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Employment Security Administrators, because I have a bill coming in that will propose that we eliminate this problem of dual administration for the employment service. I think we have reached the point of maturity where administration can be State rather than Federal. You are right. The employment service has a problem because they have for so long been able to say to both the Feds and the State, "No, we don't belong to you," and therefore avoid some of these kinds of decisions.

But I think it is more fundamental than that. We have imposed upon the employment service not only a host of programs, but then we also put them in the compliance business. So at the very point in time at which they are supposed to be serving people and employers, they also become policemen. 119

That is, in my judgment, an unwarranted role for that organization, but I will be happy to spend some time with you talking about where I think we ought to go with this, given your own interest and your own background. I think it is necessary for us to deal with it. I hope we will.

The Budget Committee, Phil, as you know, cut out the money that the subcommittee had recommended. That worries me a little bit in terms of where we go and what we do. I understand one of the reasons they did was they perceived, felt, or assumed that most of the people had, in fact, already come back into the workstream.

Of your own experience in the Muncie situation, it is clear they have not been able to do that, is that right?

Mr. SHARP. We have three different instances in my district, three different factories involved. In the case of one, it is our estimate they are all back to work. In the case of Warner Gear, the largest number of individuals involved, that clearly is not the case. There are still people unemployed.

My testimony has part of a letter that cites a very tragic example of what has happened to some of these individuals.

I might also add that, while obviously we would like for the benefits to apply at the time they are most helpful, at the time the person is out of work, I think we are also dealing with a question of serious loss of income to these individuals. Also, we are not violating the basic assumption of the program, unlike, I believe, the Budget Committee interpreted, because under the present program your petition has to establish your eligibility within 1 year, but as an individual you still have 2 more years in which to apply for the benefits.

So the original assumption of the program was that you had to obtain the benefits within a 3-year period. If this bill should pass within the next few weeks, for example, these workers would still be able to apply within that 3-year range, and still have met the basic assumption of the program.

While we all believe it would be better to provide benefits immediately, I don't think that we are violating the basic thrust of the program. I am afraid that was a misunderstanding in some of the discussion or the written papers before the Budget Committee.

We, in fact, last night delivered letters to all members of the Budget Committee, as well as the chairman, trying to argue that perhaps there was another view on this.


Mr. STEIGER. Thank you, Mr. Chairman.

Mr. GIBBONS. Let me say in defense of the Budget Committee they have an impossible task. They cannot really line-item all of these things. They really deal in maximum figures, in large economic concepts, rather than line items. So they would be the first to tell us, those who had some experience over there anyway, that theirs is merely a guideline as to what we do.

Now, when the Congress finally passes that Second Budget Resolution, then we are kind of hemmed in. Up until we pass that Second Budget Resolution in September, we can do anything within reason.

This is such a small item that it gets lost. Over $40 million, I am sure, there would be no particular serious objection from the Budget Committee. In fact, that is not even their role, as I see it and understand it.

So I think we can proceed without any real problem.

Are there any further questions or observations before we allow
Mr. Sharp to retire here?

[No response.)
Mr. GIBBONS. Thank you, sir.
Mr. SHARP. Thank you, Mr. Chairman.
Mr. GIBBONS. You have done a good job.

Our next witness is our distinguished colleague and friend, a personal friend of mine, Congressman James A. Burke of Massachusetts.


Mr. GIBBONS. Congressman Burke is a man who has long taken
an interest in this matter and I am sure will give us plenty of
good information.

Mr. Burke, we welcome you.
Mr. BURKE. Thank you very much, Mr. Chairman.

I am very grateful for the opportunity to appear before you and the other distinguished members of the Trade Subcommittee. I want to thank the committee for its initiative in holding hearings on the TAA program. It is a program with many problems, conceptual and administrative.

I recommend that we take clear focus on these problems and begin overhauling the program at once.

First of all, I want to state that the program bears little or no resemblance to that originally contemplated by Congress. If you will recall back during our discussions of the 1974 Trade Act, there was a great deal of promise made by those who were supporting provisions of TAA that this was going to be the great relief for the people who lost their jobs and for the domestic footwear industry.

I assailed it as a cruel joke and a hoax. That is exactly the way it has worked out. It has proved to be completely unworkable, bogged down with all kinds of bureaucratic redtape, loan rates which hover almost 2 percentage points above the market rates, all

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manner and number of governmental compliance regulations, delays.

There is no technical assistance whatsoever-and cumbersome and inscrutable application forms.

The GAO study commissioned by me concerning the footwear industry's experience with TAA documents there was substantial uncertainty involved in interpreting what information is required in the petition process, how much information is adequate, whether all procedures have been complied with, and how and if at all assistance can be obtained in the preproposal steps.

A firm must show compliance with EPA regulations, file what amounts to be a 14-point environmental impact statement, show evidence of an affirmative action plan, sign a civil rights statement indicating it will not discriminate on the basis of sex, religion, or race; submit financial records, tax returns for the past 5 years, undergo a FBI check on financial officers and stockholders, and document in full that imports have been a major cause of steadily declining financial conditions and prospects.

All this amounts to time and money, two sorely lacking commodities in a business about to go under. It is a classic Catch 22 situation.

The adjustment assistance provisions of the law are not practical. There is no way they can be worked out. It is unlikely that there is any way they can be worked out.

This Nation of ours is facing real problems as far as the American footwear industry is concerned.

I recall back in 1965 when I first became alarmed at the situation in the footwear industry. At that time imports had 20 percent penetration of the domestic market. You could see it climbing every year. You could see the shoe factories closing all over the country. In New England we have had 115 shoe factories close since 1965. They estimate 70,000 jobs have been lost in the industry.

Actually there are 150,000 jobs that have been lost in the shoe industry and the related industries. usy, groplow u 19h

New York City's collapse can be traced to imports. Imports eliminated jobs for the minorities and made it impossible for them to get work elsewhere. Imports wiped out 450,000 jobs in New York City in the footwear industry, garment industry, the handbag industry, the hat industry, the pocketbook industry and the umbrella industry. Those jobs were all wiped out, and 450,000 people lost their jobs. They exhausted their unemployment compensation; they went on welfare; and New York is down here to the Federal Government trying to get relief.

The northeast part of our country is facing the same problems today. I say, unless we do something within 24 months States like Rhode Island, Massachusetts, Maine, and a few other States will be down here looking for the same type of assistance.

I think somebody believes that we are fairy godmothers, and that we can continue to allow the United States to be the dumping ground for all the goods of the world.

This unemployment situation that we have today--and we have passed three tax cuts that have just caused a little ripple-is related to our trade policies. This is where the root of the problem is, right


here, and until we face it, this country is going to accelerate in unemployment, accelerate in welfare costs, and they will kill the goose that laid the golden egg.

Too many people in this Government of ours are traveling around the world meeting in the various embassies, attending the cocktail parties, drinking the pink champagne, and forgetting their obligation and their responsibility to the American people.

I don't know what happens to them. They get over there and they come back here and they start talking about protectionism. Why, do you realize that we cannot ship shoes into Japan?

Do you realize that they have all kinds of protective walls against our goods going into Japan today? The only goods they buy from us are what they need?

If you were to ship a Ford automobile that might retail for $4,000 here, when it gets to the Japanese market, it has to retail for about $7,000 or $8,000, and then they do not allow any parts to come in. Other countries have the same protection.

I am not a protectionist. I am a free trader, but I believe in reciprocal trade. I believe, if we are going to open up our markets to their goods, they have to open their markets to our goods. They are not doing it. It is not being done around the world, and when they start taking over 52 percent of the footwear domestic industry, which is a figure as of February 1977, the question you should ask in your mind is: Is this industry expendable?

If it is, what other industries are expendable? What other jobs are expendable? Where are we going to find the jobs for these people that lose their work?

When they close the shoe factory down in a community, it is usually the only industry in that town. It might employ 350 people. When it closes down, that town collapses with it.

We have a sacred responsibility to uphold the Constitution of this country and work for the interests of the American people and try to promote worldwide peace and promote goodwill amongst people, but we don't have to be stupid. We don't have to be softheaded, and we don't have to sell this country down the river the way it is being sold down today by people in this trade area.

When they open the doors to trade from the People's Republic of China, Romania, Russia, they will give Taiwan and Japan competition. When they start treating them the way they treat the other countries, then you will hear those countries crying about the competition they are getting from these countries, but nobody talks about the competition the American worker gets.

Now we have high unemployment in this country, billions of dollars are owed to the Federal Government on unemployment compensation. Members of this committee have served on the Unemployment Compensation Committee, and they know what I am talking about. You cannot keep building up unemployment, welfare, public service jobs, and have the people that produce the work pay the bills, have that level dropping. That is what is taking place in this country.

This country faces big deficits. I read a statement by the chairman of the Banking and Currency Committee, Chairman Reuss, the

other day. It is shocking to find out where the finances of this country have gone to in the world. There are people in this Nation who have played Russian roulette with the economy of this country and continue to do it today, day in and day out. This committee has a graye responsibility. I hope that you take a good hard look at this. I hope you do what is right. You know, I celebrated my 67th birthday yesterday. I am not going to be around too long, but a lot of you young fellows are going to be around. I think you ought to #. that a little thought. Where do you want this country to go? Do you want it to stay strong? Or do you want it to become weak? Do you want it to go the way of Great Britain? Do you want it

to collapse in the world today? If those are the things you want to do, then sit back and let

things float along the way they have been going. It is time somebody bit the bullet and did the work that has to be done. I am depending upon President Carter to make a decision within a week on the shoe industry. He campaigned up in New England last April. He made certain promises and pledges to the people in the footwear industry. They believed him. They are waiting to see

what he does.
I want to thank the committee for their attention.

I trust you will put my entire statement in the record.
Mr. GIBBoNs. That will be so ordered. It will be included in the

[The prepared statement follows:]


Mr. Chairman, I am grateful for the opportunity to appear before you and the other distinguished Members of the Trade Subcommittee today. I want to thank the Committee for its initiative in holding hearings on the TAA program. It is a program with many problems—conceptual and administrative —and I recommend that we take clear focus of these problems and begin overhauling the program at once. First of all, I want to state that the program bears little or or no resemblance to that originally contemplated by Congress. Congress made it quite clear when it passed the 1974 Trade Act that TAA was to be considered only if it could be shown that it would remedy demonstrated injury and be a more effective remedy than the other types of relief provided for under the Act. The Executive Branch has systematically used adjustment assistance as a palliative, most notably in the case of the domestic footwear industry, in an effort to avoid foreign criticism and in direct contravention of the Trade laws. Furthermore, what little relief is rendered under this program, has been unobtainable because of regulations and administrative decisions that have made the program virtually unworkable. Perhaps the worst aspect of this program is the fact that it has been used as a palliative by the Federal government to avoid any rational discussion regarding the real problems of import-impacted firms vis a vis low labor costs abroad, multinational firms' tax benefits, import barriers to American exports, etc. Adjustment assistance has been called forth time and time again as a quick fix, a cure-all for import battered firms. It seems to soothe some people's consciences as they watch the trade deficits grow and thousands of people separated from their jobs to point to this program as a panacea. Congress never intended its use as such. And as the experience of the shoe industry points up, it can no longer stand the test of scrutiny. It will probably come to little surprise to the Members of this panel that I intend to focus my remarks on the experience of the shoe industry with

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