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.

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

assistance. Needless to say, we recognize that, if it so much as helps. one person for a short period of time, we can hardly be against that help, and for that reason we would accept the determination of Congress in that area.

That concludes any remarks I would like to make.

[The prepared statement follows:]

STATEMENT OF MARK E. RICHARDSON, PRESIDENT, AMERICAN FOOTWEAR

INDUSTRIES ASSOCIATION

My name is Mark E. Richardson and I am President of the American Footwear Industries Association. As such, I am specifically concerned with the interests of the domestic non-rubber footwear industry, which carries on manufacturing operations in about 700 plants in 41 states, directly employs some 170,000 workers and, including its supplying industries, accounts for over 250,000 jobs throughout America.

While I do not represent worker interests in this industry, my remarks today on the subject of adjustment assistance are fully consistent with the views expressed before the International Trade Commission by John E. Mara, General President, Boot and Shoe Workers' Union, and George O. Fecteau, General President, United Shoe Workers of America, on December 7, 1976.

There are few industries in America which have had the history of the non-rubber footwear industry's intimate contact with all phases of adjustment assistance programs-dating back, I might add, to its origin in the Trade Expansion Act of 1962.

I therefore can speak to you regarding adjustment assistance with some authority, though, unhappily, our experience cannot bear witness to the effectiveness of these programs. The non-rubber footwear industry has been decimated by a flood of imported footwear. Adjustment assistance simply has not been able to cope with the broad industry-wide problems of importrelated injury. Too little and too late aid to a few firms and workers is all that this program has meant to this industry.

Repeatedly this industry has appealed to the Executive Branch for effective import relief under the Trade Act. The industry has been the subject of successive government studies in past years and several investigations by the International Trade Commission and its predecessor agency. Always the result of such government action was inaction-generally in the form of advice to the industry to avail itself of adjustment assistance.

In April 1968, President Johnson requested the then Tariff Commission to conduct a comprehensive investigation into the economic situation of the non-rubber footwear industry including the competitive relationship between imports and domestic production. The investigation conducted by the Commission under section 332 of the Tariff Act and completed in January 1969, led to the creation of an Interagency Task Force to inquire into the effects of imports in the domestic industry. Meanwhile, a new fact-finding investigation was initiated by the Tariff Commission on its own motion in October 1969 and it completed its report in December 1969.

In June 1970, the Interagency Task Force report led President Nixon to initiate a Tariff Commission investigation under the Escape Clause provisions of the Trade Expansion Act, the first time that a President had initiated an escape clause case. At the same time, President Nixon also requested the Secretary of Labor and Commerce to proceed with a number of pending adjustment assistance cases. The Tariff Commission sent to President Nixon in January 1971, a split decision on the finding of injury, but he took no action of any kind.

With the passage of the Trade Act in 1974, the industry was encouraged by the Ford Administration to petition the ITC for a new Escape Clause investigation which resulted in a unanimous finding of injury in February 1976. All but one Commissioner advocated some direct means of import relief, but President Ford in April 1976 chose the recommendation for adjustment assistance of the sixth Commissioner, despite assurances from the Ford Administration that import relief would be forthcoming if an affirmative finding of injury was handed down by the ITC. In doing so, it was given a new name "Expedited Trade Adjustment Assistance".

Clearly, President Ford's April, 1976, decision did not provide any options to injured American companies or workers not already available to them. Firms and workers do not have to petition to the ITC through the laborious escape clause procedure to secure adjustment assistance. Under the Trade Act, application is made directly to the Secretaries of Commerce and Labor. Trade adjustment assistance is no better today than in 1970 when ITC Commissioner Leonard noted:

"Had the industry qualified under the statute (i.e., Trade Expansion Act of 1962), I would have also doubted the efficacy of adjustment assistance in view of the size and complexity of the economic factors involved."

Between 1970-when Commissioner Leonard expressed his doubts-and 1975, adjustment assistance was given a profound test. In the 1976 Escape Clause report to the President four more ITC Commissioners joined Mr. Leonard in his conclusion. Commissioners Minchew and Parker stated in their decision, for example:

"Nor do we believe adjustment assistance, by itself, is appropriate. The domestic industry has had the opportunity to take advantage of adjustment assistance under provisions in Chapters 2, 3 and 4 of the Trade Act. Thus far, adjustment assistance has not been as effective as one might have hoped."

Commissioners Moore and Bedell also agreed, noting:

"The only relief which has thus far been granted has been adjustment assistance; and it has proved to be ineffective."

There have been over 14 years of "testing" the adjustment assistance program with regard to non-rubber footwear. It was ineffective in 1970 as a remedy for the import-related injury then sustained by the shoe industry. It remains so today, even with the improvements contained in the Trade Act of 1974.

I do not suggest that adjustment assistance programs could not be improved to be of more help to individual firms and workers, but they are not an answer for broad-based industry import-related injury as has been dramatically evidenced by the shoe industry's loss of one-half its shoe companies, and over 70,000 jobs. In 1967, the domestic non-rubber footwear industry had approximately 675 companies operating 1,000 plants. Today, only about 350 companies with some 700 plants in 41 states remain. Nearly 25 percent of all shoe factories employ less than 20 people and 50 percent maintain less than 100 workers on their payrolls. These plants are located in rural or semi-rural areas where the shoe factory provides the only or major source of employment. Rural jobs are at stake here.

The theory of trade adjustment assistance sounds fine; namely, that the process of international trade expansion can produce hardships on some domestic sectors and that the Government should take the responsibility and initiative to help these sectors effect better utilization of their manpower and capital resources so as to adapt themselves to the new conditions of trade. This would be accomplished by assistance to workers through allowances for re-training and relocation, while firms would be aided in modernizing their plants and productive methods and in shafting lines of production with the help of technical and financial assistance.

But putting theory into practice has been another story! Congress understood the failure of the original program as embodied in the Trade Expansion Act of 1962 and wrote changes in it into the Trade Act of 1974.

The eligibility criteria were liberalized for obtaining adjustment assistance and revisions were introduced in the petitioning and investigative processes for such assistance. On the other hand, some provisions in the Trade Act made financial assistance more restrictive; for example, under section 255 (b) firms certified for direct loans under the adjustment assistance program must pay a significantly higher interest rate than is charged for "business development loans", both administered by the Commerce Department's Economic Development Administration.

Section 255 (b) of the Trade Act specifies that: "(i) a rate determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity that are comparable to the average maturities of such loans, adjusted to the nearest one-eighth of 1 percent, plus (ii) an amount adequate in the judgment of the Secretary to cover administrative costs and probable losses under the program."

For EDA business development loans, the rate of interest does not include the extra charge specified in (ii) above. For example, in 1976, the interest rate on adjustment assistance loans ranged from 91⁄2 to 9 percent, while business development fixed asset loan rates ranged from 7% to 8% percent. The record shows that the statutory changes in the adjustment assistance program introduced by the Trade Act have been of no help to the non-rubber footwear industry. Consider the fact that, as of March 1, 1977, a total of 19 footwear firms had been certified under the provisions of the Trade Act but three of these represented recertifications of old cases certified under the previous Act so that the true total is 16 footwear firms certified as eligible for assistance. Prior to the Trade Act, seven certified firms received assistance and three of these subsequently went out of business and a fourth closed one of its two plants. Since the Trade Act, only five of the certified firms have actually received financial assistance.

The record of the Department of Labor is not much more encouraging for worker adjustment assistance. Its latest official figures covering the period April 3, 1975 to February 28, 1977 show that for the entire leather and leather products industry, 113 petitions were certified involving an estimated 17,232 workers. It is understood that well over 16,000 of these were footwear workers. What these figures really mean for shoe workers displaced by imports can best be said in the words of John E. Mara of the Boot and Shoe Workers' Union when he testified before the International Trade Commission on December 7, 1976:

"The labor force in this country consists of a high proportion of workers from minority groups, semi-skilled workers, and women. Semi-skilled workers comprise almost three-fourths of the industry's labor force compared to about fifty percent for manufacturing generally. Women constitute sixty-five percent of the labor force. Furthermore, the work force consists of a large number of workers who are over 50 years old. A large percentage of our plants are located in rural or semi-rural communities where the shoe factory is the major employer. The nature of the work force coupled with where the work force is located certainly shows the lack of mobility of these workers. When a job is lost in this industry, that person who had previously occupied that job will probably stay out of work. The unemployment and welfare figures bear this out."

Adjustment assistance gives a shoe worker a meager cash payment akin to unemployment compensation.

Moreover, State employment agencies which are entrusted by the Labor Department to administer worker re-training and relocation are given little direct supervision. State agencies would rather train an unemployed youngster than an older person with 20 years' experience in the shoe industry; also, the workers themselves do not want re-training in another industry. They want a job back in the shoe industry. The worker trade adjustment assistance program is more in the nature of a compensatory one than a program of workers adjustment.

There are many verifications of this: One study conducted among Massachusetts footwear workers receiving adjustment assistance (the results of which were published in the New England Economic Review, July/August 1975) concluded that the participants had "severe adjustment problems", with 25 percent of the 185 sample employees who had been laid off during the previous 20 to 56 months, still unable to find other jobs and another 50 percent unable to obtain full-time employment. Although the program ostensibly offered numerous benefits beyond financial aid, only one worker attended a government training program, only one received a relocation allowance, and only five had found other jobs through the State's employment services. For those fortunate to maintain continuous employment, their real wages declined by 16%. The cost of this failure can be calculated in dollar terms. It cannot be computed in terms of human suffering.

Adjustment assistance just will not, and cannot, give the thousands of unemployed footwear workers their jobs back. Since other employment generally does not exist for these workers, they will eventually end up with food stamps, welfare payments, and other sources of federal assistance. If, as has been calculated, this adds up to $8,000 per unemployed person, we are already expending about $128 million to shoe workers laid off on account of imports. Incidentally, if we are concerned about holding down inflation, we should also recognize that adjustment assistance costs in that it represents a transfer