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Accordingly, the board of governors of NEMA commissioned the National Industrial Conference Board of New York to study the economic phases of the problem; and it commissioned Messrs. Donovan, Leisure, Newton, and Irvine to study existing laws, regulations, and administrative rulings in the field.

The conference board report was to include a study of the relationship of the United States electrical manufacturing industry to the national health, welfare, safety, and security. Because it was felt that this required an engineering background in the electrical field, the conference board subcontracted this phase of the study to Stone & Webster Engineering Corp.

All three organizations participating in the study were instructed to present factual conclusions only, and to make no attempt at analysis, evaluation, or

recommendation.

In view of this objective and factual approach, O. Glenn Saxon, professor of economics at Yale University, was asked to make an analysis and evaluation of the three documents and to prepare his own conclusions and recommendations as to foreign economic policy. Professor Saxon was asked to make the analysis as a recognized expert in the field, divorced from the economic impacts of day-to-day foreign-trade problems.

The three studies by the conference board, Stone & Webster, and Donovan, Leisure, Newton & Irvine, and the analysis by Professor Saxon, contain summaries by the authors. Because the studies and the analysis are somewhat voluminous, Westinghouse Electric Corp. has collected these summaries and presents them in this booklet for the easy use and reference of those who do not wish to examine the basic background material.

THE UNITED STATES AND ITS FOREIGN TRADE POSITION AND THE ELECTRICAL MANUFACTURING INDUSTRY

A SUMMARY PREPARED BY THE NATIONAL INDUSTRIAL CONFERENCE BOARD OF ITS SPECIAL REPORT PREPARED FOR THE NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION

The highlights of the factual data, charts, and tables of this report-a large portion of which has never before been available for general public use-may be summarized as follows:

1. The dollar value of total sales of United States corporations manufacturing electrical products, as well as the dollar value of both exports and imports of such products, have risen sharply in the postwar years, 1946-53 (inclusive), but at widely varying rates.

(a) Total sales during the postwar years have averaged 6.6 times their average for the prewar years (1935-39, inclusive).

(b) Exports have averaged in the postwar years 4.9 times their prewar average. (c) Imports have averaged in the post war years 4.6 times their prewar average. 2. While total sales in 1952 were 9 times their prewar average, imports in 1952 were 12 times their prewar average. In contrast, export sales in 1952 were only six times higher than their prewar level.

The foregoing data are expressed in tabular form below:

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3. The rate of increase of imports of electrical equipment reflects the rehabilitation of foreign industry and its approach toward a surplus position.

The rate of increase in imports has accelerated significantly in more recent years, as compared with a slowing down in the growth of exports.

This divergence in trends became far more marked in 1953, as is shown by the following table:

First half of 1955 over first half of 1952, percent increase

United States imports.

United States exports.

50 9

Excluding Canada, exports for the first 6 months of 1953 were 7 percent below those of the first 6 months of 1952.

4. Competition from foreign countries for third markets has also grown much keener, especially during the past 2 years, and is now threatening further inroads upon United States exports of electrical equipment, particularly in South America. For example, a comparison of European and United States price quotations of heavy electrical equipment, publicly opened within the past 18 months in LatinAmerican and Asian countries, shows that of 124 different quotations 80 percent were less than the United States bid.

5. Foreign manufacturers of electrical products have very large labor cost advantages over United States competitors. These advantages are greater now than ever before.

(a) In 1952 total monetary hourly wages and wage supplements (converted into United States dollars at official exchange rates) of the 9 nations covered by the survey ranged between only 10 percent of United States wages (and supplements) in Japan to 33 percent in Belgium and Sweden. In 1938, the range was from 7.3 percent in Japan to 46.6 in Germany.

Wage supplements have now become a significant factor in any wage comparisons among nations. For example, in France and Italy such supplements exceed one-third of the cash wages of their workers.

The wage ranges for 1938 and 1952 in the nine countries were as follows:

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The wage differentials between the United States and these nine countries have widened substantially in the postwar years. Only Japan, of the nine countries, has increased its wage rates relative to the United States since 1938. Germany, as shown by the above table, has moved from her prewar position of the highest wage country among the nine nations to the fourth lowest in 1952.

(b) By 1952 industrial production in 7 of the 9 countries had recovered to levels which were 33% percent or more above their 1938 levels. Japan was only 1 percent above her 1938 level.

West Germany's production in 1952 was 44 percent higher than in 1936, while her production of electrical machinery and equipment was 188 percent above 1936, but a substantial portion of these gains has been the result of transfers of industrial capacity from East to West Germany rather than overall increases in West German production.

(c) The legal workweek (before overtime payments become due) ranges between 44 and 48 hours in most European countries. Overtime payments are not generally more than 25 percent above regular wages.

(d) During the poastwar period, labor costs as a percentage of production value have decreased considerably more in the various foreign countries than they have in the United States. Three of the four countries for which comparison with a prewar year is possible also show a much steeper decline for that period than does the United States. The reason for the more rapid postwar decrease in labor costs abroad is a combination of increases in productivity, which was very low at the beginning of the postwar period, and in value of production both rising considerably faster than wage rates (including wage supplements). In the United States, on the other hand, money wages and wage supplements approximately kept pace with increases in productivity and in value of output. These factors are mainly responsible for the increased disparity in labor costs between the United States and the various European countries.

(e) Statistical limitations make it impossible accurately to compare the output per man-hour between particular industries of various nations. However, it is both proper and possible to compare trends in productivity of particular industries of various countries, since substantiating data are available for certain nations over certain periods.

The following table show changes in productivity of the electrical manufacturing industries in six nations over certain years for which comparable data are available.

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Qualified representatives of a United States manufacturer of electrical equipment recently made a study of prevailing labor rates and general efficiency in the use of labor and materials in that industry in seven foreign countries. This study concluded that labor costs of various electrical products in the countries ranged between 20 and 78 percent of United States labor costs of the same products. In Germany, where there is a combination of low wage rates, a high workweek, and efficiency of both labor and equipment, labor costs excluding relatively moderate supplements in the industry are shown to be only about onethird of United States labor costs.

6. Foreign exporters almost universally enjoy the benefits of many and varied kinds of both domestic and export subsidies, as well as a rather wide variety of other types of aid from their government. United States industrial producers enjoy much less assistance of this sort.

7. Postwar conditions have led to the establishment (or intensification where they already existed) of numerous import restrictions and exchange controls abroad. Many of these restraints on international trade are far more effective barriers to its expansion than are protective tariffs. Most such restraints are not practiced by the United States Government and, where practiced, are not generally applied to the electrical-equipment industry.

Since dollars in the postwar years have been, and still are, scarce in most foreign countries, such restrictions have fallen more heavily on goods offered abroad for dollars and upon United States exporters selling for dollars than upon foreign exporters who can sell for their "soft" (nondollar) currencies. There has been a very considerable relaxation of many such controls and restrictions, as they apply to other currencies but relatively little as they apply to the United States dollar.

8. Substantial losses of foreign investment income and smaller profits from various services since World War II have tended in the postwar years to create heavily adverse balance-of-payment positions among European countries and Japan, particularly with respect to the United States. This state of affairs, due primarily to lack of multilateral convertibility of most foreign currencies, and the need for goods often available only in the United States, has led to "dollar drives" and other efforts by foreign governments to subsidize and otherwise stimulate their exports to the United States.

9. There has been a dramatic improvement, however, in almost all foreign countries over the last year and a half toward balancing off their respective dollar sales with their dollar purchases. Figures for France for 1952 were not available in time for inclusion in the report. Except for Italy and France all other seven countries (covered in the survey), whose payment balances have been causes of concern, show substantial credit balances in their current accounts for 1952 and to date in 1953.

If the "dollar gap" be defined as the excess of the dollar value of United States exports of goods and services over United States imports of goods and services, then the gap has vanished, at least for the time being. During the year ended June 30, 1953, United States imports for the first time since prewar days substantially exceeded United States exports for which we were paid. The United States has been called upon in this 12-month period to settle these adverse accounts by deliveries of gold bullion and transfers of United States (dollar) bank balances and Federal Government bonds or other obligations.

Foreign nations nonetheless, during this 12-month period, received economic and military aid from the United States in larger sums than during any previous 12-month period since the war.

This general reversal of the world's balance-of-payment position with the United States was even more remarkable during the first half of 1953, when United States gold, bank balances, and Government securities-earned net by

other nations would have more than paid for all economic aid extended by the United States in the period.

10. Qualified opinion differs as to the probable durability of this dramatic change, but there is substantial support for the view that this improvement in balance-of-payment positions now rests on more solid foundations than did a similar improvement in 1950, after which conditions were rendered highly ab normal by the outbreak of war in Korea.

11. To a major degree the postwar progress abroad has been due to United States aid, but full credit should be given to those nations which have adopted policies that have been successful in ending inflation, expanding production, and reducing restraints on domestic and foreign trade.

Germany is now outstripping all others in return to normal peacetime operations, despite loss of East Germany.

Replacement of bombed-out and dismantled machinery and equipment in Germany and Japan has given these countries more technologically efficient industrial plants than they had prewar. Because of their more efficient industrial plants, trade taking the place of aid might well benefit Germany more than any of our World War II allies. However, both Germany and Japan must expand their exports outside the Iron Curtain or they will be forced to do so inside that curtain to support normal employment and feed their peoples.

12. In all foreign countries, duties on imports produce much larger percentages of their respective total revenues than they do in the United States, where customs duties produce approximately 1 percent of total Federal revenues, compared with sharply higher percentages of total revenues produced by import duties in most foreign nations. In 1951 the combined individual and corporate income taxes produced 71 percent of total Federal revenues in the United States, while abroad no nation collected more than 49 percent and the majority collected not more than 35 percent on an average from their income taxes-France only 25.6 percent; West Germany, 23.3 percent; Italy, 11.9 percent; Switzerland, 31.0 percent; and the United Kingdom, 49.0 percent. All national, State, and local government receipts in the United States (mostly taxes arising directly or indirectly from the domestic operation of the economy) come to about 26 percent of gross national product.

Foreign nations, therefore, make up this difference in income-tax receipts primarily from general sales taxes or excises which importers into these countries must absorb in addition to their own income tax costs. The general sales tax ranges from 36.4 percent in France to 7.3 percent in the United Kingdom.

Consequently, foreign competitors selling into the United States or third markets have sharply lower tax costs than American competitors selling into their own or foreign markets.

13. In summing up:

(a) The wage differentials in postwar years between United States electrical equipment manufacturers and their foreign competitors have broadened compared to prewar years.

(b) Domestic and export subsidies and aids by foreign nations exceed those enjoyed by their United States competitors. In the postwar years, the differentials in this respect have substantially increased.

(c) There has been an increase in the number, and intensification in the use, of various types of exchange controls and other restraints on foreign trade since World War II which discriminate against the United States.

(d) The so-called dollar gap in foreign balance-of-payment positions has disappeared in the last 18 months. It has been replaced by a dollar surplus.

(e) Because of Germany's more efficient industrial plants, trade taking the place of aid might well benefit Germany more than our World War II allies. (f) Foreign competitors selling into their own, United States, or third markets have sharply lower tax costs than United States manufacturers selling in their own or any foreign market.

THE UNITED STATES ELECTRICAL MANUFACTURING INDUSTRY AND ITS RELATION TO THE SECURITY, HEALTH, SAFETY, AND WELFARE OF THE COUNTRY

A SUMMARY PREPARED BY STONE WERSTER ENGINEERING CORP.

The conclusions contained in this report of Stone & Webster Engineering Corp. as to the dependence of the security, health, safety, and welfare of the United States upon the use of domestic-built electrical products have been summarized by Stone & Webster as follows:

THE ELECTRICAL INDUSTRY IN THE UNITED STATES AND ITS PLACE IN THE UNITED STATES ECONOMY

The economy of this country, its great productivity and high standard of living, is dependent upon electric power and the proper equipment to use it. The extraordinary development of the United States economy has been made possible by the United States electric utility industry expanding its capacity and by the United States electrical manufacturing industry developing and producing the equipment for generating, transmitting, and distributing electric power, and for using it effectively and economically.

From 1946 through 1955, the electrical industry will have produced and put in service more electrical equipment than in the previous seventy-odd years of its history. The generating capacity scheduled to be in place by 1955 will be more than double the 1946 capacity.

The continuous and uninterrupted supply of adequate electric power is essential to the industrial, agricultural, and domestic economy and health of this country. Without such power the expansion of industry, the growth of agriculture, and the improvement in the standard of living which have taken place would not have been possible.

RESEARCH, DEVELOPMENT, AND SERVICES PERFORMED BY THE UNITED STATES ELECTRICAL MANUFACTURING INDUSTRY

The great progress made in the United States in the use of electricity is due to the recognition of the great potential of this form of energy by users and producers of electrical equipment and their continuous cooperative effort to develop the equipment necessary to realize this potential.

There is intense competition among United States manufacturers to develop new and better equipment. This continuous development is accomplished with the funds of private companies, without Government subsidy.

Standards for equipment are established which maintain that high degree of reliability and high quality of electrical service accepted as commonplace in this country.

Progress in establishing international standards has been slow as United States representatives, at meetings held for this purpose, have refused to lower United States standards and European representatives, seemingly content with their lower standards, have declined to raise their standards to our level.

The research, development, and planning service so essential to the continuing expansion and increased availability of power in the United States is supported by the sale of electrical products. Such service is not available in this country from others than the United States electrical manufacturing industry. Foreign manufacturers do not incur a proportionate share of the cost of this research, development, and planning service and are therefore in a favorable position in competitive bidding if price alone be considered.

Comparative aspects of United States and foreign-built equipment.-United States built equipment generally is capable of operating above capacity. This was a significant factor in the outstanding performance of United States industry during World War II.

It is the generally accepted opinion of engineers in the United States that foreign manufactured equipment does not have the capacity or reliability of equipment furnished by United States manufacturers.

Maintenance service by the United States electrical manufacturing industry.-The United States electrical manufacturing industry undertakes the installation, maintenance, and servicing of its products throughout the country. For this purpose, it maintains an extensive field service organization of highly skilled specialists in all types of electric products whose activities include, among other things, installation, preventative maintenance, and repair of equipment.

The ability, knowledge, and skill of these field forces has established the general reputation of United States built equipment for efficient operation to full capacity promptly following its installation without long shakedown periods during which realinement and readjustment of parts and components are made. Standards prevailing in this aspect of the work compare with those for the production itself. It is not uncommon for one United States manufacturer to maintain or repair products of another. This derives from the development of more or less common standards in this country and the familiarity which each manufacturer has with the products of his competitors. American maintenance and production methods are sufficiently standardized to permit this practice.

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