(3) suspend in whole or in part the applicaton of items 806.30 and 807.00 of the Tariff Schedules, with respect to the item in question;

(4) negotiate orderly marketing arrangements;

(5) recommend that petitions for adjustment assistance for workers in the industry concerned be expedited; or

(6) take any combination of the above actions.

As can be seen, the suspension of items 806.30 and 807.00 of the Tariff Schedules is in the TRA as an alternative remedy in "safeguard" system. It may be imposed either solely or in conjunction with any of the other remedies in the system. For example, if it were determined that fairly priced foreign imports were the cause of "serious injury" or threat thereof, the President could not only impose quotas but could also suspend in whole or in part the application of items 806.30 and 807.00 of the Tariff Schedules.

The Glastron Boat Company feels very strongly that items 806.30 and 807.00 should be retained in toto in the U.S. Tariff Schedules. We believe, moreover, that these items should not be exposed to partial repeal, on a commodity-by-commodity basis, as the TRA would do under the "safeguard" system. Our position is based on five considerations:

(1) First, as the Tariff Commission and the Commission on International Trade and Investment Policy (Williams Commission) Report have noted, the elimination of these items would have an adverse impact on the U.S. balance of payments. This is because foreign concerns would henceforth purchase component parts locally rather than import them from the United States, as there would be no tariff incentives to continue to use U.S. parts. It has been estimated that repeal of these provisions would reduce exports of U.S. materials for use under these provisions by $180 to $250 million. Imports, however, would be reduced by a far smaller amount, not more than $30 to $50 million. Thus, the net effect of repeal of these items on an across-the-board basis would be a $150 to $200 million deterioration in the U.S. balance of payments.*

(2) Repeal of items 806.30 and 807.00, in whole or in part, would decrease employment opportunities in the United States. These provisions now provide employment for approximately 37,000 people in the United States. These are workers producing U.S. materials for export to be assembled or processed abroad and further processed after the items have been returned. Repeal of items 806.30 and 807.00 would cause more unemployment among these workers than it would "create" in the form of jobs returned to the United States. The arguments of some that these tariff items cost U.S. jobs is incorrect. The alternative to the installation of assemblage operations abroad, and the retention of the production of parts in the United States, would frequently be the exit of the producer from the U.S. market entirely and the permanent loss of jobs in the United States.

(3) The repeal of items 806.30 and 807.00, either in whole or in part, would result in an increased tariff duty on the completed product that would be passed on to the consumer. A tariff is simply a tax on imports. By insuring that there is no exemption from the tariff for components produced in the United States, we are also insuring that the U.S. consumer will pay a higher price for the finished product.

(4) Repeal of items 806.30 and 807.00 would create substantial difficulties for less developed countries, whose share of total imports entering under these provisions has increased from 6.8 percent in 1966 to 22.2 percent in 1969. This is totally inconsistent with Title VI of the TRA, which calls for tariff preferences for the exports of less developed countries.

(5) Finally, the "safeguard" system does not correlate any wrong allegedly suffered as a result of items 806.30 and 807.00 with their possible suspension. They could be suspended if they were not at all involved as a cause of a) complaining industry's distress. It would be very tempting for the President to suspend these items in every "safeguard" case, to ensure that all bases were touched, even if these items were not related to the industry's distress.

It may be argued by some that the TRA does not repeal items 806.30 and 807.00, and that, therefore, their potential suspension on a commodity-by-commodity basis is unimportant. But the Tariff Commission studies and the prestigious Williams Commission Report have stated unequivocally that it would be a mistake in

2 Economic Factors Affecting the Use of Items 807.00 and 806.30 of the Tariff Schedules

of the United States, Tariff Commission Publication No. 339, at 231 (1970).

3 See Commission on International Trade and Investment Policy Report to the President, at 109 (1971).

policy to repeal these items across the board. How, then, could it make sense to effectuate the same policy on a piecemeal basis? The net result would simply be to harm U.S. workers and put U.S. industries in selective product lines at a competitive disadvantage against their foreign competitors, practically all of whom permit the return of articles assembled or processed abroad with duty only on the value added. Accordingly, the Glastron Boat Company recommends that the suspension of items 806.30 and 807.00 not be included among the possible remedies available under the "safeguard" system.

BALANCE OF PAYMENTS AUTHORITIES: TITLE IV OF THE TRADE REFORM ACT

The second matter of concern to the Glastron Boat Company is the balance of payments authorities contained in Title IV of the TRA. The TRA provides that the President may impose a temporary import surcharge and/or quantitative limitations on imports in the case of a serious imbalance of payments deficit, or reduce temporarily or suspend duties and/or import limitations in the event of a persistent balance of payments surplus. The bill provides that the President may impose a surcharge or quotas on a country or countries on a discriminatory basis, or on an across-the-board basis. Import restraints under the Act are to be lifted when the President feels the objectives of the Act have been accomplished. The net result of the TRA, then, is to permit the President to impose tariffs and/or quotas on a Most-Favored-Nation or discriminatory basis, and to lift them at will. We do not believe that the President needs the extensive balance of payments authorities granted in Title IV of the TRA. The technique of import restraints is a relatively ineffective mechanism for dealing with balance of payments problems. This is because it impacts only on the import of merchandise, and does not reach the exports of merchandise, services, or capital flows. Assuming arguendo that the Committee approves the balance of payments authorities of the TRA, we believe that such authorities should be: (a) non-discriminatory in nature; (b) limited to corrections of problems on the trade account; (c) be reviewed by the Congress within sixty days of the Executive's imposition of surcharges and/or quotas; and (d) be made applicable only to imports from the developed countries, and exempt from its coverage the less developed countries. We wish to emphasize the last limitation that should be attached to any balance of payments authorities. The less developed countries are clearly not the culprit in the recent imbalances in U.S. payments; they do, however, get swept up as innocent victims when import surcharges are levied. In 1972, for example, when our balance of payments deficit was $6.3 billion, we ran a balance of payments surplus with the developing countries of $1.0 billion. Rather than visit upon the developing countries the burden of import surcharges, it would seem that we should be assisting their economic development.

Less developed country corporations (LDCC's) are given preferential treatment under the U.S. tax laws in recognition of their particular difficulties; similarly, our trade laws should seek to take account of the particular problems of generating adequate foreign exchange presently being experienced by the less developed countries. Again, it would seem to be contradictory to provide for preferences for the less developed countries in Title VI of the TRA on the one hand, and, on the other, to provide provisions that may limit LDC imports into the United States. To provide consistency in the law there should be a less developed country exemption in any balance of payments authorities.

SUMMARY

In summary, the Glastron Boat Company supports the Trade Reform Act of 1973. We believe that it can be improved by reforming the "safeguard" system designed to deal with fairly priced imports, and the balance of payments authorities sought by the President. We thank you for giving us the opportunity to express our views before the Committee today.

Source: Economic Factors Affecting the Use of Items 807.00 and 806.30 of the Tariff Schedules of the United States, Tariff Commission Publication No. 339, at 231 (1970).

APPENDIX B

RATIO OF DUTY-FREE VALUE TO TOTAL VALUE OF IMPORTS UNDER ITEMS 806.30 AND 807.00

Source: Economic Factors Affecting the Use of Items 807.00, 806.30 of the Tariff Schedules of the United States, Tariff Commission Publication No. 339, at 231 (1970).

Mr. GIBBONS [presiding]. Mr. Duncan.

Mr. DUNCAN. Thank you, Mr. Chairman.

Mr. Boggs, where do most of our exports go to?
Mr. BOGGS. Boats?

Mr. DUNCAN. Yes, sir.

Mr. BOGGS. You really have to divide boats from outboard motors because they both are very large export items and they are different export items.

Mr. DUNCAN. Combine them then.

Mr. BOGGS. Combined I would say the highest is Canada.

Mr. DUNCAN. Do we have a deficit in dollar terms with Canada? Mr. BOGGS. We have a substantial deficit on boats. We have a surplus on motors.

Mr. DUNCAN. You say they have around 18 percent duty on our boats going in there?

Mr. BOGGS. Yes, sir.

Mr. DUNCAN. We have what? Four?

Mr. BOGGS. Four percent duty on boats of less than $15,000, which is really the pleasure boat industry.

Mr. DUNCAN. Do most of our imports come from Canada?

Mr. BOGGS. Of boats?

Mr. DUNCAN. Yes.

Mr. FISHER. Yes, the largest single country, 26 percent of our boat imports were from Canada last year.

Mr. DUNCAN. I think that is all, Mr. Chairman.

Thank you very much.

Mr. GIBBONS. Mr. Archer.

Mr. ARCHER. No questions, Mr. Chairman.

Mr. GIBBONS. Let me thank you for the informative testimony you have given.

Do any other foreign countries have the same kind of non-tariff barrier you were describing that the Japanese have; that of requiring you to submit the plans and specifications on your proposed motor or whatever before they will license its import?

Mr. BOGGS. No. Most countries will accept the certification of the manufacturer that his product meets the standards imposed by law in that country. Now, they will usually transfer that liability to the importer so that they will have somebody that they can sue or hold accountable if the product does not in fact meet the standard.

But we know of no other country besides Japan that actually will require detailed plans and specs prior to certification.

Mr. GIBBONS. Have the Japanese been exporting many motors? Mr. BOGGS. They are beginning to go into the outboard motor business in a fairly substantial way. They are a large exporter presently of two-cycle engines. Most of your snowmobile engines, for example, are Japanese engines and a lot of your lawnmower engines are Japanese engines. There is not much difference between a two-cycle engine of that nature and a two-cycle outboard engine. Japanese manufacturers have not gone into the large outboard, 125, 135, the big motor, which does require some fairly sophisticated tooling, particularly to have a motor of a weight that can be carried by an individual. That is the area which gives Mercury, Outboard Marine, and Chrysler real

concern.