elimination of treatment afforded under 806.30 or 807. It is our position that the elimination of these provisions would have an adverse effect on the U.S. balance of payments, and I think both the Tariff Commission study which was published in 1970 goes into that in great depth and the so-called Williams commission report goes into that in great depth, and both of these come out with the conclusion that while we may end up reducing imports by $30 to $40 million, it would decrease exports of U.S. components anywhere from $180 to $250 million. Secondly, there are roughly 37,000 people employed in the assembly industries in the United States which are making the products which are being shipped out of the United States for further assembly. It is unlikely those people would be gainfully employed if these provisions were eliminated from the program. The administration's argument seems to be that while they are not recommending the elimination of the sections, because they recognize, I take it, that those sections have caused a plus to the balance of payments, they are providing for their piecemeal repeal on sort of a commodity-by-commodity basis through the safeguard mechanism. Now, I think from our point of view a commodity repeal versus an overall repeal would be very difficult in the case of a competitive industry where one of your competitors may or may not have the advantage of the section that your other competitor does. I think we would prefer not to have it at all or have it on an equitable basis. Finally, in the case of the particular company that we are representing, it generally opposes the balance-of-payments authority requested by the President for surcharge powers, primarily feeling that the imposition of a surcharge is not the solution to a balance-of-trade problem. It only goes to the root of one of the aspects of the problem: namely, imports versus the other aspects involving capital flows and export control. Secondly, again the administration has recommended that this authority be given on a discriminatory and selective basis. This would again be most difficult for a country to try to plan for the future and compete with other companies if a surcharge applied to a product that affected it, but did not apply to its competitor. Finally, one thing that should be stressed in this area is that if the committee does decide to give the President these powers, it might give consideration to excluding from the surcharge the products coming from less developed countries. This would certainly be consistent with the provision of the Trade Act recommended by the administration which provides a preference for these countries and, secondly. I think if you look at the figures there has been roughly a $1-billion trade surplus coming from the developing countries as opposed to the deficit which we have been incurring from the developed countries and if a surcharge were discriminatorily imposed on some of these countries. I think it would have a much more serious effect than it might have on the developed countries. That concludes our testimony, Mr. Chairman. STATEMENT OF THOMAS H. BOGGS, COUNSEL FOR INTERNATIONAL MARINE EXPOSITIONS, INC. Mr. Chairman: My name is Thomas H. Boggs, and I am appearing today as Counsel for International Marine Expositions, Inc., a corporation composed of over 600 manufacturers of recreational boats, marine engines and marine accessories. We appreciate the opportunity to testify on behalf of the recreational marine industry in favor of the general provisions of the Trade Reform Act of 1973 (TRA). This industry has a major stake in the world economy. In 1971, $3.6 billion was spent by Americans for marine equipment and services; 9 million recreational boats were in use on American waters; and 45 million Americans went boating. In 1971, 495,000 outboard motors were sold in the United States, with a retail value of $362.3 million, and 278,000 outboard boats were sold, representig retail dollar sales of $189 million. The exports of pleasure boats in 1970 were almost $28 million, and imports of pleasure boats into the United States were over $35 million. International Marine Expositions, Inc., supports the Trade Reform Act of 1973. It comes before this Committee as part of an industry that has been hampered by the presence of tariff and non-tariff barriers abroad. Accordingly, the marine industry would benefit from a more open and equitable world trading economy. On the other hand, we believe that a strong "safeguard" system should accompany further liberalization of imports for the United States. Thus, we will direct our comments on the TRA to Title I, which deals with authority for new trade negotiations, and Title II, which deals with relief from disruption caused by fairly priced foreign imports (the "safeguard" system). Secondly, we believe that there should be equality of tariff treatment for boat imports in the United States and Canada, as opposed to the burdensome tariffs presently levied on pleasure boats by the Canadian government. There is equality of tariff treatment for automobiles and snowmobiles under the United States-Canadian Automotive Products Agreement of 1965. We feel that there is no rational basis on which to make a distinction between boats which are not covered and other transportation equipment which is covered by the accord. AUTHORITY FOR NEW TRADE NEGOTIATIONS: TITLE I OF THE TRADE REFORM ACT International Marine Expositions, Inc. believes that the negotiating authority for a "Nixon Round" of trade talks within the General Agreement on Tariffs and Trade (GATT) is the most important part of the trade bill for the Administration. We recognize that the tariff-cutting authority of the President expired on June 30, 1967, and that no meaningful round of trade talks can be carried on by the United States without a new delegation of negotiating authority by the Congress. Accordingly, we support the concept of a five-year delegation of authority from the Congress to the President to enter into trade agreements with foreign countries. We believe that the Executive should have the authority to modify tariffs downward as he determines to be necessary, and upward to levels not above fifty percent of tariff levels presently prevailing. Most importantly, the delegation of negotiating authority in Title I should cover nontariff barriers to trade. Our industry, like many others, has discovered that the key barriers to trade now that tariffs have been reduced in many markets are nontariff barriers to trade (NTB's such as quotas, government procurement practices, customs valuation procedures, patent practices, taxes, subsidies, and discriminatory standards procedures. An NTB that has proven to be particularly nettlesome for the pleasure boat industry has been the question of standards for safety for pleasure craft. In the United States, the burdens that apply for boat safety are no different for a domestic or a foreign manufacturer of pleasure craft, either in design or in the implementation of our laws. In Japan, however, it has been our experience that importers are subjected to differing needs requirements for boat safety tests. Some boat manufacturers have complained that the Japanese government requires submission of plans and specifications in order to import boat equipment into Japan. These manufacturers are understandably reluctant to disclose proprietary trade secrets, and many have decided to not export to Japan rather than divulge euch information. The reason for the greater difficulty of passing safety tests for non-Japanese boat manufacturers is not difficult to find. Japan wishes to encourage the production and sales of its own pleasure craft in its internal market over those produced by the United States. It might be worthwhile to focus on the question of standards which impede trade as a prototype issue for the next round of GATT trade talks. How can this seemingly intractable problem involving many standards for many products from many nations be resolved in trade negotiations? The important point is that the problem is so vast in this area of commerce, as with other NTB's, that our objective should be to take the critical first step of establishing a process by which disputes among nations on the origination and application of standards laws can be aired, and hopefully, resolved. There are many different types of standards. Some are primarily consumer-oriented, such as health and safety requirements and advertising standards. Others are aimed at control of production because of the side effects of the production processes itself. In most of these areas, it would probably be impossible to establish international agree, ments on appropriate standards, as the experts themselves can rarely agree within countries on what standards should be. What we believe is possible is the establishment of an on-going process whereby the problem of standards as deterrents to international trade can be regulated.1 General principles and a consultative, and if necessary, an appellate, process could be established based on four general principles : (1) whenever new or different standards are established in a country, there should be adequate publicity, adequate public consultation procedures, and a reasonable delay period to take account of complaints about the new rules; (2) standards should never be used as discriminatory techniques for impeding trade. In practice, this would mean that the same burdens should be borne by domestic as well as foreign manufacturers; (3) testing procedures in all countries should be expeditious. Where it appears that testing is taking a considerable period of time, some procedure should be available for certification from impartial foreign laboratories; and (4) with these general principles as guidelines, it should then be possible to appeal to the GATT or some other international trade organization on a regularized basis if standards are being used to impede trade. Compensation and other techniques used presently to counter tariffs and quotas should also be available in the area of standards. It may be useful for the Committee to provide guidance for our trade negotiators in a Committee Report on which NTB's should be given priority in the negotiations, and what procedures such NTB agreements should establish. We recognize that working out a formula for Congressional oversight in the area of negotiation of non-tariff barrier accords is both essential and inordinately difficult. The President must have a mandate to negotiate, and the Congress must have an opportunity to check on the results of its delegation. We believe that the TRA has an adequate oversight process in Title I, and we support the threefold system for implementing foreign trade agreements on NTB's established in the TRA. We support the techniques for advanced authorities for certain items such as valuation procedures, and the 90-day, onehouse veto procedure on NTB agreeemnts. The need for an accommodation on Congressional oversight is imperative, due to the fact that the number of NTB's is so vast that it would probably be impossible to frame a delegation with adequate standards in advance. THE SAFEGUARD SYSTEM: TITLE II OF THE TRADE REFORM ACT International Marine Expositions, Inc. also supports Title II of the TRA, which deals with relief caused by disruption from sudden surges in foreign imports. We believe that the other side of the coin from liberalization of world trade barriers is the ability to moderate difficult adjustment to foreign imports through a viable "safeguard" system. The pleasure boat industry itself has experienced difficulty in containing the growth in foreign boat imports into the U.S. market. The ratio of foreign imports to apparent consumption in the pleasure boat market in the United States has risen from seven percent in 1968 to nineteen percent in 1972 (based on value). Accordingly, we support a permanent delegation of authority to the President to protect U.S. industries from foreign imports that are the "primary" cause of "serious" injury or threat 1 The GATT has already taken an interest in the subject of international harmonization and certification procedures for standards. Its draft code of conduct would aim for as wide a harmonization of standards as possible, encourage participation in international, as opposed to regional, certification arrangements for assuring conformity to standards, and formulate rules to be followed by national standards bodies so that standards writing and certification will not create unjustifiable obstacles to trade. thereof. We support the major changes which have been effected in the criteria for import relief in the safeguard system, especially the elimination of the link to prior tariff concessions as the required cause for the increased foreign imports. This change is justified because it is inordinately difficult to separate out the reason for an increase in foreign imports. Also, it was never clear whether it was equitable to accumulate very old tariff concessions, or merely to look at the most recent set of tariff concessions. At present escape clause relief is practically non-existent, largely because of the difficult causation criteria-changes to "open up" the import relief mechanism for U.S. producers should be enacted to ease the adjustment difficulties of import-impacted industries. ECONOMIC FACTORS IN THE UNITED STATES-CANADIAN BOAT MARKET We recognize that the focus of these hearings is the Trade Reform Act of 1973 and other bills relating thereto. We believe that this may, however, be an appropriate forum to express our views on certain economic factors in the United States-Canadian boat market. Our basic view is that pleasure boats should be granted more favorable treatment by Canada. There are three reasons for our position. First, it is conceptually impossible to distinguish between on-the-road transportation vehicles which have tariff equality under the United StatesCanadian Automotive Agreement and off-the-road transportation such as boats. All transportation vehicles should be treated in the same manner. Secondly, equality of tariff treatments by Canada would substantially improve the U.S. trade balance. Our trade balance with Canada has deteriorated since 1965, due in large part to the United States-Canadian Automotive Products Agreement of 1965. During the period 1954 through 1964, prior to the Agreement, the United States' favorable automotive trade balance with Canada averaged slightly over $400 million per year. Depending on how the trade balance is measured, it would seem that U.S. exports are now approximately in equilibrium with U.S. imports under the accord. Our overall balance of trade deficit with Canada last year was $2.5 billion. We believe that our trade posture with Canada could be improved by equality of tariff treatment in the area of boats. Presently, there is a large deficit in the balance of trade in pleasure boats between the United States and Canada. In 1970, 14 percent of overall U.S. pleasure boat exports, went to Canada. In the same year, however, the United States imported 26 percent of its overall boat imports from Canada. In dollar terms the deficit in the balance of trade in pleasure boats with Canada was $5.5 million. The reason for this trade imbalance can be traced largely to the differing tariff structures of the two countries. Our tariff on pleasure boats is only 4 percent ad valorem on boats not over $15,000, and 10 percent ad valorem on boats over $15,000. The Canadian tariff on pleasure boats, regardless of price, is 17.5 percent. By providing equality of tariff treatment between the United States and Canada we would be greatly expanding export opportunities into Canada by U.S. boat manufacturers. SUMMARY In summary, International Marine Expositions, Inc. supports the Trade Reform Act of 1973. We hope that Title I and II, which deal with negotiating authorities and a "safeguard" system for U.S. businesses and workers are adopted in their proposed form. Moreover, we propose that equality of treatment be sought in the United States-Canadian boat market by adjusting the United States and the Canadian tariffs on pleasure boats to the same levels. We can see no reason to distinguish between pleasure boats and other transportation equipment granted equality of treatment by the United States-Canadian Automotive Products Agreement of 1965. STATEMENT OF THOMAS H. BOGGS, COUNSEL FOR GLASTRON BOAT Co. Mr. Chairman: My name is Thomas H. Boggs. I am appearing this morning on behalf of the Glastron Boat Company, a division of Conroy, Inc., a publicly held U.S. corporation headquartered in Texas. Glastron is the largest manufacturer of recreational boats in the United States. We appear here today in support of most of the provisions contained in the Trade Reform Act of 1973, particularly those sections that seek authority from the Congress to: negotiate on trade barriers with other countries (Title I); grant trade preferences to the less developed countries (Title VI). However, we are troubled by the availability of the suspension of Items 806.30 and 807.00 of the Tariff Schedules as an alternative remedy under the "safeguard" system in Title II of the TRA, and by Title IV, which grants the Executive the discretion to impose general or selective surcharges and/or quotas to reestablish balance of payments equilibria. Our position on these items is explained in more detail below. ITEMS 806.30 AND 807.00: TITLE II OF THE TRADE REFORM ACT Title II of the TRA establishes a "safeguard" system to protect U.S. industries from sudden surges in fairly priced foreign imports. This "safeguard" system is essentially a revised escape clause mechanism with alterations in triggering mechanisms and remedies designed to make it more effective. The Glastrom Boat Company supports the concept of a "safeguard" system that is vigorously enforced to ensure that adjustments to sharp surges in foreign imports can be moderated. Accordingly, we support the changes in causation criteria in Title II of the TRA. Cutting the link to prior tariff concessions appears to make a good deal of sense, as it is inordinately difficult to separate out the reason for an increase in foreign imports. We also support the concept of "market disruption" that has been introduced into the law. The reason we support these changes is that they will tend to protect the American worker, and maintain his standard of living in comparison with that of foreign workers in periods of adjustment to sharp surges in foreign imports. We can not, however, support revisions of the escape clause that will lower the standards of the American worker and business community. We are here today to tell you about one such change that has been introduced into the "safeguard" system-the presence as an alternative remedy to tariffs and quotas of the suspension of tariff items 806.30 and 807.00 of the Tariff Schedules. We shall address this issue in some detail, largely because other speakers have glossed over this inequity or not mentioned it at all. Items 806.30 and 807.00 of the Tariff Schedules provide for the exemption from U.S. customs duties for certain goods that are exported from the United States and then reimported. Under Item 806.30 articles of metal (except precious metal) that have been manufactured or have been subjected to a process of manufacture in the United States and exported for processing, and then returned to the United States for further processing, are subject to duty only on the value of the foreign processing. Under tariff item 807.00, imported articles assembled in foreign countries with fabricated components that have been manufactured in the United States are subject to duty on the full value of the imported product less the value of the U.S. fabricated components contained therein. This duty exemption under item 807.00 is available only for those fabricated components that have not lost their physical identity by changes in form or shape abroad and which have not been advanced in condition abroad except by their having been assembled into a finished product. As opposed to item 806.30, goods imported under item 807.00 need not be processed further in the United States after reimportation to qualify for the duty exemption. For example, an American corporation with a foreign affiliate could, under item 807.00, make a car with certain U.S. parts and the tariff paid upon re-entry into the United States would only be imposed on the value added overseas. This is a preference for domestic industries that the Federal Government has granted for over forty years, and has been granted by almost all other developed countries. The amounts involved under these tariff items is substantial-imports entering under these classifications rose sharply from $953 million in 1966 to $1,842 million in 1969.1 Of the latter figure, $442.6 million were U.S. components. The Trade Reform Act of 1973 impacts directly upon the application of items 806.30 and 807.00 of the Tariff Schedules of the United States in its "safeguard" system in Title II of the Act. This Title permanently delegates authority to the President to protect U.S. industries from sudden surges of fairly priced foreign imports that are the "primary" cause of "serious" injury, or threat thereof. The President, after the initial finding of injury by the Tariff Commission, would have the authority to: (1) raise tariffs; (2) impose quotas; 1 Background Material on Selected Trade Legislation introduced in the U.S. House of Representatives, Committee on Ways and Means, 91st Cong., 2d Sess. (1970), at 75-83. See Appendices A, B, and C. |