INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE &
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA-UAW,
Detroit, Mich., April 20, 1977.

Re: Additional information requested during the appearance of Leonard Woodcock before Subcommittee on Trade on April 1, 1977.

DEAR MR. MARTIN: On April 1, 1977, UAW President Leonard Woodcock appeared before the Subcommittee on Trade of the Committee on Ways and Means to discuss adjustment assistance under the Trade Act of 1974.

Congressman Charles A. Vanik of Ohio requested an update of the number of engines or other components that are being imported from outside North America under the Canadian-U.S. Auto Agreement. Under that Agreement, Canada permits the auto companies to import original parts from various countries duty free. It appears that the Ford Motor Company is the only company currently involved in this practice as we previously reported in hearings before the Subcommittee on Labor Standards of the Committee on Education and Labor on April 14, 1976. Currently every Pinto produced at Ford's St. Thomas, Ontario plant contains an engine supplied through a Ford engine plant in Taubate, Brazil. These engines were formerly produced at the Ford engine plant in Lima, Ohio.

Ford Motor Company also imports transmissions from Bordeaux, France. These transmissions were formerly produced at the Ford Sharonville-Fairfax transmission plant located near Cincinnati.

The Ford Motor Company truck plant at Oakville, Ontario uses transmissions from Mexico. These transmissions were previously produced at the Ford Livonia transmission plant located in Livonia, Michigan.

We are attempting to get the number of engines and transmissions involved in these situations from the Ford Motor Company. So far we have not been successful. As soon as we get the data we'll forward it.

Very truly yours,

GEORGE WEAVER, Research Department.

Mr. VANIK. As you know, the act really does not address itself to this problem. It was never assumed there would be third-market goods coming in. It was never contemplated.

In other words, do you think the agreement should be revised to address itself to this problem? How do you think we ought to treat it?

Mr. WOODCOCK. The auto pact?

Mr. VANIK. Yes; I am relating to Canada bringing in third-nation goods and sending them over the border free of tariffs.

Mr. WOODCOCK. I would hesitate to give an offhand answer to that because there are many imported cars which look as a total offset in our balance of trade which contain American components, and that is more true of the European imports than it is of Japanese imports. I know with regard to Mexico, we have certain things going down there and coming back in. There has been considerable complaint, but, when you look at the overall balance of trade in automotive parts and related things between the United States and Mexico, it is substantially adverse to Mexico.

Mr. VANIK. The Canadians tell us we got the best of that agreement. Do you have any opinion on that?

Mr. WOODCOCK. What happens, members of the UAW who live in the United States look at all of those Canadian-assembled vehicles coming south of the border and think we got the short end of the

deal Our Canadian members who assemble all of those Americanbuilt components into those vehicles think they got the short end of the deal.

All things considered, I think the package has worked very well. The alternative was that Canada would have gone the way of Australia or Brazil and had a sealed-off industry, heavy domestic content, which would have been worse for both countries, I think.

Mr. VANIK. I would appreciate it if you can bring us up to date on this problem. I know the last statement we had was last September, and I would appreciate an update on it. I think we should be aware of it. I think it is something we ought to look at very, very carefully.

Mr. WOODCOCK. I am reminded in my testimony with regard to the auto pact I said the duty-free should be raised from 55 to 75 percent, but it has never come anywhere near 50 percent.

Mr. VANIK. I assume you meant Canadian content?

Mr. WOODCOCK. North American content.

Mr. VANIK. Mr. Woodcock, I have one other question here. Yesterday we heard testimony from the United Steelworkers suggesting that the problems created by narrow definition of adversely affected employment takes care of bumping cases by allowing the worker who is ultimately to be displaced to be eligible for adjustment assistance. Is this solution satisfactory in your view?

Mr. WOODCOCK. I think this relates to the testimony we have here relative to appropriate subdivision.

Mr. VANIK. Is this solution sufficient? Would you concur, or are workers bumped along the line, also

Mr. WOODCOCK. As I understand, the steelworkers are saying here. is the individual affected, but under their seniority system they can bump out Jones. He loses his job because of the import penetration. Obviously, we would agree with that, but beyond that, we are concerned about the appropriate subdivision being widened.

Mr. VANIK. Thank you very much, Mr. Woodcock. We certainly appreciate your time and your very thoughtful statement.

We know we have a problem. We have a task to do. And we are going to address ourselves to it.

The next witness is Rudolph Oswald, director of research of the American Federation of Labor, accompanied by Ray Denison, who is almost a member of the committee, he is here so much. We would be very happy to hear from you, Mr. Oswald.

STATEMENT OF RUDOLPH OSWALD, DIRECTOR, DEPARTMENT OF RESEARCH, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, ACCOMPANIED BY RAY DENISON, DEPARTMENT OF LEGISLATION

Mr. OSWALD. Thank you, Mr. Chairman.

For the record, with me this morning is Ray Denison, legislative assistant for the department of legislation for the AFL-CIO.

The AFL-CIO welcomes this opportunity to review the operation and effectiveness of trade adjustment assistance for workers, firms, and communities. The AFL-CIO is familiar with adjustment assist

ance and its promised role. We are also familiar with what actually happens to Americans who lose jobs in the real world of the 19.0 s. It is time to examine trade adjustment assistance honestly for what it is and what it is not.

It is not adjustment to a different job, it is welfare. It is not comparable to unemployment compensation, for that program implies a return to one's former work, a reuse of one's skills. Adjustment assistance is the declaration of a job eliminated forever and not replaced. Adjustment assistance, in its scale today, is an admission that U.S. trade laws changes have allowed the erosion of industries, the loss of occupations, the loss of wages and family security in health care, pension security and self-esteem for millions of Americans. And, this burden and loss has been heaviest among blacks, chicanos, women and other minorities in low-paid industries. Now the threat is reaching out to highly skilled Americans in our most sophisticated industries.

Adjustment assistance is not a transitional program. If fully utilized in behalf of every worker and every firm and every community stricken by losse due to import penetration, the cost could be billions of dollars in the years ahead.

The AFL-CIO supports worker aid programs, the same as we support unemployment compensation, black lung benefits, workers' compensation and others, but no one has ever suggested that jobless pay is a substitute for a community's industry nor that workers compensation and black lung benefits replace the need for safe and healthy working conditions.

However, instead of seeking to restore industry, we now hear disquieting reports that this program is to be made even more of a substitute for a solution. We understand that at the White House level a determination is being prepared that, if approved, will be disastrous to the shoe industry. Instead of helping workers regain their jobs in the shoe industry, where import injury has been massive, there is a strong possibility that the proposed "remedy" will be "super" adjustment assistance.

In other words, instead of stabilizing an important U.S. industry, the shoe industry and its workers are going to be written off and abandoned. The American people will be told that a new program of Federal task forces will be set up to spread the word of existing Federal programs to stricken shoe manufacturing areas. A new Office of Structural Adjustment will be established to coordinate the campaign. And as a backup, the super assistance proposal will include proposals to Congress to establish low-interest loans, loan guarantees, tax relief, subsidy programs, and other fund aids.

This unbelievable Rube Goldberg bureaucratic contraption, which admittedly will take considerable leadtime to assemble, is a classic example of the convolutions being undertaken to avoid coming face to face with the real problem.

Adjustment assistance was never intended as a Government subsidy to pay off and quiet the massive numbers of workers affected by sweeping changes in the world economy or the movement of multinational firms out of the United States. Nor was it designed to help foreign cartels or State-run industries wipe out American industry in the name of free trade. Nor was it designed to promote preferential

imports into the United States from oppressed labor in closed economies abroad. Such trade is not free; it is costly in jobs, taxes, and prices.

In short, the world has changed rapidly in the 1960's and early 1970's. America lost its place as the leading exporter of manufactured goods. In fact, America became a net importer of manufactured products and parts of manufactured products.

Now, in the late 1970's, full employment is nowhere in sight. Our Nation's trade makeup is a big part of the reason that our unemployment is higher than our industrial trading partners.

In 1976, the United States imported $5.9 billion more than it exported, with an added $9 billion in import costs for insurance and freight. The deficit included more manufactured imports than before and more sophisticated equipment. From Japan alone, the United States imported over $6 billion more than it exported.

According to an airgram from the U.S. Embassy in Japan in January 1977, Japanese exports to the United States could increase even more. The embassy predicts that Japanese exports in computers and electronic data processing will be strong, "Paralleling this surge in the use of computers and related EDP systems in Japan has been an increasingly high rate of growth in the domestically owned computer industry, which has been carefully fostered for years by large GOJ financial subsidies and various forms of protectionism." Chemicals, advanced electrical machinery and nonelectrical machinery, nuclear powerplants, railway equipment, commercial aircraft components including advanced aerospace equipment, were also cited.

Let's take a brief look at the history of adjustment assistance. It was originally established in an era of expected sharp increases in economic growth and employment. From 1962 to 1969, no one received any payments. Then, with no language change, some workers received benefits. More workers would benefit, we were told, if the law were changed. But the record since 1974 is still not clear, because the number of workers who petition for trade adjustment assistance are not reported on the Labor Department calendar. The numbers of workers certified and the number denied relief are only estimated. Thus, if in one plant closing, 1.000 workers petition and 500 are certified. only the 500 are reported. American workers not only need fair trade, they need a fair count of jobs lost from trade.

Between April 1975 and February 28, 1977, 1.683 petitions, covering an estimated 479.480 workers, sought adjustment assistance. according to the Labor Department. Of these, 589 cases covering an estimated 188.929 workers were certified. Through January 31, 1977. 142.000 workers had collected $192 million. The average payment is $53 a week for 25.7 weeks.

From April 1975 to March 1977, the program has cost $195 million in benefits. Costs are now running at an annual rate of $240 million in payouts.

As it now stands, the adjustment assistance provisions do not meet real life problems. Under the 1974 law the following criteria must be met in section 222.

I think there are a number of specific changes in criteria in section 222 of the Trade Act that I would like to address.

One: Increases of imports of articles like or directly competitive with articles produced by such workers must have contributed im

portantly to such total or partial separation of the employees concerned and to a decline in sales or production.

Two: Sales or production of such firm or subdivision must have decreased absolutely.

Three: A significant number of proportion of workers in the firm or subdivision must have become totally or partially separated; or threatened by such separation.

These requirements are inadequate to cover job displacements from imports. Many changes are necessary to make the law exclusive.

The section 222 requirement that imports must increase should be removed. Imports alone can contribute importantly to job loss. Current interpretations ignore the fact that rising imports over a period of time can cause a plant shutdown even where there is a decline immediately prior to the shutdown. Thus imports may have risen for 10 years but declined in the year of impact. The result is: no relief.

Members of the Rubber Workers Union were denied relief when a B. F. Goodrich tire plant in California closed. The union found that the company had lost its western U.S. markets because of a heavy level of imported cars. thus the demand for American-made tire sizes declined. As the imported cars finally leveled off, the number of American cars remaining was too few for the plant to service. The other U.S. market areas were serviced by other plants of the company. "Our people were denied adjustment assistance," a union official declared, "because imports of tires hadn't increased significantly in the period just prior to the actual layoffs. The historical development of the situation didn't seem to matter."

Also, in section 222 the term "like or directly competitive" should be amended to include more realistic situations. The definition should be changed to include "components" and/or "later or earlier stages of processing." Imports of components are not now considered "like or directly competitive" with a product that is imported.

Thus a worker who makes heels for shoes-and his companycannot get relief unless heels are imported in rising quantities. The fact that 50 percent of all shoes, with heels, were imported in 1977 does not count. However, if the same company makes shoes and heels. the worker and the company can be compensated. This provision discriminates against small suppliers and workers. Similarly, it has been held that a steelworker or an auto worker making bumpers for an independent supplier is not eligible, but if he works for General Motors or Ford, he is, solely because the imports of cars, not bumpers alone, are rising.

Congress must give consideration to service workers, too. In a case involving the Teamsters and Pan American World Airways, the Labor Department determined that service workers were not eligible for assistance because they did not produce an article. The heavy reduction of traffic caused by foreign-flag airlines caused the loss of their jobs, but no assistance was forthcoming.

Similarly a worker in services that are related to a dislocation is not eligible unless part of a larger integrated unit. The Labor Department ruled against a Teamsters petition in behalf of drivers of Nu-Car Transportation Co. who hauled products from Chrysler manufacturing factories because they were not part of the integrated unit. The Chrysler production workers, however, represented by the United Auto Workers, received adjustment assistance.