border. Since the agreement is for the benefit of all people in both countries, it would be immoral in our opinion to require those workers to bear the entire brunt of the burdens and sacrifices involved. We have, therefore, said repeatedly that our support for the agreement is conditioned on the provisions made to minimize hardships for those workers. The adjustment assistance provisions of the Trade Expansion Act will not serve that purpose. First, under this agreement dislocations can occur not only as a result of an increase in imports, which is the only situation covered by the Trade Expansion Act, but also, first, (a) because of a decrease in U.S. exports of certain automotive products to Canada and, (b) because of reallocation of operations Senator SMATHERS. Mr. Weinberg, I apologize for interrupting, but we are having a vote over on the Senate floor, on the highway beautification bill and must recess today's hearing. Could we put your statement in the record and then it is my understanding that Senator Hartke wants to interrogate you. You live in town? Mr. WEINBERG. No; I do not, Senator. I live in Detroit. I would be very glad to wait until the vote is over. Senator SMATHERS. Senator Hartke is supposed to be meeting with Mr. George Meany after the vote. Senator HARTKE. I am supposed to be meeting with him right now. Senator SMATHERS. I would like to suggest that Mr. Hartke reduce to writing the questions he chooses to ask you Senator HARTKE. I do not want to do that. If you want to deny me the right to ask questions, I will do that. But I refuse to take this thing in a cavalier fashion and rush on through. It is evident that is what is being attempted to be done. If you want to deny me the right, to deny me the right to question Mr. WEINBERG. I will be glad to come back, Senator, tomorrow morning. Senator SMATHERS. We have a number of witnesses scheduled for tomorrow who were originally scheduled to testify today. If Senator Hartke wants to ask you questions, there you sit, there is the microphone, nobody is denying you anything. Senator HARTKE. I am going to go vote. Senator SMATHERS. All right. So he is going to vote. Now that being the case, and I don't have any desire to ask you any questions, we will make your statement a part of the record, and the committee itself, the full committee, will have to determine whether or not you will be required to come back. As far as I am concerned, you are excused. The committee will recess until 10 a.m. tomorrow morning. (The following communications favoring enactment of the pending legislation were inserted in the record of the hearings at the direction of the Chair:) Senator HARRY F. BYRD, Chairman, Senate Finance Committee, DETROIT, MICH., September 13, 1965. Newspapers have carried reports that numerous automotive parts suppliers have protested the United States-Canada Auto Trade Agreement. The manufacturers of largest volumes of components for the passenger car and truck industries do not oppose the agreement-we are for it. In the years 1962-64 the United States exported $1,839 million in vehicle and auto components to Canada. Dur ing that time $104 million in similar products moved from Canada to the United States; a ratio of 18 to 1. How long can we expect Canada to hold still. The agreement will result in some short-term dislocations and create some duplication of facilities, but the improved longer term growth will correct these rapidly. When we speak of dislocation there will probably be more in Canada than in the United States. Low-volume tooling has handicapped the Canadian automotive industry for 40 years. The long-term employment and standard of living growth forces in Canada and the United States will be greatly inhanced by the agreement. Rockwell-Standard Corp. is a major supplier of axles, transmissions, springs, universal joints, brakes, bumpers, and seat cushions to the industries. Eighteen plants in the United States now produce these products for us. addition we operate one plant in Canada and have a 75-percent ownership in Ontario Steel Products Co., Ltd., operating six Canadian plants. Our U.S. auto component plants are in Michigan, Ohio, Indiana, Pennsylvania, and Wisconsin. We visualize little dislocations here as a result of the agreement. Certain Canadian facilities would show larger short-term growth. Approval delay is creating confusion. In Failure to pass the agreement presents long-term economic problems that will not be solved without alternate action preferably acomplishing similar objectives. A return to Canadian duty remission or anticipated similar punitive action in Canada will stultify the growth of the Canadian automotive industry and its requirements on U.S. manufacturers. Such action would also stultify the Canadian standard of living and promote poor relations with one of the few real friends our Nation has left. We strongly recommend favorable Senate action, the larger automotive component suppliers are in substantial agreement. A concerted voice that has been heard in Washington is by an association of service parts manufacturers "ASIA" representing smaller companies producing service replacement parts for independent canals of distribution. The proposed agreement has not eliminated tariffs on automotive service parts, but eventually these should go. Also there is no association representing the largest manufacturers of automotive components. We are very cognizant of severe tariff differentials abroad that penalize U.S. manufacturers of automotive vehicles and components. Our national concern should be to help a friend geared intimately with the U.S. economy. R. G. WINGERTER. President, Automotive Division, Rockwell Standard Corp. DETROIT, MICH., September 2, 1965. Hon. HARRY F. BYRD, Chairman, Finance Committee, House-passed bill, H.R. 9042, on August 31 and being sent to Senate for your consideration. As a supplier of axles, transmissions, springs, engine components to the auto industry we urge favorable action. Passage would assist us in selling in Canadian market. Delay is holding up expansion plans. Failure to pass will eventually seriously curtail Canadian purchases of U.S.-made parts. F. I. GOODRICH, Vice President, Eaton Manufacturing Co. ROMULUS, MICH., September 2, 1965. Hon. HARRY F. BYRD, Chairman, Finance Committee, The Kelsey-Hayes Co. of Romulus, Mich., is a significant producer in the United States and Canada of passenger car and truck wheels and brakes for the principal automobile and truck manufacturers. We believe that the Automotive Products Trade Act of 1965 implementing the agreement concerning automotive products between United States and Canada is beneficial legislation. In our opinion, the automotive industry and its suppliers would be adversely affected by a failure to pass this act. We respectfully urge the enactment of the Automotive Products Trade Act of 1965. W. D. MACDONNELL, Kelsey-Hayes Co. STATEMENT OF JOHN W. HIGHT, EXECUTIVE DIRECTOR OF THE COMMITTEE FOR A NATIONAL TRADE POLICY The Committee for a National Trade Policy wishes to support H.R. 9042, which would permit the United States to implement the executive agreement signed by the President and by the Canadian Prime Minister last January 16. We have taken this position because we believe that the objectives of the agreement and of the proposed legislation are freedom of trade between the United States and Canada in automotive vehicles and parts. As your committee knows from previous statements of our organization, we believe that free international trade is the trade policy best calculated to advance the national interest, and that the pace of trade liberalization should be as fast as the capabilities of the United States and its major trading partners allow. We therefore supported the Trade Expansion Act and its predecessor legislation, and we have opposed the continuing efforts that have been made to get our Government to impose new restrictions on trade. Despite the obvious fact that the executive agreement does not provide for total free trade at this time on shipments of all automotive vehicles and original parts between the two countries, we feel that it goes in the direction of rationalizing the automotive industry on the North American Continent and should therefore result in lower costs of production both in Canada and the United States, to the ultimate benefit of consumers of both countries. The provisions relating to periodic review of the effects of the agreement will, in our opinion, enable both countries to make certain that the agreement actually results in the benefits which are currently contemplated. We have no way of predicting what patterns of production mix will be decided upon by the various companies in their operations on both sides of the border. The results should be studied, however, to determine whether the agreement is working toward the agreed objectives of free trade and market expansion, and whether the adjustments are working out as expected. These points should be covered in the annual report. Integration of the North American automotive industry is a goal worth striving for, since it would lead to greater efficiency and lower prices on both sides of the border, to the benefit of both countries. Canadian tariffs protected a relatively inefficient industry in a relatively small market, and their existence invited manipulation as a means of accomplishing the desired integration. However, the most soundly based approach to achievement of this goal is the elimination of tariffs on both sides without causing the liquidation or serious decline of the weaker Canadian industry-an industry already in-being and in which the Canadian economy had an important stake. This should have been the answer sought by the Canadian Government in the first instance, rather than the unfortunate road they initially chose. This in fact should have been sought by both Governments as part of a wider effort to achieve free trade in products of industries on both sides of the border which lend themselves in a special way to integration. The fact that the January agreement emerged out of controversy surrounding the Canadian Order in Council on automobile export promotion, and was largely if not entirely motivated by a need to resolve that difficulty and the political problem that followed on our side of the border, should not detract from the basic merits of what both Governments have now decided to do. We are aware of the fact that a major element in this new step is the assurances which the Canadian automobile manufacturers have given the Canadian Government regarding the amount of Canadian production they will maintain in relation to their total operations in the Canadian market. Such assuraces are important qualifications for the right to benefit from the duty-free provisions of the agreement. Our support of the bill before you, proceeds on the assumption that these commitments are consistent with the objectives we have endorsed. In our examination of these "letters of undertaking" we find nothing which necessarily conflicts with the purpose of the agreement. In supporting the bill before the House Ways and Means Committee we suggested that certain features of this proposed legislation and of the overall trade policy dimensions of the bilateral agreement could be improved upon to the advantage of the U.S. position in the General Agreement on Tariffs and Trade and in the Kennedy round, as well as to the advantage of sound trade policy administration here at home. One of these suggestions dealing with U.S. Tariff Commission review of adjustment assistance cases has already been adopted, in part, by the House. We regret that the Tariff Commission's responsibilities under this bill do not include the reaching of conclusions and the making of recommendations. Another dealt with the relation of the agreement and this bill to overall U.S.. trade policy principles. We believe that the duty-free treatment provided in this legislation should, in the first instance, be extended to all countries on a most-favored-nation basis, on the condition that this duty-free treatment be made a part of the Kennedy round negotiations and that other major producing countries should be prepared to give similar treatment with respect to their imports of automotive vehicles and parts. If such reciprocity is not forthcoming, we would then be justified in denying those other countries most-favorednation treatment with respect to the concessions made in the agreement with Canada. We recognize, of course, that the agreement is open ended, permitting other countries to benefit from its provisions provided they subscribe to all its rules. However, this is not quite the same as the most-favored-nation step which we are here proposing. What we have recommended would make it easier to obtain a GATT waiver, permitting us to deny most-favored-nation privileges, if such a waiver should become necessary. Psychologically, having granted most-favored-nation treatment subject to reciprocity, we would be in a better position to get such a waiver in the event that reciprocity is not forthcoming. We also feel that such a tactic might have a stimulating effect on the overall prospects for a successful Kennedy round. Presenting these views regarding most-favored-nation and the possibility of making it conditional on satisfactory reciprocity received from other major suppliers does not mean that our committee no longer favors the general principle of unconditional most-favored-nation. We do favor this principle as being in the best interest of the United States and of the worldwide trading community. There are situations, however, and proposed free trade between industrialized countries is such a situation, where an exception from unconditional most favored nation might be justified. Having outlined this projosed amendment in the foregoing paragraphs for the Finance Committee record, we would like to make it clear that we support the bill whether or not this recommendation is adopted. Hon. HARRY F. BYRD, Chairman, Senate Committee on Finance, TOLEDO, OHIO, September 17, 1965. Dana Corp. is a major supplier to the automotive industry of axles, trans-missions, universal joints, frames, piston rings, clutches, etc. We operate 23 plants in the United States and employ approximately 17,000 people. We have a 55-percent ownership in Hayes Steel Products, Ltd., of Thorold, Ontario, and 100-percent ownership in Perfect Circle of Canada in Don Mills, Ontario, we feel very strongly that the proposed United States-Canadian tariff agreement now under discussion before your committee, will, in the long run, be most beneficial to our company, to the independent parts producers in general and to the United States and Canada. We feel many of the statements made that the independent parts producers are protesting this proposed agreement are not altogether true. While some of the smaller and special interest companies have made loud and vocal protests, we do not feel this is necessarily the feeling of the major segment of the independent parts industry. The agreement may result in some short-term problems and will tend to create some confusion initially. However, the long-term prospect of increased business, through growth, and the resultant efficiencies that will surely come about because of this proposed legislation. We believe, are benefits vastly outweighing the disadvantages. We feel strongly, also, that this is a much more palatable course of action than increased content requirements that can be imposed by the Canadian Government if this legislation is not enacted. With the deadline for achieving the action required by the Canadian Government by 1968 getting closer every day, we are faced with serious and pressing problems as to the proper course of action to take because the legislation has not been enacted. We, therefore, strongly recommend favorable Senate action as quickly as is practical. If this legislation is not enacted it will, in our opinion, have a very bad effect since some action has already been undertaken based on the prospect of its passage. J. E. MARTIN, President, Dana Corp. (Whereupon, at 5 p.m., the committee recessed, to reconvene at 10 a.m., September 16, 1965.) UNITED STATES-CANADIAN AUTOMOBILE AGREEMENT THURSDAY, SEPTEMBER 16, 1965 U. S. SENATE, COMMITTEE ON FINANCE, Washington, D.C. The committee met, pursuant to recess, at 10 a.m., in room 2221, New Senate Office Building, Senator Harry Flood Byrd (chairman) presiding. Present: Senators Byrd, Long, Douglas, Gore, Talmadge, Ribicoff, Williams, and Carlson. Also present: Elizabeth B. Springer, chief clerk, and Thomas Vail, professional staff member. The CHAIRMAN. The committee will come to order. STATEMENT OF HON. GAYLORD NELSON, A U.S. SENATOR FROM THE STATE OF WISCONSIN Senator NELSON. Mr. Chairman, I appreciate the opportunity to present my views on H.R. 9042, the Automotive Products Trade Act of 1965, and on the Automotive Products Agreement which it is designed to implement. It has been suggested that the bill and the agreement are really free trade measures. The House Committee on Ways and Means said the agreement would "remove the barriers to creation of a single North American industry," and intimated that the only respect in which the agreement fell short of complete free trade was that it did not cover replacement parts. The facts do not appear to support that contention. The agreement, along with the collateral commitments made privately by the Canadian auto producers to the Government of Canada, may actually prove to be a greater restraint on free trade than the high tariffs on autos and auto parts which existed before the agreement was signed. It would seem there are two respects in which the agreement falls short of free trade, in addition to the relatively minor matter of not including replacement parts. First, while all duties are removed on Canadian-made vehicles and parts for original equipment entering the United States, tariffs on goods entering Canada from the United States are removed only if the importer is an auto manufacturer who meets two criteria: he must maintain the ratio of the net sales value of the cars he produces in Canada to the net sales value of the cars he sells in Canada at a level at least as high as that which existed in the 1964 model year for the major auto companies this is about 95 to 100, and the agreement sets a minimum ratio of 75 to 100; and he must |