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funds, and in Ohio in excess of $2 million per month in State funds. What portion of the Ohio payments are attributable to the shoe industry I do not
know. I am advised by the commisssioner of the department of employment security that further statistical information was submitted to the international economic policy subcommittee in April of 1975. I believe statistical information from Pennsylvania and other shoe States was submitted to that committee
at that time. New Hampshire's payments in 1975 equaled 1 percent of the present total amount in the State unemployment trust fund. In a State the size of New Hampshire, with small businesses scattered through small communities, the enforced closing of a business employing 200 to 300 people is a catastrophe. To further burden the remaining businesses in New Hampshire with a cost
of Trade-Act-created unemployment is to rub salt in the wound. MELDRIM THOMSON, JR., Governor, State of New Hampshire.
Mr. VANIK. Mr. Steiger? Mr. STEIGER. I have no questions, Mr. Chairman. I want to compliment the Governor for the fact that he is here in person. He did not send in a statement, but he came down to testify before the subcommittee. It is indicative of his very deep interest in and very deep concern for his State and the problems within his State with which he is faced. I am grateful that you would take the time out of your schedule to come down to testify and give us the benefit of your thinking. Governor THoMsoN. Thank you. I may just say the interest on my part stems from the fact that I have visited almost every shoe plant in our State in the course of the past several years, and have seen the deep concern of those who do work in that industry to preserve their jobs. Mr. VANIR. Thank you. Mr. Frenzel? Mr. FRENzEL. I want to say “Amen” to Mr. Steiger's comments. It is far more impressive to us when the chief executive officer of a State appears, rather than sending someone else. I sure appreciate the time that you are taking, Governor. I will yield the balance of my time. Mr. VANIK. Do you have any other suggestions, Governor? Let's suppose you had the problem of dealing with this shoe decision. You must be mindful of the fact that the situation of the shoe manufacturers throughout the world is pretty much the same all over the world, with our trading partners as it is in America. It is something that settles in one community. Very often it is the total * of the community, so its threat creates a widespread probem. Then we are dealing in a world in which we are trying to have an intercommunication with the other states of the world. We are trying to develop a relationship of commerce and trade and understanding. I think all of us want the people of the world to have the goods of the best quality. We want some competition both from the standpoint of quality and price. We want to preserve as broad a base of jobs in our own country as we can, but yet we realize the pitfalls : Poio and isolationism. We cannot separate ourselves from the world.
What would you suggest if you were writing and dealing with this issue of shoes? How would you treat the whole subject? Do you have any ideas on that? You are now making the decision, and we have this problem. What two or three philisophical tenets would you say should govern our action? You come from a State where you have a high level of citizen participation. Your voters are among the best informed in the country. They are not really people who live in a shell. They have great influence on the world. You have a great many authors, writers, teachers, and professors. You have a highly sophisticated, intellectual climate. In that framework, what would you think would be the solution to this problem? Governor THoMson. I have given a lot of thought to that in the past. I have visited, for example, shoe plants in Tokyo. This was back about 6 years ago. I saw there the conditions under which they worked, o I would describe as much worse than these workers that we have in our plants. Their pay was far under that of ours. I have seen in Taiwan on two trips what capitalization blended with a labor market whose reward is much less than that of the workers in our State can do, such as in taking over the textile industry, which was one of the plants I visited; trade names like Bud's and that sort of thing. It occurred to me that if we in this country through the Congress, through our State legislatures, are going to set minimum wages that are far superior to the wages paid in many of the other countries, then we must encourage the free enterprise system, the ingenuity and the imagination of the American working man to reach out to find better ways to produce at a faster pace. One thing I think the Congress has overlooked, and I come back to the shoe industry, is that many of our plants here are not modernized. They are not as good as plants as you will find in some of the competing countries; and instead of waiting until the hammer has fallen and the business goes into recession, I think it would be smart on the part of the Congress to find ways, just as you have with small business, for example, to encourage the building of better plants, the equipping of better shoe plants, the training of shoe workers. In fact, I have taken the initiative in my State. My first executive order this year was to create a shoe industry committee of the Governor's. On that I have half of the personnel who are manufacturers of shoes and half are labor leaders or representatives of labor. They have been working with me on our shoe problems. One of the things that we are going to try to do is retrain and bring on young people, because the shoe people tell me it is very difficult to find young people who will join the industry at their present wages. What they are relying upon is older workers. As I say, this idea of trying to make it, possible for American working men and women to use their imagination and their initiative and even though their prices are high, produce good shoes and produce them faster than they can be produced in some other countries, is one that we should foster.
I think the same thing applies in other industries. What I have said about shoes, you know far better than I exists in many other industries. The electronics industry is a good example. Following World War II, out in your State, for example, many of your manufacturers of dishes went out of business because of competition from foreign countries. I am not saying that we must build a wall around America, but we must find a way to keep our people— Mr. VANIR. To keep up with the competition. Governor THoxtson. To exceed the competition. That is in the best spirit of the American free enterprise system. Mr. VANIK. Thank you very much, Governor. We appreciate your statement and we very much appreciate you being here. Governor THoMson. Thank you, sir. We will now hear from Mr. Mark Richardson, president of the American Footwear Industries Association. Mr. Richardson, we are very delighted to have you here. The same principle applies to you. You can submit your statement and have it printed as submitted, or comment on it, or you may read from it, whichever you desire. We have a long list of witnesses, so we would like to proceed as rapidly as we can and have the maximum time for questions. You may proceed.
STATEMENT OF MARK E. RICHARDSON, PRESIDENT, AMERICAN F00TWEAR INDUSTRIES ASSOCIATION, ACCOMPANIED BY STANLEY NAMER, ECONOMIST
Mr. RICHARDsoN. Thank you, and good morning Mr. Chairman and members of the subcommittee. I do have a rather extensive statement which I have submitted to the subcommittee, and I understand, Mr. Chairman Mr. VANIK. Without objection, it will be printed in the record. b M; RICHARDsoN. I will try to keep my summary remarks quite r1et. Since I have spoken at one time or another to most of the members of the subcommittee, I will try at this time to give you an update on the situation with respect to the footwear industry. I heard you during the questioning, Mr. Chairman, discuss with Governor Thomson the fact that at year-end 1976 the average for 1976 imports came to approximately 45 percent. Unfortunately, I must also tell you that that was an average and did not reflect the conditions as they evolved during the course of the year. As you know, in April of last year, President Ford saw fit not to put forward any import relief under a unanimous decision of the ITC on an escape clause decision. As a result, imports which had been running at the rate of approximately 42 percent gained, and throughout the year we saw the import rate accelerate, ending in December with an import penetration of approximately 48 or 49 percent and averaging, as you pointed out, 45 or 46 percent. . In January, Mr. Chairman, and members of the subcommittee, imports went over the magic number of 50 percent in most of the trading nations of the world, it is recognized that, once the 50 per
cent level is reached, you have really sounded the death knell of an industry unless immediate and effective action is taken.
In February our statistics show us the penetration went to 52.2 percent, and in March early figures show it is at 53 percent. I don't know how much longer it is going to continue, and I don't know whether or not the reports in the press that we are not going to get effective relief are correct. I hope this administration will see fit to give the footwear industry import relief.
I certainly feel that when an industry establishes twice within 2 years, under the Trade Act of 1974, an act of Congress, that it is seriously injured as a result of imports, that something by way of effective import relief must be put into effect.
I am here, of course, to address myself to a subject that is not considered under the Act, import relief. It is, however, something that you are quite rightly seriously considering and with which you are quite seriously concerned.
As applied to the footwear industry, trade adjustment assistance is a palliative, not a cure. It has been available to domestic industries hurt by imports since 1962. It has never created a job, it has never created a new factory. It has never added a cent to the net wealth of our country, and it will never be able to do any of those things.
All it can do is prolong the agony of workers and firms, and I might say prolong the agony of the taxpayers who come up with the money,
For workers, trade adjustment assistance is basically a dole. Our workers prefer payrolls rather than welfare rolls, and as long as we have people in this country who still have the concept of the work ethic, it seems a shame to see so many forced to go to a concept (welfare] or other than the work ethic.
It supplements unemployment insurance payments for a short period of time during which period the workers are supposed to find new employment or training to enable them to find a job in another field.
For our industry, the shoe industry, finding new employment is almost impossible. Since unemployment in our industry runs 50 percent higher_than the national unemployment average.
Mr. VANIK. Is that in any way related to the senior nature of the workforce? The Governor pointed out just before you that these are elderly people.
Mr. RICHARDSON. I think there is a decided correlation, Mr. Chairman. I was going to couple that with some of my comments.
I see that Mr. Nehmer has turned up. I wonder if I could ask the privilege of having Mr. Stanley Nehmer join me at the table. He is a former Government officer, both nationally and internationally, for over 25 years with the State Department, the Commerce Department, and the World Bank. He is recognized authority in the field of international trade.
If a shoe factory in a town closes down, there is little likelihood another shoe factory exists to take those people, or, if there is one in the area, it is not likely to be seeking new employees.
Yesterday the Heavenly Shoe Co. in Wilkes-Barre, Pa., closed its plant. Approximately 3,000 people marched in the town's square, of
Wilkes-Barre. Heavenly's 400 or 500 employees will not find jobs in the 10 or 11 other shoe plants in that area. There are not additional jobs in those Wilkes-Barre plants. Most are currently operating on 3- or 4-day workweeks.
The training generally available through the adjustment insurance program is of little value for a variety of reasons. Over 40 percent of shoe factories are located in communities of under 5,000; 70 percent of shoe plants are in towns of under 20,000. These towns do not generally have alternate sources of employment and, therefore, retraining is useless. There is no place to use it.
If there is alternate employment, it would probably be in another labor-intensive industry, such as textiles or apparel. These industries, indeed, are labor-intensive and compete just as intensively with imports from low-wage countries as does the footwear industry, and these industries have suffered the same massive layoffs and injury.
To train someone with Federal funds, or anybody else's funds, to work in another industry where there are also no jobs does not make sense to me.
The program, therefore, becomes one of a temporary income support, which turns into welfare after a period of time. The Department of Labor recently completed a study of assistance in the footwear industry over the last 18 months. That study shows over 16,000 shce workers have been certified for adjustment assistance. Other employment does not exist for these workers. They will eventually end up with food stamps, welfare payments, and other sources of Federal assistance, all paid for by the taxpayers.
With an estimated $8,000 cost for an unemployed person, we are spending almost $128 million for these workers laid off due to imports.
As for trade adjustment assistance for firms, it has been in existence just as long as trade adjustment assistance for workers. It has many built-in defects.
To become certified, a firm must prove it is almost on the brink of bankruptcy. After certification, the difficulties encountered in trying to obtain the Government funds are almost insurmountable. To begin with, the firm must be able to prove that the Government loan will be repaid. This seems like a reasonable request, except that at the same time it must be able to prove it is going out of business.
Assuming that it can pass this catch-22 test, the interest on the loans is approximately 2 to 3 percentage points above the prime lending rate, a rate hardly attractive to firms in the kind of shape these firms are in.
Mr. VANIK. We agree with you on that. We have to do something about that. Any owner's guarantee is private guarantee of a company loan. Sertifitas
Mr. RICHARDSON. I would hope that none of the defects you gentlemen have detected in the current adjustment assistance programs would lead you to believe that adjustment assistance, if improved, if changed in some way, would represent truly effective import relief. That. I think, would be a mistake.
The footwear industry, through the American Footwear Industries Association, has never indicated that it favored adjustment