monetary policies of the Government. For instance, the debasement of the dollar by the Federal Reserve's expansion of the money supply is an important reason for the skyrocketing price of OPEC oil. But if government mismanagement of money is the problem, don't try to solve it, or get around it, by trade restrictions. Don't punish the American people if the Fed is to blame. Demand that the Fed stop destroying the currency, but leave the people alone.

The case for import restrictions was destroyed by Adam Smith but the neomercantilists who seek higher tariffs are not concerned about consumer well-being or even their own long-term interests. They continue to promote the most absurd fallacies about world trade. Defying all common sense, they argue that imports are harmful, cheaper imports even more so. They would have us believe that all Japan need do to wreck the American economy is give us everything we want for free. While this would surely be costly to the Japanese, it would do wonders for us. Not only would we have all those products without charge, we'd have ample labor, capital and raw materials here to produce cheaply all the many things we couldn't afford before but would all like to have.

The neo-mercantilists would have us believe that citizens of foreign countries desire to sell us goods, but do not themselves wish to buy any American goods. In other words, they sell to us simply to get our paper money, which they will then hold forever. But do any of us sell our services or our products just to be able to hold paper money? Of course not, and for obvious reasons. So why would the foreign sellers do so? The neo-mercantilists have no answer.

Each of the myths of foreign trade collapses with the realization that trade benefits all voluntary parties, that nations do not trade and that the economy is worldwide, not national. When these lessons are understood, the destructive limitation of trade will be but a sad memory.

Finally, a word about those who think trade restrictions should be ended only when other nations reciprocate. Holders of this view also miss the point of trade. The benefit is in what is received, not what is given up. The reciprocity position may be analogized like this: Imagine two men. Each is holding his own throat and threatening to strangle himself. The advocate of reciprocity would be saying, “I will not let go of my throat unless you let go of yours.” It makes no more sense when the issue is trade.

The American people would benefit immediately from the unilateral abolition of trade restrictions. Even if foreign nations never remove their barriers, our people would be better off because their access to wider array of inexpensive products. Removal of our barriers will also encourage other nations to follow suit when they see the enormous benefits of free trade. Reciprocity is not something that needs to bargained for. The prosperity of free trade will make it irresistable.

I cannot stress enough the grave harm that is inflicted on the American people by trade barriers. Each time we make it more cumbersome for foreigners to sell to us, we make it more difficult for them to buy from us. The Japanese, whom the neomercantilists aspire to paint as villians, export so much because they need to import so much. We cannot block their exports without cutting their imports.

Exports and imports are two sides of the same coin. Imports are the benefits, exports, the payment. Human freedom and prosperity depend on our understanding this so that governments everywhere will once again unleash the creativity and productivity that results from the international division of labor and free trade. Thank you very much.

STATEMENT ON BEHALF OF THE COUNCIL FOR A COMPETITIVE ECONOMY, BY

WILLIAM L. Law, PRESIDENT, CUDAHY TANNING Co., CUDAHY, Wis. Regarding the efforts of the leather industry to curb imports, be advised that the industry is not unanimous in its efforts. Actions of the protectionists remind one of Dr. Milton Friedman's dictum that "the great enemies of the free enterprise are business men and intellectuals—business men, because they want socialism for themselves and free enterprise for everyone else; intellectuals, because they want free enterprise for themselves and socialism for everyone else."

I have some knowledge of the subject, inasmuch as baseball glove leather was the principle product of our firm until 1957 when Japanese-manufactured ball gloves entered and ultimately captured 70% of the United States market. Today we tan no baseball glove leather. Sentiment in the ball glove industry at that time was very strong for protective action and I investigated the matter in some depth but found that I could not in good faith urge protectionist action on my Representative. Such action would have been wrong economically, politically and morally.

THE PRODUCT IS PROFIT My sentiments may be colored by the fact that I look on myself not as a tanner whose product is leather, but as a capitalist whose product is profit. That climate most beneficial to capitalists and for that matter, to workers and society in general, is one in which there exists a minimum governmental interference.

The protectionist argument is almost as widespread today as it was 200 years ago, when Adam Smith so brilliantly demonstrated its fallacies. Fortunately, we have the work of Smith and his many successors plus numerous empirical lessons on the benefits of free trade (of which the United States is a notable example) to demonstrate the advantages of unrestrained exchange.

No improvement can be made on Smith's understanding that “It was the highest impertinence of kings and ministers, to pretend to watch over the economy of private people and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without exception, the greatest spend-thrifts in the society. Let them look well after their own expense, and they may safely trust, private people with theirs. if their own extravagance does not ruin the state, that of their subjects never will ..." And further: "To give the monopoly of the home market to the produce of domestic industry . . must in almost all cases be either a useless or a hurtful regulation. If the produce of domestic industry can be bought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful.

"It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of a shoemaker: The shoemaker does not attempt to make his own clothes, but employs a tailor; the farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it in their own interests to employ their whole industry in a way in which they will have some advantage over their neighbors, and to purchase with a part of its produce or what is the same thing, with the price of a part of it, whatever else they have occasion for. What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom . .

"That it was the spirit of monopoly which originally both invented and propagated this protectionist doctrine cannot be doubted; and they who first taught it were by no means such fools as they who believe it. In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind."

The "sophistry' of which Smith speaks is in essence that being advanced today by protectionists: The U.S. is a high wage country; its industry is unable to compete with other countries; imports are increasing, and unless remedial measures are adopted our industries will be destroyed, our defense posture will be weakened and large-scale unemployment will ensue.

FREE TRADE ARGUMENT On the other hand we have the rationale of free trade: We trade to obtain goods that are either unobtainable domestically, such as asbestos, or that can be obtained cheaper abroad-baseball gloves. Trade between individuals, between states, between nations, is economic and it does not reduce living standards of the participants, rather it enchances them. In short, trade raises wages. Those who think otherwise fail to understand that wages in the U.S. are the world's highest for a reason: Americans work with the most and best tools. American industry has the world's highest average capital investment per worker ($23,000) and therefore has the highest average productivity per worker. We have high wages, but because of the multiplier (tools) we have low labor costs.

Certainly, labor-intensive industries are unable to compete. Give an Italian girl a needle and $20 per week and she will produce lace for one-fourth the costs of the

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