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American girl who receives $80 per week. Their productivity must be equal. However, give an American miner a giant mechanical shovel and $150 per week and by mining 100 tons he will produce much cheaper coal then the British miner with less efficient tools who receives $50 per week and only produces 20 tons. So we import handmade lace and we export computers.
Exports must equal imports. If this were not so, we should hope for all imports we would get. Imagine receiving goods for nothing. But we must pay—and we pay with exports.
Those who would limit imports are taking a superficial view and it is essential for the sake of our economic well-being that we consider this matter in depth. Consider not only the worker who competes with imports, but also the worker who is helped by exports.
Consider the consumers whose real wages are raised by cheap imports. Consider the merchants with whom the consumer who buys cheap imports spends the dollars saved. Consider the industries themselves which by competing in world markets are honed to a higher degree of competitive efficiency than they might otherwise be. Indeed, no one likes competition, but it is competition that has given the U.S. the world's highest standard of living.
Let those who say that free trade causes unemployment examine our history. They will discover that our periods of highest unemployment occurred when tariffs were highest-a fact that doesn't necessarily indicate a correlation, nor would its reverse. Unemployment is not caused by imports, nor is it caused by automation or by growth of the labor force.
Unemployment is caused when money wages are arbitrarily forced or held above the level indicated by the market. Remember, the level of real wages in an area is in proportion to the capital investment per worker in that area. But if money wages are arbitrarily over-supported, unemployment ensues. To illustrate: In the 1929 inflation the money supply fell by one-third; prices of goods fell, but the Administration used all weapons at its disposal to hold money wages up and for 10 years 15 percent to 25 percent of the work force was unemployed. The situation was not corrected until 1940, when the Government took the opposite position (though for other reasons) and held wages down while it printed money to finance the war. Unemployment disappeared at once.
Most economists agree with the above position. One of them, Sir William Beveridge, wrote in his book, "Full Employment in a Free Society:" "This potential effect of high wages policy in causing unemployment is not denied by any competent authority . as a matter of theory, the continuance in any country of a substantial volume of unemployment which cannot be accounted for by specific maladjustment of place, quality, and time is, in itself, proof that the price being asked for labor as wages is too high for the conditions of the market; demand for and supply of labor are not finding the appropriate price for meeting.”
In the final argument, that national defense requires that the consumers subsidize these non-competitive industries, let it be said that this position has a better foundation than the others, though in most cases an insufficient one.
ENOUGH STEEL For instance, the chairman of our steel corporations asks, "Can we, for example, be assured of the strong industrial base in steel we need for modern defense if one quarter or more of the steel we require were imported from countries lying uncomfortably close to the Soviet Union and China?”
I imagine that we can, but properly this is a matter for the strategic planners within whose purview this matter falls, to be made in a calm and rational matter and without distortions urged by parties whose interests are not necessarily those pretended.
The free market has the answer to imports, to unemployment, to gold out-flow and to most economic problems if we will but let it function. If the level of money wages (the distinction between real wages and money wages is important) is so high that unemployment threatens and that the balance of trade is negative, then a high tariff policy will simply reduce exports and employment as it always has in the past. The answer to such a problem is hard money and the free market.
There is no other effective method. It is the only method consistent with the highest possible standard of living and climate of political freedom.
Mr. GIBBONS. Thank you.
STATEMENT OF PAUL H. DeLANEY, JR., COUNSEL FOR AND AC
COMPANIED BY JEFFREY WILSON, VICE PRESIDENT, WILSON'S HOUSE OF SUEDE & LEATHER, AND LYLE BERMAN, PRESIDENT, BERMAN'S, THE LEATHER EXPERTS, DIVISION OF W. R. GRACE & CO.
Mr. DELANEY. Thank you. We certainly will summarize our comments and keep it to a minimum, since most of the points we wish to make have been made earlier today anyway.
Mr. Chairman, I am accompanied today by Mr. Jeff Wilson of Wilson's, and Mr. Lyle Berman of Berman's. They are both involved in the industry.
We are here to oppose this concurrent resolution.
Most of the points which we wish to make have been discussed previously today, but I think the major issue of concern to us is that if this congressional override were adopted, it would obviously increase inflationary pressures and it would eliminate the domestic market for certain types of products.
This particularly has to do with price break points and the quality of certain items which have been mentioned. It is doubtful that the relief, if provided, would necessarily do much for the domestic industry. There have been a number of questions raised in that regard.
On the agricultural side of things, there are serious questions about problems which would be created in terms of new pressure for export controls on hides if this resolution were passed; and then there is the related question of foreign markets for U.S. agricultural commodities. Countries such as Taiwan and Korea have become major purchasers of agricultural commodities. It has been a growing trend. We must be concerned about these points as well.
assume our prepared remarks will be included in the record, as you have related, and if that is the case we only wish to urge the committee to oppose this concurrent resolution.
Mr. GIBBONS. Yes, all the statements will be put into the record, including that of William L. Law, which will follow that of Mr. Wilcke.
[The prepared statement follows:] STATEMENT ON BEHALF OF WILSON'S HOUSE OF SUEDE & LEATHER AND BERMAN'S, THE
LEATHER EXPERTS, DIVISION OF W. R. GRACE & Co., BY PAUL H. DELANEY, JR., COUNSEL
INTRODUCTION AND SUMMARY My name is Paul H. DeLaney, Jr., and I am testifying before the Subcommittee on behalf of Wilson's House of Suede and Leather and Bermans, The Leather Experts, Division of W. R. Grace & Co. I am accompanied today by Mr. Jeffrey Wilson, Vice President of Wilson's House of Suede, Inc., and Mr. Lyle Berman, President of Bermans, The Leather Experts. We are appearing to oppose House Concurrent Resolution Number 383 which would override the Presidential Determination of March 24, 1980 on leather wearing apparel.
We urge the Subcommittee to reject House Concurrent Resolution Number 383 which would reinstate import relief recommended by the United States International Trade Commission notwithstanding the Presidential Determination noted above. In accordance with the reasons set forth in the subject Presidential Determination, this resolution is contrary to the United States national interest for the following reasons:
1. It would increase inflationary pressures;
2. It would eliminate the domestic market for various price categories of the subject products;
3. It is doubtful that the relief requested would benefit the domestic industry in any
significant way; 4. It would violate international commitments made by the United States to Argentina regarding the elimination of restrictions on the export of hides;
5. It would increase the likelihood of retaliation against Unites States exports by those countries which would be entitled to compensation under the escape clause procedures of the General Agreement on Tariffs and Trade.
LEGISLATIVE AND PROCEDURAL CONSIDERATIONS History of escape clause and import relief procedures
Article XIX of the General Agreement on Tariffs and Trade ("GATT”) permits countries to modify, suspend, or withdraw obligations made under GATT if, as the result of obligations under GATT and unforeseen developments, imports increase to the extent that they cause, or threaten to cause, serious injury to domestic producers. This provision is commonly known as the "escape clause.
Prior to the Trade Act of 1974 ("TA"), United States law implementing the escape clause was Title III of the Trade Expansion Act of 1962 (“TEĀ”). Section 201 of the TA superceded the TEA with a different escape clause provision. Under the TEA, increased imports must have been in major part the result of trade agreement concessions before import relief measures could be instituted. Under the TĂ, no link to concessions is required. Furthermore, under the TA, increased imports must only be a substantial cause of serious injury or the threat thereof (“substantial cause” is defined to mean a cause which is “important” and not less than any other cause) and no longer the major factor (generally assumed to mean a cause greater than all other causes combined) causing injury.
Under provisions of the TA, if the United States International Trade Commission (“USITC'5 finds that imports are a substantial cause of serious injury, or threat thereof, to an industry, the President of the United States is required, with certain exceptions, to provide some form of import relief, including duty increases, tariffrate quotas, quantitative restrictions, orderly marketing agreements, or, under appropriate circumstances and, upon a recommendation of the USITC, adjustment assistance, or a combination of remedies. Under the TA, the President can also choose not to provide import relief when he determines that it will not be in the national economic interest.
However, if the Congress prefers the form of import relief proposed by the USITC to the relief provided by the President, or if the President determines not to provide import relief, then a majority of those present and voting of both houses of Congress can pass a resolution requiring the President to implement the relief recommended by the USITC. Relevant statutory provisions under title II of the Trade Act of 1974
Under Title II of the Trade Act of 1974, pertaining to relief from injury caused by import competition, the following statutory provisions are particularly significant for present purposes:
“A petition for eligibility for import relief for the purpose of facilitating orderly adjustment to import competition may be filed with the International Trade Commission (hereinafter in this chapter referred to as the 'Commission') by an entity, including a trade association, firm, certified or recognized union, or group of workers, which is representative of an industry. The Petition shall include a statement describing the specific purposes for which import relief is being sought, which may include such objectives as facilitating the orderly transfer of resources to alternative uses and other means of adjustment to new conditions of competition.”
"In making its determinations under paragraph (1) the Commission shall take into account all economic factors which it considers relevant, including (but not limited to)
(A) with respect to serious injury, the significant idling of productive facilities in the industry, the inability of a significant number of firms to operate at a reasonable level of profit, and significant unemployment or underemployment within the industry;
(B) with respect to threat of serious injury, a decline in sales, a higher and growing inventory, and a downward trend in production, profits, wages, or employment (or increasing underemployment) in the domestic industry concerned; and
1 See Trade Act section 201(a)(1).
(C) with respect to substantial cause, an increase in imports (either actual or relative to domestic production) and a decline in the proportion the domestic
market supplied by domestic producers. For purposes of paragraph (1), in determining the domestic industry producing an article like or directly competitive with an imported article, the Commission
(A) may, in the case of a domestic producer which also imports, treat as part of such domestic industry only its domestic production,
(B) may, in the case of a domestic producer which produces more than one article, treat as part of such domestic industry only that portion or subdivision of the producer which produces the like or directly competitive article, and
(C) may, in the case of one or more domestic producers, who produce a like or directly competitive article in a major geographic area of the United States and whose production facilities in such area for such article constitute a substantial portion of the domestic industry in the United States and primarily serve the market in such area, treat as such domestic industry only that segment of the
production located in such area. For purposes of this section, the term 'substantial cause' means a cause which is important and not less than any other cause.
"The Commission shall report to the President its findings under subsection (b), and the basis therefore and shall include in each report any dissenting or separate views. If the Commission finds with respect to any article, as a result of its investigation, the serious injury or threat thereof described in subsection (b), it shall
(A) find the amount of the increase in or imposition of, any duty or import restriction on such article which is necessary to prevent or remedy such injury, or
(B) If it determines that adjustment assistance under chapters 2, 3, and 4 can
effectively remedy such injury, recommend the provision of such assistance, and shall include such findings or recommendation in its report to the President. The Commission shall furnish to the President a transcript of the hearings and any briefs which were submitted in connection with each investigation.
The report of the Commission of its determination under subsection (b) shall be made at the earliest practicable time, but not later than 6 months after the date on which the petition is filed (or the date on which the request or resolution is received or the motion is adopted, as the case may be). Upon making such report to the President, the Commission shall also promptly make public such report (with the exception of information which the Commission determines to be confidential) and shall cause a summary thereof to be published in the Federal Register.
Except for good cause determined by the Commission to exist, no investigation for the purposes of this section shall be made with respect to the same subject matter as a previous investigation under this section, unless 1 year has elapsed since the Commission made its report to the President of the results of such previous investigation."3 U.S. International Trade Commission Determinations under Section 201 of the Trade
Act of 1974 concerning Leather Wearing Apparel In accordance with section 201(d)(1) of the Trade Act of 1974, on January 24, 1980, the USITC reported to the President of the United States the results of its investigation regarding importation of leather wearing apparel into the United States (USITC Investigation Number TA-201-40).
This investigation was initiated to determine whether leather wearing ap under TSUS category number 791.76 was being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article. The USITC instituted this investigation under section 201(b)(1) of the Trade Act on August 3, 1979, following receipt, on July 24, 1979, of a petition for import relief filed by National Outerwear and Sportswear Association, Amalgamated Clothing and Textile Workers Union, International Ladies' Garment Workers Union, United Food and Commercial Workers Union, and Tanners' Council of America, Inc.
On the basis of its investigation, the USITC determined that leather wearing apparel under TSUS number 791.76 was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof, to the domestic industry producing an article like or directly competitive with the imported article.
2 See Trade Act sections 201(b)(2) through 201(b)(4). 3 See Trade Act sections 201 (d)(1) through 201(e).
The USITC found and determined that to prevent the injury to the domestic industry it would be necessary to impose additional rates of duty on the subject articles (the present rate of United States Customs duty on such articles is 6 percent ad valorem) so as to provide for the following ad valorem rates of duty:
Percent 1st year.....
31 2d year.........
26 3d year.......
21 Presidential determination
In accordance with established practice and procedure under provisions of the Trade Act of 1974, the Chairman of the Trade Policy Staff Committee (“'TPSC”) issued a notice in the Federal Register on February 4, 1980, soliciting views from interested parties regarding the report of the USITČ to the President of the United States concerning importation of leather wearing apparel into the United States (USITC Investigation Number TA-201-40).
On March 24, 1980, the President of the United States issued a determination denying import relief for leather wearing apparel, based on statutory national economic considerations, including the inflationary impact and the ineffectiveness of import relief as a means to promote adjustment.
"Pursuant to section 202(b)(1) of the Trade Act of 1974 (Public Law 93-618, 88 Stat. 1978), the President determined the action he would take with respect to the report of the United States International Trade Commission (USITC), transmitted to him on January 24, 1980, concerning the results of its investigation of a petition for import relief filed by the National Outerwear and Sportswear Association, the Amalgamated Clothing and Textile
Worker's Union, the International Ladies' Garment Workers Union, the United Food and Commercial Workers Union, and the Tanners' Council of America, Inc., on behalf of the domestic industry producing leather wearing apparel, provided for in item 791.76 of the Tariff Schedules of the United States (TSUS).
“After considerating all relevant aspects of the case, including those considerations set forth in section 202(c) of the Trade Act of 1974, the President determined that expedited adjustment assistance is the most effective remedy for the injury suffered by the domestic leather wearing apparel industry, and that import relief is not in the national economic interest.
“Expedited adjustment assistance is the only positive action that would aid the adjustment process of the industry without being inflationary or possibly causing a further erosion in consumer demand by further increasing prices. Firm adjustment assistance would facilitate the purchase of new equipment and the implementation of new marketing techniques that the industry has stated would be its primary adjustment actions if import relief were granted.
"The imposition of import relief itself would have an inflationary impact and consumer cost would be unacceptable in light of the strong emphasis that the Administration places on its anti-inflation efforts.
“Also, it is not clear that the industry would be in a position to compete once relief expires.
"The President directed the Secretaries of Commerce and Labor to give expeditious consideration to any petitions for adjustment assistance filed by firms producing leather wearing apparel, by their workers, and by communities impacted by imports of such articles." [Italic supplied.]
Congressional override proceedings
On July 21, 1980, Congressman James M. Shannon introduced House Concurrent Resolution Number 383, which was referred to the House Ways and Means Commit
On July 22, 1980, Senator John C. Danforth introduced Senate Concurrent Resolution Number 108, which was referred to the Senate Finance Committee. On August 1, 1980, this later resolution was scheduled for hearings before the Senate Finance Committee Subcommittee on International Trade.?
4 See Presidential determination on section 202(b) of the Trade Act of 1974, Mar. 24, 1980, and Federal Register, vol. 45, No. 60, Mar. 26, 1980, p. 19543 and Press Release No. 319, U.S. Trade Representative, Mar. 24, 1980.
5 See H. Con. Res. 383, 96th Congress, 2d session, July 21, 1980.